UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  FORM 10-KSB
<TABLE>
<CAPTION>

<S>                                                                        <C>

(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [FEE REQUIRED]
      For the fiscal year ended December 31, 1997
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
      For the transition period from to.
Commission File Number 1-6336
PETROMINERALS CORPORATION
(Name of small business issuer in its charter)
                Delaware                        95-2573652
--------------------------------  -----------------------------------
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
 incorporation or organization)
915 WESTMINSTER AVENUE, ALHAMBRA, CALIFORNIA 91803
------------------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (626) 284-8842
Securities registered pursuant to Section 12(b) of the Act:  NONE
Securities registered pursuant to Section 12(G) of the Act:
COMMON STOCK, PAR VALUE $.80
-------------------------------------------------------------------------
(Title of Class)
</TABLE>


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

Check  if  there is no disclosure of delinquent filers in response to Item 405
of  Registration  S-B  is  not  contained  in  this  form and no disclosure be
contained,  to  the  best  of  Registrant's  knowledge, in definitive proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-KSB  or  any  amendment  to  this  Form  10-KSB.
[X]

The  issuer's  revenues  for  its  most  recent fiscal year were approximately
$1,407,000.

Check  whether  the  Issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities  under  a  plan  confirmed  by  a  court.
[    ]  yes          [    ]    no

Transitional  small  business  disclosure  format.        [  ] yes      [X] no
The number of shares of Registrant's common stock outstanding was 1,059,417 as
of  March  16,  1998.
The  aggregate  market  value  of  the  Registrant's  voting  stock  held  by
non-affiliates  of the Registrant was approximately $2,880,401 as of March 20,
1998.

The  total  number  of  pages  in  this  Form  10-KSB  are  61.
The  Index  of  Exhibits  included  in this Form 10-KSB is located at page 58.





Page 1
<PAGE>
PETROMINERALS  CORPORATION
PART  I
ITEM  1  -  BUSINESS
            --------
A.    GENERAL  DESCRIPTION  OF  BUSINESS
      ----------------------------------
INTRODUCTION
Petrominerals  Corporation  (Petrominerals  or  the  Company)  which  was
incorporated  under  the  laws of the State of Delaware in 1966, is engaged in
the  production  of on-shore domestic crude oil and natural gas in Los Angeles
County, California, and oilfield services through its well servicing division,
Hydro-Test  International,  Inc.  (Hydro-Test).  The  Company sells the oil it
produces  at the well site and does not refine any of its production or market
any  other  petroleum  products.  The  Company's  wholly  owned  subsidiary,
Hydro-Test,  a  New  Mexico  corporation    acquired in 1993, provides tubular
testing services including hydro-static testing of tubing, pipelines and valve
assemblies in the oil and gas industry. Hydro-Test is currently doing business
as  Texas  Tubing  Testers.

BUSINESS  STRATEGY

After  completing  a  two  year program of corporate downsizing and performing
remedial  work, the Company engaged the services of an investment banking firm
to  look  for  another Company to become a partner to a merger or acquisition.
During  this process, the Company received an offer for the purchase of all of
the  Company's  oil  and  gas  operations.

Management  signed  an agreement on February 4, 1998, with an unrelated entity
for  the  sale  of  all  of  the  oil  and  gas producing property and related
infrastructure,  including  the 140 acres (see "Real Property Holdings") owned
by the Company, for $4,450,000 in cash and an installment note for $1,150,000.
The  sale does not include the assets of Hydro-Test. The effective date of the
sale  is  March 31, 1998, and the cash proceeds of the sale should be received
by  the  Company shortly thereafter. Following this sale, the Company plans to
use  the  proceeds to either purchase other oil producing assets or merge with
another  company.  Management  is  currently  considering    various  options.
Following  this  sale,  the  Company  will  no  longer operate the oil and gas
segment  of  the business, unless other oil producing properties are acquired.

DISPOSITION  AND  BANKRUPTCY  OF  HYDRO-TEST  INTERNATIONAL,  INC.

In  March  1995, the Company adopted a formal plan to liquidate and dispose of
the  assets  of Hydro-Test, due to a downturn in the oilfield service industry
in the first quarter of 1995.  Through August 1995, the Company proceeded with
this  liquidation  plan  by  selling  the  equipment  and inventory of several
locations  operated  by Hydro-Test. On September 1, 1995, management abandoned
the  liquidation plan and commenced its voluntary reorganization case with the
filing  of  a  petition under Chapter 11 of the United States Bankruptcy Code.
This case was filed as a Chapter 11 case to protect the Hydro-Test assets from
seizure  and to pay creditor claims in a greater amount than could be obtained
in  an  immediate  Chapter  7  liquidation  case.



Page 2
<PAGE>
ITEM  1  -  BUSINESS  (Continued)
            --------

A.    GENERAL  DESCRIPTION  OF  BUSINESS  (Continued)
      ----------------------------------

DISPOSITION  AND  BANKRUPTCY  OF  HYDRO-TEST  INTERNATIONAL,  INC. (Continued)

On  May 16, 1996, the plan of reorganization was accepted by the creditors and
confirmed  by the United States Bankruptcy Courts for the Southern District of
Texas,  Houston  Division.  On  August 14, 1996, a final hearing took place to
approve  the  payment  of  professional fees and order final payment. As such,
Hydro-Test  is  no  longer  in  bankruptcy.

All of the creditors that had the option elected to receive 50% of their claim
over  60  months rather than 25% over 90 days. Hydro-Test has not yet paid any
of  these  claims.  Management  continues to review the financial condition of
Hydro-Test  on  an ongoing basis and will determine when payments to creditors
will  be  made.  Management is also considering a complete liquidation of this
subsidiary.

REAL  PROPERTY  HOLDINGS

The  Company  owns  140  acres  of unimproved land in the Hasley Canyon field,
Santa  Clarita  Valley, Los Angeles County, California, which is the Company's
primary  location  of  oil  production.  Six of the Company's wells and a tank
battery  are located on land owned by the Company, and the remaining wells are
located  on  leased  property.

The  Company  entered  into  an option to purchase agreement with an unrelated
entity  effective  December 30, 1996, in an effort to raise additional capital
by  selling  most  of  the  140  acres mentioned above. Under the terms of the
agreement,  the  purchaser  has an option to purchase the property at any time
during  the  next 31 months, subject to certain restrictions. The purchaser is
required to make various monthly payments and can withdraw at any time. If the
purchaser  does  withdraw,  none  of the option payments will be refunded. The
payments  do  not  reduce the purchase price of the property. The Company will
dispose  of  these assets and transfer the purchase option as part of the sale
noted  under  "business  strategy."  Following  this sale, the Company will no
longer  have  any  real  property  holdings.















Page 3
<PAGE>
ITEM  1  -  BUSINESS  (Continued)
            --------
B.    FINANCIAL  INFORMATION  CONCERNING  INDUSTRY  SEGMENTS
      ------------------------------------------------------

Petrominerals  principally  operates  in  two  industry  segments:  (1)  the
production  and  sale  of  crude  oil;  and  (2) providing tubular testing and
complimentary  services  through its oilfield services subsidiary, Hydro-Test.
During  the past three years, revenues were derived from the oilfield services
operations  and the production and sale of produced crude oil and natural gas.
The  following table shows the Industry Segment Percentage Revenues derived by
Petrominerals  for  the  past  three  years:

Industry  Segment  Percentage  Revenues for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>


                   1997   1996   1995
                   -----  -----  -----
<S>                <C>    <C>    <C>

Oilfield services   6.7%   1.0%  36.3%
Oil and gas sales  76.7%  94.0%  57.6%
Other              16.6%   5.0%   6.1%
</TABLE>


See Note 10 to the Consolidated Financial Statements in Item 7 hereof for
information regarding amount of revenue, operating profit, and identifiable
assets attributable to Petrominerals' industry segments for the fiscal years
indicated above.

C.  DESCRIPTION OF BUSINESS
    -----------------------
OIL AND GAS SALES

The Company currently owns and operates oil wells in Los Angeles County,
California. Specifically, the Hasley Canyon and Castaic Hills fields are
located in the Santa Clarita Valley, Los Angeles County.

Development of  Properties
-------------------------
Petrominerals contracts to sell the oil it produces to customers who either
refine the oil or resell it to refiners. The Company does not refine any of
its oil production and uses all of the gas produced to either generate
electricity for pumping units or to operate natural gas powered pumping units
and tank heaters. Sales of produced oil are generally made pursuant to
contracts of 30 or 90 days duration and fluctuate with differences in posted
field prices based on the quality of the oil produced. The price obtained for
oil depends upon numerous factors, including the extent of domestic production
and foreign imports, world events, market demand, hostilities in oil producing
countries, and the effect of governmental regulations. As a result of a
combination of these factors, oil prices are constantly fluctuating. Prices
for California oil are significantly lower than reported benchmark prices for
similar oil in the United States, due to the influx of Alaskan North Slope
(ANS) crude into West Coast markets, which is directly in competition with
California's production.



Page 4
<PAGE>
ITEM 1 - BUSINESS (Continued)
         --------
C.  DESCRIPTION OF BUSINESS (Continued)
    -----------------------
    Development of  Properties (Continued)
    --------------------------

The average price the Company received for its crude oil during 1997 was
approximately $14.29 per barrel, which is approximately $0.84 per barrel lower
than the average price which the Company received for its crude in 1996. This
price had fallen to approximately $7.25 per barrel as of March 12, 1998. The
Company incurred average production costs of approximately $9.17 per barrel,
and produced approximately 118,689 barrels of crude.

The Company entered into a joint venture agreement with Petrominerals 96-1, a
limited partnership formed on December 3, 1996, to drill a well on a
designated site. The Company has a 1% interest as general partner in the
partnership, and the limited partners consist of three directors and two
unrelated parties. The Company contributed the drill site in exchange for
their interest in the partnership and serves as the well's operator.

Operating Hazards and Uninsured Risks. The Company's operations are subject to
all of the operating hazards and risks associated with producing oil, such as
environmental pollution and personal injury. The Company carries general
liability insurance, however, it has not obtained insurance against
environmental pollution over and above the minimum amounts required by the
State of California.

Government Regulations. Federal, state and local governments impose numerous
laws and regulations on the production and sale of oil and gas. In addition,
state and Federal regulations have been adopted which pertain to the spacing
of wells, prevention of waste of oil and gas, limiting rates of production,
proration of productions, handling of waste water and similar matters. All
such laws and regulations are subject to change at any time, and there is no
way to ascertain either the likelihood or potential effect of such future
changes.

Major Customers. The Company sold all of its oil production to Texaco Trading
and Transportation, Inc. (Texaco) during 1997. The contract with Texaco is for
the period September 1, 1995 through March 1, 1996, and continues on a
month-to-month basis thereafter until the first month following either party's
sixty-day advance written notice of termination.

Management believes that the loss of its contract with Texaco could have a
material adverse effect on Petrominerals, in the unlikely event that the
Company were unable to obtain new customers which were sufficient
replacements. See Note 10 to the Financial Statements included in Item 7
hereof which contains information regarding sales to a major customer.








Page 5
<PAGE>
ITEM 1 - BUSINESS (Continued)
         --------
C.  DESCRIPTION OF BUSINESS (Continued)
    -----------------------
    OIL AND GAS SALES (Continued)

Development of  Properties (Continued)
--------------------------

Petrominerals' oil and gas segment faces competition from a large number of
companies and individuals, both foreign and domestic, who are engaged in the
production of oil and gas. Most of the Company's competitors have
substantially more technical and financial resources available to them. The
Company competes on price only, and its ability to market its oil production
is directly influenced by factors that are beyond the Company's control. These
factors include crude oil imports, actions by foreign oil producing nations,
the availability of adequate pipeline and other transportation facilities, the
availability of equipment and personnel, marketing of competitive fuels, the
effect of governmental regulations, and the fluctuation of supply and demand
with respect to oil and gas.

Environmental Matters. The Company has established procedures for the on-going
evaluation of its operations to identify potential environmental exposures and
assure compliance with regulatory policies and procedures. Management monitors
these laws and regulations and periodically assesses the propriety of its
operational and accounting policies related to environmental issues. The
nature of the Company's business requires routine day-to-day compliance with
environmental laws and regulations. Additionally, the Company has been
identified as a potentially responsible party (PRP) by the Environmental
Protection Agency (see Item 3). Management is unable to determine what effect,
if any, this will have on the Company.

The Company is unable to predict whether its future operations will be
materially affected by these laws and regulations. It is believed that
legislation and regulations relating to environmental protection will not
materially affect the results of operations of the Company. Environmental
clean-up costs are incurred by the Company in the ordinary course of business.
In 1996, the Company incurred approximately $973 in environmental
investigation, compliance and remediation costs. The Company has not incurred
any environmental costs since 1996.

Employees.  As of December 31, 1997, the Company employed a total of 12
individuals, of which 4 were employed by Hydro-Test International, Inc.













