United States
                       Securities and Exchange Commission
                             Washington, D. C. 20549

                                    Form 10-Q

(Mark one)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
     Act of 1934
    For the Quarterly Period Ended June 30, 2002
                                   -------------

[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
     Act of 1934
    For the Transition Period from .......... to ..........


                     Commission File Number..........1-12508
                                                     -------


                          MAGNUM HUNTER RESOURCES, INC.
                          -----------------------------
              Exact name of registrant as specified in its charter


                  Nevada                           87-0462881
                  ------                           -----------
State or other jurisdiction of              IRS employer identification No.
incorporation or organization


           600 East Las Colinas Blvd., Suite 1100, Irving, Texas 75039
           -----------------------------------------------------------
                     Address of principal executive offices

                                 (972) 401-0752
                ------------------------------------------------
               Registrant's 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 [X]  No [ ]

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of August 9, 2002: 68,461,997.

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)

<TABLE>
<CAPTION>
<S>                                                                                       <C>                  <C>
                                                                                              June 30,           December 31,
                                                                                                2002                 2001
                                                                                        ---------------------------------------
                               ASSETS                                                        (Unaudited)
Current Assets
  Cash and cash equivalents.............................................................    $      7,934         $    2,755
  Restricted cash.......................................................................             432                  -
  Accounts receivable
    Trade, net of allowance of $4,376 and $3,264 respectively...........................          41,673             14,251
    Due from affiliates.................................................................             262                235
  Notes receivable......................................................................           2,350                  -
  Notes receivable from affiliate.......................................................               -                300
  Deferred tax asset....................................................................          12,500                300
  Derivative assets, current............................................................             992              5,045
  Prepaid and other.....................................................................           7,873              2,220
                                                                                        --------------------------------------
    Total Current Assets................................................................          74,016             25,106
                                                                                        --------------------------------------
Property, Plant, and Equipment
  Oil and gas properties, full cost method
    Unproved............................................................................         153,586             18,653
    Proved..............................................................................       1,055,173            556,766
  Pipelines.............................................................................          33,814             12,642
  Other property........................................................................           5,987              3,640
                                                                                        --------------------------------------
  Total Property, Plant and Equipment...................................................       1,248,560            591,701
    Accumulated depreciation, depletion, amortization and impairment....................        (210,502)          (171,864)
                                                                                        --------------------------------------
  Net Property, Plant and Equipment.....................................................       1,038,058            419,837
Other Assets
  Deposits and other assets.............................................................          14,067              4,420
  Investment in unconsolidated affiliates...............................................           5,404              5,022
  Goodwill..............................................................................          61,758                  -
                                                                                        --------------------------------------
  Total Assets..........................................................................    $  1,193,303         $  454,385
                                                                                        ======================================
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Trade payables and accrued liabilities................................................    $     39,816         $   41,446
  Suspended revenue payable.............................................................           9,265              2,154
  Derivative liabilities, current.......................................................          17,938                996
  Current maturities of long-term debt, with recourse...................................           1,935                 73
  Notes payable.........................................................................           1,320              4,044
                                                                                        --------------------------------------
    Total Current Liabilities                                                                     70,274             48,713
                                                                                        --------------------------------------
Long-Term Liabilities
  Long-term debt, with recourse, less current maturities................................         656,078            284,466
  Long-term debt, non recourse..........................................................           5,834                  -
  Production payment liability..........................................................             185                203
  Derivative liabilities, noncurrent....................................................          11,075              1,531
  Deferred income taxes payable.........................................................          96,820              1,498
Stockholders' Equity
  Preferred stock - $.001 par value; 10,000,000 shares authorized, 216,000
   designated as Series A;
     80,000 issued and outstanding, liquidation amount $0...............................               -                  -
   1,000,000 designated as 1996 Series A Convertible; 1,000,000 purchased and held for
     remarketing by subsidiary, liquidation amount $10,000,000..........................               1                  1
  Common Stock - $.002 par value; 100,000,000 shares authorized;
     70,797,010 and 36,588,097 shares issued, respectively..............................             141                 73
  Additional paid-in capital............................................................         418,859            157,836
  Accumulated other comprehensive income (loss).........................................         (17,436)             1,632
  Accumulated deficit...................................................................         (26,938)           (36,636)
  Receivable from stockholder...........................................................            (617)              (442)
  Unearned common stock in ESOP, at cost (837,952 and 468,652 shares, respectively).....          (5,259)            (2,576)
                                                                                        --------------------------------------
                                                                                                 368,751            119,888
  Treasury stock, at cost (2,327,013  and 441,813  shares of common stock, respectively)         (15,714)            (1,914)
                                                                                        --------------------------------------
  Total Stockholders' Equity............................................................         353,037            117,974
                                                                                        --------------------------------------
  Total Liabilities and Stockholders' Equity............................................    $  1,193,303         $  454,385
                                                                                        ======================================
</TABLE>

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

                                       1
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
                                   (Unaudited)
                  (in thousands, except for per share amounts)

<TABLE>
<CAPTION>
<S>                                                            <C>              <C>                 <C>             <C>
                                                                       Three Months Ended                  Six Months Ended
                                                                            June 30,                          June 30,
                                                                    2002              2001              2002              2001
                                                                -------------------------------------------------------------------
Operating Revenues:
  Oil and  gas sales..........................................  $     70,543      $    33,908        $    109,693      $   76,861
    Gas gathering, marketing and processing...................         4,596            4,830               8,178          11,932
    Oil field management services.............................         1,051              606               1,443           1,121
                                                              ---------------------------------------------------------------------
            Total Operating Revenues..........................        76,190           39,344             119,314          89,914
                                                              ---------------------------------------------------------------------
Operating Costs and Expenses:
  Oil and gas production lifting costs........................        15,438            4,956              24,386          9,606
  Production taxes and other costs............................         7,922            3,169              12,225          7,184
  Gas gathering, marketing and processing.....................         3,466            4,431               6,146         11,003
  Oil field management services...............................           543              392                 819            754
  Depreciation, depletion and amortization....................        23,542            9,686              38,638         17,101
  Gains on sale of assets.....................................             -               (2)                  -             (4)
  General and administrative..................................         4,223            2,065               6,747          3,777
                                                              ---------------------------------------------------------------------
          Total Operating Costs and Expenses..................        55,134           24,697              88,961         49,421
                                                              ---------------------------------------------------------------------
Operating Profit .............................................        21,056           14,647              30,353         40,493
  Equity in earnings of affiliate.............................            81              237                 382            855
  Other income................................................           108               63                 165            157
  Provision for impairment of investments.....................          (621)               -                (621)             -
    Other non-cash hedging adjustments........................        (3,330)             765              (3,923)         1,654
    Interest expense..........................................       (13,670)          (5,122)            (21,175)        (9,988)
                                                              ---------------------------------------------------------------------
Income before income tax......................................         3,624           10,590               5,181         33,171
  Provision for income tax benefit/(expense):
       Current................................................             -             (602)                  -         (1,885)
       Deferred...............................................        (1,373)          (3,409)              5,138        (10,679)
                                                              ---------------------------------------------------------------------
          Total provision for income tax benefit/(expense)....        (1,373)          (4,011)              5,138        (12,564)
Income before extraordinary loss..............................         2,251            6,579              10,319         20,607
  Extraordinary loss from early extinguishment of debt,
   net of income tax benefit of $379 in 2002 and $186
   in 2001 ...................................................             -             (304)               (621)          (304)
                                                              ---------------------------------------------------------------------
Net Income....................................................  $      2,251      $     6,275        $      9,698      $  20,303
                                                              =====================================================================
Comprehensive Income:
Net Income....................................................  $      2,251      $     6,275        $      9,698      $  20,303
Other Comprehensive Income (Loss), net of tax
  Cumulative effect on prior years of a change in
    accounting principle......................................               -              -                   -         (1,757)
  Change in fair value of outstanding hedge position..........        (3,610)           1,526             (18,429)         3,429
  Reclassification adjustment related to derivative contracts.         1,482             (138)               (639)          (275)
  Unrealized loss on investments..............................          (251)            (193)               (323)          (397)
  Reclassification adjustment for loss on investments.........           323                -                 323              -
                                                              ---------------------------------------------------------------------
Comprehensive Income (Loss)...................................  $        195      $     7,470        $     (9,370)     $  21,303
                                                              =====================================================================
Income  per Common Share - Basic
  Income before Extraordinary Loss............................  $       0.03      $      0.19        $       0.19      $    0.59
  Extraordinary Loss..........................................             -            (0.01)              (0.01)         (0.01)
                                                              ---------------------------------------------------------------------
Income per Common Share - Basic...............................  $       0.03      $      0.18        $       0.18      $    0.58
                                                              =====================================================================
Income per Common Share - Diluted
  Income before Extraordinary Loss............................  $       0.03      $      0.18        $       0.18      $    0.55
  Extraordinary Loss..........................................             -            (0.01)              (0.01)         (0.01)
                                                              ---------------------------------------------------------------------
Income per Common Share - Diluted.............................  $       0.03      $      0.17        $       0.17      $    0.54
                                                              =====================================================================
Common Shares Used in Per Share Calculation
  Basic.......................................................    68,490,021       34,879,318          55,207,518     34,736,166
                                                              =====================================================================
  Diluted.....................................................    69,710,567       37,307,219          56,441,193     37,364,030
                                                              =====================================================================
</TABLE>


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

                                        2

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
               FOR THE SIX MONTHS ENDED JUNE 30, 2002 (Unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
<S>                                                   <C>          <C>         <C>          <C>       <C>           <C>

                                                          Preferred Stock         Common Stock             Treasury Stock
                                                      Shares        Amount      Shares       Amount     Shares         Amount
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001......................... 1,080,000     $ 1        36,588,097    $  73      (441,813)    $ (1,914)
    Common stock and warrants issued in Prize
        Energy Corp. merger, less fees...............                          34,062,963       68
    Exercise of employees' common stock options......                             145,950        -
    Deferred tax benefit on exercise of employees'
      common stock options...........................
    Purchase of warrants.............................
    Purchase of treasury stock.......................                                                 (1,885,200)     (13,800)
    Net income.......................................
    Change in fair value of outstanding hedging
       positions.....................................
    Reclassification adjustment related to
      derivative contracts...........................
    Unrealized loss on investments...................
    Reclassification adjustment for loss on
        investments..................................
    Loan to stockholder..............................
    Loan to ESOP.....................................
                                                     -----------------------------------------------------------------------------
Balance at June 30, 2002                              1,080,000     $ 1        70,797,010    $ 141    (2,327,013)    $(15,714)
                                                     =============================================================================
</TABLE>


<TABLE>
<CAPTION>
<S>                                             <C>         <C>                 <C>            <C>          <C>          <C>
                                                 Additional   Accumulated Other                  Receivable   Unearned Shares in
                                                  Paid-In      Comprehensive      Accumulated       from             ESOP
                                                  Capital      Income-(Loss)       Deficit      Stockholder   Shares       Amount
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001.....................$ 157,836      $   1,632        $ (36,636)      $ (442)     (468,652)     $ (2,576)
  Common stock and warrants issued in Prize
      Energy Corp. merger, less fees............   260,454
  Exercise of employees' common stock options...       592
  Deferred tax benefit on exercise of employees'
    common stock options........................        75
  Purchase of warrants..........................       (98)
  Purchase of treasury stock....................
  Net income....................................                                     9,698
  Change in fair value of outstanding hedging
     positions..................................                  (18,429)
  Reclassification adjustment related to
    derivative contracts........................                     (639)
  Unrealized loss on investments................                     (323)
  Reclassification adjustment for loss on
      investments...............................                      323
  Loan to stockholder...........................                                                   (175)
  Loan to ESOP..................................                                                             (369,300)       (2,683)
                                                ------------------------------------------------------------------------------------
Balance at June 30, 2002                         $ 418,859      $ (17,436)       $ (26,938)      $ (617)     (837,952)     $ (5,259)
                                                ====================================================================================
</TABLE>

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

                                        3

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
<S>                                                                                       <C>                   <C>
                                                                                                    Six Months Ended
                                                                                                        June 30,
                                                                                          ------------------------------------
                                                                                                2002                  2001
                                                                                          ------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net Income........................................................................  $        9,698         $     20,303
         Adjustments to reconcile net income to cash provided by operating activities:
                Extraordinary loss.......................................................             621                  304
                Depreciation, depletion and amortization.................................          38,638               17,101
                Amortization of financing fees...........................................             920                  735
               Imputed interest on debt due to merger....................................             108                    -
                Deferred income taxes....................................................          (5,138)              10,679
                Equity in income of unconsolidated affiliate.............................            (382)                (855)
                Gain on sale of assets...................................................               -                   (4)
               Provision for impairment of investments...................................             621                    -
                Other non-cash hedging adjustments.......................................           3,923               (1,654)
               Other.....................................................................             (82)                   -
                Changes in certain assets and liabilities
                         Accounts and notes receivable...................................          (8,989)               9,011
                        Derivative assets................................................           3,600                1,002
                        Refund of income taxes...........................................             300                    -
                         Other current assets............................................          (4,287)                 (32)
                           Accounts payable and accrued liabilities......................         (39,014)               3,921
                           Current income taxes payable..................................               -                1,150
                                                                                        -----------------------------------------
         Net Cash Provided By Operating Activities.......................................             537               61,661
                                                                                        -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
         Proceeds from sale of assets....................................................           1,681                    4
         Additions to property and equipment.............................................         (56,197)             (84,528)
        Cash paid in Prize merger, net of cash on hand in Prize..........................         (41,097)                   -
         Increase in note receivable.....................................................          (2,350)                   -
         Payments received on note receivable ...........................................               -                   65
         Distribution from unconsolidated affiliate......................................               -                1,013
         Investment in unconsolidated affiliate..........................................               -               (2,000)
                                                                                        -----------------------------------------
         Net Cash Used In Investing Activities...........................................         (97,963)             (85,446)
                                                                                        -----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
         Proceeds from the issuance of long-term debt....................................         592,183              171,480
         Fees paid related to financing activities.......................................         (11,899)                (731)
         Payments of principal on long-term debt and production payment..................        (461,383)            (148,516)
         Loan made to stockholder .......................................................            (175)                (300)
         Repayment of note receivable from affiliate.....................................             300                  360
         Loan made to ESOP...............................................................          (2,683)                   -
         Proceeds from issuance of common stock, net of offering costs...................             592                2,317
         Purchase of warrants ...........................................................             (98)                   -
         Purchase of treasury stock .....................................................         (13,800)                (621)
         (Increase)/decrease in restricted cash for payment of notes payable ............            (432)               1,820
         Cash dividends paid.............................................................               -                 (169)
                                                                                        -----------------------------------------
         Net Cash Provided By Financing Activities.......................................         102,605               25,640
                                                                                        -----------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.....................................           5,179                1,855
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.........................................           2,755                    9
                                                                                        -----------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...............................................  $        7,934         $      1,864
                                                                                        =========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         Cash interest paid..............................................................  $       23,121         $      9,231
                                                                                        =========================================
         Cash taxes (received) paid......................................................  $         (271)        $        735
                                                                                        =========================================
</TABLE>

