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                                  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 March 31, 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 March 31, 2000.



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<PAGE>

                                  PANACO, Inc.
                      Consolidated Condensed Balance Sheets


                                     ASSETS

<TABLE>
<CAPTION>

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

  Cash and cash equivalents                        $      6,145,000          $       5,575,000
  Accounts receivable                                    13,931,000                  9,675,000
  Accounts receivable-employee                               21,000                     16,000
  Prepaid and other                                         678,000                    729,000
                                                   ----------------          -----------------
     Total current assets                                20,775,000                 15,995,000
                                                   ----------------          -----------------

OIL AND GAS PROPERTIES, AS DETERMINED BY THE
SUCCESSFUL EFFORTS METHOD OF ACCOUNTING
  Oil and gas properties, proved                        269,653,000                262,043,000
  Oil and gas properties, unproved                       15,724,000                 15,672,000
  Less accumulated depletion, depreciation,
     and amortization                                  (193,514,000)              (188,827,000)
                                                   ----------------          -----------------
     Net oil and gas properties                          91,863,000                 88,888,000
                                                   ----------------          -----------------

PIPELINES AND EQUIPMENT
  Pipelines and equipment                                26,343,000                 26,327,000
  Less accumulated depreciation                          (6,792,000)                (6,130,000)
                                                   ----------------          -----------------
     Net pipelines and equipment                         19,551,000                 20,197,000
                                                   ----------------          -----------------
OTHER ASSETS
  Deferred debt costs, net                                4,109,000                  4,456,000
  Employee note receivable                                  300,000                    300,000
  Restricted deposits and other                           6,103,000                  5,602,000
                                                   ----------------          -----------------
     Total other assets                                  10,512,000                 10,358,000
                                                   ----------------          -----------------

 TOTAL ASSETS                                      $    142,701,000          $     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' DEFICIT
<TABLE>
<CAPTION>


                                                          As of                    As of
                                                      March 31, 2000         December 31, 1999
                                                   ------------------       -------------------
CURRENT LIABILITIES                                    (Unaudited)
<S>                                                         <C>                     <C>

  Accounts payable                                 $     19,687,000          $      20,408,000
  Interest payable                                        5,665,000                  3,003,000
                                                   ----------------          ----------------
     Total current liabilities                           25,352,000                 23,411,000
                                                   ----------------          -----------------


LONG-TERM DEBT                                          143,940,000                138,902,000

COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' 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                              68,978,000                68,852,000
  Accumulated deficit                                    (95,815,000)              (95,970,000)
                                                    ----------------         -----------------
      Total stockholders' deficit                        (26,591,000)              (26,875,000)
                                                    ----------------         -----------------


 TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT        $    142,701,000         $     135,438,000
                                                    ================         =================
</TABLE>




         The accompanying notes are an integral part of this statement.

                                       3

<PAGE>
                                  PANACO, Inc.
                      Consolidated Statements of Operations
                      For the Three Months Ended March 31,
                                   (Unaudited)

<TABLE>
<CAPTION>

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

REVENUES
  Oil and natural gas sales                          $     15,556,000        $       9,499,000

COSTS AND EXPENSES
  Lease operating expense                                   4,191,000                4,120,000
  Depletion, depreciation & amortization                    5,746,000                6,630,000
  General and administrative expense                          984,000                1,122,000
  Production and ad valorem taxes                             259,000                  154,000
  Exploratory dry hole expense                                320,000                      -
  Geological and geophysical expense                          301,000                  387,000
                                                      ---------------        -----------------
     Total                                                 11,801,000               12,413,000
                                                      ---------------        -----------------

OPERATING INCOME (LOSS)                                     3,755,000               (2,914,000)
                                                      ---------------        -----------------

OTHER INCOME (EXPENSE)
  Interest income                                              54,000                   12,000
  Interest expense                                         (3,654,000)              (2,723,000)
                                                      ---------------        -----------------
     Total                                                 (3,600,000)              (2,711,000)
                                                      ---------------        -----------------

NET INCOME (LOSS)                                     $       155,000        $      (5,625,000)
                                                      ===============        =================


Net income (loss) per share                           $          0.01        $           (0.24)
                                                      ===============        =================

Basic Shares Outstanding                                   24,075,400               23,801,734
                                                      ===============        =================
Diluted Shares Outstanding                                 24,075,400               23,801,734
                                                      ===============        =================
</TABLE>




         The accompanying notes are an integral part of this statement.

