<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

             [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                      OR

             [_]  TRANSITION REPORT UNDER SECTION 13 OR 15(D)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                        Commission file number: 0-8043

                         SOUTHERN MINERAL CORPORATION
            (Exact Name of Registrant as Specified in Its Charter)

                    NEVADA                              36-2068676
        (State or Other Jurisdiction of              (I.R.S. Employer
        Incorporation or Organization)               Identification No.)

          1201 LOUISIANA, SUITE 3350                   77002-5609
                Houston, Texas                         (Zip Code)
  (Address of Principal Executive Offices)

      Registrant's Telephone Number, Including Area Code: (713) 658-9444

     Check 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 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 the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  As of May 8, 2000, there
were 13,027,397 shares of the Registrant's common stock outstanding.

================================================================================
<PAGE>

                         SOUTHERN MINERAL CORPORATION
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>
PART I.   FINANCIAL INFORMATION

Item 1.  Unaudited Consolidated Financial Statements

Consolidated Financial Statements:

   Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999..............  3
   Unaudited Consolidated Statements of Operations for the three months ended
     March 31, 2000 and 1999.......................................................................  4
   Unaudited Consolidated Statements of Cash Flows for the
     three months ended March 31, 2000 and 1999....................................................  5

   Notes to Consolidated Financial Statements......................................................  6

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

   Liquidity and Capital Resources................................................................. 12
   Financial Condition and Results of Operations................................................... 16

Item 3. Quantitative and Qualitative Disclosures about Market Risk................................. 17

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings.......................................................................... 18

Item 6. Exhibits and Reports on Form 8-K........................................................... 19
</TABLE>
<PAGE>
                        PART I - FINANCIAL INFORMATION

              ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
                          CONSOLIDATED BALANCE SHEETS
                     (in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                                   March 31,        December 31,
                                                                                      2000             1999
                                                                                    --------         --------
                                      ASSETS                                        (Unaudited)
<S>                                                                               <C>              <C>
CURRENT ASSETS
   Cash and cash equivalents                                                        $  2,263         $  1,981
   Receivables, net                                                                    4,816            4,923
   Property held for sale                                                                 --            8,914
   Other                                                                                 593              606
                                                                                    --------         --------
              Total current assets                                                     7,672           16,424

PROPERTY AND EQUIPMENT, AT COST USING SUCCESSFUL
   EFFORTS METHOD FOR OIL AND GAS ACTIVITIES
     Oil and gas producing properties                                                112,932          120,932
     Unproven properties                                                               4,891            4,443
     Office equipment                                                                    561              561
     Accumulated depreciation, depletion and amortization                            (41,339)         (47,971)
                                                                                    --------         --------
                                                                                      77,045           77,965
OTHER ASSETS                                                                             350              345
                                                                                    --------         --------
              Total assets                                                          $ 85,067         $ 94,734
                                                                                    ========         ========
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES NOT SUBJECT TO COMPROMISE:

CURRENT LIABILITIES
   Accounts payable (Post-petition)                                                 $  1,468         $  1,375
   Accrued liabilities (Post-petition)                                                 3,316            2,950
   Canadian bank loan                                                                  2,580           13,876
                                                                                    --------         --------
              Total current liabilities                                                7,364           18,201
                                                                                    --------         --------
LONG-TERM LIABILITIES
   Deferred Income Taxes                                                               4,327            4,240
                                                                                    --------         --------
              Total liabilities not subject to compromise                             11,691           22,441
                                                                                    --------         --------
LIABILITIES SUBJECT TO COMPROMISE:
    Accounts payable (Pre-petition)                                                    2,093            1,981
    Accrued liabilities (Pre-petition)                                                 1,760            1,779
    Notes payable banks (Pre-petition)                                                16,109           16,109
    Subordinated debentures (Pre-petition)                                            41,400           41,400
                                                                                    --------         --------
              Total liabilities subject to compromise (Pre-petition)                  61,362           61,269
                                                                                    --------         --------
STOCKHOLDERS' EQUITY
    Preferred stock, par value $.01 per share; authorized 5,000,000
       shares at March 31, 2000; none issued
    Common stock, par value $.01 per share; authorized 50,000,000
       shares at March 31, 2000; issued 13,020,360 and 13,000,360
       at March 31, 2000 and December 31,1999, respectively;
       outstanding 12,929,137 and 12,909,137
       shares at March 31, 2000 and December 31, 1999, respectively                      130              130
    Additional paid-in capital                                                        30,891           30,885
    Accumulated other comprehensive loss-foreign currency translation adjustment        (477)            (288)
    Retained deficit                                                                 (18,477)         (19,651)
    Less: Treasury stock                                                                 (53)             (52)
                                                                                    --------         --------
              Total stockholders' equity                                              12,014           11,024
                                                                                    --------         --------
              Total liabilities and stockholders' equity                            $ 85,067         $ 94,734
                                                                                    ========         ========
</TABLE>
   The accompanying notes to consolidated financial statements of Southern
Mineral Corporation and subsidiaries are an integral part of these statements.


                                       3

<PAGE>
                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
                     STATEMENTS OF CONSOLIDATED OPERATIONS
                   (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED
                                                                                MARCH 31,
                                                                         -----------------------
                                                                           2000           1999
                                                                         -------         -------
                                                                               (Unaudited)
<S>                                                                     <C>             <C>
Revenue
  Oil and gas........................................................    $ 7,412         $ 5,621
  Gains on sales of properties and other assets......................         --           5,073
                                                                         -------         -------
                                                                           7,412          10,694
Expenses
  Production.........................................................      1,973           2,081
  Exploration........................................................        218              47
  Depreciation, depletion and amortization...........................      1,918           3,081
  General and administrative.........................................        601           1,040
  Restructuring and bankruptcy expenses..............................        852              --
                                                                         -------         -------
                                                                           5,562           6,249
                                                                         -------         -------
Income from operations...............................................      1,850           4,445

Other income, expenses and deductions
  Interest and other income..........................................         72              27
  Interest and debt expense..........................................       (557)         (1,774)
                                                                         -------         -------
Income before income taxes...........................................      1,365           2,698
Provision (benefit) for foreign, federal and state income taxes
  Current provision..................................................         75              33
  Deferred provision (benefit).......................................        116            (263)
                                                                         -------         -------
                                                                             191            (230)
                                                                         -------         -------
Net income...........................................................    $ 1,174         $ 2,928
                                                                         =======         =======
Net income per share-basic...........................................    $   .09         $   .23
                                                                         =======         =======
Net income per share-diluted.........................................    $   .09         $   .20
                                                                         =======         =======
Weighted average number of shares outstanding-basic..................     12,917          12,800
                                                                         =======         =======
Weighted average number of shares outstanding-diluted................     12,955          17,812
                                                                         =======         =======
</TABLE>
   The accompanying notes to consolidated financial statements of Southern
 Mineral Corporation and subsidiaries are an integral part of these statements.


