UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-QSB



(Mark one)

[X]      Annual Report Under Section 13 or 15(d) of The Securities  Exchange Act
         of 1934

                  For the quarterly period ending June 30, 2004

[ ]      Transition Report Under Section 13 or 15(d) of The Securities  Exchange
         Act of 1934

         For the transition period from ______________ to _____________



                         Commission File Number: 0-29613
                                                 -------

                         TIDELANDS OIL & GAS CORPORATION
        (Exact name of small business issuer as specified in its charter)

          Nevada                                               66-0549380
------------------------                                ------------------------
(State of incorporation)                                (IRS Employer ID Number)

                  1862 West Bitters Rd., San Antonio, TX 78410
                  --------------------------------------------
                    (Address of principal executive offices)

                                 (210) 764-8642
                          (Issuer's telephone number)



      Securities registered under Section 12 (b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:
                        Common Stock - $0.001 par value



Check  whether  the issuer  has (1) filed all  reports  required  to be files by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period the Company was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X  No
                                                             ---   ---

APPLICABLE  ONLY TO  ISSUERS  INVOLVED  IN  BANKRUPTCY  PROCEEDINGS  DURING  THE
PRECEDING  FIVE YEARS
Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes    No
                                                 ---   ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

As of June 30,  2004,  there were  50,528,647  shares of Common Stock issued and
outstanding.

Transitional Small Business Disclosure Format : Yes    No X
                                                   ---   ---

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                                   FORM 10-QSB

                                      INDEX
                                      -----

                                                                            Page
PART I - Financial Information

Item 1 - Financial Statements
         Condensed Consolidated Balance Sheets as of
         June 30, 2004 and December 31, 2003..............................   3-4

         Condensed Consolidated Statements of Operations
         For the Three Months Ended June 30, 2004 and 2003................     5

         Condensed Consolidated Statements of Operations
         For the Six Months Ended June 30, 2004 and 2003..................     6

         Condensed Consolidated Statements of Cash Flows
         For the Six Months Ended June 30, 2004 and 2003..................   7-8

         Notes to Condensed Consolidated Financial Statements.............  9-14

Item 2 - Management's Discussion and Analysis or Plan of Operation........ 15-18

Item 3 - Controls and Procedures..........................................    19

PART II - Other Information

Item 1 - Legal Proceedings ...............................................    20

Item 2 - Changes in Securities and Use of Proceeds........................    21

Item 3 - Defaults Upon Senior Securities..................................    21

Item 4 - Submission of Matters to a Vote of Security Holdings.............    21

Item 5 - Other Information................................................    22

Item 6 - Exhibits and Reports on Form 8K .................................    22

Signature.................................................................    22



                                      - 2 -



<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements


                         TIDELANDS OIL & GAS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                     ASSETS
                                     ------



                                             June 30, 2004     December 31, 2003
                                           -----------------   -----------------
                                              (Unaudited)

Current Assets:
      Cash                                 $       1,850,519   $         894,457
      Cash - Restricted                            1,000,000                   0
      Accounts Receivable                            540,756                 228
      Prepaid Expenses                               350,613              22,209
                                           -----------------   -----------------
         Total Current Assets                      3,741,888             916,894
                                           -----------------   -----------------

Property Plant and Equipment, Net                  6,903,775             604,192
                                           -----------------   -----------------

Investment - Reef Ventures, L.P.                           0              98,629
                                           -----------------   -----------------

Other Assets:
       Goodwill                                      673,992                   0
       Deposits                                        4,108               3,800
                                           -----------------   -----------------

         Total Other Assets                          678,100               3,800
                                           -----------------   -----------------

         Total Assets                      $      11,323,723   $       1,623,515
                                           =================   =================
















      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -3-


<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (CONTINUED)



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


                                                     June 30, 2004      December 31, 2003
                                                   -----------------    -----------------
                                                      (Unaudited)
<S>                                                <C>                  <C>
Current Liabilities:
      Accounts Payable and
          Accrued Expenses                         $         742,320    $         813,905
         Current Maturities of Long-Term Debt                150,000              325,000
                                                   -----------------    -----------------

         Total Current Liabilities                           892,320            1,138,905
                                                   -----------------    -----------------

Long-Term Debt                                             6,523,773                    0
                                                   -----------------    -----------------

         Total Liabilities                                 7,416,093            1,138,905
                                                   -----------------    -----------------

Commitments and Contingencies                                   --                   --

Stockholders' Equity:
      Common Stock, $.001 par value per share,
        100,000,000 shares authorized;
        50,528,647 shares issued and outstanding
        June 30, 2004, 44,825,302 shares issued
        and outstanding December 31, 2003                     50,529               44,826
Additional Paid-in Capital                                18,274,728           11,072,987
Subscriptions Receivable                                     (18,000)             (18,000)
Accumulated (Deficit)                                    (14,399,587)         (10,615,203)
                                                   -----------------    -----------------

         Total Stockholders' Equity                        3,907,670              484,610
                                                   -----------------    -----------------

         Total Liabilities and
              Stockholders' Equity                 $      11,323,763    $       1,623,515
                                                   =================    =================
</TABLE>












      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -4-
<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                   Three Months Ended    Three Months Ended
                                                      June 30, 2004         June 30, 2003
                                                   ------------------    ------------------
<S>                                                <C>                   <C>
Revenues:
      Gas Sales                                    $          507,712    $                0
      Other                                                         0                14,827
                                                   ------------------    ------------------
         Total Revenues                                       507,712                14,827
                                                   ------------------    ------------------

Expenses:
      Purchases                                               497,820                     0
      Operating Expenses                                        2,616                 9,268
      Depreciation                                             36,638                10,664
      Interest                                                 43,718                 7,966
      Officers & Directors Salaries & Fees                    133,750                75,000
      General and Administrative                            2,050,419               179,875

                                                   ------------------    ------------------
      Total Operating Expenses                              2,764,961               282,773
                                                   ------------------    ------------------

