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 September 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 November 8, 2002: 68,358,749.

<PAGE>

                         PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements
-----------------------------

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)
<TABLE>
<CAPTION>
<S>                                                                             <C>                            <C>
                                                                                     September 30,                 December 31,
                                                                                          2002                         2001
                                                                                ---------------------------------------------------
                                         ASSETS                                      (Unaudited)
Current Assets
   Cash and cash equivalents....................................................   $       4,646                    $      2,755
   Restricted cash..............................................................             329                               -
   Accounts receivable
      Trade, net of allowance of $4,376 and $3,264 respectively.................          42,511                          14,251
      Due from affiliates.......................................................              50                             235
   Notes receivable.............................................................           2,450                               -
   Notes receivable from affiliate..............................................             300                             300
   Deferred tax asset...........................................................          12,500                             300
   Derivative assets, current...................................................             267                           5,045
   Prepaid and other............................................................          11,281                           2,220
                                                                                ---------------------------------------------------
      Total Current Assets                                                                74,334                          25,106
                                                                                ---------------------------------------------------
Property, Plant, and Equipment
   Oil and gas properties, full cost method
      Unproved..................................................................         153,995                          18,653
      Proved....................................................................       1,045,381                         556,766
   Pipelines....................................................................          33,861                          12,642
   Other property...............................................................           6,441                           3,640
                                                                                ---------------------------------------------------
   Total Property, Plant and Equipment..........................................       1,239,678                         591,701
      Accumulated depreciation, depletion, amortization and impairment..........        (234,810)                       (171,864)
                                                                                ---------------------------------------------------
   Net Property, Plant and Equipment............................................       1,004,868                         419,837
                                                                                ---------------------------------------------------
Other Assets
   Deposits and other assets....................................................          13,503                           4,420
   Investment in unconsolidated affiliates......................................           6,542                           5,022
   Goodwill.....................................................................          59,254                               -
                                                                                ---------------------------------------------------
Total Assets....................................................................   $   1,158,501                    $    454,385
                                                                                ===================================================
                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Trade payables and accrued liabilities.......................................   $      55,049                    $     41,446
   Suspended revenue payable....................................................           8,208                           2,154
   Derivative liabilities, current..............................................          30,965                             996
   Current maturities of long-term debt, with recourse..........................           1,945                              73
   Notes payable................................................................             443                           4,044
                                                                                ---------------------------------------------------
      Total Current Liabilities.................................................          96,610                          48,713
                                                                                ---------------------------------------------------
Long-Term Liabilities
   Long-term debt, with recourse, less current maturities.......................         602,382                         284,466
   Long-term debt, non recourse.................................................           5,834                               -
   Production payment liability.................................................             134                             203
   Derivative liabilities, noncurrent...........................................           7,345                           1,531
   Deferred income taxes payable................................................          94,836                           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;
         71,024,012 and 36,588,097 shares issued, respectively..................             142                              73
   Additional paid-in capital...................................................         419,861                         157,836
   Accumulated other comprehensive income (loss)................................         (22,651)                          1,632
   Accumulated deficit..........................................................         (24,193)                        (36,636)
   Receivable from stockholder..................................................            (442)                           (442)
   Unearned common stock in ESOP, at cost (837,952 and 468,652 shares,
         respectively)..........................................................          (5,259)                         (2,576)
                                                                                ---------------------------------------------------
                                                                                         367,459                         119,888
   Treasury stock, at cost (2,385,113 and 441,813 shares of common
         stock, respectively)...................................................         (16,099)                         (1,914)
                                                                                ---------------------------------------------------
   Total Stockholders' Equity...................................................         351,360                         117,974
                                                                                ---------------------------------------------------
Total Liabilities and Stockholders' Equity......................................   $   1,158,501                    $    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                   Nine Months Ended
                                                                         September 30,                       September 30,
                                                               --------------------------------------------------------------------
                                                                      2002           2001                2002             2001
                                                               --------------------------------------------------------------------
Operating Revenues:
  Oil and gas sales............................................  $     66,364    $     29,814        $   176,057      $   106,675
  Gas gathering, marketing and processing......................         5,456           3,775             13,634           15,707
  Oil field management services................................         1,013             273              2,456            1,394
                                                               --------------------------------------------------------------------
       Total Operating Revenues................................        72,833          33,862            192,147          123,776
                                                               --------------------------------------------------------------------
Operating Costs and Expenses:
  Oil and gas production lifting costs.........................        14,031           5,389             38,417           14,995
  Production taxes and other costs.............................         8,123           2,729             20,348            9,913
  Gas gathering, marketing and processing......................         4,026           3,083             10,172           14,086
  Oil field management services................................           728             201              1,547              955
  Depreciation, depletion and amortization.....................        24,309          12,218             62,947           29,319
  Gains on sale of assets......................................           (29)              -                (29)              (4)
  General and administrative...................................         2,872           2,040              9,619            5,817
                                                               --------------------------------------------------------------------
       Total Operating Costs and Expenses......................        54,060          25,660            143,021           75,081
                                                               --------------------------------------------------------------------
Operating Profit...............................................        18,773           8,202             49,126           48,695
  Equity in earnings of affiliate..............................           534             334                916            1,189
  Other income.................................................            93              67                258              224
  Provision for impairment of investments......................             -               -               (621)               -
  Other non-cash hedging adjustments...........................        (1,507)         (1,091)            (5,430)              563
  Interest expense.............................................       (13,474)         (4,340)           (34,649)          (14,328)
                                                               --------------------------------------------------------------------
Income before income tax benefit/(expense).....................         4,419           3,172              9,600           36,343
  Provision for income tax benefit/(expense)
       Current.................................................             -           1,885                  -                -
       Deferred................................................        (1,673)         (3,086)             3,464          (13,765)
                                                               --------------------------------------------------------------------
            Total provision for income tax benefit/(expense)...        (1,673)         (1,201)             3,464          (13,765)
                                                               --------------------------------------------------------------------
Income before extraordinary loss...............................         2,746           1,971             13,064           22,578
Extraordinary loss from early extinguishment of debt, net
    of income tax benefit of $379 in 2002 and $186 in 2001.....             -               -               (621)            (304)
                                                               --------------------------------------------------------------------
Net Income.....................................................  $      2,746    $      1,971        $    12,443      $    22,274
                                                               ====================================================================
Comprehensive Income:
  Net Income...................................................  $      2,746    $      1,971        $    12,443      $    22,274
Other Comprehensive Income (Loss), net of tax
  Cumulative effect on prior years of a change in accounting
    principle..................................................             -               -                  -           (1,757)
  Reclassification adjustment related to derivative contracts..         2,224            (380)             1,179            3,049
  Change in fair value of outstanding hedge positions..........        (7,952)             64            (25,975)            (211)
  Unamortized cost basis of purchased hedges...................           513               -                513                -
  Unrealized loss on investments...............................             -            (537)              (323)            (934)
  Reclassification adjustment for loss on investments..........             -               -                323                -
                                                               --------------------------------------------------------------------
Comprehensive Income (Loss)....................................  $     (2,469)   $      1,118        $   (11,840)     $    22,421
                                                               ====================================================================
Income per Common Share - Basic
  Income before Extraordinary Loss.............................  $       0.04    $       0.06        $      0.22      $      0.65
  Extraordinary Loss...........................................             -               -              (0.01)           (0.01)
                                                               --------------------------------------------------------------------
Income per Common Share - Basic................................  $       0.04    $       0.06        $      0.21      $      0.64
                                                               ====================================================================
Income per Common Share - Diluted
  Income Before Extraordinary Loss.............................  $       0.04    $       0.05        $      0.22      $      0.61
  Extraordinary Loss...........................................             -               -              (0.01)           (0.01)
                                                               --------------------------------------------------------------------
Income per Common Share - Diluted..............................  $       0.04    $       0.05        $      0.21      $      0.60
                                                               ====================================================================
Common Shares Used in Per Share Calculation
  Basic........................................................        67,679          34,897             59,411           34,790
                                                               ====================================================================
  Diluted......................................................        68,553          36,806             60,524           37,179
                                                               ====================================================================
</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 NINE MONTHS ENDED September 30, 2002
                                   (Unaudited)
                                 (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      $  1        36,588     $   73         (442)     $  (1,914)
  Common stock and warrants issued in Prize
     Energy Corp. merger, less fees................                         34,063         68
  Exercise of employees' common stock options......                            373          1
  Deferred tax benefit on exercise of employee
     stock options.................................
  Exercise of warrants.............................                              -          -
  Purchase of warrants.............................
  Purchase of treasury stock.......................                                                 (1,943)       (14,185)
  Net income.......................................
  Reclassification adjustment related to
    derivative contracts...........................
  Change in fair value of outstanding
    hedging positions..............................
  Unamortized cost basis of purchased
    hedges.........................................
  Unrealized loss on investments...................
  Reclassification adjustment for loss on
    investments....................................
  Loan to ESOP.....................................
                                                   ---------------------------------------------------------------------------
Balance at September 30, 2002......................  1,080      $  1        71,024     $  142       (2,385)     $ (16,099)
                                                   ===========================================================================
</TABLE>

