UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended                  JUNE 30, 1998
                               ------------------------------

                                       OR

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

For the transition period from ______________________ to

                          COMMISSION FILE NUMBER  0-9946

                               GOLDEN OIL COMPANY
            (Exact name of registrant as specified in its charter)

            DELAWARE                                      84-0836562
(State or other jurisdiction of incorporation          (I.R.S. Employer 
            or organization)                           Identification No.)

550 POST OAK BOULEVARD, SUITE 550, HOUSTON, TEXAS           77027
   (Address of principal executive offices)               (Zip Code)

                                 (713) 622-8492
              (Registrants telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES               NO    X

      As of August 1, 1998, the Registrant had outstanding 1,624,291 shares of
common stock, par value $.01 per share and 22,254 shares of Class B common
stock, par value $.01 per share.
<PAGE>
                                    CONTENTS

                                                                          PAGE

PART I.     FINANCIAL INFORMATION

Item 1.           Financial Statements

            -   Consolidated Statements of Operations.....................  3

            -   Consolidated Balance Sheets...............................  5

            -   Consolidated Statements of Cash Flows.....................  7

            -   Notes to Consolidated Financial Statements................  9

Item 2.           Management's Discussion and Analysis of
            Financial Condition and Results of Operations.................  17

PART II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K..............................  27

                                       2
<PAGE>
                               GOLDEN OIL COMPANY

                          PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                       THREE MONTHS ENDED
                                                            JUNE 30,
                                                  -----------------------------
                                                       1998              1997
                                                  -----------       -----------
Revenues:
   Oil and gas production ..................      $   258,523       $   456,344
   Other ...................................            6,409             6,886
                                                  -----------       -----------
      Total revenues .......................          264,932           463,230
                                                  -----------       -----------

Costs and expenses:
   Production costs ........................          209,649           294,431
   Pit impoundment costs, net ..............             --              23,715
   Depreciation, depletion and
     amortization ..........................           73,554            79,343

   General and administrative ..............           95,787            99,376
                                                  -----------       -----------

      Total costs and expenses .............          378,990           496,865
                                                  -----------       -----------

                                                     (114,058)          (33,635)
Gain (loss) on sale of property,
   equipment and other assets ..............            1,000            (7,552)
Interest expense, net ......................           (4,711)           (4,567)


Other income (expense) .....................          (25,169)           (1,220)
                                                  -----------       -----------

Net earnings (loss) ........................      $  (142,938)      $   (46,974)
                                                  ===========       ===========


Basic and diluted (loss) per common
   share ...................................      $      (.09)      $      (.03)
                                                  ===========       ===========

Weighted average number of
   common shares and common
   share equivalents outstanding ...........        1,536,379         1,424,291
                                                  ===========       ===========


               See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
                               GOLDEN OIL COMPANY

                          PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                       SIX MONTHS ENDED
                                                             JUNE 30,
                                                  -----------------------------
                                                      1998              1997
                                                  -----------       -----------
Revenues:
   Oil and gas production ..................      $   533,675       $   878,708

   Other ...................................           14,391            13,222
                                                  -----------       -----------

      Total revenues .......................          548,066           891,930
                                                  -----------       -----------

Costs and expenses:
   Production costs ........................          473,782           578,505
   Pit impoundment costs, net ..............           22,681            46,217
   Depreciation, depletion and
     amortization ..........................          146,613           160,906

   General and administrative ..............          136,449           165,084
                                                  -----------       -----------

      Total costs and expenses .............          779,525           950,712
                                                  -----------       -----------

                                                     (231,459)          (58,782)
Gain (loss) on sale of property,
   equipment and other assets ..............             (995)           (7,552)
Interest expense, net ......................           (8,601)           (9,643)

Other income (expense) .....................          (19,698)           (1,590)
                                                  -----------       -----------

Net earnings (loss) ........................      $  (260,753)      $   (77,567)
                                                  ===========       ===========


Basic and diluted (loss) per common
   share ...................................      $      (.17)      $      (.05)
                                                  ===========       ===========

Weighted average number of
   common shares and common
   share equivalents outstanding ...........        1,530,368         1,424,291
                                                  ===========       ===========


               See Notes to Consolidated Financial Statements.

                                       4
<PAGE>
                               GOLDEN OIL COMPANY

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                      JUNE 30,      DECEMBER 31,
                                                        1998             1997
                                                   -----------      -----------
          ASSETS

Current assets:
    Cash and cash equivalents ................     $    45,044      $   178,481
    Accounts receivable, net .................         406,060          402,512

    Prepaid expenses and other ...............          26,346           39,409
                                                   -----------      -----------


         Total current assets ................         477,450          620,402
                                                   -----------      -----------

Property and equipment, at cost:
    Oil and gas properties
    (using the successful efforts
      method of accounting)
         Producing properties ................       5,882,105        5,867,128
         Non-producing properties ............         105,000          105,000
                                                   -----------      -----------

         Total oil and gas properties ........       5,987,105        5,972,128
                                                   -----------      -----------

Pipeline, field and other well equipment .....         241,288          225,274

Other property and equipment .................         341,588          413,981
                                                   -----------      -----------
                                                     6,569,981        6,611,383

Less accumulated depreciation,
    depletion and amortization ...............      (3,820,396)      (3,757,030)
                                                   -----------      -----------


    Net property and equipment ...............       2,749,585        2,854,353
                                                   -----------      -----------

Investments, real estate .....................         196,829          192,229

Other assets .................................           1,481            1,481
                                                   -----------      -----------

                                                   $ 3,425,345      $ 3,668,465
                                                   ===========      ===========


                                   (Continued)

               See Notes to Consolidated Financial Statements.

