--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ________________

                                    FORM 10-Q

(Mark One)

[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2000


[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

                      Commission File Number 0-26662


                               PANACO, Inc.
          (Exact name of registrant as specified in its charter)

         Delaware                                      43 - 1593374
(State or other jurisdiction of                (I.R.S. Employer Identification
 incorporation or organization)                             Number)

     1100 Louisiana Street, Suite 5100
            Houston, Texas                              77002
    (Address of principal executive offices)          (Zip Code)

      Registrant's telephone number, including area code: (713) 970 - 3100



     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 _______.


     24,323,521  shares of the  registrant's  $.01 par value  Common  Stock were
outstanding on September 30, 2000.



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

<PAGE>
                                                  PANACO, Inc.
                                      Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>

                                     ASSETS
                                                                   As of                        As of
                                                             September 30, 2000           December 31, 1999
                                                            --------------------         -------------------
                                                                (Unaudited)
      <S>                                                           <C>                           <C>

 CURRENT ASSETS
   Cash                                                          $ 2,154,000                 $ 5,575,000
   Accounts receivable, net of an allowance of
      $714,000 and $671,000, respectively                         17,211,000                   9,675,000
   Accounts receivable-employee                                      326,000                      16,000
   Prepaid and other                                               1,344,000                     729,000
                                                             ----------------            ----------------

      Total current assets                                        21,035,000                  15,995,000
                                                             ----------------            ----------------

 OIL AND GAS PROPERTIES, AS DETERMINED BY THE
 SUCCESSFUL EFFORTS METHOD OF ACCOUNTING
   Oil and gas properties, proved                                283,062,000                 262,043,000
   Less proved property accumulated depletion,
      depreciation and amortization                             (192,211,000)               (175,048,000)
   Net unproved oil and gas properties                             1,884,000                   1,893,000
                                                             ----------------            ----------------
      Net oil and gas properties                                  92,735,000                  88,888,000
                                                             ----------------            ----------------

 PIPELINES AND EQUIPMENT
    Pipelines and equipment                                       26,367,000                  26,327,000
    Less accumulated depreciation                                 (8,117,000)                 (6,130,000)
                                                             ----------------            ----------------
      Net pipelines and equipment                                 18,250,000                  20,197,000
                                                             ----------------            ----------------

 OTHER ASSETS
    Deferred income taxes                                         25,931,000                           -
    Deferred debt costs, net                                       3,511,000                   4,456,000
    Employee note receivable                                               -                     300,000
    Restricted deposits                                            7,120,000                   5,602,000
                                                             ----------------           -----------------
      Total other assets                                          36,562,000                  10,358,000
                                                             ----------------           -----------------


TOTAL ASSETS                                                   $ 168,582,000               $ 135,438,000
                                                             ================           =================

                                                                                          (continued)

</TABLE>

         The accompanying notes are an integral part of this statement.

                                       2

<PAGE>

                                  PANACO, Inc.
                      Consolidated Condensed Balance Sheets


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                As of                       As of
                                                         September 30, 2000          December 31, 1999
                                                        --------------------        -------------------
 CURRENT LIABILITIES                                       (Unaudited)
<S>                                                           <C>                           <C>

    Accounts payable                                        $ 28,618,000                $ 20,408,000
    Interest payable                                           5,573,000                   3,003,000
    Current portion of long-term debt                         23,068,000                           -
                                                         ----------------            ----------------
       Total current liabilities                              57,259,000                  23,411,000
                                                         ----------------            ----------------

 DEFERRED CREDITS                                              1,697,000                           -

 LONG-TERM DEBT                                              102,249,000                 138,902,000

 COMMITMENTS AND CONTINGENCIES

 STOCKHOLDERS' EQUITY (DEFICIT)
    Preferred Shares, $.01 par value,
      5,000,000 shares authorized; no
      shares issued and outstanding                                    -                           -
    Common Shares, $.01 par value,
      100,000,000 shares authorized;
      24,323,521 and 23,986,521 shares
      issued and outstanding, respectively                      246,000                     243,000
    Additional paid-in capital                               68,976,000                  68,852,000
    Accumulated deficit                                     (61,845,000)                (95,970,000)
                                                        ----------------            ----------------
         Total stockholders' equity (deficit)                 7,377,000                 (26,875,000)
                                                        ----------------            ----------------

 TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY (DEFICIT)                         $ 168,582,000               $ 135,438,000
                                                        ================            ================

</TABLE>

         The accompanying notes are an integral part of this statement.

                                       3
<PAGE>

                                  PANACO, Inc.
                      Consolidated Statements of Operations
                     For the Nine Months Ended September 30,
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                  2000                     1999
                                                           ---------------           ---------------
<S>                                                              <C>                        <C>

 REVENUES
    Oil and natural gas sales                               $ 63,499,000              $ 30,607,000

 COSTS AND EXPENSES
    Lease operating expense                                   16,359,000                12,382,000
    Depletion, depreciation & amortization                    20,614,000                18,492,000
    General and administrative expense                         3,474,000                 3,127,000
    Production and ad valorem taxes                            1,454,000                   654,000
    Geological and geophysical expense                         1,171,000                   963,000
    Exploratory dry hole expense                                 794,000                   942,000
    Impairment of oil and gas properties                               -                 5,693,000
    Severance expense                                            746,000                         -
    Lawsuit recovery                                            (990,000)                        -
                                                           --------------           ---------------
      Total                                                   43,622,000                42,253,000
                                                           --------------           ---------------

 OPERATING INCOME (LOSS)                                      19,877,000               (11,646,000)

 OTHER INCOME (EXPENSE)
    Interest income                                              113,000                    78,000
    Interest expense                                         (11,689,000)               (9,037,000)
                                                           --------------           ---------------
      Total                                                  (11,576,000)               (8,959,000)
                                                           --------------           ---------------

 INCOME (LOSS) BEFORE INCOME TAXES
   AND EXTRAORDINARY ITEM                                      8,301,000               (20,605,000)

 INCOME TAX EXPENSE (BENEFIT)                                (25,824,000)                        -
                                                           --------------           ---------------

 INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                      34,125,000               (20,605,000)

 EXTRAORDINARY ITEM-Loss on early retirement of debt                   -                  (132,000)
                                                           --------------           ---------------

 NET INCOME (LOSS)                                          $ 34,125,000             $ (20,737,000)
                                                           ==============           ===============

 Net income (loss) per share                                $       1.41             $       (0.87)
                                                           ==============           ===============

 Basic Shares Outstanding                                     24,241,116                23,925,204
                                                           ==============           ===============
 Diluted Shares Outstanding                                   24,241,116                23,925,204
                                                           ==============           ===============

</TABLE>

         The accompanying notes are an integral part of this statement.

                                       4
<PAGE>

                                  PANACO, Inc.
                      Consolidated Statements of Operations
                    For the Three Months Ended September 30,
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               2000                     1999
                                                         ---------------          ---------------
<S>                                                             <C>                      <C>

 REVENUES
    Oil and natural gas sales                             $  25,918,000            $  10,481,000

 COSTS AND EXPENSES
    Lease operating expense                                   6,283,000                3,977,000
    Depletion, depreciation & amortization                    8,062,000                6,153,000
    General and administrative expense                        1,174,000                1,059,000
    Production and ad valorem taxes                             489,000                  283,000
    Geological and geophysical expense                          319,000                  399,000
    Exploratory dry hole expense                                347,000                   97,000
    Impairment of oil and gas properties                              -                5,693,000
    Severance expense                                           746,000                        -
                                                         ---------------         ----------------
      Total                                                  17,420,000               17,661,000
                                                         ---------------         ----------------

 OPERATING INCOME (LOSS)                                      8,498,000               (7,180,000)

 OTHER INCOME (EXPENSE)
    Interest income                                              39,000                   43,000
    Interest expense                                         (3,853,000)              (3,594,000)
                                                         ---------------         ----------------
      Total                                                  (3,814,000)              (3,551,000)
                                                         ---------------         ----------------

 INCOME (LOSS) BEFORE INCOME TAXES
    AND EXTRAORDINARY ITEM                                    4,684,000              (10,731,000)

 INCOME TAX EXPENSE                                           1,778,000                        -
                                                         ---------------         ----------------

 INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                      2,906,000              (10,731,000)

 EXTRAORDINARY ITEM-Loss on early retirement of debt                  -                 (132,000)
                                                         ---------------         ----------------

 NET INCOME (LOSS)                                        $   2,906,000             $(10,863,000)
                                                         ===============         ================

 Net income (loss) per share                              $        0.12             $      (0.45)
                                                         ===============         ================

 Basic Shares Outstanding                                    24,323,521               23,985,927
                                                         ===============         ================
 Diluted Shares Outstanding                                  24,323,521               23,985,927
                                                         ===============         ================
</TABLE>


        The accompanying notes are an integral part of this statement.