Page 6
<PAGE>
ITEM 1 - BUSINESS (Continued)
         --------

C.  DESCRIPTION OF BUSINESS (Continued)
    -----------------------

OILFIELD SERVICES

Hydro-Test is engaged in the hydro-static testing of tubular pipe, pipelines
and valve assemblies in the oil and gas industry at one facility near Houston,
Texas. Hydro-Test previously operated two offices in California, three offices
in Texas, one office in New Mexico, and through its franchisees, licensed an
additional four offices in the United States and other countries. All
operations were consolidated into the remaining Texas operation during 1995 in
anticipation of reorganization.

Major Customers. Under current operating conditions, the loss of any one
customer would not have a material adverse effect upon Hydro-Test's revenues.



ITEM 2 - PROPERTIES
         ----------

AGREEMENT FOR SALE OF PROPERTY

As noted in "Management's Discussion and Analysis" contained in Item 6 hereof,
the Company has agreed to sell all of its oil and gas producing assets to an
unrelated entity. All of the properties noted below will be included in this
sale.

GENERAL

The principal properties of the oil and gas segment consist of proved
developed oil and gas properties; equipment and wells related to proved
properties; proved undeveloped oil and gas properties; maps, geologic and
geophysical records related thereto; and real estate. The Company's interest
in oil and gas properties are principally in the form of direct and indirect
working interests in leases, located in Los Angeles County, California. The
Company does not sell the natural gas produced in their remaining fields, but
instead uses the gas to produce electricity for electric pumping units or to
operate natural gas powered pumping units and tank heaters.

OIL AND GAS RESERVES AND PRODUCTION INFORMATION

The tables located in Note 13 of Item 7 located elsewhere herein set forth
information with respect to the engineering estimates of proved oil and gas
reserves owned by the Company. The reserves are shown in barrels (Bbl) of oil.
Except as set forth in this report, Petrominerals has not filed any estimates
of proved reserves with any federal authority or agency during the last fiscal
year. The Company's net interest in proved reserves and related valuations for
the years ended December 31, 1997 and 1996 have been prepared by Babson &
Sheppard, an independent petroleum engineering firm in Long Beach, California.



Page 7
<PAGE>
ITEM 2 - PROPERTIES (Continued)
         ----------

OIL AND GAS RESERVES AND PRODUCTION INFORMATION (Continued)

Reserve estimates are based upon detailed engineering and geological studies.
Where an adequate production trend has been established, extrapolation of
production performance is used. If insufficient well data is available for
performance calculations, the initial gas or oil in place volumes are
estimated from geological interpretation of reservoirs, analysis of production
from wells in similar surrounding areas, or other techniques. Petroleum
engineering is not an exact science, and it involves estimates based upon
numerous factors, many of which are inherently variable and uncertain. Such
factors include the price of oil and gas and estimates of oil and gas
production and costs. Estimates of reserves and future net revenue costs
involve projecting future results by estimating future events. Therefore,
there are no assurances that actual productions, revenues, taxes, development
expenditures and operating expenses will occur as estimated.

Oil and Gas Reserves Information
--------------------------------

Information regarding the Company's estimated net oil and gas reserves,
additions and revisions to estimated net reserves, estimated future cash
inflows and related costs and discounted future net cash flows for the years
ended December 31, 1997 and 1996, are contained in Note 13 to the Company's
consolidated financial statements in Item 7 hereof. The Company's reserve
report, from which the foregoing estimates were derived, is based upon prices
in effect at October 31, 1997.

The Company periodically evaluates its oil and gas properties for impairment
by determining if the carrying value of the properties exceeds the present
value of their estimated future net revenues, calculated at current prices
(i.e., the ceiling). Since March 1986, the Company has established impairment
reserves of $10,963,000 against its oil and gas properties, of which
$1,390,000 was recorded in 1993, due to the year-end average posting prices of
$7.05 per barrel. Current accounting standards do not allow the Company to
reinstate value for subsequent increases in the ceiling.
















Page 8
<PAGE>
ITEM 2 - PROPERTIES (Continued)
         ----------

PRODUCTION

Net Annual Production
--------------------

The following table sets forth the Company's net production of oil interests
for the years ended December 31 (in thousands). Net production represents
production owned by Petrominerals and produced to its interest, less royalty
and other similar interests.
<TABLE>
<CAPTION>


                        1997  1996
                        ----  ----
<S>                     <C>   <C>

Net annual production
   Oil (Bbl)             119   106
</TABLE>


Sales Prices and Production Costs
---------------------------------

The following table sets forth the average sales price and average production
(lifting) cost per unit of oil produced by the Company for the years ended
December 31,:
<TABLE>
<CAPTION>


                                        1997    1996
                                       ------  ------
<S>                                    <C>     <C>

Average sales price of oil per barrel  $14.29  $15.13
Average production cost per barrel       9.17    9.04
</TABLE>






















Page 9
<PAGE>
ITEM 2 - PROPERTIES (Continued)
         ----------

PRODUCTIVE WELLS AND DEVELOPED ACREAGE

Proved developed oil and gas properties are properties on which wells have
been drilled, and are capable of producing crude oil or natural gas in
commercial quantities. The Company's proved acreage and the number of
productive wells as of December 31, 1997, are set forth in the tables below:

Productive Wells
----------------

The productive wells in which the Company owned interests consisted of the
following:
<TABLE>
<CAPTION>


Gross Wells  Net Wells
-----------  ---------
<S>          <C>

36                  28
</TABLE>


Developed Acreage
-----------------

The Company's working and royalty interests in developed acreage consists of
the following:
<TABLE>
<CAPTION>


               Gross  Net
               -----  ---
<S>            <C>    <C>

Total Acreage  1,200  968
</TABLE>


Drilling Activity
-----------------

The Company entered into a joint venture during 1996 with Petrominerals 96-1,
a newly formed, limited partnership, to drill a well on a designated site in a
proven area. Under the terms of the agreement, the Company has a 1% interest
as general partner and 6 other entities, including 2 directors and a company
controlled by a director, own the remaining 99% interest. The partnership was
formed to enter into a joint venture agreement with the Company to drill a
well on the Company's Mabel Strawn lease. The Company received $280,000 from
the partnership under a turnkey drilling contract. Proceeds from the working
interest will be paid 90% to Petrominerals 96-1 and 10% to the Company until
payout, and thereafter 30% to Petrominerals 96-1 and 70% to the Company.
Payout occurs when Petrominerals 96-1 has recouped the monies it contributed
to the joint venture. The Company completed the well on January 20, 1997, and
began production shortly thereafter.







Page 10
<PAGE>
ITEM 2 - PROPERTIES (Continued)
         ----------
         PRODUCTIVE WELLS AND DEVELOPED ACREAGE (Continued)

Delivery Commitments
--------------------

The Company is not obligated to provide a fixed and determinable quantity of
oil in the future under existing contracts or agreements, however, they do
have an agreement to sell the oil produced.


ITEM 3 - LEGAL PROCEEDINGS
         -----------------

The Company is not a party to nor is its property the subject of any material
legal proceedings other than ordinary routine litigation incidental to its
business, or which is covered by insurance, except as set forth below:

In December 1989, the Company was notified by the United States Environmental
Protection Agency (EPA) that, under the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the
Company was considered a potentially responsible party (PRP) in the clean-up
of the Operating Industries, Inc. (OII) waste disposal site located in
Monterey Park, California. Century Oil Corporation, a predecessor of the
Company, disposed of drilling mud and water at the OII disposal site, at
various times from 1975 to 1977. The Company, along with several other similar
PRP's,  contend that drilling mud and waste water do not constitute hazardous
substances within the meaning of CERCLA. Although the ultimate impact of the
resolution of this contingency is unknown, management believes that this
matter will not have a material adverse affect on the financial position of
the Company.

On September 1, 1995, the Company's subsidiary, Hydro-Test International, Inc.
(Hydro-Test), filed a petition under Chapter 11 of the United States
Bankruptcy Code.  This case was filed as a Chapter 11 case to protect the
assets from seizure and pay creditor claims a greater amount than could be
obtained in an immediate Chapter 7 liquidation case.  The case was presented
before the United States Bankruptcy Courts for the Southern District of Texas,
Houston Division.  Under the plan, creditors had the option of receiving a 25%
cash payment of allowed claims within 90 days of the effective date or 50% of
allowed claims over a period of 60 months, with the exception of unsecured
creditors with claims in excess of $5,001. Creditors with claims in excess of
$5,001 will receive payments over 84 months. The parent Company also agreed to
pay $50,000 in cash for equipment repair and convert $500,000 of its unsecured
debt to equity at the rate of $100,000 per year for five years and defer
participation in cash distribution for 24 months. The new value of the parent
company's contribution was computed at $300,000.





Page 11
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS (Continued)
         -----------------

On May 16, 1996, the plan of reorganization was accepted by the creditors and
confirmed by the United States Bankruptcy Courts for the Southern District of
Texas, Houston Division. On August 14, 1996, a final hearing took place to
approve the payment of professional fees and order final payment. As such,
Hydro-Test is no longer in bankruptcy.

All of the creditors that had the option elected to receive 50% of their claim
over 60 months rather than 25% over 90 days. The Company has not yet paid any
of these claims.


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

During the fourth quarter of 1997, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.

































Page 12
<PAGE>
                                    PART II


ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND
         --------------------------------------------
         RELATED SECURITY HOLDER MATTERS
         -------------------------------

The Company's common stock is currently traded in the Small Cap System under
the  nasdaq symbol PTRO. The following table sets forth the range of high and
low sales prices on the nasdaq Small Cap System for the Company's common
stock, for the fiscal years ended December 31, by fiscal quarters as indicated:

<TABLE>
<CAPTION>


                      High    Low
                     ------  ------
<S>                  <C>     <C>

1996
     First quarter   $    3  $    2
     Second quarter       3   2 3/4
     Third quarter        3   2 1/4
     Fourth quarter   2 1/2       2
1997
     First quarter   $    4  $2 1/2
     Second quarter   3 1/2       3
     Third quarter    3 1/2   2 3/4
     Fourth quarter       6   3 1/4
</TABLE>


These stock prices have been retroactively adjusted to reflect the eight for
one reverse stock split that occurred on January 9, 1998 (see Item 7, Note 14
- Subsequent Events).

The Company has 884 shareholders of record of its common stock as of March 16,
1998.

No regular dividends for Petrominerals' stock have been declared since 1986.
The Board of Directors has no current intention to declare or pay dividends in
the foreseeable future. The Board of Directors periodically reviews the
financial position of the Company and evaluates whether or not it will declare
dividends.








Page 13
<PAGE>
ITEM 6 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
         -----------------------------------------------
         CONDITION AND RESULTS OF OPERATIONS
         -----------------------------------

The following discussion should assist in an understanding of the Company's
financial position and results of operations for each of the two years in the
period ended December 31, 1997. The Notes to Consolidated Financial Statements
as of December 31, 1997, included elsewhere herein, contain detailed
information that should be referred to in conjunction with this discussion.

BUSINESS REVIEW

General
-------

The current President and CEO of the Company served his second full term since
returning during 1995. He continued his original goals of cutting corporate
overhead, disposing of unproductive assets and performing previously deferred
remedial work. He began considering various merger and acquisition scenarios
that would assure future profitable growth and maximize shareholder value.

The Company engaged the services of an investment banking firm during 1997 to
assist in locating a merger or acquisition partner. During this process, the
Company received an offer from an unrelated entity for the purchase of all its
oil and gas producing assets. An agreement was signed on February 4, 1998,
that provides for $4,450,000 in cash to be paid at the closing, and an
additional reserved production payment of $1,150,000, to be paid in
installments in any month in which certain postings for crude oil exceed
$13.50 per barrel.  The monthly payment will be equal to one-half of the
difference between the weighted average price and $13.50, multiplied by the
number of barrels produced. There is no stated interest associated with the
note. The purchase and sale of assets is expected to close not later than
March 31, 1998, and is contingent upon the purchaser's due diligence review.
Following this sale, the Company's oil and gas segment will be discontinued,
unless other properties are purchased or a merger with another producer takes
place.

Oil and Gas Segment
-------------------

The Company's oil revenues are impacted by several factors that are beyond the
Company's control, however, the prevailing factor is the price of crude oil
paid by the purchaser that holds their current contract. This prevailing price
is consistent with prices paid by other local purchasers.

The Company's oil revenues were extremely volatile between 1990 and 1994,
however, the average price per barrel of oil sold was fairly stable from 1995
through 1997. Unfortunately, the price of oil has declined sharply during the
first quarter of 1998, which would have a significant negative impact on
future oil revenues if the Company should continue to operate their oil and
gas segment.




Page 14
<PAGE>
ITEM 6 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
         -----------------------------------------------
         CONDITION AND RESULTS OF OPERATIONS (Continued)
         -----------------------------------

BUSINESS REVIEW (Continued)

Oil and Gas Segment (Continued)
-------------------

The Company entered into a joint venture agreement with Petrominerals 96-1, a
limited partnership formed on December 3, 1996, to drill a well on the
Company's Mabel Strawn oil lease. The Company assigned the drill site and
casing required for the well to the joint venture, and leased to the joint
venture the tangible equipment necessary for the well. The Company currently
does not have any plans in place to drill additional wells. The new well began
producing on January 20, 1997.