<TABLE>
<CAPTION>
<S>                                             <C>            <C>             <C>            <C>          <C>          <C>
                                                                 Accumulated
                                                 Additional         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)    (469)       $  (2,576)
  Common stock and warrants issued in Prize
     Energy Corp. merger, less fees..............   260,454
  Exercise of employees' common stock options....     1,419
  Deferred tax benefit on exercise of employee
     stock options...............................       249
  Exercise of warrants...........................         1
  Purchase of warrants...........................       (98)
  Purchase of treasury stock.....................
  Net income.....................................                                    12,443
  Reclassification adjustment related to
    derivative contracts.........................                    1,179
  Change in fair value of outstanding
    hedging positions............................                  (25,975)
  Unamortized cost basis of purchased
    hedges.......................................                      513
  Unrealized loss on investments.................                     (323)
  Reclassification adjustment for loss on
    investments..................................                      323
  Loan to ESOP...................................                                                           (369)          (2,683)
                                                 ----------------------------------------------------------------------------------
Balance at September 30, 2002.................... $ 419,861     $  (22,651)     $   (24,193)    $  (442)    (838)       $  (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>
                                                                                             Nine Months Ended
                                                                                               September 30,
                                                                                ----------------------------------------------
                                                                                        2002                    2001
                                                                                ----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income....................................................................   $      12,443            $     22,274
  Adjustments to reconcile net income to cash provided by operating activities:
       Extraordinary loss.......................................................             621                     304
       Depreciation, depletion and amortization.................................          62,947                  29,319
       Amortization of financing fees...........................................           1,431                     961
       Imputed interest on debt due to merger...................................             108                       -
       Deferred income taxes....................................................          (3,464)                 13,765
       Equity in income of unconsolidated affiliate.............................            (916)                 (1,189)
       Gain on sale of assets...................................................             (29)                     (4)
       Provision for impairment of investments..................................             621                       -
       Other non-cash hedging adjustments.......................................           5,430                    (563)
       Changes in certain assets and liabilities:
            Accounts and notes receivable.......................................          (9,711)                 10,683
            Derivative assets...................................................           3,600                     208
            Refund (payment) of income taxes....................................              87                    (731)
            Other current assets................................................          (7,695)                 (1,384)
            Accounts payable and accrued liabilities............................         (26,196)                  5,515
                                                                                -------------------------------------------
  Net Cash Provided By Operating Activities.....................................          39,277                  79,158
                                                                                -------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sale of assets..................................................          56,592                     706
  Additions to property and equipment...........................................         (98,241)               (153,259)
  Cash paid in Prize merger, net of cash on hand in Prize.......................         (41,097)                      -
  Increase in note receivable...................................................          (2,450)                      -
  Payments received on note receivable..........................................               -                      66
  Distribution from unconsolidated affiliate....................................             161                   1,589
  Investment in unconsolidated affiliate........................................            (765)                 (2,000)
                                                                                -------------------------------------------
  Net Cash Used In Investing Activities.........................................         (85,800)               (152,898)
                                                                                -------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from the issuance of long-term debt..................................         610,683                 231,980
  Fees paid related to financing activities.....................................         (11,899)                   (825)
  Payments of principal on long-term debt and production payment................        (534,496)               (157,539)
  Loan made to stockholder......................................................            (300)                   (300)
  Repayment of note receivable from affiliate...................................             300                     360
  Loan made to ESOP.............................................................          (2,683)                   (749)
  Proceeds from issuance of common stock, net of offering costs.................           1,421                   3,248
  Purchase of warrants..........................................................             (98)                      -
  Purchase of treasury stock....................................................         (14,185)                 (1,015)
  (Increase)/decrease in restricted cash for payment of notes payable...........            (329)                  1,820
  Cash dividends paid...........................................................               -                    (169)
                                                                                -------------------------------------------
  Net Cash Provided By Financing Activities.....................................          48,414                  76,811
                                                                                -------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......................................           1,891                   3,071
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................           2,755                       9
                                                                                -------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................................   $       4,646            $      3,080
                                                                                ===========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash interest paid............................................................   $      40,222            $     10,613
                                                                                ===========================================
</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
                               September 30, 2002
                                   (Unaudited)

NOTE 1 - MANAGEMENT'S REPRESENTATION

     The  consolidated  balance  sheet of  Magnum  Hunter  Resources,  Inc.  and
subsidiaries  (the  "Company")  as  of  September  30,  2002,  the  consolidated
statements  of income and  comprehensive  income  for the three and nine  months
ended September 30, 2002 and 2001, the  consolidated  statement of stockholders'
equity for the nine  months  ended  September  30,  2002,  and the  consolidated
statements of cash flows for the nine months ended  September 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 September  30, 2002,  results of  operations,  changes in
stockholders' equity and cash flows for the three and nine 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 nine month periods ended September 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"),  a publicly  traded  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 nine months ended September 30,
2002,  include  three  months  and seven  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  since  Redhead  Energy,  Inc. is a  wholly-owned  subsidiary  of
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., a wholly-owned subsidiary of Magnum Hunter Resources, Inc.

     Effective  September  1, 2002,  the Company sold  approximately  41 billion
cubic feet  equivalent  of proved  producing  reserves to a new private  limited
partnership  in which the  Company  is the  general  partner  with a 5%  initial
ownership  interest.  The sales  proceeds of $49.0 million ($46.6 million to the
Company) were used to reduce bank debt. Also,  effective  September 1, 2002, the
Company sold approximately 7.1 billion cubic feet equivalent of proved producing
reserves at various  auctions for $8.0 million,  the proceeds of which were used
to reduce  bank debt.  Total  proceeds  from the sale of oil and gas  properties
through  September 30, 2002, have been $56.6 million,  of which $53.9 million is
attributable to properties acquired in the Prize merger. These sales are part of
the  Company's  plan to sell up to $95  million of  non-core  oil and gas assets
during fiscal 2002,  with proceeds used to reduce  overall  indebtedness  as the
Company seeks to improve its debt-to-equity ratio and streamline its operations.
Additional  non-core properties are expected to be sold in the fourth quarter of
2002 and the first quarter of 2003.

     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

                                        5

<PAGE>

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

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,  a publicly  traded
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 the 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 price  allocation,  which will be made on or before March 31,
2003,  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 (000's) as of September 30, 2002:

<TABLE>
<CAPTION>
<S>                                                                            <C>
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............................................         (145,929)
                                                                               -------------------
     Excess purchase price.....................................................          185,513
     Adjustment of proved oil and gas properties to fair value.................          (58,223)
     Adjustment of unproved oil and gas properties to fair value...............         (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..........................  $        63,210
                                                                               ===================
</TABLE>

     During  the third  quarter of 2002,  the  Company  divested  of a number of
properties  that were acquired in the Prize merger.  Total proceeds  received on
the Prize divestitures were approximately $53.9 million. In accordance with SFAS
142, the Company  attached $4.0 million of goodwill to the divested  properties.
Proceeds (net of goodwill) of approximately

                                        6

<PAGE>

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

$49.9  million  were  applied  against  the full cost pool.  The  remaining
goodwill  balance at September  30, 2002 was $59.3  million.  Also in accordance
with SFAS 142, the Company performed a goodwill impairment test at September 30,
2002. Test results showed no impairment of goodwill.

     The following summary,  prepared on a pro forma basis, presents the results
of operations for the three and nine month periods ended  September 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.

                         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                   Nine Months Ended
                                                           September 30,                       September 30,
                                              -------------------------------------------------------------------------
                                                     2002               2001              2002                2001
                                              -------------------------------------------------------------------------
Total Operating Revenues......................    $   72,833        $    68,548      $    219,151        $    269,488
Total Operating Costs and Expenses............       (54,060)           (51,313)         (165,296)           (176,170)
                                              -------------------------------------------------------------------------
Operating Profit..............................        18,773             17,235            53,855              93,318
Interest expense and other....................       (14,354)           (13,719)          (44,790)            (30,345)
                                              -------------------------------------------------------------------------
Income before income tax......................         4,419              3,516             9,065              62,973
Benefit (Provision) for income tax............        (1,673)            (1,331)            3,782             (23,851)
Extraordinary loss from early
     extinguishment of debt...................             -                  -              (621)               (304)
                                              -------------------------------------------------------------------------
Net Income                                        $    2,746        $     2,185      $     12,226        $     38,818
                                              =========================================================================
Net Income Per Common Share
     Basic....................................    $     0.04        $      0.03      $       0.18        $       0.56
                                              =========================================================================
     Diluted..................................    $     0.04        $      0.03      $       0.18        $       0.54
                                              =========================================================================

</TABLE>

                                        7

<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                               September 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
                                                  ----------------------------------------------------------------------------------
                                                            September 30, 2002                     September 30, 2001
                                                  ----------------------------------------------------------------------------------
                                                                            Per Share                                    Per Share
                                                     Income     Shares       Amount          Income        Shares          Amount
-----------------------------------------------------------------------------------------------------------------------------------
                                                                     (Thousands, except per share amounts)
Basic EPS
     Income available to common
          stockholders............................ $    2,746   67,679      $    0.04      $     1,971     34,897        $   0.06
                                                                            =========                                    =========
Effect of Dilutive Securities
     Warrants.....................................                 -0-                             -0-        156
     Options......................................                 874                             -0-      1,753
                                                  ---------------------                    -----------------------
Diluted EPS
     Income available to common stockholders
          and assumed conversions................. $    2,746   68,553      $    0.04      $     1,971     36,806        $   0.05
                                                  =================================================================================
</TABLE>