                                       5
<PAGE>
                               GOLDEN OIL COMPANY

                   CONSOLIDATED BALANCE SHEETS (CONTINUED)
                                   (UNAUDITED)

                                                      JUNE 30,      DECEMBER 31,
                                                        1998            1997
                                                   ------------    ------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Notes payable and
     current portion of long-term debt .........         75,770         114,969
   Accounts payable ............................      1,135,326       1,201,629

   Accrued expenses ............................        313,578         290,362
                                                   ------------    ------------

        Total current liabilities ..............      1,524,674       1,606,960
                                                   ------------    ------------

Long-term debt .................................        167,360          24,091
Other liabilities ..............................         99,931         168,281

Commitments and contingencies
(See Notes 4 and 5) ............................           --              --

Stockholders' equity:
  Preferred stock, par value $.01;
    authorized 10,000,000 shares, none issued ..           --              --
  Common stock, par value $.01
    authorized 15,000,000 shares,
    issued and outstanding; 1,624,291
    shares at June 30, 1998
    and 1,524,291 at December 31, 1997 .........         16,243          15,243
  Class B common stock, par value $.01
    (convertible share-for-share into common
    stock);  authorized  3,500,000 shares;
    issued and outstanding 22,254 shares at
    June 30, 1998 and December 31, 1997 ........            223             223
  Additional paid-in capital ...................     13,907,479      13,883,479

  Accumulated deficit ..........................    (12,270,565)    (12,029,812)
                                                   ------------    ------------

        Total stockholders' equity .............      1,633,380       1,869,133
                                                   ------------    ------------

                                                   $  3,425,345    $  3,668,465
                                                   ============    ============

               See Notes to Consolidated Financial Statements.

                                       6
<PAGE>
                               GOLDEN OIL COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                           SIX MONTHS ENDED
                                                               JUNE 30,
                                                      -------------------------
                                                         1998            1997
                                                      ---------       ---------
Cash flows from operating activities:
   Net earnings (loss) .........................      $(260,753)      $ (77,567)
   Adjustments to reconcile net
      income to net cash provided
      by operating activities:
   Depreciation, depletion
      and amortization .........................        146,613         160,906
   Equity in net (income) loss of
      investment in commercial
      realty ...................................         (4,600)          2,526
   Loss on sale of property
      and equipment ............................            995           7,552
   Guarantee fee ...............................         25,000            --
   Changes in components of working
   capital:
      (Increase) decrease in
      accounts receivable, net .................         (3,548)         79,616
      (Increase) decrease in prepaid
         expenses and other ....................         13,063           6,634
      Increase (decrease) in accounts
         payable ...............................        (66,303)       (168,765)
      Increase (decrease) in
      accrued expenses .........................         23,216         (22,510)
      Increase (decrease) in
         other liabilities .....................        (68,350)         70,015
                                                      ---------       ---------

Net cash provided by (used
       in) operating activities ................      $(194,667)      $  58,407
                                                      =========       =========


                                   (Continued)

               See Notes to Consolidated Financial Statements.

                                       7
<PAGE>
                               GOLDEN OIL COMPANY

              CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (UNAUDITED)

                                                           SIX MONTHS ENDED
                                                               JUNE 30,
                                                      -------------------------
                                                         1998             1997
                                                      ---------       ---------
Cash flows from investing activities:
   Proceeds from sale of property    
     and equipment .............................          1,174           1,803
   Additions of oil and gas properties .........        (14,977)        (73,810)
   Additions  of other  property
   and equipment ...............................        (29,037)         (4,067)
   Decrease in short-term investments ..........           --              (753)
                                                      ---------       ---------

Net cash used in investing
activities .....................................        (42,840)        (76,827)
                                                      ---------       ---------

Cash flows from financing activities:
    Proceeds from issuance of
      long-term debt ...........................        250,000          64,566

      Payment of debt ..........................       (145,930)        (72,915)
                                                      ---------       ---------
Net cash provided by (used in)
   financing activities ........................        104,070          (8,349)
                                                      ---------       ---------

Net increase  (decrease) in cash
and cash equivalents ...........................       (133,437)        (26,769)
Cash and cash equivalents at
   beginning of period .........................        178,481         165,209
                                                      ---------       ---------
Cash and cash equivalents at
   end of period ...............................      $  45,044       $ 138,440
                                                      =========       =========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

      Cash paid for interest expense was $7,744 and $10,304 for the six months
ended June 30, 1998 and 1997, respectively. No cash was paid for federal income
taxes during the same corresponding periods.

                See Notes to Consolidated Financial Statements

                                       8
<PAGE>
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

            For a summary of significant accounting principles, see Notes to
      Consolidated Financial Statements and Note 1 thereof contained in the
      Annual Report on Form 10-K of Golden Oil Company ("Golden" or "Company")
      for the year ended December 31, 1997. The Company follows the same
      accounting policies during interim periods as it does for annual reporting
      purposes.

            The accompanying consolidated financial statements are condensed and
      unaudited and have been prepared pursuant to the rules and regulations of
      the Securities and Exchange Commission ("SEC"). In the opinion of
      management, the unaudited interim financial statements reflect such
      adjustments as are necessary to present a fair statement of the financial
      position, results of operations and cash flows for the interim periods
      presented. Interim results are not necessarily indicative of a full year
      of operations. Certain information and note disclosures normally included
      in annual financial statements prepared in accordance with generally
      accepted accounting principles have been condensed or omitted pursuant to
      SEC rules and regulations; however, the Company believes that the
      disclosures made are adequate to make the information presented not
      misleading. These financial statements should be read in conjunction with
      the financial statements and the notes thereto included in the Company's
      Form 10-K for the year ended December 31, 1997.