Net (Loss) From Operations                                 (2,257,249)             (267,946)
      Extraordinary Item - Gain on Partial Sale
        Of Subsidiary                                               0             1,533,731
       Interest Income                                          7,206                     0
                                                   ------------------    ------------------
Net Income (Loss)                                  $       (2,250,043)   $        1,265,785
                                                   ==================    ==================

Net Income (Loss) Per Common Share
      Basic
       Loss From Operations                        $            (0.05)   $            (0.01)
      Gain - Extraordinary Item                                  0.00                  0.04
                                                   ------------------    ------------------
           Total                                   $            (0.05)   $             0.03
                                                   ==================    ==================

Weighted Average Number of Common
      Shares Outstanding, Basic                            49,701,986            37,765,368
                                                   ==================    ==================

      Diluted
      Loss From Operations                         $            (0.03)   $            (0.01)
      Gain - Extraordinary Item                                  0.00                  0.04
                                                   ------------------    ------------------
           Total                                   $            (0.03)   $             0.03
                                                   ==================    ==================
Weighted Average Number of Common
      Shares Outstanding, Diluted                          62,201,986            39,765,368
                                                   ==================    ==================
</TABLE>







      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -5-


<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                   Six Months Ended    Six Months Ended
                                                     June 30, 2004       June 30, 2003
                                                   ----------------    ----------------
<S>                                                <C>                 <C>
Revenues:
      Gas Sales                                    $        507,712    $              0
      Other                                                       0              20,092
                                                   ----------------    ----------------
         Total Revenues                                     507,712              20,092
                                                   ----------------    ----------------

Operating Expenses:
      Purchases                                             497,820                   0
      Pipeline Operating Expenses                             2,616              14,693
      Depreciation                                           47,918              21,320
      Interest                                               48,437              33,641
      Officers & Directors Salaries & Fees                  336,358             150,000
      General and Administrative                          3,370,020             375,667
                                                   ----------------    ----------------
Total Operating Expenses                                  4,303,169             595,321
                                                   ----------------    ----------------

Net (Loss) From Operations                               (3,795,457)           (575,229)
      Extraordinary Item - Gain on Partial Sale
      Of Subsidiary                                               0           1,533,731
      Interest Income                                        11,073                   0
                                                   ----------------    ----------------
Net Income (Loss)                                  $     (3,784,384)   $        958,502
                                                   ================    ================

Net Income (Loss) Per Common Share
      Basic
      Loss From Operations                         $          (0.08)   $          (0.01)
      Gain - Extraordinary Item                                0.00                0.04
                                                   ----------------    ----------------
           Total                                   $          (0.08)   $           0.03
                                                   ================    ================

Weighted Average Number of Common
      Shares Outstanding, Basic                          47,676,976          37,033,618
                                                   ================    ================

      Diluted
      Loss From Operations                         $          (0.06)   $          (0.01)
      Gain - Extraordinary Item                                0.00                0.04
                                                   ----------------    ----------------
           Total                                   $          (0.06)   $           0.03
                                                   ================    ================
Weighted Average Number of Common
      Shares Outstanding, Diluted                        59,310,378          38,033,618
                                                   ================    ================
</TABLE>






      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -6-
<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                 STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
                                   (UNAUDITED)


                                                     Six Months Ended    Six Months Ended
                                                       June 30, 2004       June 30, 2003
                                                     ----------------    ----------------
<S>                                                  <C>                 <C>
Cash Flows Provided (Required) By
  Operating Activities:
    Net Income (Loss)                                $     (3,784,384)   $        958,502
    Adjustments to Reconcile Net (Loss)
         to Net Cash Provided (Required) By
         Operating Activities:

    Depreciation                                               47,918              21,320
    Issuance of Common Stock
       for Services Provided                                3,005,816             109,297
     Officers' Salaries                                             0              40,000
       Changes in:
          Accounts Receivable                                (540,528)             15,419
          Prepaid Expenses                                   (328,404)             12,176
          Other Assets                                           (308)                937
          Accounts Payable and
             Accrued Expenses                                 (33,274)           (556,818)
          Current Maturities of Long-Term Debt                      0            (302,924)
                                                     ----------------    ----------------

Net Cash Provided (Required)
   by Operating Activities                                 (1,633,164)            297,909
                                                     ----------------    ----------------

Cash Flows Provided (Required)
  By Investing Activities:
      Increase in Investments                                (575,363)            (98,629)
      Acquisitions of Property, Plant & Equipment          (6,347,501)            (92,926)
      Proceeds From Disposals of Property, Plant
        and Equipment                                               0             696,436
                                                     ----------------    ----------------

         Net Cash Provided (Required)
            by Investing Activities                        (6,922,864)            504,881
                                                     ----------------    ----------------
</TABLE>








      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -7-

<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                 STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
                                   (UNAUDITED)

                                   (CONTINUED)


                                                 Six Months Ended     Six Months Ended
                                                   June 30, 2004       June 30, 2003
                                                   -------------       -------------
<S>                                                    <C>                    <C>

Cash Flows Provided (Required)
   by Financing Activities:
      Proceeds from Issuance of Common Stock           4,088,317              50,000
      Repayment of Short-Term Loans                     (100,000)                  0
      Proceeds of Long-Term Loans                      6,523,773                   0
      Proceeds of Loans from Related Parties                   0              15,000
      Repayment of Loans Fees and Accrued
        Salaries Due Related Parties                           0            (848,671)
                                                   -------------       -------------

Net Cash Provided (Required)
  by Financing Activities                             10,512,090            (783,671)
                                                   -------------       -------------

Net Increase in Cash                                   1,956,062              19,119
Cash at Beginning of Period                              894,457             193,669
                                                   -------------       -------------

Cash at End of Period                              $   2,850,519       $     212,788
                                                   =============       =============

Supplemental Disclosures of
   Cash Flow Information:
      Cash Payments for Interest                   $      14,123       $      33,141
                                                   =============       =============

      Cash Payments for Income Taxes               $           0       $           0
                                                   =============       =============
Non-Cash Financing Activities:
   Issuance of Common Stock:
      Operating Activities                         $   3,005,816       $     109,297
      Payment of Accounts Payable                         38,311              62,500
      Repayment of Short-Term Loans                       75,000             198,767
      Repayment of Loans and Accrued
        Salaries From Related Parties                          0             866,157
                                                   -------------       -------------

      Total Non-Cash Financing Activities          $   3,119,127       $   1,236,721
                                                   =============       =============
</TABLE>






      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -8-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004



NOTE 1 - BASIS OF PRESENTATION
------   ---------------------

         The accompanying  unaudited condensed consolidated financial statements
         for the six  month  periods  ended  June 30,  2004 and 2003  have  been
         prepared in conformity with accounting principles generally accepted in
         the United States of America for interim financial information and with
         the  instructions  to Form 10-QSB and  Regulation  S-B.  The  financial
         information  as of December 31, 2003 is derived  from the  registrant's
         Form 10-KSB for the year ended December 31, 2003.  Certain  information
         or  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 pursuant to
         the rules and regulations of the Securities and Exchange Commission.