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

                                        4

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2002
                                   (Unaudited)

NOTE 1 - MANAGEMENT'S REPRESENTATION

     The  consolidated  balance  sheet of  Magnum  Hunter  Resources,  Inc.  and
subsidiaries (the "Company") as of June 30, 2002, the consolidated statements of
income and comprehensive income for the three and six months ended June 30, 2002
and 2001, the consolidated  statement of stockholders' equity for the six months
ended June 30, 2002, and the  consolidated  statements of cash flows for the six
months  ended  June  30,  2002  and  2001,  are  unaudited.  In the  opinion  of
management,  all  necessary  adjustments  (which  include only normal  recurring
adjustments) have been made to present fairly the financial position at June 30,
2002, results of operations,  changes in stockholders' equity and cash flows for
the three and six month periods.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting  principles generally accepted
in the United States of America have been condensed or omitted.  It is suggested
that  these  condensed  financial  statements  be read in  conjunction  with the
financial  statements and notes thereto included in the December 31, 2001 annual
report and on Form 10-K for the Company. The results of operations for the three
and six month periods ended June 30, 2002, are not necessarily indicative of the
operating results for the full year.

     The accompanying  consolidated financial statements include the accounts of
the Company and its subsidiaries.  All significant intercompany transactions and
balances  have  been  eliminated  in  consolidation.  Certain  items  have  been
reclassified to conform with the current presentation.

     During the first  quarter of 2002,  the Company  merged  with Prize  Energy
Corp. ("Prize"),  an independent oil and gas development and production company.
The merger with Prize closed on March 15, 2002,  but for operating and financial
reporting  purposes,  was effective as of March 1, 2002. As such,  the operating
results for the three and six months ended June 30, 2002,  include  three months
and four  months  of  contributions  from  Prize,  respectively.  See Note 2 for
further discussion of the Prize merger.

     On March  1,  2002,  the  Company  created  two  unrestricted  wholly-owned
subsidiaries,  Canvasback  Energy,  Inc., and Redhead  Energy,  Inc.  Canvasback
Energy, Inc. and Redhead Energy Inc. will hereafter be collectively  referred to
as Canvasback. On March 15, 2002, Bluebird Energy, Inc. ("Bluebird") transferred
all of its assets to Canvasback,  which effectively capitalized Canvasback. Upon
completion of this transfer,  Bluebird was merged into Magnum Hunter Production,
Inc.

     The Company is a holding  company with no significant  assets or operations
other than its investments in its subsidiaries. The wholly-owned subsidiaries of
the  Company,  except  for  Canvasback,  are  direct  guarantors  of each of the
Company's  10%  Senior  Notes  and  9.6%  Senior  Notes,   and  have  fully  and
unconditionally  guaranteed  these  Notes  on a joint  and  several  basis.  The
guarantors  comprise all of the direct and indirect  subsidiaries of the Company
(other  than  Canvasback),  and the  Company has  presented  separate  condensed
consolidating   financial  statements  and  other  disclosures  concerning  each
guarantor  and  Canvasback  (See Note 8).  Except  for  Canvasback,  there is no
restriction on the ability of  consolidated  or  unconsolidated  subsidiaries to
transfer funds to the Company in the form of cash dividends, loans, or advances.

NOTE 2 - MERGER WITH PRIZE ENERGY CORP.

     On March 15, 2002,  the Company merged with Prize,  an independent  oil and
gas  development  and  production   company  based  in  Grapevine,   Texas.  The
transaction  was  accounted  for  as a  purchase  of  Prize  by the  Company  in
accordance  with the provisions of Statement of Financial  Accounting  Standards
(SFAS) No. 141 "Business  Combinations",  which requires the use of the purchase
method of accounting  for business  combinations  initiated and completed  after
June 30, 2001. Under the terms of the merger, the Company distributed 2.5 shares
of  common  stock  plus  $5.20 in cash for each  Prize  share  outstanding.  The
purchase  price,  computed from the equity and cash  consideration  given at the
time of the merger,  was allocated to the fair value of the net assets acquired.
The amount of  purchase  price in excess of the fair value of Prize's net assets
was assigned to goodwill.  In  accordance  with SFAS No. 142 "Goodwill and Other
Intangible  Assets",  which was adopted by the  Company on January 1, 2002,  the
goodwill  realized  in the merger  with Prize  will not be  amortized.  However,
future  evaluations of goodwill will be performed  annually to determine whether
any impairment has occurred. The Company has not completed a final allocation of
the purchase price to the fair value of the specific  assets and  liabilities of
Prize and the related  business  integration  plan. The Company expects that the
ultimate purchase

                                        5

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

price  allocation may include  additional  adjustments to the fair value of
the specific assets and the carrying values of certain liabilities. Accordingly,
to the  extent  that such  assessments  indicate  that the fair value of certain
assets and liabilities differ from their preliminary  purchase price allocation,
such  differences   would  adjust  the  amounts  allocated  to  the  assets  and
liabilities  and would change the amounts  allocated to goodwill.  The following
table  summarizes  the total  assumed  purchase  price and  related  preliminary
allocation to the net assets acquired (in thousands) as of June 30, 2002:


Total Purchase Price:
     Fair Value of 34,062,963 shares of Magnum Hunter
  common stock................................................. $     257,175
     Cash consideration........................................        70,851
     Fair Value of Prize warrants..............................         3,416
                                                                   ----------
          Total................................................ $     331,442
                                                                   ==========
Net Preliminary Purchase Price Allocation:
     Net purchase price........................................ $     331,442
     Historical net assets acquired............................      (146,192)
                                                                   ----------
     Excess purchase price.....................................       185,250
     Adjustment of proved oil and gas properties to fair value.       (59,412)
     Adjustment of unproved oil and gas properties to fair valu      (124,766)
     Adjustment of gas plant to fair value.....................       (18,977)
     Write-off of historical Prize deferred financing costs....         2,386
     Other fair value adjustments..............................         2,163
     Imputed interest on debt due to merger....................          (108)
     Additional deferred income taxes..........................        75,222
                                                                   ----------
          Excess purchase price allocated to goodwill.......... $      61,758
                                                                   ==========


     The following summary,  prepared on a pro forma basis, presents the results
of operations  for the three and six month periods ended June 30, 2002 and 2001,
as if the  acquisition  of Prize  occurred as of the beginning of the respective
periods.  The pro forma  information  includes  the effects of  adjustments  for
interest expense,  depreciation,  depletion and amortization,  and income taxes.
The pro forma results are not necessarily indicative of what actually would have
occurred if the  acquisition  had been  completed  as of the  beginning  of each
period  presented,  nor are they necessarily  indicative of future  consolidated
results.

                                        6

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)


                         Pro Forma Results of Operations
                                   (Unaudited)
             (in thousands of dollars, except for per share amounts)

<TABLE>
<CAPTION>
<S>                                       <C>           <C>                   <C>             <C>
                                           Three Months Ended June 30,           Six Months Ended June 30,
                                        ---------------------------------------------------------------------
                                               2002           2001                 2002             2001
                                        ---------------------------------------------------------------------
Total Operating Revenues.................  $  76,190      $  93,860            $   146,318      $  200,940
Total Operating Costs and Expenses.......    (55,134)       (67,357)              (111,535)       (124,857)
                                           ----------------------------------------------------------------
Operating Profit.........................     21,056         26,503                 34,783          76,083
Interest expense and other...............    (17,432)        (9,967)               (30,436)        (16,626)
                                           ----------------------------------------------------------------
Income before income tax.................      3,624         16,536                  4,347          59,457
Benefit (Provision) for income tax.......     (1,373)        (6,263)                 5,455         (22,520)
Extraordinary loss from early
     extinguishment of debt..............          -           (304)                  (621)           (304)
                                           ----------------------------------------------------------------
Net Income...............................  $   2,251      $   9,969            $     9,181      $   36,633
                                           ================================================================
Net Income Per Common Share
     Basic...............................  $    0.03           0.14            $      0.13      $     0.53
                                           ================================================================
     Diluted.............................  $    0.03      $    0.14            $      0.13      $     0.51
                                           ================================================================
</TABLE>

                                        7

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

NOTE 3 - EARNINGS PER SHARE INFORMATION

     The  following is a  reconciliation  of the basic and diluted  earnings per
share computations:

<TABLE>
<CAPTION>
<S>                                         <C>          <C>         <C>            <C>            <C>          <C>
                                                                          Three Months Ended

                                                          June 30, 2002                       June 30, 2001
                                                                       Per Share                                 Per Share
                                               Income      Shares      Amount         Income        Shares        Amount
-----------------------------------------------------------------------------------------------------------------------------------
                                                                  (Thousands, except per share amounts)
 Income before extraordinary loss...........  $   2,251                $    0.03      $    6,579                 $    0.19
 Less: Extraordinary loss...................          -                        -            (304)                    (0.01)
                                              ---------                ---------      -----------                ----------
Basic EPS
 Income available to common
   stockholders.............................  $   2,251    68,490      $    0.03      $    6,275      34,879     $    0.18
                                                                       =========                                 ==========
Effect of Dilutive Securities
 Warrants...................................          -        73                              -         234
 Options....................................          -     1,148                              -       2,194
                                              --------------------                    -----------------------
Diluted EPS
 Income available to common stockholders
   and assumed conversions..................  $   2,251    69,711      $    0.03      $   6,275       37,307     $    0.17
 Add Back: Extraordinary loss...............          -                        -            304                       0.01
                                              ----------------------------------      -------------------------------------
 Income before Extraordinary Loss...........  $   2,251    69,711      $    0.03      $   6,579       37,307     $    0.18
                                              ==================================      =====================================

</TABLE>

<TABLE>
<CAPTION>
<S>                                          <C>          <C>         <C>           <C>           <C>          <C>
                                                                           Six Months Ended

                                                          June 30, 2002                       June 30, 2001
                                                                       Per Share                                 Per Share
                                               Income      Shares      Amount         Income        Shares        Amount
-----------------------------------------------------------------------------------------------------------------------------------
                                                                  (Thousands, except per share amounts)
  Income before extraordinary loss............  $ 10,319               $    0.19      $ 20,607                   $    0.59
  Less: Extraordinary Loss....................      (621)                  (0.01)         (304)                      (0.01)
                                                --------               ---------      ---------                  ----------
Basic EPS

  Income available to common
    stockholders..............................  $  9,698   55,208      $    0.18      $ 20,303      34,736       $    0.58
                                                                       =========                                 ==========
Effect of Dilutive Securities
  Warrants....................................         -       69                            -         254
  Options.....................................         -    1,164                            -       2,374
                                                ------------------                    ---------------------
Diluted EPS

  Income available to common stockholders
    and assumed conversions...................  $  9,698   56,441      $    0.17      $ 20,303      37,364       $    0.54
  Add Back: Extraordinary Loss................       621                    0.01           304                        0.01
                                                --------------------------------      -------------------------------------
  Income before Extraordinary Loss............  $ 10,319   56,441      $    0.18      $ 20,607      37,364       $    0.55
                                                ================================      =====================================

</TABLE>

     At June 30, 2002, warrants  representing  12,091,446 shares of common stock
and options representing 5,237,634 shares of common stock were outstanding.  The
total  outstanding  warrants  includes the remainder of the  conversion of Prize
warrants  in  connection  with the  merger on March  15,  2002 (See Note 2) into
4,271,813 Magnum Hunter warrants. Additionally, the Company distributed on March
21, 2002, one warrant for every five shares of the Company's  common stock owned
on January  10,  2002,  for a total of  7,228,457  warrants.  At June 30,  2001,
warrants  representing  644,749 shares of common stock and options  representing
4,212,313  shares of common  stock were  outstanding.  On  January 1, 2001,  the
remaining  $25.0 million  (liquidation  value) of the Company's 1999 Series A 8%
convertible preferred stock was converted into 4,761,904 shares of common stock.
For the three and six month  periods ended June 30, 2002,  11,446,967  shares of
stock  representing  warrants and 3,300,700 shares and 3,285,350 shares of stock
representing options, respectively,  were excluded from the diluted earnings per
share calculations because they were anti-dilutive. For the

                                        8

<PAGE>


                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

     three  and six  month  periods  ended  June 30,  2001,  no  shares of stock
representing  warrants  and 25,000  shares of stock  representing  options  were
excluded  from the diluted  earnings  per share  calculations  because they were
anti-dilutive.

NOTE 4 - DEBT

     The Company  amended and  restated  its Senior  Bank Credit  Facility  (the
"facility")  in  conjunction  with the merger with Prize.  The amended  facility
provides for total borrowings of $500 million, up from $225 million,  and raises
the borrowing  base limit from $160 million to $300 million.  Additionally,  the
expiration  date of the facility  was amended and extended to March 2005.  After
March 15,  2002,  the  facility  was used to i) fund the cash  component  of the
merger  consideration  paid to the Prize  shareholders,  ii) pay  certain  costs
associated with the merger, and iii) for general corporate purposes.

