SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     of the Securities Exchange Act of 1934

For the Quarterly Period Ended:
     September 30, 1998                               Commission File No. 0-9675


                           GREAT NORTHERN GAS COMPANY
             (Exact name of registrant as specified in its charter)


           Colorado                                               38-1900351
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                             621 Seventeenth Street
                                   Suite 2150
                             Denver, Colorado 80293
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (303) 295-0938

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 such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days.

                                  Yes  X    No


Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
common stock as of the latest practicable date:

                                      Shares                    As of Close of
Title of Class                      Outstanding                   Business on

Common Stock,
$.01 Par Value                       3,082,710                  October 30, 1998

                    Page 1 of 10 sequentially numbered pages.

<PAGE>

                           GREAT NORTHERN GAS COMPANY




                                      INDEX




PART I.        FINANCIAL INFORMATION                                Page No. (s)
                                                                    ------------

         Balance Sheets as of September 30, 1998
         and December 31, 1997 (Unaudited)                                 3-4

         Statements of Operations for the Three
         Months Ended September 30, 1998 and 1997 (Unaudited)                5

         Statements of Operations for the Nine Months
         Ended September 30, 1998 and 1997 (Unaudited)                       6

         Statements of Cash Flows for the Nine Months
         Ended September 30, 1998 and 1997 (Unaudited)                       7

         Notes to Unaudited Financial Statements for the Nine Months
         Ended September 30, 1998 and 1997                                   8

         Management's Discussion and Analysis of
         Financial Condition and Results of Operations                       9


PART II.      OTHER INFORMATION                                             10

              SIGNATURES                                                    10



                                       2
<PAGE>


                           GREAT NORTHERN GAS COMPANY
                                 BALANCE SHEETS
                    SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                                   (UNAUDITED)



                                     ASSETS
                                     ------


                                                     September 30,  December 31,
                                                         1998            1997
                                                         ----            ----

CURRENT ASSETS:
    Cash and cash equivalents                          $2,155,299     $1,812,386
    Accounts receivable:
         Oil and gas sales                                 33,662         90,902
         Joint interest billings                          149,393        139,201
    Other                                                   9,619          9,619
                                                       ----------     ----------
            Total current assets                        2,347,973      2,052,108
                                                       ----------     ----------


PROPERTY AND EQUIPMENT, at cost:
    Oil and gas properties, accounted for
         using the full cost method                     1,749,944      2,682,627
    Furniture, fixtures and automobile                     60,105         60,105
                                                       ----------     ----------
                                                        1,810,049      2,742,732
    Less accumulated depreciation, depletion
         and amortization                               1,032,563        881,735
                                                       ----------     ----------
            Net property and equipment                    777,486      1,860,997
                                                       ----------     ----------

                                                       $3,125,459     $3,913,105
                                                       ==========     ==========


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


                                       3
<PAGE>



                           GREAT NORTHERN GAS COMPANY
                           BALANCE SHEETS - CONTINUED
                    SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                                   (UNAUDITED)



                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------


                                                 September 30,     December 31,
                                                     1998              1997
                                                     ----              ----

CURRENT LIABILITIES:
    Accounts payable:
         Trade                                   $     20,718      $     24,404
         Oil and gas sales                            175,553           229,707
    Income taxes                                        1,286            17,286
    Other                                              66,878            88,099
                                                 ------------      ------------
            Total current liabilities                 264,435           359,496
                                                 ------------      ------------

DEFERRED INCOME TAXES                                  51,042           192,161
                                                 ------------      ------------

STOCKHOLDERS' EQUITY:
    Common Stock, $.01 par value;
      authorized 50,000,000 shares,
      issued 3,083,210 shares at
      September 30, 1998 and 3,297,343
      shares at December 31, 1997                      30,832            32,975
    Additional paid-in-capital                     38,684,834        39,004,013
    Accumulated deficit                           (35,905,684)      (35,675,540)
                                                 ------------      ------------

            Total stockholders' equity              2,809,982         3,361,448
                                                 ------------      ------------

                                                 $  3,125,459      $  3,913,105
                                                 ============      ============



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


                                       4
<PAGE>


                           GREAT NORTHERN GAS COMPANY
                            STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)



                                                Three Months Ended September 30,
                                                --------------------------------
                                                     1998             1997
                                                     ----             ----

REVENUES:
    Oil and gas sales                             $   135,413     $   132,507
    Interest and other income                          40,891          35,491
                                                  -----------     -----------
                                                      176,304         167,998
                                                  -----------     -----------