            IMPAIRMENT OF LONG-LIVED ASSETS. On January 1, 1996 the Company
      adopted Statement of Financial Accounting Standard ("SFAS") No. 121,
      "Accounting for the Impairment of Long-lived Assets and for Long-lived
      Assets to be Disposed Of." No effect on the financial position, results of
      operations or cash flows has been recognized as a result of the adoption
      of this standard. However, pursuant to SFAS No. 121, in the future
      material negative adjustments to the carrying value of the Company's
      producing oil and gas properties could be required should prices
      obtainable for oil and/or gas production decline significantly, or if the
      Company were to revise its estimates of recoverable oil and gas reserves.
      Although oil prices declined very significantly during the second quarter,
      the Company has not provided an impairment reserve during that period, as
      management believes that price recovery is likely to occur this fall. If
      price recovery has not occurred by the time to report for the third
      quarter ending September 30, 1998, the Company would make a charge to
      reflect impairment of the value of long-lived production assets. If the
      current range of prices for oil and gas continues through the third
      quarter, the additional third quarter charge for impairment would be in
      the range of $150,000 to $400,000.

                                       9
<PAGE>
            ACCOUNTS RECEIVABLE. Amounts shown as accounts receivable are net of
      $113,718 at June 30, 1998 and December 31, 1997 to reflect estimated
      provisions for doubtful collection of certain non-recourse obligations
      primarily in connection with certain working interest participants of
      Company subsidiaries. Accounts receivable reflect net amounts due from
      affiliates of $78,304 at June 30, 1998 and $17,583 at December 31, 1997.

            The Company holds a limited partnership interest in its headquarters
      office building. The Company accounts for this investment using the equity
      method and, accordingly, the Company recognizes its pro-rata share of net
      income or loss of the limited partnership in its current operating
      statements.

            RECLASSIFICATIONS. Certain amounts from prior periods have been
      reclassified to conform to the presentation format for the 1998
      Consolidated Financial Statements with no effect on reported results of
      operations.

(2)   CERTAIN FIXED PRICE SALE AGREEMENTS

            In order to plan Company operations and as a measure of protection
      against sudden declines in oil and gas prices, from time to time the
      Company enters into fixed price sales contracts. The Company held a fixed
      price oil contract for approximately 40% of its monthly oil production
      through March 1, 1998 at an average price at the wellhead of approximately
      $19.75 per barrel. If, as and when oil prices increase from current levels
      the Company anticipates that it will enter new fixed price oil contracts.
      In March 1998, the Company entered into a fixed price contract for
      approximately 60% of its monthly gas production in the San Juan Basin in
      New Mexico. Such contract extends through August 31, 1998 at an average
      price of approximately $1.99 per Mmbtu after which gas production likely
      will be sold at prevailing market rates. The Company believes the fixed
      price arrangements it might typically sign are entered with financially
      capable purchasers and does not anticipate nonperformance by
      counterparties to such transactions.



(3)   DEVELOPMENT OF SOUTH DOG CREEK FIELD

            In March 1993, an agreement was reached between the Company and
      Calumet Oil Company, which are the principal operators in the South Dog
      Creek field in Osage County, Oklahoma, aimed at enhancing and extending
      the producing life of the field by injection of water into the
      Mississippian formation in ten wells covering four separate quarter
      section leases. The operators filed for a water injection permit with the
      Environmental Protection Agency ("EPA") and, during October 1993, a
      field-wide water injection permit was granted by the 

                                       10
<PAGE>
      EPA to the Company and another interest holder and operator. During 1995
      the Company initiated a limited waterflood injection program on one of its
      operated leases believed to have demonstrated engineering potential for
      success. Under the program certain marginal producing wells were converted
      to water injectors and producing wells and well equipment were reworked to
      increase the wells' fluid volume capacity. To date, the expenditures on
      the waterflood project on this lease are approximately $313,000 through
      June 1998, exclusive of operating fees charged by the Company, of which
      the Company's share was approximately $232,000. The Company funded its
      share of costs through internally generated cash flows with the balance
      paid by outside working interest owners who elected to join the project.

            At current prices of oil and gas, the Company has a negative cash
      flow from operations and can fund development costs only through third
      party arrangements such as borrowings, asset sales, joint operations or
      the like.

            To date, the Osage County, Oklahoma field has not exhibited a
      substantial, sustained increase in production from water injection. The
      Company does not anticipate significant increases in overall production
      volumes from this field unless further development can be implemented
      across a more extensive area and such further development is successful.
      Management plans to evaluate the results of ongoing development at various
      stages before determining whether or to what extent to attempt additional
      development. Current rates of total water injection, including reinjected
      water, total approximately 1,600 barrels per day into three injection
      wells. The Company is currently reviewing the estimated costs of various
      methods to acquire or develop additional sources of water needed for
      injection. The availability of source water supply is not itself expected
      to be a material limiting factor in the overall project. To date the
      Company has injected approximately 310,000 barrels of net new water into
      the producing formation. Based on current engineering projections, at
      least 650,000 net new barrels will be required to reach the level at which
      localized repressurization may be expected to occur. Subject to the
      availability of funds and based on indications available from the


                                       18
<PAGE>
      localized response to water injection to date, the Company plans to
      continue a water injection program. If in the future sufficient production
      response is achieved and sustained, the Company intends to pursue a
      field-wide waterflood plan. The feasibility and overall scheduling of full
      scale, field-wide development for water injection remain subject to, among
      other things, engineering advice based on the localized injection
      summarized above; actual and projected oil prices; and the availability of
      additional financing.

            Due to the uneconomic nature of oil operations at current oil
      prices, and to other variables discussed above, the Company is not able to
      assure a schedule of ongoing development, nor to provide a definitive
      estimate of overall projected waterflood costs. As results are received
      and analyzed, the Company will continue to review the actual and projected
      overall costs of the waterflood project. Subject to the foregoing, the
      Company is using a working projection for its share of overall project
      costs of $750,000, inclusive of $313,000 of costs already incurred, and is
      projecting 1998 capital expenditures of $58,000 for this project.