                                       4
<PAGE>
                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
                     STATEMENTS OF CONSOLIDATED CASH FLOWS
                                (in thousands)
<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                   March 31,
                                                                            -----------------------
                                                                              2000            1999
                                                                            -------         -------
                                                                                  (Unaudited)
<S>                                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income............................................................    $ 1,174         $ 2,928
  Adjustments to net income.............................................      2,946          (4,439)
                                                                            -------         -------
              NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.......      4,120          (1,511)

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sales of properties.....................................      9,334           6,204
  Acquisition of Neutrino, net of cash received.........................         --             285
  Capital expenditures..................................................     (1,907)         (1,161)
                                                                            -------         -------
              NET CASH PROVIDED BY INVESTING ACTIVITIES.................      7,428           5,328

CASH FLOWS FROM FINANCING ACTIVITIES
  Payments of long-term debt............................................         --          (4,437)
  Payments on note payable..............................................    (11,246)            ---
  Loan acquisition costs................................................        (20)           (258)
                                                                            -------         -------
              NET CASH USED IN FINANCING ACTIVITIES.....................    (11,266)         (4,695)

EFFECT OF EXCHANGE RATE CHANGES ON CASH.................................         --              14
                                                                            -------         -------
              NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......        282            (864)
Cash and cash equivalents at beginning of period........................      1,981           1,541
                                                                            -------         -------
Cash and cash equivalents at end of period..............................    $ 2,263         $   677
                                                                            =======         =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid for interest................................................    $   551         $ 2,940
  Cash paid for taxes...................................................         25              45

NON-CASH INVESTING AND FINANCING ACTIVITIES
  Directors' fees paid in stock.........................................          7               5

</TABLE>

   The accompanying notes to consolidated  financial statements of Southern
Mineral Corporation and subsidiaries are an integral part of these statements.

                                       5

<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
             NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Basis of Presentation

  The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, though the Company believes that the disclosures are
adequate to make the information presented not misleading.  These consolidated
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's latest Annual Report to the
Securities and Exchange Commission on Form 10-K, as amended, for the year ended
December 31, 1999.  In the opinion of the Company, all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
position as of March 31, 2000 and December 31, 1999, the results of operations
for the three months ended March 31, 2000 and 1999 and statements of cash flows
for the three months then ended have been included.

  On October 29, 1999 ("Petition Date"), the Company and its wholly-owned
subsidiaries, BEC Energy, Inc., Amerac Energy Corporation, SMC Ecuador, Inc. and
SMC Production Company ("Debtor Subsidiaries"), filed voluntary petitions for
relief under Chapter 11, Title 11 of the United States Code ("Bankruptcy Code"),
in order to facilitate the restructuring of the Company's long-term debt,
revolving credit, trade debt and other obligations.  The filings were made in
the U.S. Bankruptcy Court for the Southern District of Texas, Victoria Division
("Bankruptcy Court").  All debts of the Company and Debtor Subsidiaries, except
those of the Company's Canadian Subsidiary, Neutrino Resources, Inc.
("Neutrino"), as of the Petition Date are currently stayed by the bankruptcy
petitions and subject to compromise pursuant to such proceedings. See Note 2 for
further information. The Company and its Debtor Subsidiaries continue to operate
as debtors-in-possession subject to the Bankruptcy Court's supervision and
orders. The proceedings of the Company and its Debtor Subsidiaries have been
consolidated for administrative purposes. Under the provisions of the Bankruptcy
Code, the Company and its Debtor Subsidiaries have the exclusive right for 120
days following the Petition Date to file a Plan of Reorganization with the
Bankruptcy Court. On May 2, 2000 the Company and its Debtor Subsidiaries filed a
Second Amended Plan of Reorganization and Disclosure Statement. On May 2, 2000,
the Bankruptcy Court approved the Disclosure Statement and exclusivity was
extended to June 22, 2000. The Bankruptcy Court has set June 30, 2000 for
hearing on confirmation of the Second Amended Plan. See Note 2 for further
discussion.

  The accompanying financial statements have been prepared in a manner
consistent with the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. Beginning in the fourth quarter of 1999, and for the year
ended December 31, 1999, the consolidated financial statements of the Company
and its subsidiaries are presented in accordance with Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(SOP 90-7).  SOP 90-7 provides guidance on financial reporting by entities that
have filed petitions with the bankruptcy court and expect to reorganize as going
concerns under Chapter 11,  Title 11 of the United States Code.  SOP 90-7
generally requires the reclassification of the consolidated balance sheet,
statement of operations and cash flows to distinguish transactions and events
that are directly associated with the reorganization from the ongoing operations
of the Company.  The accompanying consolidated financial statements of the
Company have been prepared on a going concern basis, which contemplates the
realization of assets and the liquidation of liabilities in the ordinary course
of business. As discussed above, the Company has filed for reorganization under
Chapter 11 of the Bankruptcy Code. The consolidated financial statements do not
include any adjustments relating to recoverability and classifications of
reported asset amounts or the amounts and classifications of liabilities that
might result from the ultimate resolution of Plan of Reorganization.

Use of Estimates in the 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


<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--Continued

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.

Earnings per Share - Basic earnings per share are based on the weighted
average shares outstanding without any dilutive effects considered.  Diluted
earnings per share reflect dilution from all potential common shares, including
options and convertible debt.

