<PAGE>



                                  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 June 30, 2002

                                       or

       Transition Report Pursuant to Section 13 or 15 (d) of the Securities
-----                         Exchange Act of 1934

                   For the Transition Period From to _________

                          Commission file number 0-9498

                          MISSION RESOURCES CORPORATION
             (Exact name of registrant as specified in its charter)



Delaware                                                              74-0437769
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)
1331 Lamar, Suite 1455  Houston, Texas                                77010-3039
(Address of principal executive offices)                              (ZIP Code)

       Registrant's telephone number, including area code: (713) 495-3000

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
                                             ---

As of August 9, 2002, 23,585,633 shares of common stock of Mission Resources
Corporation were outstanding.


<PAGE>



                          MISSION RESOURCES CORPORATION

                                      INDEX

<TABLE>
<CAPTION>

PART I.   FINANCIAL INFORMATION                                                 Page #
<S>                                                                               <C>
     ITEM 1.  Financial Statements

              Condensed Consolidated Balance Sheets:
                  June 30, 2002 (Unaudited) and December 31, 2001 ............    1
              Condensed Consolidated Statements of Operations (Unaudited):
                  Three months and six months ended June 30, 2002 and 2001 ...    3
              Condensed Consolidated Statements of Cash Flows (Unaudited):
                  Six months ended June 30, 2002 and 2001 ....................    4
              Notes to Condensed Consolidated Financial Statements (Unaudited)    6

     ITEM 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations ........................   19

     ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk .....   30

PART II.  OTHER INFORMATION ..................................................   32
</TABLE>



                                       i

<PAGE>


                          PART I. FINANCIAL INFORMATION

                              Financial Statements

                          MISSION RESOURCES CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                             (Amounts in thousands)

ITEM I.
<TABLE>
<CAPTION>

                                     ASSETS

                                                                                June 30,   December 31,
                                                                                  2002        2001
                                                                               ---------    ---------
                                                                              (Unaudited)
<S>                                                                            <C>          <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................................   $   1,785    $     603
Accounts receivable and accrued revenues ...................................      16,276       25,668
Current portion of interest rate swap ......................................        --            180
Commodity derivative asset .................................................        --          8,359
Prepaid expenses and other .................................................       3,036        3,879
                                                                               ---------    ---------
    Total current assets ...................................................      21,097       38,689
                                                                               ---------    ---------

PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties (full cost):
    United States - Unproved properties of $11,568 and $15,530 excluded from
       amortization as of June 30, 2002 and December 31, 2001,
       respectively ........................................................     765,649      753,905
Accumulated depreciation, depletion and amortization--oil and gas ..........    (404,241)    (374,167)
                                                                               ---------    ---------
Net property, plant and equipment ..........................................     361,408      379,738
Leasehold, furniture and equipment .........................................       3,439        3,347
Accumulated depreciation ...................................................      (1,186)        (916)
                                                                               ---------    ---------
                                                                                   2,253        2,431
                                                                               ---------    ---------

LONG TERM RECEIVABLE .......................................................        --            899

GOODWILL & OTHER INTANGIBLES ...............................................      14,612       15,436

OTHER ASSETS ...............................................................       8,505       10,571
                                                                               ---------    ---------
                                                                               $ 407,875    $ 447,764
                                                                               =========    =========
</TABLE>

      See accompanying notes to condensed consolidated financial statements

<PAGE>


                          MISSION RESOURCES CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                (Amounts in thousands, except share information)

<TABLE>
<CAPTION>
                                                                                    June 30,       December 31,
                                                                                      2002             2001
                                                                                    ---------       ---------
                                                                                   (Unaudited)
CURRENT LIABILITIES:
<S>                                                                                 <C>             <C>
Accounts payable and accrued liabilities .....................................      $  20,137       $  38,584
Commodity derivative liabilities .............................................          1,032            --
Interest rate swap ...........................................................             89            --
                                                                                    ---------       ---------
    Total current liabilities ................................................         21,258          38,584
                                                                                    ---------       ---------


LONG-TERM DEBT:
Revolving credit facility ....................................................         39,500          35,000
Subordinated notes due 2007 ..................................................        225,000         225,000
Unamortized premium on issuance of $125 million subordinated notes ...........          1,566           1,695

INTEREST RATE SWAP, excluding current portion ................................          4,234           4,248

COMMODITY DERIVATIVE LIABILITIES, excluding current portion ..................            669            --

DEFERRED INCOME TAXES ........................................................         21,530          31,177

OTHER LIABILITIES ............................................................          1,886           1,820

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or
    outstanding at June 30, 2002 and December 31, 2001 .......................           --              --
Common stock, $0.01 par value, 60,000,000 shares authorized, 23,896,959 shares
    issued at June 30, 2002 and December 31, 2001, respectively ..............            239             239
Additional paid-in capital ...................................................        163,837         163,735
Retained deficit .............................................................        (69,471)        (54,115)
Treasury stock, at cost, 311,000 shares ......................................         (1,905)         (1,905)
Other comprehensive income (loss), net of taxes ..............................           (468)          2,286
                                                                                    ---------       ---------
     Total stockholders' equity ..............................................         92,232         110,240
                                                                                    ---------       ---------
                                                                                    $ 407,875       $ 447,764
                                                                                    =========       =========
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                      -2-

<PAGE>


                          MISSION RESOURCES CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

              (Amounts in thousands, except per share information)


<TABLE>
<CAPTION>

                                                                                Three Months Ended             Six Months Ended
                                                                                      June 30                       June 30
                                                                              -----------------------       -----------------------
                                                                                2002           2001           2002           2001
                                                                              --------       --------       --------       --------
<S>                                                                           <C>            <C>            <C>            <C>
REVENUES:
   Oil revenues ........................................................      $ 20,451       $ 19,970       $ 39,008       $ 31,661
   Gas revenues ........................................................        11,458         14,090         21,240         34,057
   Gas plant revenues ..................................................          --            1,514           --            3,123
   Interest and other income (expense) .................................        (3,643)          (331)        (9,682)           217
                                                                              --------       --------       --------       --------
                                                                                28,266         35,243         50,566         69,058
                                                                              --------       --------       --------       --------

COST AND EXPENSES:
   Production expenses and taxes .......................................        13,856         11,724         28,873         19,650
   Transportation costs ................................................            61             10            138             50
   Gas plant expenses ..................................................          --              662           --            1,412
   Mining venture ......................................................          --               87           --              866
   Loss on sale of assets ..............................................         2,719         11,221          2,719         11,221
   Depreciation, depletion and amortization ............................        10,924         11,637         22,199         19,575
   General and administrative expenses .................................         2,558          3,466          5,207          6,015
   Interest expense ....................................................         7,369          5,868         15,055          9,832
                                                                              --------       --------       --------       --------
                                                                                37,487         44,675         74,191         68,621
                                                                              --------       --------       --------       --------

Income (loss) before income taxes and cumulative effect of a
   change in accounting method .........................................        (9,221)        (9,432)       (23,625)           437
Provision (benefit) for income taxes ...................................      $ (3,228)        (3,425)        (8,269)            48
                                                                              --------       --------       --------       --------
Income (loss) before income taxes and cumulative effect of a
   change in accounting method .........................................      $ (5,993)      $ (6,007)      $(15,356)      $    389
Cumulative effect of a change in accounting method, net of
   deferred tax of $1,633 ..............................................          --             --             --            2,767
                                                                              --------       --------       --------       --------
Net loss ...............................................................      $ (5,993)      $ (6,007)      $(15,356)      $ (2,378)
                                                                              ========       ========       ========       ========
Income (loss) before cumulative effect of a change in accounting
   method per share ....................................................      $  (0.25)      $  (0.32)      $  (0.65)      $   0.02
                                                                              ========       ========       ========       ========
Income (loss) before cumulative effect of a change in accounting
   method per share-diluted ............................................      $  (0.25)      $  (0.32)      $  (0.65)      $   0.02
                                                                              ========       ========       ========       ========

