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 March 31, 2003
                                      --------------

[   ]  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 [   ]

Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).
Yes [ X ]    No [   ]

State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of May 12, 2003: 67,209,384.

<PAGE>
                         PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

                MAGNUM HUNTER RESSOURCES, INC. AND SUBSIDIAIRIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)

<TABLE>
<CAPTION>
<S>                                                                                      <C>                     <C>
                                                                                             March 31,              December 31,
                                                                                               2003                     2002
                                                                                        -------------------------------------------
                                ASSETS                                                      (Unaudited)
Current Assets
  Cash and cash equivalents..............................................................    $      3,557             $      3,069
  Restricted cash........................................................................             754                      682
  Accounts receivable - trade, net of allowance of $4,573................................          60,408                   53,864
  Deposits...............................................................................             600                    8,856
  Other current assets...................................................................          35,643                   31,625
                                                                                         ----------------         ----------------
     Total Current Assets................................................................         100,962                   98,096
                                                                                         ----------------         ----------------
Property, Plant, and Equipment
  Oil and gas properties, full cost method
    Unproved.............................................................................         166,976                  165,676
    Proved...............................................................................       1,113,792                1,053,426
  Gas processing plants and pipelines....................................................          33,954                   33,951
  Other property.........................................................................           6,681                    6,636
                                                                                         ----------------         ----------------
 Total Property, Plant and Equipment.....................................................       1,321,403                1,259,689
    Accumulated depreciation, depletion, amortization and impairment.....................        (273,284)                (258,080)
                                                                                         ----------------         ----------------
 Net Property, Plant and Equipment.......................................................       1,048,119                1,001,609
                                                                                         ----------------         ----------------
Other Assets
 Goodwill................................................................................          50,568                   50,710
 Other assets............................................................................          18,673                   19,364
                                                                                         ----------------         ----------------
 Total Assets............................................................................    $  1,218,322             $  1,169,779
                                                                                         ================         ================
                                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
 Trade payables and accrued liabilities..................................................    $    121,253             $    114,079
 Accrued interest........................................................................           5,713                   10,327
 Due to affiliates.......................................................................           7,793                    2,848
 Current portion of long-term debt.......................................................           6,523                    1,865
                                                                                         ----------------         ----------------
    Total Current Liabilities............................................................         141,282                  129,119
                                                                                         ----------------         ----------------
Long-Term Liabilities
 Long-term debt, less current maturities.................................................         573,083                  569,086
 Asset retirement obligations............................................................          30,333                        -
 Derivative liabilities, noncurrent......................................................           5,049                    3,316
 Deferred income taxes payable...........................................................         122,882                  118,062
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                        1
 Common Stock - $.002 par value; 100,000,000 shares authorized,
    71,713,697 and 71,707,897 shares issued, respectively................................             143                      143
 Additional paid-in capital..............................................................         423,388                  423,364
 Accumulated other comprehensive loss....................................................         (31,302)                 (26,902)
 Accumulated deficit.....................................................................         (13,124)                 (21,114)
 Common stock in deferred compensation plan at cost (56,600 shares)......................            (318)                       -
 Unearned common stock in KSOP, at cost (874,046 and 757,246 shares, respectively).......          (5,548)                  (4,888)
                                                                                         ----------------         ----------------
                                                                                                  373,240                  370,604
 Treasury stock, at cost (4,458,113 and 3,168,013 shares, respectively)..................         (27,547)                 (20,408)
                                                                                         ----------------         ----------------
 Total Stockholders' Equity..............................................................         345,693                  350,196
                                                                                         ----------------         ----------------
     Total Liabilities and Stockholders' Equity..........................................    $  1,218,322             $  1,169,779
                                                                                         ================         ================
</TABLE>

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

                                       1
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                                     <C>                    <C>
                                                                                             Three Months Ended March 31,
                                                                                            2003                     2002
                                                                                        -------------          --------------
       Operating Revenues:
            Oil and gas sales...........................................................  $   69,590              $   39,150
            Gas gathering, marketing and processing.....................................       9,385                   3,582
            Oil field management services...............................................       1,079                     392
                                                                                        ------------           -------------
                 Total Operating Revenues...............................................      80,054                  43,124
                                                                                        ------------           -------------
       Operating Costs and Expenses:
            Oil and gas production lifting costs........................................      12,948                   8,948
            Production taxes and other costs............................................       9,177                   4,303
            Gas gathering, marketing and processing.....................................       6,546                   2,680
            Oil field services..........................................................         857                     276
            Depreciation, depletion, amortization and accretion.........................      21,524                  15,096
            Gain on sale of assets......................................................         (94)                      -
            General and administrative..................................................       3,182                   2,524
                                                                                        ------------           -------------
                 Total Operating Costs and Expenses.....................................      54,140                  33,827

       Operating Profit.................................................................      25,914                   9,297
            Equity in earnings of affiliate.............................................         288                     301
            Other income................................................................         118                      57
            Other non-cash hedging adjustments..........................................         369                    (593)
            Costs associated with early retirement of debt..............................      (1,855)                 (1,000)
            Interest expense............................................................     (12,578)                 (7,505)
                                                                                        ------------           -------------
       Income Before Income Tax.........................................................      12,256                     557
            Deferred income tax (expense) benefit.......................................      (4,665)                  6,889
                                                                                        ------------           -------------
       Income Before Cumulative Effect of a Change in Accounting Principle..............       7,591                   7,446
           Cumulative effect of a change in accounting principle, net of income tax
            expense of $244.............................................................         399                       -
                                                                                        ------------           -------------
       Net Income.......................................................................  $    7,990              $    7,446
                                                                                        ============           =============
       Income per Common Share - Basic
            Income before cumulative effect of a change in accounting principle.........  $     0.11              $     0.18
            Cumulative effect of a change in accounting principle.......................        0.01                       -
                                                                                        ------------           -------------
       Income per Common Share - Basic                                                    $     0.12                    0.18
                                                                                        ============           =============
       Income per Common Share - Diluted
            Income before cumulative effect of a change in accounting principle........   $     0.11              $     0.17
            Cumulative effect of a change in accounting principle......................         0.01                       -
                                                                                       -------------           -------------
       Income per Common Share - Diluted...............................................   $     0.12              $     0.17
                                                                                       =============           =============
       Common Shares Used in Per Share Calculation
            Basic......................................................................   66,709,502              41,777,431
                                                                                       =============           =============
            Diluted....................................................................   67,338,391              43,024,235
                                                                                       =============           =============
</TABLE>

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

                                       2
<PAGE>

<TABLE>
<CAPTION>
                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME
                    FOR THE THREE MONTHS ENDED March 31, 2003
                                   (Unaudited)
                                 (in thousands)
<S>                                                                <C>          <C>       <C>         <C>           <C>

                                                                                                       Additional
                                                                     Preferred   Common    Treasury     Paid in      Accumulated
                                                                       Stock     Stock      Stock       Capital        Deficit
                                                                   ----------------------------------------------------------------
Balance at December 31, 2002                                            $ 1      $ 143    $ (20,408)   $ 423,364     $  (21,114)

Issuance of 6 shares of common stock pursuant to employee
  stock option plan..................................................                                         17
Deferred tax benefit on exercise of employee stock options...........                                          7
Purchase of 1,290 shares of treasury stock...........................                        (7,139)
Loan of 117 shares to KSOP...........................................
Purchase 57 shares for deferred compensation plan....................
Net Income...........................................................                                                     7,990
Reclassification adjustment related to derivative contracts..........
Change in fair value of outstanding hedge positions..................
Amortization of purchased hedge positions............................
                                                                    ---------------------------------------------------------------
Balance at March 31, 2003                                               $ 1      $ 143    $ (27,547)   $ 423,388     $  (13,124)
                                                                    ===============================================================

</TABLE>

<TABLE>
<CAPTION>
<S>                                                         <C>          <C>        <C>             <C>             <C>
                                                                                      Accumulated
                                                                          Unearned       Other           Total          Total
                                                               Deferred   Shares in  Comprehensive   Stockholders'  Comprehensive
                                                             Compensation   KSOP     Income (Loss)       Equity     Income (Loss)
                                                          ------------------------------------------------------------------------
Balance at December 31, 2002                                   $    -     $(4,888)    $ (26,902)      $ 350,196         $

Issuance of 6 shares of common stock pursuant to employee
  stock option plan...........................................                                               17
Deferred tax benefit on exercise of employee stock options....                                                7
Purchase of 1,290 shares of treasury stock....................                                           (7,139)
Loan of 117 shares to KSOP....................................               (660)                         (660)
Purchase 57 shares for deferred compensation plan.............   (318)                                     (318)
Net Income....................................................                                            7,990            7,990
Reclassification adjustment related to derivative contracts...                           18,837          18,837           18,837
Change in fair value of outstanding hedge positions...........                          (23,036)        (23,036)         (23,036)
Amortization of purchased hedge positions.....................                             (201)           (201)            (201)
                                                              ---------------------------------------------------------------------
Balance at March 31, 2003                                      $ (318)    $(5,548)    $ (31,302)      $ 345,693         $  3,590
                                                              =====================================================================