    For the quarters ended March 31, 2000 and  March 31, 1999, the issuance or
conversion of 1,930,000 and  5,164,000 potential common shares, respectively,
were excluded as they would have an antidilutive effect on the diluted earning
per share calculation; and therefore, were not considered in the calculation of
the diluted weighted average number of shares outstanding.

Reclassifications - Certain amounts in prior financial statements may have been
reclassified to conform to the 2000 financial statement presentation.

Comprehensive Income -  Comprehensive income includes all changes in a company's
equity except those resulting from investments by owners and distributions to
owners, including, among other things, foreign currency translation adjustments.
The Company's total comprehensive income for the three months ended March 31,
2000 and 1999 was as follows (in thousands):


                                                  THREE MONTHS ENDED
                                                       MARCH 31,
                                                   -----------------
                                                    2000       1999
                                                   ------     ------

     Net income                                    $1,174     $2,928
     Foreign currency translation adjustment         (189)       769
                                                   ------     ------
     Total comprehensive income                    $  985     $3,697
                                                   ======     ======


NOTE 2.  BANKRUPTCY FILING

  On October 29, 1999, the Company and its Debtor Subsidiaries, excluding
Neutrino, filed voluntary petitions for relief under the Bankruptcy Code in
order to facilitate the restructuring of the Company's long-term debt, revolving
credit, trade debt and other obligations. The filings were made in the U.S.
Bankruptcy Court for the Southern District of Texas, Victoria Division. All
debts of the Company and its Debtor Subsidiaries as of the Petition Date are
currently stayed by the bankruptcy petitions and subject to compromise pursuant
to such proceedings. The Company and its Debtor Subsidiaries continue to operate
as debtors-in-possession subject to the Bankruptcy Court's supervision and
orders. The proceedings of the Company and its Debtor Subsidiaries have been
consolidated for administrative purposes.

  The decision to seek protection was taken by the Company and its Debtor
Subsidiaries because the Company concluded that a restructuring of its
indebtedness could not be completed without the protection and assistance of the
bankruptcy court.  Timing of the bankruptcy filing was imposed by several
factors, including the possible acceleration of the Company's $16.1 million of
indebtedness by its domestic bank creditors and the inability of the Company and
its debenture holders to reach a satisfactory compromise regarding the
consideration to be received in the previously proposed restructuring.   The
bankruptcy petitions were filed in order to preserve cash and to give the
Company the opportunity to restructure its debt.

  On February 25, 2000, the Company filed a Plan of Reorganization and
Disclosure Statement and on May 2, 2000 filed a Second Amended Plan ("Amended
Plan") having terms previously negotiated with its unsecured


<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--Continued


creditor's committee ("Committee"). On March 7, 2000, the Committee filed a
motion to terminate the Company's exclusivity period to file and solicit
acceptance of a plan of reorganization. The Committee agreed to extend the
hearing on their motion until May 1, 2000 due to the continuing negotiations
with the Company related to the Amended Plan. The Committee's motion to
terminate exclusivity was denied on May 1, 2000 and the Committee declined to
include any statement setting forth its position with respect to the Amended
Plan. The consummation of the Amended Plan is the primary objective of the
Company. The Amended Plan sets forth the means for satisfying claims, including
liabilities subject to compromise and interests in the Company. The Amended Plan
would result in, among other things, potential substantial dilution in the
future of existing shareholders as a result of the issuance of securities to
creditors or new investors. On May 2, 2000, the Bankruptcy Court held a hearing
and approved the Disclosure Statement and the procedure for transmitting the
Amended Plan and Disclosure Statement for acceptance or rejection to all
affected parties. The Bankruptcy Court set June 30, 2000 for the hearing on
confirmation of the Amended Plan. In addition, the exclusive period for the
Company and Debtor Subsidiaries to obtain acceptance of the Amended Plan was
extended through June 22, 2000 and competing plans may be filed on June 23, 2000
by all interested parties. The consummation of any plan of reorganization will
require approval of the Bankruptcy Court.

  The Amended Plan generally provides for the satisfaction of the Company and
Debtor Subsidiaries' claims after payment of all Bankruptcy Court approved
administrative expenses as follows:

 . Domestic secured debt shall be paid in full with interest and expenses
  including default interest and expenses in the reorganization proceedings of
  no greater than $350,000 with proceeds from a new secured credit facility to
  be obtained by the Company.

 . All other creditors other than domestic secured debt and amounts owed
  debenture holders shall be paid in cash over periods ranging from 1 to 14
  months.

 . Debenture holders shall be satisfied as follows:

    . Cash payment of approximately $1.4 million.

    . Issuance of Convertible Preferred Stock with liquidation preference of
      $38.5 million.

      The terms of the Preferred Stock will be generally as follows:

    . Amount - $38.5 million with liquidation preference.

    . Type - convertible into 78% of the fully diluted common stock outstanding
      at confirmation (subject to  certain limitations).

    . Dividends - 7.5% per annum, accumulating semi - annually with no dividends
      payable or accrued during the first two years following confirmation and
      payable thereafter as permitted by new secured credit facility when funds
      are legally available and as properly declared by the Board of Directors.

    . Other - Subject to conversion rights, optional redemption and voting
      rights provisions.

 . Board of Directors - two appointed by the Committee, two from existing
  board and a fifth chosen by the four, all with two year terms.


<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--Continued

  Existing common stock, option and warrants will remain outstanding with no
change in terms and conditions except that all options and warrants expiring
between the Petition Date and confirmation of the Amended Plan will be extended
for a two year period.

  This summary is not intended to be a complete discussion of all the terms and
conditions of the Amended Plan. While the Bankruptcy Court has approved the
Disclosure Statement, the Committee has not recommended the approval of the
Amended Plan by creditors of the Company and Debtor Subsidiaries. Final approval
and confirmation of the Amended Plan will not occur until voted on by all
affected parties and approved by the Bankruptcy Court.

  Subsequent to the Petition Date, the Company and its Debtor Subsidiaries filed
a Motion for Order Authorizing Use of Cash Collateral ("Cash Collateral Order"),
pursuant to which the Company and its Debtor Subsidiaries sought the use of the
secured domestic banks' cash collateral in on-going operations.   The Bankruptcy
Court has entered a series of orders granting the Company and its Debtor
Subsidiaries authority to use cash collateral in accordance with an approved
budget until June 30, 2000.   To the extent that on-going expenses are reflected
on the court-approved budget, the Company and its Debtor Subsidiaries are
permitted to make such expenditures. The Company has, as of April 30, 2000,
approximately $2.3 million in cash and cash equivalents that can be used for
operations pursuant to the terms of the Cash Collateral Order.