     The amended  facility was treated as a new credit  facility with respect to
the funds flow on the effective date of March 15, 2002. As such, the outstanding
balances on the facility prior to March 15, 2002 were paid off with the proceeds
received on March 15, 2002. The original capitalized debt issuance costs of $621
thousand,  net of tax,  related to the prior  facility  were  written  off as an
extraordinary  loss from early  extinguishment  of debt during the quarter ended
March 31, 2002.

     The amended facility  requires the Company to comply with certain financial
tests and maintain certain financial  ratios.  The Company was not in compliance
with the Funded Debt to EBITDA  Ratio (as defined by the  facility) at March 31,
2002.  The  Company  obtained a waiver from its lenders as of March 31, 2002 and
negotiated  an  amendment  dated July 3, 2002 which  adjusted the Funded Debt to
EBITDA Ratio (as defined by the  facility) to be less  restrictive  for the next
four  successive  quarters  ending March 31, 2003. The Company was in compliance
with all financial  covenants  under the amended  facility at June 30, 2002, and
believes it will be able to comply with the revised  financial  covenants in the
future.

     On March 15, 2002, the Company  completed a private placement in the amount
of $300  million  of new  unsecured  Senior  Notes  due  2012  to  institutional
investors.  Interest on these Senior Notes bears a fixed annual rate of 9.6% due
semi- annually,  commencing September 15, 2002. Funds received from the issuance
of these notes were used to i) retire  outstanding  indebtedness under the Prize
commercial bank credit facility, ii) pay fees related to the issuance of the new
Senior Notes, and iii) for general corporate purposes.

     On January 15, 2002, the Company entered into a sale-leaseback  transaction
on three newly constructed production platforms and associated pipelines located
in the Gulf of Mexico  that were  recently  placed  into  service.  The  Company
received  total  proceeds  of $11.2  million in new  funding  which was used for
general  corporate  purposes.  The production  platforms are being leased from a
syndicate  group of  lenders  over a term of three  years and at a cost of funds
based on the one month LIBO  rate,  currently  yielding a cost of  approximately
5.27% per annum. For financial statement  reporting  purposes,  this transaction
was accounted for as a capital lease and was included in long-term debt.

     On March 15,  2002,  the  Company  repaid  its 7% notes  payable to certain
vendors in the total amount of $4.0 million plus accrued interest.  On March 14,
2002, the Company  borrowed an additional  $2.5 million to finance its insurance
premium for the year under a new note bearing a fixed interest rate of 4.25% per
annum and with a maturity date of December 14, 2002.

     On March 7, 2002,  Canvasback entered into a $10.0 million revolving credit
agreement with a financial  institution.  The credit agreement provides for both
LIBOR and prime based  interest  rate options ( 6.5%  interest  rate at June 30,
2002).  On June 30, 2002,  the remaining  revolving loan balance of $5.8 million
converted  to a term loan,  repayable  on March 7, 2004,  together  with accrued
interest.  Proceeds  from the loan were used to purchase the same amount in face
value of the  Company's  10% Senior  Notes,  which were  acquired in 2001 by the
Company and were being held as an investment.  These 10% Senior Notes,  together
with $4.7 million of 10% Senior Notes formerly owned by Bluebird and contributed
to Canvasback in its initial  capitalization,  serve as the only  collateral for
the loan. The loan is non-recourse to the Company.

NOTE 5 - HEDGING

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities", as extended by SFAS No. 137 (June 1999) and amended by SFAS No. 138
(June 2000), was effective for the Company beginning January 2001. SFAS No. 133

                                        9

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

     establishes accounting and reporting standards for derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  It requires the  recognition of derivatives in the balance
sheet and the measurement of those instruments at fair value.

     The Company was obligated to nine crude oil  derivatives,  sixteen  natural
gas derivatives, and two interest rate derivatives on June 30, 2002. The Company
has determined that all outstanding  derivatives qualify as cash flow hedges and
for hedge  treatment as defined  within SFAS No. 133, which requires the Company
to record  the  derivative  assets or  liabilities  at their  fair  value on its
balance  sheet  with an  offset  to  other  comprehensive  income.  However,  in
connection  with the merger with Prize on March 15, 2002, the Company  purchased
$7.6  million in hedge  assets  from  Prize at fair value on that date,  with no
corresponding  offset to other  comprehensive  income.  During  June  2002,  the
Company  sold its  position  in one natural  gas collar  purchased  in the Prize
acquisition,  realizing proceeds of $3.6 million which was charged against hedge
assets. Consequently,  this net hedge balance of $4.0 million will amortize as a
charge to other non-cash hedging  adjustments over 33 months (30 remaining as of
June 30, 2002).  Future hedge  ineffectiveness  on the cash-flow  hedges will be
recorded in earnings.

     At June 30,  2002,  the fair  value of the  Company's  derivatives  were as
follows (in thousands):


Derivative Assets
----------------------------------------------
Natural gas collars...........................         $      992
                                                       -----------
Total derivative assets.......................         $      992
                                                       -----------
Derivative Liabilities
----------------------------------------------
Natural gas collars...........................         $   11,882
Natural gas swaps.............................             12,952
Crude oil collars.............................                851
Crude oil swaps...............................              2,140
Interest rate swaps...........................              1,188
                                                       -----------
Total derivative liabilities..................         $   29,013
                                                       -----------
Net derivative liabilities....................         $   28,021
                                                       ===========

     For the  three  and six month  periods  ended  June 30,  2002,  the  income
statement  includes  a  non-cash  loss  of  $219  thousand  and  $377  thousand,
respectively,  related  to the  crude  oil and  natural  gas  derivatives  and a
non-cash  loss of $3.1 million and $3.5  million,  respectively,  related to the
amortization of hedge assets purchased in the Prize merger.  The Company expects
that the remaining balances in other comprehensive  income at June 30, 2002 will
be reclassified into the income statement within the next 30 months.  During the
next 12 months,  $1.9 million of amortization  of hedge assets  purchased in the
Prize  merger  will be  expensed  on the income  statement.  Additionally,  $8.0
million  of other  comprehensive  loss  will be  reclassified  into  the  income
statement during the next 12 months.

NOTE 6 - INCOME TAXES

     The Company realized a tax benefit of $5.1 million for the six month period
ended June 30,  2002.  This  benefit was realized as a result of the reversal of
the $7.1 million valuation  allowance for the Company's net operating losses and
tax credit  carryforwards from 2001 and earlier years. The Company believes that
due to the merger with Prize,  it will be  possible to generate  future  taxable
income to utilize  these prior losses and  carryforwards  and that the valuation
allowance is no longer needed.

     At June 30, 2002, the Company had a deferred tax asset of $12.5 million and
a deferred tax liability of $96.8  million,  for a net deferred tax liability of
$84.3 million.  The majority of this balance was booked as a result of the Prize
merger;  $41.0 million related to Prize's historical  deferred tax liability and
$75.2 million  related to the deferred  taxes  computed on the purchase price in
excess of historical net assets,  excluding  goodwill.  Additionally,  the $12.5
million  deferred  tax asset is  related to the  portion  of  Prize's  total net
operating loss and tax assets that may be used by the Company as

                                       10

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

     carrybacks,  to the extent of available  offsetting prior operating profits
generated  by Prize.  This  deferred  tax asset was  included  in the  Company's
original goodwill allocation resulting from the Prize merger.

NOTE 7 - SEGMENT DATA

     The Company has three reportable  segments.  The Exploration and Production
segment is engaged in  exploratory  and  development  drilling and  acquisition,
production,  and  sale of  crude  oil,  condensate,  and  natural  gas.  The Gas
Gathering,  Marketing  and  Processing  segment is engaged in the  gathering and
compression of natural gas from the wellhead, the purchase and resale of natural
gas which it gathers,  and the processing of natural gas liquids.  The Oil Field
Services  segment is engaged in the managing and  operation of producing oil and
gas properties for interest owners.

     The Company's  reportable  segments are strategic business units that offer
different  products  and  services.  They are managed  separately  because  each
business requires different technology and marketing strategies. The Exploration
and Production  segment has three geographic areas that are aggregated.  The Gas
Gathering,  Marketing and Processing  segment includes the activities of the two
gathering  systems  and  four  natural  gas  liquids  processing  plants  in two
geographic  areas that are aggregated.  The Oil Field Services segment has three
geographic  areas that are aggregated.  The reason for aggregating the segments,
in each case, is due to the similarity in nature of the products, the production
processes, the type of customers, the method of distribution, and the regulatory
environments.

     The  accounting  policies  of the  segments  are the same as those  for the
Company as a whole. The Company  evaluates  performance  based on profit or loss
from operations  before income taxes. The accounting for intersegment  sales and
transfers is done as if the sales or transfers were to third  parties,  that is,
at current market prices.

     Segment  data for the  periods  ended June 30,  2002 and 2001  follows  (in
thousands):

<TABLE>
<CAPTION>
<S>                                       <C>             <C>              <C>            <C>            <C>          <C>
                                                            Gas Gathering,
                                           Exploration &      Marketing &   Oil Field
    Three Months Ended June 30, 2002:       Production        Processing     Services        All Other    Elimination Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers........... $  70,543       $   4,596        $    1,051     $        -                  $  76,190
Intersegment revenues.....................                     3,477             5,978              -        (9,455)           -
Depreciation, depletion and amortization..    22,518             544               133            347                     23,542
Segment profit (loss).....................    25,572             586              (831)        (4,271)                    21,056
Equity in earnings of affiliates..........                                                         81                         81
Interest expense..........................                                                    (13,670)                   (13,670)
Other income (expense)....................                                                     (3,843)                    (3,843)
                                                                                                                         --------
Income before income taxes................                                                                                 3,624
Provision for income tax (expense)........                                                     (1,373)                    (1,373)
                                                                                                                         --------
Net income................................                                                                                 2,251
                                                                                                                         ========
Capital expenditures (net of asset sales). $  29,436       $      39        $      221     $        -                  $  29,696

</TABLE>

                                       11

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)


<TABLE>
<CAPTION>
<S>                                       <C>             <C>              <C>            <C>            <C>         <C>
                                                            Gas Gathering,
                                           Exploration &      Marketing &   Oil Field
    Three Months Ended June 30, 2001:       Production        Processing     Services      All Other    Elimination Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers.......... $    33,908      $     4,830       $   606      $        -                $       39,344
Intersegment revenues....................           -            5,258         1,533               -     (6,791)                 -
Depreciation, depletion and amortization.       9,362              220           100               4                         9,686

Segment profit (loss)....................      17,010              173          (932)         (1,604)                       14,647
Equity in earnings of affiliates.........                                                        237                           237
Interest expense.........................                                                     (5,122)                       (5,122)
Other income.............................                                                        828                           828
                                                                                                                    ---------------
Income before income taxes...............                                                                           $       10,590
Provision for income tax expense.........                                                     (4,011)                       (4,011)
Extraordinary loss.......................                                                       (304)                         (304)
                                                                                                                    ---------------
Net income...............................                                                                           $        6,275
                                                                                                                    ===============
Capital expenditures (net of asset sales) $    54,622      $         7       $    38      $        -                $       54,667

</TABLE>

<TABLE>
<CAPTION>
<S>                                       <C>             <C>              <C>            <C>            <C>          <C>
                                                            Gas Gathering,
                                           Exploration &      Marketing &   Oil Field
    Six Months Ended June 30, 2002:         Production        Processing     Services      All Other    Elimination Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers............$    109,693     $   8,178       $    1,443      $      -                 $    119,314
Intersegment revenues......................                     5,960            6,395             -     (12,355)               -
Depreciation, depletion and amortization...      37,060           914              238           426                       38,638
Segment profit (loss)......................      36,023         1,058             (908)       (5,820)                      30,353
Equity in earnings of affiliates...........                                                      382                          382
Interest expense...........................                                                  (21,175)                     (21,175)
Other income (expense).....................                                                   (4,379)                      (4,379)
                                                                                                                     -------------
Income before income taxes.................                                                                                 5,181
Provision for income tax benefit...........                                                    5,138                        5,138
Extraordinary loss.........................                                                     (621)                        (621)
                                                                                                                     -------------
Net income.................................                                                                                 9,698
                                                                                                                     =============
Capital expenditures (net of asset sales)..$    633,340     $  21,172       $    2,214      $    133                 $    656,859

</TABLE>

<TABLE>
<CAPTION>
<S>                                       <C>             <C>              <C>            <C>           <C>        <C>
                                                            Gas Gathering,
                                           Exploration &      Marketing &   Oil Field
    Six Months Ended June 30, 2001:         Production        Processing     Services     All Other    Elimination   Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers............ $   76,861       $   11,932     $     1,121   $         -                 $     89,914
Intersegment revenues......................          -           12,818           2,972             -    (15,790)                -
Depreciation, depletion and amortization...     16,459              440             193             9                       17,101
Segment profit (loss)......................     44,385              484          (1,488)       (2,888)                      40,493
Equity earnings of affiliates..............                                                       855                          855
Interest expense...........................                                                    (9,988)                      (9,988)
Other income...............................                                                     1,811                        1,811
                                                                                                                      -------------
Loss before income taxes...................                                                                           $     33,171
Provision for income tax (expense).........                                                   (12,564)                     (12,564)
Extraordinary loss.........................                                                      (304)                        (304)
                                                                                                                      -------------
Net income.................................                                                                           $     20,303
                                                                                                                      =============
Capital expenditures (net of asset sales).. $   83,485      $        13     $       172   $       854                 $     84,524

</TABLE>

                                       12

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)


<TABLE>
<CAPTION>
<S>                                 <C>             <C>               <C>           <C>           <C>        <C>
                                                      Gas Gathering,
                                     Exploration &      Marketing &   Oil Field
    As of June 30, 2002:              Production        Processing     Services     All Other    Elimination   Consolidated
-----------------------------------------------------------------------------------------------------------------------------
Segment assets...................       $ 1,116,493     $    36,977    $    17,276   $ 22,557                  $  1,193,303
Equity subsidiary investments....                                                       5,404                         5,404