</TABLE>

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

                                       3
<PAGE>


                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
<S>                                                                                     <C>                     <C>
                                                                                               For the Three Months Ended
                                                                                                       March 31,
                                                                                               2003                  2002
                                                                                        -----------------       --------------
CASH FLOW FROM OPERATING ACTIVITIES:
   Net Income...........................................................................    $  7,990                $  7,446
   Adjustments to reconcile net income to cash provided by operating activities:
      Cumulative effect of a change in accounting principle.............................        (399)                      -
      Depreciation, depletion, amortization and accretion...............................      21,524                  15,096
      Amortization of financing fees....................................................         561                     370
      Costs relating to the redemption of notes.........................................       1,855                   1,000
      Imputed interest on debt due to merger............................................           -                     108
      Deferred income taxes (benefits)..................................................       4,665                  (6,889)
      Equity in income of unconsolidated affiliate......................................        (288)                   (301)
      Non-cash hedging adjustments......................................................        (369)                    593
      Gain on sale of assets............................................................         (94)                      -
      Changes in certain assets and liabilities, net of the effect of acquisitions:
            Accounts and notes receivable...............................................      (6,544)                 (3,316)
            Deposits and other current assets...........................................       6,424                  (4,261)
            Accounts payable and accrued liabilities....................................       1,962                 (33,828)
            Income taxes payable/receivable.............................................         482                       -
                                                                                        --------------            ------------
      Net Cash Provided (Used) by Operating Activities..................................      37,769                 (23,982)
                                                                                        --------------            ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Proceeds from sale of assets......................................................         106                       -
      Additions to property and equipment...............................................     (35,886)                (18,989)
      Cash paid in Prize merger net of cash acquired....................................           -                 (41,097)
      Property sales price adjustments..................................................        (487)                      -
      Increase in note receivable.......................................................           -                  (2,350)
      Distribution from unconsolidated affiliate........................................         600                       -
      Investment in unconsolidated affiliate............................................        (600)                      -
                                                                                        --------------            ------------
      Net Cash Provided (Used) by Investing Activities..................................     (36,267)                (62,436)
                                                                                        --------------            ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of debt....................................................     104,075                 534,183
      Fees paid related to financing activities.........................................         (75)                (11,732)
      Redemption of notes payable.......................................................     (29,074)                      -
      Payments of principal on debt and production payment..............................     (67,768)               (431,269)
      Loan to KSOP......................................................................        (660)                 (2,492)
      Purchase of common stock for deferred compensation plan...........................        (318)                      -
      Proceeds from issuance of common stock, net of offering costs.....................          17                     145
      Purchase of treasury stock........................................................      (7,139)                 (1,321)
      Increase in restricted cash for payment of notes payable..........................         (72)                      -
                                                                                        --------------            ------------
      Net Cash Provided (Used) by Financing Activities..................................      (1,014)                 87,514
                                                                                        --------------            ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS...............................................         488                   1,096
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................................       3,069                   2,755
                                                                                        --------------            ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..............................................    $  3,557                $  3,851
                                                                                        ==============            ============
</TABLE>
     The accompanying notes are an integral part of these consolidated financial
statements

                                       4
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2003
                                   (Unaudited)

NOTE 1 - MANAGEMENT'S REPRESENTATION

     In  this  quarterly  report  on  Form  10-Q,  the  words  "Magnum  Hunter",
"company",  "we", "our", and "us" refer to Magnum Hunter Resources, Inc. and its
consolidated  subsidiaries  unless  otherwise  stated or the  context  otherwise
requires.  The consolidated  balance sheet of Magnum Hunter Resources,  Inc. and
subsidiaries  as of March 31, 2003,  the  condensed  consolidated  statements of
operations  for the three  months ended March 31, 2003 and 2002,  the  condensed
consolidated  statement of stockholders' equity and comprehensive income for the
three months ended March 31, 2003, and the condensed consolidated  statements of
cash flows for the three months ended March 31, 2003 and 2002, 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 March 31, 2003,  results of operations,  changes in stockholders'  equity and
comprehensive income and cash flows for the three month period.

     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 our December 31, 2002 annual
report  and on our Form 10-K.  The  results of  operations  for the  three-month
period ended March 31, 2003,  is not  necessarily  indicative  of the  operating
results for the full year.

     The accompanying  consolidated financial statements include the accounts of
the company and our 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,  we 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.

     Magnum Hunter is a holding company with no significant assets or operations
other than our investments in our subsidiaries. The wholly owned subsidiaries of
the  company,  except for  Canvasback  Energy,  Inc. and Redhead  Energy,  Inc.,
collectively referred to as Canvasback, are direct guarantors of each of our 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 our direct and indirect  subsidiaries  (other than  Canvasback),  and we have
presented  separate  condensed  consolidating  financial  statements  and  other
disclosures  concerning  each guarantor and Canvasback  (See Note 9). Except for
Canvasback,   there  is  no  restriction  on  the  ability  of  consolidated  or
unconsolidated subsidiaries to transfer funds to the company in the form of cash
dividends, loans, or advances.

NOTE 2 - NEW ACCOUNTING STANDARDS

     SFAS No. 143 - SFAS No. 143, "Accounting for Asset Retirement Obligations",
became  effective   beginning  January  1,  2003.  SFAS  No.  143  requires  the
recognition of a fair value liability for any retirement  obligation  associated
with  long-lived  assets in the period in which it is incurred  if a  reasonable
estimate of fair value can be made. The associated  asset  retirement  costs are
capitalized  as  part  of the  carrying  amount  of  the  long-lived  asset  and
depreciated over the asset's useful life. See Note 4 for additional  information
on our asset retirement obligations.  Upon adoption of SFAS No. 143, we recorded
an addition to oil and gas  properties  of $25.4  million,  an asset  retirement
obligation  of $30.4  million,  a reduction  of  accumulated  depletion  of $5.6
million, and a pre-tax gain of $ 643 thousand.

     SFAS No. 145 - SFAS No. 145  "Recission of FASB  Statements  No. 4, 44, and
64,  Amendment  of FASB  Statement  No. 13, and  Technical  Corrections"  became
effective 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 requires us to reclassify  extraordinary items
for debt  extinguishment  costs which did 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 expense.

     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

                                       5
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

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.

     SFAS No. 148 - The FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure,  an Amendment to FASB Statement No.
123", in December 2002. SFAS No. 148 provides  alternative methods of transition
for a voluntary  change to the fair value method of accounting  for  stock-based
employee compensation and amends the disclosure requirements of SFAS No. 123. We
have no plans at this time to change our method to the fair value  based  method
from the  intrinsic  value  method.  We  account  for our  stock-based  employee
compensation  plans under the  measurement  and  recognition  principles  of APB
Opinion  No.  25,   "Accounting  for  Stock  Issued  to  Employees  and  Related
Interpretations". Accordingly, we do not reflect any stock-based compensation in
net income  because all stock options  granted under these plans had an exercise
price equal to the market  value of our common  stock on the date of grant.  The
following  table  illustrates the effect on net income and earnings per share if
we had applied the fair value recognition  provisions of SFAS 123 (in thousands,
except for per share amounts):

<TABLE>
<CAPTION>
<S>                                                                               <C>                      <C>
                                                                                        Three Months Ended March 31,
                                                                                        2003                     2002
                                                                                    -----------------------------------
Net income, as reported.........................................................        $7,990                  $7,446
     Deduct:  Total stock-based employee compensation
       determined under fair value-based  method for all awards,
       net of related tax effects..............................................           (671)                   (688)
                                                                                     ----------              ----------
Pro forma net income............................................................        $7,319                  $6,758
                                                                                     ==========              ==========
Earnings per share:
     Basic - as reported........................................................        $ 0.12                  $ 0.18
                                                                                     ==========              ==========
     Basic - pro forma..........................................................        $ 0.11                  $ 0.16
                                                                                     ==========              ==========
     Diluted - as reported......................................................        $ 0.12                  $ 0.17
                                                                                     ==========              ==========
     Diluted - pro forma........................................................        $ 0.11                  $ 0.16
                                                                                     ==========              ==========
</TABLE>

     FIN No.  45 -  "Guarantor's  Accounting  and  Disclosure  Requirements  for
Guarantees",  was issued in November  2002.  This  interpretation  addresses the
disclosures  to be made by a  guarantor  in its  interim  and  annual  financial
statements  about  its  obligations  under  guarantees.  It also  clarifies  the
requirements  related to the  recognition  of a liability  by a guarantor at the
inception of a guarantee for the  obligations  the  guarantor has  undertaken in
issuing that guarantee. We adopted this statement in January 2003.

     In the past we have  provided  trade  guarantees on behalf of our 30% owned
affiliate,  NGTS,  LLC.  In the event  that NGTS,  LLC is unable to fulfill  its
obligations with certain vendors,  we would be obligated for cash payments of up
to $5.6 million to these  vendors.  We have not recorded these as a liability on
our books at March 31,  2003  because we do not expect to have to perform  under
these guarantees.  The last of these guarantees  expires in July 2003, and we do
not intend to issue any  additional  guarantees on behalf of NGTS,  LLC. We have
provided no other guarantees on behalf of any unconsolidated entities and do not
intend to issue any.

NOTE 3 - GOODWILL

     In June  2001,  SFAS No.  141  "Business  Combinations"  and SFAS No.  142,
"Goodwill  and other  Intangible  Assets" were issued to be effective for fiscal
years  beginning  after  December  15,  2001.  Under  the  new  rules  in  these
statements,  goodwill  is no  longer  amortized,  but it is  subject  to  annual
impairment tests. We completed the first of these tests at December 31, 2002 and
found no impairment.  Changes to the carrying value of goodwill during the three
months ended March 31, 2003 are as follows:

                                       6
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

Balance at December 31, 2002...................    $50,710
Purchase price adjustments.....................       (142)
                                               -----------
Balance at March 31, 2003......................    $50,568
                                               ===========

     Our  goodwill  results from our merger with Prize,  and the purchase  price
allocation will be finalized during the second quarter of 2003.