Net loss per share .....................................................      $  (0.25)      $  (0.32)      $  (0.65)      $  (0.14)
                                                                              ========       ========       ========       ========

Net loss per share-diluted .............................................      $  (0.25)      $  (0.32)      $  (0.65)      $  (0.14)
                                                                              ========       ========       ========       ========

Weighted average common shares outstanding .............................        23,586         18,861         23,586         16,458
                                                                              ========       ========       ========       ========

Weighted average common shares outstanding-diluted .....................        23,586         19,228         23,586         16,895
                                                                              ========       ========       ========       ========

</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                      -3-


<PAGE>

                          MISSION RESOURCES CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                                  Six Months Ended
                                                                                       June 30
                                                                             -------------------------
                                                                                2002            2001
                                                                             ---------       ---------
<S>                                                                          <C>             <C>
Cash flows from operating activities:

Net loss ..............................................................      $ (15,356)      $  (2,378)
    Adjustments to reconcile net loss to net cash provided by operating
    activities:
       Depreciation, depletion and amortization .......................         22,199          19,575
       Loss on interest rate swap .....................................            255             297
       (Gain) loss due to commodity hedge ineffectiveness .............          9,151            (266)
       Mining venture .................................................           --               729
       Cumulative effect of a change in accounting method,                        --             2,767
         net of deferred tax...........................................
       Stock option expense ...........................................            102             799
       Amortization of deferred financing costs and bond premium ......          1,348             576
       Loss on sale of assets .........................................           --            11,221
       Bad debt expense ...............................................            851            --
       Deferred income taxes ..........................................         (8,269)           (795)

Change in assets and liabilities:
    Accounts receivable and accrued revenue ...........................          5,735           6,883
    Accounts payable and other liabilities ............................        (16,901)        (16,011)
    Abandonment costs .................................................         (2,301)           (672)
    Other .............................................................          1,203            (820)
                                                                             ---------       ---------
    Net cash flows (used in) provided by operating activities .........         (1,983)         21,905
                                                                             ---------       ---------
Cash flows from investing activities:
    Acquisition of oil and gas properties .............................           (209)       (169,140)
    Additions to properties and facilities ............................        (11,535)        (18,462)
    Additions to leasehold, furniture and equipment ...................            (92)           (445)
    Proceeds on sale of oil and gas properties, net of costs ..........         10,563           2,281
    Additions to gas plant facilities .................................           --              (617)
                                                                             ---------       ---------
    Net cash flows used in investing activities .......................         (1,273)       (186,383)
                                                                             ---------       ---------
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                      -4-

<PAGE>




                          MISSION RESOURCES CORPORATION

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                   (Unaudited)

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                               Six Months Ended
                                                                                    June 30
                                                                           -------------------------
                                                                              2002            2001
                                                                           ---------       ---------
<S>                                                                         <C>            <C>
Cash flows from financing activities:
    Proceeds from borrowings ........................................         21,000         208,754
    Payments of long term debt ......................................        (16,500)       (173,204)
    Net proceeds from issuance of common stock ......................           --               899
    Proceeds from issuance of senior subordinated notes due 2007,
     including premium ..............................................           --           126,875
    Credit facility costs ...........................................            (62)         (6,341)
                                                                           ---------       ---------
    Net cash flows provided by financing activities .................          4,438         156,983
                                                                           ---------       ---------

    Net increase (decrease) in cash and cash equivalents ............          1,182          (7,495)
    Cash and cash equivalents at beginning of period ................            603          14,464
                                                                           ---------       ---------
Cash and cash equivalents at end of period ..........................      $   1,785       $   6,969
                                                                           =========       =========

                                                                               Six Months Ended
                                                                                    June 30
                                                                           -------------------------
                                                                              2002            2001
                                                                           ---------       ---------
Supplemental disclosures of cash flow  information:

Cash paid during the period for:
    Interest ........................................................      $ 13,667        $  7,066
    Income taxes ....................................................      $ (4,991)       $  2,023



                                                                         Six Months Ended
                                                                           June 30, 2001
                                                                         ----------------
Supplemental schedule of non-cash investing and financing activities:

Fair value of assets and liabilities acquired
    Net current assets and other assets .............................      $   2,453
    Property, plant and equipment ...................................        260,893
    Goodwill and intangibles ........................................         22,429
    Deferred tax liability ..........................................        (59,000)
                                                                           ---------
         Total allocated purchase price .............................        226,775

Less non-cash consideration - issuance of stock .....................         80,000
Less cash acquired in transaction ...................................          1,309
                                                                           =========
Cash used for business acquisition, net of cash acquired ............      $ 145,466
                                                                           =========
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                      -5-

<PAGE>


                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


1.   Summary of Significant Accounting Policies

     The accompanying unaudited condensed consolidated financial statements have
     been prepared in accordance with instructions to Form 10-Q and, therefore,
     do not include all disclosures required by accounting principles generally
     accepted in the United States of America. However, in the opinion of
     management, these statements include all adjustments, which are of a normal
     recurring nature, necessary to present fairly the financial position at
     June 30, 2002, and the results of operations and changes in cash flows for
     the periods ended June 30, 2002 and 2001. These financial statements should
     be read in conjunction with the consolidated financial statements and notes
     to the consolidated financial statements in the Mission Resources
     Corporation (the "Company") Annual Report.

     Merger

     On May 16, 2001, Bellwether Exploration Company ("Bellwether") merged with
     Bargo Energy Company ("Bargo") and changed its name to Mission Resources
     Corporation. At that time, Company increased its authorized capital stock
     to 65.0 million shares and amended its 1996 Stock Incentive Plan to
     increase the number of shares reserved for issuance under the plan by 2.0
     million shares. Under the merger agreement, holders of Bargo stock and
     options received a combination of cash and Mission common stock. The merger
     was accounted for using the purchase method of accounting.

     Oil and Gas Property Accounting

     The Company utilizes the full cost method of accounting for its investment
     in oil and gas properties. Under this method of accounting, all costs of
     acquisition, exploration and development of oil and gas reserves (including
     such costs as leasehold acquisition costs, geological expenditures, dry
     hole costs, tangible and intangible development costs, and direct internal
     costs) are capitalized as the cost of oil and gas properties when incurred.
     To the extent that capitalized costs of oil and gas properties, net of
     accumulated depreciation, depletion and amortization, exceed the discounted
     future net revenues of proved oil and gas reserves net of deferred taxes,
     such excess capitalized costs will be charged to operations. No such
     charges to operations were required during the three and six month periods
     ending June 30, 2002 or 2001.

     Reclassifications

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

     Use of Estimates

     In order to prepare these financial statements in conformity with
     accounting principles generally accepted in the United States of America,
     management of the Company has made estimates and assumptions relating to
     the reporting of assets and liabilities, the disclosure of contingent
     assets and liabilities, and reserve information. Actual results could
     differ from those estimates.

     Trade Accounts Receivable

     Trade accounts receivable are recorded at the invoiced amount and typically
     do not bear interest. The Company reviews collectibility of trade accounts
     receivable monthly. Past due balances over ninety (90) days and a specified
     amount are reviewed individually for collectibility. Account balances are
     charged off against earnings when the Company determines potential for
     recovery is considered remote. The Company does not have any off-balance
     sheet credit exposure related to its customers.