The Company also entered into an option to purchase agreement with a real
estate developer in an effort to dispose of the Company's 140 acre parcel
adjacent to their oil lease. The Company has received an initial payment of
$100,000, and will begin receiving $10,000 monthly option payments in May
1998. These payments will increase to $20,000 per month in November 1998. The
purchase option under this agreement significantly exceeds the Company's $1.1
million book value of the property.

Oilfield Services Segment
-------------------------

The Company's wholly owned subsidiary, Hydro-Test International, Inc., emerged
from Chapter 11 bankruptcy on May 16, 1996, after their plan was confirmed by
the courts and accepted by the creditors. Management has continued to sell off
its remaining assets and continues to operate the remaining facility near
Houston, Texas, on a limited basis. There are no current plans to expand the
operations or obtain additional capital from the parent company. Management is
also considering a complete liquidation as one of their options.

Under the terms of the reorganization plan, creditors will receive 50% of
their allowed claim over a 24 month period from the date the plan was
accepted. No distributions have currently been made to the creditors, and it
is questionable whether current operations will create the cash flow necessary
to meet these obligations. The parent company has agreed to forgive their
intercompany loan in exchange for $300,000 in new equity over a five year
period. The existing shares have not yet been canceled, and no new shares have
been issued.












Page 15
<PAGE>
ITEM 6 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
         -----------------------------------------------
         CONDITION AND RESULTS OF OPERATIONS (Continued)
         -----------------------------------
BUSINESS REVIEW (Continued)
1997 COMPARED WITH 1996

The Company had negative cash flows from operations of approximately $133,000
for the year ended December 31, 1997, as compared with a positive cash flow
from operations of $316,000 in the prior year. This decrease in cash was
primarily the result of the Company paying off their accounts payable and
accrued liability balances associated with the 96-1 drilling project. The cost
associated with the 96-1 drilling program was capitalized by the Company
during 1997.

The Company had a net loss of approximately $15,000, compared to net income of
$376,000 in the prior year. The prior year net income was primarily due to an
extra ordinary gain resulting from the Chapter 11 reorganization of
Hydro-Test. The current year loss is the net effect of continued net losses
from Hydro-Test of approximately $107,000 and net income of approximately
$92,000 from the Company's oil and gas operations.

The losses from Hydro-Test will most likely continue through 1998, unless the
Company is able to sell off the remaining assets. Any proceeds from the sale
of assets will be set aside to pay creditors under the Chapter 11 plan.
Revenues and expenses associated with the oilfield services segment should
remain consistent with prior year amounts during the first quarter of 1998.
Following the first quarter, the Company will report any revenues and expenses
associated with the oil and gas segment as discontinued operations.

The Company's other income increased significantly during 1997, due to one
time payments for options to purchase assets of the Company. This trend is not
expected to continue in 1998.

General and administrative expenses increased by approximately 12%, due to
additional professional fees incurred during negotiations to sell the
Company's assets. This trend will likely continue during 1998.

1996 COMPARED WITH 1995

The Company had cash provided by operations of approximately $316,000 for the
year ended December 31, 1996, compared to cash used by operations of
approximately $183,000 for the year ended December 31, 1995.  The increase in
cash flow was primarily due to the restructuring of Hydro-Test's debt and
increased oil prices.

The Company is not currently servicing Hydro-Test's prepetition liabilities,
following the protection that the Company received from creditors during
Chapter 11 reorganization. The Company received approximately $66,000 from the
sale of Hydro-Test's assets and an additional $135,000 from the sale of
Hydro-Test's inventory during 1996.



Page 16
<PAGE>
ITEM 6 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
         -----------------------------------------------
         CONDITION AND RESULTS OF OPERATIONS (Continued)
         -----------------------------------
BUSINESS REVIEW (Continued)
1996 COMPARED WITH 1995

The Company had net income of $376,000 in 1996 compared to a net loss of
$1,655,000 in 1995. The primary reason for the Company's net income in the
current year was a one-time extraordinary gain on debt forgiven in bankruptcy
of $448,000. The Company incurred a loss before income tax and extraordinary
item of $72,000 in 1996.

Oilfield service revenues declined an additional 98% during 1996, due to the
further downsizing of Hydro-Test.

Expenses related to the oilfield service sector declined 85%, however,
expenses continue to far exceed revenues in this segment. The Company is
currently working to further reduce expenses and generate more revenues.

Depreciation, depletion and amortization expense decreased by approximately
35% due to the continued disposal of Hydro-Test's fixed assets during 1996.
Depreciation, depletion and amortization was 9% and 6% of fixed assets in 1996
and 1995, respectively.

General and administrative expense decreased by approximately 25%, as a result
of the continued cost cutting by the returning President and CEO.

The 95% decrease in interest expense and prior year $805,000 loss on disposal
of assets were both directly related to the Hydro-Test Chapter 11 bankruptcy.
The Company is currently not recording interest on the prepetition
liabilities, and the loss on disposal of assets was a one-time write down to
reflect the assets' net realizable value.



















Page 17
<PAGE>
ITEM 7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------
<TABLE>
<CAPTION>


                                                           Page(s)
                                                           -------
<S>                                                        <C>

Report of Brown Armstrong Randall & Reyes,
  Independent Auditor's Report. . . . . . . . . . . . . .       19
Consolidated Balance Sheets at December 31, 1997 and 1996    20-21
Consolidated Statements of Operations for the Years Ended
  December 31, 1997 and 1996. . . . . . . . . . . . . . .       22
Consolidated Statements of Shareholders' Equity for the
  Years Ended December 31, 1997 and 1996. . . . . . . . .       23
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1997 and 1996. . . . . . . . . . . . . . .       24
Notes to Consolidated Financial Statements. . . . . . . .    25-44
</TABLE>






























Page 18
<PAGE>

                   REPORT OF BROWN ARMSTRONG RANDALL & REYES
                         INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Petrominerals Corporation


We have audited the accompanying consolidated balance sheets of Petrominerals
Corporation (a Delaware corporation) and Subsidiary as of December 31, 1997
and 1996, and the related consolidated statements of operations, shareholders'
equity, and cash flows for the two years then ended and the related December
31, 1997 and 1996 financial statement schedules as listed in the index at Item
13(a).  These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Petrominerals Corporation and
consolidated subsidiary as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.

As disclosed in Note 14 to the financial statements, on February 4, 1998, the
Company entered into negotiations to sell a major segment of its operations.
The segment represents a significant portion of the Company's total assets and
operations.

BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION

Bakersfield, California
February 27, 1998



Page 19
<PAGE>

                           PETROMINERALS CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 1997 AND 1996
               (Dollars in thousands, except par value amounts)

                                    ASSETS
<TABLE>
<CAPTION>


                                                   1997    1996
                                                  ------  ------
<S>                                               <C>     <C>

Current Assets
  Cash and cash equivalents                       $  235  $  614
  Accounts receivable, net                           115     183
  Inventories                                         50      61
  Prepaid expenses                                     7      16
  Other current assets                                22      20
                                                  ------  ------
     Total Current Assets                            429     894
Restricted Cash                                       40      40
Property and Equipment, net (including oil and
 gas properties accounted for on the successful
 efforts method)                                   2,198   2,062
Notes Receivable and Other Assets                    445     461
                                                  ------  ------
     TOTAL ASSETS                                 $3,112  $3,457
                                                  ======  ======
</TABLE>
























Page 20
<PAGE>

                     LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                    1997    1996
                                                   ------  ------
<S>                                                <C>     <C>

Current Liabilities
  Accounts payable                                 $  160  $  464
  Current portion of long-term debt                     8       8
  Accrued liabilities                                  83      87
  Royalties payable                                    29      42
                                                   ------  ------
     Total Current Liabilities                        280     601
Long-Term Debt, net of current portion                  3       7
Prepetition Liabilities                               516     521
                                                   ------  ------
     Total Liabilities                                799   1,129
                                                   ------  ------
Shareholders' Equity
  Preferred stock:
    $.10 par value, 5,000,000 shares authorized;
      no shares issued and outstanding                  -       -
  Common stock:
    $.80 par value, 20,000,000 shares authorized;
    1,059,417 shares issued and outstanding at
    December 31, 1997 and 1996                        848     848
Capital in Excess of Par Value                        563     563
Retained Earnings                                     902     917
                                                   ------  ------
     Total Shareholders' Equity                     2,313   2,328
                                                   ------  ------
     TOTAL LIABILITIES AND
       SHAREHOLDERS' EQUITY                        $3,112  $3,457
                                                   ======  ======
</TABLE>











  The accompanying notes are an integral part of these financial statements.


Page 21
<PAGE>

                           PETROMINERALS CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
               (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>


                                                  1997     1996
                                                 -------  -------
<S>                                              <C>      <C>

Revenues
  Oilfield services                              $   95   $   14
  Oil and gas                                     1,080    1,185
  Other income                                      232       70
                                                 -------  -------
     Total Revenues                               1,407    1,269
                                                 -------  -------
Costs and Expenses
  Oilfield services                                 189      199
  Oil and gas                                       601      561
  Depreciation, depletion and amortization          123      127
  General and administrative                        475      418
  Interest                                            3        3
  Other expense                                      31       33
                                                 -------  -------
     Total Costs and Expenses                     1,422    1,341
                                                 -------  -------
Loss before extraordinary item                      (15)     (72)
Extraordinary item                                    -      448
                                                 -------  -------
Net Income (Loss)                                $  (15)  $  376
                                                 =======  =======

Per Share Amounts:
  Net loss per share before extraordinary item   $ (.01)  $ (.07)
                                                 =======  =======
  Extraordinary item                             $    -   $  .43
                                                 =======  =======
  Net income (loss) per share                    $ (.01)  $  .36
                                                 =======  =======

Weighted average common shares outstanding        1,059    1,056
                                                 =======  =======
</TABLE>


(Per share amounts have been adjusted retroactively for the effects of a one
 for eight reverse stock split on January 9, 1998. See Note 14 - Subsequent
 Events).




  The accompanying notes are an integral part of these financial statements.


Page 22
<PAGE>
                           PETROMINERALS CORPORATION
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
                (Dollars in thousands, except number of shares)


<TABLE>
<CAPTION>


                                    Number of           Capital in
                                     Common              Excess of    Retained
                                     Shares    Amount    Par Value    Earnings    Total
                                    ---------  -------  -----------  ----------  -------
<S>                                 <C>        <C>      <C>          <C>         <C>

Balance, December 31, 1995          1,057,542  $   847  $       558  $     541   $1,946
  Issuance of shares for Directors
    Compensation                        1,875        1            5          -        6
  Net income                                -        -            -        376      376
                                    ---------  -------  -----------  ----------  -------
Balance, December 31, 1996          1,059,417      848          563        917    2,328
  Net income                                -        -            -        (15)     (15)
                                    ---------  -------  -----------  ----------  -------
Balance, December 31, 1997          1,059,471  $   848  $       563  $     902   $2,313
                                    =========  =======  ===========  ==========  =======
</TABLE>



(Per  share  amounts have been adjusted retroactively for the effects of a one
for  eight  reverse  stock  split on January 9, 1998. See Note 14 - Subsequent
Events).






















  The accompanying notes are an integral part of these financial statements.


Page 23
<PAGE>
                           PETROMINERALS CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
                            (Dollars in thousands)
<TABLE>
<CAPTION>


                                                                                           1997    1996
                                                                                          ------  ------
<S>                                                                                       <C>     <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                                       $ (15)  $ 376
  Adjustment to reconcile net income (loss) to net cash
    provided (used) by operating activities:
      Depreciation, depletion and amortization                                              123     127
      Gain on extraordinary item                                                              1    (448)
      (Gain) on disposal of fixed assets                                                      -      (3)
      Accounts receivable                                                                    68    (100)
      Other current assets                                                                    7     (20)
      Inventories                                                                            11     110
      Restricted cash(308)44
      Accounts payable and accrued liabilities-   246
      Royalties payable(13)18
      Liabilities subject to compromise-   (555)
      Prepetition liabilities                           (5)                         521
----------------------------------------------------------------------------------------
Net Cash Provided (Used) by Operating Activities                                           (133)    316
                                                                                          ------  ------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                                                       (276)   (102)
  Proceeds from sale of assets                                                               18      66
  Notes receivable                                                                           16      49
                                                                                          ------  ------
Net Cash Provided (Used) by Investing Activities                                           (242)     13
                                                                                          ------  ------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payments of bank debt                                                                      (4)    (18)
  Payments of prepetition liability                                                           -     (22)
                                                                                          ------  ------
Net Cash Used by Financing Activities                                                        (4)    (40)
                                                                                          ------  ------
Net increase (decrease) in cash and cash equivalents                                       (379)    289
Cash and cash equivalents at beginning of year                                              614     325
                                                                                          ------  ------
Cash and cash equivalents at end of year                                                  $ 235   $ 614
                                                                                          ======  ======

SUPPLEMENTAL DISCLOSURES:
   Cash paid during the period for interest                                               $   3   $   3
                                                                                          ======  ======
</TABLE>








  The accompanying notes are an integral part of these financial statements.