<TABLE>
<CAPTION>
<S>                                          <C>          <C>           <C>              <C>            <C>          <C>
                                                                             Nine Months Ended
                                             -------------------------------------------------------------------------------------
                                                        September 30, 2002                         September 30, 2001
----------------------------------------------------------------------------------------------------------------------------------
                                                                   (Thousands, except per share amounts)
                                                                           Per Share                                   Per Share
                                             Income          Shares          Amount           Income      Shares        Amount
                                             -------------------------------------------------------------------------------------
     Income before extraordinary loss........ $   13,064                  $    0.22        $  22,578                   $  0.65
     Less: Extraordinary loss................       (621)                     (0.01)            (304)                    (0.01)
                                             ------------                 ---------------------------                  ---------
Basic EPS
     Income available to common
          stockholders....................... $   12,443     59,411       $    0.21        $  22,274      34,790       $  0.64
                                                                          ==========                                   ========
Effect of Dilutive Securities
     Warrants................................        -0-         46                              -0-         222
     Options.................................        -0-      1,067                              -0-       2,167
                                             ----------------------                             -----------------
Diluted EPS
     Income available to common stockholders
          and assumed conversions............ $   12,443     60,524       $    0.21        $  22,274      37,179       $  0.60
     Add Back: Extraordinary loss............        621                       0.01              304                      0.01
                                             -------------------------------------------------------------------------------------
     Income before Extraordinary loss........ $   13,064     60,524       $    0.22        $  22,578      37,179       $  0.61
                                             =====================================================================================
</TABLE>



     At September 30, 2002,  warrants  representing  12,091,294 shares of common
stock  and  options   representing   6,791,534   shares  of  common  stock  were
outstanding.  The total  outstanding  warrants  includes  the  remainder  of the
conversion of Prize warrants in connection with the merger into Magnum Hunter 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.  During the three months ended  September 30, 2002, the Company issued
1,836,250  stock options to its  employees  and directors at a weighted  average
exercise price of $5.37 per share. At September 30, 2001, warrants  representing
644,749 shares of common

                                        8

<PAGE>

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

stock and  options  representing  4,086,500  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 nine month  periods ended
September  30,  2002,   12,091,394   shares  and  11,661,563   shares  of  stock
representing warrants,  respectively,  and 3,289,600 shares and 3,286,767 shares
of stock  representing  options,  respectively,  were  excluded from the diluted
earnings per share calculations  because the exercise price exceeded the average
market price of the Company's  stock for these  periods.  For the three and nine
month periods ended September 30, 2001, no shares of stock representing warrants
and 45,000 shares and 31,667 shares of stock representing options, respectively,
were  excluded  from the diluted  earnings  per share  calculations  because the
exercise  price  exceeded the average  market price of the  Company's  stock for
these periods.

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 raised
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.  In
connection  with the  divestiture  of certain oil and gas  properties  described
below, the borrowing base was reduced to $250 million on September 3, 2002.

     The amended  Facility was treated as a new credit facility 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 September 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 had been  earlier  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 LIBOR,  currently  yielding a cost of approximately  5.2%
per annum.  For financial  statement  reporting  purposes,  this transaction was
accounted for as a capital lease and has been 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.

                                        9

<PAGE>

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

     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 September 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. On September 12, 2002, the terms of the credit  agreement were amended
to allow for additional  advances of approximately $1.2 million.  Canvasback may
use the  additional  availability  of funds to purchase  incremental  10% Senior
Notes of the Company or to make an advance or to pay a dividend to an affiliate.
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
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 twelve crude oil derivatives,  sixteen natural
gas  derivatives,  and two interest rate  derivatives on September 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.  Hedge
ineffectiveness on the cash-flow hedges is recorded in earnings.

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

Derivative Assets
-----------------------
Natural gas collars.........................        $       267
                                            ---------------------
Total derivative assets.....................        $       267
                                            ---------------------
Derivative Liabilities
-----------------------
Natural gas collars.........................        $    13,390
Natural gas swaps...........................             16,831
Crude oil collars...........................              2,608
Crude oil swaps.............................              4,141
Interest rate swaps.........................              1,340
                                            ---------------------
Total derivative liabilities................        $    38,310
                                            ---------------------
Net derivative liabilities..................        $    38,043
                                            ---------------------


     For the three and nine month periods ended  September 30, 2002,  the income
statement includes a non-cash hedging  ineffectiveness loss of $245 thousand and
$622  thousand,  respectively,   related  to  the  crude  oil  and  natural  gas
derivatives and a non-cash loss of $1.3 million and $4.8 million,  respectively,
related to the amortization of hedge contracts acquired in the Prize merger. The
remaining amortization amounts relating to hedge contracts acquired in the Prize
merger that will be reclassified  into the income statement in years 2002, 2003,
and 2004 are a $1.3 million  loss,  $1.3  million  gain and $0.8  million  gain,
respectively.  It is  estimated  at  this  time  that  $18.7  million  of  other
comprehensive  loss will be reclassified  into the income  statement  during the
next 12 months.

                                       10

<PAGE>

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

NOTE 6 - INCOME TAXES

     The  Company  realized  a tax  benefit of $3.5  million  for the nine month
period ended  September  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  September  30,  2002,  the  Company  had a deferred  tax asset of $12.5
million and a deferred tax  liability of $94.8  million,  for a net deferred tax
liability of $82.3 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 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.  Subsequent to
September  30, 2002,  the Company  received a refund from the  Internal  Revenue
Service of approximately $3.1 million relating to this asset. Additional refunds
are anticipated upon filing of Prize's tax return for fiscal 2002.

NOTE 7 - SEGMENT DATA

     The Company has three reportable  segments.  The Exploration and Production
segment is engaged in exploratory and  developmental  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.

                                       11

<PAGE>

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

     Segment data for the periods ended  September 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 September 30, 2002:   Production       Processing     Services     All Other    Elimination    Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers........... $     66,364     $  5,456      $  1,013      $        -                  $      72,833
Intersegment revenues.....................                     3,480         4,199               -      (7,679)
Depreciation, depletion and amortization..       23,360          576           133             240                         24,309

Segment profit (loss).....................       20,848          928         1,447          (4,450)                        18,773
Equity in earnings of affiliates..........                                                     534                            534
Interest expense..........................                                                 (13,474)                       (13,474)
Other income (expense)....................                                                  (1,414)                        (1,414)
                                                                                                                  -----------------
Income before income taxes................                                                                          $       4,419
Provision for income tax (expense)........                                                  (1,674)                        (1,673)
                                                                                                                  -----------------
Net income................................                                                                          $       2,746
                                                                                                                  =================
Capital expenditures (net of asset sales). $     (9,383)    $     47      $    125      $     329                   $      (8,882)
</TABLE>


<TABLE>
<CAPTION>
<S>                                      <C>             <C>                <C>         <C>           <C>           <C>
                                                          Gas Gathering,
                                          Exploration &    Marketing &       Oil Field
  Three Months Ended September 30, 2001:   Production       Processing        Services     All Other   Elimination   Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers........... $    29,814       $      3,775    $    273    $        -                   $     33,862
Intersegment revenues.....................                          3,373       1,598             -      (4,971)                 -
Depreciation, depletion and amortization..      11,891                222         100             5                         12,218

Segment profit (loss).....................       9,806                480      (1,201)         (883)                         8,202
Equity in earnings of affiliates..........                                                      334                            334
Interest expense..........................                                                   (4,340)                        (4,340)
Other income..............................                                                   (1,024)                        (1,024)
                                                                                                                   ----------------
Income before income taxes................                                                                           $       3,172
Provision for income tax expense..........                                                   (1,201)                        (1,201)
Extraordinary loss........................                                                                                       -
                                                                                                                   ----------------
Net income................................                                                                           $       1,971
                                                                                                                   -===============
Capital expenditures (net of asset sales). $    67,878      $          48    $    103    $        -                   $     68,029
</TABLE>


                                       12

<PAGE>

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

<TABLE>
<CAPTION>
<S>                                          <C>              <C>              <C>          <C>          <C>         <C>
                                                               Gas Gathering,
                                              Exploration &     Marketing &     Oil Field
  Nine Months Ended September 30, 2002:        Production        Processing      Services     All Other   Elimination Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers............... $  176,057       $  13,634       $  2,456     $        -               $  192,147
Intersegment revenues.........................                      9,440         10,594              -     (20,034)           -
Depreciation, depletion and amortization......     60,420           1,490            371            666                   62,947