         The  preparation  of condensed  consolidated  financial  statements  in
         conformity with accounting  principles generally accepted in the United
         States of America requires management to make estimates and assumptions
         that affect the reported  amounts of assets and liabilities at the date
         of the financial  statements  and the reported  amounts of revenues and
         expenses during the reporting period.  Actual results could differ from
         those  estimates.  In  the  opinion  of  management,  the  accompanying
         financial statements include all adjustments  necessary (which are of a
         normal and recurring  nature) for the fair  presentation of the results
         of the interim periods  presented.  While the registrant  believes that
         the  disclosures  presented are adequate to keep the  information  from
         being  misleading,  it is suggested that these  accompanying  financial
         statements  be  read  in  conjunction  with  the  registrant's  audited
         consolidated financial statements and notes for the year ended December
         31, 2003,  included in the registrant's  Form 10-KSB for the year ended
         December 31, 2003.

         Operating  results for the six-month period ended June 30, 2004 are not
         necessarily  indicative  of the results  that may be  expected  for the
         remainder of the fiscal year ending December 31, 2004. The accompanying
         unaudited  condensed  consolidated  financial  statements  include  the
         accounts of the registrant,  its wholly-owned  subsidiaries,  Rio Bravo
         Energy,  LLC, Sonora Pipeline,  LLC,  Arrecefe  Management,  LLC, Marea
         Associates,  L.P., Reef Ventures,  L.P., Reef International,  LLC, Reef
         Marketing,  LLC,  and  Terranova  Energia  S. de R.  L.  de C.  V.  All
         significant   inter-company   accounts  and   transactions   have  been
         eliminated in consolidation.







                                       -9-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
------   -----------------------------

         A summary  of  property,  plant and  equipment  at June 30,  2004 is as
         follows:

                                                                     Estimated
                                                                   Economic Life
                                                                   -------------
         Pre-Construction Costs-
           International Crossing to Mexico             $   20,600
         Pre-Construction Costs - Mexican
           Storage Facility and Related Pipelines          509,190
         Equipment and Leasehold
           Improvements                                     36,961    3-10 Years
         Pipelines - Domestic                              431,560      15 Years
         Pipeline - Eagle Pass, Tx to Piedras
           Negras, Mexico                                 6106,255      20 Years
         Processing Plant                                  166,410      15 Years
                                                         ----------
              Total                                     $7,270,976
         Less Accumulated Depreciation                     367,201
                                                        ----------
              Total                                     $6,903,775
                                                        ==========

NOTE 3 - LITIGATION
------   ----------

         On January 6, 2003,  the Company was served as a third party  defendant
         in a lawsuit titled Northern  Natural Gas Company vs. Betty Lou Sheerin
         vs. Tidelands Oil & Gas Corporation,  ZG Gathering, Ltd. and others, in
         the 150th Judicial District Court,  Bexar County,  Texas,  Cause Number
         2002-C1-16421.  The lawsuit was initiated by Northern  Natural Gas when
         it sued Betty Lou Sheerin  for her  failure to make  payments on a note
         she executed  payable to Northern in the original  principal  amount of
         $1,950,000.  Northern's  suit was filed on November 13,  2002.  Sheerin
         answered  Northern's  lawsuit  on January  6,  2003.  Sheerin's  answer
         generally denied Northern's claims and raised the affirmative  defenses
         of fraudulent inducement by Northern,  estoppel, waiver and the further
         claim that the note does not comport with the legal  requirements  of a
         negotiable instrument. Sheerin seeks a judicial ruling that Northern be
         denied  any  recovery  on  the  note.   Sheerin's   answer  included  a
         counterclaim  against  Northern,  ZG  Gathering,  and others  generally
         alleging,  among other things,  that Northern,  ZG Gathering,  Ltd. and
         others,  fraudulently  induced her execution of the note.  Northern has
         filed a general  denial of Sheerin's  counterclaims.  Sheerin's  answer
         included a third party cross claim against Tidelands.  She alleges that
         Tidelands  entered into an  agreement to purchase the Zavala  Gathering
         System from ZG Gathering , Ltd. and that,  as a part of the  agreement,
         Tidelands  agreed to satisfy  all of the  obligations  due and owing to
         Northern,  thereby  relieving  Sheerin  of all  obligations  she had to
         Northern on the promissory note in question. She alleges that Tidelands
         is liable to her for all of her actual  damages,  costs of the  lawsuit
         and other



                                      -10-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

NOTE 3 - LITIGATION (CONTINUED)
------   ----------------------

         unstated  relief.  Tidelands  participated  in a mediation on March 11,
         2003.  The case was not settled at that time.  Tidelands  answered  the
         Sheerin suit on March 26, 2003 and denied all of Sheerin's allegations.
         No  discovery  has  been  completed  at this  time.  Based  on  initial
         investigations,   however,  Tidelands  appears  to  have  a  number  of
         potential  defenses to Sheerin's  claims,  and intends to  aggressively
         defend the lawsuit.

         In September  2002, as a pre-closing  deposit to the purchase of the ZG
         pipelines,  the Company executed a $300,000 promissory note to Betty L.
         Sheerin,  a partner of ZG  Gathering,  Ltd.  In  addition,  the Company
         issued  1,000,000  shares of its  restricted  common  stock to  various
         partners  of  ZG  Gathering,   Ltd.  The  company   believes  that  the
         aforementioned  promissory  note and shares of restricted  common stock
         will be cancelled  based upon the outcome of the  litigation  described
         above.  Accordingly,  the Company's  financial  statements reflect that
         position.