  The Company does not presently anticipate the need for debtor-in-possession
financing in order to pursue its business strategy.

NOTE 3.  DIVESTITURES

  On July 21, 1999, the Company agreed to sell properties consisting of certain
proven and unproven property interests in Texas to ANR Production Company.  The
properties include all of the Company's interest in the Brushy Creek and Texan
Gardens Fields in Dewitt, Lavaca and Hidalgo counties of Texas. In July and
August of 1999, the sale of its interests in the Brushy Creek Field and Texan
Gardens Field were closed for $15.2 million and $0.8 million, respectively.

  Neutrino sold in the fourth quarter of 1999 its interest in two non-core
properties in Alberta, Canada for approximately $3.7 million. In March 2000,
Neutrino sold its interest in Inverness and Swan Hills in Alberta, Canada, for
$9.0 million.  The Inverness/Swan Hills properties were classified as properties
held for sale and were included in current assets at December 31, 1999.

Pro forma

  The following table summarizes the pro forma (unaudited) results (stated in
thousands, except per share data), of the Company as though the dispositions of
Brushy Creek, Texan Gardens and Inverness/Swan Hills had occurred on January 1,
1999.


<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--Continued


                                              THREE MONTH ENDED
                                                   MARCH 31,
                                            -----------------------
                                            2000               1999
                                            ----               ----
                                                  (unaudited)
                                     (in thousands, except per share data)

Revenues.................................  $6,660             $9,653
Net income...............................     937              3,078
Net income per share-basic...............     .07                .24
Net income per share-diluted.............     .07                .17


  The preceding pro forma results are not necessarily indicative of those that
would have occurred had the divestitures taken place at the beginning of 1999.
During the first quarter of 1999, the Company sold its mineral interests and
substantially all of its royalty interests in Texas, Mississippi and New Mexico
for approximately $6,000,000. These divestitures did not have a material
effect on the Company's historical results of operations.

Note 4.  Debt

  Debt consisted of the following (in thousands):

                                                   MARCH 31, DECEMBER 31,
                                                      2000       1999
                                                    -------    -------
Domestic bank credit facility - in default          $16,109    $16,109
Canadian bank credit facility (U.S. Dollars)          2,580     13,876
Convertible subordinated debentures - in default     41,400     41,400
                                                    -------    -------
 Total indebtedness                                 $60,089    $71,385
                                                    =======    =======

  As described in Note 2, because of the Company's filing of Chapter 11, all
amounts are subject to compromise as of March 31, 2000, except for its Canadian
bank credit facility which is reflected as Current Liabilities not subject to
compromise on the Consolidated Balance Sheet.

  On March 29, 1999, the Company entered into a restructured and amended credit
facility ("Amended Credit Facility") with its domestic lenders. The Amended
Credit Facility provided for a borrowing base of $19,353,000, plus a principal
tranche of $12,500,000 ("Tranche A") that was due to mature on September 1,
1999. The borrowing base was reduced to $18,830,000 on April 1, 1999, reflecting
the $6,000,000 received in March and April 1999, for the sale of the Company's
mineral interests in Texas, Mississippi and New Mexico. In July and August of
1999 the sale of the Company's interests in the Brushy Creek and Texan Gardens
Fields were closed for $15.2 million and $0.8 million, respectively. The
majority of the net proceeds were applied to the Company's domestic bank
facility with $5.0 million being applied to the borrowing base facility and $9.6
million to the Tranche A obligation. In September and October 1999, the Amended
Credit Facility was further amended to extend the ultimate due date of the
Tranche A principal to October 28, 1999. Due to the bankruptcy filings on
October 29, 1999, the Company is no longer in compliance with certain provisions
of the Amended Credit Agreement. See Note 2 - Bankruptcy Filing.
<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--Continued

The obligations under the Amended Credit Facility are secured by substantially
all of the assets of the Company and its subsidiaries other than Neutrino. The
Amended Credit Facility prohibits the payment of dividends and contains
covenants relating to the financial condition of the Company including tangible
net worth and cash flow coverage covenants. On May 8, 2000, outstanding
borrowings under the Amended Credit Facility were $16,109,000 with no further
borrowing availability. Outstanding principal under the Amended Credit Facility
bears interest at the Bank Index Rate (9.00% at March 31, 2000) to the extent of
the borrowing base utilized and at Bank Index Rate plus 1% on Tranche A
principal.

  Effective June 25, 1998, Neutrino entered into a new Cdn $40,000,000 (US
$27,155,000) revolving demand loan facility (the "Canadian Credit Facility")
under which it could borrow at bank prime or Bankers Acceptance Rates plus a 1%
stamping fee. At March 31, 2000, the Canadian Bank prime rate was 7.00% and the
Bankers Acceptance Rate for 30-day maturities was 5.31%. Effective July 15,
1999, the borrowing base under the Canadian Credit Facility was reduced to Cdn
$30,500,000 (US $20,706,000) and the interest rate was increased to prime plus
1% and the stamping fee on Bankers Acceptance was increased to 1 1/4% per annum.
These changes were a result of a lender review giving effect to lower world oil
prices, the sale of certain non-strategic oil and gas properties, and the
Company's financial condition. At March 31, 2000, outstanding borrowings under
the Canadian Credit Facility were Cdn $3,752,000 (US $2,580,000). On March 3,
2000, after giving effect to the reductions related to the sale of certain oil
and gas properties, the borrowing base was reduced to Cdn $11,050,000 (US
$7,625,000) through April 30, 2000. On May 8, 2000, outstanding borrowings under
the Canadian Credit Facility were Cdn $ 3,189,000 (US $2,136,000). The Canadian
Credit Facility contains a covenant relating to the financial condition of
Neutrino, including, at each quarter's end, maintenance of a positive working
capital through maturity. The borrowing base under the Canadian Credit Facility
is subject to semi-annual redeterminations. The last borrowing base review was
as of March 3, 2000. As of December 31, 1999 and March 31, 2000, Neutrino was in
compliance with the terms of the credit facility.