EXPENSES:
    Lease operating                                    36,807          54,785
    Production taxes                                    9,320          11,112
    Depreciation, depletion and amortization           55,837          45,963
    General and administrative                        386,909          94,347
                                                  -----------     -----------
                                                      488,873         206,207
                                                  -----------     -----------


LOSS BEFORE INCOME TAXES                             (312,569)        (38,209)

INCOME TAX BENEFIT                                    118,815          14,520
                                                  -----------     -----------

NET LOSS                                          $  (193,754)    $   (23,689)
                                                  ===========     ===========

LOSS PER COMMON SHARE                             $      (.06)    $      (.01)
                                                  ===========     ===========

WEIGHTED AVERAGE COMMON SHARES
 OUTSTANDING                                        3,093,241       3,392,861
                                                  ===========     ===========




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


                                       5

<PAGE>

                           GREAT NORTHERN GAS COMPANY
                            STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)



                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                       1998            1997
                                                       ----            ----

REVENUES:
    Oil and gas sales                              $   450,472     $   631,387
    Interest and other income                          107,595         157,374
                                                   -----------     -----------
                                                       558,067         788,761
                                                   -----------     -----------


EXPENSES:
    Lease operating                                    144,268         164,214
    Production taxes                                    33,525          48,471
    Depreciation, depletion and amortization           150,828         190,721
    General and administrative                         600,709         437,822
                                                   -----------     -----------
                                                       929,330         841,228
                                                   -----------     -----------

GAIN FROM SALE OF PROPERTIES                              --           155,864
                                                   -----------     -----------

EARNINGS (LOSS) BEFORE INCOME TAXES                   (371,263)        103,397

INCOME TAX BENEFIT (PROVISION)                         141,119         (39,290)
                                                   -----------     -----------

NET EARNINGS (LOSS)                                $  (230,144)    $    64,107
                                                   ===========     ===========

EARNINGS (LOSS) PER COMMON SHARE                   $      (.07)    $       .02
                                                   ===========     ===========

WEIGHTED AVERAGE COMMON SHARES
 OUTSTANDING                                         3,123,241       3,477,326
                                                   ===========     ===========




         The accompanying notes to unaudited financial statements are an
                        integral part of these statements

                                       6
<PAGE>
<TABLE>
<CAPTION>


                                 GREAT NORTHERN GAS COMPANY
                                  STATEMENTS OF CASH FLOWS
                    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                         (UNAUDITED)

                                                               Nine Months Ended September 30,
                                                               -------------------------------
                                                                      1998          1997
                                                                      ----          ----

CASH FLOWS FROM OPERATING
 ACTIVITIES:
<S>                                                               <C>            <C>        
    Net earnings (loss)                                           $  (230,144)   $    64,107
    Adjustments to reconcile net earnings (loss) to net cash
     provided by (used in) operating activities:
         Depreciation, depletion and amortization                     150,828        190,721
         Gain on sale of properties                                      --         (155,865)
         Decrease in accounts receivable                               47,048         73,308
         (Decrease) Increase in current liabilities                   (95,061)        12,693
         Deferred income tax (benefit) provision                     (141,119)        39,291
                                                                  -----------    -----------
            Net cash provided by (used in) operating activities      (268,448)       224,255
                                                                  -----------    -----------

CASH FLOWS FROM INVESTING
 ACTIVITIES:
    Proceeds from sale of oil and gas properties                    1,206,046      1,570,979
    Proceeds from sale of short-term investments                         --          242,474
    Additions to property and equipment                              (273,363)    (1,090,640)
                                                                  -----------    -----------
            Net cash provided by investing activities                 932,683        722,813
                                                                  -----------    -----------

CASH FLOWS FROM FINANCING
 ACTIVITIES:
    Repurchase of Common Stock                                       (321,322)      (402,411)
                                                                  -----------    -----------
         Net cash used in financing activities                       (321,322)      (402,411)
                                                                  -----------    -----------

INCREASE IN CASH AND CASH EQUIVALENTS                                 342,913        544,657

CASH AND CASH EQUIVALENTS AT
 BEGINNING OF PERIOD                                                1,812,386      1,404,099
                                                                  -----------    -----------

CASH AND CASH EQUIVALENTS AT
 END OF PERIOD                                                    $ 2,155,299    $ 1,948,756
                                                                  ===========    ===========





               The accompanying notes to unaudited financial statements are an
                              integral part of these statements

                                             7
</TABLE>

<PAGE>

                           GREAT NORTHERN GAS COMPANY
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


Note 1 - Financial Statements - Basis of Presentation
-----------------------------------------------------

     Great Northern Gas Company (the  "Company") is  exclusively  engaged in the
business of oil and gas exploration, development and production.