                                      -6-

<PAGE>


                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


     Comprehensive Income

     Comprehensive income includes all changes in a company's equity except
     those resulting from investments by owners and distributions to owners. The
     Company's total comprehensive income for the three months and six months
     ended June 30, 2002 and 2001 was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                Three Months Ended             Six Months Ended
                                                                     June 30,                      June 30,
                                                             -----------------------       -----------------------
                                                               2002           2001           2002            2001
                                                             --------       --------       --------       --------
<S>                                                          <C>            <C>            <C>            <C>
     Net income (loss).................................      $ (5,993)      $ (6,007)      $(15,356)      $ (2,378)
     Cumulative effect attributable to adoption of SFAS
          No. 133, net of tax .........................          --             --             --          (19,328)
     Hedge accounting for derivative instruments ......          (608)        14,207         (2,754)        23,348
                                                             --------       --------       --------       --------
     Comprehensive income (loss) ......................      $ (6,601)      $  8,200       $(18,110)      $  1,642
                                                             ========       ========       ========       ========
</TABLE>

     The accumulated balance of other comprehensive loss related to cash flow
     commodity hedges, net of taxes, is as follows (in thousands):

     Balance at December 31, 2001 .....................      $ 2,286
     Net gains on cash flow hedges ....................       (1,634)
     Reclassification adjustments .....................       (2,206)
     Effectiveness of cancelled hedges (See Footnote 4)         (397)
     Tax effect on hedging activity ...................        1,483
                                                             -------
     Balance at June 30, 2002 .........................      $  (468)
                                                             =======

     Goodwill

     The Financial Accounting Standards Board ("FASB") approved Statement of
     Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
     Intangible Assets in June 2001. This pronouncement requires that intangible
     assets with indefinite lives, including goodwill, cease being amortized and
     be evaluated on an annual basis for impairment. The Company adopted SFAS
     No. 142 on January 1, 2002. Company had unamortized goodwill in the amount
     of $15.1 million and unamortized identifiable intangible assets in the
     amount of $374,300, all subject to the transition provisions. Upon adoption
     of SFAS No. 142, $277,000 of workforce intangible assets recorded as
     unamortized identifiable assets was subsumed into goodwill and was not
     amortized as it no longer qualifies as a recognizable intangible asset.

     SFAS No. 142 requires disclosure of what reported income before
     extraordinary items and net income would have been in all periods presented
     exclusive of amortization expense (including any related tax effects)
     recognized in those periods related to goodwill, intangible assets that are
     no longer being amortized, any deferred credit related to excess over cost
     equity method goodwill, and changes in amortization periods for intangible
     assets that will continue to be amortized (including related tax effects).
     Similarly adjusted per share amounts are also required to be disclosed for
     all periods presented. Company initially applied this statement on January
     1, 2002.

                                      -7-

<PAGE>

                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


     The merger with Bargo, which resulted in all of Company's goodwill,
     occurred in May 2001. The following table presents the required disclosures
     concerning adjusted income for the quarter and six months ended June 30,
     2001 (amounts in thousands):

<TABLE>
<CAPTION>
                                                              Three Months Ended   Six Months Ended
                                                                 June 30, 2001       June 30, 2001
                                                                 -------------       -------------
<S>                                                                 <C>                <C>
     Net loss ...............................................       $(6,007)           $(2,378)
     Exclude goodwill amortization ..........................           268                268
                                                                    -------            -------
     Net loss exclusive of amortization .....................       $(5,739)           $(2,110)
                                                                    -------            -------
     Net loss exclusive of amortization per share ...........       $ (0.30)           $ (0.13)
                                                                    -------            -------
     Net loss exclusive of amortization per share - diluted..       $ (0.30)           $ (0.13)
                                                                    =======            =======

     The changes in the carrying amount of goodwill for the period ended
     June 30, 2002, are as follows (amounts in thousands):

                                                               Intangible    Total Goodwill
                                                Goodwill         Assets     and Intangibles
                                                --------         ------     ---------------

     Balance, December 31, 2001 .............   $ 15,061       $    375       $ 15,436

     Experienced management transferred to
         goodwill ...........................        277           (277)          --

     Amortization of lease ..................       --              (98)           (98)

     Merger purchase price adjustments ......       (726)          --             (726)
                                                --------       --------       --------

     Balance, June 30, 2002 .................   $ 14,612       $   --         $ 14,612
                                                ========       ========       ========
</TABLE>

     The transition and impairment test for goodwill, effective January 1, 2002,
     was performed in the second quarter of 2002. As of January 1, 2002, the
     Company's fair value exceeded the carrying amount; therefore goodwill was
     not impaired. Goodwill will be evaluated for impairment annually at
     December 31 of each year.

     Ecuador

     Due to widening price differentials, higher operating costs and marginal
     drilling results, the Company decided in early 2001 to seek a buyer for its
     assets in Ecuador. In June 2001, with an effective date of May 31, 2001,
     the Company sold its wholly-owned subsidiaries that were party to the
     concessions of the Charapa and Tiguino fields. The Company retained two
     receivables:

          1)   a $1.0 million escrow receivable from the purchaser to be settled
               before year end upon resolution of negotiations with the
               Ecuadorian government concerning production levels, and

          2)   a receivable of approximately $900,000 to be collected out of oil
               sales from the partner in the Tiguino field.


                                      -8-

<PAGE>



                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)



     In the fourth quarter of 2001, management deemed the $1.0 million
     receivable to be uncollectible due to a lack of success in negotiating with
     the Ecuador government, increasing the loss on the sale. In the second
     quarter of 2002, the partner receivable was reduced to $559,000, with the
     $341,000 charged to income as bad debt expense. The collectible portion of
     the receivable was determined based upon actual and estimated future
     operations of the field.

     In June 2002, the Company was presented with post-closing adjustments in
     the final accounting for this sale. The post-closing adjustments include
     reimbursements for reduction of value added tax receivable, reimbursement
     of production royalties, pricing and volume adjustments negotiated with the
     purchaser through June 2002 and costs of completing the divestiture. The
     Company is recognizing the full amount of the proposed adjustments as a
     $2.7 million additional loss on the property sale. However, the Company
     continues to negotiate specific issues.

     New Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting
     for Asset Retirement Obligations, which provided accounting requirements
     for retirement obligations associated with tangible long-lived assets,
     including:

          o    the timing of liability recognition;
          o    initial measurement of liability;
          o    allocation of asset retirement cost to expense;
          o    subsequent measure of the liability; and
          o    financial statement disclosures.

     SFAS No. 143 requires that asset retirement cost be capitalized as a part
     of the cost of the related long-lived asset and subsequently allocated to
     expense using a systematic and rational method. Company will adopt this
     statement effective January 1, 2003. The transition adjustment resulting
     from the adoption of SFAS No. 143 will be reported as a cumulative effect
     of a change in accounting principle. At this time, Company cannot
     reasonably estimate the effect of the adoption of this statement on either
     its financial position or results of operations.

     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
     or Disposal of Long-Lived Assets, which will be effective as of January 1,
     2002. SFAS No. 144 requires that long-lived assets to be disposed of by
     sale be measured at the lower of the carrying amount or fair value less
     cost to sell, whether reported in continuing operations or in discontinued
     operations. SFAS No. 144 broadens the reporting of discontinued operations
     to include all components of an entity with operations that can be
     distinguished from the rest of the entity and that will be eliminated from
     the ongoing operations of the entity in a disposal transaction. After its
     effective date, SFAS No. 144 will be applied to those transactions where
     appropriate.

                                      -9-


<PAGE>

                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


     SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of
     FASB Statements No. 13 and Technical Corrections, was issued in April 2002.
     SFAS No. 145 provides guidance for income statement classification of gains
     and losses on extinguishments of debt and accounting for certain lease
     modifications that have economic effects that are similar to sale-leaseback
     transactions. SFAS No. 145 is effective for the Company in January 2003.
     The Company is evaluating the impact of SFAS No. 145.

     SFAS No. 146, Accounting for Exit or Disposal Activities, was issued in
     June 2002. SFAS No. 146 addresses significant issues regarding the
     recognition, measurement, and reporting of costs that are associated with
     exit and disposal activities, including restructuring activities that are
     currently accounted for pursuant the guidance set forth in EITF Issue No.
     94-3, Liability Recognition of Certain Employee Termination Benefits and
     Other Costs to Exit an Activity. SFAS No. 146 is effective for the exit and
     disposal activities initiated after December 31, 2001. The Company is
     evaluating the impact of SFAS No. 146.