Page 24
<PAGE>
                           PETROMINERALS CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
            ----------------------------------------------

Business
--------

Petrominerals  Corporation's  (the  Company's)  principal  business activities
consist  of  the production and sale of crude oil within the United States and
hydro-static  well  testing  oilfield  services.

Basis  of  Presentation  and  Going  Concern
--------------------------------------------

PRINCIPLES  OF  CONSOLIDATION

The  consolidated financial statements include the accounts of the Company and
its  wholly-owned subsidiary, Hydro-Test International, Inc. (Hydro-Test). All
material  intercompany  accounts  and  transactions  have  been  eliminated.

GOING  CONCERN

The  consolidated financial statements are presented on a going concern basis.
This  basis  of  accounting  contemplates  the  realization  of  assets  and
satisfaction  of  liabilities in the normal course of business operations. The
Company  incurred  net  losses  before  income taxes and extraordinary item of
$15,000  and  $72,000  for  the  years  ended  December  31,  1997  and  1996,
respectively.

Industry  conditions  caused  a  significant  downturn in the oilfield service
business in the first quarter of 1995. Because of this downturn, combined with
the  Company's  inability  to  refinance its debt and obtain a working capital
line,  the  Company  adopted  a  formal  plan  to  liquidate  its  subsidiary,
Hydro-Test  International, Inc., in March 1995. In September 1995, the Company
abandoned  this  plan  and  sought  protection  from  creditors.
















Page 25
<PAGE>
NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)
            ----------------------------------------------

Basis  of  Presentation  and  Going  Concern  (Continued)
--------------------------------------------

GOING  CONCERN  (Continued)

On  September  1, 1995, Hydro-Test International, Inc. commenced its voluntary
reorganization  case  with  the  filing  of a petition under Chapter 11 of the
United  States  Bankruptcy  Code.  This case was filed as a Chapter 11 case to
protect  the  Hydro-Test assets from seizure and pay creditor claims a greater
amount  than  could be obtained in an immediate Chapter 7 liquidation case. On
May  16,  1996,  the  plan of reorganization was accepted by the creditors and
confirmed  by the United States Bankruptcy Courts for the Southern District of
Texas,  Houston  Division.  On  August 14, 1996, a final hearing took place to
approve  the  payment  of  professional fees and order final payment. As such,
Hydro-Test  is no longer in bankruptcy, however, it is uncertain if Hydro-Test
will  be  able  to  satisfy  the  remaining  debt  with  future  cash  flows.

Use  of  Estimates
------------------

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.

Material  estimates  that  are  particularly susceptible to significant change
relate  to  the  determination of the depreciation, depletion and amortization
(DD&A) account balance and the amount of Hydro-Test's debt that is expected to
be  forgiven as a result of the Chapter 11 proceedings. DD&A is based on units
of  economic  production,  which  fluctuates  with  changes in oil prices. The
amount  of  debt expected to be forgiven is based on the Chapter 11 bankruptcy
plan,  and  may fluctuate depending on the resources available for the Company
to  service  the  debt.

Cash  and  Cash  Equivalents
----------------------------

The Company considers all highly liquid investments purchased with an original
maturity  of  less  than  three  months  to  be  cash  equivalents.












Page 26
<PAGE>
NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)
            ----------------------------------------------

Restricted  Cash
----------------

The  Company  has Certificates of Deposit (CD's) with a value of approximately
$40,000  at  December 31, 1997 and 1996, that have been recorded as restricted
cash.  Of the two CD's remaining at December 31, 1997, one has been pledged to
the  Bureau  of  Land Management to cover environmental costs and the other is
pledged  as  a  deposit  to  a  utility  company.

Accounts  Receivable
--------------------

Accounts  receivable  has been recorded net of a valuation allowance of $0 and
approximately  $29,000  at  December  31,  1997  and  1996,  respectively.

Inventories
-----------

The  Company  determines  the  cost  of inventories on the first-in, first-out
(FIFO) method. Inventories of crude oil held under sales contracts are carried
at  market  value.

Property  and  Equipment
------------------------

The  carrying  value  of oilfield service operations property and equipment is
stated  at  estimated  realizable  value.

Oil  and  gas properties are accounted for using the successful efforts method
of  accounting.  Costs  of  drilling  and equipping successful exploratory and
developmental  wells  are  capitalized.  All  other  exploratory  expenses are
charged  to  operations  as  incurred.  The  carrying  value  of  oil  and gas
properties  is  evaluated  in  relation  to the estimated present value of the
future  net  revenues. Depletion, depreciation and amortization are calculated
using  the  units-of-production  method  based  on  recoverable  reserves. The
Company  did  not  incur any exploratory costs during the years ended December
31,  1996  and  1997.



















Page 27
<PAGE>
NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)
            ----------------------------------------------

Property  and  Equipment  (Continued)
------------------------

In  March  1995,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial  Accounting Standards (SFAS) No. 121, "Accounting for
the  Impairment  of  Long-Lived Assets and/or Long-Lived Assets to be Disposed
of."  This  statement  requires  the  review of long-lived assets for possible
impairment  whenever  events  or  changes  in  circumstances indicate that the
carrying  amount of an asset may not be recoverable. It establishes guidelines
for  determining recoverability based on future net cash flows from the use of
the  asset  and  for  the  measurement  of  the  impairment  loss.

Impairment loss under SFAS No. 121 is calculated as the difference between the
carrying  amount  of  the  asset  and  its  fair value. Any impairment loss is
recorded  in  the  current  period in which the recognition criteria are first
applied and met. Under the successful efforts method of accounting for oil and
gas  operations,  the  Company periodically assesses its proved properties for
impairments  by comparing the aggregate net book carrying amount of all proved
properties  with  their  aggregate  future  net  cash flows. The new statement
requires  the  impairment  review to be performed on the lowest level of asset
groupings  for  which  there  are  identifiable cash flows. In the case of the
Company,  this  results  in  an  impairment  review  of  the  Santa  Clarita,
California,  properties.

The  Company adopted SFAS No. 121 in 1996. The future impairment loss, if any,
on the oil and gas properties will be calculated as the difference between the
asset book carrying amounts and future undiscounted net cash flow projections,
giving  consideration  to  recent prices, pricing trends and estimated reserve
quantities.  These  projections  represent the Company's best estimate of fair
value  based  on  the information available. The outcome of implementation did
not  result  in  any  additional  impairments.

In  addition  to recognition of impairment under SFAS No. 121, management also
periodically  assesses the value of significant proved and unproved properties
and  charges  estimated impairments of value to expense. A valuation allowance
expense  of  $1,390,000  was  recorded  in  1993, bringing the total valuation
provision  for  oil and gas properties to $10,963,000. The valuation allowance
has  not  increased since. The carrying value of fixed assets of the Company's
remaining  subsidiary,  Hydro-Test  International,  Inc.,  approximates  net
realizable  value  following  the  disposal  and  abandonment losses that were
recorded  in  1995.

Upon  the  sale  of  oil  and  gas  reserves  in place, costs less accumulated
amortization of such property are removed from the accounts and resulting gain
or  loss  on sale is reflected in operations.  Upon abandonment of properties,
the  reserves are deemed fully depleted and any unamortized costs are recorded
in  the  statement of operations under loss on leases. Management did not sell
or abandon any oil and gas properties during the years ended December 31, 1997
and  1996, however, a sale of the Company's oil producing assets is planned to
take  place  on  March  31,  1998  (see  Note  14  -  Subsequent  Events).






Page 28
<PAGE>
NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)
            ----------------------------------------------

Income  Taxes
-------------

The provision for income taxes is based on pretax financial accounting income.
Deferred  tax  assets  and  liabilities  are  recognized  for the expected tax
consequences  of  temporary  differences  between  the tax basis of assets and
liabilities  and  the  reported  net  amounts.

Per  Share  Computations
------------------------
Per  share  computations contained in the financial statements included herein
reflect  the  retroactive  effect of a one for eight reverse stock split which
occurred  on  January  15,  1998  (see  Note  14  -  Subsequent  Events).

Reclassifications
-----------------
Certain  prior  year  amounts  have  been  reclassified  to  conform  to
classifications  followed for 1997. These reclassifications had no effect upon
reported  net  income.

New  Accounting  Pronouncements
-------------------------------

In  June 1997, the FASB issued Statement of Financial Accounting Standards No.
130  (SFAS  130), Reporting Comprehensive Income. This statement requires that
all  items  that  are  required to be recognized under accounting standards as
components   of comprehensive income be reported in a financial statement that
is  displayed with the same prominence as other financial statements. SFAS 130
will  be  adopted  by  the Company for the year ended December 31, 1998. Prior
period  financial  statements  provided  for  comparative  purposes  will  be
reclassified,  as  required.   Upon adoption, the Company does not expect SFAS
130  to  have  a  material  effect  upon  the Company's financial condition or
results  of  operations.

In June 1997, the FASB issued Statements of Financial Accounting Standards No.
131  (SFAS  131),  Disclosures  about  Segments  of  an Enterprise and Related
Information.    The  statement  requires  the  Company  to report income\loss,
revenue,  expense  and  assets  by  business  segment  including  information
regarding  the  revenues  derived  from  specific  products  and services. The
Statement  also requires that the Company report descriptive information about
the  way  that  operating  segments were determined, the products and services
provided  by the operating segments, differences between the measurements used
in  reporting  segment  information  and those used in the Company's financial
statements,  and  changes in the measurement of segment amounts from period to
period.  SFAS  131  will be adopted by the Company for the year ended December
31,  1998.











Page 29
<PAGE>
NOTE  2  -  PROPERTY  AND  EQUIPMENT
            ------------------------
Property  and  equipment,  all  of  which  is located in the United States, is
stated  at  cost  or  net  realizable  value  and consists of the following at
December  31,  (in  thousands):
<TABLE>
<CAPTION>


                                                1997       1996
                                              ---------  ---------
<S>                                           <C>        <C>

At Cost
  Oil and gas properties, all proved, net of
    valuation allowance of $10,963            $ 21,882   $ 21,625
  Accumulated depletion and amortization       (20,974)   (20,873)
                                              ---------  ---------
Net oil and gas properties                         908        752
                                              ---------  ---------
Other Property and Equipment
  Land and building                              1,265      1,265
  Furniture, fixtures and equipment                345        337
  Accumulated depreciation related to other
    property and equipment                        (443)      (443)
                                              ---------  ---------
Net Other Property and Equipment                 1,167      1,159
                                              ---------  ---------
Net Property and Equipment, at cost              2,075      1,911
At Net Realizable Value:
  Oilfield service equipment                       123        151
                                              ---------  ---------
Property and Equipment, net                   $  2,198   $  2,062
                                              =========  =========
</TABLE>


Depreciation, depletion and amortization for the years ended December 31, 1997
and 1996 was $123,000 and $127,000, respectively.


NOTE 3 - PREPETITION LIABILITIES/EXTRAORDINARY GAIN
         ------------------------------------------
Liabilities subject to compromise were stated in the December 31, 1995
financial statements at the amount of the original claim and not at the
amounts for which the claims were settled. Certain claims were settled outside
of bankruptcy, however, most of the claims were settled at 50% of the original
prepetition liability. The Company has not accrued interest on the claims
since seeking Chapter 11 protection on September 1, 1995.

The Chapter 11 reorganization resulted in an extraordinary gain of $448,000
from the retirement of prepetition liabilities at December 31, 1996. This
event did not result in taxable income to the Company because this gain did
not exceed prepetition net operating losses. As such, no provision for taxes
has been recorded as a result of this transaction.








Page 30
<PAGE>
NOTE 3 - PREPETITION LIABILITIES/EXTRAORDINARY GAIN (Continued)
         ------------------------------------------

The remaining prepetition liability of $516,000 has been recorded as a
long-term liability as management does not intend to repay these liabilities
within the next operating cycle. Under the approved plan, the Company will
repay these liabilities with funds generated from the sale of assets or
continuing operations, within 60 months of the plan's approval on May 16, 1996.

NOTE 4 - LONG-TERM DEBT
         --------------

Long-term debt at December 31, is summarized as follows (in thousands)
(excluding prepetition liabilities):
<TABLE>
<CAPTION>


                                                 1997   1996
                                                 -----  -----
<S>                                              <C>    <C>

Bank term notes payable (secured by various
vehicles), due in monthly installments of $812,
including interest of 8.9% to 9.9%.              $  11  $  15
Less: current portion                                8      8
                                                 -----  -----
                                                 $   3  $   7
                                                 =====  =====
</TABLE>


Aggregate scheduled maturities of long-term debt at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>


            1997
            -----
<S>         <C>

Year Ended
----------
    1998    $   8
    1999        3
            -----
            $  11
            =====
</TABLE>

















Page 31
<PAGE>
NOTE 5 - DISPOSITION OF ASSETS
         ---------------------
Liquidation and Reorganization Sales
------------------------------------

On January 29, 1996, the Company sold all of the remaining assets of
Hydro-Test's manufacturing operations to an unrelated entity in Canada for
$135,000 in cash. This sale was approved by the Bankruptcy Court. Following
this sale, the Company continues to perform other oilfield services but no
longer manufactures products.

Hydro-Test sold five surplus trucks in two sales to an unrelated party on
August 23, and September 17, 1996, for total consideration of $10,700.
Additionally, two stationary testing units were sold to an unrelated party for
$50,000 on October 15, 1996.