Segment profit (loss).........................     56,871           1,986            539        (10,270)                  49,126
Equity in earnings of affiliates..............                                                      916                      916
Interest expense..............................                                                  (34,649)                 (34,649)
Other income (expense)........................                                                   (5,793)                  (5,793)
                                                                                                                     -------------
Income before income taxes....................                                                                        $    9,600
Provision for income tax benefit..............                                                    3,464                    3,464
Extraordinary loss............................                                                     (621)                    (621)
                                                                                                                     -------------
Net income....................................                                                                        $   12,443
                                                                                                                     =============
Capital expenditures (net of asset sales)..... $  623,957       $  21,219       $    777     $   2,024                $  647,977
</TABLE>


<TABLE>
<CAPTION>
<S>                                      <C>               <C>               <C>           <C>        <C>           <C>
                                                            Gas Gathering,
                                           Exploration &     Marketing &      Oil Field
  Nine Months Ended September 30, 2001:     Production        Processing       Services     All Other  Elimination   Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers............ $    106,675     $      15,707     $  1,394     $      -                 $   123,776
Intersegment revenues......................                         16,191        4,570            -     (20,761)              -
Depreciation, depletion and amortization...       28,350               662          293           14                      29,319

Segment profit (loss)......................       53,421               964       (2,689)      (3,001)                     48,695
Equity in earnings of affiliates...........                                                    1,189                       1,189
Interest expense...........................                                                  (14,328)                    (14,328)
Other income...............................                                                      787                         787
                                                                                                                    ---------------
Income before income taxes.................                                                                          $    36,343
Provision for income tax (expense).........                                                  (13,765)                    (13,765)
Extraordinary loss.........................                                                     (304)                       (304)
                                                                                                                    ---------------
Net income.................................                                                                          $    22,274
                                                                                                                    ===============
Capital expenditures (net of asset sales).. $    151,367     $          61     $    274     $    855                 $   152,557
</TABLE>


<TABLE>
<CAPTION>
<S>                              <C>                <C>                  <C>            <C>             <C>           <C>
                                                      Gas Gathering,
                                    Exploration &      Marketing &         Oil Field
As of September 30, 2002             Production         Processing         Services      All Other       Elimination   Consolidated
-----------------------------------------------------------------------------------------------------------------------------------
Segment assets....................   $  1,081,191      $     37,023        $ 17,401      $  22,886                     $ 1,158,501
Equity subsidiary investments.....                                                       $   6,542                     $     6,542

As of September 30, 2001
----------------------------------
Segment assets....................   $    372,213      $     16,749        $ 31,961      $   7,150                     $   428,073
Equity subsidiary investments.....                                                       $   9,654                     $     9,654
</TABLE>

                                       13

<PAGE>

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

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 September 30, 2002 and December
31, 2001, and for the three and nine month periods ended  September 30, 2002 and
2001, was as follows:

                 Magnum Hunter Resources, Inc. and Subsidiaries
                     Condensed Consolidating Balance Sheets

                                                     September 30, 2002
<TABLE>
<CAPTION>
<S>                                  <C>                      <C>                  <C>                  <C>
--------------------------------------------------------------------------------------------------------------------------------
                                             Magnum Hunter             Canvasback                                Magnum Hunter
                                            Resources, Inc.            Energy, Inc.                             Resources, Inc.
Amounts in Thousands                       and Guarantor Subs        (Non Guarantor)        Eliminations          Consolidated
--------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets.......................        $        76,736         $         4,440      $      (6,842)        $       74,334
Property and equipment
   (using full cost accounting)......                998,081                   6,787                  -              1,004,868
Investment in subsidiaries
   (equity method)                                    15,735                       -            (15,735)                     -
Investment in Parent.................                      -                  28,470            (28,470)                     -
Other assets.........................                 78,499                     800                  -                 79,299
                                           =====================================================================================
   Total assets......................        $     1,169,051         $        40,497       $    (51,047)        $    1,158,501
                                           =====================================================================================

LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities......................... $        96,543         $         6,909       $     (6,842)        $       96,610
Long-term liabilities.......................         703,212                  17,853            (10,534)               710,531
Stockholders' equity........................         369,296                  15,735            (33,671)               351,360
                                            =====================================================================================
  Total liabilities and stockholders' equity $     1,169,051         $        40,497       $    (51,047)        $    1,158,501
                                            =====================================================================================
</TABLE>

                                       14

<PAGE>
                MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                               September 30, 2002
                                   (Unaudited)

                                               December 31, 2001
<TABLE>
<CAPTION>
<S>                                             <C>                     <C>                 <C>                <C>
------------------------------------------------------------------------------------------------------------------------------------
                                                    Magnum Hunter            Bluebird                             Magnum Hunter
                                                   Resources, Inc.         Energy, Inc.                          Resources, Inc.
Amounts in Thousands                              and Guarantor Subs     (Non Guarantor)      Eliminations        Consolidated
---------------------------------------------------------------------------------------------------------------------------------
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
Stockholders' equity............................           129,024             14,963             (26,013)            117,974
                                                ---------------------------------------------------------------------------------
   Total liabilities and stockholders' equity...   $       458,321        $    26,777          $  (30,713)        $   454,385
                                                =================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                      For the Three Months Ended September 30, 2002
<S>                                          <C>                   <C>                <C>                  <C>
----------------------------------------------------------------------------------------------------------------------------
                                               Magnum Hunter           Canvasback                             Magnum Hunter
                                              Resources, Inc.         Energy, Inc.                           Resources, Inc.
Amounts in Thousands                         and Guarantor Subs     (Non Guarantor)      Eliminations         Consolidated
----------------------------------------------------------------------------------------------------------------------------
Revenues....................................   $      72,138         $       695         $        -         $     72,833
Expenses....................................          68,199                 215                  -               68,414
                                            --------------------------------------------------------------------------------
Income before                                          3,939                 480                  -                4,419
   Equity in net earnings of subsidiary.....             298                   -               (298)                   -
                                            --------------------------------------------------------------------------------
Income before income taxes..................           4,237                 480               (298)               4,419
Income tax provision                                  (1,491)               (182)                 -               (1,673)
                                            --------------------------------------------------------------------------------
   Net income...............................   $       2,746         $       298         $     (298)        $      2,746
                                            -===============================================================================
</TABLE>



                                  For the Three Months Ended September 30, 2001
<TABLE>
<CAPTION>
<S>                                            <C>                  <C>               <C>          <C>
----------------------------------------------------------------------------------------------------------------------
                                                Magnum Hunter           Bluebird                      Magnum Hunter
                                               Resources, Inc.        Energy, Inc.                   Resources, Inc.
Amounts in Thousands                          and Guarantor Subs    (Non Guarantor)   Eliminations    Consolidated
----------------------------------------------------------------------------------------------------------------------
Revenues.....................................    $     33,298          $    570        $    (6)       $      33,862
Expenses.....................................          30,250               446             (6)              30,690
                                             -------------------------------------------------------------------------
Income before                                           3,048               124              -                3,172
   Equity in net earnings of subsidiary......              77                 -            (77)                   -
                                             -------------------------------------------------------------------------
Income before income taxes...................           3,125               124            (77)               3,172
Income tax provision.........................          (1,154)              (47)             -               (1,201)
                                             -------------------------------------------------------------------------
   Net income................................    $      1,971          $     77        $   (77)       $       1,971
                                             =========================================================================
</TABLE>

                                       15

<page>
                MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                               September 30, 2002
                                   (Unaudited)

<TABLE>
<CAPTION>
                                       For the Nine Months Ended September 30, 2002
<S>                                            <C>                     <C>               <C>                 <C>
------------------------------------------------------------------------------------------------------------------------------
                                                 Magnum Hunter            Canvasback                           Magnum Hunter
                                                Resources, Inc.          Energy, Inc.                         Resources, Inc.
Amounts in Thousands                           and Guarantor Subs      (Non Guarantor)     Eliminations       Consolidated
------------------------------------------------------------------------------------------------------------------------------
Revenues......................................   $     190,783          $    1,364         $       -           $   192,147
Expenses......................................         182,070                 477                 -               182,547
                                              --------------------------------------------------------------------------------
Income before                                            8,713                 887                 -                 9,600
   Equity in net earnings of subsidiary.......             551                   -              (551)                    -
                                              --------------------------------------------------------------------------------
Income before income taxes....................           9,264                 887              (551)                9,600
Income tax benefit (expense) provision........           3,800                (336)                -                 3,464
                                              --------------------------------------------------------------------------------
Income before extraordinary loss..............          13,064                 551              (551)               13,064
Extraordinary loss............................            (621)                  -                 -                  (621)
                                              --------------------------------------------------------------------------------
   Net income.................................   $      12,443          $      551         $    (551)          $    12,443
                                              ================================================================================
</TABLE>