NOTE 4 - ACQUISITION
------   ---------------

         On May 25, 2004, the Company entered into a Purchase and Sale Agreement
         for Reef  Ventures,  L.P.  by and  between  Impact  International,  LLC
         ("Impact") and Coahuila Pipeline, LLC. ("Coahuila"), (jointly "Seller")
         and  Tidelands  Oil  &  Gas  Corporation   ("Tidelands")  and  Arrecefe
         Management,  LLC ("Arrecefe"),  (jointly "Buyer"). Impact is considered
         an affiliate of  Tidelands  because it possessed  warrants to acquire a
         19% interest in Tidelands  common  stock.  The closing  documents  were
         executed and placed into trust  pending  receipt of proof of insurance.
         Tideland's  received an insurance  commitment  regarding  the purchased
         assets that was  accepted  by Impact on June 18,  2004,  the  effective
         closing date.

         Purchase and Sale Agreement - Background

         Reef  Ventures,  L.P. was formed in Texas on April 16,  2003.  Coahuila
         owned one  percent  (1%) of Reef  Ventures,  L.P.  Impact was a limited
         partner of Reef  Ventures and owned  seventy-two  percent (72%) of Reef
         Ventures.  L.P. Tidelands formed Arrecefe  Management,  L.L.C., a Texas
         limited  liability  company,  to act as the  general  partner  for Reef
         Ventures, L.P. Tidelands had already owned twenty-five percent (25%) of
         Reef Ventures, L.P.

         Summary of Purchase and Sale Agreement

         The Company and Arrecefe  purchased  Impact's and  Coahuila's  units of
         interest in Reef Ventures, L.P., respectively. Impact financed the sale
         of the Reef interests for $6,523,773.30 payable as follows:



                                      -11-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

NOTE 4 - ACQUISITION (CONTINUED)
------   -----------------------

         Summary of Purchase and Sale Agreement (Continued)

         (a) Tidelands  executed a Promissory  Note to Impact for  $6,523,773.30
         (the "Tidelands  Note"). The Tidelands Note bears interest at the prime
         rate of  interest  plus  two (2%)  percent.  The  note  would  call for
         quarterly   interest  payments  the  first  fifteen  (15)  months,  and
         thereafter,  principal and interest  would be due  quarterly  amortized
         over  twenty  (20)  years,  but not to exceed  an  amount  equal to One
         Hundred  (100%)  percent of Reef's net cash flow. The unpaid balance of
         the note would be due at the end of the fourth year.

         (b) The Tideland's note is secured by (i) a deed of trust (the "Deed of
         Trust")  from the  Partnership  to Impact,  covering  the  pipeline and
         related  facilities,  easements,  rights-of-way  and the Gas  Contracts
         which  comprise the project,  being that 12-inch  pipeline  Project for
         transporting  natural  gas from Eagle  Pass  Texas to  Piedras  Negras,
         Mexico, defined in the Partnership  Agreement.  The Deed of Trust would
         include a present assignment of Reef's rights to receive cash flow from
         the Gas Project which would be  exercisable by Impact only upon default
         under the Tidelands Note, Reef guarantee, or Reef Deed of Trust. (ii) a
         guaranty  of  payment  and  performance   from  the  Partnership   (the
         "Partnership  Guaranty"),  and  (iii) a pledge  agreement  whereby  the
         Partnership pledges to Impact its 98% membership interest in Reef.

         Summary of Amendment to Warrant and Registration Rights Agreements

         The Stock Purchase Warrant  Agreement dated April 16, 2003 was amended.
         The  amended  Agreement  states that the total  number of shares  which
         Impact  is  entitled  to  receive  under  the  warrant  is Ten  Million
         (10,000,000)  shares of Tideland's  common stock,  plus such additional
         shares of common  stock which may be issued upon the  occurrence  of an
         untimely  registration  event, less the 500,000 shares issued to Impact
         on April  13,  2004.  The  exercise  price is  $0.335  per  share.  The
         expiration date of the warrant is extended to April 16, 2006.

         The Company has agreed to use its best  efforts to register  the shares
         under the warrant with the Securities  and Exchange  Commission so that
         Impact  will  be  permitted  to  publicly  resell  the  common  shares.
         Tidelands  agreed  to use its best  efforts  to keep  the  registration
         statement  effective as long as it is necessary  for Impact to sell the
         shares.

         If the  registration  statement is declared  effective  (i) by April 7,
         2005, if the  registration is on Form S-3, or (ii) July 7, 2005, if the
         registration  statement is on Form SB-2 or any other registration form,
         the   registration   statement   will  be  deemed   timely  (a  "Timely
         Registration").  In the  event of a Timely  Registration,  Impact  will
         exercise the warrant for all of the remaining  shares under the warrant
         on a cash basis payable by Impact through the execution of a promissory
         note payable to Tidelands (the "Impact Note"),


                                      -12-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004


NOTE 4 - ACQUISITION (CONTINUED)
------   -----------------------

         Summary of  Amendment  to Warrant and  Registration  Rights  Agreements
         (Continued)

         as of the effective date of the  registration  statement.  In the event
         that the Company does not accomplish a Timely Registration, then Impact
         may  exercise  the warrant at anytime  after the date which is the last
         date  for a  Timely  Registration,  at its  option  on a cash  basis or
         pursuant  to Section  1.2 of the warrant  agreement  on a net  exercise
         cashless  basis for all the  remaining  shares  under the  warrant.  If
         Impact  elects to  exercise  the  warrants on a net  exercise  cashless
         basis,  we will  increase the number of shares  available  for issuance
         under the warrant,  regardless  of whether  issued for cash or on a net
         exercise  basis,  so that the total number of shares issued would total
         10,000,000 shares.