On February 12, 1997, Hydro-Test sold an additional testing truck for $16,000
cash, plus an additional $2,000 which is to be paid over a 12 month period in
monthly installments.

Option to Purchase Agreement
----------------------------

The Company entered into an option to purchase agreement with an unrelated
entity for the option to purchase the 140 acres owned by the Company in the
Hasley Canyon field, Santa Clarita Valley, Los Angeles County, California. The
agreement, dated September 16, 1996, has an effective date of October 22, 1996.

Under the terms of the agreement, the purchaser deposited a refundable good
faith deposit of $100,000 into an escrow account to be held during a
feasibility period lasting until December 30, 1996. This feasibility period
was extended to February 14, 1997, based on an amendment dated December 30,
1996. The purchaser extended this option by 270 days from the effective date
of October 22, 1996, by releasing $10,000 from the escrow account. The
purchaser subsequently authorized the release of the additional $90,000 from
the escrow account for a total of $100,000 in prepaid rent through the 18th
month following the effective date (April 1998).

The agreement calls for future payments of $10,000 per month beginning in May
1998, for a period of six months, $20,000 per month for the next 27 months.
The purchaser may terminate this agreement on October 22, 1998, under certain
conditions.

The purchaser may purchase the property at any time during the option period
for $20,000 per acre.












Page 32
<PAGE>
NOTE 6 - INCOME TAXES
         ------------

A reconciliation of the provision (benefit) for income taxes to the statutory
Federal income tax rate before extraordinary items is as follows:
<TABLE>
<CAPTION>


                                              1997    1996
                                             ------  ------
<S>                                          <C>     <C>

Statutory Federal income tax (benefit)       $  14   $ (15)
Increase (decrease) in provision resulting
  from losses without tax benefit              (14)     15
                                             ------  ------
                                             $   -   $   -
                                             ======  ======
</TABLE>


Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes.  The following table
summarizes the significant components of the Company's deferred tax assets and
liabilities as of December 31,:
<TABLE>
<CAPTION>


                                                  1997      1996
                                                --------  --------
<S>                                             <C>       <C>

Deferred Tax Assets:
  Net operating loss carryforwards              $ 1,903   $ 1,917
Valuation reserve for deferred tax assets        (1,883)   (1,906)
                                                --------  --------
     Net Deferred Tax Assets                    $    20   $    11
                                                ========  ========
Deferred Tax Liabilities:
  Tax over book depreciation, amortization
    and depletion                               $    20   $    11
                                                --------  --------
     Deferred Tax Liabilities, net of deferred
       tax assets                               $     -   $     -
                                                ========  ========
</TABLE>


At December 31, 1997, the Company had net operating loss carryforwards of
approximately $5,597,000 for Federal income tax purposes that will expire
beginning in the year 2001. For financial reporting purposes, a valuation
allowance of $1,883,000 has been recorded to offset the deferred tax asset
related primarily to these carryforwards.










Page 33
<PAGE>
NOTE 7 - COMMON STOCK
         ------------
On February 8, 1993, the Board of Directors adopted the 1993 Incentive Stock
Option Plan and the 1993 Non-Statutory Stock Option Plan (the Plans).  The
Plans provide for the granting of options to purchase up to a maximum of
150,000 shares of the Company's common stock to officers, key employees and
directors who are not otherwise employed by the Company.  Under the Plans,
options granted to non-employee directors are limited to a maximum of 7,500
shares of the Company's common stock.  The Plans expire on February 8, 2003.

On February 8, 1993, the Board of Directors adopted the 1993 Stock Bonus Plan
(the Bonus Plan). The Bonus Plan provides for the award of up to 6,250 shares
of the Company's common stock to officers and key employees of the Company.
The Bonus Plan was approved by the shareholders at the Company's Annual
Meeting on May 23, 1993. The Bonus Plan expired on February 8, 1998.

On April 16, 1992, the Board of Directors adopted the Directors Stock
Compensation Plan (the Stock Compensation Plan).  The Stock Compensation Plan
was adopted as part of the Company's cost containment program.  The Stock
Compensation Plan provides for the granting of up to 18,750 shares of the
Company's common stock to non-employee directors. Under the Stock Compensation
Plan for the period May 1992 through September 1993, 12,450 shares were
granted to directors. On February 10, 1995, the balance of 6,300 shares of the
Company's common stock were granted to six non-employee directors under the
Stock Compensation Plan for the period October 1993 through June 1994.  The
Stock Compensation Plan terminated on February 10, 1995, at which time all of
the shares issued under the Directors Stock Compensation Plan were distributed
to the six non-employee directors.

On October 24, 1995, the Board approved the issuance of 1,875 shares to a
former officer of the Company who was laid off due to downsizing in 1995 and
received the shares on April 19, 1996, as a portion of a severance package.
Management has valued this transaction as $5,625 in officer's compensation.

On March 6, 1997, the Board adopted a resolution granting stock options to
purchase up to 5,000 shares of common stock to the CEO, and up to 2,500 shares
of common stock to each of the three non-employee directors. Under the terms
of the resolution, the CEO and each of the directors can purchase shares of
common stock for the average price that the Company's stock was trading before
and after March 6, 1997. This average is $3.00 per share. The Company has not
yet issued these options.

No stock options were exercised during the years ended December 31, 1997 and
1996.









Page 34
<PAGE>
NOTE 7 - COMMON STOCK (Continued)
         ------------

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which is effective for the Company beginning December 31, 1997. SFAS
128 replaced the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average
number of common shares for the period. It also requires dual presentation of
basic and diluted earnings per share for companies with complex capital
structures. Basic and diluted earnings per share for the twelve months ended
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>


                1997                          1996
           ---------------               ---------------
              Weighted          Net         Weighted         Net
           Average Shares   Income Per   Average Shares   Income Per
           (in thousands)      Share     (in thousands)     Share
           ---------------  -----------  ---------------  ----------
<S>        <C>              <C>          <C>              <C>

  Basic              1,059        (.01)            1,056         .36
  Diluted            1,059        (.01)            1,056         .36
</TABLE>


(All share amounts have been adjusted retroactively for the effects of a one
for eight reverse stock split on January 9, 1998. See Note 14 - Subsequent
Events).

Basic and diluted earnings per share are the same, as any impact from the
exercise of stock options would be anti-dilutive.


NOTE 8 - RELATED PARTIES AND RELATED PARTY TRANSACTIONS
----------------------------------------------
During the periods covered by the financial statements, the Company was
involved in various transactions with related parties. These related parties
consist primarily of corporations and joint ventures in which officers,
directors, and shareholders of the Company, directly and/or indirectly, own
varying ownership interest and/or are officers and directors thereof. Related
party transactions involving the purchase of property and equipment by the
Company and payments to the Company for services were approximately $134,000
and $280,000 for 1997 and 1996, respectively.














Page 35
<PAGE>
NOTE 8 - RELATED PARTIES AND RELATED PARTY TRANSACTIONS
         ----------------------------------------------
         (Continued)

On December 3, 1996, the Company became the general partner of Petrominerals
96-1, a newly formed limited partnership. Under the terms of the joint venture
agreement, the Company assigned the drillsite to the joint venture and all
casing required for the well, and leased to the joint venture the rods, tubing
and downhole and surface pumps and all other tangible equipment necessary to
produce the well.

The Company has a 1% interest as general partner and 6 other entities,
including 2 directors and a company controlled by a director, own the
remaining 99% interest. The partnership was formed to enter into a joint
venture agreement with the Company to drill a well on the Company's Mabel
Strawn lease. The Company received $280,000 from the partnership under a
turnkey drilling contract. Proceeds from the working interest will be paid 90%
to Petrominerals 96-1 and 10% to the Company until payout, and thereafter 30%
to Petrominerals 96-1 and 70% to the Company. Payout occurs when Petrominerals
96-1 has recouped the monies it contributed to the joint venture. The Company
completed the well on January 20, 1997, and began production shortly
thereafter.

Three directors of the Company are limited partners in Petrominerals 96-1. The
respective percentage interests of the partners in Petrominerals 96-1 are as
follows:
<TABLE>
<CAPTION>


                                                 Capital
                                 % Interest   Contribution
                                 -----------  -------------
<S>                              <C>          <C>

General Partner:
  Petrominerals Corporation            1.00%  $       2,800
Limited Partners:
  Paul L. Howard (director)           23.21%  $      65,000
  Morris L.  Hodges (director)        17.86%  $      50,000
  David G.  Davidson (director)       17.86%  $      50,000
  Unrelated parties                   40.07%  $     112,200
</TABLE>


The Company receives a $350 monthly management fee and a monthly rental fee
for the tangible equipment. The rental fee is $2,400 per month until payout
and $400 per month thereafter. These payments began in 1997.












Page 36
<PAGE>
NOTE 9 - UNAUDITED QUARTERLY FINANCIAL DATA
         ----------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>


                          First    Second    Third    Fourth
                         Quarter  Quarter   Quarter  Quarter    Year
                         -------  --------  -------  --------  ------
<S>                      <C>      <C>       <C>      <C>       <C>

1997
-----------------------
  Revenues                   368      337       399      303   1,407
  Costs and expenses         312      346       330      434   1,422
  Income (loss) before        56       (9)       69     (131)    (15)
    extraordinary item
  Net income (loss)           56       (9)       69     (131)    (15)
  Net income (loss)          .05     (.01)      .07     (.12)   (.01)
    per share
</TABLE>


<TABLE>
<CAPTION>


                           First     Second     Third     Fourth
                          Quarter    Quarter   Quarter   Quarter    Year
                         ---------  ---------  --------  --------  -------
<S>                      <C>        <C>        <C>       <C>       <C>

1996
-----------------------
  Revenues               $    272   $    322   $    316  $    359  $1,269
  Costs and expenses          364        362        311       304   1,341
  Income (loss) before
    extraordinary item        (92)       (40)         5        55     (72)
  Extraordinary gain            -       *448          -         -     448
  Net income (loss)           (92)       408          5        55     376
  Income (loss) before
    extraordinary item
    per share                (.08)      (.04)         -       .05    (.07)
  Net income (loss)
    per share                (.08)       .39          -       .05     .36
</TABLE>


The Company recognized an extraordinary gain in the second quarter of 1996 for
debt forgiven in bankruptcy.

* The estimated extraordinary gain reported in the second quarter for 10-QSB
  was revised as a result of audit adjustments.

(Per share amounts have been adjusted retroactively for the effects of a one
for eight reverse stock split on January 9, 1998. See Note 14 - Subsequent
Events).



Page 37
<PAGE>
NOTE 10 - SEGMENT INFORMATION
          -------------------

The Company's principal businesses are (1) the production and sale of crude
oil, and (2) oilfield services. The following tables present certain
information regarding these industry segments for the years ended December 31,
(in thousands):
<TABLE>
<CAPTION>


                                                             Oil
                                              Oilfield   Production
                                              Services    and Sales   Corporate*    Total
                                             ----------  -----------  -----------  -------
<S>                                          <C>         <C>          <C>          <C>

1997
-------------------------------------------
  Sales to outside customers                 $      95   $     1,080  $       232  $1,407
  Operating profit (loss)                         (107)           92            -     (15)
  Identifiable assets                              197         2,917            -   3,114
  Depreciation, depletion and amortization          10           113            -     123
  Capital expenditures                               -           276            -     276
1996
-------------------------------------------
  Sales to outside customers                 $      14   $     1,273  $        67  $1,354
  Operating profit (loss)                         (210)          125            -     (85)
  Gain on debt forgiven                            448             -            -     448
  Identifiable assets                              231         3,226            -   3,457
  Depreciation, depletion and amortization          10           117            -     127
  Capital expenditures                               -           102            -     102
</TABLE>


* Corporate revenues are primarily composed of interest income, royalty
  interests and lease payments.

Sales to individual customers, including royalty interests of others,
exceeding 10 percent of revenues reported in the consolidated statements of
operations, for the years ended December 31, are as follows (in thousands):
<TABLE>
<CAPTION>


                                          1997    1996
                                         ------  ------
<S>                                      <C>     <C>

Oil and gas segment (gross sales):
  Texaco Trading & Transportation, Inc.  $1,171  $1,161
</TABLE>














Page 38
<PAGE>
NOTE 11 - ENVIRONMENTAL MATTERS
          ---------------------

On December 6, 1989, the Company was notified by the United States
Environmental Protection Agency (EPA) that, under provisions of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA), the Company was considered a potentially responsible party (PRP) in
the clean-up of the Operating Industries, Inc. (OII) waste disposal site,
located in Monterey Park, California. The EPA has also contacted approximately
270 other PRPs who disposed of liquid waste at this site. The Company is in
the fourth tier of PRPs notified by the EPA, regarding this site.

Management continues to gather information related to this matter. Based upon
information available to it at this time, management believes that the Company
(through its predecessors, Century Oil Corporation) disposed of drilling mud
and water at the OII waste disposal site at various times from 1975 to 1977.
The Company contends that any drilling mud and waste water disposed of by the
Company (or its predecessor) does not contribute to the problem at the OII
site. Although the ultimate impact of the resolution of this contingency is
unknown, management believes that this matter will not have a material adverse
effect on the financial position of the Company.