As of June 30, 2001
---------------------------------
Segment assets...................       $   318,309     $    18,072    $    28,469   $  7,192                  $    372,042
Equity subsidiary investments....                                                       9,896                         9,896

</TABLE>

NOTE 8 - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

     The Company  and its  wholly-owned  subsidiaries,  except  Canvasback,  are
direct  guarantors  of the  Company's 10% Senior Notes and 9.6% Senior Notes and
have  fully and  unconditionally  guaranteed  the  Notes on a joint and  several
basis.  In addition to not being a guarantor of the  Company's  10% Senior Notes
and 9.6% Senior Notes,  Canvasback cannot be included in determining  compliance
with certain  financial  covenants under the Company's  credit  agreements.  The
Company  has  concluded  that  separate  financial  statements  related  to  the
guarantors are not included because  management has determined that they are not
material to investors.  Condensed consolidating financial information for Magnum
Hunter  Resources,  Inc. and  subsidiaries  as of June 30, 2002 and December 31,
2001,  and for the three and six month periods ended June 30, 2002 and 2001, was
as follows:

                 Magnum Hunter Resources, Inc. and Subsidiaries
                     Condensed Consolidating Balance Sheets
<TABLE>
<CAPTION>
<S>                                             <C>                   <C>                    <C>                <C>
                                                                                June 30, 2002
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Canvasback                             Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
ASSETS
Current assets..................................$         75,667        $          5,040       $      (6,691)     $        74,016
Property and equipment
  (using full cost accounting)..................       1,031,355                   6,703                   -            1,038,058
Investment in subsidiaries
  (equity method)...............................          15,434                       -             (15,434)                   -
Investment in Parent............................               -                  28,085             (28,085)                   -
Other assets....................................          81,188                      41                   -               81,229
                                                -----------------------------------------------------------------------------------
  Total assets..................................$      1,203,644        $         39,869        $    (50,210)     $     1,193,303
                                                ===================================================================================
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities.............................$         70,200        $          6,765        $     (6,691)     $        70,274
Long-term liabilities...........................         762,856                  17,670             (10,534)             769,992
Shareholders' equity............................         370,588                  15,434             (32,985)             353,037
                                                -----------------------------------------------------------------------------------
  Total liabilities and shareholders' equity....$      1,203,644        $         39,869        $    (50,210)     $     1,193,303
                                                ===================================================================================
</TABLE>

                                       13

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

<TABLE>
<CAPTION>
<S>                                             <C>                   <C>                    <C>                <C>
                                                                            December 31, 2001
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Bluebird                               Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
ASSETS
Current assets..................................  $       21,196          $       3,910         $            -     $       25,106
Property and equipment
 (using full cost accounting)...................         412,720                  7,117                      -            419,837
Investment in subsidiaries
 (equity method)................................          14,963                      -                (14,963)                  -
Investment in Parent............................               -                 15,750                (15,750)                  -
Other assets....................................           9,442                      -                      -               9,442
                                                -----------------------------------------------------------------------------------
    Total Assets................................  $      458,321           $     26,777         $      (30,713)    $       454,385
                                                ===================================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities.............................  $       48,561           $        152         $            -     $        48,713
Long-term liabilities...........................         280,736                 11,662                 (4,700)            287,698
Shareholders' equity............................         129,024                 14,963                (26,013)            117,974
                                                -----------------------------------------------------------------------------------
    Total liabilities and shareholders' equity..  $      458,321           $     26,777         $      (30,713)    $       454,385
                                                ===================================================================================
</TABLE>

                 Magnum Hunter Resources, Inc. and Subsidiaries
                Condensed Consolidating Statement of Operations

<TABLE>
<CAPTION>
<S>                                             <C>                   <C>                     <C>               <C>
                                                                   For the Three Months Ended June 30, 2002
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Canvasback                             Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
Revenues......................................... $          75,783         $   407           $         -         $         76,190
Expenses.........................................            72,497              69                     -                   72,566
                                                -----------------------------------------------------------------------------------
Income before                                                 3,286             338                     -                    3,624
  Equity in net earnings of subsidiary...........               210               -                  (210)                       -
                                                -----------------------------------------------------------------------------------
Income before income taxes.......................             3,496             338                  (210)                   3,624
Income tax (expense) provision...................            (1,245)           (128)                    -                   (1,373)
                                                -----------------------------------------------------------------------------------
    Net income................................... $           2,251         $   210           $      (210)        $          2,251
                                                ===================================================================================
</TABLE>


<TABLE>
<CAPTION>
<S>                                             <C>                   <C>                     <C>               <C>
                                                                     For the Three Months Ended June 30, 2001
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Bluebird                              Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
Revenues........................................ $        34,082          $      5,308         $        (46)         $   39,344
Expenses........................................          25,760                 3,040                  (46)             28,754
                                                ---------------------------------------------------------------------------------
Income before                                              8,322                 2,268                    -              10,590
  Equity in net earnings of subsidiary..........           1,409                     -               (1,409)                  -
                                                ---------------------------------------------------------------------------------
Income before income taxes......................           9,731                 2,268               (1,409)             10,590
Income tax (expense) provision..................          (3,152)                 (859)                   -              (4,011)
                                                ---------------------------------------------------------------------------------
Income before extraordinary loss................           6,579                 1,409               (1,409)              6,579
Extraordinary loss..............................            (304)                    -                    -                (304)
                                                ---------------------------------------------------------------------------------
    Net income.................................. $         6,275          $      1,409         $     (1,409)         $    6,275
                                                =================================================================================

</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>
<S>                                               <C>                  <C>                    <C>               <C>
                                                                       For the Six Months Ended June 30, 2002
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Canvasback                             Magnum Hunter
                                                    Resources, Inc.        Energy, Inc.                          Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
Revenues.........................................    $       118,645      $         669        $         -        $      119,314
Expenses.........................................            113,871                262                  -               114,133
                                                    ------------------------------------------------------------------------------
Income before                                                  4,774                407                  -                 5,181
  Equity in net earnings of subsidiary...........                253                  -               (253)                    -
                                                    ------------------------------------------------------------------------------
Income before income taxes.......................              5,027                407               (253)                5,181
Income tax benefit (expense) provision...........              5,292               (154)                 -                 5,138
                                                    ------------------------------------------------------------------------------
Income before extraordinary loss.................             10,319                253               (253)               10,319
Extraordinary loss...............................               (621)                 -                  -                  (621)
                                                    ------------------------------------------------------------------------------
    Net income...................................    $         9,698      $         253        $      (253)       $        9,698
                                                    ==============================================================================
</TABLE>

<TABLE>
<CAPTION>
<S>                                               <C>                  <C>                    <C>               <C>
                                                                    For the Six Months Ended June 30, 2001
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Bluebird                              Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
Revenues...........................................  $    66,525            $    23,590        $     (201)       $     89,914
Expenses...........................................       46,123                 10,821              (201)             56,743
                                                     ----------------------------------------------------------------------------
Income before                                             20,402                 12,769                 -               33,171
  Equity in net earnings of subsidiary.............        7,933                      -            (7,933)                   -
                                                     ----------------------------------------------------------------------------
Income before income taxes.........................       28,335                 12,769            (7,933)              33,171
Income tax (expense) provision.....................       (7,728)                (4,836)                -              (12,564)
                                                     ----------------------------------------------------------------------------
Income before extraordinary loss...................       20,607                  7,933            (7,933)              20,607
Extraordinary loss.................................         (304)                     -                 -                 (304)
                                                     ----------------------------------------------------------------------------
    Net income.....................................  $    20,303            $     7,933        $   (7,933)       $      20,303
                                                     ============================================================================

</TABLE>

                 Magnum Hunter Resources, Inc. and Subsidiaries
                Condensed Consolidating Statements of Cash Flows


<TABLE>
<CAPTION>
<S>                                               <C>                  <C>                    <C>               <C>
                                                                    For the Six Months Ended June 30, 2002
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter         Canvasback                             Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs     (Non Guarantor)      Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
Cash flow from operating activities...............$       (8,133)          $      8,670           $        -        $         537
Cash flow from investing activities...............       (96,036)                (1,927)                   -              (97,963)
Cash flow from financing activities...............       109,360                 (6,323)                (432)             102,605
                                                -----------------------------------------------------------------------------------
Net increase (decrease) in cash...................         5,191                    420                 (432)               5,179
Cash at beginning of period.......................           730                  2,025                    -                2,755
                                                -----------------------------------------------------------------------------------
Cash at end of period.............................$        5,921           $      2,445           $     (432)       $       7,934
                                                ===================================================================================
</TABLE>

<TABLE>
<CAPTION>
<S>                                               <C>                  <C>                    <C>               <C>
                                                                  For the Six Months Ended June 30, 2001
 ---------------------------------------------------------------------------------------------------------------------------------
                                                     Magnum Hunter          Bluebird                             Magnum Hunter
                                                    Resources, Inc.       Energy, Inc.                           Resources, Inc.
                                                    and Gurantor Subs   (Non Guarantor)        Eliminations      Consolidated
 ---------------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
Cash flow from operating activities...............   $    47,472          $      14,189          $       -         $   61,661
Cash flow from investing activities...............      (106,869)                40,001            (18,578)           (85,446)
Cash flow from financial activities...............        61,596                (54,534)            18,578             25,640
                                                    -----------------------------------------------------------------------------
Net increase (decrease) in cash...................         2,199                   (344)                 -              1,855
Cash at beginning of period.......................        (1,811)                 1,820                  -                  9
                                                    -----------------------------------------------------------------------------
Cash at end of period.............................   $       388          $       1,476          $       -         $    1,864
                                                    =============================================================================
</TABLE>

                                       15

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  June 30, 2002
                                   (Unaudited)

NOTE 9 - NEW ACCOUNTING STANDARDS

     SFAS No. 142 - SFAS No. 142, "Goodwill and Other Intangible Assets", became
effective for the Company  January 1, 2002.  SFAS No. 142 requires,  among other
things, the discontinuance of goodwill amortization. Any goodwill resulting from
acquisitions completed after June 30, 2001, will not be amortized.  In addition,
SFAS No. 142 establishes a new method of testing  goodwill that could reduce the
fair value of a reporting unit below its carrying value. Any goodwill impairment
loss will be recorded in  operations.  The  Company  incurred  goodwill of $61.8
million as the result of our merger with Prize Energy  Corp.  on March 15, 2002.
The  adoption  of SFAS  No.  142 did not  have  an  impact  on our  consolidated
financial statements on January 1, 2002.

     SFAS No. 145 - SFAS No. 145  "Rescission of FASB  Statements No. 4, 44, and
64,  Amendment of FASB  Statement  No. 13, and  Technical  Corrections"  will be
effective for the Company  beginning  January 1, 2003.  The Statement  rescinds,
updates,  clarifies and simplifies various existing  accounting  pronouncements.
SFAS  No.  145  rescinds   SFAS  No.  4,   "Reporting   Gains  and  Losses  from
Extinguishment of Debt", which required all gains and losses from extinguishment
of debt to be aggregated and, if material,  classified as an extraordinary item,
net of related  income tax effect.  As a result,  SFAS No. 145 will  require the
Company to reclassify extraordinary items for debt extinguishment costs which do
not meet the criteria as described in APB Opinion No. 30 "Reporting  the Results
of  Operations  -  Reporting  the  Effects  of  Disposal  of  a  Business,   and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions",  as
additional interest expense. The Company plans to adopt this statement beginning
January 1, 2003.

     SFAS  No.  146 - In July  2002,  the FASB  issued  Statement  of  Financial
Accounting Standards No. 146 ("SFAS No. 146"),  "Accounting for Costs Associated
with Exit or Disposal  Activities." SFAS No. 146 requires companies to recognize
costs associated with exit or disposal  activities when they are incurred rather
than at the date of a  commitment  to an exit or  disposal  plan.  SFAS No.  146
supercedes  EITF Issue No. 94-3,  "Liability  Recognition  for Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs   Incurred  in  a   Restructuring)."   Statement  146  is  to  be  applied
prospectively to exit or disposal activities  initiated after December 31, 2002.
The Company has not yet determined the impact of this standard.

NOTE 10 - SUBSEQUENT EVENT

     On July 31, 2002, the Company announced that it had entered into a mutually
binding  commitment to sell certain non-core oil and gas assets to a new private
limited  partnership in the approximate amount of $50 million.  The Company will
be the general partner with a 5% initial  ownership.  The anticipated  effective
date of the sale is August 1, 2002.  The proceeds  from the sale will be used to
reduce indebtedness and for general corporate purposes.

                                       16

<PAGE>

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

Results of Operations

     The following  discussion and analysis  should be read in conjunction  with
the Company's  consolidated  financial  statements and the notes associated with
them  contained  in its Form 10-K for the year ended  December  31,  2001.  This
discussion  should not be construed to imply that the results  discussed  herein
will necessarily  continue into the future or that any conclusion reached herein
will necessarily be indicative of actual operating  results in the future.  Such
discussion  represents  only the best present  assessment  by  management of the
Company.

     There have been no changes to  critical  our  accounting  policies  for the
period ended June 30, 2002,  except for accounting  for goodwill.  SFAS No. 142,
"Goodwill and Other Intangible Assets", became effective for the Company January
1, 2002.  SFAS No. 142  requires,  among other  things,  the  discontinuance  of
goodwill amortization.  Any goodwill resulting from acquisitions completed after
June 30, 2001,  will not be amortized.  In addition,  SFAS No. 142 establishes a
new method of testing  goodwill  that could reduce the fair value of a reporting
unit below its carrying value. Any goodwill  impairment loss will be recorded in
operations.  The Company incurred goodwill of $61.8 million as the result of our
merger with Prize Energy Corp.  on March 15, 2002.  The adoption of SFAS No. 142
did not have an impact on our  consolidated  financial  statements on January 1,
2002. For a discussion of our other critical accounting  policies,  refer to the
Company's Form 10-K for the period ended December 31, 2001.