         If the registration  statement is not filed or declared effective on or
         before July 14, 2004,  the Company  will be obligated to issue  500,000
         common  shares under the cashless  exercise  provisions  of the amended
         Stock Purchase  Warrant.  For each 90 day period that the  registration
         statement  were not filed or  declared  effective,  the  Company  would
         continue to issue 500,00 share blocks of common stock,  until  declared
         effective.


         The unaudited pro-forma condensed consolidated results of operations of
         the  Company  have  been  prepared  as  if  the   acquisition   of  the
         seventy-three percent (73%) of Reef Ventures, L.P. had occurred January
         1, 2004:


                         Tidelands Oil & Gas Corporation
                 Condensed Consolidated Statement of Operations
                         Six Months Ended June 30, 2004
                                   "Proforma"
                                   (Unaudited)


             Revenues                                             $   3,150,214
             Net (Loss)                                           $  (3,844,914)
             Net (Loss) Per Common Share - Basic                  $       (0.08)
             Weighted Average Shares Outstanding - Basic             47,676,976
             Net (Loss) Per Common Shares - Diluted               $       (0.06)
             Weighted Average Shares Outstanding - Diluted           59,310,378





                                      -13-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004


NOTE 5 - COMMON STOCK TRANSACTIONS
------   -------------------------

         During the quarter,  the Company  issued 3,322 shares of its restricted
         common stock for $4,983.

         On April 12, 2004,  the Company issued 500,000 shares of its restricted
         common stock valued at $497,000 to Impact International,  Inc. pursuant
         to the terms of the purchase of Reef Venture, L.P. described above.

         On April 15, 2004,  the Company issued 700,000 shares of its restricted
         common stock for consulting services valued at $728,000.

         On April 15, 2004,  the Company issued 450,000 shares of its restricted
         common stock for consulting services valued at $468,000.


NOTE 6 - COMMITMENT FOR SUITE LICENSE AGREEMENT
------   --------------------------------------

         On June 4, 2004,  the Company  entered into a Suite  License  Agreement
         with the San Antonio Spurs, L.C.C. commencing July 1, 2004 for a period
         of five  years.  The annual  license fee for the first year is $159,000
         and is  subject  to a 6% per annum  price  escalation  thereafter.  The
         annual fee is payable in installments as indicated in the agreement.

         The future annual license fee commitments are as follows:

                     2005                         $  161,385
                     2006                            171,068
                     2007                            181,332
                     2008                            192,212
                     2009                            101,872
                                                  ----------
                                                  $  807,869
                                                  ==========


NOTE 7 - RELATED PARTY TRANSACTIONS
------   --------------------------

The  Company  executed  an  agreement  in January  2004 with a related  party to
provide charter air trasportation  for its employees,  customers and contractors
to job sites and other business related destinations.  A payment of $300,000 was
prepaid  to secure a block of six  hundred  hours of airtime  based on  standard
industry rates.





                                      -14-

<PAGE>

Item 2.     Management's Discussion and Analysis or Plan of Operation

Business Overview

Tidelands  Oil  &  Gas  Corporation  (the  "Company"),   formerly  known  as  C2
Technologies,  Inc., was  incorporated  under the laws of the State of Nevada on
February 25, 1997. C2 Technologies, Inc. changed its name to Tidelands Oil & Gas
Corporation   on  November  19,   1998.   The  Company  has  five  wholly  owned
subsidiaries,  Rio Bravo Energy LLC,  Sonora Pipeline LLC,  Arrecefe  Management
LLC, Marea Associates, L.P. and Terranova Energia, S.de R.L. de C.V. The Company
also owns a 97% limited  partnership  interest in Reef Ventures,  L.P.  Arrecefe
Management LLC owns a 1% general  partner  interest in Reef Ventures,  L.P. Reef
Ventures,  L.P. owns 100% of the member interest in Reef  International  LLC and
Reef Marketing LLC.

The Company's  products and services are primarily  focused on  development  and
operation of transportation,  processing,  distribution and storage projects for
natural  gas and  liquids  in the  northeastern  states  of  Mexico  (Chihuahua,
Coahuila, Nuevo Leon and Tamaulipas) and the state of Texas in the United States
of America.

The Company currently derives its revenue from sales of natural gas to the local
distribution  company in Piedras Negras,  Coahuila through the pipeline owned by
Reef Ventures,  L.P.  Management  expects to convert the revenue source for this
pipeline to a transportation fee basis in the near future.  This will remove the
restriction  of use of $1,000,000 of cash to fund a credit  facility in favor of
the seller of natural gas to Reef Ventures,  L.P. It is also anticipated that by
converting  the revenue  source to a  transporation  fee, net  revenues  will be
doubled  based upon current  volumes  committed  for delivery to the customer in
Piedras Negras, Coahuila.  Management is evaluating an expansion of the pipeline
in  Coahuila  to serve new  markets  along the state  highway No. 57 corridor to
Monclova,  Coahuila.  The planned  natural gas liquid line  between  Eagle Pass,
Texas and Piedras Negras,  Coahuila is being re-evaluated in light of new supply
sources emerging in Nuevo Laredo and Reynosa, Tamaulipas. A decision to proceed,
modify or abandon  the LPG project at this  location  is expected  prior to year
end.  The above  projects  were  acquired in  connection  with the buyout of the
Impact general and limited partnership interests in Reef Ventures, L.P. which is
described  in  further  detail  in  Footnote  4 to  the  Condensed  Consolidated
Financial Statements above.

In December 2003, the Company  entered into a Memorandum of  Understanding  with
PEMEX to design,  build and operate an underground  natural gas storage facility
in the  vicinity of Reynosa,  Tamaulipas,  Mexico,  in the Burgos Basin area and
eventually at other regions in Mexico.  The MOU provides for  exclusivity in the
development of the projects and the related  transportation and  interconnecting
pipelines to and from the storage facilities.