NOTE 12 - CONTINGENCIES
          -------------

The Company has certain contingent liabilities with respect to litigation,
claims, taxes, government regulations and contractual agreements arising from
the ordinary course of business. While there are always risks inherent in
resolution of any contingency, it is the opinion of management that such
contingent liabilities will not result in any loss which would have an adverse
material effect on the Company's financial position.

The Company is subject to other possible loss contingencies pursuant to
federal, state and local environmental laws and regulations. These include
existing and potential obligations to investigate the effects of the release
of certain hydro-carbons or other substances at various sites; to remediate or
restore these sites; and to compensate others for damages and to make other
payments as required by law or regulation. These obligations relate to sites
owned by the Company or others, and are associated with past and present oil
and gas operations. The amount of such obligations is indeterminate and will
depend on such factors as the unknown nature and extent of contamination, the
unknown timing, extent and method of remedial actions which may be required,
the determination of the Company's liability in proportion to other
responsible parties, and the state of the law.













Page 39
<PAGE>
NOTE 13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED
          -----------------------------------------------
          RESERVES (UNAUDITED)
          --------------------

Results of Operations
---------------------

Selected financial information for oil and gas operations accounted for under
the successful efforts methods for the years ended December 31, is summarized
below (in thousands):
<TABLE>
<CAPTION>


                                             1997    1996
                                            ------  ------
<S>                                         <C>     <C>

Produced oil and gas sales                  $1,171  $1,185
Less:
  Operating expenses                           648     561
  Depreciation, depletion and amortization     113     116
                                            ------  ------
Results of operations from oil and gas
 producing activities, excluding corporate
 overhead and interest costs                $  410  $  508
                                            ======  ======
</TABLE>


No development or property acquisition costs were incurred in 1997 or 1996.




























Page 40
<PAGE>
NOTE 13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED
          -----------------------------------------------
          RESERVES (UNAUDITED) (Continued)
          --------------------

Estimated Quantities of Oil and Gas Reserves
--------------------------------------------

The following table presents the Company's estimates of its proved oil (in
thousands of barrels) reserves, which are all located in the United States.
All reserve estimates have been prepared by independent petroleum engineers.
The Company emphasizes that reserve estimates are inherently imprecise and are
expected to change as future information becomes available. Estimates of its
proved oil reserves for the years ended December 31, are as follows:
<TABLE>
<CAPTION>


                                             1997    1996
                                            ------  ------
<S>                                         <C>     <C>

Proved developed and undeveloped reserves:
  Beginning of period                       1,999   2,138
  Revision of previous estimates               12     (33)
  Production                                 (119)   (106)
                                            ------  ------
End of period                               1,892   1,999
Proved developed reserves:
  Beginning of period                         952     897
  End of period                               871     952
</TABLE>


Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
------------------------------------------------------------------------
A standardized measure of discounted future net cash flows is presented below
for each of the years ended December 31, 1997 and 1996. Future cash inflows
are computed by applying year-end prices of oil and gas relating to the
Company's proved reserves to year-end quantities of those reserves.

Future development and production costs are computed by estimating the
expenditures to be incurred for developing and producing proved oil and gas
reserves, based on year-end costs and assuming continuation of existing
economic conditions.

Future income tax expense is computed by applying year-end statutory rates
(adjusted for permanent differences) to the future pretax net cash flows
relating to the Company's proved oil and gas reserves, less the tax basis at
each year-end of the properties involved.

A 10% annual discount rate is used to reflect the timing of future net cash
flows relating to proved oil and gas reserves.








Page 41
<PAGE>
NOTE 13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED
          -----------------------------------------------
          RESERVES (UNAUDITED) (Continued)
          --------------------

Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
------------------------------------------------------------------------
(Continued)
-----

The projections should not be viewed as realistic estimates of future cash
flows, nor should the "standardized measure" be interpreted as representing
current value to the Company. Material revisions to estimates of proved
reserves may occur in the future; development and production of the reserves
may not occur in the periods assumed; and actual prices realized and actual
costs incurred may vary significantly from those used.

The following reserve estimates and resulting future net cash flows were
developed in accordance with Securities and Exchange Commission rules, using
selling prices in effect at the end of the years indicated. Both the quantity
estimates and "cash flow" of reserves are sensitive to sales prices in effect
at the year end quantification date. During periods of rapidly changing
prices, reserve information must be examined with this understanding. Reserve
estimates and resulting future net cash flows for the years ended December 31,
are as follows (in thousands):
<TABLE>
<CAPTION>


                                             1997       1996
                                           ---------  ---------
<S>                                        <C>        <C>

Future cash inflows                        $ 27,591   $ 35,172
Future production and development costs     (16,522)   (17,738)
Future income tax expense                    (3,763)    (5,928)
                                           ---------  ---------
Future net cash flows                         7,306     11,506
10% annual discount for estimated timing
  of cash flows                              (2,469)    (5,862)
                                           ---------  ---------
Standardized measure of discounted future
  net cash flows                           $  4,837   $  5,644
                                           =========  =========
</TABLE>



















Page 42
<PAGE>
NOTE 13 - SUPPLEMENTAL OIL AND GAS PROPERTIES AND RELATED
          -----------------------------------------------
          RESERVES (UNAUDITED) (Continued)
          --------------------

Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
------------------------------------------------------------------------
(Continued)

Following are the principal sources of change in the standardized measure of
discounted future cash flows for the years ended December 31, (in thousands):
<TABLE>
<CAPTION>


                                                1997    1996
                                               ------  -------
<S>                                            <C>     <C>

Sales and transfers of oil and gas produced,
  net of production cost                       $(455)  $ (584)
Net changes in prices and production costs,
  based on beginning of year barrels               -    1,331
Net changes in previous estimate of future
  development costs                              410     (316)
Revisions to previous estimates                  104     (188)
Accretion of discount                            330      564
Net change in income taxes                      (719)   1,791
Other                                           (477)    (477)
                                               ------  -------
Net Increase (Decrease)                        $(807)  $2,121
                                               ======  =======
</TABLE>



NOTE 14 - SUBSEQUENT EVENTS
-----------------

Disposition of Assets
---------------------

On February 4, 1998, the Company entered into a contract for the sale of all
of the Company's oil and gas operating assets to an unrelated entity. These
operating assets include the Company's 140 acre real property holding in
Hasley Canyon, together with the oil and gas wells and leasehold interests and
related equipment. The purchase price is $4,450,000 in cash to be paid at
closing, and a production payment of $1,150,000, to be paid in installments in
any month in which certain postings for crude oil exceeds $13.50 per barrel.
The price per barrel is approximately $7.25 at March 12, 1998.

The monthly payment will be equal to one-half of the difference between the
posted price and $13.50, multiplied by the barrels produced. There is no
stated interest on the note.

The purchase and sale of assets is expected to close not later than March 31,
1998, and is contingent upon the purchaser's due diligence review.








Page 43
<PAGE>
NOTE 14 - SUBSEQUENT EVENTS (Continued)
          -----------------

Stock Split
-----------

On January 9, 1998, the Company's shareholders approved a one for eight
reverse split of the Company's common stock.  Under the terms of the reverse
split, one share of $0.80 par value common stock will be issued for eight
shares of $0.10 par value common stock, effective as of January 25, 1998, for
shareholders of record on December 8, 1997. All fractional interests will be
rounded up to the next whole share.  This stock split has been shown
retroactively in the audited financial statements as of December 31, 1997 and
1996 (see Note 7 - Common Stock).







































Page 44
<PAGE>
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ------------------------------------------------
         ACCOUNTING ANDFINANCIAL DISCLOSURE
         ----------------------------------

         None.














































Page 45
<PAGE>
                                   PART III


ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, COMPLIANCE WITH SECTION
         ------------------------------------------------------
         16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
         --------------------------------------------

The Executive Officers of Petrominerals, together with the years in which such
Officers were named to their present offices are as follows:
<TABLE>
<CAPTION>


                                     Position with          Year Name to
                          Name          Company           Present Position
------------------------------  ------------------------  ----------------
<S>                             <C>                       <C>

Paul L. Howard*                 President, Chief
                                Executive Officer, Chief
                                Financial Officer and
                                Director                              1995
Phillip Mungiovino**            Secretary                             1995
Morris V.  Hodges***            Assistant Secretary and
                                Director                              1995
</TABLE>


Each of the Executive Officers serves at the pleasure of the Board of
Directors.

*   Mr. Howard was reappointed President and Chief Executive Officer on
    March 24, 1995.

**  Mr. Mungiovino was appointed Secretary on March 24, 1995.  Mr.
    Mungiovino has held the position of accountant for the Company since 1975.

*** Mr. Hodges was appointed Assistant Secretary on March 24, 1995.

Biographical Information
-----------------------

The following table sets forth the name, principal occupation, age and the
year in which the individual first became a director, and business experience
during the last five years:

PAUL L.  HOWARD - 72                             Director   1975
---------------

Mr. Howard was reappointed President and Chief Executive Officer on March 24,
1995.  He also served as President of the Company from November 1975 through
September 1987, and at various times during this period, served as Chairman
and Chief Executive Officer.  For more than the past 10 years, Mr. Howard held
a controlling interest in and served as director and officer of Howard Oil
Company and California Petroleum Products, Inc.  See "Certain Relationships
and Related Transactions."





Page 46
<PAGE>
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, COMPLIANCE WITH SECTION
         ------------------------------------------------------
         16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (Continued)
         --------------------------------------------

DAVID G. DAVIDSON - 73                         Director   1979
-----------------

Mr. Davidson has been principally employed as President and Owner of OP&E
Company since 1984.  Mr. Davidson serves as a director of Mieco, Inc., a
public company engaged in domestic and foreign petroleum trading.

EVERETT L. HODGES - 63                           Director   1979
-----------------

Mr. Everett L. Hodges served as President of the Company from September 1987
through February 1992.  For more than the past ten years, Mr. Hodges has held
a controlling interest in and has served as a director and officer of Energy
Production & Sales Co., Inc.; California Oil Independents, Inc.; Costal
Petroleum Refiners, Inc.; California Tar Sands Development Corporation; and
has served as a director of St. James Oil Corporation since 1988.  Mr. Hodges
has also served as the President of the Violence Research Foundation, a
non-profit foundation, since its inception in 1991.  Certain of the foregoing
companies have been affiliated with the Company in various transactions.  See
Item 12 - "Certain Relationships and Related Transactions."  Everett L. Hodges
and Morris V. Hodges, as a group, may be deemed to be controlling persons.

MORRIS V. HODGES - 61                           Director   1979
----------------

Mr. Morris V. Hodges was appointed Assistant Secretary on March 24, 1995.  Mr.
Morris Hodges has held a controlling interest in and has served as a director
and officer of the following companies for more than the past ten years:
Hillcrest Beverly Oil Corporation; Century Resources Development; Kaymor
Petroleum Products, Inc.; Sunset Pipeline and Terminalling, Inc.; Coastal
Petroleum Refiners, Inc.; and CPR Transportation.  Mr. Hodges has also served
as a director of St. James Oil Corporation since 1988.  Certain of the
foregoing companies have been affiliated with the Company in various
transactions.  See Item 12 - "Certain Relationships and Related Transactions."
Morris V. Hodges and Everett L. Hodges,  as a group, may be deemed to be
controlling persons.

 WILLIAM N. HAGLER - 65                           Director  1998
 -----------------

Mr William N. Hagler has been principally employed as President and owner of
Unico, Inc., which is listed on the NASDAQ exchange, and, until just recently,
served as a member of the Board of SABA Petroleum. He was appointed to the
Board on January 29, 1998, and currently sits on the audit committee. At the
time of his appointment, he did not own any stock in Petrominerals.









Page 47
<PAGE>
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, COMPLIANCE WITH SECTION
         ------------------------------------------------------
         16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (Continued)
         --------------------------------------------

Standing Committees and Meetings of the Board of Directors
----------------------------------------------------------

STANDING COMMITTEES

The Company has certain standing committees, each of which is described below:

Ad-Hoc Committee - This committee consists of Messrs. Morris Hodges, Paul
Howard and David Davidson.  This committee evaluates proposed acquisitions,
mergers or other pertinent negotiations which may come before the Board.  This
committee held no meetings during the last fiscal year.

Audit Committee - This committee consists of Messrs. William Hagler and David
Davidson.  The Audit Committee is responsible for reviewing the scope and
procedures of internal auditing work, the results of independent audits, the
accounting policies of management, and recommends to the Board the appointment
of the Company's outside auditors.  This committee did not hold any meetings
during the last fiscal year.

Compensation Committee - This committee consists of Mr. David Davidson.  This
committee reviews and makes recommendations to the Board of Directors
regarding compensation for the Company's officers and key employees.  In
addition to compensation matters, the committee determines, develops, and
makes recommendations to the Board regarding employee benefits packages, and
special stock option and stock bonus plans.  This committee held no meeting
during the last fiscal year.

ATTENDANCE AT BOARD MEETINGS

During the last fiscal year, the Board of Directors of the Company held two
regular meetings and one special meeting.  Attendance at such meetings of the
Board was 100%.



