2.   Stockholders' Equity

     On May 16, 2001, Bellwether merged with Bargo. The resulting company was
     renamed Mission Resources Corporation. As partial consideration in the
     merger, 9.5 million shares of Mission common stock were issued to the
     holders of Bargo common stock and options. The $80 million value of such
     shares was included in the purchase price. Concurrent with the merger, all
     Bellwether employees who held stock options were immediately vested in
     those options upon closing of the merger. Compensation expense of $43,000
     was recognized on that date for an estimate of those employee options that
     would have expired unexercisable pursuant to original terms. The expense
     was calculated as the excess of the price on the merger date over the
     exercise price. An additional $102,000 compensation expense was recognized
     in the first half of 2002 as a result of staff reductions.

     On May 15, 2000 the Company's President was granted 500,000 options with an
     exercise price set at the average price for the 30 days prior to the grant
     date. Such average price was less than the closing price on the grant date.
     The Company is required to recognize compensation expense equal to the
     difference between the exercise price and the closing price of the
     Company's stock on the grant date for each option. A charge of $536,000 was
     recorded in May 2000, when one-third of the options vested. The remaining
     expense was to be charged ratably over the two-year vesting period for the
     remaining options. Due to the vesting of all outstanding options in
     connection with the merger on May 16, 2001, the remaining $577,000 expense
     was recognized as compensation expense in May 2001 bringing the total
     expense as of June 30, 2001 to $756,000. There was no such compensation
     expense in the period ended June 30, 2002.

     The following represents a reconciliation of the numerator and denominator
     of the basic EPS computation to the numerator and denominator of the
     diluted EPS computation. Potentially dilutive options and warrants totaling
     3,485,998 in the three and six month periods ended June 30, 2002,
     respectively, and 457,000 and 1,987,000 in the three and six month periods
     ended June 30, 2001, respectively, were not included in the computation of
     diluted earnings per share because to do so would have been antidilutive.

                                      -10-


<PAGE>


                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


SFAS No. 128 reconciliation (amounts in thousands except per share amounts):


<TABLE>
<CAPTION>

                                                            Three Months Ended                   Three Months Ended
                                                              June 30, 2002                         June 30, 2001
                                                   ---------------------------------------------------------------------------
                                                      Loss         Shares     Per Share     Loss        Shares      Per Share
                                                   (Numerator)  (Denominator)  Amount    (Numerator) (Denominator)   Amount
                                                   ------------ ---------------------------------------------------------------
<S>                                                <C>              <C>      <C>         <C>             <C>       <C>
         Net loss per common share:
         Net loss available to common
            stockholders........................   $   (5,993)      23,586   $   (0.25)  $  (6,007)      18,861    $   (0.32)
                                                                             =========                             =========
         Effect of dilutive securities:
         Options and warrants...................   $      ---          ---             $       ---          ---
                                                   ----------       ------               ---------       ------
         Net loss per common share-diluted:
         Net loss available common stockholders
           and assumed conversions..............   $   (5,993)      23,586   $   (0.25)  $  (6,007)      18,861    $   (0.32)
                                                   ==========       ======   =========   =========       ======    =========



                                                             Six Months Ended                     Six Months Ended
                                                              June 30, 2002                         June 30, 2001
                                                   ---------------------------------------------------------------------------
                                                       Loss        Shares     Per Share     Loss        Shares      Per Share
                                                   (Numerator)  (Denominator)  Amount    (Numerator) (Denominator)   Amount
                                                   ----------------------------------------------------------------------------
         Net loss per common share:
         Net loss available to common stockholders
                                                   $  (15,356)      23,586   $   (0.65)  $  (2,378)      16,458    $   (0.14)
                                                                             =========                             =========
         Effect of dilutive securities:

         Options and warrants...................   $      ---          ---               $     ---          ---
                                                   ----------       ------               ---------       ------

         Net loss per common share-diluted:
         Net loss available common stockholders
             and assumed conversions............   $  (15,356)      23,586   $   (0.65)  $  (2,378)      16,458    $   (0.14)
                                                   ==========       ======   =========   =========       ======    =========
</TABLE>

     In periods of loss, the effect of potentially dilutive options and warrants
     is excluded from the calculation as antidilutive. For the three and six
     months ended June 30, 2002, potential incremental shares of 521 and 2,077,
     respectively, were excluded.

     In September 1998, the Company's Board of Directors authorized the
     repurchase of up to $5 million of the Company's common stock. As of June
     30, 2002, 311,000 shares had been acquired at an aggregate price of
     $1,905,000. These treasury shares are reported at cost as a reduction to
     Stockholders' Equity.

                                      -11-


<PAGE>

                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


3.   Long Term Debt

     On May 16, 2001, concurrent with the previously discussed merger, the
     Company's existing credit facility was replaced by a $200.0 million credit
     facility ("Credit Facility"). The borrowing base is determined from time to
     time by the lenders based on the Company's reserves and other factors
     deemed relevant by the lenders. Effective April 1, 2002, the borrowing base
     was redetermined at $100.0 million. The interest rate on borrowings is
     determined based upon the Company's credit rating and borrowing base
     utilization. Interest can be either Prime plus a margin of up to 1% or
     LIBOR plus a margin of 1.5% to 2.5%. The Credit Facility contains various
     covenants including certain required financial measurements for current
     ratio, ratio of total debt to EBITDAX and interest coverage ratio.
     Restrictions are placed on debt, liens, dividends, leases and capital
     spending on foreign operations. On June 30, 2002, $39.5 million was
     outstanding under the Credit Facility. As of June 30, 2002, the Company was
     in compliance with its covenants under the Credit Facility.

     The Company entered into various property sales with net proceeds of $10.6
     million during the first half of 2002. Additional sales culminated in July
     2002 with net proceeds of approximately $40 million. Substantially all such
     proceeds will be used to reduce outstanding borrowings under the Credit
     Facility to zero. As a result of these sales, the borrowing base was
     adjusted to $75 million.

     The Company is in the process of its regularly scheduled redetermination of
     the borrowing base for the Credit Facility and, as part of those
     discussions, will be negotiating the establishment of new covenants
     reflective of the downsized nature of the Company. The Company's plan is to
     have new covenants and a new borrowing base in place by mid-September. Due
     to the costs of restructuring and other non-recurring items in the fourth
     quarter of 2001, it appears that the Company may not satisfy the
     requirements of the existing covenants in the third quarter of 2002. If the
     Company is unable to amend certain covenants or establish new covenants,
     its ability to draw down on the facility may be restricted.

     In April 1997, the Company issued $100.0 million of 10-7/8% senior
     subordinated notes due 2007. On May 29, 2001 the Company issued an
     additional $125.0 million of senior subordinated notes due 2007 with
     identical terms to the notes issued in April 1997 (collectively, the
     "Notes") at a premium of $1.9 million. The premium is shown separately on
     the Balance Sheet. The premium is amortized as a reduction of interest
     expense over the life of the notes so that the effective interest rate on
     these additional bonds is 10.5%. Through June 30, 2002, approximately
     $309,000 of the premium had been amortized. Interest on the Notes is
     payable semi-annually on April 1 and October 1. The Notes will be
     redeemable, in whole or in part, at the option of the Company at any time
     on or after April 1, 2002 at 105.44%, which decreases annually to 100.00%
     on April 1, 2005 and thereafter, plus accrued and unpaid interest. In the
     event of a change of control of the Company, as defined in the indenture,
     each holder of the Notes will have the right to require the Company to
     repurchase all or part of such holder's Notes at an offer price in cash
     equal to 101.0% of the aggregate principal amount thereof, plus accrued and
     unpaid interest to the date of purchase. The Notes contain certain
     covenants, including limitations on indebtedness, liens, compliance with
     requirements of existing indebtedness, dividends, repurchases of capital
     stock and other payment restrictions affecting restricted subsidiaries,
     issuance and sales of restricted subsidiary stock, dispositions of proceeds
     of asset sales and restrictions on mergers and consolidations or sales of
     assets. As of June 30, 2002, the Company was in compliance with its
     covenants under the Notes. In the event the Company becomes out of
     compliance with its credit facility covenants in the third quarter of 2002,
     the notes will not be impacted as the company intends to repay the credit
     facility to zero with the funds from the sale of assets, and the
     requirement that the Company be in compliance with the terms of other
     indebtedness is applicable only to borrowings in excess of $10.0 million.