NOTE 4 - ASSET RETIREMENT OBLIGATIONS

     SFAS  No.  143,  "Accounting  for  Asset  Retirement  Obligations",  became
effective  beginning January 1, 2003. SFAS No. 143 requires the recognition of a
fair value liability for any retirement  obligations  associated with long-lived
assets in the period in which it is  incurred if a  reasonable  estimate of fair
value can be made. The associated asset retirement costs are capitalized as part
of the carrying amount of the long-lived  asset and depreciated over the asset's
useful life. Prior to adopting SFAS No. 143 on January 1, 2003, we accounted for
asset retirement obligations in accordance with SFAS No. 19.

     Our  long-lived  assets that are captured  under SFAS No. 143 are developed
oil and gas properties,  production and distribution facilities, and natural gas
processing   plants.   Our  asset  retirement   obligations   include  plugging,
abandonment, decommission and remediation costs.

     The  following  is a  reconciliation  of the  Asset  Retirement  Obligation
Liability at March 31, 2003 (in thousands):

Beginning balance at January 1, 2003.......................       $      -
Cumulative effect adjustment...............................         30,391
Liabilities settled........................................           (696)
Accretion expense..........................................            638
                                                           ---------------
Ending balance at March 31, 2003...........................       $ 30,333
                                                           ===============

     The  following  pro forma data  summarizes  our net  income  (loss) and net
income  (loss) per share as if we had  adopted  SFAS No. 143 on January 1, 2002.
The  associated  pro forma  asset  retirement  obligation  was $16.9  million on
January 1, 2002 and an additional asset  retirement  obligation of $12.9 million
would  have  been  recorded  at  March 1,  2002 in  conjunction  with the  Prize
acquisition.

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

                                                                               Three Months Ended March 31,
                                                                                 2003                 2002
                                                                            --------------        ------------
   Net income, as reported...........................................              $7,990              $7,446
      Pro forma adjustment to reflect retroactive adoption of
        SFAS No. 143, net of related tax effects.....................                (399)                 99
                                                                              -----------         -----------
   Pro forma net income..............................................              $7,591              $7,545
                                                                              ===========         ===========
   Earnings per share:
      Basic - as reported............................................               $0.12               $0.18
                                                                              ===========         ===========
      Basic - pro forma..............................................               $0.11               $0.18
                                                                              ===========         ===========
      Diluted - as reported..........................................               $0.12               $0.17
                                                                              ===========         ===========
      Diluted - pro forma............................................               $0.11               $0.18
                                                                              ===========         ===========
</TABLE>

                                       7
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

NOTE 5 - EARNINGS PER SHARE INFORMATION

     The  following is a  reconciliation  of the basic and diluted  earnings per
share computations (in thousands of dollars, except for per share amounts):
<TABLE>
<CAPTION>
<S>                                                        <C>         <C>         <C>          <C>          <C>         <C>

                                                                                     Three Months Ended
                                                                      March 31, 2003                      March 31, 2002
                                                            ----------------------------------    ---------------------------------
                                                                                    Per Share                             Per Share
                                                             Income       Shares     Amount       Income       Shares      Amount
-----------------------------------------------------------------------------------------------------------------------------------
Basic EPS
Income available to common stockholders....................  $7,990       66,710      $0.12       $ 7,446      41,777       $ 0.18
                                                                                     ======                                 ======
Effect of Dilutive Securities
   Warrants................................................       -            -                        -          66
   Options.................................................       -          628                        -       1,181
                                                             ------       ------                  -------      ------
Diluted EPS
Income available to common stockholders and
   assumed conversions.....................................  $7,990       67,338      $0.12       $ 7,446      43,024       $ 0.17
                                                             ======       ======     ======       =======      ======       ======
</TABLE>

     At March 31, 2003, warrants  representing  7,873,206 shares of common stock
and  stock  options   representing   5,976,866   shares  of  common  stock  were
outstanding.  At March 31,  2002,  warrants  representing  12,145,019  shares of
common stock and stock  options  representing  5,284,384  shares of common stock
were  outstanding.  For the three month period  ended March 31, 2003,  7,873,206
shares  representing  warrants and 3,130,100 shares  representing  stock options
were excluded from the diluted earnings per share calculations because they were
anti-dilutive.  For the three month period  ending  March 31,  2001,  11,446,697
shares  representing  warrants and 3,313,200 shares  representing  stock options
were excluded from the diluted earnings per share calculations because they were
anti-dilutive.

NOTE 6 - DEBT

     Notes  payable and  long-term  debt at March 31, 2003 and December 31, 2002
consisted of the following:

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

                                                                     3/31/2003      12/31/2002
                                                                    -----------    ------------
Long-Term Debt:
  Bank debt under revolving credit agreements due
    May 2, 2006..................................................     $164,175         $125,000
  Term note payable due March 7, 2004, non-recourse..............        4,652            7,000
  Production payment liability, non-recourse.....................           87              114
  Capital lease obligations......................................        8,878            9,371
  10% Senior unsecured notes, due June 1, 2007...................      101,814          129,466
  9.6% Senior unsecured notes, due March 15, 2012................      300,000          300,000
                                                                    ----------        ---------
                                                                       579,606          570,951
  Less:  Current portion of capital lease obligations............        1,871            1,865
  Less:  Current portion of term note payable, non-recourse......        4,652                -
                                                                    ----------        ---------
Total Long-Term Debt                                                  $573,083         $569,086
                                                                    ==========        =========
</TABLE>

     On January 27, 2003, we redeemed $30 million in principal of our 10% Senior
Notes at a redemption  price of 105%. We paid the holders of the redeemed  Notes
$31.5  million plus  accrued and unpaid  interest of $467  thousand.  Of the $30
million redeemed, Canvasback received $2.3 million.

                                       8
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

     We amended our Senior Bank Credit Facility (the "Facility") on May 2, 2003.
The amended Facility provides for a borrowing base of $300 million, up from $250
million.  Additionally,  the expiration date of the Facility was extended to May
2,  2006.  We will  use the  increased  borrowing  capacity  to  fund  the  Note
repurchase  announced on May 2, 2003,  under which we will redeem $50 million in
principal  amount of our  outstanding  10% Senior Notes on June 2, 2003. We will
pay a redemption price of 103.3% of par plus accrued interest,  or approximately
$51.7 million.

NOTE 7 - 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  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.

     We were  obligated  to seven crude oil  derivatives,  eighteen  natural gas
derivatives,   and  two  interest  rate  derivatives  on  March  31,  2003.  All
outstanding  derivatives  qualify for cash flow hedge  accounting  treatment  as
defined within SFAS No. 133, which requires derivative assets and liabilities to
be  recorded  at their fair value on the  balance  sheet with an offset to other
comprehensive  income. Hedge  ineffectiveness on cash-flow hedges is recorded in
earnings.

     At March 31,  2003,  the fair value of the  company's  derivatives  were as
follows (in thousands):

        Derivative Liabilities
        --------------------------------------------------
        Natural gas collars...............................     $ 33,294
        Natural gas swaps.................................       13,508
        Crude oil collars.................................        3,089
        Crude oil swaps...................................        2,157
        Interest rate swaps...............................          758
                                                          -------------
        Total derivative liabilities......................     $ 52,806
                                                          =============

     Of the $52.8  million  derivative  liability,  $47.8 million is included in
trade  payables and accrued  liabilities on our condensed  consolidated  balance
sheet at March 31, 2003.

     For the  three  month  period  ended  March  31,  2003,  the  statement  of
operations  includes a non-cash  hedging  ineffectiveness  gain of $45  thousand
related to the crude oil and natural gas derivatives and a non-cash gain of $324
thousand  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 operations  statement in
years 2003 and 2004 are a $1.0 million gain and $0.8 million gain, respectively.
It is estimated at this time that $28.6 million of other comprehensive loss will
be reclassified into the operations statement during the next 12 months.

NOTE 8 - SEGMENT DATA

     We have 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.

     Our 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 six  geographic  areas  that  are  aggregated.  The Gas
Gathering, Marketing and Processing segment includes the activities of the three
gathering  systems  and four  natural  gas  liquids  processing  plants  in four
geographic  areas that are  aggregated.  The Oil Field Services  segment has six
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.