                                      -15-

<PAGE>

The Company has completed  its initial study of the Burgos  facility and expects
to complete final contract  negotiations  with PEMEX and third party vendors for
the  construction and operation of the facility before year end. A system of two
interconnecting  pipelines is also proposed to enhance the overall pipeline grid
and the  efficiency of operation of the storage  facility.  Permit  applications
will be  filed  for all  these  projects  with  the  Mexican  Energy  Regulatory
Commission in the third quarter of 2004.  The capital  budget for these projects
exceeds $200 million USD and is expected to be funded through  additional equity
and debt issuances by the Company. Marea Associates,  L.P. was formed during the
fiscal  quarter  ended June 30, 2004 to own the  majority  interest in Terranova
Energia,  S. de R.L.  de C.V.  a  Mexican  company  which  will  enter  into all
contracts  for business  dealings in Mexico on behalf of the Company.  Rio Bravo
Energy  LLC, an  existing  wholly  owned  subsidiary  owns the  general  partner
interest in Marea Associates, L.P. and a minority interest in Terranova Energia,
S. de R.L. de C.V.

The Company  has  additional  natural  gas and  natural  gas liquid  projects in
feasibility  studies including two international  pipeline crossings for natural
gas transportation and one LPG  transportation/terminal  project in the interior
of Mexico.  The Company is also  evaluating  two projects in Texas - one for the
distribution of LPG in a metropolitan  residential  market and the other for the
interconnection  of  natural  gas  transportation  for a variety of end users in
another metropolitan market.

Rio Bravo  Energy,  LLC was formed on August 10, 1998 to operate the Chittim Gas
Processing  Plant which was  purchased  in 1999 and was  processing  natural gas
primarily from Conoco Oil's Sacatosa Field.  The Sacatosa Field was primarily an
oilfield  which produced high BTU  casinghead  gas from which  processing  would
yield  valuable  hydrocarbon  components  such as  propane,  butane and  natural
gasolines.  As the field  depleted  lower volumes of  casinghead  gas were being
delivered by Conoco and other gas  producers  could not be  contracted  with for
processing of additional replacement volumes of gas. Therefore, in October 2002,
the plant was temporarily  shut down due to the declining  economics  associated
with low volume  operation  of the plant.  Management  plans to reopen the plant
when adequate  volumes of gas from third party producers makes plant  operations
economically  attractive.  The market for the products of plant  operation could
include our future propane/butane terminal and pipeline crossing into Mexico. As
noted  above,  Rio Bravo  Energy LLC owns a general  partner  interest  in Marea
Associates,  L.P. and the minority interest in Terranova Energia,  S. de R.L. de
C.V.

Sonora  Pipeline,  LLC was formed in January 1998 to operate the Sonora pipeline
network which has the capability of delivering  adequate  volumes of natural gas
for economic operation of the Chittim Gas Processing Plant. The pipeline network
consists of approximately  80 miles of gas pipeline.  The assets of this company
were acquired in conjunction with the Chittim Gas Processing  Plant  acquisition
and, when  operational,  would generate revenue from  transportation  fees to be
charged to third party gas producers shipping natural gas to the gas plant owned
by Rio Bravo Energy LLC.


                                      -16-

<PAGE>

RESULTS OF OPERATIONS

REVENUES:  The Company  reported  revenues of $507,712  for the six months ended
June 30, 2004 as compared with revenues  from  continuing  operations of $20,092
for the six months ended June 30, 2003. The revenue  increase  resulted from the
acquisition of a 98% interest in Reef  Ventures,  L.P. which owns and operates a
natural gas pipeline serving the Piedras Negras, Coahuila market.

TOTAL COSTS AND EXPENSES:  Total costs and expenses from  continuing  operations
increased from $595,321 for the six months ended June 30, 2003 to $4,303,169 for
the six months ended June 30, 2004.

COST OF  SALES:  The  cost  of  sales  (purchases)  from  continuing  operations
increased  from -0- for the six months  ended June 30, 2003 to $497,820  for the
six months  ended June 30, 2004.  The  increase was due to the purchase  cost of
natural gas resold through the natural gas pipeline owned by Reef Ventures, L.P.

OPERATING  EXPENSES:   Other  operating  expenses  from  continuing   operations
increased from $595,321 for the six months ended June 30, 2003 to $3,805,349 for
the six  months  ended  June 30,  2004 which is total  increase  of  $3,210,028.
Depreciation  increased  by $26,598  due to the  acquisition  of the natural gas
pipeline owned by Reef Ventures,  L.P. Interest expense increased by $14,796 due
to the debt incurred to acquire the natural gas pipeline owned by Reef Ventures,
L.P. Pipeline operating expenses decreased by $12,077 due to different operating
requirements  of the assets  owned  during  the  respective  six month  periods.
Officers and Directors  Salaries & Fees increased by $186,358 for the six months
ended June 30, 2004  versus the six months  ended June 30, 2003 due to hiring of
additional officers and directors.  General & Administrative  expenses increased
substantially as detailed below.

SELLING GENERAL AND ADMINISTRATIVE:  General & Administrative Expenses increased
by $2,994,353 for the six months ended June 30, 2004 versus the six months ended
June  30,  2003  due to  the  issuance  of  common  stock  for  consulting  fees
($2,246,000),  legal fees  ($172,000)  and  financing  fees($497,000)  which are
non-cash expenses  accounting for all but $79,353 of the increase in general and
administrative  expenses.  The  remaining  increase in G & A costs was primarily
from cash paid for travel costs and legal fees.

NET LOSS FROM  OPERATIONS:  Net loss of ($575,229) for the six months ended June
30,2003  increased to  ($3,795,457)  for the six months ended June 30, 2004,  an
increase in the amount of loss of  $3,220,228.  The  non-cash  component  of the
increase in loss was $2,915,000 as noted in the above  discussion of general and
administrative expenses.

LIQUIDITY  AND CAPITAL  RESOURCES:  Capital  expenditures  during the six months
ended June 30, 2004  totaled  $6,347,501  as compared  with  $92,926 for the six
months ended June 30, 2003. The increase of $6,254,575 was due to acquisition of
the Reef Ventures,  L.P. natural gas pipeline ($6,106,255),  increased equipment
and  leasehold  cost of $17,512  and  higher  pre-construction  costs  regarding
potential  international  pipeline  crossings  and storage  facilities in Mexico
($396,482).