                           For the Nine Months Ended September 30, 2001
<TABLE>
<CAPTION>
<S>                                        <C>                <C>               <C>              <C>
--------------------------------------------------------------------------------------------------------------------
                                            Magnum Hunter          Bluebird                         Magnum Hunter
                                           Resources, Inc.       Energy, Inc.                      Resources, Inc.
Amounts in Thousands                      and Guarantor Subs   (Non Guarantor)     Eliminations     Consolidated
--------------------------------------------------------------------------------------------------------------------
Revenues.................................     $   99,823        $      24,160      $      (207)       $    123,776
Expenses.................................         76,373               11,267             (207)             87,433
                                         ---------------------------------------------------------------------------
Income before                                     23,450               12,893                -              36,343
   Equity in net earnings of subsidiary..          8,010                    -           (8,010)                  -
                                         ---------------------------------------------------------------------------
Income before income taxes...............         31,460               12,893           (8,010)             36,343
Income tax provision.....................         (8,882)              (4,883)               -             (13,765)
                                         ---------------------------------------------------------------------------
Income before extraordinary loss.........         22,578                8,010           (8,010)             22,578
Extraordinary loss.......................           (304)                   -                -                (304)
                                         ---------------------------------------------------------------------------
   Net income............................     $   22,274        $       8,010      $    (8,010)       $     22,274
                                         ===========================================================================
</TABLE>

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

                                   For the Nine Months Ended September 30, 2002
<TABLE>
<CAPTION>
<S>                                       <C>                       <C>                <C>               <C>
------------------------------------------------------------------------------------------------------------------------------
                                               Magnum Hunter         Canvasback                             Magnum Hunter
                                              Resources, Inc.        Energy, Inc.                           Resources, Inc.
Amounts in Thousands                         and Guarantor Subs    (Non Guarantor)      Eliminations         Consolidated
------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities.......   $        30,053         $     9,224          $         -         $      39,277
Cash flow from investing activities.......           (82,633)             (3,167)                   -               (85,800)
Cash flow from financing activities.......            55,569              (6,826)                (329)               48,414
                                          ------------------------------------------------------------------------------------
Net increase (decrease) in cash...........             2,989                (769)                (329)                1,891
Cash at beginning of period...............               730               2,025                    -                 2,755
                                          ------------------------------------------------------------------------------------
Cash at end of period.....................   $         3,719         $     1,256          $      (329)        $       4,646
                                          ====================================================================================
</TABLE>


                                       16

<PAGE>

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

                                   For the Nine Months Ended September 30, 2001
<TABLE>
<CAPTION>
<S>                                     <C>                      <C>                    <C>                  <C>
---------------------------------------------------------------------------------------------------------------------------------
                                         Magnum Hunter                Bluebird                                  Magnum Hunter
                                        Resources, Inc.             Energy, Inc.                               Resources, Inc.
Amounts in Thousands                   and Guarantor Subs         (Non Guarantor)           Eliminations         Consolidated
---------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities....  $         65,397         $       13,761         $            -         $     79,158
Cash flow from investing activities....          (175,127)                40,807                (18,578)            (152,898)
Cash flow from financial activities....           112,942                (54,709)                18,578               76,811
                                       ------------------------------------------------------------------------------------------
Net increase (decrease) in cash........             3,212                   (141)                     -                3,071
Cash at beginning of period............            (1,811)                 1,820                      -                    9
                                       ------------------------------------------------------------------------------------------
Cash at end of period..................  $          1,401         $        1,679         $            -         $      3,080
                                       ==========================================================================================
</TABLE>

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  recorded  goodwill of $63.2
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. 143 - SFAS No. 143, "Accounting for Asset Retirement Obligations",
will be  effective  for the  Company  beginning  January 1,  2003.  SFAS No. 143
requires the recognition of a fair value liability for any retirement obligation
associated with long-lived assets. The offset to any liability recorded is added
to the recorded asset where the additional  amount is depreciated  over the same
period  as  the  long-lived  asset  for  which  the  retirement   obligation  is
established.  SFAS No. 143 also requires additional  disclosures.  We are in the
process  of  evaluating  the  impact of the  provisions  of SFAS No.  143 to our
existing operations.

     SFAS No. 144 - SFAS No. 144,  "Accounting for the Impairment or Disposal of
Long-Lived Assets",  became effective for the Company beginning January 1, 2002.
SFAS No. 144  establishes  a single  accounting  model,  based on the  framework
established in SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for  Long-Lived  Assets to Be  Disposed  Of",  for  long-lived  assets to be
disposed of by sale and resolves  significant  implementation  issues related to
SFAS No. 121.

     SFAS No. 145 - SFAS No. 145  "Recission 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.

                                       17

<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 fiscal 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 our  critical  accounting  policies  for the
three and nine month periods ended September 30, 2002, except for accounting for
goodwill. SFAS No. 142, "Goodwill and Other Intangible Assets", became effective
for the Company  beginning  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 $63.2
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"),  a publicly  traded  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 nine month
periods  ended  September  30,  2002,  include  three months and seven 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,  exploitation,  and
development  activities.  Fluctuations  in oil and gas  prices  have  also had a
significant impact on our 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                Nine Months Ended
                                                                   September 30,                    September 30,
                                                         ------------------------------------------------------------------
Oil and Gas Operations                                      2002             2001             2002               2001
---------------------------------------------------------------------------------------------------------------------------
Reported Production:
   Oil (Mbbls)...........................................     1,100              392            2,902              1,019
   Gas (MMcf)............................................    13,164            6,821           35,663             18,106
   Oil and Gas (Mmcfe)...................................    19,764            9,174           53,076             24,221
   Equivalent Daily Rate (Mmcfe/day).....................     214.8             99.7            194.4               88.7
Average Sale Prices (after hedging)
   Oil (per Bbl)......................................... $   25.14        $   25.07         $  23.90         $    25.79
   Gas (per Mcf).........................................      2.94             2.93             2.99               4.44
   Oil and Gas (per Mcfe)................................      3.36             3.25             3.32               4.40
Effect of hedging activities (per Mcfe)..................     (0.10)            0.18             0.07               0.03
Lease Operating Expense (per Mcfe)
   Lifting costs......................................... $    0.71        $    0.59         $   0.73         $     0.62
   Production tax and other costs........................      0.41             0.30             0.38               0.41
Gross margin (per Mcfe).................................. $    2.24        $    2.36         $   2.21         $     3.37
</TABLE>

                                       18

<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>            <C>            <C>              <C>
                                                               Three Months Ended              Nine Months Ended
                                                                  September 30,                  September 30,
                                                         ---------------------------------------------------------------
Gas Gathering, Marketing and Processing  Operations              2002           2001           2002           2001
------------------------------------------------------------------------------------------------------------------------
Throughput Volumes (Mcf per day)
   Gathering.............................................         15,673       15,525          15,381        16,111
   Processing............................................         25,926       14,311          21,852        13,637
Gross margin (in thousands)..............................     $    1,430    $     692      $    3,462    $    1,621
   Gathering (per Mcf throughput)........................     $     0.17    $    0.19      $     0.14    $     0.08
   Processing (per Mcf throughput).......................     $     0.49    $    0.32      $     0.44    $     0.34
</TABLE>

Period-to-Period Comparison

For the Three Months Ended September 30, 2002 and 2001

     We reported net income of $2.7 million for the three months ended September
30, 2002, as compared to net income of $2.0 million for the same period in 2001.
Total operating  revenues  increased 115% to $72.8 million and operating  profit
increased 129% to $18.8 million in 2002, due primarily to the Prize merger. Both
basic and diluted earnings per share were $0.04 in the 2002 quarter versus basic
and diluted  earnings  per share of $0.06 and $0.05,  respectively,  in the 2001
quarter.

Oil and Gas Operations:

     For the three months ended  September 30, 2002, we reported oil  production
of 1.1 million  barrels and gas  production  of 13.2 billion  cubic feet,  which
represents  an  increase of 181% in oil  produced  and an increase of 93% 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 115%
to 214.8 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 $17.8 million, or 181%, in the third quarter of 2002
compared to the same period in 2001, due to production  gains of 707 Mbbls.  Oil
prices were essentially flat at $25.14 in 2002,  compared to $25.07 for the same
period in 2001.  Gas  revenues  increased  $18.7  million,  or 94%, in the third
quarter of 2002  versus the same period in 2001 due to  production  gains of 6.3
Bcf. Gas prices were essentially flat at $2.94 in 2002 compared to $2.93 for the
same period in 2001.

     From time to time,  the  Company  enters  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 $1.83 per barrel and had no effect on the average  price we
received  for  gas.   During  the  third  quarter  of  2002,   the  Company  had
approximately  60.0  Mmcf/d  hedged  through  fixed  price swaps with a weighted
average price of $2.87 per MMbtu and  approximately  8.0 Mmcf/d  hedged  through
cost-less  collars with a weighted  average floor price of $3.99 per MMbtu and a
weighted  average ceiling price of $5.45 per MMbtu.  Approximately  48% of third
quarter 2002 natural gas production  was hedged.  On the crude side, the Company
had approximately  5,000 Bbls/d hedged through fixed price swaps with a weighted
average price of $25.27 per barrel and approximately 3,800 Bbls/d hedged through
cost-less collars with a weighted average floor price of $21.00 per barrel and a
weighted average ceiling price of $26.70 per barrel.  Approximately 74% of third
quarter 2002 crude oil  production  was hedged.  For the fourth quarter of 2002,
the  Company has 60.0 MMcf/d  hedged  through  fixed price swaps with a weighted
average price of $2.87 per MMbtu and  approximately  8.0 MMcf/d  hedged  through
cost-less  collars with a weighted  average floor price of $4.07 per MMbtu and a
weighted average ceiling price of $5.52 per MMbtu. In addition,  the Company has
hedged 5,000 Bbls/d of fourth quarter 2002 crude production  through fixed price
swaps with a weighted average price of $25.27 per barrel and 4,500 Bbls/d hedged
through  cost-less  collars  with a weighted  average  floor price of $21.27 per
barrel and a weighted average ceiling price of $26.79 per barrel.