                                       4

<PAGE>
                                  PANACO, Inc.
                      Consolidated Statement of Cash Flows
                      For the Three Months Ended March 31,
                                   (Unaudited)

<TABLE>
<CAPTION>

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

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                              $     155,000      $    (5,625,000)
  Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
     Depletion, depreciation and amortization                        5,746,000            6,630,000
     Exploratory dry hole expense                                      320,000                  -
     Changes in operating assets and liabilities:
        Accounts receivable                                         (4,256,000)               8,000
        Prepaid and other                                               46,000              164,000
        Accounts payable                                              (721,000)             364,000
        Interest payable                                             2,662,000            2,645,000
                                                                 -------------      ---------------
                    Net cash provided by operating activities        3,952,000            4,186,000
                                                                 -------------      ---------------

CASH FLOWS USED IN INVESTING ACTIVITIES
     Capital expenditures and acquisitions                          (7,998,000)          (9,359,000)
     Increase in restricted deposits                                  (500,000)            (249,000)
                                                                 -------------      ---------------
                    Net cash used in investing activities           (8,498,000)          (9,608,000)
                                                                 -------------      ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of common shares                                         129,000              250,000
     Long-term debt borrowings                                       8,538,000            9,500,000
     Repayment of long-term debt                                    (3,500,000)                 -
     Additional deferred financing costs                               (51,000)                 -
                                                                 -------------      ---------------
                    Net cash provided by financing activities        5,116,000            9,750,000
                                                                 -------------      ---------------

NET INCREASE IN CASH                                                   570,000            4,328,000

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

CASH AT MARCH 31                                                 $   6,145,000      $     7,780,000
                                                                 =============      ===============
</TABLE>




         The accompanying notes are an integral part of this statement.

                                       5

<PAGE>
                                  PANACO, Inc.
           Consolidated Statement of Changes in Stockholders' Deficit
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                  Amount ($)
                                                     -----------------------------------------------------------------------
                                        Number of                         Additional                             Total
                                         Common            Common          Paid-in          Accumulated       Stockholders'
                                         Shares            Stock           Capital            Deficit            Deficit
                                    ---------------   ---------------  ---------------  ----------------  ------------------
<S>                                       <C>               <C>              <C>                <C>               <C>


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

Net Income                                    -                -                -             155,000            155,000

Common shares issued to the ESOP          337,000            3,000          126,000               -              129,000

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

Balances, March 31, 2000               24,323,521    $     246,000    $  68,978,000    $  (95,815,000)   $   (26,591,000)

                                    =============    =============    =============    ==============    ===============
</TABLE>



        The accompanying notes are an integral part of this statement.

                                       6

<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 March 31, 2000 and December 31, 1999 and the
results of  operations  and cash flows for the periods  ended March 31, 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  have  been  made in order  to make  the  information
comparable.

     The Company currently has 1,150,000 stock options  outstanding at March 31,
2000 that are excluded from per share  calculations  in 2000 as they are "out of
the money" at $4.45 per share and they expire June 20,  2000.  They are excluded
from 1999 per share  calculations  as they are  anti-dilutive.  The options were
issued in 1997 to officers and directors.

Note 2 - OIL AND GAS PROPERTIES AND PIPELINES AND EQUIPMENT

     The Company  utilizes the  successful  efforts method of accounting for its
oil and gas properties.  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.  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.

     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

                                       7

<PAGE>

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

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

     For  purposes of the  consolidated  statement  of cash  flows,  the Company
considers  all cash  investments  purchased  with  original  maturities of three
months  or less to be cash  equivalents.  Cash  payments  for  interest  totaled
$1,044,000  and  $269,000  during  the  first  three  months  of 2000 and  1999,
respectively.  Cash  payments for income taxes totaled $0 during the first three
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
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 will deposit
$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.  However,  NEG is in  Chapter  11
bankruptcy  proceedings,  and so any action by the  Company to assert  indemnity
rights against NEG is currently  stayed.  The Company's Counsel has prepared and
may  file a  motion  to lift  the  stay so  that  the  Company  may  assert  its
indemnification  rights  against NEG. But even if the Company is  successful  in
proving  its right to  indemnity,  NEG's  ability to satisfy  the  judgement  is
questionable because of the bankruptcy.