                                      -17-

<PAGE>

Total debt increased from  $1,134,436 at June 30, 2003 to $7,416,093 at June 30,
2004.  The net  increase  in total debt is due to the  acquisition  indebtedness
created in the acquisition of the Reef Ventures, L.P. partnership interests from
Coahuila Pipeline LLC and Impact International LLC as described in Note 4 to the
Condensed  Consolidated Financial Statements for the period ended June 30, 2004.
Total debt as of June 30, 2004 and June 30, 2003  expressed as a  percentage  of
the  sum  of  total  debt  and   shareholders'   equity  was  65.5%  and  134.5%
respectively.

Net loss for the six months ended June 30, 2004 was  ($3,784,384) an increase of
494.8% from the net income of $958,502  for the six months  ended June 30, 2003.
Diluted net loss per common share  increased  300% to ($0.06).  The net loss per
share calculation for the six months ended June 30, 2004 included an increase in
actual and equivalent shares outstanding.

As detailed above,  the Company has experienced a significant  improvement  with
respect to its financial  condition in the past six months.  Improvement  in the
ability to fund  ongoing  operations  has also  occurred  as a result of actions
taken in the six months  ended June 30,  2004.  At December 31, 2003 the Company
had received  $1,000,000 of the $5,000,000 total funding commitment with respect
to the private  placement of  3,308,601  restricted  common  shares with Margaux
Investment Management Group, S.A. On February 11, 2004, the Company received the
final disbursement of funds which fulfilled the full $5,000,000  commitment plus
an oversubscription of $88,318. Management anticipates that sufficient liquidity
and capital  resources  currently  exist to fund our operations  with respect to
recurring  operating  expenses  and project  pre-construction  expenditures  for
planned  projects  in the  remainder  of the fiscal  year,  however,  additional
borrowing  and, or sale of additional  shares of stock will be necessary to fund
actual  construction  of newly  planned  projects such as the Burgos Gas Storage
facility  which is  currently  in the  pre-construction  phase  of  development.
Management  expects that  financing for the  construction  costs of this project
will be available in the form of a conventional  project  finance  structure,  -
i.e.- a construction  loan followed with term debt. Other projects  currently in
the feasibility study phase would likely utilize similar  financing  structures.
Until the various  projects are constructed and operating,  the Company does not
expect to receive significant  revenues and must rely on existing cash resources
and future  borrowings and/or equity issuance.  Management  believes that market
forces continue to emerge and justify the Company's efforts to provide midstream
energy projects for the  cross-border and Mexico natural gas marketplace and the
Company's efforts will continue to address these opportunities in the future.

Management  believes that the financial  effect of the acquisition of the Impact
International  LLC and Coahuila  Pipeline LLC interests in Reef  Ventures,  L.P.
will be  affordable  due to a cap  limitation of required cash payments from the
Company to the  Sellers in the amount of  existing  project net cash flow during


                                      -18-

<PAGE>

the term of the purchase money note.  Similarly,  the  opportunity to offset the
Stock Warrant Purchase note owed the Company against the purchase money note for
the  acquisition  of the  Impact/Coahuila  partnership  interests will limit the
effective  total  purchase  price for the  natural gas  pipeline  crossing to an
acceptable level.

FORWARD-LOOKING STATEMENTS:
We have included  forward-looking  statements in this report.  For this purpose,
any  statements  contained in this report that are not  statements of historical
fact may be  deemed to be  forward  looking  statements.  Without  limiting  the
foregoing,  words  such as "may",  "will",  "expect",  "believe",  "anticipate",
"estimate",  "plan" or "continue" or the negative or other variations thereof or
comparable  terminology  are  intended to identify  forward-looking  statements.
These statements by their nature involve  substantial  risks and  uncertainties,
and actual  results  may differ  materially  depending  on a variety of factors.
Factors that might cause  forward-looking  statements to differ  materially from
actual  results  include,  among other  things,  overall  economic  and business
conditions,  demand  for the  Company's  products,  competitive  factors  in the
industries  in which we compete or intend to compete,  natural gas  availability
and cost and timing,  impact and other  uncertainties of our future  acquisition
plans.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The  Company  does  not  issue  or  invest  in  financial  instruments  or their
derivatives for trading or speculative  purposes.  The operations of the Company
are conducted  primarily in the United States,  and, are not subject to material
foreign  currency  exchange risk.  Although the Company has outstanding debt and
related  interest  expense,  market risk of interest rate exposure in the United
States is currently not material.

Item 3.     Controls and Procedures

(a)      Evaluation of Disclosure Controls and Procedures.

         Within the 90 days prior to the date of this  Quarterly  Report for the
period ended June 30, 2004, we carried out an evaluation,  under the supervision
and with the participation of our management,  including the Company's  Chairman
and  Chief  Executive   Officer  and  the  Chief  Financial   Officer,   of  the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  pursuant to Rule 13a-14 of the Securities  Exchange Act of 1934 (the
"Exchange Act"), which disclosure controls and procedures are designed to insure
that  information  required to be  disclosed by a company in the reports that it
files under the  Exchange Act is recorded,  processed,  summarized  and reported
within required time periods specified by the SEC's rules and forms.  Based upon
that evaluation, the Chairman and the Chief Financial Officer concluded that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to the  Company  required to be included in the
Company's period SEC filings.


                                      -19-

<PAGE>

(b)      Changes in Internal Control.