     The financial  statements included herein are unaudited.  In the opinion of
management,  such  statements  include  all  adjustments,  consisting  of normal
recurring  adjustments,  necessary  to present  fairly the  Company's  financial
position for all periods presented.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted as permitted by the rules and  regulations of the
Securities  and  Exchange  Commission.  Although the Company  believes  that the
disclosures are adequate to make the information presented not misleading, it is
suggested  that  these  financial  statements  be read in  conjunction  with the
December 31, 1997 financial  statements and the notes thereto as reported on the
Company's Annual Report on Form 10-KSB.

     Results of  operations  for the nine month period ended  September 30, 1998
are not necessarily indicative of the results to be expected for the full year.

Note 2 - Income Taxes
---------------------

     The Company's net deferred tax liability at September 30, 1998 and December
31, 1997 primarily  relates to book basis being in excess of tax basis partially
offset by loss carryforwards.

Note 3 - Sale of Properties
---------------------------

     On March 13, 1998 , the Company  closed on the sale of its  interest in all
the Haybarn  properties  in Freemont  County,  Wyoming.  These  properties  were
acquired in September of 1997.  These  properties were sold for  $1,136,046.  On
June 1, 1998,  the  Company  closed on the sale of its  interest in all the East
Plateau  properties in Mesa County,  Colorado.  These  properties  were sold for
$70,000. The proceeds have been recorded as a reduction of the full cost pool.

Note 4 - Repurchase of Common Stock
-----------------------------------

During the first,  second and third  quarters  of 1998 the  Company  repurchased
214,133 shares of the Company's Common Stock. The shares were retired.


                                       8
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Liquidity and Capital Resources
-------------------------------

     At  September  30,  1998 the  Company  had  working  capital of  $2,083,538
compared to working  capital of $1,692,612 at December 31, 1997. The increase in
working  capital  is  primarily  related  to the  proceeds  from the sale of the
Haybarn properties partially offset by operating expenses in excess of revenues,
and of the purchase of common stock of the Company.

     Net cash used in  operating  activities  was  $268,448  for the first  nine
months of 1998 compared to net cash provided by operating activities of $224,255
for the comparable period of 1997. Such change is primarily due to the reduction
in oil and gas revenues as stated below.

Analysis of Results of Operations:
----------------------------------

Three Months Ended September 30, 1998
-------------------------------------

     The $135,413 in oil and gas sales for the three months ended  September 30,
1998 is $2,906 more than for the same period in 1997. Other income has increased
by $5,400  primarily  due to interest  income that was generated by the funds in
escrow from the Haybarn sale. Lease operating expenses have decreased by $17,978
primarily due to the sale of the Haybarn properties.  General and administrative
expenses  increased by $292,562  for the three  months  ended  September 30 1998
compared to the same period in 1997 mainly due to bonuses paid in 1998.

Nine Months Ended September 30, 1998
------------------------------------

     The  $450,472  in oil and gas sales for the  first  nine  months of 1998 is
$180,915  less  than for the same  period in 1997  primarily  due to the sale of
South Douglas  Creek,  White River Dome and Gasaway  properties  in 1997.  Other
income has  decreased  due to the well  operation  income that was  generated by
Gasaway and White River Dome  Properties.  Production  taxes have decreased also
primarily  due to the  sale of  these  properties.  General  and  administrative
expenses for the nine months ended September 30, 1998 increased  compared to the
same period in 1997 mainly due to bonuses paid in 1998.



                                       9
<PAGE>

                           PART II - OTHER INFORMATION



Items 1 thru 5 not applicable.

Item 6 - Exhibits and Reports on Form 8-K 
         None.



                                   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.


                                              GREAT NORTHERN GAS COMPANY
                                              (Registrant)



Dated: November 12, 1998                      By: /s/ Frank S. DiGrappa
                                                 -------------------------------
                                                 Frank S. DiGrappa
                                                 Chairman of the Board,
                                                 and Treasurer



Dated: November 12, 1998                      By: /s/ Thomas L. DiGrappa
                                                 -------------------------------
                                                 Thomas L. DiGrappa
                                                 President and Chief
                                                 Operating Officer


                                       10