(4)   ENVIRONMENTAL MATTERS

            In recent years the Bureau of Land Management ("BLM") of the U.S.
      Department of the Interior has implemented extensive national regulations
      for the handling and maintenance of produced water from well sites on all
      federal lands. The stated objective of the regulations is to provide
      guidance for closure of unlined surface impoundments in a manner that
      assures protection of fresh waters, public health and the environment. The
      regulations require oil and gas companies to eliminate the use of unlined
      surface impoundments in the operation of wells and to remediate and
      replace them with lined and enclosed surface pits. Such federal government
      regulations provide for implementation on a region-by-region basis.

            In January 1997, the regions designated by the federal government
      were expanded to include 81 wells in the Company's field of operations on
      lands of the Jicarilla Apache Nation in New Mexico. Pursuant to the
      Company's operating permit from the Jicarilla Apache Indian Nation, the
      Company's operating subsidiary was required to develop a plan for
      remediation and improvement for every well site. In May 1997 the BLM and
      the Jicarilla Environmental Protection Office ("EPO") approved the
      remediation and improvement plan ("Plan"). The Plan provided for the
      remediation and enclosure of surface pits at all well sites in accordance
      with Ordinance 95-0-308-03. Surface pits on 28 well sites have been
      enclosed and soil remediation is complete in accordance with BLM and EPO
      regulations. Work is ongoing for an additional 35 well sites. Costs for
      the project to date, including the interests of the Company and third
      parties, vary substantially by well site but have ranged between $2,000 to
      $10,000 per site, and are approximately $163,000 in total.

            Remediation on all 81 well sites operated by the Company in New
      Mexico is currently required to be completed by December 1998. Numerous
      oil and gas producers in the region, including the Company, are seeking
      extensions of such date; however, to date extensions have not yet been
      granted. Total costs are subject to a number of variable expense factors
      including, among others, the cost and manner of disposal of removed soil
      and the amounts of soil which may be required to be removed per site. The
      Plan allows relatively broad soil disposal options; however, it is
      possible that even more costly soil disposal alternatives

                                       12
<PAGE>
      may be deemed necessary or may be mandated by the regulatory agencies
      governing the remediation and impoundment programs.

            Based upon preliminary information available at this time, the
      Company has estimated the total cost to complete the entire remediation
      and pit impoundment program in this region to be in the range of
      approximately $350,000 to $500,000. Total costs could vary significantly
      from such estimate due to numerous variable expense factors as summarized
      above. In recognition of the above variables the Company charged against
      income a provision reflecting its preliminary net cost estimate for such
      work of approximately $106,000 as of December 31, 1997 and an additional
      amount of $22,681 as of June 30, 1998. The adequacy of such provision is
      reviewed periodically and may be adjusted as actual costs are incurred.

            Primarily as a result of negative cash flow generated currently by
      New Mexico oil production operations at current prices and other
      materially negative factors summarized above, it is uncertain to what
      extent the costs to complete the federal government's mandated pit
      impoundment program may be met through internally generated cash flow. In
      event that the Company can not meet such obligations from internally
      generated funds, the Company would be required to look to asset sales;
      additional borrowings, if possible; or to third party arrangements.

(5)   INDEBTEDNESS

            In April 1996 the Company entered into a credit agreement with a
      commercial bank in Albuquerque, New Mexico under which the Company was
      able to reschedule payments of existing borrowings which had fallen due
      for repayment in full, and to increase its available credit from $150,000
      to $400,000. The loan agreement extended the maturity schedule of the
      Company's debt to four years, subject to certain conditions, and provided
      monthly payments totaling approximately $10,400 monthly through April
      2000. As a condition to the new credit agreement, the lending bank
      required the entire credit facility to be independently, personally
      guaranteed by a person acceptable to it, particularly a member of the
      ongoing management of the Company. An officer of the Company agreed to
      provide such unconditional personal guarantee for which the officer would
      receive fair compensation. After having received delivery of the written
      opinion from an independent investment banking advisor that such
      transaction was fair, from a financial point of view, to the Company and
      its stockholders, the Board of Directors approved the new credit agreement
      and the delivery to the guarantor of warrants to purchase 250,000
      unregistered shares of common stock of the Company through March 2006 at
      an exercise price of $.20 per share. During 

                                       13
<PAGE>
      1997 the guarantor exercised rights to purchase 100,000 such shares. No
      rights have been exercised during 1998 to date.

            During the second quarter of 1998 oil prices declined precipitously,
      and have since reached ten year lows. The Company's oil production
      operations became uneconomic and failed to generate cash flow to pay costs
      including the government mandated pit remediation program; monthly
      principal and interest charges under the bank agreement; or costs of the
      Company's waterflood injection program at its Osage County, Oklahoma
      field. In order to fund its obligations, the Company obtained a new credit
      agreement under which the Company increased its borrowings by
      approximately $150,000; extended its loan maturity to July 1, 2001; and
      reduced monthly payment requirements to $8,200. The new credit bears
      interest at 1% over the lending bank's prime lending rate, adjusted
      periodically, an initial interest rate of 10.5% per annum. Proceeds from
      the new financing will be applied primarily to fund operating cash
      requirements; to continue the government mandated pit impoundment program;
      and to maintain the ongoing waterflood project as above.