     During the first  quarter of 2002,  the Company  merged  with Prize  Energy
Corp.  ("Prize"),  an independent oil and gas development and production company
based in Grapevine,  Texas.  The merger with Prize closed on March 15, 2002, but
for  operating and financial  reporting  purposes,  was effective as of March 1,
2002.  As such,  the results for the three and six month  periods ended June 30,
2002,  include  three  months and four months of  operating  contributions  from
Prize, respectively.

     Throughout  this  document  we  make  statements  that  are  classified  as
"forward-looking."  Please refer to the "Forward-Looking  Statements" section of
this document for an explanation of these types of assertions.

     The Company's results of operations have been significantly affected by our
past success in acquiring oil and gas  properties and our ability to maintain or
increase oil and natural gas production  through  exploration  and  exploitation
activities.  Fluctuations in oil and gas prices have also significantly affected
the results of operations.

     The following table sets forth certain  information with respect to our oil
and gas operations and our gas gathering, marketing and processing operations.

<TABLE>
<CAPTION>
<S>                                                              <C>           <C>                    <C>              <C>
                                                                      Three Months Ended                  Six Months Ended
                                                                           June 30,                           June 30,
-----------------------------------------------------------------------------------------------------------------------------------
Oil and Gas Operations                                              2002             2001                 2002           2001
-----------------------------------------------------------------------------------------------------------------------------------
Reported Production:
    Oil (Mbbls)...............................................         1,132             325                1,802            627
    Gas (MMcf)................................................        13,431           5,748               22,499         11,285
    Oil and Gas (Mmcfe).......................................        20,223           7,697               33,312         15,048
    Equivalent Daily Rate (Mmcfe/day).........................         222.2            84.6                184.0           83.1
Average Sale Prices (after hedging)
    Oil (per Bbl).............................................     $   24.40       $   24.98            $   23.15      $   26.23
    Gas (per Mcf).............................................          3.20            4.49                 3.02           5.35
    Oil and Gas (per Mcfe)....................................          3.49            4.41                 3.29           5.11
Effect of hedging activities (per Mcfe).......................             -            0.03                 0.17          (0.06)
Lease Operating Expense (per Mcfe)
    Lifting costs.............................................     $    0.76       $    0.64            $    0.73      $    0.64
    Production tax and other costs............................          0.39            0.41                 0.37           0.48
Gross margin (per Mcfe).......................................     $    2.34       $    3.36            $    2.19      $    3.99

Gas Gathering, Marketing and Processing Operations
-----------------------------------------------------------------------------------------------------------------------------------
Throughput Volumes (Mcf per day)
      Gathering...............................................        15,207          16,571               15,232         16,409
      Processing..............................................        21,277          14,718               19,588         13,295
Gross margin (in thousands)...................................     $   1,130       $     399            $   2,032      $     929
      Gathering (per Mcf throughput)..........................     $    0.11       $   (0.09)           $    0.12      $    0.02
      Processing (per Mcf throughput).........................     $    0.48       $    0.21            $    0.44      $    0.31

</TABLE>

                                       17

<PAGE>

Period to Period Comparison

For the Three Months Ended June 30, 2002 and 2001

     We reported  net income of $2.3 million for the three months ended June 30,
2002, as compared to net income of $6.3 million for the same period in 2001. Net
income was  unfavorably  impacted by lower  average sale prices for oil and gas,
higher general and  administrative  expenses related to nonrecurring  activities
associated  with  the  Prize  merger,  and  amortization   expense  incurred  on
derivative  instruments  acquired in the Prize merger.  Total operating revenues
increased  94% to $76.2  million and  operating  profit  increased  44% to $21.1
million in 2002,  due  primarily to the Prize merger.  We reported  decreases in
revenues from our gas gathering,  marketing and  processing  segment in the 2002
period compared to the 2001 period as a result of lower product prices. However,
gross margins for the segment  increased,  due to the acquisition of a gas plant
in the Prize merger and also due to the reduction of  unfavorable  gas imbalance
pricing  effects  experienced  in the 2001  period.  Oil field  service  revenue
increased  73% to $1.1  million for the three  months in 2002 as compared to the
same period in 2001.  This revenue  increase is also  attributable to the merger
with  Prize.  Both basic and diluted  earnings  per share were $0.03 in the 2002
quarter  versus  basic  and  diluted  earnings  per  share of $0.18  and  $0.17,
respectively, in the 2001 quarter.

Oil and Gas Operations:

     For the three  months ended June 30, 2002,  we reported oil  production  of
1.132 million  barrels and gas  production of 13.431  billion cubic feet,  which
represents  an increase of 249% in oil  produced  and an increase of 134% in gas
produced from the comparable period in 2001. Our reported  equivalent daily rate
of production on a million cubic feet per day basis  (Mmcfe/day)  increased 163%
to 222.2 Mmcfe/day in the 2002 period. These increases were primarily the result
of the merger  with Prize and the  success of our  drilling  program  offsetting
normal production declines.

     Oil revenues  increased  $19.5  million,  or 240%, in the second quarter of
2002 compared to the same period in 2001,  primarily  attributable to production
gains of 807 Mbbls. Oil prices declined 2% to $24.40 per bbl in 2002 compared to
the same period in 2001.  Gas  revenues  increased  $17.1  million in the second
quarter of 2002 versus the same period in 2001. Gas price decreases of $1.29 per
Mcf, or a 29%  decline,  decreased  gas  revenue by $17.3  million in the second
quarter of 2002 compared to the same period in 2001.  The price  decreases  were
offset by an increase of $34.4  million in gas revenues as the result of a 7.683
billion cubic feet increase in gas production for the 2002 period.

     From time to time,  we enter into various  commodity  hedging  contracts in
order to reduce our exposure to the possibility of declining oil and gas prices.
During the 2002 period,  hedging decreased the average price we received for oil
by $0.53 per barrel and increased the average price we received for gas by $0.05
per Mcf.  During  the  second  quarter of 2002,  we had 70% of our  natural  gas
production  hedged  through a  combination  of fixed price  swaps and  cost-less
collars at a weighted average floor price of  approximately  $3.19 per Mcf and a
ceiling  price of $3.47 per Mcf.  We also had 68% of our  crude oil  hedged at a
weighted average floor price of $23.50 per bbl and a ceiling price of $25.90 per
bbl.  From July 1, 2002  through the  remainder  of 2002,  we have an average of
68,000  Mcf/day of natural  gas hedged  with a weighted  average  floor price of
approximately  $3.01 per Mcf and a ceiling  price of $3.18 per Mcf. For the same
period,  we also have 8,500  bbls/day of crude  hedged  with a weighted  average
floor price of $23.35 per bbl and a ceiling price of $25.74 per bbl.

     Lease operating expenses consist of two primary  components,  lifting costs
and  production  tax and other costs.  For the 2002 period,  lifting  costs were
$15.4  million  versus  $5.0  million in the 2001  period,  an increase of 208%.
Production  taxes and other costs were $7.9  million in the 2002  period  versus
$3.2  million in the 2001  period,  an increase  of 147%.  Both  increases  were
primarily  attributable to the Prize merger. For the 2002 period, lifting costs,
on a unit of production basis, were $0.76 per Mcfe as compared to $0.64 per Mcfe
in the 2001  period,  an increase  of 19% due to an  increase  in  workover  and
remedial expense. Production tax and other costs were $0.39 per Mcfe in the 2002
period  compared to $0.41 per Mcfe in the 2001  period,  a decrease of 5% due to
lower  production  taxes,  which are a function of lower oil and gas prices on a
unit basis.

     Our gross  margin for oil and gas  operations  (oil and gas  revenues  less
lease  operating  expenses) for the 2002 period was $47.2 million,  or $2.34 per
Mcfe,  compared  to $25.8  million,  or $3.36  per  Mcfe in the 2001  period,  a
decrease of 30% on a per unit of production  basis,  primarily a result of a 21%
decline in the  product  price  received  per Mcfe and a 10%  increase  in lease
operating expense per Mcfe.

Gathering, Marketing and Processing Operations:

     For the  three  months  ended  June  30,  2002,  our gas  gathering  system
throughput was 15.2 MMcf/day versus 16.6 MMcf/day for the same period in 2001, a
decline of 8% due to normal well  production  declines  behind the systems.  Gas
processing throughput was 21.3 MMcf/day in 2002 versus 14.7 MMcf/day in 2001, an
increase of 45%.  This increase is primarily  due to the  acquisition  of a 100%
owned  interest in the Elmore  City  processing  plant  located in Oklahoma as a
result of the Prize merger.

                                       18

<PAGE>

     Revenues from gas gathering,  marketing and processing decreased 5% to $4.6
million in 2002  versus  $4.8  million in 2001.  We  received  lower  prices for
natural gas liquids and plant  products sold in the 2002 period  compared to the
2001 period.  Operating  costs for the gas  gathering,  marketing and processing
segment  decreased 22% to $3.5 million in 2002 from $4.4 million in 2001.  Lower
natural gas prices paid also  affected the cost of gas  marketed and  processed.
The 2001 period was also impacted by adverse gas imbalance pricing effects.

     The gross margin realized from gas gathering,  marketing and processing for
2002 was $1.1 million versus $399 thousand in 2001, an increase of 183%. The gas
gathering  margin was $0.11 per Mcf  gathered in 2002 versus a loss of $0.09 per
Mcf in 2001,  due to an  increase in  marketing  spreads  and the  reduction  of
adverse gas imbalance pricing effects which occurred in 2001. The gas processing
margin was $0.48 per Mcf in 2002  compared to $0.21 per Mcf in 2001,  due to the
addition of the Elmore City plant and improved plant processing spreads.

Oil Field Management Services Operations:

     Revenues from oil field management  services  increased 73% to $1.1 million
in the second  quarter of 2002  versus $606  thousand  in the second  quarter of
2001.  This  increase is  primarily  due to the Prize  merger.  Operating  costs
increased to $543 thousand in 2002 from $392  thousand in 2001,  also due to the
Prize merger. The gross margin for this segment in 2002 was $508 thousand versus
$214 thousand in 2001, an increase of 137%, due to overhead costs charged.

Other Income and Expenses:

     Depreciation  and  depletion  expense was $23.5  million in the 2002 period
versus $9.7 million in the 2001 period, primarily the result of higher depletion
expense calculated on a unit of production basis.  Depreciation and depletion of
oil and gas properties was $1.11 per Mcfe produced in 2002 versus $1.22 per Mcfe
produced in 2001. This 8% decrease in the equivalent unit cost was due primarily
to the lower depletion rate  associated  with  properties  acquired in the Prize
merger.

     General and administrative  expense for 2002 increased 105% to $4.2 million
from $2.1 million in 2001. One cause of this increase was an increase in salary,
benefits and retirement  plan expenses and an increase in the Company's  overall
headcount associated with its merger with Prize. We also incurred  approximately
$858  thousand in  nonrecurring  legal and  accounting  services  involved  with
various registration  statements and $251 thousand in transitional payroll costs
associated  with the Prize  merger in the 2002  period.  We  recorded  equity in
earnings of affiliate of $81 thousand in 2002 versus  earnings of $237  thousand
in 2001.  This  decrease  was due to reduced  net  earnings  from gas  marketing
operations of the Company's 30% owned gas marketing affiliate.  Other income was
$108  thousand  for 2002 versus $63  thousand in 2001,  caused by an increase in
interest income.  We recognized a permanent  impairment loss of $621 thousand on
an  investment  held  for  resale  in 2002  versus  none in  2001.  The  Company
recognized a $3.3 million loss in other  non-cash  hedging  adjustments  in 2002
versus a $765  thousand  gain in 2001.  In the 2002 period,  $3.1 million of the
hedging loss relates to the  amortization  of hedge assets acquired in the Prize
merger, while $200 thousand was due to recording hedge ineffectiveness.

     Interest  expense was $13.7  million for 2002 versus $5.1 million for 2001.
Interest  expense  increased as a result of the addition of $300 million in 9.6%
Senior Notes and an increase in the borrowing base and amount outstanding on the
Senior Bank Credit  Facility,  both created in connection with the Prize merger.
Additional  interest  expense was  recorded  as a result of new capital  leases,
vendor financed loans, and non-recourse indebtedness.

     We recorded income tax expense of $1.4 million on income before tax of $3.6
million in 2002 versus  income tax expense of $4.0 million on income  before tax
of $10.6 million in 2001, resulting in a 38% effective rate in both periods. The
2001  period  provision  included  a  $602  thousand  current  provision  due to
alternative minimum tax regulations.  We also incurred an extraordinary loss due
to early  extinguishment of debt of $304 thousand in the 2001 period versus none
in the 2002 period.

For the Six Months Ended June 30, 2002 and 2001

     We reported  net income of $9.7  million for the six months  ended June 30,
2002,  compared to net income of $20.3 million for the same period in 2001.  Net
income was unfavorably  impacted in the 2002 period by lower average sale prices
for  oil  and  gas,  higher  general  and  administrative  expenses  related  to
nonrecurring  activities  associated  with the Prize  merger,  and  amortization
expense  incurred on derivative  instruments  acquired in the Prize merger.  The
unfavorable  effects were partially offset in the 2002 period by the elimination
of a $7.1  million  valuation  allowance on the  Company's  deferred tax assets,
which resulted in a net tax benefit of $5.1 million being recognized in the 2002
period.  Total  operating  revenues  increased 33% to $119.3  million in 2002 on
higher  volumes  of oil  and gas  produced  as a  result  of the  Prize  merger.
Operating  profit  decreased  25% to $30.4 million in 2002, in part due to a 36%
decline in oil and gas prices  received.  We reported a 31% decrease in revenues
from our gas  gathering,  marketing  and  processing  segment in the 2002 period
compared to the 2001 period, due to lower product prices. However, gross margins
for the segment increased, primarily as a result of the reduction of unfavorable
gas imbalance pricing effects experienced in the 2001 period, the acquisition of
a gas plant in the Prize merger,  and improved  plant  processing  spreads.  Oil
field  service  revenue  increased  29% to $1.4 million for the six months ended
June 30, 2002

                                       19

<PAGE>


compared  to the same  period in 2001,  primarily  the  result of the Prize
merger.  Income per common share, basic, was $0.18, and income per common share,
diluted, was $0.17 in the 2002 period versus $0.58 and $0.54,  respectively,  in
the 2001 period.