                                      -12-

<PAGE>


                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


4.   Derivative Instruments and Hedging Activities

     Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for
     Derivative Instruments and Hedging Activities. This statement establishes
     accounting and reporting standards requiring that derivative instruments
     (including certain derivative instruments embedded in other contracts) be
     recorded at fair value and included in the balance sheet as assets or
     liabilities. The accounting for changes in the fair value of a derivative
     instrument depends on the intended use of the derivative and the resulting
     designation, which is established at the inception of a derivative.
     Accounting for qualified hedges allows a derivative's gains and losses to
     offset related results on the hedged item in the Statement of Operations.
     For derivative instruments designated as cash flow hedges, changes in fair
     value, to the extent the hedge is effective, are recognized in Other
     Comprehensive Income until the hedged item is recognized in earnings. Hedge
     effectiveness is measured at least quarterly based upon the relative
     changes in fair value between the derivative contract and the hedged item
     over time. Any change in the fair value resulting from ineffectiveness, as
     defined by SFAS No. 133, is recognized immediately in earnings. For the
     quarters ended June 30, 2002 and 2001, respectively, a $2.9 million loss
     and a $473,000 loss were reported in the interest and other income line of
     the Statement of Operations due to commodity hedge ineffectiveness.

     In May 2002, the Company saw an opportunity to enter into hedging
     transactions at favorable prices. In order to maximize this opportunity,
     several existing oil collars were cancelled and new swaps and collars,
     hedging forecast oil production were acquired. The Company paid
     approximately $3.3 million to counterparties, the fair value of the oil
     price collars at that time, in order to cancel the transactions. As
     required by SFAS No. 133, the effective portion of the hedges at
     termination was $418,000. Such amount remains in Other Comprehensive Income
     and is amortized as a hedge loss over the 19-month life of the cancelled
     hedges.

                                      -13-


<PAGE>



                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


     The following tables detail all hedges of future production outstanding at
     June 30, 2002:

     Oil Hedges
<TABLE>
<CAPTION>

                                                                                               NYMEX          NYMEX
                     Period                 BBLS         Total BBLS           Type             Price          Price
                                           Per Day                                             Floor         Ceiling
                     ------                -------       ----------           ----             -----         -------
<S>            <C>                         <C>           <C>                 <C>              <C>            <C>
               July 2002-Sep. 2002           4,500       414,000             Collar           $25.00         $26.50
               July 2002-Sep. 2002             500        46,000             Collar           $25.00         $27.00
               Oct. 2002-Dec. 2002           4,500       414,000             Collar           $25.00         $25.50
               Oct. 2002-Dec. 2002             500        46,000             Collar           $25.00         $25.90
               Jan. 2003-Mar. 2003           3,500       315,000              Swap            $24.80           n/a
               Jan. 2003-Mar.2003              500        45,000              Swap            $24.92           n/a
               Apr. 2003-June 2003           3,500       318,500              Swap            $24.30           n/a
               Apr. 2003-June 2003             500        45,500              Swap            $24.37           n/a
               July 2003-Sep. 2003           3,000       276,000              Swap            $23.95           n/a
               July 2003-Sep. 2003             500        46,000              Swap            $23.94           n/a
               Oct. 2003-Dec. 2003           3,000       276,000              Swap            $23.59           n/a
               Oct. 2003-Dec. 2003             500        46,000              Swap            $23.58           n/a

     Gas Hedges

                                                                                               NYMEX          NYMEX
                     Period                  MCF         Total MCF            Type             Price          Price
                                           Per Day                                             Floor         Ceiling
                     ------                -------       ----------           ----             -----         -------
               July 2002-Sep. 2002           9,800       901,600             Collar            $3.00          $6.60
               July 2002-Sep. 2002          10,000       920,000             Collar            $2.50          $3.55
               Oct. 2002-Dec. 2002           8,500       782,000             Collar            $3.40          $7.00
               Jan. 2003-Mar. 2003          10,000       920,000             Collar            $3.00          $4.65
               Apr. 2003-June 2003           5,000       455,000             Collar            $3.00          $4.02
               Apr. 2003-June 2003           5,000       455,000             Collar            $3.00          $3.97
               July 2003-Sep. 2003          10,000       920,000             Collar            $3.00          $4.10
               Oct. 2003-Dec. 2003          10,000       920,000             Collar            $3.00          $4.65
</TABLE>

     By removing the price volatility from these volumes of oil and natural gas
     production, the Company has mitigated, but not eliminated, the potential
     negative effect of declining prices on its operating cash flow. The
     potential for increased operating cash flow due to increasing prices has
     also been reduced.

     Effective September 22, 1998, the Company entered into an eight and
     one-half year interest rate swap agreement with a notional value of $80
     million. Under the agreement, the Company receives a fixed interest rate
     and pays a floating interest rate based on the simple average of three
     foreign LIBOR rates. Floating rates are redetermined for six-month periods
     each April 1 and October 1. The interest rate swap does not qualify for
     hedge accounting under SFAS No. 133 and is marked to market quarterly. The
     Company recognized $2.8 million, net of tax, loss as the cumulative effect
     of a change in accounting method related to this interest rate swap upon
     implementation of SFAS No. 133 in January 2001. Currently, the swap's fair
     value of $4.3 million is shown on the Balance Sheet as an $89,000 current
     liability and a $4.2 million long-term liability. The increase in the
     swap's fair value of $295,000 and decrease of $71,000 during the three
     months ended June 30, 2002 and 2001, respectively, have been included in
     interest expense.

                                      -14-


<PAGE>


                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


5.   Income Taxes

     The provision for federal and state income taxes for the three and six
     months ended June 30, 2002 was based upon a 35% effective tax rate. The
     $4.3 million valuation allowance on deferred taxes applicable at December
     31, 2001 has been increased to $5.0 million at June 30, 2002, because the
     Company determined that the portion of deferred tax asset relating to state
     taxes generated during the quarter would not be realized. In assessing the
     realizability of the deferred tax assets, management considers whether it
     is more likely than not that some portion or all of the deferred tax assets
     will not be realized. The ultimate realization of deferred tax assets is
     dependent upon the generation of future taxable income during the periods
     in which those temporary differences become deductible. Based upon the
     projection for future state taxable income, management believes it is more
     likely than not that the Company will not realize its deferred tax asset
     related to state income taxes.

6.   Pro Forma

     The merger with Bargo, completed on May 16, 2001, significantly impacted
     the future operating results of the Company. The merger was accounted for
     as a purchase, and the results of operations are included in the Company's
     results of operations from May 16, 2001. The pro forma results are based on
     assumptions and estimates and are not necessarily indicative of the
     Company's results of operations had the transaction occurred as of January
     1, 2001, or of those in the future.

     The following table presents the unaudited pro forma results of operations
     as if the merger had occurred on January 1, 2001 (amounts in thousands,
     except earnings per share).

                                            Three Months Ended  Six Months Ended
                                               June 30, 2001     June 30, 2001
                                                 ---------         ---------
     Revenues ............................      $  46,331         $ 109,233
     Income before cumulative effective of
          change in accounting method ....      $  (7,165)        $   2,513
     Net income ..........................      $  (6,657)        $    (254)

     Net income per share ................      $   (0.28)        $   (0.01)
     Net income per share-diluted ........      $   (0.28)        $   (0.01)


7.   Restructuring

     During 2001 the Company took several steps planned to enhance its asset
     base, improve its cost structure and boost its competitive position in the
     business environment presented by low oil and gas prices. Among those steps
     were the reduction of staff by almost 50% and the termination of the
     Company's administrative, accounting, information technology services and
     field operations outsourcing contracts. In the fourth quarter of 2001, the
     Company recorded a $2.1 million charge associated with these plans. The
     charge was included in general and administrative expenses. During 2002,
     the Company paid these restructuring costs.