            In order to obtain the new financing the Company was required by the
      lending bank to provide an unconditional personal guarantee, having
      substance acceptable to the bank, of repayment in full of all principal,
      interest and related costs provided under the new agreement. At this time
      the Company's management and the bank were concerned about factors
      including the Company's lack of liquidity; the working capital deficit
      exceeding one million dollars; and the rapid and severe declines in oil
      prices, which drove current oil production operations into a negative cash
      flow position. As a result of its financial postion, the Company was not
      able to pay a cash fee to the personal guarantor of the proposed
      financing. Instead, the Company agreed, subject to final approval of the
      guarantee and performance by the bank lender, to pay the financing fee by
      delivering to the guarantor 100,000 unregistered shares of its common
      stock, and warrants to purchase 250,000 unregistered shares of the
      Company's common stock, exerciseable in whole or in part through June 30,
      2008 at an exercise price of $.15 per share. On June 19, 1998 the Board of
      Directors ratified the execution by the Company of the bank credit
      agreement and approved the payment and delivery to the guarantor of such
      compensation. Prior to approving the agreement to obtain additional bank
      credit and the related guarantee arrangements, the Board of Directors
      retained an independent investment banking firm to advise concerning the
      fairness to the Company and its stockholders, from a financial point of
      view, of the terms proposed for payment for such guarantee. In the regular
      course of its business, such investment banking firm renders advice and
      opinions regarding mergers, acquisitions, financing arrangements, and cash
      and share transactions for small capitalization natural resource
      companies. At the meeting of the Board of Directors as above, the Board
      considered the written opinion delivered to it by the 

                                       14
<PAGE>
      independent investment banking advisor that the proposed transaction was
      fair, from a financial point of view, to the Company and its stockholders.
      The credit agreement and guarantee fee were thereupon approved by the
      Board of Directors. Subsequent to the close of the second quarter, 100,000
      such shares were delivered to the guarantor.

(6)   STRATEGIC CONSIDERATIONS

            In earlier stages of its development, the Company's strategic
      emphasis focused on oil and gas production and development, particularly
      of the substantial reserves categorized by the Company's independent
      petroleum engineering firm as proved undeveloped reserves, which are
      possibly recoverable by waterflood of the South Dog Creek field in
      Oklahoma. In addition the Company owned proved developed production of
      good quality, but having higher fixed costs of production than that of its
      Oklahoma field, located in the San Juan Basin, New Mexico. However, since
      the early 1990s a number of changes have occurred which have adversely
      impacted the independent oil and gas industry. As a result the Company has
      changed its strategic objectives. Generally, the adverse changes have
      included increased price volatility; repeated periods of sharply lower,
      sometimes uneconomic prices; increasing costs of operation; increased
      government regulation; adverse changes in the federal and state tax
      burden; and relatively less attractive opportunities to acquire oil and
      gas properties or purchase other independent operators in the Company's
      size range. These developments have adversely affected the independent oil
      and gas industry generally. In response to the changed operating
      environment, the Company has taken steps to diversify into other sectors
      of operation deemed to offer greater long-term potential and is actively
      considering transactions by which it may further diversify. In this
      process the Company may reduce its dependence on oil and gas operations
      while adding significantly to its participation in the real estate,
      financial services or other sectors.

            During late 1993 and 1994, the Company diversified outside of the
      energy sector through purchase of a limited partnership interest in a
      partnership ("Partnership") which owns the office building in Houston,
      Texas in which the Company maintains its principal offices. The Company is
      actively reviewing other possible transactions outside the energy sector.
      While such diversification appears to offer more attractive long-term
      opportunities than are offered by the small oil and gas sector, the
      Company's ability to arrange financing to enter any material transaction
      is subject to a number of other factors and constraints, certain of which
      are difficult to predict or are beyond management's control. Such factors
      include the degree of the Company's future success in the waterflood
      development of its proved undeveloped reserves; the future performance of
      oil and gas prices, 

                                       15
<PAGE>
      respectively; the extent of internal cash flow from operations; and the
      availability of financing to support current or prospective business
      operations of the Company.

            The Partnership has recently advised that, primarily to achieve
      greater diversification, the general partner is recommending the sale of
      such office building. Based on current market indications, the Company
      expects to recognize a gain on disposition of its ownership interest;
      however, arrangements for sale are not expected to be at a definitive
      stage until approximately the fall of the current year.

            Management is actively considering investment in other real estate
      interests as well as other diversification. While the long-term prospects
      of real estate sector may be considered attractive compared to those of
      the small independent oil and gas sector, the Company is constrained by
      its limited financial resources. Accordingly, unless oil prices increase
      greatly above current levels or the Company's asset base or capitalization
      is restructured, its ability to achieve significant diversification could
      be limited.







              End of Notes to Consolidated Financial Statements.

                                       16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES

      DIVERSIFICATION. The Company is a somewhat diversified business whose
current scope of operations includes oil and gas operation and development, but
with increasing emphasis on diversification into other sectors. Over the last
several years the Company has continued to develop its properties and has
expanded through corporate transactions, primarily asset purchases and mergers,
including the purchase of an interest in a commercial real estate venture.
Management places strong emphasis on further diversification. Subject to a
number of factors including the success of its ongoing secondary recovery
projects; future prices of oil and gas production and properties; the
availability of financing; and opportunities for diversification, the Company
plans to diversify from the independent oil and gas sector.

      FUNDING. The Company's operations during 1997, and to date during 1998,
have been funded primarily through borrowings under credit facilities,
internally generated funds from operating activities, and from working capital.
Unless oil prices continue at current levels, management anticipates that the
Company will meet ordinary operating needs for working capital from external
financing now in place and from internal sources. However, the Company will
require additional financing or internal cash generation in order to continue
its program to develop proved undeveloped reserves by waterflood injection, or
to continue to diversify. Management believes that it may be possible for the
Company to diversify and to obtain additional financing through issuance of
securities, asset sales, joint ventures, or other means. In this connection, the
Company recognizes a significant need to improve its current working capital
position.

      DECLINES IN CASH FLOW. Cash flow used in operating activities was $194,667
for the first six months of 1998 compared to cash provided by operating
activities of $58,407 for the first six months of 1997. The decrease from the
first six months of 1997 is due primarily to a decrease in production revenues
resulting from the collapse in oil prices and a significant decline in gas
prices in the first six months of 1998 compared to the prior year period.