Page 48
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION
----------------------

The following Summary Annual Compensation Table sets forth all cash
compensation paid, distributed or accrued for services, including salary and
bonus amounts rendered in all capacities for the Company during the fiscal
year ended December 31, 1996, whose annual cash compensation exceeded $100,000
or served as Chief Executive Officer. All other tables required to be reported
have been omitted as there has been no compensation awarded to, earned by or
paid to any of the Company's executives in any fiscal year covered by the
table.

                       SUMMARY ANNUAL COMPENSATION TABLE
<TABLE>
<CAPTION>


                                             Year  Salary
                                             ----  -------
<S>                                          <C>   <C>

Paul L.  Howard, President, Chief Executive
Officer and Chief Financial Officer          1997  $90,000
</TABLE>


Mr. Howard was appointed Chairman, President, Chief Executive Officer, and
Chief Financial Officer of Petrominerals Corporation on March 24, 1995.  His
compensation for the year ended December 31, 1995, was in the form of a
director's fee of $5,000 per month.  At the March 1996 board meeting, the
directors increased Mr. Howard's salary to $7,500 per month, effective January
1, 1996.  Mr. Howard now receives an annual salary of $90,000 per year.

OTHER COMPENSATION OF EXECUTIVE OFFICERS

The Company provided travel and entertainment expenses to its executive
officers and key employees.  The aggregate amount of such compensation, as to
any executive officer or key employee, did not exceed the lesser of $25,000 or
10% of the cash compensation paid to such executive officer or key employee,
nor did the aggregate amount of such other compensation exceed 10% of the cash
compensation paid to all executive officers or key employees as a group.

TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS

In July 1993, the Board of Directors adopted a severance plan for executive
officers providing that, in the event of termination of employment as a result
of a change in control of the corporation, that such executive officer would
receive severance in the amount of one year's base salary.  The Plan does not
provide for any severance in the event of the resignation, retirement or
termination of any Executive Officer's employment with the Company for reasons
other than a change in control of the Company.









Page 49
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION (Continued)
----------------------

COMPENSATION OF DIRECTORS

During the year ended December 31, 1997, each of the three non-employee
directors who held office the entire year were paid $350 per month for a total
of $4,200 each.  Mr. Howard, who became President and Chief Executive Officer
on March 24, 1995, received a $7,500 per month fee (as previously noted) for
his services. In addition, the non-employee directors are reimbursed for
reasonable expenses incurred in connection with any meetings.

The Company did not pay any additional fees to directors for serving as members
of the Audit, Ad-Hoc or Compensation Committees during the last fiscal year.


ITEM 11 - SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND
-------------------------------------------
MANAGEMENT
----------

The following table lists the beneficial ownership, as of February 27, 1998,
of the Company's common stock with respect to all directors and officers as a
group, to the extent that it is known to the Company, either through
Securities Exchange Act filings, Company records or information supplied by
the persons named in the table.
<TABLE>
<CAPTION>


Name and Address          Amount and Nature of
of Beneficial Owner       Beneficial Ownership   Percent of Class
------------------------  ---------------------  -----------------
<S>                       <C>                    <C>

William N. Hagler                            -                  -
David G. Davidson                        3,750                .35%
Paul L. Howard                   86,375     (2)              8.15%
Everett L. Hodges                93,060     (3)              8.78%
Morris V. Hodges                108,125     (4)             10.21%
                          ---------------------  -----------------
                                291,310     (1)             27.49%
                          =====================  =================
</TABLE>


(1)     All directors and officers, as a group, including persons named above.

(2)      The 86,375 shares beneficially held by Paul L. Howard are held in the
Howard  Family  Trust.












Page 50
<PAGE>
ITEM  11  -  SECURITY  OWNERSHIP  OF  BENEFICIAL  OWNERS  AND
             ------------------------------------------------
             MANAGEMENT  (Continued)
             ----------

(3)          The  93,060 shares beneficially held by Everett L. Hodges include
73,487  shares  held  of  record jointly in the Everett L. Hodges  and Mary M.
Hodges Trust.  This amount also includes 5,425 shares held directly by Everett
L. Hodges, 10,398 shares held of record by Energy Production & Sales Co., Inc.
(EPS),  and  3,750 shares held by California Oil Independents, Inc. The 93,060
shares  do  not  include  10,052  shares  held  in  trust for the children and
grandchild  of Everett L. and Mary M. Hodges, as to which Mr. and Mrs. Everett
L.  Hodges disclaim any beneficial ownership.  Everett L. Hodges and Morris V.
Hodges,  as a group, may be deemed to be a controlling person of Petrominerals
by  virtue  of  their  share  ownership.

(4)       The 102,161 shares beneficially held by Morris V. Hodges include 714
shares  held  of  record jointly in the Morris V. Hodges and Kathryn M. Hodges
Trust.    This  amount  also  includes  10,398 shares held of record by Sunset
Pipeline  and  Terminalling,  Inc.,  a  company  controlled by Mr. Hodges, and
96,025  shares  held  by  adult  children  of  Morris V. Hodges and Kathryn M.
Hodges.  Everett  L. Hodges and Morris V. Hodges, as a group, may be deemed to
be  a  controlling person of Petrominerals by virtue of their share ownership.

1993  INCENTIVE  STOCK  OPTION  PLAN  AND 1993 NON-STATUTORY STOCK OPTION PLAN

The  Company  has  in effect two stock option plans - the 1993 Incentive Stock
Option  Plan (the Incentive Plan) and the 1993 Non-Statutory Stock Option Plan
(the  Non-Statutory  Plan)  (the Incentive Plan and the Non-Statutory Plan are
sometimes collectively referred to herein as the Plans), which were adopted by
the  Board  of  Directors  and  approved by the shareholders of the Company in
1993.    The  Plans  in  the  aggregate provide for the granting of options to
purchase  a  maximum  of  150,000  shares  of  the  Company's  common stock to
employees and directors of the Company and its affiliates (as defined herein);
however, options which may be granted to non-employee directors are limited to
a  maximum  of  7,500  shares.    The  Plans  expire  on  February  8,  2003.

Any of the Company's current or future employees who render, in the opinion of
the  Board  of  Directors,  the  type  of  services  which  tend to contribute
materially  to  the  success of the Company or an affiliate of the Company are
eligible to participate in the Incentive Plan. Any of the Company's current or
future  employees  or  directors  (whether  or  not  otherwise employed by the
Company)  who  render,  in  the opinion of the Board of Directors, the type of
services  which tend to contribute materially to the success of the Company or
an  affiliate  of the Company are eligible to participate in the Non-Statutory
Plan.










Page 51
<PAGE>
ITEM  11  -  SECURITY  OWNERSHIP  OF  BENEFICIAL  OWNERS  AND
             ------------------------------------------------
             MANAGEMENT  (Continued)
             ----------

1993  INCENTIVE  STOCK  OPTION  PLAN  AND 1993 NON-STATUTORY STOCK OPTION PLAN
  (Continued)

The  Plans are administered by the Board of Directors of the Company which has
the  authority to determine the employees and directors to whom options are to
be  granted,  the number of shares subject to each option price of outstanding
options  (but  not below the fair market value of the shares subject thereto),
to  enter  into  agreements relating to the value of the option at the date of
grant,  and  to  make  all  other determinations necessary or advisable to the
administration  of  the  Plan.  With the consent of the optionee, the Board of
Directors  will also have the power to substitute options with different terms
for  previously  granted  options,  or  to  amend  the  terms  of  any option.

The  Board of Directors may delegate administration of the Plan to a committee
composed  of  not  less  than  three  members  of  the  Board  of  Directors.
Administration  of  the  Plan with respect to committee members, however, just
remain vested in the Board. With respect to options granted to a director, the
Board of Directors shall take action by a vote sufficient without counting the
vote  of  the  interested  director.  Interested  directors  may be counted in
determining  the  presence  of  quorum  at a meeting of the Board of Directors
which  authorized  the  granting  of  options  to  such  directors.

1993  STOCK  BONUS  PLAN

In  February  1993,  the  Board  of Directors adopted the Company's 1993 Stock
Bonus  Plan  (Bonus Plan). The Bonus Plan provides the awarding of up to 6,250
shares  of  the  Company's  common  stock to officers and key employees of the
Company.  The  Plan  is  administered  by the Board of Directors which has the
authority  to  determine  the officers and key employees to whom stock bonuses
are  to  be awarded, the time or times at which stock bonuses will be awarded,
and, subject to the limits discussed below, the number of shares to be granted
under  each  award.  The  Board  of  Directors  has  the power to delegate the
administration  of  the  Bonus  Plan  to a committee of the Board appointed in
accordance  with  the  Company's  Bylaws.  The  aggregate  fair  market  value
(determined  as of the date of grant) of the shares of common stock awarded to
any  officer  or  key  employee  under the Bonus Plan in any one calendar year
cannot  exceed  one-sixth of the officer's or key employee's salary (excluding
bonuses  and awards under other incentive plans maintained by the Company) for
such  calendar  year.  The  Bonus  Plan  terminated  on  February  8,  1998.












Page 52
<PAGE>
ITEM  11  -  SECURITY  OWNERSHIP  OF  BENEFICIAL  OWNERS  AND
             ------------------------------------------------
             MANAGEMENT  (Continued)
             ----------

DIRECTORS  STOCK  COMPENSATION  PLAN
On  April  16,  1992,  as  part  of its cost containment program, the Board of
Directors  of  the  Company adopted the Directors Stock Compensation Plan (the
Stock  Compensation  Plan).  The  Stock  Compensation  Plan  provides  for the
granting  of  stock to non-employee directors of the Company in lieu of paying
director's  fees  in  cash.  The  purpose of the Stock Compensation Plan is to
minimize  cash outflow from the Company by compensating non-employee directors
for  their  services  to the Company in stock rather than in cash. The maximum
number  of  shares  provides  for  the Stock Compensation Plan is 18,750. Only
non-employee directors of the Company are eligible to participate in the Stock
Compensation Plan. In February 1994 and February 1993, a distribution of 2,075
shares  and  1,050 shares was made to each of the non-employee directors under
this  Plan,  respectively. This Plan terminated on February 10, 1995, at which
time all of the shares issued under this Plan were distributed to non-employee
directors.

The  Stock  Compensation  Plan is administered by the disinterested members of
the  Board,  or,  in  the  event  there are none such, the President and Chief
Executive  Officer  and  the  Secretary  of the Company. The granting of stock
under the Stock Compensation Plan is according to a pre-set formula. Directors
fees payable to non-employee directors of the Company under this plan were set
by  the  Board  at  $700  per  month.  Under  the Stock Compensation Plan, the
eligible  directors received stock at a value of $700 per month, determined by
the  average  trading  price  as quoted on the nasdaq Small Cap System for the
calendar  month immediately preceding the month in which the directors fees is
earned;  provided,  however, that the valuation of the stock shall not be less
than  the  net  book  value of the Company expressed on a per share basis. Any
shares  issued  under  this  plan shall be restricted shares, subject to a two
year  holding  period.

REPORTABLE  TRANSACTIONS

To  the  knowledge  of  the  Company,  as  of February 27, 1997, all reporting
persons  have  properly  filed  the  appropriate  forms  on  all  reportable
transactions  and all forms were timely filed in compliance with Section 16(a)
of  the  Exchange  Act.

OPTION/SAR  GRANTS  IN  LAST  FISCAL  YEAR

On  March  6,  1997,  the Board adopted a resolution granting stock options to
purchase up to 5,000 shares of common stock to the CEO, and up to 2,500 shares
of  common  stock to each of the three non-employee directors. Under the terms
of  the  resolution,  the CEO and each of the directors can purchase shares of
common stock for the average price that the Company's stock was trading before
and  after March 6, 1997. This average is $3.00 per share. The Company has not
yet  issued  these  options.

No  stock  options were exercised during the years ended December 31, 1996 and
1997.





Page 53
<PAGE>
ITEM  12  -  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
             --------------------------------------------------

TRANSACTIONS  WITH  MANAGEMENT  AND  OTHERS

During  the last fiscal year, the Company has been involved in various related
party  transactions  with  certain  Directors  of  the  Company,  or  entities
controlled or affiliated with such individuals. The following table sets forth
the  relationship,  through ownership of securities, between Petrominerals and
the  following  individuals  and  entities:
<TABLE>
<CAPTION>


                                                        Percentage
                      Name           Beneficial Owner      Owned
-----------------------------------  -----------------  -----------
<S>                                  <C>                <C>

Petrominerals 96-1, a Limited        General Partner:
  Partnership                        Petrominerals            1.00%
                                     Limited Partners:
                                     Paul L. Howard          23.21%
                                     Morris V. Hodges        17.86%
                                     David G. Davidson       17.86%
                                     Unrelated parties       40.07%
                                                        -----------
   Total                                                    100.00%
                                                        ===========
Petrominerals 81-1, a Limited        General Partner:
 Partnership (Partnership)           Petrominerals            6.78%
                                     Limited Partners:
                                     EPS                     33.90%
                                     Morris V. Hodges         2.26%
                                     Paul L. Howard           2.26%
                                     Unrelated parties       54.80%
                                                        -----------
   Total                                                    100.00%
                                                        ===========
Terra-Therme II (formerly the        Petrominerals           19.13%
  Newberry Partnership), a general   Paul L.  Howard          9.56%
  partnership (Terra-Therme II)      Unrelated parties       71.31%
                                                        -----------
   Total                                                    100.00%
                                                        ===========
</TABLE>


Petrominerals  96-1  Limited  Partnership
-----------------------------------------

The  Petrominerals  96-1  Limited Partnership was formed in December 1996, for
the  purpose  of  drilling a well on the Company's Mabel Strawn oil lease. The
Company  entered  into  a  joint  venture  agreement  with the partnership and
assigned  the  drill  site  to  the  joint  venture.