                                        5
<PAGE>



                                  PANACO, Inc.
                      Consolidated Statement of Cash Flows
                     For the Nine Months Ended September 30,
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                2000                1999
                                                                           --------------       -------------
<S>                                                                             <C>                   <C>


 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
    Net income (loss)                                                      $  34,125,000         $(20,737,000)
    Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
       Deferred income taxes                                                 (25,931,000)                   -
       Depletion, depreciation and amortization                               20,614,000           18,492,000
       Impairment of oil and gas properties                                           -             5,693,000
       Exploratory dry hole expense                                              794,000              942,000
       ESOP stock contribution                                                   127,000              250,000
       Extraordinary item-loss on early retirement of debt                             -              132,000
       Changes in assets and liabilities:
          Accounts receivable                                                 (7,546,000)            (989,000)
          Accounts payable                                                     8,210,000            6,333,000
          Deferred credits                                                     1,697,000                    -
          Interest payable                                                     2,570,000           (2,745,000)
          Prepaid and other                                                     (615,000)            (191,000)
                                                                         ---------------       ---------------
                  Net cash provided by operating activities                   34,045,000            7,180,000
                                                                         ---------------       ---------------
 CASH FLOWS USED IN INVESTING ACTIVITIES
       Sale of oil and gas properties                                                  -              378,000
       Capital expenditures and acquisitions                                 (22,009,000)         (17,911,000)
       Increase in restricted deposits                                        (1,518,000)          (1,250,000)
                                                                          ---------------      ---------------
                  Net cash used in investing activities                      (23,527,000)         (18,783,000)
                                                                          ---------------      ---------------
 CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
       Long-term debt borrowings                                              11,415,000           39,580,000
       Repayment of long-term debt                                           (25,000,000)         (24,000,000)
       Additional deferred financing costs                                      (354,000)          (1,737,000)
                                                                         ----------------      ---------------
                  Net cash provided by (used in) financing activities        (13,939,000)          13,843,000
                                                                         ----------------      ---------------

 NET INCREASE (DECREASE) IN CASH                                              (3,421,000)           2,240,000

 CASH AT BEGINNING OF YEAR                                                     5,575,000            3,452,000
                                                                         ----------------      ---------------

 CASH AT SEPTEMBER 30                                                      $   2,154,000        $   5,692,000
                                                                         ================      ===============
</TABLE>


         The accompanying notes are an integral part of this statement.

                                        6

<PAGE>

                                  PANACO, Inc.
       Consolidated Statement of Changes in Stockholders' Equity (Deficit)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                      Amount ($)
                                                    -----------------------------------------------------------------------------

<S>                                      <C>               <C>                <C>                <C>                  <C>

                                     Number of                            Additional                                 Total
                                      Common             Common            Paid-in           Accumulated         Stockholders'
                                      Shares             Stock             Capital             Deficit          Equity (Deficit)
                                  ---------------   ----------------   ----------------   ------------------   ------------------

 Balances, December 31, 1999          23,986,521      $     243,000     $   68,852,000     $    (95,970,000)    $    (26,875,000)

 Net Income                                    -                  -                  -           34,125,000           34,125,000

 Common shares issued to the ESOP        337,000              3,000            124,000                    -              127,000

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

 Balances, September 30, 2000         24,323,521      $     246,000     $   68,976,000     $    (61,845,000)     $     7,377,000

                                  ===============   ================   ================   ==================   ==================


</TABLE>


         The accompanying notes are an integral part of this statement.

                                        7

<PAGE>

                                  PANACO, Inc.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1 - BASIS OF PRESENTATION

     In  the  opinion  of  management,   the  accompanying  unaudited  condensed
consolidated  financial statements contain all adjustments  necessary to present
fairly the financial position as of September 30, 2000 and December 31, 1999 and
the results of  operations  and cash flows for the periods  ended  September 30,
2000 and  1999.  Most  adjustments  made to the  financial  statements  are of a
normal, recurring nature. Although the Company believes that the disclosures are
adequate to make the information  presented not misleading,  certain information
and footnote disclosures,  including significant  accounting policies,  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted  pursuant to the rules and
regulations  of the  Securities  and Exchange  Commission  (the  "SEC").  A more
complete  description of the accounting policies followed by the Company are set
forth in Note 1 to the Company's financial  statements in Form 10-K for the year
ended  December  31,  1999.  These  financial   statements  should  be  read  in
conjunction with the financial statements and notes included in the Form 10-K.

     Certain  reclassifications  of prior  period  statements  have been made to
conform with current reporting practices.

     Weighted  average options to purchase  1,150,000  shares of common stock at
$4.45 per share were  outstanding  during 1999 and the first and second quarters
of 2000. The options were not included in the  computation  of diluted  earnings
per share  because the  options'  exercise  prices were greater than the average
market price of the common shares. These options were issued in 1997 to officers
and directors and expired June 20, 2000.

Note 2 - OIL AND GAS PROPERTIES AND PIPELINES AND EQUIPMENT

     The Company  utilizes the  successful  efforts method of accounting for its
oil and gas operations.  Under the successful efforts method,  lease acquisition
costs are initially capitalized. Exploratory drilling costs are also capitalized
pending determination of proved reserves. If proved reserves are not discovered,
the exploratory costs and associated lease  acquisition costs are expensed.  All
development costs are capitalized.  Non-drilling  exploratory  costs,  including
geological  and  geophysical  costs and delay  rentals,  are expensed.  Unproved
leaseholds with significant  acquisition costs are assessed  periodically,  on a
property-by-property basis, and a loss is recognized to the extent, if any, that
the  cost  of  the  property  has  been  impaired.   Unproved  leaseholds  whose
acquisition  costs are not  individually  significant  are  aggregated,  and the
portion  of such are  amortized  over an average  holding  period.  As  unproved
leaseholds are determined to be productive, the related costs are transferred to
proved leaseholds. The provision for depreciation and depletion is determined on
a depletable unit basis using the  unit-of-production  method.  Estimated future
abandonment  costs are recorded by charges to depreciation and depletion expense
over the lives of the proved reserves of the properties.

     The  Company  performs  a  review  for  impairment  of  proved  oil and gas
properties on a depletable unit basis when circumstances suggest there is a need
for such a review.  For each  depletable  unit  determined  to be  impaired,  an
impairment loss equal to the difference  between the carrying value and the fair
value of the  depletable  unit will be recognized.  Fair value,  on a depletable
unit basis,  is estimated to be the present value of expected  future cash flows
computed  by applying  estimated  future oil and gas prices,  as  determined  by
management,  to estimated  future  production  of oil and gas reserves  over the
economic  lives of the reserves.  Future cash flows are based upon the Company's
estimate  of proved  reserves.

                                       8

<PAGE>

                                  PANACO, Inc.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (Unaudited)

     Property and equipment  are carried at cost.  Oil and natural gas pipelines
and equipment are depreciated on the  straight-line  method over their estimated
lives,  primarily  fifteen  years.  Other  property is also  depreciated  on the
straight-line  method  over their  estimated  lives,  ranging  from three to ten
years.  Fees for  processing  oil and  natural  gas for others are  treated as a
reduction  of  lease   operating   expense   related  to  the   facilities   and
infrastructure.

Note 3 - CASH FLOW INFORMATION

     Cash payments for interest  totaled  $9,275,000 and $11,963,000  during the
first nine months of 2000 and 1999, respectively. Cash payments for income taxes
totaled  $50,000  and $0  during  the  first  nine  months  of  2000  and  1999,
respectively.

Note 4 - RESTRICTED DEPOSITS

     Pursuant to existing agreements the Company is required to deposit funds in
bank trust and escrow accounts to provide a reserve against  satisfaction of its
eventual  responsibility  to plug and abandon wells and remove  structures  when
certain  fields no longer  produce oil and gas.  Through  November  30, 1997 the
Company  funded  $900,000 into an escrow  account with respect to the West Delta
Fields. At that time, the Company completed its obligation for the funding under
the West Delta agreement.  The Company has entered into an escrow agreement with
Amoco Production  Company under which the Company deposits,  for the life of the
fields,  in a bank escrow  account ten  percent  (10%) of the net cash flow,  as
defined in the agreement, from the Amoco properties. The Company has established
the  "PANACO  East  Breaks 110  Platform  Trust" in favor of RLI,  Underwriter's
Indemnity.  This trust required an initial funding of $846,720 in December 1996,
and  remaining  deposits of $250,000  due at the end of each  quarter  until the
balance  in  the  account  reaches  $5.4  million.  In  connection  with  the BP
Acquisition,  the Company  deposited $1.0 million into an escrow account on July
1, 1998.  On the first day of each  quarter  thereafter,  the  Company  deposits
$250,000 into the escrow account until the balance in the escrow account reaches
$6.5 million.

Note 5 - COMMITMENTS AND CONTINGENCIES

     An action was filed  against  the  Company in  Louisiana,  along with Exxon
Pipeline Company ("Exxon"), National Energy Group, Inc. ("NEG"), Mendoza Marine,
Inc., Shell Western Exploration & Production,  Inc. ("Shell"), and the Louisiana
Department of Transportation  and Development.  The petition was filed in August
1998, and alleges that, in 1997 and perhaps  earlier,  leaks from a buried crude
oil pipeline contaminated the plaintiff's property.