                                       9
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

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

     Segment  data for the periods  ended  March 31,  2003 and 2002  follows (in
thousands):
<TABLE>
<CAPTION>
<S>                                            <C>            <C>              <C>         <C>          <C>          <C>

                                                               Gas Gathering,
                                                Exploration &   Marketing &     Oil Field
   Three Months Ended March 31, 2003:           Production      Processing      Services    All Other   Elimination  Consolidated
----------------------------------------------------------------------------------------------------------------------------------
Revenue from external customers................ $ 69,590         $9,385           $1,079        $  -     $               $ 80,054
Intersegment revenue...........................      400          6,416            3,485           -      (10,301)              -
Depreciation, depletion, amortization and
  accretion....................................   20,597            576              146         205                       21,524

Segment profit (loss)..........................   26,869          2,263               75      (3,293)                      25,914
Equity in earnings of affiliates...............                                                  288                          288
Interest expense...............................                                              (12,578)                     (12,578)
Costs relating to early retirement of debt.....                                               (1,855)                      (1,855)
Other income...................................                                                  487                          487
                                                                                                                         --------
Income before income taxes.....................                                                                            12,256
Provision for income tax expense...............                                               (4,665)                      (4,665)
Cumulative effect of a change in accounting                                                      399                          399
  principle....................................                                                                          --------
Net income.....................................                                                                           $ 7,990
                                                                                                                         ========
</TABLE>

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

                                                               Gas Gathering,
                                              Exploration &    Marketing &      Oil Field
   Three Months Ended March 31, 2002:         Production       Processing       Services     All Other  Elimination  Consolidated
---------------------------------------------------------------------------------------------------------------------------------

Revenue from external customers............... $  39,150         $  3,582         $ 392       $    -     $              $ 43,124
Intersegment revenues.........................                      2,483           417            -      (2,900)              -
Depreciation, depletion, amortization and
  accretion...................................    14,542              370           105           79                      15,096

Segment profit (loss).........................    10,451              472           (77)      (1,549)                      9,297
Equity in earnings of affiliates..............                                                   301                         301
Interest expenses.............................                                                (7,505)                     (7,505)
Costs relating to early retirement of debt....                                                (1,000)                     (1,000)
Other income (expense)........................                                                  (536)                       (536)
                                                                                                                    ------------
Income before income taxes....................                                                                               557
Provision for income tax benefit..............                                                 6,889                       6,889
                                                                                                                    ------------
Net income....................................                                                                          $  7,446
                                                                                                                    ============
</TABLE>


NOTE 9 - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

     The company  and our wholly  owned  subsidiaries,  except  Canvasback,  are
direct  guarantors  of our 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 our 10% Senior Notes and 9.6% Senior Notes,
Canvasback  cannot be included in determining  compliance with certain financial
covenants under our credit agreements. We have 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
March 31, 2003 and December 31, 2002, and for the three-month period ended March
31, 2003 and 2002 were as follows:

                                       10
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

                 Magnum Hunter Resources, Inc. and Subsidiaries
                     Condensed Consolidating Balance Sheets
<TABLE>
<CAPTION>
<S>                                               <C>                     <C>                <C>               <C>

                                                      As of March 31, 2003
-----------------------------------------------------------------------------------------------------------------------------------
                                                    Magnum Hunter          Canvasback                            Magnum Hunter
                                                    Resources, Inc. and    Energy, Inc.                          Resources, Inc.
  Amounts in Thousands                              Guarantor Subs         (Non Guarantor)     Eliminations      Consolidated
  ---------------------------------------------------------------------------------------------------------------------------------

  ASSETS
  Current assets...................................    $  117,930              $  4,328         $  (21,296)         $  100,962
  Property and equipment
     (using full cost accounting)..................     1,040,676                 7,443                  -           1,048,119
  Investment in subsidiaries
     (equity method)...............................        16,136                     -            (16,136)                  -
  Investment in Parent.............................             -                42,040            (42,040)                  -
  Other assets.....................................        68,640                   601                  -              69,241
                                                    -------------           -----------         -----------       ------------
     Total assets                                      $1,243,382              $ 54,412         $  (79,472)         $1,218,322
                                                    =============           ===========         ===========       ============

  LIABILITIES AND STOCKHOLDERS'
  EQUITY
  Current liabilities..............................    $  136,568              $ 26,010         $  (21,296)         $  141,282
  Long-term liabilities............................       727,267                12,266             (8,186)            731,347
  Stockholders' equity.............................       379,547                16,136            (49,990)            345,693
                                                    -------------           -----------         -----------       ------------
     Total liabilities and stockholders' equity....    $1,243,382              $ 54,412         $  (79,472)         $1,218,322
                                                    =============           ===========         ===========       ============
</TABLE>

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

                                                     As of December 31, 2002
-----------------------------------------------------------------------------------------------------------------------------------
                                                      Magnum Hunter          Canvasback                         Magnum Hunter
                                                      Resources, Inc. and    Energy, Inc.                       Resources, Inc.
  Amounts in Thousands                                Guarantor Subs         (Non Guarantor)   Eliminations     Consolidated
  ---------------------------------------------------------------------------------------------------------------------------------

  ASSETS
  Current assets....................................     $   110,584            $  4,036        $  (16,524)        $   98,096
  Property and equipment
     (using full cost accounting)...................         994,766               6,843                 -          1,001,609
  Investment in subsidiaries
     (equity method)................................          15,431                   -           (15,431)                 -
  Investment in Parent..............................               -              39,563           (39,563)                 -
  Other assets......................................          69,345                 729                 -             70,074
                                                      --------------        ------------        -----------      ------------
     Total assets...................................     $ 1,190,126            $ 51,171        $  (71,518)        $1,169,779
                                                      ==============        ============        ===========      ============

  LIABILITIES AND STOCKHOLDERS'
  EQUITY
  Current liabilities...............................     $   129,092            $ 16,551        $  (16,524)        $  129,119
  Long-term liabilities.............................         681,809              19,189           (10,534)           690,464
  Stockholders' equity..............................         379,225              15,431           (44,460)           350,196
                                                      --------------        ------------        -----------      ------------
     Total liabilities and stockholders' equity.....     $ 1,190,126            $ 51,171        $  (71,518)        $1,169,779
                                                      ==============        ============        ===========      ============
</TABLE>

                                       11
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)



                 Magnum Hunter Resources, Inc. and Subsidiaries
                Condensed Consolidating Statement of Operations
<TABLE>
<CAPTION>
<S>                                     <C>                      <C>                      <C>                   <C>

                                          For the Three Months Ended March 31, 2003
-----------------------------------------------------------------------------------------------------------------------------------
                                         Magnum Hunter             Canvasback                                     Magnum Hunter
                                         Resources, Inc. and       Energy, Inc.                                   Resources, Inc.
Amounts in Thousands                     Guarantor Subs            (Non Guarantor)          Eliminations          Consolidated
-----------------------------------------------------------------------------------------------------------------------------------

Revenues................................        $ 78,880              $  1,174                  $     -              $  80,054
Expenses................................          67,814                   272                        -                 68,086
                                           --------------          ------------              -----------           ------------
Income before equity in sub earnings....          11,066                   902                        -                 11,968
Equity in net earnings of subsidiary....             894                  (121)                    (485)                   288
                                           --------------          ------------              -----------           ------------
Income before income taxes..............          11,960                   781                     (485)                12,256
Income tax provision....................          (4,369)                 (296)                       -                 (4,665)
                                           --------------          ------------              -----------           ------------
Income before cumulative change.........           7,591                   485                     (485)                 7,591
Cumulative change.......................             399                     -                        -                    399
                                           --------------          ------------              -----------           ------------
   Net income...........................        $  7,990              $    485                  $  (485)             $   7,990
                                           ==============          ============              ===========           ============
</TABLE>

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

                                       For the Three Months Ended March 31, 2002
-----------------------------------------------------------------------------------------------------------------------------------
                                           Magnum Hunter              Canvasback                            Magnum Hunter
                                           Resources, Inc. and        Energy, Inc.                          Resources, Inc.
Amounts in Thousands                       Guarantor Subs             (Non Guarantor)    Eliminations       Consolidated
-----------------------------------------------------------------------------------------------------------------------------------

Revenues...............................           $  42,862              $   262            $    -                $  43,124
Expenses...............................              42,675                  193                 -                   42,868
                                              -------------           ----------          ---------             -----------
Income before equity in sub earnings...                 187                   69                 -                     256
Equity in net earnings of subsidiary...                 344                    -               (43)                    301
                                              -------------           ----------          ---------             -----------
Income before income taxes.............                 531                   69               (43)                    557
Income tax provision...................               6,915                  (26)                -                   6,889
                                              -------------           ----------          ---------             -----------
   Net income..........................           $   7,446              $    43            $  (43)               $  7,446
                                              =============           ==========          =========             ===========

</TABLE>

                 Magnum Hunter Resources, Inc. and Subsidiaries
                Condensed Consolidating Statements of Cash Flows
<TABLE>
<CAPTION>
<S>                                         <C>                       <C>                   <C>               <C>

                                For the Three Months Ended March 31, 2003
-----------------------------------------------------------------------------------------------------------------------------------
                                             Magnum Hunter               Canvasback                             Magnum Hunter
                                             Resources, Inc. and         Energy, Inc.                           Resources, Inc.
Amounts in Thousands                         Guarantor Subs              (Non Guarantor)     Eliminations       Consolidated
-----------------------------------------------------------------------------------------------------------------------------------

Cash flow from operating activities......          $ 31,858                $  5,911            $      -             $  37,769
Cash flow from investing activities......           (35,376)                 (3,368)              2,477               (36,267)
Cash flow from financing activities......             3,883                  (2,420)             (2,477)               (1,014)
                                                 ------------            ------------         ----------          ------------
Net increase in cash.....................               365                     123                   -                   488
Cash at beginning of period..............             2,540                     529                   -                 3,069
                                                 ------------            ------------         ----------          ------------
   Cash at end of period.................          $  2,905                $    652            $      -             $   3,557
                                                 ============            ============         ==========          ============
</TABLE>

                                       12
<PAGE>

                 MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                 March 31, 2003
                                   (Unaudited)

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

                                           For the Three Months Ended March 31, 2002
-----------------------------------------------------------------------------------------------------------------------------------
                                          Magnum Hunter             Canvasback                                   Magnum Hunter
                                          Resources, Inc. and       Energy, Inc.                                 Resources, Inc.
Amounts in Thousands                      Guarantor Subs            (Non Guarantor)            Eliminations      Consolidated
-----------------------------------------------------------------------------------------------------------------------------------

Cash flow from operating activities......     $  (26,058)             $   2,076                  $    -            $   (23,982)
Cash flow from investing activities......        (60,021)                (2,415)                      -                (62,436)
Cash flow from financing activities......         88,616                 (1,102)                      -                 87,514
                                             ------------           -----------                 --------          -------------
Net increase (decrease) in cash..........          2,537                 (1,441)                      -                  1,096
Cash at beginning of period..............            730                  2,025                       -                  2,755
                                             ------------           -----------                 --------          -------------
   Cash at end of period.................     $    3,267              $     584                  $    -            $     3,851
                                             ============           ===========                 ========          =============
</TABLE>


NOTE 10 - SUBSEQUENT EVENTS

     On  April  5,  2003,  we  reached  an  agreement  for the  sale of  certain
properties,  primarily located in southern Louisiana,  considered to be non-core
assets.  The  preliminary  purchase  price,  subject to certain  purchase  price
adjustments, has been set at $13.4 million. The sale is scheduled to close on or
before May 31, 2003.