     Lease operating expenses consist of two primary  components,  lifting costs
and  production  tax and other costs.  For the 2002 period,  lifting  costs were
$14.0  million  versus  $5.4  million in the 2001  period,  an increase of 160%.
Production  taxes and other costs were $8.1  million in the 2002  period  versus
$2.7  million in the 2001  period,  an increase  of 198%.  Both  increases  were
primarily  attributable to the Prize merger. For the 2002 period, lifting costs,
on a unit of production basis,

                                       19

<PAGE>

were $0.71 per Mcfe as  compared to $0.59 per Mcfe in the 2001  period,  an
increase of 20% due to an increase in workover and  remedial  expense as well as
higher  recurring costs  associated with oil production  acquired with the Prize
properties.  Production  tax and  other  costs  were  $0.41 per Mcfe in the 2002
period  compared to $0.30 per Mcfe in the  2001period,  an increase of 37%.  The
increase is primarily due to higher  production  taxes associated with the Prize
properties which have a higher production mix of onshore properties.

     Our gross  margin for oil and gas  operations  (oil and gas  revenues  less
lease  operating  expenses) for the 2002 period was $44.2 million,  or $2.24 per
Mcfe,  compared  to $21.7  million,  or $2.36  per  Mcfe in the 2001  period,  a
decrease of 5% on a per unit of  production  basis,  primarily a result of a 26%
increase in lease operating expense per Mcfe,  partially offset by a 3% increase
in the product price received per Mcfe.

Gathering, Marketing and Processing Operations:

     For the three months ended  September 30, 2002,  our gas  gathering  system
throughput  was 15.7 MMcf/day  versus 15.5 MMcf/day for the same period in 2001,
an increase of 1%. Gas  processing  throughput  was 25.9 MMcf/day in 2002 versus
14.3 MMcf/day in 2001, an increase of 81%. This increase is primarily due to the
acquisition  of a 100% owned interest in the Elmore City  processing  plant as a
result of the Prize merger.

     Revenues from gas gathering, marketing and processing increased 45% to $5.5
million  in 2002  versus  $3.8  million  in 2001.  Operating  costs  for the gas
gathering,  marketing and  processing  segment  increased 31% to $4.0 million in
2002 from $3.1 million in 2001.  Both the revenues and operating  cost increases
were a product of increased gas processing throughput.

     The gross margin realized from gas gathering,  marketing and processing for
2002 was $1.4 million versus $692 thousand in 2001, an increase of 107%. The gas
gathering  margin was $0.17 per Mcf  gathered  in 2002  versus  $0.19 per Mcf in
2001. The gas processing  margin was $0.49 per Mcf in 2002 compared to $0.32 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 271% to $1.0 million
in the third  quarter of 2002 versus $273 thousand in the third quarter of 2001.
This increase is primarily due to the Prize merger. Operating costs increased to
$728 thousand in 2002 from $201 thousand in 2001,  also due to the Prize merger.
The gross margin for this segment in 2002 was $285 thousand  versus $72 thousand
in 2001, an increase of 296%, due to overhead costs charged.

Other Income and Expenses:

     Depreciation  and  depletion  expense was $24.3  million in the 2002 period
versus $12.2 million in the 2001 period, a result of increased production due to
the Prize merger. Depreciation and depletion of oil and gas properties was $1.18
per Mcfe  produced  in 2002  versus  $1.30 per Mcfe  produced  in 2001.  This 9%
decrease in the  equivalent  unit cost was due primarily to longer  reserve life
associated with the Prize properties  acquired when compared to the higher costs
in the 2001 period from the shorter life Gulf of Mexico activities.

     General and  administrative  expense for 2002 increased 41% to $2.9 million
from $2.0 million in 2001.  The primary  cause for 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 recorded
equity in earnings of affiliate of $534 thousand in 2002 versus earnings of $334
thousand in 2001.  This  increase  was due to net  earnings  from gas  marketing
operations of the Company's 30% owned gas marketing affiliate.  Other income was
$93  thousand  for 2002 versus $67  thousand  in 2001,  caused by an increase in
interest  income.  The Company  recognized a $1.5 million loss in other non-cash
hedging  adjustments  in 2002 versus a $1.1  million  loss in 2001.  In the 2002
period,  $1.3  million  of the  hedging  loss  relates  to the  amortization  of
commodity hedge assets acquired in the Prize merger,  while $0.2 million was due
to recording hedge ineffectiveness.

                                       20

<PAGE>

     Interest  expense was $13.5  million for 2002 versus $4.3 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
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 $1.7 million on income before tax of $4.4
million in 2002 versus  income tax expense of $1.2 million on income  before tax
of $3.2 million in 2001,  resulting in a 38% effective rate in both periods. The
2001  period  provision  included  a  $1.9  million  current  provision  due  to
alternative minimum tax regulations.

For the Nine Months Ended September 30, 2002 and 2001

     We reported net income of $12.4 million for the nine months ended September
30, 2002,  compared to net income of $22.3  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 $3.5 million being recognized in the 2002
period.  Total  operating  revenues  increased 55% to $192.1  million in 2002 on
higher  volumes  of oil  and gas  produced  as a  result  of the  Prize  merger.
Operating profit was $49.1 million in 2002,  versus $48.7 for the same period in
2001.  Both basic and  diluted  earning  per share were $0.21 in the 2002 period
versus $0.64 and $0.60, respectively, in the 2001 period.

Oil and Gas Operations

     For the nine months ended September 30, 2002, we reported oil production of
2.9 million  barrels  and gas  production  of 35.7  billion  cubic  feet,  which
represents  an  increase of 185% in oil  produced  and an increase of 97% 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 119%
to 194.4 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  $43.1  million or 164% for the nine months  ended
September 30, 2002 compared to the same period in 2001.  Production gains of 1.9
million barrels  increased oil revenues by $45.0 million,  while a price decline
of 7% decreased  oil revenues by $1.9  million.  Gas  revenues  increased  $26.3
million in the nine month period in 2002, compared to the same period in 2001. A
gas price decrease of $1.45 per Mcf, or a 33% decline,  decreased gas revenue by
$26.2 million in the 2002 period  compared to the same period in 2001. The price
decreases  were  offset by an  increase  of $52.5  million in gas  revenues as a
result of a 17.6  billion  cubic feet  increase in gas  production  for the 2002
period.

     From time to time the Company  enters into  various  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 $0.83 per barrel and increased the average price we received for gas by $0.17
per Mcf.  During the 2002  period,  the  Company had  approximately  65.0 Mmcf/d
hedged  through  fixed  price swaps with a weighted  average  price of $2.88 per
MMbtu and  approximately  21.4 Mmcf/d hedged  through  cost-less  collars with a
weighted  average floor price of $3.82 per MMbtu and a weighted  average ceiling
price of $4.67 per  MMbtu.  Approximately  66% of the 2002  period  natural  gas
production was hedged.  On the crude side, the Company had  approximately  3,800
Bbls/d hedged through fixed price swaps with a weighted  average price of $25.37
per barrel and approximately  2,750 Bbls/d hedged through cost-less collars with
a weighted  average  floor  price of $20.93  per  barrel and a weighted  average
ceiling price of $26.79 per barrel.  Approximately  62% of the 2002 period crude
oil production was hedged.  For the fourth quarter of 2002, the Company has 60.0
MMcf/d hedged  through fixed price swaps with a weighted  average price of $2.87
per MMbtu and  approximately  8.0 MMcf/d hedged through cost-less collars with a
weighted  average floor price of $4.07 per MMbtu and a weighted  average ceiling
price of $5.52 per MMbtu.  In  addition,  the Company has hedged 5,000 Bbls/d of
fourth quarter 2002 crude  production  through fixed price swaps with a weighted
average  price of $25.27 per barrel and 4,500 Bbls/d  hedged  through  cost-less
collars with a weighted  average floor price of $21.27 per barrel and a weighted
average ceiling price of $26.79 per barrel.

     Lease operating expenses consist of two primary  components,  lifting costs
and  production  tax and other costs.  For the 2002 period,  lifting  costs were
$38.4  million  versus $15.0  million in the 2001  period,  an increase of 156%.
Production

                                       21

<PAGE>

taxes and other  costs were $20.3  million in the 2002  period  versus $9.9
million in the 2001 period,  an increase of 105%.  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 $0.62 per Mcfe in the
2001  period,  an increase of 18% due to an  increase in workover  and  remedial
expense  as well as  higher  recurring  costs  associated  with  oil  production
acquired with the Prize  properties.  Production  tax and other costs were $0.38
per Mcfe in the 2002  period  compared to $0.41 per Mcfe in the 2001  period,  a
decrease of 7% 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 $117.3 million,  or $2.21 per
Mcfe,  compared  to $81.8  million,  or $3.37  per  Mcfe in the 2001  period,  a
decrease of 34% on a per unit of production  basis,  primarily a result of a 25%
decline  in the  product  price  received  per Mcfe and a 8%  increase  in lease
operating expense per Mcfe.