      FIXED PRICE CONTRACTS. In order to plan Company operations and as a
measure of protection against sudden declines in oil and gas prices, from time
to time the Company enters into fixed price sales contracts. The Company held a
fixed price oil contract for approximately 40% of its monthly oil production
through March 1, 1998 at an average price at the wellhead of approximately
$19.75 per barrel. If, as and when oil prices increase from current levels the
Company anticipates that it will enter new fixed price oil contracts. In March
1998, the Company entered into a fixed price contract for approximately 60% of
its monthly gas production in the San Juan Basin in New Mexico. 

                                       17
<PAGE>
Such contract extends through August 31, 1998 at an average price of
approximately $1.99 per Mmbtu after which gas production likely will be sold at
prevailing market rates. The Company believes the fixed price arrangements it
might typically sign are entered with financially capable purchasers and does
not anticipate nonperformance by counterparties to such transactions.

      WATERFLOOD DEVELOPMENT. In March 1993, an agreement was reached between
the Company and Calumet Oil Company, which are the principal operators in the
South Dog Creek field in Osage County, Oklahoma, aimed at enhancing and
extending the producing life of the field by injection of water into the
Mississippian formation in ten wells covering four separate quarter section
leases. The operators filed for a water injection permit with the Environmental
Protection Agency ("EPA") and, during October 1993, a field-wide water injection
permit was granted by the EPA to the Company and another interest holder and
operator. During 1995 the Company initiated a limited waterflood injection
program on one of its operated leases believed to have demonstrated engineering
potential for success. Under the program certain marginal producing wells were
converted to water injectors and producing wells and well equipment were
reworked to increase the wells' fluid volume capacity. To date, the expenditures
on the waterflood project on this lease are approximately $313,000 through June
1998, exclusive of operating fees charged by the Company, of which the Company's
share was approximately $232,000. The Company funded its share of costs through
internally generated cash flows with the balance paid by outside working
interest owners who elected to join the project.

      At current prices of oil and gas, the Company has a negative cash flow
from operations and can fund development costs only through third party
arrangements such as borrowings, asset sales, joint operations or the like.

      To date, the Osage County, Oklahoma field has not exhibited a substantial,
sustained increase in production from water injection. The Company does not
anticipate significant increases in overall production volumes from this field
unless further development can be implemented across a more extensive area and
such further development is successful. Management plans to evaluate the results
of ongoing development at various stages before determining whether or to what
extent to attempt additional development. Current rates of total water
injection, including reinjected water, total approximately 1,600 barrels per day
into three injection wells. The Company is currently reviewing the estimated
costs of various methods to acquire or develop additional sources of water
needed for injection. The availability of source water supply is not itself
expected to be a material limiting factor in the overall project. To date the
Company has injected approximately 310,000 barrels of net new water into the
producing formation. Based on current engineering projections, at least 650,000
net new barrels will be required to reach the level at which localized
repressurization may be expected to occur. Subject to the availability of funds
and based on indications available from the 

                                       18
<PAGE>
localized response to water injection to date, the Company plans to continue a
water injection program. If in the future sufficient production response is
achieved and sustained, the Company intends to pursue a field-wide waterflood
plan. The feasibility and overall scheduling of full scale, field-wide
development for water injection remain subject to, among other things,
engineering advice based on the localized injection summarized above; actual and
projected oil prices; and the availability of additional financing.

      Due to the uneconomic nature of oil operations at current oil prices, and
to other variables discussed above, the Company is not able to assure a schedule
of ongoing development, nor to provide a definitive estimate of overall
projected waterflood costs. As results are received and analyzed, the Company
will continue to review the actual and projected overall costs of the waterflood
project. Subject to the foregoing, the Company is using a working projection for
its share of overall project costs of $750,000, inclusive of $313,000 of costs
already incurred, and is projecting 1998 capital expenditures of $58,000 for
this project.

      CREDIT AGREEMENTS. In April 1996 the Company entered into a credit
agreement with a commercial bank in Albuquerque, New Mexico under which the
Company was able to reschedule payments of existing borrowings which had fallen
due for repayment in full, and to increase its available credit from $150,000 to
$400,000. The loan agreement extended the maturity schedule of the Company's
debt to four years, subject to certain conditions, and provided monthly payments
totaling approximately $10,400 monthly through April 2000. As a condition to the
new credit agreement, the lending bank required the entire credit facility to be
independently, personally guaranteed by a person acceptable to it, particularly
a member of the ongoing management of the Company. An officer of the Company
agreed to provide such unconditional personal guarantee for which the officer
would receive fair compensation. After having received delivery of the written
opinion from an independent investment banking advisor that such transaction was
fair, from a financial point of view, to the Company and its stockholders, the
Board of Directors approved the new credit agreement and the delivery to the
guarantor of warrants to purchase 250,000 unregistered shares of common stock of
the Company through March 2006 at an exercise price of $.20 per share. During
1997 the guarantor exercised rights to purchase 100,000 such shares. No rights
have been exercised during 1998 to date.

            During the second quarter of 1998 oil prices declined precipitously,
and have since reached ten year lows. The Company's oil production operations
became uneconomic and failed to generate cash flow to pay costs including the
government mandated pit remediation program; monthly principal and interest
charges under the bank agreement; or costs of the Company's waterflood injection
program at its Osage County, Oklahoma field. In order to fund its obligations,
the Company obtained a new credit agreement under which the Company increased
its borrowings by approximately $150,000; 

                                       19
<PAGE>
extended its loan maturity to July 1, 2001; and reduced monthly payment
requirements to $8,200. The new credit bears interest at 1% over the lending
bank's prime lending rate, adjusted periodically, an initial interest rate of
10.5% per annum. Proceeds from the new financing will be applied primarily to
fund operating cash requirements; to continue the government mandated pit
impoundment program; and to maintain the ongoing waterflood project as above.