     On May 1, 2003, we closed  20,000  Mmbtu/d of natural gas collar hedges for
June through  December  2003.  In closing these  contracts,  we locked in a $5.7
million loss which will be recognized in earnings with the underlying forecasted
commodity sales transactions in June through December 2003.

     On May 2, 2003,  our Senior bank credit  Facility was amended to allow for,
among other items,  an increase in the borrowing  base from $250 million to $300
million and the extension of the maturity of the Facility to May 2, 2006.

     On May 2,  2003,  we  announced  our  election  to redeem  $50  million  in
principal  amount of our  outstanding  10% Senior Notes on June 2, 2003. We will
pay a redemption price of 103.3% of par plus accrued interest,  or approximately
$51.7 million.

                                       13
<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
our  consolidated  financial  statements  and the  notes  associated  with  them
contained in our Form 10-K for the fiscal year ended  December  31,  2002.  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.

     There have been no  changes to our  critical  accounting  policies  for the
three  month  period  ended  March 31,  2003,  except for  accounting  for asset
retirement  obligations and accounting for gains and losses from  extinguishment
of debt. SFAS No. 143,  "Accounting for Asset  Retirement  Obligations",  became
effective  for  us  beginning  January  1,  2003.  SFAS  No.  143  requires  the
recognition of a fair value liability for any retirement  obligations associated
with  long-lived  assets.  The offset to any liability  recorded is added to the
recorded asset and the additional  amount is depreciated over the same period as
the long-lived  asset for which the retirement  obligation is established.  SFAS
No. 145,  "Recission  of FASB  Statements  No. 4, 44 and 64,  Amendment  of FASB
Statement  No. 13, and  Technical  Corrections",  was effective for us beginning
January 1, 2003.  SFAS No. 145 requires us to classify gains or losses from debt
extinguishment  as additional  interest  expense.  For a discussion of our other
critical  accounting  policies,  refer to the Company's Form 10-K for the period
ended December 31, 2002.

     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.

     Our  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.

     During  the first  quarter  of 2002,  we 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.  Accordingly,
the results of operations for the three months ended March 31, 2002 include only
one month of activity  related to Prize  while the same period in 2003  includes
three months of activity related to Prize.

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

                                                        Three Months Ended
                                                            March 31,
                                                -------------------------------
Oil and Gas Operations                              2003                   2002
---------------------------------------------   -----------            --------

Reported Production:
   Oil (Mbbls)................................         957                  670
   Gas (MMcf).................................      11,322                9,068
   Oil and Gas (Mmcfe)........................      17,063               13,089
   Equivalent Daily Rate (Mmcfe/day)..........       189.6                145.4
Average Sale Prices (after hedging)
   Oil (per Bbl)..............................     $ 27.39              $ 21.04
   Gas (per Mcf)..............................        3.83                 2.76
   Oil and Gas (per Mcfe).....................        4.08                 2.99
Effect of hedging activities (per Mcfe).......       (1.76)                0.44
Lease Operating Expense (per Mcfe)
   Lifting costs..............................        0.76                 0.68
   Production tax and other costs.............        0.54                 0.33
Gross margin (per Mcfe).......................        2.78                 1.98
Depreciation and depletion (per Mcfe).........     $  1.17              $  1.11

                                       14
<PAGE>

                                                         Three Months Ended
                                                             March 31,
                                                       -----------------------
Gas Gathering, Marketing and Processing Operations       2003           2002
----------------------------------------------------   --------       --------

Throughput Volumes (Mcf per day)
   Gathering....................................        15,514         15,257
   Processing...................................        22,768         17,880
Gross margin (in thousands).....................       $ 2,839        $   902
   Gathering (per Mcf throughput)...............       $  0.18        $  0.13
   Processing (per Mcf throughput)..............       $  1.25        $  0.38

Period-to-Period Comparison

For the Three Months Ended March 31, 2003 and 2002

     We reported net income of $8.0 million for the three months ended March 31,
2003,  as compared to net income of $7.4 million for the same period in 2002, an
increase  of 7%.  Total  operating  revenues  increased  86% to  $80.1  million,
operating  profit  increased  179% to $25.9 million and net income before income
tax increased  2,100% to $12.3 million in the 2003 period,  due primarily to the
Prize merger and  increases in commodity  prices in the 2003 period  compared to
the 2002 period. We recorded deferred income tax expense of $4.7 million for the
three  months in 2003 versus a deferred tax benefit of $6.9 million for the same
period in 2002. The 2002 period income tax benefit resulted from the elimination
of the $7.1 million  valuation  allowance that had been carried against deferred
tax assets derived from net operating loss carryovers.  As a result of the Prize
merger, we believe that this tax asset can be fully realized.  Additionally, the
2003  period  includes  the  cumulative  effect  on prior  years of a change  in
accounting  principle  due to the  adoption  of SFAS No. 143  relating  to asset
retirement  obligations.  The cumulative effect was a gain of $399 thousand, net
of income tax  expense  of $244  thousand,  or $0.01 per  share,  both basic and
diluted.  Basic and  diluted  earnings  per share were $0.12 in the 2003  period
versus basic and diluted earnings per share of $0.18 and $0.17, respectively, in
the 2002 period.  The decline in earnings per share was caused by an increase in
basic and diluted shares outstanding of 60% and 57%, respectively,  primarily as
a result of the Prize merger.

Oil and Gas Operations:

     For the three months ended March 31, 2003,  we reported oil  production  of
957  thousand  barrels and gas  production  of 11.3  billion  cubic feet,  which
represents  an  increase  of 43% in oil  produced  and an increase of 25% in gas
produced from the comparable period in 2002. Our reported  equivalent daily rate
of production on a million cubic feet per day basis (Mmcfe/day) increased 30% to
189.6 Mmcfe/day in the 2003 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  86% to $26.2  million in the first quarter of 2003
compared  to the same  period in 2002.  The oil price  received,  after  hedging
effects,  was $27.39 per Bbl in the 2003  period  compared to $21.04 per Bbl for
the same period in 2002, an increase of 30%. Gas revenues increased 73% to $43.4
million in the first  quarter of 2003  versus the same  period in 2002.  The gas
price  received,  after hedging  effects,  was $3.83 per Mcf in 2003 compared to
$2.76 per Mcf for the same period in 2002, an increase of 39%.

     From time to time,  we enter into various  commodity  hedging  contracts in
order to reduce our exposure to the possibility of declining oil and gas prices.
During the 2003 period,  hedging decreased the average price we received for oil
by $5.07 per Bbl and  decreased  the average  price we received for gas by $2.22
per Mcf. During the first quarter of 2003, we had  approximately  60.0 MMcf/d of
gas of gas hedged  through  fixed price swaps with a weighted  average  price of
$3.01 per MMbtu and  approximately  40.0 MMcf/d of gas hedged through  cost-less
collars  with a weighted  average  floor price of $3.06 per MMbtu and a weighted
average  ceiling  price of $4.30 per MMbtu.  Approximately  79% of first quarter
2003 natural gas production was hedged.  On the crude side, we had approximately
1,000 Bbls/d hedged  through fixed price swaps with a weighted  average price of
$21.25  per barrel and  approximately  6,000  Bbls/d  hedged  through  cost-less
collars  with a weighted  average  floor  price of $23.00 per Bbl and a weighted
average ceiling price of $27.00 per Bbl. Approximately 66% of first quarter 2003
crude oil  production  was  hedged.  For the  second  quarter  of 2003,  we have
approximately  60.0 MMcf/d of gas  production  hedged  through fixed price swaps
with a weighted average price of $3.01 per MMbtu and  approximately  40.0 MMcf/d
of gas production hedged through cost-less collars with a weighted average floor
price of $3.06 and a weighted  average ceiling price of $4.30. For the third and
fourth quarters of 2003, we have  approximately 10.0 MMcf/d hedged through fixed
price swaps with a weighted  average price of $3.65 per MMbtu and  approximately
90.0 MMcf/d hedged through cost-less collars with a weighted average floor price
of $2.89 and a weighted  average  ceiling price of $3.87.  In addition,  for the
remainder of 2003, we have hedged 1,000 Bbls/d of crude oil

                                       15
<PAGE>

production  through a fixed  price  swap with a price of $21.25 per Bbl and
6,000 Bbls/d of crude oil production  through  cost-less collars with a weighted
average  floor price of $23.00 per Bbl and a weighted  average  ceiling price of
$27.00 per Bbl.

     On May 1, 2003, we closed  20,000  Mmbtu/d of natural gas collar hedges for
June through  December  2003.  In closing these  contracts,  we locked in a $5.7
million loss which will be recognized in earnings with the underlying forecasted
commodity sales transactions in June through December 2003.