                                      -15-


<PAGE>



                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


8.   Related Party Transactions

     Milam Energy, LP ("Milam") is a 51% working interest owner with the Company
     in several south Louisiana properties. Torch Energy Advisors Incorporated
     ("Torch") is a majority owner of Milam, and J.P. Bryan, a director of
     Company is also managing director and stockholder of Torch. As of June 30,
     2002, Milam owed the Company approximately $1.9 million in joint interest
     billings and cash calls related to these properties. The receivable is
     reflected on the accounts receivable and accrued revenues line of the
     consolidated Balance Sheet. A portion of the outstanding receivable is past
     due. The Company is exercising its rights under the joint operating
     agreement to net all further revenue against all outstanding receivables
     until paid.

     A $250,000 payment under a non-compete agreement was paid in the second
     quarter to Tim J. Goff, Bargo's former CEO and former member of Mission's
     Board of Directors.

     During the fiscal year 1992, Company acquired an average 24.4% interest in
     three mining ventures (the "Mining Venture") from an unaffiliated
     individual for $128,500. At the time of such acquisition, J. P. Bryan, a
     member of the Mission Board of Directors, his brother, Shelby Bryan and
     Robert L. Gerry III (the "Affiliated Group"), owned an average 21.5%
     interest in the Mining Venture. Company's interest in the Mining Venture
     increased as it paid costs of the venture while the interest of the
     Affiliated Group decreased. Throughout the first half of 2001, the Company
     spent $137,000, primarily for soil core assays. These costs, plus the
     $729,000 accumulated on the Balance Sheet in Other Assets as of December
     31, 2000, were charged to earnings in 2001. No such costs were incurred in
     2002. Pursuant to contracts in place, Company is not obligated to make any
     future payments.

                                      -16-



<PAGE>



                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)


9.   Segment Reporting

     The Company's operations were concentrated primarily in three segments:
     exploration and production of oil and natural gas in the United States, in
     Ecuador and gas plants. The Ecuadorian assets were sold in June 2001 and
     the gas plants were sold in October and November 2001.

<TABLE>
<CAPTION>
                                                                   Three Months Ended          Six Months Ended
                                                                       June 30,                     June 30,
                                                               ------------------------      ------------------------
                                                                  2002           2001           2002         2001
                                                               ---------      ---------      ---------      ---------
<S>                                                            <C>            <C>            <C>            <C>
Sales to unaffiliated customers:
Oil and gas - US .........................................     $  31,909      $  32,705      $  60,248      $  63,841
Oil and gas - Ecuador ....................................          --            1,355           --            1,877
Gas plants ...............................................          --            1,514           --            3,123
                                                               ---------      ---------      ---------      ---------
   Total sales ...........................................     $  31,909      $  35,574      $  60,248         68,841
   Interest and other income .............................        (3,643)          (331)        (9,682)           217
                                                               ---------      ---------      ---------      ---------
    Total revenues .......................................     $  28,266      $  35,243      $  50,566      $  69,058
                                                               =========      =========      =========      =========

Operating profit (loss) before income taxes and cumulative
effect of change in accounting method:

   Oil and gas - US ......................................     $   7,068      $  10,757      $   9,038      $  27,275
   Oil and gas - Ecuador .................................          --             (155)          --           (1,698)
   Gas plants ............................................          --              852           --            1,711
                                                               ---------      ---------      ---------      ---------
                                                                   7,068         11,454          9,038         27,288
   Loss on sale of assets ................................         2,719         11,221          2,719         11,221
   Unallocated corporate expenses ........................         6,201          3,797         14,889          5,798
   Interest expense ......................................         7,369          5,868         15,055          9,832
                                                               ---------      ---------      ---------      ---------
   Operating profit (loss) before income taxes ...........     $  (9,221)     $  (9,432)     $ (23,625)     $     437
                                                               =========      =========      =========      =========
Identifiable assets:
   Oil and gas - US ......................................     $ 361,408      $ 410,023      $ 361,408      $ 410,023
   Oil and gas - Ecuador .................................          --             --             --             --
   Gas plants ............................................          --           11,099           --           11,099
                                                               ---------      ---------      ---------      ---------
                                                                 361,408        421,122        361,408        421,122
   Corporate assets and investments ......................        46,467         78,103         46,467         78,013
                                                               ---------      ---------      ---------      ---------
         Total ...........................................     $ 407,875      $ 499,225      $ 407,875      $ 499,225
                                                               =========      =========      =========      =========
Capital expenditures:
   Oil and gas - US ......................................     $   4,291      $  29,170      $  11,535      $  37,984
   Oil and gas - Ecuador .................................          --            3,542           --            4,151
   Gas plants ............................................          --              139           --              617
                                                               ---------      ---------      ---------      ---------
                                                               $   4,291      $  32,851      $  11,535      $  42,752
                                                               =========      =========      =========      =========
Depreciation, depletion, amortization and impairments:

   Oil and gas - US ......................................     $  10,924      $  10,558      $  22,199      $  17,935
   Oil and gas - Ecuador .................................          --              370           --              504
   Gas plants ............................................          --              318           --              625
                                                               ---------      ---------      ---------      ---------
                                                               $  10,924      $  11,246      $  22,199      $  19,064
                                                               =========      =========      =========      =========
</TABLE>


                                      -17-

<PAGE>


                         MISSION RESOURCES CORPORATION

              Notes to Condensed Consolidated Financial Statements

                                  (Unaudited)



10.  Subsequent Events

     As announced on July 16, 2002, the Company's chief executive officer and
     chairman of the board resigned effective July 31, 2002. The Company will
     incur related severance costs of $1.3 million which will be reported in
     general and administrative expenses in the third quarter of 2002.

     The Company's board of directors has selected Robert L. Cavnar to assume
     the roles of Chairman of the Board and Chief Executive Officer effective
     August 13, 2002. Mr. Cavnar was previously employed as Senior Vice
     President and Chief Financial Officer of El Paso Production Company.

     Through July 31, 2002, the Company sold non-core oil and gas properties for
     net proceeds of approximately $40 million. The proceeds received to date,
     and to be received following termination of preferential rights to purchase
     certain of the properties, are being used to pay down the entire
     outstanding balance under the Company's Credit Facility.

                                      -18-


<PAGE>



                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

ITEM 2.

General

2001 Merger

On May 16, 2001, Bellwether Exploration Company ("Bellwether") merged with Bargo
Energy Company ("Bargo") and changed its name to Mission Resources Corporation.
Simultaneously with the merger, Bellwether increased its authorized capital
stock to 65.0 million shares and amended its 1996 Stock Incentive Plan to
increase the number of shares reserved for issuance under the plan by 2.0
million shares. Under the merger agreement, holders of Bargo stock and options
received a combination of cash and Mission common stock. The merger was
accounted for using the purchase method of accounting.

The merger was financed through the issuance of $80.0 million in Company common
stock to Bargo option holders and shareholders, and an initial draw down under a
new credit facility of $166.0 million used to refinance Bargo's and Bellwether's
then existing credit facilities and to pay the cash portion of the purchase
price of the Bargo common stock and options, and the amount incurred by Bargo to
redeem its preferred stock immediately prior to the merger. Company issued
$125.0 million of additional senior subordinated notes on May 29, 2001 and used
most of the net proceeds to reduce borrowings under the new credit facility.