      In order to obtain the new financing the Company was required by the
lending bank to provide an unconditional personal guarantee, having substance
acceptable to the bank, of repayment in full of all principal, interest and
related costs provided under the new agreement. At this time the Company's
management and the bank were concerned about factors including the Company's
lack of liquidity; the working capital deficit exceeding one million dollars;
and the rapid and severe declines in oil prices, which drove current oil
production operations into a negative cash flow position. As a result of its
financial postion, the Company was not able to pay a cash fee to the personal
guarantor of the proposed financing. Instead, the Company agreed, subject to
final approval of the guarantee and performance by the bank lender, to pay the
financing fee by delivering to the guarantor 100,000 unregistered shares of its
common stock, and warrants to purchase 250,000 unregistered shares of the
Company's common stock, exerciseable in whole or in part through June 30, 2008
at an exercise price of $.15 per share. On June 19, 1998 the Board of Directors
ratified the execution by the Company of the bank credit agreement and approved
the payment and delivery to the guarantor of such compensation. Prior to
approving the agreement to obtain additional bank credit and the related
guarantee arrangements, the Board of Directors retained an independent
investment banking firm to advise concerning the fairness to the Company and its
stockholders, from a financial point of view, of the terms proposed for payment
for such guarantee. In the regular course of its business, such investment
banking firm renders advice and opinions regarding mergers, acquisitions,
financing arrangements, and cash and share transactions for small capitalization
natural resource companies. At the meeting of the Board of Directors as above,
the Board considered the written opinion delivered to it by the independent
investment banking advisor that the proposed transaction was fair, from a
financial point of view, to the Company and its stockholders. The credit
agreement and guarantee fee were thereupon approved by the Board of Directors.
Subsequent to the close of the second quarter, 100,000 such shares were
delivered to the guarantor.

      In recent years the Bureau of Land Management ("BLM") of the U.S.
Department of the Interior has implemented extensive national regulations for
the handling and maintenance of produced water from well sites on all federal
lands. The stated objective of the regulations is to provide guidance for
closure of unlined surface impoundments in a manner that assures protection of
fresh waters, public health and the environment. The regulations require oil and
gas companies to eliminate the use of unlined surface impoundments in the
operation of wells and to remediate and replace them with lined and 

                                       20
<PAGE>
enclosed surface pits. Such federal government regulations provide for
implementation on a region-by-region basis.

      In January 1997, the regions designated by the federal government were
expanded to include 81 wells in the Company's field of operations on lands of
the Jicarilla Apache Nation in New Mexico. Pursuant to the Company's operating
permit from the Jicarilla Apache Indian Nation, the Company's operating
subsidiary was required to develop a plan for remediation and improvement for
every well site. In May 1997 the BLM and the Jicarilla Environmental Protection
Office ("EPO") approved the remediation and improvement plan ("Plan"). The Plan
provided for the remediation and enclosure of surface pits at all well sites in
accordance with Ordinance 95-0-308-03. Surface pits on 28 well sites have been
enclosed and soil remediation is complete in accordance with BLM and EPO
regulations. Work is ongoing for an additional 35 well sites. Costs for the
project to date, including the interests of the Company and third parties, vary
substantially by well site but have ranged between $2,000 to $10,000 per site,
and are approximately $163,000 in total.

      Remediation on all 81 well sites operated by the Company in New Mexico is
currently required to be completed by December 1998. Numerous oil and gas
producers in the region, including the Company, are seeking extensions of such
date; however, to date extensions have not yet been granted. Total costs are
subject to a number of variable expense factors including, among others, the
cost and manner of disposal of removed soil and the amounts of soil which may be
required to be removed per site. The Plan allows relatively broad soil disposal
options; however, it is possible that even more costly soil disposal
alternatives may be deemed necessary or may be mandated by the regulatory
agencies governing the remediation and impoundment programs.

      Based upon preliminary information available at this time, the Company has
estimated the total cost to complete the entire remediation and pit impoundment
program in this region to be in the range of approximately $350,000 to $500,000.
Total costs could vary significantly from such estimate due to numerous variable
expense factors as summarized above. In recognition of the above variables the
Company charged against income a provision reflecting its preliminary net cost
estimate for such work of approximately $106,000 as of December 31, 1997 and an
additional amount of $22,681 as of June 30, 1998. The adequacy of such provision
is reviewed periodically and may be adjusted as actual costs are incurred.

      Primarily as a result of negative cash flow generated currently by New
Mexico oil production operations at current prices and other materially negative
factors summarized above, it is uncertain to what extent the costs to complete
the federal government's mandated pit impoundment program may be met through
internally generated cash flow. In event that the Company can not meet such
obligations from internally generated funds, 

                                       21
<PAGE>
the Company would be required to look to asset sales; additional borrowings, if
possible; or to third party arrangements.

      At June 30, 1998, the Company had a working capital deficit of $1,047,224
compared to a working capital deficit of $986,558 at December 31, 1997, and a
current ratio of .31 to 1.00 as of June 30, 1998 compared to a current ratio of
 .39 to 1.00 as of December 31, 1997. The increase in the working capital deficit
at June 30, 1998 primarily reflects reduced short-term debt resulting from
refinancing the short-term debt then outstanding offset by a decrease in
production revenues due to a collapse in oil prices and a significant decline in
gas prices in the first six months of 1998.

      On January 1, 1996 the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed Of." No effect on the financial
position, results of operations or cash flows has been recognized as a result of
the adoption of this standard. However, pursuant to SFAS No. 121, in the future
material negative adjustments to the carrying value of the Company's producing
oil and gas properties could be required should prices obtainable for oil and/or
gas production decline significantly, or if the Company were to revise its
estimates of recoverable oil and gas reserves. Although oil prices declined very
significantly during the second quarter, the Company has not provided an
impairment reserve during that period, as management believes that price
recovery is likely to occur this fall. If price recovery has not occurred by the
time to report for the third quarter ending September 30, 1998, the Company
would make a charge to reflect impairment of the value of long-lived production
assets. If the current range of prices for oil and gas continues through the
third quarter, the additional third quarter charge for impairment would be in
the range of $150,000 to $400,000.