     Lease  operating  expense  consists of lifting costs and production tax and
other costs.  For the 2003 period,  lifting costs were $12.9 million versus $8.9
million in the 2002 period, an increase of 45%. Production taxes and other costs
were $9.2 million in the 2003 period versus $4.3 million in the 2002 period,  an
increase  of 113%.  Both  increases  were  primarily  attributable  to the Prize
merger. For the 2003 period,  lifting costs, on a unit of production basis, were
$0.76 per Mcfe as compared to $0.68 per Mcfe in the 2002 period,  an increase of
12% 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  $0.54 per Mcfe in the 2003
period  compared to $0.33 per Mcfe in the 2002  period,  an increase of 64%. The
increase is primarily due to higher  production taxes caused by higher commodity
prices received in the 2003 period.

     Our gross margin realized from oil and gas operations (oil and gas revenues
less lease operating  expenses) for the 2003 period was $47.4 million,  or $2.78
per Mcfe,  compared to $25.9 million,  or $1.98 per Mcfe in the 2002 period,  an
increase of 40% on a per unit of production basis, as a result of a 36% increase
in revenue per Mcfe,  offset by a 29%  increase in lease  operating  expense per
Mcfe.

     Depreciation,  depletion and accretion of oil and gas  properties was $20.0
million in 2003 versus $14.5 million in 2002. The 2003 period included accretion
expense  relating to asset  retirement  obligations (due to the adoption of SFAS
No. 143) of $638  thousand.  On a unit of  production  basis,  depreciation  and
depletion  expense was $1.17 per Mcfe  produced in the 2003 period  versus $1.11
per Mcfe produced in the 2002 period.  This 5% increase in the  equivalent  unit
cost was due primarily to an increase in development  costs  associated with our
activities in the Gulf of Mexico.

     Segment  profit for oil and gas  operations was $26.9 million for the three
months of 2003 versus $10.5  million for the same period in 2002, an increase of
156%.

Gathering, Marketing and Processing Operations:

     For the  three  months  ended  March 31,  2003,  our gas  gathering  system
throughput  was 15.5 MMcf/day  versus 15.3 MMcf/day for the same period in 2002,
an increase of 2%. Gas  processing  throughput  was 22.8 MMcf/day in 2003 versus
17.9 MMcf/day in 2002, an increase of 27%. 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 162% to
$9.4  million in 2003 versus $3.6 million in 2002.  Operating  costs for the gas
gathering,  marketing and processing  segment  increased 144% to $6.5 million in
2003 from $2.7 million in 2002.  Both the revenues and operating  cost increases
were the result of increased  gas  processing  throughput  and higher  commodity
prices.

     The gross margin realized from gas gathering,  marketing and processing for
the 2003 period was $2.8 million  versus $902  thousand in the 2002  period,  an
increase of 215%.  The gas  gathering  margin was $0.18 per Mcf gathered in 2003
versus $0.13 per Mcf in 2002 due to higher gathering fees and commodity  prices.
The gas processing margin was $1.25 per Mcf in 2003 compared to $0.38 per Mcf in
2002, due to the addition of the Elmore City plant and improved plant processing
spreads.

     Depreciation  expense for gas  gathering,  marketing and processing for the
2003 period was $576 thousand  versus $370 thousand for the same period in 2002,
an  increase  of 56% due to the  addition  of the Elmore City plant in the Prize
merger.

     Segment profit for the gas gathering,  marketing and processing segment was
$2.3 million in the 2003 period  versus $472  thousand  for the 2002 period,  an
increase of 387%.

Oil Field Management Services Operations:

     Revenues from oil field management  services increased 175% to $1.1 million
in the first  quarter of 2003 versus $392 thousand in the first quarter of 2002.
This increase is primarily due to the Prize merger.  Operating  costs  increased
211% to $857 thousand in 2003 from 2002, also due to the Prize merger. The gross
margin for this segment in 2003 was $222 thousand  versus $116 thousand in 2002,
an increase of 91%, due to overhead costs charged. Depreciation expense was

                                       16
<PAGE>

$146  thousand in the 2003 period  versus $105 thousand in the 2002 period,
an increase of 39% due to the Prize merger.  Segment profit was $75 thousand for
the three  months in 2003 versus a loss of $77  thousand  for the same period in
2002.

Other Income and Expenses:

     Total depreciation, depletion, amortization and accretion expense was $21.5
million in the 2003 period versus $15.1 million in the 2002 period,  an increase
of 42% primarily a result of increased production due to the Prize merger.

     General and  administrative  expense for 2003 increased 26% to $3.2 million
from $2.5 million in 2002.  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 $288 thousand in 2003 versus earnings of $301
thousand in 2002. This decrease was due to net losses from operations of our 32%
owned remote data gathering  affiliate.  Other income was $118 thousand for 2003
versus $57  thousand in 2002,  caused by an increase  in  interest  income.  The
company recognized a $369 thousand gain in other non-cash hedging adjustments in
2003 versus a $593 thousand  loss in 2002. In the 2003 period,  $324 thousand of
the hedging gain relates to the  amortization of commodity hedge assets acquired
in  the  Prize   merger,   while  $45  thousand  was  due  to  recording   hedge
ineffectiveness.

     We incurred  costs  associated  with the early  retirement  of debt of $1.9
million in the three  months of 2003 versus  $1.0  million in the same period of
2002. The 2003 period costs were associated with the $30.0 million redemption of
our 10% Senior Notes in January 2003. The 2002 period costs were associated with
the amendment of our senior bank credit  facility in  connection  with the Prize
merger.

     Interest  expense was $12.6  million for 2003 versus $7.5 million for 2002,
as a result of the  addition of $300  million in 9.6% Senior Notes in March 2002
in connection  with the Prize merger.  Our weighted  average  interest rate paid
under our senior bank credit facility was 3.3% in the 2003 period versus 4.4% in
the 2002 period.

     The  effective  tax rate was 38.1% and  (123.7)% for the three months ended
March 31, 2003 and 2002,  respectively.  The variance from the statutory rate of
35% was due to state  income  taxes in the 2003 period and to the release of the
valuation  allowance  on  previously  reserved  deferred  tax assets in the 2002
period.

Liquidity and Capital Resources

     CASH FLOW AND  WORKING  CAPITAL.  Net cash  provided  (used)  by  operating
activities  for the three  month  period in 2003 and 2002 was $37.8  million and
$(24.0) million,  respectively.  The substantial  increase in our operating cash
flows in 2003 from 2002 was primarily the result of large  payments in the first
quarter of 2002 on payables that had  accumulated at year-end as well as current
liability  balances  acquired in the merger with Prize. We also benefited in the
2003 period from the return of $8.9  million in margins we had posted on certain
commodity hedged  positions.  Our net working capital position at March 31, 2003
was a deficit of $40.3  million,  which  included a $47.8  million  net  current
derivative  liability  on commodity  and  interest  rate hedges due to continued
increases in commodities  prices over our hedged prices.  If actual  commodities
prices  realized remain higher than our hedged prices during 2003, the resulting
higher cash proceeds from our production will offset any amounts ultimately paid
out on these  derivative  liabilities.  At March 31, 2003,  we had $83.3 million
available to be drawn under our Senior Bank credit facility (the "Facility").

     Although there were higher commodities prices received on our production in
the first quarter of 2003 over the prior year's same period, our realized prices
(after commodity  hedges) were lowered by  approximately  $1.76 per Mcfe for our
combined oil and gas production.  Approximately 79% of our first quarter natural
gas production was hedged;  60% of these hedged volumes were through fixed price
swaps with a weighted  average  price of $3.01 per Mmbtu,  and 40% were  through
collars  with a weighted  average  floor price of $3.06 per MMbtu and a weighted
average  ceiling  price of $4.30 per MMbtu.  These gas  hedges  remain in effect
through June 2003; for the remainder of 2003, we have hedged  approximately  72%
of our forecasted gas  production.  Approximately  10% of our hedged volumes are
through fixed price swaps with a weighted  average price of $3.65 per MMbtu, and
90% are through  collars with a weighted  average floor price of $2.89 per Mmbtu
and a weighted  average ceiling price of $3.87 per Mmbtu.  Approximately  66% of
our first  quarter crude oil  production  was hedged;  approximately  14% of our
hedged  volumes were through fixed price swaps with a weighted  average price of
$21.25 per Bbl, and approximately 86% was hedged through collars with a weighted
average  floor of $23.00  per Bbl and a weighted  average  ceiling of $27.00 per
Bbl. These hedges remain in effect through December 2003.

     INVESTING  ACTIVITIES.  Net cash  used in  investing  activities  was $36.3
million for the three months ended March 31, 2003. We made capital  expenditures
of $35.9 million under our $100 million  capital budget during the first quarter
of 2003. Our capital  expenditures  are discussed in further  detail below.  For
2003,  we also  received  proceeds  from the sale of assets of $106 thousand and
paid out $487 thousand in revenues received on properties sold during 2002.

                                       17
<PAGE>

     Net cash  used in  investing  activities  was $62.4  million  for the three
months ended March 31, 2002. We made capital  expenditures of $19 million during
the first three months of 2002.  Additionally,  we paid $41.1 million associated
with the  Prize  merger  and  made a loan of $2.4  million  to a  minority-owned
affiliate.