Gathering, Marketing and Processing Operations:

     For the nine months ended  September  30, 2002,  our gas  gathering  system
throughput was 15.4 MMcfe/day  compared to 16.1 MMcfe/day for the same period in
2001, a decline of 5% due to normal well production  declines behind the system.
Gas  processing  throughput  was 21.9  MMcf/day in 2002 versus 13.6  MMcf/day in
2001, an increase of 60%. This increase is primarily due to the acquisition of a
100% owned interest in the Elmore City processing plant as a result of the Prize
merger.

     Revenues  from gas  gathering,  marketing and  processing  decreased 13% to
$13.6 million in 2002 versus  $15.7million 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 28% to $10.2 million in 2002 from $14.1 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 $3.5 million  versus $1.6 million in 2001, an increase of 114%. The gas
gathering  margin  was  $0.14  per Mcf  gathered  in 2002  versus  $0.08 per Mcf
gathered 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 $0.34 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 76% to $2.5 million
for the 2002 period  versus $1.4  million in the 2001 period.  This  increase is
primarily due to the Prize merger.  Operating costs increased to $1.5 million in
2002 from $955 thousand in 2001, also due to the Prize merger.  The gross margin
for this  segment in 2002 was $909  thousand  versus $439  thousand in 2001,  an
increase of 107%, due to overhead costs charged.

Other Income and Expenses:

     Depreciation  and  depletion  expense was $62.9  million in the 2002 period
versus $29.3 million in the 2001 period, a result of increased production due to
the Prize merger. Depreciation and depletion of oil and gas properties was $1.19
per Mcfe  produced  in 2002  versus  $1.21 per Mcfe  produced  in 2001.  This 2%
decrease in the  equivalent  unit cost was due primarily to the lower  depletion
rate as the result of the  inclusion  of the  properties  acquired  in the Prize
merger.

     General and  administrative  expense for 2002 increased 65% to $9.6 million
from $5.8 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 $916  thousand in 2002 versus  earnings of $1.2 million
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
$258  thousand for 2002 versus $224  thousand in 2001,  caused by an increase in
interest income.  We recognized a permanent  impairment loss of $621 thousand on
an investment

                                       22

<PAGE>

held for resale in 2002 versus none in 2001. The Company  recognized a $5.4
million loss in other non-cash hedging adjustments in 2002 versus a $0.6 million
gain in 2001.  In the 2002  period,  $4.8  million  of the loss  relates  to the
amortization of commodity hedge assets acquired in the Prize merger,  while $0.6
million was the result of hedge ineffectiveness.

     Interest  expense was $34.6 million for 2002 versus $14.3 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
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 $3.5  million on income  before tax of
$9.6 million in 2002 versus income tax expense of $13.8 million on income before
tax of $36.3 million in 2001,  resulting in a negative 36% 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.  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 nine month periods in 2002 and 2001 was $39.2 million and $79.2 million,
respectively.  The substantial decrease in our operating cash flows in 2002 from
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 September  30, 2002 was a deficit of $22.3  million,  which
included a $30.7  million net current  derivative  liability  on  commodity  and
interest rate hedges. On that date, the Company also had $82.4 million available
to be drawn under its Senior Bank credit facility (the "Facility").

     INVESTING  ACTIVITIES:  Net cash  used in  investing  activities  was $85.8
million  for the nine  months in 2002.  We made  capital  expenditures  of $98.2
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 $56.6 million, made a loan of $2.4 million to a minority owned
affiliate,  paid $4l.1 million  associated with the merger of Prize, and made an
investment in an unconsolidated affiliate of $604 thousand.

     Net cash used in  investing  activities  was  $152.9  million  for the nine
months in 2001. We made capital  expenditures of $153.3 million during the first
nine months of 2001.  Our capital  expenditures  are discussed in further detail
below.  Additionally,  we  received  a  distribution  of  $1.6  million  from an
unconsolidated  affiliate  and  we  made  an  investment  in  an  unconsolidated
affiliate of $2.0  million.  We realized  proceeds of $706 thousand from sale of
assets and  received  payments  on  promissory  notes  receivable  totaling  $66
thousand during the 2001 period.

     FINANCING  ACTIVITIES.  Net cash provided by financing activities was $48.4
million  for the nine  months in 2002.  We  borrowed a total of $610.7  million,
including  $300  million in new 9.6% Senior  Notes  during the  period.  We also
repaid  borrowings of $534.5  million,  including  $155.7 million to pay off the
Company's  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
other  indebtedness.  We paid $11.9  million in fees related to the newly issued
Senior Notes and the new  Facility,  loaned $2.7 million to the ESOP,  purchased
treasury stock for $14.2 million,  purchased  warrants for $98 thousand,  made a
loan to a stockholder and executive officer for $300 thousand,  received payment
on a loan to a  stockholder  and  executive  officer  of $300  thousand,  had an
increase in  restricted  cash of $329  thousand,  and had net proceeds  from the
issuance of common stock of $1.4 million. Our financing activities are discussed
in further detail below.

     Net cash  provided by financing  activities  was $76.8 million for the nine
months in 2001. We borrowed  $232.0  million under our senior bank credit lines.
We repaid borrowings under our Facility of $146.6 million, made payments of $145
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  $3.2 million in cash from the issuance of common  stock.  We paid $825
thousand for fees related to financing activities, made a loan to stockholder of
$300 thousand,  received repayment of stockholder loans of $360 thousand, made a
loan to the ESOP of $749 thousand and purchased treasury stock for $1.0 million.
Cash dividends paid were $169 thousand in 2001.

                                       23

<PAGE>

     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 Facility are the Company's  major  sources 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  Facility in  conjunction  with the
merger with Prize.  The amended  Facility  provides for total borrowings of $500
million,  up from $225 million,  and raised 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.  In  connection  with  the  sale  of oil  and  gas
properties  described below, the borrowing base was voluntarily  reduced to $250
million on September 3, 2002.

     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 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  September  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 were 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 LIBOR,  currently  yielding a cost of approximately  5.2%
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 September 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. On September 12, 2002 the terms of the credit  agreement  were amended
to allow for additional  advances of approximately $1.2 million.  Canvasback may
use the  additional  advances to purchase  incremental  10% Senior  Notes of the
Company or to make an advance or pay a  dividend  to an  affiliate.  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.  By July 16, 2002,  two million
shares had been repurchased under the program,

                                       24

<PAGE>

including  1,943,300 shares in 2002 at a cost of $14.2 million.  On October
17, 2002,  the  Company's  Board of  Directors  approved a new  3,000,000  share
repurchase program.

     Effective  September  1, 2002,  the Company sold  approximately  41 billion
cubic feet  equivalent  of proved  producing  reserves to a new private  limited
partnership  in which the  Company  is the  general  partner  with a 5%  initial
ownership  interest.  The sales  proceeds of $49.0 million ($46.6 million net to
the Company) were used to reduce bank debt. Also,  effective  September 1, 2002,
the Company  sold  approximately  7.1 billion  cubic feet  equivalent  of proved
producing  reserves at various auctions for $8.0 million,  the proceeds of which
were also used to reduce bank debt.  Total proceeds from the sale of oil and gas
properties  through September 30, 2002, have been $56.6 million,  of which $53.9
million is attributable to properties acquired in the Prize merger.  These sales
are part of the Company's plan to sell up to $95 million of non-core oil and gas
assets during fiscal 2002, with proceeds used to reduce overall  indebtedness as
the  Company  seeks to  improve  its  debt-to-equity  ratio and  streamline  its
operations. Additional non-core properties are expected to be sold in the fourth
quarter of 2002 and the first quarter of 2003.

     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 semi-annual basis, the Company's  borrowing base under its 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 December 31, 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 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 $98.2  million,  excluding  the $602.3  million in properties
acquired through the Prize merger.  Exploration  activities  accounted for $23.5
million,  development  activities  accounted  for $66.2  million,  additions  to
unproved properties not accounted for as exploration or development expenditures
accounted  for $7.4 million,  and  additions to other assets  accounted for $1.1
million of the capital expenditures. The Company participated in the drilling of
86 wells during the 2002 period,  of which 70 were onshore and 16 were  offshore
in  the  Gulf  of  Mexico.  Fourteen  of  the  offshore  wells  were  considered
successful. Of the 86 wells drilled, 16 were exploratory wells, of which 13 were
successful,  and 70 were development  wells, of which 69 were successful.  As of
September 30, 2002, the Company had total unproved oil and gas property costs of
$154.0 million,  consisting of $125.7 million  acquired in the merger with Prize
and $28.3 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  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.

                                       25

<PAGE>

     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,  other than  required by law, 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.