     Pursuant to the purchase and sales  agreement  between the Company and NEG,
NEG is required to indemnify the Company from any damages  attributable to NEG's
operations on the property after the sale. Pursuant to another purchase and sale
agreement,  the  Company  may owe  indemnity  to Shell and  Exxon,  from whom it
acquired the property prior to selling same to NEG. The Company believes that it
has insurance coverage for the claims asserted in the petition, and has notified
all  insurance  carriers  that might provide  coverage  under its policies.  The
Company's  insurance  carrier  at the time of the  incident  assumed  all of the
ongoing  legal costs for the case  effective  July 1, 1999.  Some  discovery has
occurred in the case,  but  discovery is not yet  complete.  Therefore,  at this
point it is not possible to evaluate the likelihood of an  unfavorable  outcome,
or to estimate  the amount or range of potential  loss.

                                       9

<PAGE>

                                  PANACO, Inc.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     The Company is subject to various other legal  proceedings and claims which
arise in the ordinary  course of  business.  In the opinion of  management,  the
amount  of  liability,  if any,  with the  respect  to these  actions  would not
materially  affect the  financial  position  of the  Company  or its  results of
operation.

Note 6 - LONG-TERM DEBT

     In October 1999 the Company put in place a new credit facility. The loan is
a reducing  revolver  which will  provide  the Company  with up to $60  million,
depending on the borrowing  base. The Company's  borrowing base at September 30,
2000 was $60.0 million, with availability of $34.7 million. The principal amount
of the loan is due  September  30, 2001,  and may be extended for an  additional
year at the option of the  Company.  Interest  on the loan is  computed at Wells
Fargo's prime rate plus .5% to 3.0%, depending on the percentage of the facility
being used. The Credit Facility is collateralized by a first mortgage on most of
the  Company's  properties.   The  loan  agreement  contains  certain  covenants
including an EBITDA (as defined in the  agreement) to interest  expense ratio of
at least 1.5 to 1.0 and a working capital ratio (as defined in the agreement) of
at least .25 to 1.0. The loan agreement also contains  limitations on additional
debt, dividends,  mergers and sales of assets. At September 30, 2000 the Company
was in compliance with all of the requirements of its long-term debt.

Note 7 - NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 133,  Accounting for
Derivative Instruments and Hedging Activities, and in June 2000, the FASB issued
SFAS No. 138, Accounting for Certain Derivative  Instruments and Certain Hedging
Activities,  an amendment of FASB Statement No. 133. These statements  establish
standards of  accounting  for and  disclosures  of  derivative  instruments  and
hedging  activities.  These  statements are effective for fiscal years beginning
after June 15, 2000.  The Company is evaluating the impact of the provisions and
believes it will not have a material impact on the Company's financial condition
or results of operations.

Note 8 - INCOME TAXES

     At  December  31,  1999  the  Company  had a  tax  valuation  allowance  of
approximately  $29 million against its deferred tax assets. As of June 30, 2000,
the Company  determined  that it was more likely than not that the  deferred tax
assets would be realized. This determination was based on current projections of
future taxable income.  This analysis  included current  estimates of future oil
and  natural  gas  prices in  addition  to  recent  reserve  additions.  Current
projections  of future taxable income are sufficient to utilize our deferred tax
assets due to higher  commodity  prices and  reserve  additions,  therefore  the
valuation allowance was removed.

                                       10

<PAGE>


                                  PANACO, Inc.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

     These projections of future taxable income are management's best estimates,
using current reserve estimates,  estimates of future commodity prices and other
information currently available. While the Company believes that the assumptions
used in these  projections are reasonable,  unfavorable  future events such as a
decrease in  commodity  prices could result in a reduction in some or all of the
deferred tax assets in a future period. The $29 million benefit recorded for the
removal of the valuation  allowance  during the second  quarter of 2000 has been
offset by a $3.1 million deferred tax liability. This deferred tax liability was
generated  during the nine months  ended  September  30,  2000;  resulting in an
overall tax benefit of $25.9  million for the nine months  ended  September  30,
2000.

Note 9 - SEVERANCE EXPENSE

     Effective  October  1, 2000 the  Company's  President  and Chief  Executive
Officer  resigned  his  position as an  employee  and  director of the  Company.
Pursuant to an employment  contract  between the Company and the  employee,  the
employee  was  entitled  to receive  two years of salary and  benefits  for past
service  with the  Company.  The Company had the right to offset the amounts due
the employee with  principal and interest on a promissory  note due the Company.
The  severance  charge  incurred  in the third  quarter  of 2000  relates to the
settlement of all amounts due the employee  under the  agreement,  including the
remaining salary and coverage under the Company's  various  insurance  policies.
The  employee  was paid a portion of this  amount  due in  October  2000 and the
remaining amount due the employee will be offset against the principal amount of
the promissory  note in January 2001.  Effective  October 15, 2000 the Company's
Chief Operating Officer took over as President of the Company.






                                       11

<PAGE>



PART I
Item 2.
                           MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Forward-looking Statements

     With the exception of historical information, the matters discussed in this
Form 10-Q contain forward-looking  statements. The forward-looking statements we
make, not only in this Form 10-Q, but also in press  releases,  oral  statements
and other  reports  that we file with the  Securities  and  Exchange  Commission
("SEC") are intended to be subject to the safe harbor  provisions of the Private
Securities  Litigation  Reform Act of 1995.  These  statements  relate to future
results of operations,  the ability to satisfy future capital requirements,  the
growth  of  our  Company  and  other   matters.   You  are  cautioned  that  all
forward-looking   statements   involve  risks  and   uncertainties.   The  words
"estimate," "anticipate," "expect," "predict," "believe" and similar expressions
are intended to qualify these  forward-looking  statements.  We believe that the
forward-looking  statements  that we make are based on reasonable  expectations.
However,  due to the nature of the business we are in and other factors,  we can
not assure you that the actual results of our Company will not differ from those
expectations.

General

     The oil and natural gas industry has experienced  significant volatility in
recent  years  because  of the  fluctuatory  relationship  of the supply of most
fossil fuels relative to the demand for those  products and other  uncertainties
in the world energy markets. You should consider the volatility of this industry
when reading the following.

Liquidity and Capital Resources

     In  implementing  our business  strategy of increasing our reserve base and
cash flows from operations, we have reinvested our cash flows from operations as
capital expenditures and as a reduction of debt. During the first nine months of
2000,  our net cash  provided by operating  activities  totaled  $34.0  million,
which,  along with cash on hand, was used to fund capital  expenditures of $22.0
million, for required restricted deposit increases of $1.5 million and to reduce
debt by $13.6 million.  Our capital  expenditures of $22.0 million for the first
nine months of 2000 represent a 23 % increase over capital expenditures totaling
$17.9 million for the comparable period of 1999.

     For the year  2000,  our Board of  Directors  has  approved  a $30  million
capital  budget for new projects in addition to projects that began in late 1999
and continued  into the first quarter of 2000 for a total budget of $39 million.
This budget is based primarily on the resources available to us at this time. We
believe  that our cash  flows  from  operations  will fund this level of capital
expenditures in addition to reducing outstanding debt.

     In an attempt to reduce  interest  costs, we keep as little cash on hand as
possible and apply available cash to our Credit Facility balance.  The timing of
receipt of monies due us and the payment of amounts due others also  affects our
working  capital.  These two factors caused us to have a working capital deficit
on September 30 2000,  excluding the current portion of long-term debt, of $13.2
million.   We  believe  that  our  cash  flow  from   operations  and  borrowing
availability  under our Credit  Facility will be sufficient to fund this working
capital deficit in addition to our ongoing operations,  capital expenditures and
additional  reduction  of debt.  As the initial  term of the Credit  Facility is
through  September 20, 2000, we have  classified the balance  outstanding  under

                                       12

<PAGE>

this  facility as  current.  We have the option to extend the term of the Credit
Facility for an additional year or we may replace the facility during 2001.

Credit Facility

     Our primary source of capital beyond discretionary cash flows is our Credit
Facility.  Our Credit Facility is secured by a first mortgage on most of our oil
and natural gas  properties,  and is used  primarily as  development  capital on
properties  that we own. We may also use the Credit Facility for working capital
support, to provide letters of credit and general corporate purposes.

     In  October  1999 we put in  place a new  Credit  Facility,  with  Foothill
Capital  Corp. as the Agent,  and includes  Foothill  Partners,  L.P. and Ableco
Finance, a subsidiary of Cereberus Capital Management, L.P. This Credit Facility
is a $60  million  line,  with  a term  of  two  years,  and  extendable  for an
additional year at our option.  Borrowings  under this Facility bear interest at
rates ranging from prime plus .5% up to prime plus 3.0%  depending on the amount
borrowed.  We had $23.1 million outstanding at September 30, 2000, a decrease of
$12.9  million  during the third  quarter of 2000.  We  anticipate  reducing our
outstanding balance during the fourth quarter of 2000.