Critical Accounting Policies

Mission's discussion and analysis of its financial condition and results of
operation are based upon consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP). The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. In response to SEC
Release No. 33-8040, "Cautionary Advice Regarding Disclosure About Critical
Accounting Policies", the Company has indemnified certain of these policies as
being of particular importance to the portrayal of its financial position and
results of operations and which require the application of significant judgment
by its management. The Company analyzes its estimates, including those related
to oil and gas assets and the fair value of derivative instruments and bases its
estimates on historical experience and various other assumptions that it
believes to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. The Company
believes critical accounting policies, detailed in the Company's Form 10-K filed
with the Securities and Exchange Commission, affect its more significant
judgments and estimates used in the preparation of its consolidated financial
statements.

Revenue Recognition

Company records revenues from sales of crude oil and natural gas when delivery
to the customer has occurred and title has transferred. This occurs when
production has been delivered to a pipeline or a tanker lifting has occurred.
Company may have an interest with other producers in certain properties. In this
case, Company uses the sales method to account for sales of production. It is
customary in the industry for various working interest partners to sell more or
less than their entitled share of natural gas production, creating gas
imbalances. Under the sales method, gas sales are recorded when revenue checks
are received or are receivable on the accrual basis. No provision is made on the
balance sheet to account for potential amounts due to or from Company related to
gas imbalances.

                                      -19-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Ecuador

Due to widening price differentials, higher operating costs and marginal
drilling results, the Company decided in early 2001 to seek a buyer for its
assets in Ecuador. In June 2001, with an effective date of May 31, 2001, the
Company sold its wholly-owned subsidiaries that were party to the concessions of
the Charapa and Tiguino fields. The Company retained two receivables:

     1)   a $1.0 million escrow receivable from the purchaser to be settled
          before year end upon resolution of negotiations with the Ecuadorian
          government concerning production levels, and

     2)   a receivable of approximately $900,000 to be collected out of oil
          sales from the partner in the Tiguino field.

In the fourth quarter of 2001, management deemed the $1.0 million receivable to
be uncollectible due to a lack of success in negotiating with the Ecuador
government, increasing the loss on the sale. In the second quarter of 2002, the
partner receivable was reduced to $559,000, with the $341,000 charged to income
as bad debt expense. The collectible portion of the receivable was determined
based upon actual and estimated future operations of the field.

In June 2002, the Company was presented with post-closing adjustments in the
final accounting for this sale. The post-closing adjustments include
reimbursements for reduction of value added tax receivable, reimbursement of
production royalties, pricing and volume adjustments negotiated with the
purchaser through June 2002 and costs of completing the divestiture. The Company
is recognizing the full amount of the proposed adjustments as a $2.7 million
additional loss on the property sale. However, the Company continues to
negotiate specific issues.

Liquidity and Capital Resources

The Company strives to maximize long-term shareholder value through aggressive
growth in reserves and cash flow using advanced technologies, implementation of
a low cost structure and maintenance of a capital structure supportive of
growth. The Company employs an integrated interdisciplinary team approach to a
balanced program of strategic acquisitions of producing oil and gas properties
and technology driven development and exploration activities. The funding of
these activities has historically been provided by operating cash flows, bank
financing, debt and equity placements and sale of non-core assets. Future
borrowings under credit facilities are subject to variables including the
lenders' practices and policies, changes in the prices of oil and natural gas
and changes in our oil and natural gas reserves. In periods of reduced
availability of funds from either cash flows or credit sources, the Company
would anticipate delaying planned capital expenditures, which could negatively
impact future revenues and cash flows.

Cash Flows

Cash flow from operations, excluding changes in assets and liabilities was $10.3
million and $32.5 million for the six month periods ending June 30, 2002 and
2001, respectively. The period to period decrease in cash flow is due to the
decline in oil and gas prices, increased interest expenses related to the $125.0
million of senior subordinated notes issued May 29, 2001, sale of properties
since June 30, 2001 and increased production expenses related to the properties
acquired in 2001.

                                      -20-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Cash used in investing activities for the six month periods ending June 30, 2002
and 2001 was $1.3 million and $186.4 million, respectively. The Company invested
$11.5 million in exploration and development of oil and gas properties for the
six month period ended June 30, 2002 compared to $18.5 million for the same
period of 2001. Spending on property acquisitions, however, was $169.1 million
in 2001. In 2002, the Company has focused on evaluating existing properties and
divesting of those determined to be non-core properties. Through June 30, 2002
$10.6 million in proceeds were received from the sale of oil and gas properties.
Additional sales culminated in July 2002 with net proceeds of approximately $40
million.

Cash provided by financing activities was $4.4 million and $157.0 million for
the six month periods ending June 30, 2002 and 2001, respectively. Activity in
2002 represents borrowing, net of principal payments under the Credit Facility.
Activity in 2001 related to the Bargo merger with initial borrowings under the
Credit Facility, which borrowings were substantially repaid with the proceeds of
the $125.0 million issuance of subordinated notes.

A capital budget of $26.6 million was adopted for the year 2002, with $21.3
million for development, $0.6 million for exploration and $4.7 million for
seismic data, land and other related items. The Company believes that cash flow
provided by operating activities, borrowings under its credit facility and
proceeds from property sales will be sufficient to fund its capital investment
program.

Credit Facilities

The Company is party to a $200 million revolving credit facility ("Credit
Facility"), which allows the Company to borrow, repay and re-borrow under the
facility from time to time. The borrowing base is determined from time to time
by lenders based on the Company's reserves and other factors deemed relevant by
the lenders. Effective April 1, 2002, the borrowing base was set at $100.0
million, however, the total borrowing capacity under the Credit Facility has
remained unchanged. The interest rate on borrowings is determined based upon the
Company's credit rating and borrowing base utilization. Interest can be either
Prime plus a margin of up to 1% or LIBOR plus a margin of 1.5% to 2.5%. During
the first half of 2002, borrowings under the Credit Facility had an average
interest rate of 4%. The Credit Facility contains various covenants including
certain required financial measurements for current ratio, ratio of total debt
to EBITDAX and interest coverage ratios. Restrictions are placed on debt, liens,
dividends, leases and capital spending on foreign operations.

The Company entered into various property sales with net proceeds of $10.6
million during the first half of 2002. Additional sales culminated in July 2002
with net proceeds of approximately $40 million. Substantially all such proceeds
will be used to reduce outstanding borrowings under the Credit Facility to zero.
As a result of these sales, the borrowing base was adjusted to $75 million.

The Company's debt covenants under the Credit Facility for the four quarters of
2002 have been amended, with the required ratio of total debt to EBITDAX being
increased and the required interest coverage ratio being reduced. At June 30,
2002, $39.5 million was outstanding under the Credit Facility. As of June 30,
2002, the Company was in compliance with the amended covenants.

 The Company is in the process of its regularly scheduled redetermination of the
borrowing base for the Credit Facility and, as part of those discussions, will
be negotiating the establishment of new covenants reflective of the downsized
nature of the Company. The Company's plan is to have new covenants and a new
borrowing base in place by mid-September. Due to the costs of restructuring and
other non-recurring items in the fourth quarter of 2001, it appears that the
Company may not satisfy the requirements of the existing covenants in the third
quarter of 2002. If the Company is unable to amend certain covenants or
establish new covenants, its ability to draw down on the Credit Facility may be
restricted.

                                      -21-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Senior Subordinated Notes

In April 1997, the Company issued $100.0 million of 10-7/8% senior subordinated
notes due 2007. On May 29, 2001 the Company issued an additional $125.0 million
of senior subordinated notes due 2007 with identical terms to the notes issued
in April 1997 (collectively "Notes") at a premium of $1.9 million. The premium
is shown separately on the Balance Sheet. The premium is amortized as a
reduction of interest expense over the life of the Notes so that the effective
interest rate on these additional bonds is 10.5%. Through June 30, 2002,
approximately $309,000 of the premium had been amortized. Interest on the Notes
is payable semi-annually on April 1 and October 1. The Notes will be redeemable,
in whole or in part, at the option of the Company at any time on or after April
1, 2002 at 105.44% which decreases annually to 100.00% on April 1, 2005 and
thereafter, plus accrued and unpaid interest. In the event of a change of
control of the Company, as defined in the indenture, each holder of the Notes
will have the right to require the Company to repurchase all or part of such
holder's Notes at an offer price in cash equal to 101.0% of the aggregate
principal amount thereof, plus accrued and unpaid interest to the date of
purchase. The Notes contain certain covenants, including limitations on
indebtedness, liens, compliance with requirements of existing indebtedness,
dividends, repurchases of capital stock and other payment restrictions affecting
restricted subsidiaries, issuance and sales of restricted subsidiary stock,
dispositions of proceeds of asset sales and restrictions on mergers and
consolidations or sales of assets. As of June 30, 2002, the Company was in
compliance with its covenants under the Notes. In the event the Company becomes
out of compliance with its Credit Facility covenants in the third quarter of
2002, the Notes will not be impacted as the Company intends to repay the Credit
Facility to zero with the funds from the sale of assets, and the requirement
that the Company be in compliance with the terms of other indebtedness is
applicable only to borrowings in excess of $10.0 million.