                                       8

<PAGE>

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

     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 may have  insurance  coverage  for the claims
asserted in the  petition,  and has notified all  insurance  carriers that might
provide  coverage  under its policies.  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.

     The Company is subject to various 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 March 31, 2000
was $60.0 million,  with availability of $16.1 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 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.

                                       9

<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.  During the first  quarter  of 2000,  our cash flows from
operations  totaled $4.0 million,  while long-term  borrowings  under our Credit
Facility  increased  $5.0  million  both of which were used to fund our  capital
expenditures of $8.0 million and our required restricted deposit increase of $.5
million.  Our capital expenditures of $8.0 million for the first quarter of 2000
were down slightly from $9.4 million during the first quarter of 1999.

     For the year  2000,  our Board of  Directors  has  approved  a $30  million
capital budget.  This budget is based primarily on the resources available to us
at this time.  We believe  that our cash flows from  operations  and  borrowings
under our Credit Facility will fund this level of capital  expenditures and that
we will have sufficient availability under our Credit Facility to do so.

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  September  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

                                       10

<PAGE>

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 amounts
borrowed.  We had $41.7 million  outstanding at March 31, 2000. We will continue
to use this Facility in 2000 to fund part of our $30 million capital budget.

     The Credit  Facility is a  revolving  credit  agreement  subject to monthly
borrowing base determinations. These determinations are made based on 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
March 31, 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. Of the $96.2
million net proceeds,  $54.7 million was used to repay  substantially all of our
outstanding  indebtedness  with the  remaining  $41.5  million  used for capital
expenditures including the BP Acquisition.

Commodity price hedges

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

     For the year 2000,  we have  purchased  options to put oil and  natural gas
produced 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 will be amortized over the period the
hedge item is  produced,  fiscal year 2000.  We have also  purchased  an oil put
option for 1,000 barrels of oil per day beginning March 1 and continuing through
December  31 at NYMEX  price of  $20.00  per  barrel.  The oil put  option  cost
$275,000 and will also be amortized  over the period the hedge item is produced,
fiscal  year 2000.  We also have a swap 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 the Goldking in 1997.

     On December 31, 1999 our open hedge  position had a fair value of estimated
future losses  totaling  $800,000,  to be realized over the periods  hedged.  On
March  31,  2000 this open  hedge  position  had  decreased  to a fair  value of
estimated future losses totaling $667,000.

     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.

                                       11

<PAGE>

Capital expenditures

     Capital  expenditures  totaled  $8.0  million for the first three months of
2000,  which  represents  a 15%  decrease  from  the  $9.4  million  of  capital
expenditures incurred in the comparable period of 1999. The capital expenditures
incurred in 2000 were primarily for three new wells  completed  during the first
quarter and two  acquisitions.  The first development well was in the Price Lake
Field,  the Sturlese #3 that was  successfully  completed in March 2000. We also
drilled a new development  well in the Umbrella Point Field, the ST #87-12 well,
which was also  successfully  completed in March 2000.  A third new  development
well was completed in the West Delta Fields in January. In addition, 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  and
borrowings under our Credit  Facility,  accounting for the $5.0 million increase
in debt  outstanding  at March 31, 2000. Our total capital  expenditures  during
fiscal year 2000 are estimated to be $30 million.

Results of Operations

For the three months ended March 31, 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)         3,248            3,359            (3%)
       Average price per Mcf
        excluding hedging                $    2.57         $   1.72            49%
       Average price per Mcf
        including hedging                $    2.53         $   1.77            43%

       Oil Production (MBbl)                   266              262             2%
       Average price per Bbl
        excluding hedging                $   27.92         $  13.36           109%
       Average price per Bbl
        including hedging                $   27.64         $  13.51           105%
</TABLE>

     Both natural gas and oil  production  remained  relatively  flat during the
first quarter of 2000 when compared to the first quarter of 1999. The resumption
of capital  spending  during the fourth  quarter of 1999 and  continuing  in the
first quarter of 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  were the Price Lake
Field,  which  did not  produce  during  the  first  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

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<PAGE>

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" remained  relatively flat at $4.2 million in 2000
when  compared to $4.1 million in 1999.  On an Mcf  equivalent  ("Mcfe")  basis,
lease operating expenses also remained relatively flat at $0.87 in 2000 compared
to $0.84 in 1999.