     The Credit  Facility is a  revolving  credit  agreement  subject to monthly
borrowing base  determinations.  These  determinations are made using internally
prepared engineering reports, using a two-year average of NYMEX future commodity
process  and  are  based  on  our  semi-annual   third  party  reserve  reports.
Indebtedness  under this Credit Facility  constitutes  senior  indebtedness with
respect to the Senior Notes.

     Under  the  terms of this  Credit  Facility,  we must  maintain  a ratio of
trailing twelve-month EBITDA to net interest expense of not less than 1.5 to 1.0
throughout  the term of the Facility.  We must also  maintain a working  capital
ratio,  as  defined in the  agreement,  of not less than .25 to 1.0.  Also,  the
Credit Facility contains certain limitations on mergers, additional indebtedness
and pledging or selling  assets.  We were in  compliance  with all  covenants on
September 30, 2000 and anticipate compliance throughout the term of the loan.

Senior Note offering

     On October 9, 1997,  we issued  $100  million  principal  amount of 10 5/8%
Senior Notes due October 1, 2004. Interest on the Notes is payable semi-annually
in arrears on each April 1 and October 1, commencing April 1, 1998.

Commodity price hedges

     We follow a hedging strategy designed to protect against the possibility of
severe  price  declines  due to  market  volatility.  We  usually  make  hedging
decisions to assure a payout of a specific acquisition or development project.

     For the year 2000,  we have  options to put oil and  natural  gas,  that we
produce,  to a purchaser at an agreed upon price.  The natural gas put option is
for 10,000  MMbtu per day at a NYMEX  price of $2.04 per MMbtu.  The cost of the
natural gas put option was $366,000,  which is being  amortized  over the period
the hedged item is produced,  fiscal year 2000. We also have two oil put options
in place,  each for 1,000 barrels of oil per day. The first oil put option began
March 1, 2000 and continues  through  December 31, 2000 at NYMEX price of $20.00
per  barrel.  The  second oil put option  begins  October 1, 2000 and  continues
through September 30, 2001. The oil put options cost a total of $640,000 and are
being  amortized over the period the hedged item is produced.  In addition,  for
the  remainder of 2000 only, we have swaps in place on an average of 232 barrels

                                       13

<PAGE>

of oil for each day at  $17.00  per  barrel.  This  swap  was  assumed  with the
acquisition of Goldking in 1997.

     On September 30, 2000 our open hedge position had a fair value of estimated
future  losses  totaling  $615,000.  A 10% adverse  change in prices would cause
these estimated future losses to increase to $635,000.

     We produce and sell natural gas, oil and natural gas liquids.  As a result,
our  financial  results  can be  significantly  affected  by  changes  in  these
commodity  prices. We use derivative  financial  instruments to attempt to hedge
our  exposure  to  changes in the market  price of  natural  gas and oil.  While
commodity  financial  instruments are intended to reduce exposure to declines in
these market  prices,  the commodity  financial  instruments  may also limit the
gains from increases in the market price of natural gas and oil. Gains or losses
on these  transactions  are recognized in the production  month to which a hedge
contract relates.

Capital expenditures

     Capital  expenditures  totaled  $22.0  million for the first nine months of
2000,  which  represents  a 23%  increase  over the  $17.9  million  of  capital
expenditures incurred in the comparable period of 1999. The capital expenditures
incurred in 2000 were  primarily for the drilling of  development  wells in five
fields that we operate, as follows.

     In late June 2000,  we began a new  development  program in the East Breaks
109 and 110 Fields,  with the aid of 3-D  seismic,  which we  purchased  in late
1998. These Fields are in approximately 700 feet of water in the Gulf of Mexico.
We own a 100%  working  interest in these Fields and are the  operator.  Through
September  30, 2000 we had spent $6.8  million for the first new well drilled in
these Fields since we acquired them in July 1995.  This first well was completed
and began  production in October 2000.  The second well was spud in October 2000
and we have  four  additional  projects  scheduled  for  2000  and 2001 in these
Fields.

     During the first  quarter of 2000 we  completed  a second well in the Price
Lake Field,  located in Cameron Parish,  Louisiana.  We own approximately 51% of
both wells in the Price Lake Field and are the  operator.  We spent $4.2 million
in capital expenditures in the Price Lake Field through the first nine months of
2000.

     During  the  second  and  third  quarters  of 2000 we  spent  $3.1  million
recompleting  wells in the East Breaks 165 Field. This Field is also in the Gulf
of Mexico,  in  approximately  900 feet of water. We own a 100% working interest
and are the operator of the Field.

     During  the  first  quarter  of  2000  we  spent  $2.8  million  for  a new
development well in the Umbrella Point Field.  This well was completed and began
production  during March 2000. This Field is located in Galveston Bay, Texas. We
own an 80% working interest in the new well and are the operator of the Field.

     During  the  first  quarter  of  2000  we  spent  $0.8  million  for  a new
development  well in the  West  Delta  Field,  located  offshore  Louisiana,  in
Plaquemines  Parish.  This well was completed  and began  production in February
2000.  During the third  quarter we spent an additional  $0.8 million  beginning
location work for two new wells to be drilled during the fourth quarter of 2000.
We own a 100% working interest in the Field and are the operator.

     In addition,  we participated  in several  smaller capital  projects and we
acquired minority, non-operating interests in our North Coward's Gully Field and
in the East Breaks 109 Fields,  giving us essentially  100% ownership of both of
these Fields.  These expenditures were funded with cash flows from operations in

                                       14

<PAGE>

addition to cash on hand. Our total capital expenditures during the remainder of
fiscal year 2000 are estimated to be $10 to $12 million.

Results of Operations

For the nine months ended September 30, 2000 and 1999:

"Oil and natural gas sales"

Production and Prices:

<TABLE>
<CAPTION>
                                                                                              % Increase
                                                     2000                  1999               (Decrease)
                                                     ----                  ----               ----------
                <S>                                   <C>                   <C>                   <C>


         Natural gas production (MMcf)               10,701                 8,383                  28%
         Average price per Mcf
          excluding hedging                       $    3.73              $   2.21                  69%
         Average price per Mcf
          including hedging                       $    3.70              $   1.98                  87%

         Oil Production (MBbl)                          818                   863                  (5%)
         Average price per Bbl
          excluding hedging                       $   29.78              $  16.90                  76%
         Average price per Bbl
          including hedging                       $   29.23              $  16.27                  80%

</TABLE>

     Natural gas production  increased  28%,  while oil production  decreased 5%
during the first nine  months of 2000 when  compared to the first nine months of
1999. The resumption of capital  spending  during the fourth quarter of 1999 and
continuing  increase  during 2000 resulted in  additional  production in several
fields that we  operate.  This  additional  production  resulted  in  offsetting
production declines that occur naturally on some of our other properties.

     The fields that we  experienced  increased  production  from were the Price
Lake Field,  which  essentially  did not produce during the first nine months of
1999.  Initial  production from the Price Lake Field began in September 1999 and
was increased  further with a second successful well completed in March 2000. We
also increased  production  with two  successful  projects in the Umbrella Point
Field.  A workover of the ST #74-10 well in December 1999 was the primary factor
in  increasing  natural gas  production  in the Umbrella  Point  Field.  We also
completed a successful  development well in this Field, the ST #87-12, which did
not begin production until March 2000.

     "Lease operating  expense" increased to $16.4 million during the first nine
months of 2000 compared to $12.4 million in 1999. On an Mcf equivalent  ("Mcfe")
basis,  lease  operating  expenses also increased to $1.05 in 2000 from $0.91 in
1999.  Part of our  increased  capital and project  spending in 2000  included a
number of workover and repair expenditures  totaling  approximately $5.2 million
during the first nine months of 2000.  These types of expenditures  are expensed
as they are  incurred.  The largest of these  expenses  was incurred at our East
Breaks  165  Fields.  During  the  second  and third  quarters  of 2000 we spent
approximately  $3.3 million for MMS  mandated  repairs of  production  tubing on
several wells.

                                       15

<PAGE>

     "Depletion, depreciation and amortization" increased $2.1 million primarily
due to a 15%  increase in total  production,  which was offset  slightly by a 3%
decrease  in  the  depletion  rate  per  Mcfe.  On  an  Mcfe  basis,  depletion,
depreciation and amortization decreased to $1.32 in 2000 from $1.36 in 1999. The
primary factor in decreased  depletion,  depreciation  and amortization per Mcfe
was higher unproved property  amortization  during 1999 than in 2000. During the
third and  fourth  quarters  of 1999 most of our  unproved  property  costs were
impaired, reducing the amount of amortization during 2000.

     "General and  administrative  expense"  increased  $0.3 million  during the
first nine months of 2000 primarily due to higher salaries, wages and benefits.