Oil and Gas Operations:

     For the six months ended June 30, 2002, we reported oil production of 1.802
million  barrels  and  gas  production  of  22.499  billion  cubic  feet,  which
represents  an  increase of 187% in oil  produced  and an increase of 99% in gas
produced from the comparable period in 2001. Our reported  equivalent daily rate
of production on a million cubic feet per day basis  (MMcfe/day)  increased 121%
to 184.0 MMcfe/day in the 2002 period. These increases were primarily the result
of the merger  with Prize and the  success of our  drilling  program  offsetting
normal production declines.

     Oil revenues  increased $25.3 million or 154% for the six months ended June
30, 2002 compared to the same period in 2001.  Production gains of 1.175 million
barrels  increased oil revenues by $30.8  million,  while a price decline of 12%
decreased oil revenues by $5.5 million.  Gas revenues  increased $7.6 million in
the six month  period in 2002,  compared to the same  period in 2001.  Gas price
decreases  of $2.33 per Mcf, or a 44%  decline,  decreased  gas revenue by $52.4
million  in the 2002  period  compared  to the same  period  in 2001.  The price
decreases  were  offset by an  increase  of $60.0  million in gas  revenues as a
result of 11.214  billion  cubic feet  increase in gas  production  for the 2002
period.

     From time to time we enter into  various  commodity  hedging  contracts  in
order to reduce our exposure to the possibility of declining oil and gas prices.
During the 2002 period,  hedging decreased the average price we received for oil
by $0.22 per barrel and increased the average price we received for gas by $0.28
per Mcf. During the 2002 period, we had 77% of our natural gas production hedged
through a combination  of fixed price swaps and cost-less  collars at a weighted
average floor price of approximately  $3.28 per Mcf and a ceiling price of $3.56
per Mcf.  We also had 54% of our crude oil  hedged at a weighted  average  floor
price of $23.70 per bbl and a ceiling price of $26.18 per bbl. From July 1, 2002
through the remainder of 2002,  we have an average of 68,000  Mcf/day of natural
gas hedged with a weighted  average floor price of  approximately  $3.01 per Mcf
and a ceiling  price of $3.18 per Mcf. For the same  period,  we also have 8,500
bbls/day of crude hedged with a weighted  average  floor price of $23.35 per bbl
and a ceiling price of $25.74 per bbl.

     Lease operating expenses consist of two primary  components,  lifting costs
and  production  tax and other costs.  For the 2002 period,  lifting  costs were
$24.4  million  versus  $9.6  million  in the 2001  period,  an incease of 154%.
Production  taxes and other costs were $12.2  million in the 2002 period  versus
$7.2  million in the 2001  period,  an  increase  of 69%.  Both  increases  were
primarily  attributable to the Prize merger. For the 2002 period, lifting costs,
on a unit of production basis, were $0.73 per Mcfe as compared to $0.64 per Mcfe
in the 2001  period,  an increase  of 14% due to an  increase  in  workover  and
remedial expense. Production tax and other costs were $0.37 per Mcfe in the 2002
period  compared to $0.48 per Mcfe in the 2001 period,  a decrease of 23% due to
lower  production  taxes,  which are a function of lower oil and gas prices on a
unit basis.

     Our gross  margin for oil and gas  operations  (oil and gas  revenues  less
lease  operating  expenses) for the 2002 period was $73.1 million,  or $2.19 per
Mcfe,  compared  to $60.1  million,  or $3.99  per  Mcfe in the 2001  period,  a
decrease of 45% on a per unit of production  basis,  primarily a result of a 36%
decline  in the  product  price  received  per Mcfe and a 2%  decrease  in lease
operating expense per Mcfe.

Gathering, Marketing and Processing Operations:

     For  the six  months  ended  June  30,  2002,  our  gas  gathering  systems
throughput was 15.2 MMcfe/day  versus 16.4 MMcf/day for the same period in 2001,
a decline of 7% due to normal well production  declines behind the systems.  Gas
processing throughput was 19.6 MMcf/day in 2002 versus 13.3 MMcf/day in 2001, an
increase of 47%.  This increase is primarily  due to the  acquisition  of a 100%
owned  interest in the Elmore  City  processing  plant  located in Oklahoma as a
result of the Prize merger.

     Revenues from gas gathering, marketing and processing decreased 31% to $8.2
million in 2002  versus  $11.9  million in 2001.  We received  lower  prices for
natural gas liquids and plant  products sold in the 2002 period  compared to the
2001 period.  Operating  costs for the gas  gathering,  marketing and processing
segment  decreased 44% to $6.1 million in 2002 from $11.0 million in 2001. Lower
natural gas prices paid also  affected the cost of gas  marketed and  processed.
The 2001 period was also impacted by adverse gas imbalance pricing effects.

     The gross margin realized from gas gathering,  marketing and processing for
2002 was $2.0 million versus $929 thousand in 2001, an increase of 119%. The gas
gathering  margin was $0.12 per Mcf  gathered  in 2002  versus  $0.02 per Mcf in
2001, due to an increase in marketing  spreads and due to the fact that the 2001
period was  unfavorably  impacted  by adverse  gas  imbalance  pricing.  The gas
processing  margin was $0.44 per Mcf in 2002  compared to $0.31 per Mcf in 2001,
due to the  addition  of the Elmore  City plant and  improved  plant  processing
spreads.

                                       20

<PAGE>

Oil Field Management Services Operations:

     Revenues from oil field management  services  increased 29% to $1.4 million
for the 2002 period  versus $1.1  million in the 2001 period.  This  increase is
primarily due to the Prize merger. Operating costs increased to $819 thousand in
2002 from $754 thousand in 2001, also due to the Prize merger.  The gross margin
for this  segment in 2002 was $624  thousand  versus $367  thousand in 2001,  an
increase of 70%, due to overhead costs charged.

Other Income and Expenses:

     Depreciation  and  depletion  expense was $38.6  million in the 2002 period
versus  $17.1  million  in the 2001  period,  primarily  the  result  of  higher
depletion  expense  calculated on a unit of production  basis.  Depreciation and
depletion of oil and gas  properties  was $1.11 per Mcfe produced in 2002 versus
$1.09 per Mcfe produced in 2001.  This 2% increase in the  equivalent  unit cost
was due primarily to the higher  depletion rate  associated  with our properties
located in the Gulf of Mexico.

     General and  administrative  expense for 2002 increased 79% to $6.7 million
from $3.8 million in 2001. One cause of this increase was an increase in salary,
benefits and retirement  plan expenses and an increase in the Company's  overall
headcount associated with its merger with Prize. We also incurred  approximately
$858  thousand in  nonrecurring  legal and  accounting  services  involved  with
various registration  statements and $251 thousand in transitional payroll costs
associated  with the Prize  merger in the 2002  period.  We  recorded  equity in
earnings of affiliate of $382 thousand in 2002 versus  earnings of $855 thousand
in 2001.  This  decrease  was due to reduced  net  earnings  from gas  marketing
operations of the Company's 30% owned gas marketing affiliate.  Other income was
$165  thousand for 2002 versus $157  thousand in 2001,  caused by an increase in
interest income.  We recognized a permanent  impairment loss of $621 thousand on
an  investment  held  for  resale  in 2002  versus  none in  2001.  The  Company
recognized a $3.9 million loss in other  non-cash  hedging  adjustments  in 2002
versus a $1.7 million gain in 2001. In the 2002 period, $3.5 million of the loss
relates to the amortization of hedge assets acquired in the Prize merger,  while
$400 thousand was the result of hedge ineffectiveness.

     Interest  expense was $21.2 million for 2002 versus $10.0 million for 2001.
Interest  expense  increased as a result of the addition of $300 million in 9.6%
Senior Notes and an increase in the borrowing base and amount outstanding on the
Senior Bank Credit  Facility,  both created in connection with the Prize merger.
Additional  interest  expense was  recorded  as a result of new capital  leases,
vendor financed loans, and non-recourse indebtedness.

     We recorded an income tax benefit of $5.1  million on income  before tax of
$5.2 million in 2002 versus income tax expense of $12.6 million on income before
tax of $33.2 million in 2001,  resulting in a negative 98% effective rate in the
2002 period  compared to a 38% effective  rate in the 2001 period..  In the 2002
period,  the Company was able to eliminate the $7.1 million valuation  allowance
on its NOL  balances  as a result of the  merger  with  Prize.  The 2001  period
provision  included a $1.9 million current provision due to alternative  minimum
tax  regulations.   We  also  incurred  an  extraordinary   loss  due  to  early
extinguishment  of debt of $621 thousand in the 2002 period versus $304 thousand
in the 2001 period.

Liquidity and Capital Resources

     CASH FLOW AND WORKING  CAPITAL.  Net cash provided by operating  activities
for the six month periods in 2002 and 2001 was $537 thousand and $61.7  million,
respectively.  The substantial decrease in our operating cash flows in 2002 over
2001 was  primarily  the result of a reduction of balances due on payables  that
had  accumulated  at year-end  and from the merger  with Prize.  Our net working
capital position at June 30, 2002 was $3.7 million.  On that date, Magnum Hunter
also had $79.3  million  available  to be drawn  under its  Senior  Bank  credit
facility.

     INVESTING  ACTIVITIES.  Net cash  used in  investing  activities  was $98.0
million in the 2002 period. We made capital  expenditures of $56.2 million under
our capital  budget  during  2002.  Our capital  expenditures  are  discussed in
further  detail  below.  For 2002,  we also  received  proceeds from the sale of
assets of $1.7  million,  made a loan of $2.4 million to an  affiliate  and used
$41.1 million associated with the merger of Prize.

     In the 2001  period,  net  cash  used in  investing  activities  was  $85.4
million.  We made cash  expenditures  of $84.5 million under our capital  budget
during 2001.  Additionally,  during  2001,  we received a  distribution  of $1.0
million  from  an  unconsolidated  affiliate,  and  made  an  investment  in  an
unconsolidated affiliate of $2.0 million,  received proceeds from sale of assets
of $4 thousand,  and received  payments on promissory notes receivable  totaling
$65 thousand.

     FINANCING ACTIVITIES.  Net cash provided by financing activities was $102.6
million in the 2002  period.  We borrowed a total of $592.2  million,  including
$300  million  in new 9.6%  Senior  Notes  during  the  period.  We also  repaid
borrowings of $461.4 million,  including  $155.7 million to pay off the previous
bank credit  facility,  $245.8 million to pay off the Prize bank credit facility
in connection with the merger, and the remainder to pay off other  indebtedness.
We paid $11.8  million in fees related to the newly issued  Senior Notes and the
new Senior Bank credit  facility,  loaned  $2.7  million to the ESOP,  purchased
treasury stock for $13.8 million,  purchased  warrants for $98 thousand,  made a
loan to a stockholder and executive officer for $175 thousand,

                                       21

<PAGE>

received  payment on a loan to a stockholder and executive  officer of $300
thousand,  had an  increase in  restricted  cash of $432  thousand,  and had net
proceeds  from the  issuance of common  stock of $523  thousand.  Our  financing
activities are discussed in further detail below.

     Net cash  provided by  financing  activities  was $25.6  million in the six
months in 2001.  We  borrowed  $171.5  million  under  our  Senior  Bank  credit
facility.  We repaid  borrowings under our Senior Bank credit facility of $137.6
million,  made payments of $138 thousand on production  payment and other loans,
and  repurchased  $10.5 million  principal  value of our 10% Senior Notes on the
open  market  for $10.8  million.  We  received  $2.3  million  in cash from the
issuance of common  stock.  We paid $731  thousand for fees related to financing
activities,  made a loan to stockholders of $300 thousand, received repayment of
stockholder  loans of $360 thousand,  had a decrease in restricted  cash of $1.8
million,  and purchased  treasury stock for $621  thousand.  Cash dividends paid
were $169 thousand in 2001.

     CAPITAL  RESOURCES.  The following  discussion of Magnum  Hunter's  capital
resources  refers to the Company and its affiliates (not including  Bluebird for
the 2001 period).  Internally  generated  cash flow and the  borrowing  capacity
under  its  Senior  Bank  credit  facility  are the  Company's  major  source of
liquidity.  From  time to  time,  the  Company  may  also  sell  non-  strategic
properties  in order to increase  liquidity.  In  addition,  the Company may use
other sources of capital,  including the issuance of additional  debt securities
or equity  securities,  as sources to fund acquisitions or other specific needs.
In the past,  the  Company  has  accessed  both the public and  private  capital
markets to provide  liquidity  for  specific  activities  and general  corporate
purposes.

     The Company  amended and  restated  its Senior  Bank Credit  Facility  (the
"facility")  in  conjunction  with the merger with Prize.  The amended  facility
provides for total borrowings of $500 million, up from $225 million,  and raises
the borrowing  base limit from $160 million to $300 million.  Additionally,  the
expiration  date of the facility  was amended and extended to March 2005.  After
March 15,  2002,  the  facility  was used to i) fund the cash  component  of the
merger  consideration  paid to the Prize  shareholders,  ii) pay  certain  costs
associated with the merger, and iii) for general corporate purposes.

     On March 15, 2002, the Company  completed a private placement in the amount
of $300 million of new unsecured Senior Notes due 2012. Interest on these Senior
Notes bears a fixed annual rate of 9.6% due semi-annually,  commencing September
15, 2002. Funds received from the issuance of these notes were used to i) retire
outstanding  indebtedness  under the Prize commercial bank credit facility,  ii)
pay fees  related to the  issuance  of the Senior  Notes,  and iii) for  general
corporate purposes.