  The outstanding balance under the Canadian Credit Facility is classified as a
current liability because of the demand feature of the loan. However, it is
management's intention that the facility be utilized to provide long-term
financing for the Company.

  On October 2, 1997, the Company issued $41,400,000 of 6.875% convertible
subordinated debentures due on October 1, 2007. The debentures are convertible
into Common Stock of the Company at any time prior to maturity, at a conversion
price of $8.26 per share. Proceeds of the offering were used to reduce bank debt
and fund subsequent acquisitions. Pursuant to the debenture indenture, in the
event of a change of control of the Company, debenture holders have the right to
require the Company to repurchase the security at face value plus accrued
interest. Due to the bankruptcy filings on October 29, 1999, the Company is no
longer in compliance with certain provisions of the debenture agreement. See
Note 2 - Bankruptcy Filing.

NOTE 5.  NASDAQ NATIONAL MARKET LISTING

  The Company was advised that it was not in compliance with Nasdaq Stock Market
listing requirements due to the low price per share of its Common Stock. The
Company was granted a hearing on May 27, 1999 to present a plan to the Nasdaq
National Market for compliance with the $1.00 per share minimum bid requirement.
Subsequently, the Company was notified that effective with the close of business
on August 4, 1999, its securities including convertible subordinated debentures
were delisted from the Nasdaq National Market and Nasdaq SmallCap Market. The
Company's Common Stock is now traded on the OTC Bulletin Board. The Company
decided to not pursue at this time a review of the delisting decision by the
Nasdaq Review Council. The Company believes a permanent delisting of its Common
Stock and convertible subordinated debentures would impair the liquidity of the
Common Stock, convertible subordinated debentures and capital raising
flexibility of the Company. The Company cannot assure that it will be successful
in obtaining from Nasdaq a reversal of its delisting decision.
<PAGE>

                 SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
                 (DEBTOR-IN-POSSESSION AS OF OCTOBER 29, 1999)
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE 6.  RESTRUCTURING AND BANKRUPTCY COSTS

    During the third quarter, the Board of Directors of the Company concluded
that the proposed restructuring plan as filed with the Securities and Exchange
Commission on July 21, 1999 could not be consummated on the terms contemplated.
Therefore, estimated costs of approximately $1,372,000 associated with the
restructuring were expensed during the third and fourth quarters of 1999. These
costs are primarily legal, accounting, financial advisory and other transaction
costs related to the proposed restructuring. Since the Company's filing for
bankruptcy on October 29, 1999, it has incurred approximately $553,000 in 1999
and $852,000 in the three months ended March 31, 2000 related to legal,
accounting and financial advisory services rendered in connection with the
bankruptcy. In addition $2,463,000 capitalized as other assets for fees and
expenses related to securing the domestic bank debt and convertible subordinated
debentures were expensed during the fourth quarter of 1999 pursuant to SOP 90-7.
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Liquidity and Capital Resources

  The Company has historically funded its operations, acquisitions, exploration
and development expenditures from cash flows from operating activities, bank
borrowing, issuance of common stock and debt securities and the sale of assets.

  The Company's cash flow provided by (used in) operating activities for the
three months ended March 31, 2000 and 1999 was $4,120,000 and ($1,511,000),
respectively. Additional cash in the amounts of $9,334,000 and $6,204,000 were
received in 2000 and 1999, respectively, from the sale of assets.

  On October 29, 1999, the Company and its Debtor Subsidiaries, excluding
Neutrino, filed voluntary petitions for relief under of the Bankruptcy Code in
order to facilitate the restructuring of the Company's long-term debt, revolving
credit, trade debt and other obligations. The filings were made in the U.S.
Bankruptcy Court for the Southern District of Texas, Victoria Division. All
debts of the Company and its Debtor Subsidiaries as of the Petition Date are
currently stayed by the bankruptcy petitions and subject to compromise pursuant
to such proceedings. The Company and its Debtor Subsidiaries continue to operate
as debtors-in-possession subject to the Bankruptcy Court's supervision and
orders. The proceedings of the Company and its Debtor Subsidiaries have been
consolidated for administrative purposes.

  The decision to seek protection was taken by the Company and its Debtor
Subsidiaries because the Company concluded that a restructuring of its
indebtedness could not be completed without the protection and assistance of the
bankruptcy court.  Timing of the bankruptcy filing was imposed by several
factors, including the possible acceleration of the Company's $16.1 million of
indebtedness by its domestic bank creditors and the inability of the Company and
its debenture holders to reach a satisfactory compromise regarding the
consideration to be received in the previously proposed restructuring.   The
bankruptcy petitions were filed in order to preserve cash and to give the
Company the opportunity to restructure its debt.

  On February 25, 2000, the Company filed a Plan of Reorganization and
Disclosure Statement and on May 2, 2000 filed a Second Amended Plan ("Amended
Plan") having terms previously negotiated with its unsecured creditors committee
("Committee").  On March 7, 2000, the Committee filed a motion to terminate the
Company's exclusivity period to file and solicit acceptance of a plan of
reorganization.  The Committee agreed to extend the hearing on their motion
until May 1, 2000 due to the continuing negotiations with the Company related to
the Amended Plan.  The Committee's motion to terminate exclusivity was denied on
May 1, 2000 and the Committee declined to include any statement setting forth
its position with respect to the Amended Plan.  The consummation of the Amended
Plan is the primary objective of the Company. The Amended Plan sets forth the
means for satisfying claims, including liabilities subject to compromise and
interests in the Company. The Amended Plan would result in, among other things,
potential substantial dilution in the future of existing shareholders as a
result of the issuance of securities to creditors or new investors.  On May 2,
2000, the Bankruptcy Court held a hearing and approved the Disclosure Statement
and the procedure for transmitting the Amended Plan and Disclosure Statement for
acceptance or rejection to all affected parties.   The Bankruptcy Court set June
30, 2000 for the hearing on confirmation of the Amended Plan.  In addition, the
exclusive period for the Company and Debtor Subsidiaries to obtain acceptance of
the Amended Plan was extended through June 22, 2000 and competing plans may be
filed on June 23, 2000 by all interested parties.  The consummation of any plan
of reorganization will require approval of the Bankruptcy Court.