     "Production and ad valorem taxes" increased $0.8 million,  or 122%,  during
the first nine months of 2000 primarily due to two factors.  Production taxes on
oil  sales  are  calculated  based on the  value  of the oil  being  sold  which
increased  significantly  with a 80% increase in our  realized  oil prices.  Our
production  mix  during  2000 also  changed  to  include  more  production  from
properties onshore, or in state waters, which are subject to severance taxes.

     "Geological  and  geophysical  expense"  increased  $0.2 million during the
first nine months of 2000. The increase relates to drilling activity and related
required  geological  work during the first nine months of 2000,  including  the
purchase 3-D seismic for further development of a field that we operate.

     "Exploratory dry hole expense" decreased $0.1 million during the first nine
months of 2000.  The costs  incurred  in 2000  relate to three  wells  that were
completed  and are  currently  producing.  The expense  related to each of these
wells represent the incremental  costs for drilling to exploratory  zones in the
wells that did not contain an economical quantity of reserves. These incremental
expenditures were expensed based on their proportional costs of the entire well.
The third well with  exploratory dry hole expenses was not completed until early
November 2000. As such, we anticipate an additional  approximately $1 million of
exploratory dry hole expense during the fourth quarter of 2000.

     "Impairment of oil and gas properties" incurred during 1999 was a result of
the  Company's  regular  review  of the  recoverability  of the  property  costs
incurred from the estimated  future net cash flows related to those assets.  The
impairment  incurred  in 1999 was a result of the  decision  not to develop  the
unproved  properties  that  had  been  allocated  unproved  property  values  in
connection with acquisitions made in 1996 and 1997.

     "Severance  expense" relates to the termination of the employment  contract
with our former Chief Executive Officer and President.

     "Lawsuit  recovery"  relates  to a lawsuit  that we had  filed in 1996,  in
conjunction with our insurance  carrier,  related to a property that we operate.
Our part of the lawsuit was primarily for time value of delayed  revenues from a
fire caused by a third party service company.  The judgement against the service
companies'  insurance carrier was appealed on April 7, 2000 and was subsequently
settled for which we received $990,000.

     "Income  tax  benefit"  reflects a  reduction  of our  deferred  income tax
valuation  allowance.  At December 31, 1999 we had a tax valuation  allowance of
approximately  $29 million against our deferred tax assets. As of June 30, 2000,
we  determined  that it was more  likely than not that the  deferred  tax assets
would be realized.  This  determination was based on our current  projections of
future taxable income.  This analysis  included current  estimates of future oil
and  natural gas prices in addition  to recent  reserve  additions.  Our current
projections  of future taxable income are sufficient to utilize our deferred tax
assets due to higher  commodity  prices and  reserve  additions,  therefore  the
valuation allowance was removed.

                                       16

<PAGE>

     These projections of future taxable income are management's best estimates,
using current reserve estimates,  estimates of future commodity prices and other
information  currently available.  While we believe that the assumptions used in
these projections are reasonable,  unfavorable  future events such as a decrease
in  commodity  prices  could  result  in a  reduction  in some or all of the net
deferred tax assets in a future period. The $29 million benefit recorded for the
removal of the valuation  allowance  has been offset by a $3.1 million  deferred
tax  liability  that was  generated  during the nine months ended  September 30,
2000,  resulting in an overall tax benefit of $25.9  million for the nine months
ended September 30, 2000.

     "Interest  expense"  increased  due  to a  combination  of  higher  average
borrowings  and an increase in the prime  rate,  upon which our Credit  Facility
interest rate is based on.

For the three months ended September 30, 2000 and 1999:

"Oil and natural gas sales"

Production and Prices:

<TABLE>
<CAPTION>
                                                                                            % Increase
                                                  2000                   1999               (Decrease)
                                                  ----                   ----               ----------
                <S>                                 <C>                    <C>                <C>


       Natural gas production (MMcf)              3,867                  2,079                  86%
       Average price per Mcf
        excluding hedging                        $ 4.52                 $ 3.22                  40%
       Average price per Mcf
        including hedging                        $ 4.50                 $ 2.36                  91%

       Oil Production (MBbl)                        277                    312                 (11%)
       Average price per Bbl
        excluding hedging                        $31.45                 $19.91                  58%
       Average price per Bbl
        including hedging                        $30.81                 $17.86                  73%

</TABLE>

     The  resumption of capital  spending  during the fourth quarter of 1999 and
continuing  in 2000  resulted in  increased  natural gas  production  in several
fields that we operate.  This additional  production more than offset production
declines that occur naturally on other properties.

     The fields that we  experienced  increased  production  from were the Price
Lake Field,  which did not produce  during the second  quarter of 1999.  Initial
production  from the Price Lake Field began in September  1999 and was increased
further with a second successful well completed in March 2000. We also increased
production with two successful  projects in the Umbrella Point Field. A workover
of the ST #74-10 well in  December  1999 was the  primary  factor in  increasing
natural  gas  production  in the  Umbrella  Point  Field.  We also  completed  a
successful development well in this Field, the ST #87-12, which began production
in March 2000. In addition,  a project  completed  during the second  quarter of
2000 in which we own a 33% working  interest  and is operated by a third  party,
also increased our and oil and natural gas  production  during the third quarter
of 2000.

     "Lease operating  expense"  increased $2.3 million during the third quarter
of 2000 compared to the comparable  period in 1999. On an Mcf equivalent  basis,

                                       17

<PAGE>

lease  operating  expenses  also  increased to $1.14 in 2000 from $1.01 in 1999.
Part of our increased  capital and project spending in 2000 included a number of
workover and repair  expenditures  during the second quarter of 2000,  which are
expensed as they are  incurred.  The largest of which were  incurred at our East
Breaks 165 Field. We spent  approximately  $2.2 million for MMS mandated repairs
of production tubing on several wells in that Field.

     "Depletion,  depreciation and amortization" increased $1.9 million, or 31%,
primarily  due  to a  40%  increase  in  total  production.  On an  Mcfe  basis,
depletion,  depreciation and amortization  decreased to $1.46 in 2000 from $1.56
in  1999.  The  primary  factor  in  decreased   depletion,   depreciation   and
amortization per Mcfe was higher unproved property amortization during 1999 than
in 2000.  During  the third and  fourth  quarters  of 1999 most of our  unproved
property costs were impaired, reducing the amount of amortization during 2000.

     "General and  administrative  expense"  increased  $0.1 million during 2000
primarily due to higher salaries, wages and benefits.

     "Production  and ad valorem taxes"  increased $0.2 million,  or 73%, during
the third quarter of 2000 due to two factors.  Production taxes on oil sales are
calculated   based  on  the  value  of  the  oil  being  sold  which   increased
significantly with a 73% increase in our realized oil prices. Our production mix
during 2000 also changed to include more production from properties  onshore, or
in state waters, which are subject to severance taxes.

     "Geological  and  geophysical  expense"  decreased  $0.1 million during the
third  quarter of 2000.  The  decrease is  primarily  due to 3-D  seismic  costs
incurred during the third quarter of 1999.

     "Exploratory  dry hole  expense"  increased  $0.3 million  during the third
quarter of 2000.  The costs incurred in 2000 relate to a well that was completed
in early  November  2000.  The  expense  related  to this  well  represents  the
incremental  costs for  drilling to  exploratory  zones in the well that did not
contain an economical  quantity of reserves.  The incremental  expenditures were
expensed based on their proportional costs of the entire well. This well was not
completed  until early  November  2000.  As such,  we  anticipate  an additional
approximately  $1  million of  exploratory  dry hole  expense  during the fourth
quarter of 2000.

     "Impairment of oil and gas properties" incurred during the third quarter of
1999 was a result of the Company's  regular review of the  recoverability of the
property  costs  incurred  from the  estimated  future net cash flows related to
those assets.  The impairment  incurred in 1999 was a result of the decision not
to develop the unproved  properties  that had been allocated  unproved  property
values in connection with acquisitions made in 1996 and 1997.

     "Severance  expense"  relates to the termination of an employment  contract
with our former Chief Executive Officer and President.

     "Income tax expense" is a deferred tax provision  against our income before
income  taxes using our  effective  tax rate.  The  provision  is recorded as an
offset to our deferred tax asset.

     "Interest  expense"  increased  due  to a  combination  of  higher  average
borrowings  during the third quarter of 2000 along with an increase in the prime
rate, upon which our Credit Facility interest rate is based on.

                                       18

<PAGE>

Other Contingencies

     We are subject to various  legal  proceedings  and claims that arise in the
ordinary course of business.  We believe,  based on the information available to
us, that the amount of  liability,  if any,  with the  respect to these  actions
would not materially affect the financial position of the Company or its results
of operation.

     An action was filed against the Company,  Exxon Pipeline Company ("Exxon"),
National  Energy  Group,  Inc.  ("NEG"),  Mendoza  Marine,  Inc.,  Shell Western
Exploration  &  Production,  Inc.  ("Shell")  and the  Louisiana  Department  of
Transportation  and  Development.  The petition  was filed in August  1998,  and
alleges  that,  in 1997 and  perhaps  earlier,  leaks  from a buried  crude  oil
pipeline  contaminated  the plaintiff's  property.  Pursuant to the purchase and
sale agreement between the Company and NEG, NEG is required to indemnify us from
any damages attributable to NEG's operations on the property after the sale.