     "Depletion, depreciation and amortization" decreased $0.9 million primarily
due to a decrease in depletion  costs per Mcfe.  Depletion per Mcfe decreased to
$1.19 in 2000 compared to $1.34 in 1999  primarily due to a property  impairment
on High Island 309 and 310 in 1999.

     "General and  administrative  expense"  decreased $138,000 primarily due to
lower legal fees in 2000.

     "Exploratory   dry  hole  expense"   increased   $320,000  in  2000.  These
exploration  expenses incurred in 2000 related to two successful wells completed
during the first  quarter,  the Umbrella Point Field ST#87-12 and the Price Lake
Field D.T.  Sturlese #3.  Although the wells were  completed and are  producing,
portions  of the  targeted  zones  in each  well  were  exploratory  and did not
encounter an economical quantity of reserves. The incremental costs for drilling
to these zones were  expensed  based on their  proportional  costs of the entire
well.

     "Geological and geophysical expense" decreased in 2000 as a result of lower
lease and right-of-way rental expenses incurred.

     "Interest  expense"  increased  primarily due to higher average  borrowings
outstanding  under our Credit  Facility.  Our average  interest  rates have also
increased with the three prime rate increases since the first quarter of 1999.

New Accounting Principles

Accounting for Derivatives

     Statement of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting
for Derivative  Instruments and for Hedging  Activities,"  provides guidance for
accounting for derivative instruments and hedging activities. In July 1999, SFAS
No. 137 "Deferring  Statement 133's Effective Date," was issued which delays the
effective date for one year, to fiscal years  beginning  after June 15, 2000. We
have not yet completed an evaluation of the impact of the provisions of SFAS No.
133.

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.

                                       13

<PAGE>

     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.  However,  NEG is in  Chapter  11
bankruptcy proceedings, and so any action we take to assert our indemnity rights
against NEG is currently stayed.  Our Counsel has prepared and may file a motion
to lift the stay so that we may assert our  indemnification  rights against NEG.
But  even  if we are  successful  in  proving  our  right  to  indemnity,  NEG's
judgementworthiness is questionable because of the bankruptcy.

     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.  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.

     In January 2000 we received a favorable judgement in a lawsuit we had filed
with our insurance carrier in 1996 related to the West Delta Fields. Our part of
the lawsuit was  primarily for lost revenues in 1996 from a fire at Tank Battery
#3, which was caused by a third party service company. The judgement against the
service  companies'  insurance  carrier  was $1.1  million.  The  judgement  was
appealed on April 7, 2000 and  currently,  we can not estimate  when,  or if, we
will receive the proceeds from this judgement.

Item 3.         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 unusual market conditions.  We usually make hedging
decisions to assure a payout of a specific acquisition or development project or
to take advantage of unusual strength in the market.

     For the year 2000,  we have  purchased  options to put oil and  natural gas
produced 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 will be amortized over the period the
hedge item is  produced,  fiscal year 2000.  We have also  purchased  an oil put
option for 1,000 barrels of oil per day beginning March 1 and continuing through
December  31 at NYMEX  price of  $20.00  per  barrel.  The oil put  option  cost
$275,000 and will also be amortized  over the period the hedge item is produced,
fiscal  year 2000.  We also have a swap 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 the Goldking in 1997.

     On December 31, 1999 our open hedge  position had a fair value of estimated
future losses  totaling  $800,000,  to be realized over the periods  hedged.  On
March  31,  2000 this open  hedge  position  had  decreased  to a fair  value of
estimated future losses totaling $667,000.

                                       14

<PAGE>

PART II                         OTHER INFORMATION

Item 6.        EXHIBITS AND REPORTS ON FORM 8-K

       (a)     Exhibits

               27               Financial Date Schedule


       (b)     Reports on Form 8-K

               None


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



                                       15

<PAGE>