  The Amended Plan generally provides for the satisfaction of the Company and
Debtor Subsidiaries' claims after payment of all Bankruptcy Court approved
administrative expenses as follows:

 . Domestic secured debt shall be paid in full with interest and expenses
  including default interest and expenses in the reorganization proceedings of
  no greater than $350,000 with proceeds from a new secured credit facility to
  be obtained by the Company.

 . All other creditors other than domestic secured debt and amounts owed
  debenture holders shall be paid in cash over periods ranging from 1 to 14
  months.
<PAGE>

 . Debenture holders shall be satisfied as follows:

    . Cash payment of approximately $1.4 million.

    . Issuance of Convertible Preferred Stock with liquidation preference of
      $38.5 million.

      The terms of the Preferred Stock will be generally as follows:

    . Amount - $38.5 million with liquidation preference.

    . Type - convertible into 78% of the fully diluted common stock outstanding
      at confirmation (subject to  certain limitations).

    . Dividends - 7.5% per annum, accumulating semi - annually with no dividends
      payable or accrued during the first two years following confirmation and
      payable thereafter as permitted by new secured credit facility when funds
      are legally available and as properly declared by the Board of Directors.

    . Other - Subject to conversion rights, optional redemption and voting
      rights provisions.

 . Board of Directors - two appointed by the Committee, two from existing
  board and a fifth chosen by the four, all with two year terms.

  Existing common stock, option and warrants will remain outstanding with no
change in terms and conditions except that all options and warrants expiring
between the Petition Date and confirmation of the Amended Plan will be extended
for a two year period.

  At this time, it is not possible to predict the outcome of the bankruptcy
proceedings, in general, or the effect on the business of the Company or on the
interests of creditors or shareholders.  As a result of the bankruptcy filing,
all of the Company's and Debtor Subsidiaries, liabilities incurred prior to the
Petition Date, including certain secured debt, are subject to compromise.

  The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business.  As a result of
the bankruptcy filing and related events, there is no assurance that the
carrying amounts of assets will be realized or that liabilities will be
liquidated or settled for the amounts recorded.  In addition, a plan of
reorganization, or rejection thereof, could change the amounts reported in the
financial statements. As a result, there is substantial doubt about the
Company's ability to continue as a going concern. The ability of the Company to
continue as a going concern is dependent upon confirmation of a plan of
reorganization, adequate sources of capital and the ability to sustain positive
results of operations and cash flows sufficient to continue to acquire, explore
for and develop oil and gas reserves.

  In the ordinary course of business, the Company makes substantial capital
expenditures for the acquisitions, exploration and development of oil and
natural gas reserves.  Historically, the Company has financed its capital
expenditures, debt service and working capital requirements with cash flow from
operations, public offerings of equity, private offerings of debt, asset sales,
borrowings under its senior credit facility and other financings.  Cash flow
from operations is sensitive to the prices the Company receives for its oil and
natural gas production.  Lower hydrocarbon production associated with a
reduction in planned capital spending or an extended decline in oil and gas
prices could result in less than anticipated cash flow from operations in later
years, which could have a material adverse effect on the Company.

  Management's plans are to continue to incur capital expenditures with the goal
of increasing production and reserves.  The Company plans to accumulate cash
subsequent to the Petition Date and may utilize that cash, subject to
restrictions and provisions of a court-approved cash collateral order, to fund
its operations, including planned capital expenditures, during the pending
bankruptcy proceedings.  The ability to incur capital expenditures, sell
properties and obtain additional financing is subject to the approval and
ongoing supervision of
<PAGE>

the Bankruptcy Court. There is no assurance that adequate funds can be obtained
on a timely basis or that the Bankruptcy Court will approve such transactions.

   On March 29, 1999, the Company entered into a restructured and amended credit
facility ("Amended Credit Facility") with its domestic lenders. The Amended
Credit Facility provided for a borrowing base of $19,353,000, plus a principal
tranche of $12,500,000 ("Tranche A") that was due to mature on September 1,
1999. The borrowing base was reduced to $18,830,000 on April 1, 1999, reflecting
the $6,000,000 received in March and April 1999, for the sale of the Company's
mineral interests in Texas, Mississippi and New Mexico. In July and August of
1999 the sale of the Company's interests in the Brushy Creek and Texan Gardens
Fields in Texas were closed for $15.2 million and $0.8 million, respectively.
The majority of the net proceeds were applied to the Company's Amended Credit
Facility with $5.0 million being applied to the borrowing base facility and $9.6
million to the Tranche A obligation. In September and October 1999, the Amended
Credit Facility was further amended to extend the ultimate due date of the
Tranche A principal to October 28, 1999. Due to the bankruptcy filings on
October 29, 1999, the Company is not in compliance with certain provisions of
the Amended Credit Agreement. As of December 31, 1999 and March 31, 2000, the
entire amount outstanding under the Amended Credit Facility was included in
Liabilities Subject to Compromise on the Consolidated Balance Sheet. See
Note 2 - Bankruptcy Filing. The obligations under the Amended Credit Facility
are secured by substantially all of the assets of the Company and its
subsidiaries other than Neutrino. The Amended Credit Facility prohibits the
payment of dividends and contains covenants relating to the financial condition
of the Company including tangible net worth and cash flow coverage covenants. On
March 31, 2000, outstanding borrowings under the Amended Credit Facility were
$16,109,000 with no further borrowing availability. Outstanding principal under
the Amended Credit Facility bears interest at the Bank Index Rate (9.00% at
March 31, 2000) to the extent of the borrowing base utilized and at Bank Index
Rate plus 1% on Tranche A principal.

   The working capital and net cash balances available at March 31, 2000 may be
used to cover some of the liabilities subject to compromise pursuant to a final
plan of reorganization. The Company's capital expenditures for 2000 will remain
subject to the approval and supervision of the Bankruptcy Court until plan
confirmation and may vary significantly due to a variety of factors, including
drilling results, oil and gas prices, industry conditions and outlook, future
acquisitions of properties, the availability of capital and the consent of the
Company's creditors.