Page 54
<PAGE>
ITEM  12  -  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
             --------------------------------------------------
             (Continued)

Petrominerals  96-1  Limited  Partnership  (Continued)
-----------------------------------------

The partnership contributed $280,000 to cover the intangible costs of drilling
the  well  and  the  Company  provided  the drill site and well casing under a
turnkey drilling contract. The Company also provided all of the other tangible
equipment  needed  to  produce the well under a lease agreement. Proceeds from
the  working  interest  will  be paid 90% to Petrominerals 96-1 and 10% to the
Company  until payout, and thereafter 30% to Petrominerals 96-1 and 70% to the
Company.  The  Company  receives  $2,400  per month for leased equipment until
payout  and  $400  thereafter.  The  Company  also  receives  a $350 per month
management  fee  as  general  partner.

Petrominerals  81-1  Limited  Partnership
-----------------------------------------

The  Petrominerals 81-1 Limited Partnership was formed in 1981 for the purpose
of  drilling  one development well on the Company's McGillivrae Lease, located
on  the  Hasley  Canyon  field,  Santa  Clarita  Valley,  Los  Angeles County,
California,  and  two development wells on the Field Fee Lease, located on the
Cat  Canyon field, Santa Barbara County, California. The Limited Partners were
granted  options  to participate in the drilling of one additional well on the
McGillivrae  Lease  and  two  additional  wells  on  the  Field  Fee  Lease.
Petrominerals,  as General Partner, elected to exercise its option to purchase
the interest in the McGillivrae No. 3 well for a cash consideration of $8,161.
An  Option  Agreement  for  the  purchase  of  the  McGillivrae No. 3 well was
executed  on  July  1,  1988.

Petrominerals,  as  General  Partner,  has  contributed  $104,067  to  the
Partnership,  which  represents  approximately  seven  percent  (7%)  of  the
aggregate contributions to the Partnership's capital, and the limited partners
have  contributed $1,443,277 to the Partnership. Petrominerals will receive or
be  charged  with  its  proportionate  share of each item of the Partnership's
income,  gain,  expense,  deduction,  loss  or credit; provided, however, that
Petrominerals  bears  100% of the losses incurred by the Partnership after the
loss  exceeds  the  capital contributions of the limited partners. During 1993
and  1994,  Petrominerals  did  not  receive  any  income from the Partnership
options  and  realized  $3,986  in  overriding  royalty  interests.















Page 55
<PAGE>
ITEM  12  -  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
             --------------------------------------------------
             (Continued)

Petrominerals  81-1  Limited  Partnership  (Continued)
-----------------------------------------

The Partnership contributed the funds for the intangible costs of drilling the
wells.  Until  the Partnership received 110% of its investment in all ventures
(payout),  the  Partnership  will  receive  176%  and  110%  of  the  revenues
attributable  to  the  working  interest  in  the first and second McGillivrae
wells,  respectively,  and  Petrominerals, as General Partner, receives a five
percent  (5%)  overriding  royalty  on  the  McGillivrae Lease. Petrominerals'
overriding  royalty  terminates after payout, at which time Petrominerals will
receive  65% of the net revenues attributable to the working interest, and the
Partnership will receive the remaining 35% of the net revenues attributable to
the  working  interest.

The  McGillivrae  No.  3  Partnership  well was completed during 1982, and the
McGillivrae  No.  2  well was completed during 1983. The Partnership redrilled
the  McGillivrae  No.  3  well  during  1985.

In addition to income derived from its overriding royalties, working interests
and  drilling  fees,  Petrominerals received operator and equipment lease fees
which  totaled  $7,800  during  1997.

Terra-Therme  II
----------------

Terra-Therme  II,  a general partnership, was formed in November 1982, for the
purpose  of acquiring and owning interests in geothermal leases located in the
Newberry  Crater  area  of the Deschutes National Forest in Central Oregon. In
addition to their interest in Terra-Therme II, the Company and Paul L. Howard,
individually,  held interests in lease options to acquire approximately 17,000
acres  and  15,000  acres,  respectively, of geothermal leases in the Newberry
Crater  area.

In  June  1991,  Vulcan  Power Company (Vulcan) entered into negotiations with
representatives  of Petrominerals and Terra-Therme II Partnership with respect
to  Vulcan  purchasing certain rights in the Newberry Crater geothermal leases
formerly  held by another party. Vulcan formed a new joint venture partnership
entity  known  as  Vulcan  Pacific,  in  which  Vulcan acts as operator of the
interest  it  acquired.















Page 56
<PAGE>
ITEM  12  -  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
             --------------------------------------------------
             (Continued)

TRANSACTIONS  WITH  MANAGEMENT  AND  OTHERS  (Continued)

Terra-Therme  II  (Continued)
----------------

Vulcan  purchased  its interests in the Newberry Crater properties for a total
investment  of less than $500,000, plus approximately 120,000 shares of Vulcan
Class A common stock. Petrominerals received $11,915 in cash and 44,943 shares
of  Vulcan  Class  A common stock for a carried interest in the development of
this  property.  The  Terra-Therme  II  Partnership  retains  a  1% net profit
interest  in  certain of the properties in the Newberry site. In addition, the
Terra-Therme Partnership retains a 0.6% overriding royalty interest on certain
remaining  properties  it  acquired from Vulcan. The Company retains a 19.125%
interest  and  Mr.  Howard  retains  a  9.563% interest in the Terra Therme II
Partnership.

Other  than  the transactions described above, no executive officer, director,
stockholder  known to the Company to own, beneficially or of record, more than
5% of the Company's common stock, or any member of the immediate family of any
of  those persons has engaged since the beginning of the Company's last fiscal
year  or  proposes  to  engage  in the future, in any transaction or series of
similar  transactions with the Company, directly through a separate entity, in
which  the  amount  involved  exceeded  or  will  exceed  $60,000.

INDEBTEDNESS  OF  MANAGEMENT

During  the  Company's  last  fiscal year, no executive officer, director, any
member  of  the  immediate  family or any of those persons, any corporation or
organization  for  which any of those persons serve as an executive officer or
partner  or  which  they  own directly or indirectly 10% or more of its equity
securities,  or  any  trust  or  other  estate  in  which any of the Company's
executive  officers or directors have a substantial beneficial interest or for
which  they  serve as a trustee or in a similar capacity, has owed the Company
at  any  time  since  the beginning of its last fiscal year more than $60,000.


















Page 57
<PAGE>
                                    PART IV
                                    -------

ITEM  13  -  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS
             --------------------------------------------------------
             ON  FORM  8-K
             -------------
<TABLE>
<CAPTION>


                                                                              Page(s)
                                                                              -------
<S>                                                                           <C>

A.  LIST OF DOCUMENTS
----------------------------------------------------------------------------

      1.  Report of Brown Armstrong Randall & Reyes,
             Independent Auditor's Report. . . . . . . . . . . . . . . . . .       19
           Consolidated Balance Sheets at December 31, 1997 and 1996 . . . .    20-21
           Consolidated Statements of Operations for the Years Ended
             December 31, 1997 and 1996. . . . . . . . . . . . . . . . . . .       22
           Consolidated Statements of Shareholders' Equity for the
             Years Ended December 31, 1997 and 1996. . . . . . . . . . . . .       23
           Consolidated Statements of Cash Flows for the Years Ended
             December 31, 1997 and 1996. . . . . . . . . . . . . . . . . . .       24
           Notes to Consolidated Financial Statements. . . . . . . . . . . .    25-44
      2.  Financial Statement Schedules
----------------------------------------------------------------------------

           The financial statement schedules of the Company filed herewith
           are listed below.  Schedules not included have been omitted
           because they are not applicable or the required information as
           shown in the consolidated financial statements and notes thereto.
           Schedules for the Years Ended December 31, 1997 and 1996:

           Schedule II - Valuation, Qualifying Accounts and Reserves . . . .       60
</TABLE>

















Pagr 58
<PAGE>
ITEM 13 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
---------------------------------------------------
ON FORM 8-K (Continued)
-----------
3.  Reports on Form 8-K
-------------------
    None.
4.  Exhibits
-------------
(2)(a)     Order Approving Disclosure Statement and Fixing Time for Filing
           Acceptances and Rejections of Plan and Fixing Date for
           Confirmation
           Hearing for Hydro-Test International, Inc.*
(2)(b)     Supplemental Hydro-Test International, Inc. Chapter 11
           Disclosure Statement*
(2)(c)     Supplemental Hydro-Test International, Inc. Chapter 11
           Plan*
(3)(a)     Certificate of Incorporation**
(3)(a)(I)  Amendment of Certificate of Incorporation***
(3)(b)     Bylaws, as Amended***
(10)(a)    Petrominerals Corporation 1993 Incentive Stock Option Plan
           and 1993
           Non-Statutory Stock Option Plan Incorporation****
(10)(b)    Form of Petrominerals Corporation Employee Stock Option
           Agreement****
(10)(c)    Petrominerals Corporation 1993 Employee Stock Bonus
           Plan*****
(10)(d)    Petrominerals Corporation Directors Stock Compensation
           Plan******
(21)       Subsidiaries of the Registrant

*       Incorporated herein by reference to Exhibit of same number in
        Registrant's Annual Report on Form 10-K for the year ended
        December 31, 1995.

**      Incorporated herein by reference to Exhibit of same number in
        Registrant's Annual Report on Form 10-K for the year ended
        December 31, 1981.

***     Incorporated herein by reference to Exhibit of same number in
        Registrant's Annual Report on Form 10-K for the year ended
        December 31, 1987.

****    Incorporated herein by reference to Form S-8 Registration No.
        33-70690, as filed with the Securities and Exchange Commission on
        October 22, 1993.

*****   Incorporated herein by reference to Form S-8 Registration No.
        33-70688, as filed with the Securities and Exchange Commission on
        October 22, 1993.

******  Incorporated herein by reference to Form S-8 Registration No.
        33-70692, as filed with the Securities and Exchange Commission on
        October 22, 1993.









Page 59
<PAGE>
                           PETROMINERALS CORPORATION
           SCHEDULE II - VALUATION, QUALIFYING ACCOUNTS AND RESERVES
                    YEARS ENDED DECEMBER 31, 1997 AND 1996
                                (In Thousands)




<TABLE>
<CAPTION>


                                                                Additions
                                   Balance at   (Recoveries)   Balance at
                                    Beginning    Charged to      End of
                                    of Period      Income        Period
                                   -----------  -------------  -----------
<S>                                <C>          <C>            <C>

Valuation allowance on oil and
  gas properties
        1997                       $    10,963  $           -  $    10,963
                                   ===========  =============  ===========
        1996                       $    10,963  $           -  $    10,963
                                   ===========  =============  ===========

                                   Balance at     (Additions)  Balance at
                                   Beginning    Posted to      End of
                                   of Period    Income         Period
                                   -----------  -------------  -----------
Allowance for doubtful receivable
        1997                       $        29  $          29  $         -
                                   ===========  =============  ===========
        1996                       $        66  $          37  $        29
                                   ===========  =============  ===========
</TABLE>




















Page 60
<PAGE>
                                  SIGNATURES




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

                                                   PETROMINERALS CORPORATION
                                                   (Registrant)



Dated:      February  27,  1998                     By: /S/ Paul L. Howard
                                                        ------------------
                                                         Paul L. Howard,
                                                         President  and Chief
                                                         Executive  Officer


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


Dated:      February  27,  1998                     By: /S/ Paul L. Howard
                                                        ------------------
                                                        Paul L. Howard,
                                                        President and Chief
                                                        Executive  Officer

Dated:      February  27,  1998                     By: /S/ David G. Davidson
                                                        ---------------------
                                                         David  G.Davidson,
                                                         Director


Dated:      February  27,  1998                    By: /S/ Everett L. Hodges
                                                       ---------------------
                                                         Everett  L. Hodges,
                                                         Director


Dated:      February  27,  1998                     By: /S/ Morris V. Hodges
                                                        --------------------
                                                         Morris  V.Hodges,
                                                         Assistant Secretary
                                                         and  Director


Dated:      February  27,  1998                      By: /S/ William N. Hagler
                                                         ---------------------
                                                         William  N. Hagler






Page 61
<PAGE>
                                   EXHIBITS

<PAGE>
                                  EXHIBIT 21


                        SUBSIDIARIES OF THE REGISTRANT


<PAGE>
1.          Hydro-Test  International,  Inc.