     Subsequent to the issuance of the consolidated financial statements for the
period  ended March 31,  2002,  the  Company's  management  determined  that the
Company was not in  compliance  with the Funded Debt to EBITDA Ratio (as defined
by the facility),  of the amended and restated Senior Bank Credit  Facility,  at
March 31, 2002.  The Company  obtained a waiver from its lenders as of March 31,
2002 and  negotiated an amendment  dated July 3, 2002 which  adjusted the Funded
Debt to EBITDA Ratio (as defined by the facility) to be less restrictive for the
next  four  successive  quarters  ending  March 31,  2003.  The  Company  was in
compliance with the revised  financial  covenants under the amended  facility at
June 30, 2002, and believes it will be able to comply with the revised financial
covenants in the future.

     On January 15, 2002, the Company entered into a sale-leaseback  transaction
on three newly constructed production platforms and associated pipelines located
in the Gulf of Mexico  that were  recently  placed  into  service.  The  Company
received  total  proceeds  of $11.2  million in new  funding  which was used for
general  corporate  purposes.  The production  platforms are being leased from a
syndicate  group of  lenders  over a term of three  years and at a cost of funds
based on the one month LIBO  rate,  currently  yielding a cost of  approximately
5.27% per annum. For financial statement  reporting  purposes,  this transaction
was accounted for as a capital lease and was included in long-term debt.

     On March 15,  2002,  the  Company  repaid  its 7% notes  payable to certain
vendors in the total amount of $4.0 million plus accrued interest.  On March 14,
2002, the Company  borrowed an additional  $2.5 million to finance its insurance
premium for the year under a new note bearing a fixed interest rate of 4.25% per
annum and with a maturity date of December 14, 2002.

     On March 7, 2002,  Canvasback entered into a $10.0 million revolving credit
agreement with a financial  institution.  The credit agreement provides for both
LIBOR and prime based  interest  rate options ( 6.5%  interest  rate at June 30,
2002).  On June 30, 2002,  the remaining  revolving loan balance of $5.8 million
converted  to a term loan,  repayable  on March 7, 2004,  together  with accrued
interest.  Proceeds  from the loan were used to purchase the same amount in face
value of the  Company's  10% Senior  Notes,  which were  acquired in 2001 by the
Company and are being held as an  investment.  These 10% Senior Notes,  together
with $4.7 million of 10% Senior Notes formerly owned by Bluebird and contributed
to Canvasback in its initial  capitalization,  serve as the only  collateral for
the loan. The loan is non-recourse to the Company.

     On May 1, 2002, the Company's Board of Directors  announced an expansion of
the Company's existing stock repurchase  program originally  established in June
2001.  The Company or its  affiliates  were  authorized  to repurchase up to two
million  shares of the  Company's  common stock.  At June 30, 2002,  two million
shares had been  repurchased  under the program,  including  1,885,200 shares in
2002 at a cost of $13.8 million.

                                       22

<PAGE>

     On July 31, 2002, the Company announced that it had entered into a mutually
binding  commitment to sell certain non-core oil and gas assets to a new private
limited  partnership in the approximate amount of $50 million.  The Company will
be the general partner with a 5% initial  ownership.  The anticipated  effective
date of the sale is August 1, 2002.  The proceeds  from the sale will be used to
reduce indebtedness and for general corporate purposes.

     In January 2001, the remaining 50% of the Company's outstanding 1999 Series
A 8%  Convertible  preferred  stock was converted by the holder to the Company's
common stock at the conversion  price of $5.25 per share.  The Company no longer
has any dividend paying preferred stock outstanding to a non-affiliated entity.

     On a semiannual  basis, the Company's  borrowing base under its Senior Bank
credit facility is redetermined by the financial institutions who have committed
to the  Company  based on  their  review  of the  Company's  proved  oil and gas
reserves. If the outstanding senior bank debt exceeds the redetermined borrowing
base, the Company must repay the excess. The next  redetermination  date will be
no later than September 15, 2002.

     The Company's  internally  generated cash flow, results of operations,  and
financing for its operations are substantially  dependent on oil and gas prices.
To the extent that oil and gas prices decline,  the Company's  earnings and cash
flows may be adversely  affected.  The Company  believes that its cash flow from
operations,  existing working capital and availability under its new Senior Bank
credit  facility will be  sufficient  to meet interest  payments and to fund the
capital expenditure budget for the year 2002.

     CAPITAL  EXPENDITURES.  During the 2002 period, the Company's total capital
expenditures  were $56.2  million,  excluding  the $602.3  million in properties
acquired through the Prize merger.  Exploration  activities  accounted for $17.0
million,  development  activities  accounted  for $34.6  million,  additions  to
unproved properties not accounted for as exploration or development expenditures
accounted  for $3.9 million,  and  additions to other assets  accounted for $700
thousand of the capital  expenditures.  The Company participated in the drilling
of 52 wells  during  the 2002  period,  of  which  41 were  onshore  and 11 were
offshore in the Gulf of Mexico.  Nine of the 11 offshore  wells were  considered
successful.  Of the 52 wells drilled, 10 were exploratory wells, of which 8 were
successful,  and 42 were development  wells, 41 of which were successful.  As of
June 30, 2002,  the Company had total  unproved  oil and gas  property  costs of
$153.6 million,  consisting of $125.7 million  acquired in the merger with Prize
and $27.9 million of other property acquisition costs.

     For calendar year 2002, the Company has budgeted approximately $115 million
for  exploration and development  activities.  The Company is not  contractually
obligated to proceed with any of its material budgeted capital expenditures. The
amount and allocation of future capital  expenditures will depend on a number of
factors  that are not  entirely  within  the  Company's  control  or  ability to
forecast, including drilling results, oilfield service costs, and changes in oil
and gas prices. As a result,  actual capital expenditures may vary significantly
from current expectations. In the normal course of business, the Company reviews
opportunities  for  the  possible  acquisition  of  oil  and  gas  reserves  and
activities related thereto. When potential acquisition  opportunities are deemed
consistent  with the Company's  growth  strategy,  bids or offers in amounts and
with terms acceptable to the Company may be submitted.  It is uncertain  whether
any such bids or offers  which may be submitted by the Company from time to time
will  be  acceptable  to the  sellers.  In the  event  of a  future  significant
acquisition,   the  Company  may  require  additional  financing  in  connection
therewith.

     FORWARD-LOOKING STATEMENTS. This Form 10-Q and the information incorporated
by reference  contain  statements that constitute  "forward-looking  statements"
within the meaning of Section 27A of the  Securities  Act and Section 21E of the
Securities Exchange Act. The words "expect", "project",  "estimate",  "believe",
"anticipate",  "intend",  "budget",  "plan",  "forecast",  "predict"  and  other
similar expressions are intended to identify forward-looking  statements.  These
statements  appear in a number of places and include  statements  regarding  our
plans,  beliefs,  or current  expectations,  including the plans,  beliefs,  and
expectations of our officers and directors.

     When considering any forward-looking statement, you should keep in mind the
risk factors that could cause our actual results to differ materially from those
contained in any forward-looking  statement.  Important factors that could cause
actual results to differ materially from those in the forward-looking statements
herein include the timing and extent of changes in commodity  prices for oil and
gas, operating risks and other risk factors as described in our Annual Report on
Form 10-K as filed with the Securities and Exchange Commission. Furthermore, the
assumptions  that  support  our   forward-looking   statements  are  based  upon
information  that  is  currently   available  and  is  subject  to  change.   We
specifically  disclaim all  responsibility  to publicly  update any  information
contained in a forward-looking statement or any forward-looking statement in its
entirety and therefore disclaim any resulting  liability for potentially related
damages.

     All  forward-looking  statements  attributable to Magnum Hunter  Resources,
Inc. are expressly qualified in their entirety by this cautionary statement.

                                       23

<PAGE>

Inflation and Changes in Prices

     During the 2002 period, the Company  experienced  substantial  decreases in
the price for both oil and gas compared to the same period in the previous year.
The  results of  operations  and cash flow of the  Company  have been,  and will
continue to be,  affected by the  volatility  in oil and gas prices.  Should the
Company  experience  a  significant  increase  in oil  and  gas  prices  that is
sustained  over a prolonged  period,  it would expect that there would also be a
corresponding  increase in oil and gas finding costs,  lease acquisition  costs,
and operating expenses.  Periodically, the Company enters into futures, options,
and swap  contracts to reduce the effects of  fluctuations  in crude oil and gas
prices.  It is the policy of the Company not to enter into any such arrangements
which exceed 75% of the  Company's oil and gas  production  during the projected
next 12 months.  For the remainder of 2002, the Company has approximately 65% of
its crude oil production hedged and 42% of its natural gas production hedged.

     The Company  markets  oil and gas for its own  account,  which  exposes the
Company  to  the  attendant  commodities  risk.  A  significant  portion  of the
Company's gas production is currently sold to a 30% owned affiliate,  NGTS, LLC,
or end-users either on the spot market on a  month-to-month  basis at prevailing
spot market prices,  or under  long-term  contracts based on current spot market
prices. The Company normally sells its oil under  month-to-month  contracts to a
variety of purchasers.

Hedging

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities", as extended by SFAS No. 137 (June 1999) and amended by SFAS No. 138
(June 2000), was effective for the Company  beginning January 2001. SFAS No. 133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  It requires the  recognition of derivatives in the balance
sheet and the measurement of those instruments at fair value.

     The Company was obligated to nine crude oil  derivatives,  sixteen  natural
gas derivatives, and two interest rate derivatives on June 30, 2002. The Company
has determined that all outstanding  derivatives qualify as cash flow hedges and
for hedge  treatment as defined  within SFAS No. 133, which requires the Company
to record  the  derivative  assets or  liabilities  at their  fair  value on its
balance  sheet  with an  offset  to  other  comprehensive  income.  However,  in
connection  with the merger with Prize on March 15, 2002, the Company  purchased
$7.6  million in hedge  assets  from  Prize at fair value on that date,  with no
corresponding  offset to other  comprehensive  income.  During  June  2002,  the
Company  sold its  position  in one natural  gas collar  purchased  in the Prize
acquisition, realizing proceeds of $3.6 million which was char ged against hedge
assets. Consequently,  this net hedge balance of $4.0 million will amortize as a
charge to other non-cash hedging  adjustments over 33 months (30 remaining as of
June 30, 2002).  Future hedge  ineffectiveness  on the cash-flow  hedges will be
recorded in earnings.

     At June 30,  2002,  the  fair  value of the  Company's  derivatives  was as
follows (in thousands):


Derivative Assets
------------------------------------------
Natural gas collars.......................  $        992
                                          ---------------
Total derivative assets...................  $        992
                                          ---------------
Derivative Liabilities
------------------------------------------
Natural gas collars.......................  $     11,882
Natural gas swaps.........................        12,952
Crude oil collars.........................           851
Crude oil swaps...........................         2,140
Interest rate swaps.......................  $      1,188
                                          ---------------
Total derivative liabilities..............  $     29,013
                                          ---------------
Net derivative liabilities................  $     28,021
                                          ===============

     For the  three  and six month  periods  ended  June 30,  2002,  the  income
statement  includes  a  non-cash  loss  of  $219  thousand  and  $377  thousand,
respectively,  related  to the  crude  oil and  natural  gas  derivatives  and a
non-cash  loss of $3.1 million and $3.5  million,  respectively,  related to the
amortization of hedge assets purchased in the Prize merger.  The Company expects
that the remaining balances in other comprehensive  income at June 30, 2002 will
be reclassified into the income statement within the next 30 months.  During the
next 12 months,  $1.9 million of amortization  of hedge assets  purchased in the
Prize  merger  will be  expensed  on the income  statement.  Additionally,  $8.0
million  of other  comprehensive  loss  will be  reclassified  into  the  income
statement during the next 12 months.

                                       24

<PAGE>

New Accounting Standards


     SFAS No. 142 - SFAS No. 142, "Goodwill and Other Intangible Assets", became
effective for the Company  January 1, 2002.  SFAS No. 142 requires,  among other
things, the discontinuance of goodwill amortization. Any goodwill resulting from
acquisitions completed after June 30, 2001, will not be amortized.  In addition,
SFAS No. 142 establishes a new method of testing  goodwill that could reduce the
fair value of a reporting unit below its carrying value. Any goodwill impairment
loss will be recorded in  operations.  The  Company  incurred  goodwill of $61.8
million as the result of our merger with Prize Energy  Corp.  on March 15, 2002.
The  adoption  of SFAS  No.  142 did not  have  an  impact  on our  consolidated
financial statements on January 1, 2002.

     SFAS No. 145 - SFAS No. 145  "Rescission of FASB  Statements No. 4, 44, and
64,  Amendment of FASB  Statement  No. 13, and  Technical  Corrections"  will be
effective for the Company  beginning  January 1, 2003.  The Statement  rescinds,
updates,  clarifies and simplifies various existing  accounting  pronouncements.
SFAS  No.  145  rescinds   SFAS  No.  4,   "Reporting   Gains  and  Losses  from
Extinguishment of Debt", which required all gains and losses from extinguishment
of debt to be aggregated and, if material,  classified as an extraordinary item,
net of related  income tax effect.  As a result,  SFAS No. 145 will  require the
Company to reclassify extraordinary items for debt extinguishment costs which do
not meet the criteria as described in APB Opinion No. 30 "Reporting  the Results
of  Operations  -  Reporting  the  Effects  of  Disposal  of  a  Business,   and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions",  as
additional interest expense. The Company plans to adopt this statement beginning
January 1, 2003.

     SFAS  No.  146 - In July  2002,  the FASB  issued  Statement  of  Financial
Accounting Standards No. 146 ("SFAS No. 146"),  "Accounting for Costs Associated
with Exit or Disposal  Activities." SFAS No. 146 requires companies to recognize
costs associated with exit or disposal  activities when they are incurred rather
than at the date of a  commitment  to an exit or  disposal  plan.  SFAS No.  146
supercedes  EITF Issue No. 94-3,  "Liability  Recognition  for Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs   Incurred  in  a   Restructuring)."   Statement  146  is  to  be  applied
prospectively to exit or disposal activities  initiated after December 31, 2002.
The Company has not yet determined the impact of this standard.