  Effective June 25, 1998, Neutrino entered into a new Cdn $40,000,000 (US
$27,155,000) revolving demand loan facility (the "Canadian Credit Facility")
under which it could borrow at bank prime or Bankers Acceptance Rates plus a 1%
stamping fee. At March 31, 2000, the Canadian Bank prime rate was 7.00% and the
Bankers Acceptance Rate for 30-day maturities was 5.31%. Effective July 15,
1999, the borrowing base under the Canadian Credit Facility was reduced to Cdn
$30,500,000 (US $20,706,000) and the interest rate was increased to prime plus
1% and the stamping fee on Bankers Acceptance was increased to 1 1/4% per annum.
These changes were a result of a lender review giving effect to lower world oil
prices, the sale of certain non-strategic oil and gas properties and the
Company's financial condition. At March 31, 2000, outstanding borrowings under
the Canadian Credit Facility were Cdn $3,752,000 (US $2,580,000). On March 3,
2000 subsequent to the sale of certain oil and gas properties, the borrowing
base under the Canadian Credit Facility was reduced to Cdn $11,050,000 (US
$7,624,500). The Canadian Credit Facility contains certain covenants relating to
the financial condition of Neutrino including, at each quarter's end,
maintenance of a positive working capital through maturity. The borrowing base
under the Canadian Credit Facility is subject to semi-annual redeterminations.
As of March 31, 2000, Neutrino was in compliance with the terms of the Canadian
Credit Facility. The outstanding balance under the Canadian Credit Facility is
classified as a current liability because of the demand feature of the loan.
However, it is management's intention that the facility be utilized to provide
long-term financing for the Company. Judgments by the Canadian lender regarding
the level of future oil and natural gas prices, among other things, will impact
their borrowing base determinations for the Company's Canadian Credit
Facilities.

  The Company's substantial leverage poses certain risks, including the risk
that the Company may not generate sufficient cash flow to service its
indebtedness or that the Company may be unable to obtain additional financing in
the future and as a result, may not have the necessary resources to respond to
market conditions and opportunities. The Company's high level of indebtedness,
covenant requirements and working capital deficit subjects it to risks of
default, which significantly impaired its ability to meet its liquidity needs.
<PAGE>

The Company's Amended Credit Facility contained provisions whereby default under
the Company's Canadian Credit Facility or the 6.875% Convertible Subordinated
Debentures or the filing of a bankruptcy petition create a default condition
under the Amended Credit Facility. In addition, the holders of Convertible
Subordinated Debentures have acceleration rights if the Company is in payment
default under either its Amended Credit Facility or Canadian Credit Facility or
has filed a petition under the Bankruptcy Code. Due to the bankruptcy filing on
October 29, 1999, the Company is in default under its Amended Credit Facility,
the Canadian Credit Facility and the 6.875% Convertible Subordinated Debentures.

  The Company's financial condition at the end of 1998 resulted in the Company's
independent auditors, in their opinion on the 1998 financial statements,
disclosing their substantial doubt about the Company's ability to continue as a
going concern. In February 1999, the Board of Directors of the Company retained
CIBC World Markets Corp. as independent advisors to assist in evaluating various
strategic alternatives for maximizing shareholder value. On July 21, 1999, the
Company announced that its Board of Directors had approved a restructuring of
the Company that involved a $20.6 million equity infusion, the sale of the
Brushy Creek and Texan Garden Fields in Texas and an exchange offer for its
6.875% Convertible Subordinated Debentures due 2007. The restructuring plan, as
initially filed with the Securities and Exchange Commission, would have
substantially reduced the current common stockholders interest in the Company.
Based upon discussions with certain of the holders of its debentures, the Board
of Directors of the Company concluded that the restructuring could not be
consummated on the terms previously contemplated.

  Due to the Company's filing for bankruptcy on October 29, 1999 and its
continuing high level of indebtedness and working capital deficit as of December
31, 1999, the Company's independent auditors' 1999 report continued to disclose
their substantial doubt about the Company's ability to continue as a going
concern.

  The Company was notified that effective with the close of business on
August 4, 1999, its Common Stock was delisted from the Nasdaq National Market
and its Convertible Subordinated Debentures were delisted from the NASDAQ Small
Cap Market. This action was attributable to its inability to satisfy the Nasdaq
National Market maintenance standards for the continued listing of its Common
Stock. Following the delisting, the Company's Common Stock has continued to be
quoted and traded on the OTC Bulletin Board under the symbol, SMINQ.OB and is
currently SMINE.OB. Due to its bankruptcy proceedings, the Company did not
pursue a review of the delisting decision by the Nasdaq Review Council. The
Company believes a permanent delisting of its Common Stock and Convertible
Subordinated Debentures would impair the liquidity of the Common Stock,
Convertible Subordinated Debentures and capital raising flexibility of the
Company. The Company cannot assure that it will be successful in obtaining
relisting of its securities once it emerges from bankruptcy proceedings.

  Since the trading of the Company's securities will be conducted on the OTC
Bulletin Board, the Company expects the spreads between the "bid and "asked"
prices of the Common Stock quoted by market makers will likely be greater than
in the past and shareholders will likely experience a greater degree of
difficulty in trading the Common Stock. In addition, there are significant
restrictions imposed by most brokerage houses on the ability of their brokers to
solicit orders or recommend the purchase of securities that trade on the OTC
Bulletin Board. In the majority of the cases, the purchase of the securities is
limited to unsolicited offers from private investors, who have to comply with
policies and practices involving the completion of time-consuming forms that can
make the handling of lower-priced securities economically unattractive.
Moreover, most brokerage houses do not permit lower-priced securities to be used
as collateral for margin accounts or to be purchased on margin. The Company
believes that the current market price of its securities may limit the effective
marketability because of the reluctance of many brokerage firms and
institutional investors to recommend lower-priced securities to their clients or
to hold them in their own portfolios. The brokerage commission on the purchase
or sale of a lower-priced securities may also represent a higher percentage of
the price than the brokerage commission on a higher-priced issue.