     Pursuant to another  purchase and sale  agreement,  we may owe indemnity to
Shell and Exxon,  from whom we acquired  the  property  prior to selling same to
NEG.  We believe we have  insurance  coverage  for the  claims  asserted  in the
petition,  and have notified all insurance  carriers that might provide coverage
under our policies.  The Company's insurance carrier at the time of the incident
assumed all of the ongoing legal costs for the case effective July 1, 1999. Some
discovery  has  occurred  in  the  case,  but  discovery  is not  yet  complete.
Therefore,  at this point it is not  possible to evaluate the  likelihood  of an
unfavorable outcome, or to estimate the amount or range of potential loss.

Item 3a.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity price hedges

     We follow a hedging strategy designed to protect against the possibility of
severe  price  declines  due to  market  volatility.  We  usually  make  hedging
decisions to assure a payout of a specific acquisition or development project.

     For the year 2000,  we have  options to put oil and  natural  gas,  that we
produce,  to a purchaser at an agreed upon price.  The natural gas put option is
for 10,000  MMbtu per day at a NYMEX  price of $2.04 per MMbtu.  The cost of the
natural gas put option was $366,000,  which is being  amortized  over the period
the hedged item is produced,  fiscal year 2000. We also have two oil put options
in place,  each for 1,000 barrels of oil per day. The first oil put option began
March 1, 2000 and continues  through  December 31, 2000 at NYMEX price of $20.00
per  barrel.  The  second oil put option  begins  October 1, 2000 and  continues
through September 30, 2001. The oil put options cost a total of $640,000 and are
being  amortized over the period the hedged item is produced.  In addition,  for
the  remainder of 2000 only, we have swaps in place on an average of 232 barrels
of oil for each day at  $17.00  per  barrel.  This  swap  was  assumed  with the
acquisition  of Goldking in 1997. On September 30, 2000 our open hedge  position
had a fair value of estimated  future losses  totaling  $615,000.  A 10% adverse
change in prices  would  cause  these  estimated  future  losses to  increase to
$635,000.

                                       19

<PAGE>

PART II             OTHER INFORMATION

Item 6.       EXHIBITS AND REPORTS ON FORM 8-K

    (a)   Exhibits

          10.26   Second amendment to credit agreement dated September 29, 2000.
          10.27   Employment agreement between the Company and Robert G. Wonish.
          27      Financial Date Schedule.


    (b)   Reports on Form 8-K


          October 26, 2000  Change in ownership of Senior Notes due 2004.


                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                  PANACO, Inc.

Date:   November 10, 2000                  /s/ Todd R. Bart
     -----------------------               -----------------------------------
                                           Todd R. Bart, Chief Financial Officer

<PAGE>


Exhibit 10.26
-------------

                     SECOND AMENDMENT TO AMEND AND RESTAED
                          LOAN AND SECURITY AGREEMENT


     THIS SECOND  AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY  AGREEMENT
(this  "Amendment")  is made and entered into as of September  29, 2000,  by and
among:  PANACO,  INC.,  a Delaware  corporation  ("Borrower")  which is the sole
surviving  corporation  of the  merger by  Panaco  Production  Company,  a Texas
corporation ("PPC"),  with and into Panaco, Inc. and is the  successor-by-merger
to PPC  thereunder;  the financial  institutions  listed on the signature  pages
hereof (such financial  institutions,  together with their respective successors
and assigns,  are referred to hereinafter  each  individually  as a "Lender" and
collectively as the "Lenders");  and FOOTHILL CAPITAL CORPORATION,  a California
corporation, as agent for the Lenders ("Agent").

                                    RECITALS
                                    --------

     A. Borrower,  Panaco Production  Company (prior to its merger with and into
Borrower), Agent and Lenders have entered into that certain Amended and Restated
Loan and Security Agreement,  dated as of September 30, 1999, as amended by that
certain  First  Amendment to Amended and Restated  Loan and Security  Agreement,
dated November 30, 1999 (as so amended, the "Loan Agreement").

     B. PPC and Goldking Acquisition Corporation, a Delaware corporation, merged
with and into Borrower (the  "Merger"),  with Borrower  being the sole surviving
entity of the Merger.

     C.  Borrower,  Agent and  Lenders  desire to amend  the Loan  Agreement  as
hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:

                                    AGREEMENT
                                    ---------

                                    ARTICLE I
                          Amendments to Loan Agreement
                          ----------------------------

     1.01 Amendment to Section 7.21 of the Loan  Agreement.  Effective as of the
date hereof,  Section 7.21  of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:

     "7.21  Capital  Expenditures.  Make capital  expenditures  in excess of (a)
$40,000,000  during  Borrower's  fiscal year ending  December 31,  2000,  or (b)
$30,000,000  during any fiscal  year of Borrower  ending on or after  January 1,
2001."

     1.02  Amendment to Section 1.6 of the Loan  Agreement.  Effective as of the
date of the  merger  of PPC  with  and  into  Panaco,  Section 1.6  of the  Loan
Agreement is hereby amended to add the following at the end of such section:

     "Notwithstanding the foregoing provisions of this Section 1.6 and any other
provisions of this Agreement  referring  either to PPC (whether as a Borrower or
otherwise)  or to GAC, from and after the date of the merger of PPC and GAC with
and into Panaco, with Panaco being the sole surviving entity, as required by and
in accordance  with  Section 3.3(d)  of this  Agreement,  it is understood  that
(a) all references to "Borrower" or "Borrowers" shall refer solely to Panaco and
shall no  longer be  understood  to refer to and  include  PPC and  (b) for  all
purposes of this  Agreement  and the other Loan  Documents,  including,  without
limitation,  for purposes of making representations and warranties and complying

<PAGE>

with covenants and agreements,  neither PPC nor GAC shall continue to maintain a
separate existence,  both such entities having been merged with and into Panaco,
with Panaco being the sole surviving entity."

                                   ARTICLE II
                              Conditions Precedent
                              --------------------

     2.01 Conditions to  Effectiveness.  The  effectiveness of this Amendment is
subject to the  satisfaction of the following  conditions  precedent in a manner
satisfactory to Agent, unless specifically waived in writing by Agent:

     (a) Agent shall have received this Amendment, duly executed by Borrower.

     (b) Agent shall have received the  Amendment Fee described in  Section 4.11
of this Amendment.

     (c) The  representations  and warranties  contained  herein and in the Loan
Agreement and the other Loan Documents, as each is amended hereby, shall be true
and correct as of the date hereof, as if made on the date hereof.

     (d) No Default or Event of Default shall have  occurred and be  continuing,
unless such Default or Event of Default has been otherwise  specifically  waived
in  writing  by Agent and to the  extent  required  by the Loan  Agreement,  the
Lenders.

     (e) All corporate  proceedings  taken in connection  with the  transactions
contemplated  by this Amendment and all documents,  instruments  and other legal
matters incident thereto shall be satisfactory to Agent and its legal counsel.

                                   ARTICLE III
                  Ratifications, Representations and Warranties
                  ---------------------------------------------

     3.01  Ratifications.  The terms and  provisions set forth in this Amendment
shall modify and supersede all  inconsistent  terms and  provisions set forth in
the Loan  Agreement  and the other  Loan  Documents,  and,  except as  expressly
modified and superseded by this Amendment,  the terms and provisions of the Loan
Agreement  and the other Loan  Documents  are ratified and  confirmed  and shall
continue in full force and effect.  Borrower,  Agent and Lenders  agree that the
Loan Agreement and the other Loan Documents,  as amended hereby,  shall continue
to be legal, valid,  binding and enforceable in accordance with their respective
terms.

     3.02  Representations  and  Warranties.   Borrower  hereby  represents  and
warrants  to  Agent  and  each  Lender  that  (a) the  execution,  delivery  and
performance  of this  Amendment  and any and all other Loan  Documents  executed
and/or  delivered in connection  herewith have been  authorized by all requisite
corporate  action on the part of Borrower  and will not violate the  Articles of
Incorporation  or Bylaws of Borrower;  (b) attached hereto as Annex A is a true,
correct and complete copy of presently effective resolutions of Borrower's Board
of  Directors  authorizing  the  execution,  delivery  and  performance  of this
Amendment  and any and all other Loan  Documents  executed  and/or  delivered in
connection   herewith,   certified  by  the  Secretary  of  Borrower;   (c)  the
representations  and  warranties  contained  in the Loan  Agreement,  as amended
hereby,  and any other Loan  Document are true and correct on and as of the date
hereof; (d) no Default or Event of Default under the Loan Agreement,  as amended
hereby, has occurred and is continuing,  unless such Default or Event of Default
has been  specifically  waived in writing by Agent and to the extent required by
the Loan  Agreement,  the Lenders;  (e) Borrower is in full  compliance with all

<PAGE>

covenants  and  agreements  contained in the Loan  Agreement  and the other Loan
Documents,  as amended hereby;  and (f) Borrower has not amended its Articles of
Incorporation or its Bylaws since the date of the Loan Agreement.