Inflation and Changes in Prices

     During the 2002 period, the Company experienced  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 hedging contracts to reduce the effects of
significant  fluctuations in crude oil and gas prices. The Company may hedge the
greater of (i) 90% of its  overall  daily  crude oil  production  and 75% of its
overall  daily  natural gas  production  or (ii) 75% of its combined oil and gas
production.  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.  For the remainder of 2002, the Company has  approximately  65% of
its combined crude oil and natural gas production hedged on a Mcfe basis.

     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 twelve crude oil derivatives,  sixteen natural
gas  derivatives,  and two interest rate  derivatives on September 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.  Hedge
ineffectiveness on the cash-flow hedges is recorded in earnings.

                                       26

<PAGE>

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


Derivative Assets
-----------------------
Natural gas collars........................ $        267
                                           ------------------
Total derivative assets.................... $        267
                                           ------------------
Derivative Liabilities
-----------------------
Natural gas collars........................ $     13,390
Natural gas swaps..........................       16,831
Crude oil collars..........................        2,608
Crude oil swaps............................        4,141
Interest rate swaps........................        1,340
                                           ------------------
Total derivative liabilities............... $     38,310
                                           ------------------
Net derivative liabilities................. $     38,043
                                           ==================

     For the three and nine month periods ended  September 30, 2002,  the income
statement includes a non-cash hedging  ineffectiveness loss of $245 thousand and
$622  thousand,  respectively,   related  to  the  crude  oil  and  natural  gas
derivatives and a non-cash loss of $1.3 million and $4.8 million,  respectively,
related to the  amortization of hedge  contracts  purchased in the Prize merger.
The remaining  amortization  amounts relating to hedge contracts acquired in the
Prize merger that will be reclassified  into the income  statement in 2002, 2003
and 2004  are $1.3  million  loss,  $1.3  million  gain and $0.8  million  gain,
respectively.  It is estimated  that $18.7 million of other  comprehensive  loss
will be reclassified into the income statement during the next 12 months.

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  recorded  goodwill of $63.2
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. 143 - SFAS No. 143, "Accounting for Asset Retirement Obligations",
will be  effective  for the  Company  beginning  January 1,  2003.  SFAS No. 143
requires the recognition of a fair value liability for any retirement obligation
associated with long-lived assets. The offset to any liability recorded is added
to the recorded asset where the additional  amount is depreciated  over the same
period  as  the  long-lived  asset  for  which  the  retirement   obligation  is
established.  SFAS No. 143 also requires additional  disclosures.  We are in the
process  of  evaluating  the  impact of the  provisions  of SFAS No.  143 to our
existing operations.

     SFAS No. 144 - SFAS No. 144,  "Accounting for the Impairment or Disposal of
Long-Lived Assets",  became effective for the Company beginning January 1, 2002.
SFAS No. 144  establishes  a single  accounting  model,  based on the  framework
established in SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for  Long-Lived  Assets to Be  Disposed  Of",  for  long-lived  assets to be
disposed of by sale and resolves  significant  implementation  issues related to
SFAS No. 121.

     SFAS No. 145 - SFAS No. 145,  "Recission 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,

                                       27

<PAGE>

     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.

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 hedging  contracts for a
portion  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 Henry Hub natural gas, 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 counterparty to the agreement.
The Company does not anticipate any material impact to its results of operations
as a result of nonperformance by such parties.

     Due to hedge  contracts  acquired  in the  Prize  merger,  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.  Margins
posted at September 30, 2002 totaled $3.2 million.  The Company has not and does
not  intend to enter  into any new  hedging  contracts  with  institutions  that
require margin deposits.

                                       28

<PAGE>

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


                                     Weighted average      Weighted average
           Period     Volumes/day       floor price          ceiling price
           ----------------------------------------------------------------


Oil         2002         9,500        $    23.38         $       25.99
Gas         2002        68,000        $     3.01         $        3.18
Oil         2003         5,000        $    22.65         $       25.85
Gas         2003       100,000        $     3.00         $        3.69
Gas         2004        15,000        $     3.00         $        4.20

     Based on future market prices at September 30, 2002, the fair value of open
contracts  to the Company was a liability  of $36.7  million.  If future  market
prices were to increase 10% from those in effect at September 30, 2002, the fair
value of open contracts to the Company would be a liability of $54.3 million. If
future  market  prices were to decline 10% from those in effect at September 30,
2002,  the fair value of the open  contracts to the Company would be a liability
of $16.4 million.

     The Company may hedge the greater of (i) 90% of its overall daily crude oil
production  and 75% of its overall daily  natural gas  production or (ii) 75% of
its combined oil and gas production.  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 1.77%)
</TABLE>

     Based on future market rates at September 30, 2002,  the fair value of open
contracts to the Company was a liability of $1.3 million. If future market rates
were to increase 10% from those in effect at September 30, 2002,  the fair value
of open contracts to the Company would be a liability of $1.3 million. If future
market rates were to decline 10% from those in effect at September 30, 2002, the
fair value of the open  contracts  to the Company  would be a liability  of $1.4
million.

     Fixed and Variable Rate Debt. The Company uses fixed and variable rate 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 September 30, 2002.

                                       29

<PAGE>
<TABLE>
<CAPTION>
<S>                                    <C>         <C>             <C>           <C>            <C>             <C>
      Expected Maturity Dates              2002             2003-5      2007         2012            Total         Fair Value
---------------------------------------------------------------------------------------------------------------------------------
          (in thousands)
Variable Rate Debt:
Bank Debt with Recourse (a)...........   $      -    $   165,000    $         -   $       -      $   165,000      $  165,000
Bank Debt without Recourse (b)........   $      -    $     5,834    $         -   $       -      $     5,834      $    5,834
Capital Leases (c)....................   $  1,945    $     7,911    $         -   $       -      $     9,856      $    9,856
Fixed Rate Debt:
Senior Notes (d)......................   $      -    $         -    $   129,466   $       -      $   129,466      $  134,645
Senior Notes (e)......................   $      -    $         -    $         -   $ 300,000      $   300,000      $  309,375
Note Payable (f)......................   $    443    $         -    $         -   $       -      $       443      $      443
Other.................................   $      5    $         -    $         -   $       -      $         5      $        5
</TABLE>

---------------
(a)     The average interest rate on the bank debt with recourse is 4.0%.
(b)     The average interest rate on the bank debt without recourse is 6.3%.
(c)     The average interest rate on the two capital leases is 5.2%.
(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%.

Item 4. Controls and Procedures

     The Company's  chief  executive  officer and chief  financial  officer have
reviewed and evaluated the  effectiveness of the Company's  disclosure  controls
and  procedures [as defined in Rules  240.13a-14 (c) and 15d-14 (c)  promulgated
under the  Securities  Exchange  Act of 1934] as of a date  within  ninety  days
before  the  filing  date of this  quarterly  report.  Based on that  review and
evaluation,  which  included  inquiries  made to certain other  employees of the
Company,  the chief executive officer and chief financial officer have concluded
that the Company's current disclosure  controls and procedures,  as designed and
implemented,  are  reasonably  adequate  to ensure that they are  provided  with
material  information  relating to the Company  required to be  disclosed in the
reports the Company files or submits under the Securities  Exchange Act of 1934.
There have not been any significant  changes in the Company's  internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation. There were no significant deficiencies or material
weaknesses and, therefore, no corrective actions were taken.

                                       30

<PAGE>

                          PART III - 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, Inc., 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, Inc., 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, 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 (Incorporated by reference to Form 10-Q for the
           period ended June 30, 2002)
10.3       Employment Agreement for Gary C. Evans (Incorporated by reference to Form 10-K for the fiscal
</TABLE>

                                       31

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

          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)
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)
99.1*     Certification pursuant to 18 U.S.C. Section 1350, signed by Gary C. Evans
99.2*     Certification pursuant to 18 U.S.C. Section 1350, signed by Chris Tong
</TABLE>

*Filed herewith

(b) Reports on Form 8-K

     1) Form 8-K, filed July 2, 2002 under Item 5, including  audited  financial
statements of Prize Energy Corp.


                                       32

<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,  hereunto duly
authorized.

MAGNUM HUNTER RESOURCES, INC.



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


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


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


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

                                       33

<PAGE>
                                  CERTIFICATION

I, Gary C. Evans, certify that:

     1. I have  reviewed  this  quarterly  report on Form 10-Q of Magnum  Hunter
Resources, Inc.

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of material  fact or omit to state a material  fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report.

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the registrants' disclosure controls and
procedures  as of a date within 90 days prior to filing  date of this  quarterly
report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002


                                     /s/ Gary C. Evans
                                     ---------------------------------
                                     Gary C. Evans, Chairman
                                     President and Chief Executive Officer


                                       34

<PAGE>

                                  CERTIFICATION


I, Chris Tong, certify that:

     1. I have  reviewed  this  quarterly  report on Form 10-Q of Magnum  Hunter
Resources, Inc.

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of material  fact or omit to state a material  fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report.

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the registrants' disclosure controls and
procedures  as of a date within 90 days prior to filing  date of this  quarterly
report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date.

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002


                          /s/ Chris Tong
                          ---------------------------------
                          Chris Tong
                          Senior Vice President and Chief Financial Officer

                                       35

<PAGE>