     FINANCING  ACTIVITIES.  Net  cash  used by  financing  activities  was $1.0
million for the first  quarter of 2003.  We  borrowed a total of $104.1  million
during the period, and repaid borrowings of $67.8 million. We paid $29.1 million
to redeem $30.0 million in principal of our 10% Senior Notes, at a price of 105%
of par. The $31.5 million paid to redeem the Notes was reduced by  approximately
$2.4 million in redeemed Notes which were held by a wholly-owned subsidiary.  We
also loaned our KSOP $660  thousand to purchase  shares of our common  stock and
paid $7.1  million to purchase  an  additional  1.3  million  shares of treasury
stock.  We  also  spent  $318  thousand  to  purchase  stock  for  our  deferred
compensation plan.

     Net cash  provided by financing  activities  was $87.5  million in the 2002
period.  We borrowed a total of $534.2  million,  including  $300 million in new
9.6% Senior Notes, $185.6 million under the new Senior Bank credit facility, and
the remainder under the previous credit facility and from other sources.  During
the period we also repaid borrowings of $431.3 million, including $155.7 million
to pay off the previous  credit  facility,  $245.8  million to pay off the Prize
credit  facility in  connection  with the merger,  and the  remainder to pay off
other  indebtedness.  We paid $11.8  million in fees related to the newly issued
Senior Notes and the new Senior Bank credit facility, loaned $2.5 million to the
ESOP,  purchased treasury stock for $1.3 million,  and had net proceeds from the
issuance  of  common  stock  of $145  thousand.  Our  financing  activities  are
discussed in further detail below.

     CAPITAL  RESOURCES.  The following  discussion of Magnum  Hunter's  capital
resources  refers to the company and our affiliates.  Internally  generated cash
flow and the  borrowing  capacity  under our Facility  are our major  sources of
liquidity. From time to time, we may also sell non-strategic properties in order
to  increase  liquidity.  In  addition,  we 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,  we have
accessed both the public and private  capital  markets to provide  liquidity for
specific activities and general corporate purposes.

     We amended our  Facility in May 2003.  The amended  Facility  provides  for
total  borrowings  of $300  million,  up from $250  million.  Additionally,  the
expiration  date of the Facility was extended to May 2006.  The increase will be
used to retire an  additional  $50 million of our 10% Senior  Notes at 103.3% of
par plus accrued interest, or approximately $51.7 million. At March 31, 2003, we
had $83.3 million available under this Facility.

     On April 5, 2003,  we reached an agreement  for the sale of certain oil and
gas properties  considered to be non-strategic  assets. The preliminary purchase
price,  subject to certain  purchase  price  adjustments,  has been set at $13.4
million. The sale is scheduled to close on or before May 31, 2003.

     On March 7, 2002,  Canvasback entered into a $10.0 million revolving credit
agreement with a financial  institution.  This loan is collateralized by the 10%
Senior Notes  Canvasback  holds.  During 2002, this revolving loan was converted
into a $7 million term loan. The proceeds of $2.3 million received by Canvasback
by the bond  redemption  were used to reduce  the  outstanding  balance  to $4.7
million.

     On May 1,  2002,  our Board of  Directors  announced  an  expansion  of our
existing  stock  repurchase  program  originally  established  in June 2001. The
company or our affiliates were authorized to repurchase up to 2.0 million shares
of our common stock. On October 17, 2002, our Board of Directors  approved a new
3.0 million share repurchase program. Approximately 4.1 million shares have been
purchased  through March 31, 2003 under these programs,  and  approximately  900
thousand remain available for repurchase.

     On  a  semi-annual   basis,  our  borrowing  base  under  our  Facility  is
redetermined  by the financial  institutions  who have  committed to the company
based on their  review of our 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 June 30, 2003.

     Our internally  generated cash flow,  results of operations,  and financing
for our operations  are  substantially  dependent on oil and gas prices.  To the
extent  that oil and gas  prices  decline,  our  earnings  and cash flows may be
adversely affected in spite of our commodity hedging activities. We believe that
our cash flow from operations,  existing working capital and availability  under
our  Facility  will be  sufficient  to meet  interest  payments  and to fund the
capital expenditure budget for the year 2003.

     CAPITAL   EXPENDITURES.   During  the  2003  period,   our  total   capital
expenditures  were $35.9  million.  Exploration  activities  accounted for $12.0
million,  development  activities  accounted  for $20.9  million,  additions  to
unproved

                                       18
<PAGE>

properties not accounted for as  exploration  or  development  expenditures
accounted  for $2.9 million,  and  additions to other assets  accounted for $125
thousand of the capital  expenditures.  We  participated  in the  drilling of 29
wells during the 2003 period, of which 26 were considered successful.  Of the 29
wells drilled, 7 were exploratory wells, of which 4 were successful, and 22 were
development  wells, all of which were  successful.  As of March 31, 2003, we had
total unproved oil and gas property costs of $167.0 million.

     For calendar  year 2003, we have  budgeted  approximately  $100 million for
exploration and development  activities.  We are not contractually  obligated to
proceed with any of our material budgeted capital  expenditures.  The amount and
allocation  of future  capital  expenditures  will depend on a number of factors
that are not  entirely  within our  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, we review opportunities for the
possible  acquisition  of oil and gas reserves and activities  related  thereto.
When potential  acquisition  opportunities are deemed consistent with our growth
strategy,  bids or offers in  amounts  and with  terms  acceptable  to us may be
submitted.  It is  uncertain  whether  any  such  bids or  offers  which  may be
submitted by us from time to time,  will be  acceptable  to the sellers.  In the
event of a future significant  acquisition,  we 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.  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 2003 period, we experienced  significant  increases in the price
for both oil and natural 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 natural gas prices. Should
we  experience  a  significant  increase  in oil and  natural gas prices that is
sustained  over a prolonged  period,  we would expect that there would also be a
corresponding  increase in oil and gas finding costs,  lease acquisition  costs,
and operating expenses.  Periodically, we enter into hedging contracts to reduce
the effects of significant  fluctuations in crude oil and natural gas prices. At
inception,  commodity  hedge positions may not exceed 75% of the natural gas and
90% of the crude oil forecasted  current (18 months) commodity  production.  For
non-current  (greater  than  18  months)  commodity  production,  at  inception,
commodity  hedge  positions  for natural gas and crude oil may not exceed 75%. A
portion  of our  oil  and  natural  gas  production  will be  subject  to  price
fluctuations  unless we enter  into  additional  hedging  transactions.  For the
remainder  of 2003,  we have  approximately  70% of our  combined  crude oil and
natural gas production hedged.

     We market oil and natural gas for our own account,  which exposes us to the
attendant  commodities  risk. A large  portion of our natural 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.  We normally sell our
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

                                       19
<PAGE>

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.

     We were  obligated  to seven crude oil  derivatives,  eighteen  natural gas
derivatives,   and  two  interest  rate  derivatives  on  March  31,  2003.  All
outstanding  derivatives  qualify for cash flow hedge  accounting  treatment  as
defined within SFAS No. 133, which requires derivative assets and liabilities to
be  recorded  at their fair value on the  balance  sheet with an offset to other
comprehensive  income. Hedge  ineffectiveness on cash-flow hedges is recorded in
earnings.

     At March 31,  2003,  the fair value of the  company's  derivatives  were as
follows (in thousands):

        Derivative Liabilities
        -----------------------------------------
        Natural gas collars......................                 $ 33,294
        Natural gas swaps........................                   13,508
        Crude oil collars........................                    3,089
        Crude oil swaps..........................                    2,157
        Interest rate swaps......................                      758
                                                              ------------
        Total derivative liabilities.............                 $ 52,806
                                                              ============

     For the three month  period  ended  March 31,  2003,  the income  statement
includes a non-cash hedging  ineffectiveness gain of $45 thousand related to the
crude oil and  natural  gas  derivatives  and a non-cash  gain of $324  thousand
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 2003 and
2004  are a $1.0  million  gain  and  $0.8  million  gain,  respectively.  It is
estimated at this time that $28.6  million of other  comprehensive  loss will be
reclassified into the income statement during the next 12 months.

     On May 1, 2003, we closed  20,000  Mmbtu/d of natural gas collar hedges for
June through  December  2003.  In closing these  contracts,  we locked in a $5.7
million loss which will be recognized in earnings with the underlying forecasted
commodity sales transactions in June through December 2003.

New Accounting Standards

     SFAS No. 143 - SFAS No. 143, "Accounting for Asset Retirement Obligations",
became  effective   beginning  January  1,  2003.  SFAS  No.  143  requires  the
recognition of a fair value liability for any retirement  obligation  associated
with  long-lived  assets in the period in which it is incurred  if a  reasonable
estimate of fair value can be made. The associated  asset  retirement  costs are
capitalized  as  part  of the  carrying  amount  of  the  long-lived  asset  and
depreciated  over the asset's  useful  life.  Upon  adoption of SFAS No. 143, we
recorded  an  addition  to oil and gas  properties  of $25.4  million,  an asset
retirement  obligation of $30.4 million, a reduction of accumulated depletion of
$5.6 million, and a pre-tax gain of $ 643 thousand.

     SFAS No. 145 - SFAS No. 145  "Recission of FASB  Statements  No. 4, 44, and
64,  Amendment  of FASB  Statement  No. 13, and  Technical  Corrections"  became
effective 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 requires us to reclassify  extraordinary items
for debt  extinguishment  costs which did 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 expense.

     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.