                                   ARTICLE IV
                            Miscellaneous Provisions
                            ------------------------

     4.01 Survival of Representations  and Warranties.  All  representations and
warranties  made in the Loan  Agreement or any other Loan  Document,  including,
without  limitation,  any document  furnished in connection with this Amendment,
shall survive the  execution  and delivery of this  Amendment and the other Loan
Documents,  and no  investigation  by  Agent or any  closing  shall  affect  the
representations  and  warranties  or the right of Agent and the  Lenders to rely
upon them.

     4.02 Reference to Loan Agreement.  Each of the Loan Agreement and the other
Loan Documents,  and any and all other Loan Documents,  documents or instruments
now or hereafter executed and delivered pursuant to the terms hereof or pursuant
to the terms of the Loan  Agreement,  as amended  hereby,  are hereby amended so
that any reference in the Loan  Agreement  and such other Loan  Documents to the
Loan Agreement shall mean a reference to the Loan Agreement, as amended hereby.

     4.03  Expenses of Agent and  Lenders.  As  provided in the Loan  Agreement,
Borrower  agrees to pay on demand all costs and  expenses  incurred by Agent and
Lenders in connection with the preparation,  negotiation,  and execution of this
Amendment and the other Loan Documents  executed pursuant hereto and any and all
amendments,   modifications,   and  supplements  thereto,   including,   without
limitation,  the costs and fees of Agent's and Lenders' legal  counsel,  and all
costs  and  expenses  incurred  by Agent  and  Lenders  in  connection  with the
enforcement or preservation  of any rights under the Loan Agreement,  as amended
hereby, or any other Loan Documents,  including,  without, limitation, the costs
and fees of Agent's and Lenders' legal counsel.

     4.04  Severability.  Any  provision  of this  Amendment  held by a court of
competent  jurisdiction  to be  invalid  or  unenforceable  shall not  impair or
invalidate  the  remainder of this  Amendment  and the effect  thereof  shall be
confined to the provision so held to be invalid or unenforceable.

     4.05 Successors and Assigns. This Amendment is binding upon and shall inure
to the  benefit  of  Agent,  each  Lender  and  Borrower  and  their  respective
successors  and assigns,  except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of Agent.

     4.06  Counterparts.   This  Amendment  may  be  executed  in  one  or  more
counterparts,  each of which when so executed shall be deemed to be an original,
but all of  which  when  taken  together  shall  constitute  one  and  the  same
instrument.

     4.07 Effect of Waiver. No consent or waiver,  express or implied,  by Agent
or any  Lender  to or for any  breach  of or  deviation  from  any  covenant  or
condition by Borrower shall be deemed a consent to or waiver of any other breach
of the same or any other covenant, condition or duty.

     4.08  Headings.  The  headings,  captions,  and  arrangements  used in this
Amendment are for convenience  only and shall not affect the  interpretation  of
this Amendment.

     4.09 Applicable  Law. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS  EXECUTED
PURSUANT  HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE  PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF
NEW YORK.

     4.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH
AS AMENDED HEREBY,  REPRESENT THE ENTIRE  EXPRESSION OF THE PARTIES WITH RESPECT

<PAGE>

TO THE SUBJECT  MATTER HEREOF ON THE DATE THIS  AMENDMENT IS EXECUTED.  THE LOAN
AGREEMENT  AND  THE  OTHER  LOAN  DOCUMENTS,  AS  AMENDED  HEREBY,  MAY  NOT  BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.  NO
MODIFICATION,  RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE,  EXCEPT BY A WRITTEN  AGREEMENT SIGNED BY EACH BORROWER
AND AGENT.

     4.11 Amendment Fee. In  consideration  of the execution of this  Amendment,
Borrower  agrees to pay to Agent on the date of this  Amendment an amendment fee
of $50,000, which fee shall be fully earned and non-refundable as of the date of
this Amendment.

      [remainder of page intentionally left blank; signature page follows]

<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed as of the date first written above.


                                      BORROWER:
                                      ---------

                                      PANACO, INC.

                                      By:/s/ Todd R. Bart
                                         --------------------------------
                                      Title: Chief Financial Officer
                                             ----------------------------


                                      AGENT:
                                      ------

                                      FOOTHILL CAPITAL CORPORATION,
                                      as Agent for the Lenders

                                      By:/s/ Sheri Fenenbock
                                         --------------------------------
                                      Title: Vice President
                                             ----------------------------


                                      LENDERS:
                                      --------

                                      FOOTHILL CAPITAL CORPORATION, as a Lender

                                      By:/s/ Sheri Fenenbock
                                         --------------------------------
                                      Title: Vice President
                                             ----------------------------

                                      ABLECO FINANCE LLC, as a Lender

                                      By:/s/
                                         --------------------------------
                                      Title: ----------------------------

<PAGE>

Exhibit 10.27
-------------

                              EMPLOYMENT AGREEMENT

PANACO, INC.,  ("Panaco") hereby employs ROBERT G. WONISH (hereinafter  referred
to as  "Employee")  to be employed  and serve as President  and Chief  Operating
Officer,  effective  September 15, 2000, on the following  terms and conditions:

                                   WITNESSETH

1. Duties.  Employee  shall  perform such services  regarding the  operations of
Panaco as the Board of Directors may from time to time request.  Employee  shall
at all  times  faithfully,  with  diligence,  and to the  best  of his  ability,
experience and talents,  perform all the duties that may be required of and from
him  pursuant to the terms of this  Agreement.  It is expressly  understood  and
agreed that in the performance of his duties and obligations hereunder, Employee
shall at all times be  subject  to the  direction  and  control  of the Board of
Directors of Panaco.

2.  Term and  Renewal.  The  initial  term of  employment  contemplated  by this
Agreement shall commence  effective  September 15, 2000, and continue for a term
of one (1) year.  Thereafter,  this Agreement  shall  automatically  renew for a
consecutive  term of one (1) year each,  upon expiration of the initial term and
each renewal term  hereunder,  unless  terminated  upon thirty (30) days written
notice.

3.  Compensation.  In consideration of the work and other services that Employee
performs for Panaco hereunder, Panaco shall pay Employee the following:

     (a)  Base Salary. During the term hereof, Panaco shall pay Employee a gross
          annual salary of $250,000, payable semi-monthly in accordance with the
          company's normal payroll policies,  subject to withholding for federal
          income tax,  social  security,  state and local taxes, if any, and any
          other sums that Panaco my be legally  required to  withhold.  Employee
          will be eligible for all cost of living  adjustments  that are awarded
          to Panaco employees.

     (b)  Vacation.  Employee  shall be entitled to vacation in accordance  with
          vacation  policies of Panaco from time to time in effect with  respect
          to the executive employees of Panaco.

     (c)  Other Benefits.  During the term of this Agreement,  Employee shall be
          entitled to  participate  in all employee  benefit  plans from time to
          time made available to the executives or general employees of Panaco.

     (d)  Insurance.  Panaco will provide  Employee and  Employee's  dependant's
          with  coverage  under a policy of  hospitalization  and major  medical
          insurance and dental coverage at no cost to the Employee.  Panaco will
          provide  life  insurance  coverage  to  Employee  in an  amount  to be
          determined by the company.

     (e)  Bonuses.  Panaco will  provide  Employee  with a yearly  bonus that is
          determined by and at the  discretion  of the Board of  Directors.  The
          Board of Directors can elect to not issue any bonus for any given year
          that this contract is valid.  It is also understood that Employee will
          be granted a bonus for the  calendar  year of 2000 payable in January,
          2001 with the amount to be equal to or greater than $25,000.

<PAGE>

     (f)  Stock  Options.  Panaco,  at  the  full  discretion  of the  Board  of
          Directors,  may issue stock options to Employee at any time during the
          term of this contract.  The quantity and pricing of such options is to
          be determined solely by the Board of Directors.

4. Expenses.  Panaco shall  reimburse  Employee for all reasonable  expenses and
disbursements   incurred  by  Employee  in  connection  with  Employee's  duties
hereunder,  including  expenses for  entertainment and travel, as are consistent
with the policies and procedures of Panaco.

5.  Confidential  Information.  Employee  acknowledges  that  in the  course  of
employment  by  Panaco,   Employee  will  receive   certain  trade  secrets  and
confidential  information belonging to Panaco which Panaco desires to protect as
confidential.  For  the  purposes  of this  Agreement,  the  term  "confidential
information"  shall mean  information of any nature and in any form which at the
time is not generally known to those persons engaged in business similar to that
conducted by Panaco.  Employee agrees that such  information is confidential and
that he will  not  reveal  such  information  to  anyone  other  than  officers,
directors and  employees of Panaco.  Upon  termination  of  employment,  for any
reason,  Employee  shall  surrender  to Panaco all papers,  documents  and other
property of Panaco.