      Due to factors including changes in tax laws, adverse changes in the
economics of exploration drilling and the availability to the Company of
alternative uses of capital, during the late 1980s the Company curtailed
exploration activities. If the Company commences such programs in the future, it
intends to continue its previous policy of sharing exploration risks with third
party drilling participants. Certain of the Company's oil and gas leases provide
for ongoing drilling arrangements for periodic development of proved reserves.
The Company's principal development obligations under such agreements have been
suspended pending clarification of title assignments on certain federal leases.
The Company expects to obtain drilling participation from industry partners so
as to reduce the amount of the Company's required drilling commitments.

                                       22
<PAGE>
RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 WITH THE THREE MONTHS ENDED
JUNE 30, 1997.

REVENUES

      Revenues from oil and gas production decreased from $456,344 during the
second quarter of 1997 to $258,523 in the comparable 1998 quarter, a decrease of
$197,821. The decrease is primarily attributable to a decrease in average oil
prices of $6.79 per barrel from $21.56 per barrel during the second quarter of
1997 to $14.77 per barrel during the second quarter of 1998. Third quarter oil
prices may be as low or lower than average prices obtained during the second
quarter. Additionally, average gas prices decreased $0.05 per mcf from $1.39 per
mcf during the second quarter of 1997 to $1.34 per mcf during the second quarter
of 1998. As a result of the collapse of oil prices, the Company has temporarily
shut-in certain high cost, marginally producing wells in New Mexico, resulting
in a 26% decrease in the Company's total production volumes compared to the same
period in 1997.

      Other revenues were $6,409 for the second quarter of 1998 compared to
$6,886 for the comparable period in 1997.

COSTS AND EXPENSES

      Oil and gas production costs decreased by $84,782 from $294,431 for the
second quarter of 1997 to $209,649 for the same period in 1998. Such decrease is
due primarily to reduced production costs for well workovers during 1998
compared to the workover costs in the San Juan field in New Mexico during the
second quarter of 1997. Pit impoundment costs were $23,715, net of operating
charges, during the second quarter of 1997. General and administrative expenses
decreased by $3,589 from $99,376 for the second quarter of 1997 to $95,787 for
the same period in 1998.

      Depreciation, depletion and amortization expenses decreased from $79,343
for the second quarter of 1997 to $73,554 for the comparable period of 1998.

      Loss on sale of property and equipment during the second quarter of 1997
of $7,552 and gain on sale of property and equipment of $1,000 in the comparable
1998 quarter reflects the sale of field equipment.

      Interest expense increased by $144 from $4,567 for the second quarter of
1997 to $4,711 for the same period in 1998 reflecting increased average
borrowings outstanding.

                                       23
<PAGE>

      Other expense during the second quarter of 1998 of $25,169 primarily
represents a guarantee fee of $25,000 for the Company's bank credit agreement.

      Primarily reflecting the factors discussed above, the Company reported a
net loss for the three months ended June 30, 1998 of $142,938 compared to a net
loss of $46,974 for the same period of 1997.



                                       24
<PAGE>
RESULTS OF OPERATIONS

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 WITH THE SIX MONTHS ENDED JUNE
30, 1997.

REVENUES

      Revenues from oil and gas production decreased from $878,708 during the
first six months of 1997 to $533,675 in the comparable 1998 period, a decrease
of $345,033. The decrease is primarily attributable to a decrease in average oil
prices of $6.76 per barrel from $22.19 per barrel during the first six months of
1997 to $15.43 per barrel during the first six months of 1998. Additionally,
average gas prices decreased $0.55 per mcf, from $1.90 per mcf during the first
six months of 1997 to $1.35 per mcf during the first six months of 1998. As a
result of the collapse of oil prices, the Company has temporarily shut-in
certain high cost, marginally producing wells in New Mexico, resulting in a 18%
decrease in the Company's total production volumes compared to the same period
in 1997.

      Other revenues were $14,391 for the first six months of 1998 compared to
$13,222 for the comparable period in 1997.

COSTS AND EXPENSES

      Oil and gas production costs decreased by $104,723 from $578,505 for the
first six months of 1997 to $473,782 for the same period in 1998. Such decrease
is primarily due to production costs associated with an above-average number of
well workovers on Company-operated properties in its San Juan field in New
Mexico in the first six months of 1997. Pit impoundment costs were $46,217, net
of operating charges, during the first six months of 1997 compared to $22,681
for the same period in 1998. General and administrative expenses decreased by
$28,635 from $165,084 for the first six months of 1997 to $136,449 for the same
period in 1998.

      Depreciation, depletion and amortization expenses decreased from $160,906
for the first six months of 1997 to $146,613 for the comparable period of 1998.

      Loss on sale of property and equipment for the first six months of 1997
and 1998 of $7,552 and $995, respectively, reflects the sale of property and
field equipment.

      Interest expense decreased by $1,042 from $9,643 for the first six months
of 1997 to $8,601 for the same period in 1998 due to a decrease in average
outstanding borrowings.

                                       25
<PAGE>
      Other expense during the first six months of 1998 of $19,698 primarily
represents a guarantee fee of $25,000 for the Company's bank credit agreement.

      Primarily reflecting the factors discussed above, the Company reported a
net loss for the six months ended June 30, 1998 of $260,753 compared to a net
loss of $77,567 for the same period of 1997.


                                       26
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K  (MATERIAL EVENT).

            (a)   Exhibits

                  None.

            (b)   Reports on Form 8-K

                  None.

                                       27
<PAGE>
                                   SIGNATURES

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

                                    GOLDEN OIL COMPANY



Date: August 14, 1998               By:   /s/ RALPH T. MCELVENNY, JR.
                                          ---------------------------
                                            Chief Executive Officer

                                    By:   /s/ JEFFREY V. HOUSTON
                                          ---------------------------
                                            Chief  Financial and Accounting
                                          Officer



                                       28