     SFAS No. 148 - The FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure,  an Amendment to FASB Statement No.
123", in December 2002. SFAS No. 148 provides  alternative methods of transition
for a voluntary  change to the fair value method of accounting  for  stock-based
employee compensation and amends the disclosure requirements of SFAS No. 123. We
have no plans at this time to change our method to the fair value  based  method
from the  intrinsic  value  method.  We  account  for our  stock-based  employee
compensation  plans under

                                       20
<PAGE>

the  measurement  and  recognition   principles  of  APB  Opinion  No.  25,
"Accounting  for  Stock  Issued  to  Employees  and  Related   Interpretations".
Accordingly,  we do not  reflect  any  stock-based  compensation  in net  income
because all options granted under these plans had an exercise price equal to the
market value of our stock on the date of grant. The following table  illustrates
the effect on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS 123 (in thousands, except for per share amounts):

<TABLE>
<CAPTION>
<S>                                                                        <C>                     <C>
                                                                               Three Months Ended March 31,
                                                                               2003                    2002
                                                                            ----------               ---------
Net income, as reported................................................        $7,990                 $7,446
     Deduct:  Total stock-based employee compensation
       determined under fair value-based  method for all awards,
       net of related tax effects......................................          (671)                  (688)
                                                                            ----------               ---------
Pro forma net income...................................................        $7,319                 $6,758
                                                                            ==========               =========
Earnings per share:
     Basic - as reported...............................................        $ 0.12                 $ 0.18
                                                                            ==========               =========
     Basic - pro forma.................................................        $ 0.11                 $ 0.16
                                                                            ==========               =========
     Diluted - as reported.............................................        $ 0.12                 $ 0.17
                                                                            ==========               =========
     Diluted - pro forma...............................................        $ 0.11                 $ 0.16
                                                                            ==========               =========
</TABLE>

     FIN No.  45 -  "Guarantor's  Accounting  and  Disclosure  Requirements  for
Guarantees",  was issued in November  2002.  This  interpretation  addresses the
disclosures  to be made by a  guarantor  in its  interim  and  annual  financial
statements  about  its  obligations  under  guarantees.  It also  clarifies  the
requirements  related to the  recognition  of a liability  by a guarantor at the
inception of a guarantee for the  obligations  the  guarantor has  undertaken in
issuing that guarantee. We adopted this statement in January 2003.

     In the past we have  provided  trade  guarantees on behalf of our 30% owned
affiliate,  NGTS,  LLC.  In the event  that NGTS,  LLC is unable to fulfill  its
obligations with certain vendors,  we would be obligated for cash payments of up
to $5.6 million to these  vendors.  We have not recorded these as a liability on
our books at March 31,  2003  because we do not expect to have to perform  under
these guarantees.  The last of these guarantees  expires in July 2003, and we do
not intend to issue any  additional  guarantees on behalf of NGTS,  LLC. We have
provided no other guarantees on behalf of any unconsolidated entities and do not
intend to issue any.

Item 3. Qualitative and Quantitative Disclosure About Market Risk

     Our operations are exposed to market risks primarily as a result of changes
in  commodity  prices and interest  rates.  We do not use  derivative  financial
instruments for speculative or trading purposes.

Commodity Price Swaps and Options

     We produce,  purchase,  and sell crude oil,  natural gas,  condensate,  and
natural gas liquids.  As a result,  our financial  results can be  significantly
impacted  as these  commodity  prices  fluctuate  widely in response to changing
market forces and conditions.  We have previously engaged in oil and gas hedging
activities and intend to continue to consider  various  hedging  arrangements to
realize  commodity  prices which we consider  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 crude oil and Henry Hub natural gas,
and the Inside FERC natural gas index price posting ("Index"). We have 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,  we pay the  spread,  and to the extent the
contract price exceeds the Index price, we receive the spread.  In addition,  we
have combined option  contracts which have agreed upon price floors and ceilings
("Costless  collars").  To the  extent  the Index  price  exceeds  the  contract
ceiling,  we pay the spread  between the ceiling and the Index

                                       21
<PAGE>

price applied tothe related  contract  volumes.  To the extent the contract
floor exceeds the Index,  we receive the spread  between the contract  floor and
the Index price applied to the related contract volumes.

     To the extent we receive  the spread  between  the  contract  price and the
Index price applied to related  contract  volumes,  we have a credit risk in the
event  of  nonperformance  of  the  counterparty  to  the  agreement.  We do not
anticipate  any  material  impact to its  results of  operations  as a result of
nonperformance by such parties.

     The  following  is a summary of our open  commodity  hedge  contracts as of
March 31, 2003:

<TABLE>
<CAPTION>
<S>                <C>               <C>                    <C>                  <C>
                                                                                    Weighted Average
Commodity              Type              Volume/Day             Duration                  Price
---------------    -------------     ------------------      ---------------       ------------------
Natural Gas            Swap            60,000 MMBTU           Apr 03 - Jun 03            $3.01
Natural Gas            Swap            10,000 MMBTU           Jul 03 - Dec 03            $3.65
Natural Gas           Collar           40,000 MMBTU           Apr 03 - Jun 03        $3.06 - $4.30
Natural Gas           Collar           90,000 MMBTU           Jul 03 - Dec 03        $2.89 - $3.87
Natural Gas           Collar           55,000 MMBTU           Jan 04 - Dec 04        $3.64 - $4.93
Crude Oil              Swap             1,000 BBL             Apr 03 - Dec 03            $21.25
Crude Oil             Collar            6,000 BBL             Apr 03 - Dec 03       $23.00 - $27.00
Crude Oil             Collar            1,000 BBL             Jan 04 - Dec 04       $23.00 - $27.00

</TABLE>

     Based on future  market  prices at March 31,  2003,  the fair value of open
commodity hedging  contracts was a liability of $52.0 million.  If future market
prices were to  increase  10% from those in effect at March 31,  2003,  the fair
value of open contracts would be a liability of $85.1 million.  If future market
prices  were to  decline  10% from those in effect at March 31,  2003,  the fair
value of the open contracts would be a liability of $27.3 million.

     At inception,  commodity  hedge positions may not exceed 75% of natural gas
and 90% of crude oil forecasted  current (18 months) commodity  production.  For
non-current  (greater  than  18  months)  commodity  production,  at  inception,
commodity  hedge  positions  for  natural  gas and crude oil may not exceed 75%.
Unhedged portions of our natural gas and crude oil production will be subject to
market price fluctuations.

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 1.34%)
</TABLE>

     Based on future  market  rates at March 31,  2003,  the fair  value of open
contracts  was a liability  of $758  thousand.  If future  market  rates were to
increase  10% from  those in effect at March 31,  2003,  the fair  value of open
contracts would be a liability of $742 thousand.  If future market rates were to
decline 10% from those in effect at March 31,  2003,  the fair value of the open
contracts would be a liability of $774 thousand.

     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 our 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 March 31,
2003.

                                       22
<PAGE>

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

             Expected Maturity Dates                 2003         2004-6        2007           2012         Total     Fair Value
  --------------------------------------------   -------------------------------------------------------------------------------
                 (in thousands)

Variable Rate Debt:
Bank Debt with Recourse (a)......................   $     -      $164,175     $      -       $      -     $164,175     $164,175
Bank Debt without Recourse (b)...................   $     -      $  4,652     $      -       $      -      $ 4,652     $  4,652
Capital Leases (c)...............................   $ 1,372      $  5,324     $  2,182       $      -      $ 8,878     $  8,878

Fixed Rate Debt:
Senior Notes (d).................................   $     -      $      -     $101,814       $      -     $101,814     $105,887
Senior Notes (e).................................   $     -      $      -     $      -       $300,000     $300,000     $324,000
Production Payment liability (f).................   $     -      $     87     $      -       $      -       $   87     $     87

</TABLE>

---------------

(a)    The average interest rate on the bank debt with recourse is 3.3%.
(b)    The average interest rate on the bank debt without recourse is 5.9%.
(c)    The average interest rate on the two capital leases is 4.7%.
(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 production payment liability is a fixed 13.5%.

Item 4. Controls and Procedures

     Our 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 our 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 our 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.

                                       23
<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*      Amendment to Fourth Amended and Restated Credit Agreement
10.4       Employment Agreement for Gary C. Evans (Incorporated by reference to Form 10-K for the fiscal
</TABLE>

                                       24

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

          year-end December 31, 1999 filed March 30, 2000)
10.5      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)
10.6      Employment Agreement for Chris Tong (Incorporated by reference to Form 10-K for the year ended
          December 31, 2002)
10.7      Employment Agreement for R. Douglas Cronk (Incorporated by reference to Form 10-K for the year
          ended December 31, 2002)
10.8      Employment Agreement for Charles Erwin (Incorporated by reference to Form 10-K for the year
          ended December 31, 2002)
10.9      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)
10.10     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)
10.11     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)
10.12     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 Section 906 of Sarbanes-Oxley Act of 2002, signed by Gary C. Evans
99.2*     Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002, signed by Chris Tong
99.3*     Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002, signed by Gary C. Evans
99.4*     Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002, signed by Chris Tong
</TABLE>

*Filed herewith

                                       25
<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                                      May 15, 2003
     -------------------------------------------------------
     Gary C. Evans
     Chairman, President and Chief Executive Officer




By   /s/  Chris Tong                                         May 15, 2003
     -------------------------------------------------------
     Chris Tong
     Senior Vice President and Chief Financial Officer



By   /s/  Morgan F. Johnston                                 May 15, 2003
     -------------------------------------------------------
     Morgan F. Johnston
     Senior Vice President, General Counsel and Secretary




By   /s/  David S. Krueger                                   May 15, 2003
     -------------------------------------------------------
     David S. Krueger
     Vice President and Chief Accounting Officer


                                       26