6. Agreement Not To Solicit. During the initial or renewal term hereof and for a
period  of  two  years  after  the  termination  of  employment  hereunder  (the
"Termination  Date"),  regardless of how terminated,  Employee will not, singly,
jointly,  or  as a  partner,  member,  contractor,  employee  or  agent  of  any
partnership or as an officer, director, employee, agent, contractor, stockholder
or  investor  in  any  other  entity  or in  any  other  capacity,  directly  or
indirectly:

     (a)  induce,  or  attempt  to  induce,  any  person  or party  who,  on the
          Termination  Date is employed by or  affiliated  with Panaco or at any
          time  during  the term of this  covenant  is, or may be, or becomes an
          employee of or affiliated  with Panaco,  to terminate  his, her or its
          employment or affiliation with Panaco;

     (b)  induce, or attempt to induce, any person,  business or entity which is
          or becomes a customer or supplier of Panaco,  or which  otherwise is a
          contracting  party with Panaco,  as of the Termination Date, or at any
          time  during  the  term  hereof,  to  terminate  any  written  or oral
          agreement or understanding  with Panaco, or to interfere in any manner
          with any relationship between Panaco and such customer or supplier;

     (c)  employ or  otherwise  engage in any  capacity  any  person  who at the
          Termination  Date or at any time  during the  period  two years  prior
          thereto was employed,  or otherwise engaged, in any capacity by Panaco
          and  who,  by  reason  thereof  is or is  reasonably  likely  to be in
          possession of any confidential information.

Employee   acknowledges  and  agrees  that  the  provisions  of  this  paragraph
constitute a material, mutually bargained for portion of the consideration to be
delivered  under this  agreement  and that it is a  condition  precedent  to the
creation and existence of the obligations of Panaco hereunder.

                                       2

<PAGE>

7. Termination of Employment.

     (a)  Termination  for Cause.  Nothing  hereunder  shall prevent Panaco from
          terminating  Employee's employment for Cause (as hereinafter defined).
          Upon termination for Cause Employee shall receive his base salary only
          through the date of  termination,  and neither  Employee nor any other
          person  shall be entitled to any further  payments  from Panaco  under
          this  Agreement.  Any  rights  and  benefits  Employee  may have under
          employee  benefit  plans and  programs of Panaco by reason of or after
          his  termination  shall be determined in accordance  with the terms of
          such plans and programs.  For purposes of this Agreement,  Termination
          for Cause shall mean:

          (i)  termination due to continued neglect of duties for which Employee
               is employed  after  receipt of written  notice  thereof  from the
               Board of Directors of Panaco;

          (ii) termination  due to  conduct  involving  moral  turpitude  in the
               performance of duties for which Employee is employed,  including,
               without limitation, the commission of fraud,  misappropriation or
               embezzlement by Employee; or

          (iii)termination  due to conduct which,  if not in connection with the
               performance  of  Employee's  duties  hereunder,  would  result in
               serious  prejudice to the interests of Panaco if he were retained
               as an employee.

     (b)  Death,    Disability   and   Termination   Other   Than   for   Cause.
          Notwithstanding any other term or provision of this Agreement,  Panaco
          may terminate Employee's employment at any time, during any initial or
          renewal term  hereof,  for any reason it deems  appropriate  or for no
          reason.  If  Employee's  employment  hereunder is  terminated  for any
          reason  other than Cause in  accordance  with  paragraph  7(a),  or if
          Employee dies or because disabled  (meaning that employee is unable to
          perform his duties  prescribed  by section 1 of this  Agreement  for a
          period of 180  consecutive  days),  then Employee shall be entitled to
          payment of his base salary,  at the rate in effect at the time of such
          termination  for a  period  of 12  months.  Any  rights  and  benefits
          Employee may have under employee  benefit plans and programs of Panaco
          by  reason  of  or  after  his  termination  shall  be  determined  in
          accordance with the terms of such plans and programs.

     (c)  Voluntary  Termination  Employee may terminate  his  employment at any
          time upon ninety (90) days' prior written notice to Panaco;  provided,
          however, that Panaco, in its discretion, may cause such termination to
          be effective  at any time during that ninety (90) day period.  Neither
          Employee  nor any  other  person  shall  be  entitled  to any  further
          payments from Panaco under this Agreement upon a voluntary termination
          by Employee of his employment  hereunder,  and any rights and benefits
          Employee may have under employee  benefit plans and programs of Panaco
          by  reason  of  or  after  his  termination  shall  be  determined  in
          accordance with the terms of such plans and programs.

     (d)  Voluntary  Termination  for "Good Reason."  Notwithstanding  any other
          term  or  provision  of  this  Agreement,   if  Employee   voluntarily
          terminates his employment  for Good Reason (as  hereinafter  defined),

                                       3

<PAGE>

          then Employee shall be entitled to payment of his base salary,  at the
          rate in  effect  at the time of such  termination  for a period  of 12
          months.  Any  rights and  benefits  Employee  may have under  employee
          benefit  plans  and  programs  of  Panaco  by  reason  of or after his
          termination  shall be determined in accordance  with the terms of such
          plans and  programs.  "Good  Reason"  shall mean any of the  following
          (without Executive's express written consent):

          (i)  Employee's  Base  Salary is set at an amount less than 90 percent
               of the  greater of (a) his annual  salary in effect on  September
               15, 2000, or (b) his annual salary in effect during the preceding
               calendar year,  and Employee  resigns within ninety days after he
               is notified of the decision to modify his Base Salary.

          (ii) A substantial and material  alteration in the nature or status of
               Employee's   responsibilities,   or  the   assignment  of  duties
               inconsistent with Employee's duties and responsibilities;

          (iii)Employee's  line of report is changed so that he is  required  to
               report to anyone other than the Executive  Committee or the Board
               of Directors;

          (iv) A  change  in   Employee's   titles  or   Panaco's   employing  a
               co-President or Chief Executive officer;

          (v)  Employee  is not  elected  as a  director  of  Panaco at the next
               annual meeting;

          (vi) Any material  breach by Panaco of any provision of this Agreement
               if such  material  breach has not been cured  within  thirty (30)
               days  following  written notice of such breach by Employee to the
               Executive Committee setting forth with reasonable specificity the
               nature of the breach.

8.  Contingent  Immediate  Vesting of Options.  Employee will be entitled to the
immediate full vesting of any existing options  outstanding if his employment is
terminated  prior to the end of the term of this Agreement due to one or more of
the following events:

          (a)  Employee's employment is terminated other than for Cause;

          (b)  Employee voluntarily terminates his employment for Good Reason;

          (c)  Employee becomes disabled; or

          (d)  Employee dies.

9. Notices. All notices or other communications pursuant to this contract may be
given by personal delivery,  or by certified mail,  addressed to the home office
of Panaco or to the last known  address of Employee.  Notices  given by personal
delivery  shall be deemed  given at the time of  delivery,  and notices  sent by
certified mail shall be deemed given when deposited with the U.S. Post Office.

                                       4

<PAGE>

10. Entirety of Agreement.  This Agreement contains the entire  understanding of
the parties and all of the  covenants  and  agreements  between the parties with
respect to the employment.

11.  Governing Law. This Agreement shall be construed and enforced in accordance
with, and be governed by, the laws of the State of Texas.

12. Waiver.  The failure of either party to enforce any rights  hereunder  shall
not be deemed to be a waiver of such  rights,  unless  such waiver is an express
waiver  which has been signed by the waiving  party.  Waiver of one breach shall
not be deemed a waiver of any  other  breach of the same or any other  provision
hereof.

13. Assignment. This Agreement shall not be assignable by Employee. In the event
of a future  disposition  of the  properties  and  business of Panaco by merger,
consolidation,  sale of assets,  or  otherwise,  then  Panaco  may  assign  this
Agreement  and all of its rights and  obligations  to the acquiring or surviving
entity;  provided  that any such entity shall assume all of the  obligations  of
Panaco hereunder.

14. Arbitration. Any dispute, controversy or claim arising out of or relating to
this Agreement shall be submitted to and finally settled by binding  arbitration
to be held in  Houston,  Texas,  in  accordance  with the rules of the  American
Arbitration  Association in effect on the date of this  Agreement,  and judgment
upon the award rendered by the  arbitrator(s) may be entered in any court having
jurisdiction  thereof. All agreements  contemplated herein to be entered into to
which the parties hereto are parties shall contain provisions which provide that
all claims,  actions or  disputes  pursuant  to, or related to, such  agreements
shall be  submitted  to  binding  arbitration.  Employer  agrees to pay all fees
charged  by  the  American  Arbitration   Association  in  connection  with  any
arbitration.

DATED this  11  day of   October,   2000.
           ----         ----------

PANACO, INC.                                       EMPLOYEE


By:/s/ Harold First                                By:/s/ Robert G. Wonish
   -------------------------                       -----------------------
   A member of its Executive Committee


By:/s/ A. Theodore Stautberg
   -------------------------
   A member of its Executive Committee

                                        5
<PAGE>