Item 3. Qualitative and Quantitative Disclosure About Market Risk

     The Company's  operations are exposed to market risks primarily as a result
of changes in  commodity  prices and  interest  rates.  The Company does not use
derivative financial instruments for speculative or trading purposes.

     Energy swap agreements.  The Company produces,  purchases,  and sells crude
oil,  natural  gas,  condensate,  and  natural  gas  liquids.  As a result,  the
Company's  financial  results can be  significantly  impacted as these commodity
prices  fluctuate  widely in response to changing  market forces and conditions.
The Company has previously engaged in oil and gas hedging activities and intends
to continue to consider various hedging arrangements to realize commodity prices
which it considers  favorable.  The Company  engages in futures  contracts  with
certain  of  its  oil  and  gas  production  through  various  contracts  ("Swap
Agreements").  The primary  objective of these  activities is to protect against
significant decreases in price during the term of the hedge.

     The Swap  Agreements  provide for separate  contracts  tied to the New York
Mercantile  Exchange  ("NYMEX")  light sweet oil and the Inside FERC natural gas
index price posting ("Index").  The Company has contracts which contain specific
contracted  prices  ("Swaps") that are settled  monthly based on the differences
between  the  contract  prices  and the  specified  Index  prices for each month
applied to the related  contract  volumes.  To the extent the Index  exceeds the
contract  price,  the Company  pays the spread,  and to the extent the  contract
price exceeds the Index price, the Company receives the spread. In addition, the
Company has combined  contracts which have agreed upon price floors and ceilings
("Costless  Collars").  To the  extent  the Index  price  exceeds  the  contract
ceiling,  the  Company  pays the spread  between the ceiling and the Index price
applied to the  related  contract  volumes.  To the extent  the  contract  floor
exceeds the Index,  the Company  receives the spread  between the contract floor
and the Index price applied to the related contract volumes.

     To the extent the Company  receives the spread  between the contract  floor
and the Index  price  applied to related  contract  volumes,  the  Company has a
credit  risk  in the  event  of  nonperformance  of  the  counter  party  to the
agreement. The Company does not anticipate any material impact to its results of
operations as a result of nonperformance by such parties.

     The Company is  contractually  obligated  to a  counter-party  to provide a
margin deposit in the form of cash or bank letter of credit should the aggregate
fair value of hedge contracts held with the counter-party exceed a predetermined
value.

                                       25

<PAGE>

     The following is a summary of the Company's open commodity  hedge contracts
as of June 30, 2002:

                                                               Weighted
                                    Weighted average       average ceiling
         Period    Volumes/day         floor price              price
        ---------------------------------------------------------------------
Oil       2002          8,500          $      23.35        $       25.74
Gas       2002         68,000          $       3.01        $        3.18
Oil       2003          1,000          $      21.25        $       21.25
Gas       2003        100,000          $       3.00        $        3.69
Gas       2004         15,000          $       3.00        $        4.20

     Based on future  market  prices at June 30,  2002,  the fair  value of open
contracts  to the Company was a liability  of $26.8  million.  If future  market
prices  were to  increase  10% from those in effect at June 30,  2002,  the fair
value of open contracts to the Company would be a liability of $41.2 million. If
future  market prices were to decline 10% from those in effect at June 30, 2002,
the fair value of the open  contracts  to the Company  would be a  liability  of
$11.1 million.

     The  Company  currently  intends  to  commit  no more than 75% of its daily
production on a Bcfe basis to such  arrangements at any point in time. A portion
of the  Company's  oil and  natural  gas  production  will be  subject  to price
fluctuations unless the Company enters into additional hedging transactions.

Interest Rate Swaps

     On August 9, 2001,  the Company  entered  into two  interest  rate swaps in
order to shift a portion of its variable rate bank debt to fixed rate debt.  The
following table reflects the terms of these swaps:

<TABLE>
<CAPTION>
<S>                             <C>                <C>                 <C>                <C>

           Type                Notional Amount     Termination Date     Pay Rate           Receive Rate
---------------------------------------------------------------------------------------------------------------
Pay Fixed/Receive Variable       $50,000,000           8/23/03         4.25% Fixed         3 month LIBOR
                                                                                           currently 1.90%
</TABLE>

     Based on  future  market  rates at June 30,  2002,  the fair  value of open
contracts to the Company was a liability of $1.2 million. If future market rates
were to increase  10% from those in effect at June 30,  2001,  the fair value of
open  contracts to the Company would be a liability of $1.1  million.  If future
market rates were to decline 10% from those in effect at June 30, 2001, the fair
value of the open contracts to the Company would be a liability of $1.3 million.

     Fixed and  Variable  Debt.  The  Company  uses fixed and  variable  debt to
partially finance budgeted expenditures.  These agreements expose the Company to
market risk related to changes in interest rates.

     The following  table  presents the carrying and fair value of the Company's
debt along with average  interest  rates.  Fair values are calculated as the net
present value of the expected cash flows of the  financial  instruments,  except
for the fixed rate Senior  Notes,  which are valued at their last  traded  value
before June 30, 2002.

<TABLE>
<CAPTION>
<S>                               <C>         <C>          <C>           <C>           <C>          <C>           <C>

Expected Maturity Dates             2002        2003-6        2006           2007           2012         Total     Fair Value
--------------------------------------------------------------------------------------------------------------------------------
     (in thousands)
Variable Rate Debt:
Bank Debt with Recourse (a).....  $     -      $      -     $ 218,104      $      -      $       -   $ 218,104      $  218,104
Bank Debt without Recourse (b)..  $     -      $  5,834     $       -      $      -      $       -   $   5,834      $    5,834
Capital Leases (c)..............  $ 1,935      $  8,498     $       -      $      -      $       -   $  10,433      $   10,433

Fixed Rate Debt:
Senior Notes (d)................ $      -      $      -     $       -      $ 29,466      $       -   $ 129,466      $  132,378
Senior Notes (e)................ $      -      $      -     $       -      $      -      $ 300,000   $ 300,000      $  309,000
Note Payable (f)................ $  1,320      $      -     $       -      $      -      $       -   $   1,320      $    1,320
Other........................... $     10      $      -     $       -      $      -      $       -   $      10      $       10

</TABLE>

-------------
(a) The average interest rate on the bank debt with recourse is 3.9%.
(b) The average interest rate on the bank debt without recourse is 6.5%.
(c) The average interest rate on the two capital leases is 5.3%
(d) The interest rate on the senior notes due 2007 is a fixed 10%.
(e) The interest rate on the senior notes due 2012 is a fixed 9.6%
(f) The interest rate on the note payable to vendors is 4.25%

                                       26

<PAGE>

                          PART II -- OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits
<TABLE>
<CAPTION>
<S>             <C>
Number           Description of Exhibit
-----------      -------------------------
3.1 & 4.1        Articles of Incorporation (Incorporated by reference to Registration Statement on Form S-18, File No.
                 33-30298-D)
3.2 & 4.2        Articles of Amendment to Articles of Incorporation (Incorporated by reference to Form 10-K for the year
                 ended December 31, 1990)
3.3 & 4.3        Articles of Amendment to Articles of Incorporation (Incorporated by reference to Registration Statement on
                 Form SB-2, File No. 33-66190)
3.4 & 4.4        Articles of Amendment to Articles of Incorporation (Incorporated by reference to Registration Statement on
                 Form S-3, File No. 333-30453)
3.5 & 4.5        Articles of Amendment to Articles of Incorporation (incorporated by reference to Form 10-K for the year
                 ended December 31, 2001)
3.6 & 4.6        By-Laws, as Amended (Incorporated by reference to Registration Statement on Form SB-2, File No. 33-66190)
3.7 & 4.7        Amendment to By-Laws (Incorporated by reference to Registration Statement on Form S-4, File No. 333-76774)
3.8 & 4.8        Certificate of Designation of 1996 Series A Preferred Stock (Incorporated by reference to Form 8-K dated
                 December 26, 1996, filed January 3, 1997)
3.9 & 4.9        Amendment to Certificate of Designations for 1996 Series A Convertible Preferred Stock (Incorporated by
                 reference to Registration Statement on Form S-3, File No. 333-30453)
4.10             Form of Warrant Agreement by and between Magnum Hunter Resources, Inc. and American Stock  Transfer
                 & Trust Company, as warrant agent (Incorporated by reference to Registration Statement on Form S-3, File
                 No. 333-82552)
4.11             Form of Warrant Agreement by and between Midland Resources, Inc. and Stock Transfer Company of
                 America, Inc., as warrant agent, dated November 1, 1990 (Incorporated by reference to Registration Statement
                 on Form S-3, File No. 333-83376)
4.12             Form of Warrant Agreement by and between Vista Energy Resources, Inc. and American Stock Transfer &
                 Trust Company, as warrant agent, dated October 28, 1998 (Incorporated by reference to Registration
                 Statement on Form S-3, File No. 333-83376)
4.13             Indenture dated May 29, 1997 between Magnum Hunter Resources, the subsidiary guarantors named therein
                 and First Union National Bank of North Carolina, as Trustee (Incorporated by reference to Registration
                 Statement on Form S-4, File No. 333-2290)
4.14             Supplemental Indenture dated January 27, 1999 between Magnum Hunter Resources, the subsidiary
                 guarantors named therein and First Union National Bank of North Carolina, as Trustee (Incorporated by
                 reference to Form 10-K for the fiscal year-end December 31, 1998 filed April 14, 1999)
4.15             Form of 10% Senior Note due 2007 (Incorporated by reference to Registration Statement on Form S-4, File No.
                 333-2290)
4.16             Indenture, dated March 15, 2002, 2002, between Magnum Hunter Resources, Inc., the subsidiary  guarantors
                 named therein and Bankers Trust Company, as Trustee (Incorporated by reference to Form 10-K for the year
                 ended December 31, 2001)
4.17             Shareholder Rights Agreement dated as of January 6, 1998 by and between Magnum Hunter Resources, Inc.
                 and Securities Transfer Corporation, as Rights Agent (Incorporated by reference to Form 8-K dated January 7,
                 1998, filed January 9, 1998)
10.1             Fourth Amended and Restated Credit Agreement, dated March 15, 2002, between Magnum Hunter
                 Resources, Inc. and Bankers Trust Company, et al  (Incorporated by reference to Form 10-K for the year ended
                 December 31, 2001)
10.2*            Amendment to Fourth Amended and Restated Credit Agreement.
10.3             Employment Agreement for Gary C. Evans (Incorporated by reference to Form 10-K for the fiscal year-end
                 December 31, 1999 filed March 30, 2000)
10.4             Employment Agreement for Richard R. Frazier (Incorporated by reference to Form 10-K for the fiscal year-end
                 December 31, 1999 filed March 30, 2000)
10.5             Employment Agreement for Chris Tong (Incorporated by reference to Form 10-K for the year ended December
                 31, 2001)
10.6             Employment Agreement for R. Douglas Cronk  (Incorporated by reference to Form 10-K for the year ended
                 December 31, 2001)

10.7             Employment Agreement for Charles Erwin  (Incorporated by reference to Form 10-K for the year ended
                 December 31, 2001)

</TABLE>

                                       27

<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
10.8             Purchase and Sale Agreement, dated February 27, 1997 among Burlington Resources Oil and Gas Company,
                 Glacier Park Company and Magnum Hunter Production, Inc. (Incorporated by reference to Form 8-K, dated
                 April 30, 1997, filed May 12, 1997)
10.9             Purchase and Sale Agreement between Magnum Hunter Resources, Inc. , NGTS, et al., dated December 17,
                 1997  (Incorporated by reference to Form 8-K, dated December 17, 1997, filed December 29, 1997)
10.10            Purchase and Sale Agreement dated November 25, 1998 between Magnum Hunter Production, Inc. and
                 Unocal Oil Company of California (Incorporated by reference to Form 10-K for the fiscal year-end December
                 31, 1998 filed April 14, 1999)
10.11            Agreement of Limited Partnership of Mallard Hunter, L.P., dated May 23, 2000 (Incorporated by reference to
                 Form 10-Q/A for the period ended June 30, 2000 filed November 30, 2000)
</TABLE>

* Filed herewith

(b) Reports on Form 8-K

     1) Form 8-K filed April 22, 2002 under Item 9.
     2) Form 8-K filed April 30, 2002 under Item 9.

                                       28

<PAGE>

                                    SIGNATURE

     In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

MAGNUM HUNTER RESOURCES, INC.

 By   /s/Gary C. Evans                                     August 14, 2002
      ----------------------------------
      Gary C. Evans
      Chairman, President and Chief Executive Officer



 By   /s/ Chris Tong                                       August 14, 2002
      ----------------------------------
      Chris Tong
      Senior Vice President and Chief Financial Officer




 By   /s/ David S. Krueger                                 August 14, 2002
      ----------------------------------
      David S. Krueger
      Vice President and Chief Accounting Officer




 By   /s/ Morgan F. Johnston                               August 14, 2002
      ----------------------------------
      Morgan F. Johnston
      Vice President, General Counsel and Secretary

<PAGE>
               Informational Addendum to Report on Form 10-Q Filed
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
           (Not Filed Pursuant to the Securities Exchange Act of 1934)


     Solely for the purpose of meeting the apparent  requirements of Section 906
of the  Sarbanes-Oxley  Act of 2002, and solely to the extent this certification
may be applicable to this quarterly report on Form 10-Q, the undersigned  hereby
certify that:

     (1) this quarterly report on Form 10-Q fully complies with the requirements
of Section  13(a) or 15(d) of the  Securities  Exchange Act of 1934, as amended;
and

     (2) the information  contained in this quarterly report on Form 10-Q fairly
presents,  in all material  respects,  the  financial  condition  and results of
operations of Magnum Hunter Resources, Inc.


/s/Gary C. Evans                            /s/Chris Tong
---------------------------------           -----------------------------------
Gary C. Evans, Chairman                     Chris Tong
President and Chief Executive Officer       Senior Vice President
(principal executive officer)               and Chief Financial Officer
Date:  August 14, 2002                      (principal financial officer)
                                            Date:  August 14, 2002