         Subsequent to the date of such  evaluation as described in subparagraph
(a) above,  there were no significant  changes in our internal controls or other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         On January 6, 2003,  we were  served as a third  party  defendant  in a
lawsuit titled Northern  Natural Gas Company vs. Betty Lou Sheerin vs. Tidelands
Oil & Gas  Corporation,  ZG Gathering,  Ltd. and Ken Lay, in the 150th  Judicial
District Court, Bexar County, Texas, Cause Number 2002-C1-16421. The lawsuit was
initiated by Northern Natural Gas when it sued Betty Lou Sheerin for her failure
to make  payments on a note she  executed  payable to  Northern in the  original
principal amount of $1,950,000.  Northern's suit was filed on November 13, 2002.
Sheerin  answered  Northern's  lawsuit  on January  6,  2003.  Sheerin's  answer
generally  denied  Northern's  claims  and raised the  affirmative  defenses  of
fraudulent inducement by Northern,  estoppel,  waiver and the further claim that
the not does not comport with the legal requirements of a negotiable instrument.
Sheerin  seeks a judicial  ruling that  Northern  be denied any  recovery on the
note. Sheerin's answer included a counterclaim  against Northern,  ZG Gathering,
and Ken Lay generally alleging, among other things, that Northern, ZG Gathering,
Ltd. and Ken Lay,  fraudulently  induced her execution of the note. Northern has
filed a general denial of Sheerin's  counterclaims.  Sheerin's answer included a
third party cross claim against  Tidelands.  She alleges that Tidelands  entered
into an agreement to purchase the Zavala Gathering System from ZG Gathering Ltd.
and that,  as a part of the  agreement,  Tidelands  agreed to satisfy all of the
obligations  due  and  owing  to  Northern,  thereby  relieving  Sheerin  of all
obligations she had to Northern on the promissory note in question.  She alleges
that  Tidelands  is liable to her for all of her  actual  damages,  costs of the
lawsuit and other  unstated  relief.  Tidelands and Sheerin  agreed to delay the
Tideland's  answer  date in order  to allow  time  for  mediation  of the  case.
Tideland's  participated  in a  mediation  on March 11,  2003.  The case was not
settled at that time.  Tideland's  answered  the Sheerin suit on March 26, 2003.
Tideland's  answer  denies all of Sheerin's  allegations.  No discovery has been
completed  at this time.  Based on  initial  investigation,  however,  Tidelands
appears to have a number of potential  defenses to Sheerin's claims.  Tideland's
intends  to  aggressively  defend  the  lawsuit.  At  this  early  stage  in the
litigation,  and in light of our continuing  investigation  of the facts and the
issues in the case,  we cannot give a more  definitive  evaluation of the extent
Tideland's liability exposure.

         On May 24 and June 16, 2004  respectively,  Betty Lou Sheerin filed her
first  and  second  amended  original  answer,   affirmative  defenses,  special
exceptions and second amended  original  counterclaim,  second amended  original
third  party  cross-actions  and  requests  for  disclosure.  In  these  amended
pleadings,  she sued Michael Ward, Royis Ward,  James B. Smith,  Carl Hessel and



                                      -20-

<PAGE>

Ahmed Karim in their individual capacities. Her claims against these individuals
are for fraud,  breach of the Uniform  Commercial  Code,  breach of duty of good
faith and fair  dealing  and  conversion.  These  claims  are  being  vigorously
defended.

         In September  2002, as a pre-closing  deposit to the purchase of the ZG
pipelines,  the Company executed a $300,000 promissory note to Betty L. Sheerin,
a partner of ZG Gathering, Ltd. In addition, the Company issued 1,000,000 shares
of its common  stock to various  partners  of ZG  Gathering,  Ltd.  The  company
believes that the  promissory  note and shares of common stock will be cancelled
based upon the  outcome of the  litigation  described  above.  Accordingly,  our
financial statements reflect this belief.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         During the second quarter of 2004 the Company  authorized,  offered and
sold the  following  securities  pursuant to  exemptions  from the  registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").

         On April 12, 2004, we issued  500,000  shares of common stock to Impact
International,  Inc.  valued at $497,000 in a cashless  exercise of their common
stock warrants.

         On April  15,  2004,  we  issued  700,000  common  shares  to  Majestic
Holdings, LLC. for consulting services valued at $728,000.

         On April 15, 2004,  we issued  450,000  common shares to New Age Group,
LLC for consulting services valued at $468,000.

         On June 30, 2004,  we issued  3,322 common  shares to Carl Hessel for $
4,983. Carl Hessell is a member of our board of directors.

         We believe the shares issued above were issued in private  transactions
pursuant  to  Section  4(2) of the  Securities  Act of 1933,  as  amended,  (the
"Securities Act"). These shares are considered restricted securities and may not
be publicly resold unless  registered for resale with  appropriate  governmental
agencies or unless exempt from any applicable registration requirements.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         No matter was submitted to a vote of the security holders,  through the
solicitation  of proxies or  otherwise,  during the first  quarter of the fiscal
year covered by this report.


                                      -21-

<PAGE>

Item 5.  Other Information

         On April 7, 2004, we formed Terranova  Energia,  S. de R.L. de C.V., an
entity organized under the laws of the United Mexican States. We plan to conduct
all of our Mexican business through Terranova.

         On April 13, 2004,  we formed Marea  Associates,  L.P., a Texas limited
partnership.  Marea Associates is the 99% owner of Terranova  Energia S. de R.L.
de C.V. Rio Bravo Energy, LLC owns the other 1% of Terranova.

         On May 19, 2004, we formed  Arrecefe  Management,  LLC, a Texas limited
liability company. Arrecefe acts as the general partner for Reef Ventures, L.P.

Item 6.  Exhibits and Reports on Form 8-K

a) Exhibits

      Exhibit No.                Exhibit Name

         31.1              Chief  Executive  Officer-Section  302  Certification
                           pursuant to Sarbane-Oxley Act.

         31.2              Chief Financial  Officer-  Section 302  Certification
                           pursuant to Sarbane-Oxley Act.

         32.1              Chief  Executive  Officer-Section  906  Certification
                           pursuant to Sarbane-Oxley Act.

         32.2              Chief Financial  Officer-  Section 906  Certification
                           pursuant to Sarbane-Oxley Act.

(b) Reports on Form 8-K.  During the second quarter of 2004 we filed two Current
Reports on Form 8-K, the first on April 21, 2004  reporting  under Item 5, Other
Events and the second on June 25, 2004 reporting under Items 2 and 7.


                                   SIGNATURES

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

                                                     TIDELANDS OIL & GAS CORP.

                                                      /s/ Michael Ward
Dated: August 16, 2004                               ---------------------------
                                                     By: Michael Ward
                                                     Title: President, CEO


                                                      /s/ James B. Smith
Dated: August 16, 2004                               ---------------------------
                                                     By: James B. Smith
                                                     Title: CFO



















                                      -22-