  The Company did not declare dividends in three months ended March 31, 2000 and
1999. The Company does not expect, under its existing capital structure, to be
able to pay dividends for the foreseeable future. Payment of dividends is
currently prohibited by the terms of the Company's Amended Credit Facility and
would require approval from the Bankruptcy Court.
<PAGE>

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2000
AS COMPARED TO THE QUARTER ENDED  MARCH 31, 1999

  Oil and gas revenues for the quarter ended March 31, 2000 were $7,412,000
compared to oil and gas revenues of $5,621,000 for the same period in 1999. Oil
and NGL production decreased 17% to 195,791 barrels and natural gas production
decreased 44% to 966 MMcf in the first quarter of 2000 compared to the first
quarter of 1999. The lower production levels in the first quarter of 2000 are
due primarily to the sale of properties in 1999. Increases in commodity prices
more than offset the impact of the lower volumes.

  The average realized oil and NGL price increased 146% from $10.46 per barrel
in the first quarter of 1999 to $25.72 in the first quarter of 2000. Average
realized natural gas prices increased 38% to $2.36 per Mcf during the first
quarter of 2000 compared to $1.71 per Mcf in same period a year earlier.

  During the first quarter of 1999, the Company sold its mineral interests and
substantially all of its royalty interests in Texas, New Mexico and Mississippi
for approximately $6,000,000. The gain on the sale of these assets was
$5,073,000. The proceeds from asset sales in the first quarter of 1999 were used
to reduce bank indebtedness and for other corporate purposes.

  First quarter 2000 production costs, including production and ad valorem
taxes, decreased 5% to $1,973,000 compared to $2,081,000 in the first quarter of
1999. However, on an energy equivalent unit basis, production costs rose 39%
quarter-over-quarter resulting primarily from non-reocurring workovers and other
operations.

  General and administrative expenses were $601,000 in the first quarter of
2000, a 42% decrease from $1,040,000 in the prior year's first quarter primarily
related to reductions in force through attrition and layoffs in 1999. On an
energy equivalent unit basis, costs declined 15% from the first quarter of 1999
to the same period in 2000.

  Depreciation, depletion and amortization ("DD&A") decreased 38% to $1,918,000
in the first quarter of 2000 compared to $3,081,000 in 1999. On a unit of
equivalent production basis, DD&A decreased 9% from $0.98 per Mcfe to $0.89 per
Mcfe.

  Restructuring and bankruptcy costs were $852,000 in the first quarter of 2000
compared to no such costs in 1999. These costs were charged to expense pursuant
to SOP 90-7.

  Interest and debt expense in the quarter ended March 31, 2000 was $557,000
compared to $1,774,000 in the same period in 1999. The decrease primarily
reflects the reduced indebtedness outstanding due to the application of proceeds
from property sales to debt reduction and no accrual of interest related to
subordinated debt in accordance with SOP-7. Additional interest during the first
quarter would have been $711,562.

  Tax provision in the first quarter 2000 was $191,000 compared to tax benefit
of $230,000 in the same period in 1999. The increase in tax provision primarily
reflects increased pre-tax income from the Company's Canadian operations in the
first quarter of 2000 compared to a loss in the same period in 1999 and state
income tax liability associated with the Company's U. S. operations in 2000.

  The Company recorded net income of $1,174,000, or $0.09 per basic share for
the quarter ended March 31, 2000 compared to $2,928,000 or $0.23 per basic share
for the quarter ended March 31, 1999.
<PAGE>

DEFINITIONS

   As used herein:

     Thousand cubic feet ("Mcf")
     Million cubic feet ("MMcf")
     Natural gas liquids ("NGL")
     Energy Equivalents Units (1 barrel of liquids = 6 Mcf of natural gas)
     Thousand cubic feet of gas equivalent ("Mcfe")

Recent Accounting Pronouncements

  Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), was issued by the
Financial Accounting Standards Board in June 1998. SFAS 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts. Under the standard, entities are required to carry
all derivative instruments in the statement of financial position at fair value.
The Company will adopt SFAS 133 beginning in fiscal year 2000. The Company has
not yet determined the impact that SFAS 133 will have on its financial
statements.

FORWARD-LOOKING STATEMENTS

  All statements other than statements of historical fact contained in this
report, including statements in Management's Discussion and Analysis of
Financial Condition and Results of Operations, are forward-looking statements.
When used herein, the words "budget", "expressions", "anticipate", "expects",
"believes", "seeks", "goals", "plans", "strategy", "intends", or "projects" and
similar expressions are intended to identify forward-looking statements. It is
important to note that the Company's actual results could differ materially from
those projected by such forward-looking statements and no assurance can be given
that the expectations will prove correct. In reliance upon the Private
Securities Litigation Reform Act of 1995, factors identified by the Company that
could cause the Company's future results to differ materially from the results
discussed in such forward-looking statements include the risks described under
"Risk Factors" in Item 1 of its Annual Report on Form 10-K, as amended, for the
year ended December 31, 1998. All forward-looking statements in this report are
expressly qualified in their entirety by the cautionary statements in this
paragraph and shall be deemed in the future to be modified in their entirety by
the Company's public pronouncements, including those contained in all future
reports and other documents filed by the Company with the Securities and
Exchange Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The Company is exposed to a variety of market risks including the potential
for adverse changes in oil and gas prices, foreign currency exchange rates and
interest rates. There have been no material changes to the Company's disclosures
about market risk from those contained in its 10-K, as amended, for the year
ended December 31, 1999.
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

  The Company is involved in several lawsuits arising in the ordinary course of
business, none of which management believes presents the possibility of a
material payment liability.

  Items 2, 3, 4 and 5 for which provision is made in the applicable regulations
of the Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

           (a) EXHIBITS:

               27.1 Financial Data Schedule (filed herewith).

           (b) REPORT ON FORM 8-K:

               Form 8-K filed March 1, 2000, reporting the Registrant's
               disposition of interests held by its subsidiary, Neutrino
               Resources, Inc.
<PAGE>

                                   SIGNATURE


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


                                    SOUTHERN MINERAL CORPORATION


Date: May 15, 2000                  By /s/ Michael E.Luttrell
                                       -------------------------------
                                          Michael E. Luttrell
                                       Vice President-Finance and CFO