The Company receives debt ratings from two major rating agencies in the United
States. In determining Company's debt rating, the agencies consider a number of
items including, but not limited to, debt levels, planned asset sales, near-term
and long-term production growth opportunities, capital allocation challenges and
commodity price levels. Company's corporate bonds are rated "B+, Negative Watch"
by Standard & Poor's and "Caa1, Negative Outlook" by Moody's. There are no
"rating triggers" in the Company's Notes or its Credit Facility.

Gas Balancing

It is customary in the industry for working interest partners to sell more or
less than their entitled share of natural gas. The settlement or disposition of
existing gas balancing positions is not anticipated to materially impact the
financial condition of the Company.

Related Parties

Milam Energy, LP ("Milam") is a 51% working interest owner with the Company in
several south Louisiana properties. Torch Energy Advisors Incorporated ("Torch")
is a majority owner of Milam, and J.P. Bryan, a director of Company, is also
managing director and stockholder of Torch. As of June 30, 2002, Milam owed the
Company approximately 1.9 million in joint interest billings and cash calls
related to these properties. The receivable is reflected on the accounts
receivable and accrued revenues line of the consolidated Balance Sheet. A
portion of the outstanding receivable is past due. The Company is exercising its
rights under the joint operating agreement to net all further revenue against
all outstanding receivables until paid.

A $250,000 payment under a non-compete agreement was paid in the second quarter
to Tim J. Goff, Bargo's former CEO and former member of Mission's Board of
Directors.

                                      -22-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

During the fiscal year 1992, Company acquired an average 24.4% interest in three
mining ventures (the "Mining Venture") from an unaffiliated individual for
$128,500. At the time of such acquisition, J. P. Bryan, a member of the Mission
Board of Directors, his brother, Shelby Bryan and Robert L. Gerry III (the
"Affiliated Group"), owned an average 21.5% interest in the Mining Venture.
Company's interest in the Mining Venture increased as it paid costs of the
venture while the interest of the Affiliated Group decreased. Throughout the
first half of 2001, the Company spent $137,000, primarily for soil core assays.
These costs, plus the $729,000 accumulated on the Balance Sheet in Other Assets
as of December 31, 2000, were charged to earnings in 2001. No such costs were
incurred in 2002. Pursuant to contracts in place, Company is not obligated to
make any future payments.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, Accounting for Asset Retirement Obligations, which provided accounting
requirements for retirement obligations associated with tangible long-lived
assets, including:

     o the timing of liability recognition;
     o initial measurement of liability;
     o allocation of asset retirement cost to expense;
     o subsequent measure of the liability; and
     o financial statement disclosures.

SFAS No. 143 requires that asset retirement cost be capitalized as a part of the
cost of the related long-lived asset and subsequently allocated to expense using
a systematic and rational method. Company will adopt this statement effective
January 1, 2003. The transition adjustment resulting from the adoption of SFAS
No. 143 will be reported as a cumulative effect of a change in accounting
principle. At this time, Company cannot reasonably estimate the effect of the
adoption of this statement on either its financial position or results of
operations.

In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which will be effective as of January 1, 2002.
SFAS No. 144 requires that long-lived assets to be disposed of by sale be
measured at the lower of the carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations. SFAS
No. 144 broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. After its effective date, SFAS No. 144 will be
applied to those transactions where appropriate.

SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statements No. 13 and Technical Corrections, was issued in April 2002. SFAS No.
145 provides guidance for income statement classification of gains and losses on
extinguishments of debt and accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. SFAS No. 145
is effective for the Company in January 2003. The Company is evaluating the
impact of SFAS No. 145.

SFAS No. 146, Accounting for Exit or Disposal Activities, was issued in June
2002. SFAS No. 146 addresses significant issues regarding the recognition,
measurement, and reporting of costs that are associated with exit and disposal
activities, including restructuring activities that are currently accounted for
pursuant the guidance set forth in EITF Issue No. 94-3, Liability Recognition of
Certain Employee Termination Benefits and Other Costs to Exit an Activity. SFAS
No. 146 is effective for the exit and disposal activities initiated after
December 31, 2001. The Company is evaluating the impact of SFAS No. 146.

                                      -23-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Results of Operations

The following table sets forth certain operating information for the Company for
the periods presented:

<TABLE>
<CAPTION>
                                                               Three Months Ended           Six Months Ended
                                                                    June 30,                    June 30,
                                                          -------------------------------------------------------
                                                                2002        2001 (2)        2002        2001 (2)
                                                          -------------------------------------------------------
<S>                                                              <C>           <C>         <C>          <C>
 Production:
    Oil and condensate (MBbls)--US......................         905           826         1,895        1,293
    Oil and condensate (MBbls)--Ecuador.................         ---            69           ---           95
    Natural gas (MMcf)..................................       3,530         4,631         7,164        8,679
    Equivalent barrels (MBOE)...........................       1,493         1,667         3,089        2,835

 Average sales price including the effect of hedges:

    Oil and condensate ($ per Bbl)--US..................       22.60         22.54         20.58        23.03
    Oil and condensate ($ per Bbl)--Ecuador.............         ---         19.64           ---        19.76
    Natural gas  ($ per Mcf)............................        3.25          3.04          2.96         3.92

 Average sales price excluding the effect of hedges:

    Oil and condensate ($ per Bbl) --US.................       22.67         22.54         20.38        23.03
    Oil and condensate per ($ per Bbl) -Ecuador.........         ---         19.64           ---        19.76
    Natural gas ($ per Mcf).............................        3.25          4.35          2.79         5.65

 Average costs:
    Lease operating expenses (per Boe)..................      $ 8.26        $ 6.42        $ 8.45       $ 6.29
    Production taxes (per Boe)..........................      $ 1.02        $ 0.62        $ 0.90       $ 0.64
    General and administrative expense
          (per Boe)--US.................................      $ 1.71        $ 1.73        $ 1.69       $ 1.93
    General and administrative expense
            (per Boe)--Ecuador..........................      $  ---        $10.26        $  ---       $ 7.60
    Depreciation, depletion and amortization
         (per Boe)(1) --US..............................      $ 7.21        $ 6.61        $ 7.06       $ 6.55
    Depreciation, depletion and amortization
         (per Boe)(1) --Ecuador.........................      $  ---        $ 5.36        $  ---       $ 5.31

</TABLE>


(1)  Excludes depreciation, depletion and amortization on gas plants, furniture
     and fixtures and other assets.

(2)  Beginning with May 16, 2001, the operations of the former Bargo properties
     are included.


                                      -24-

<PAGE>



                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Three Months Ended June 30, 2002 and 2001

Net Loss

For the three months ended June 30, 2002, the Company reported a loss of $6.0
million or $0.25 per share, and for the same period in 2001 reported a loss of
$6.0 million, or $0.32 per share. The $11.2 million dollar loss on the sale of
the company's Ecuadorian interests had a significant impact on net income in
2001. Additionally, the impact of the May 16, 2001 merger with Bargo is
reflected for the entire quarter in 2002 as compared to one-half the quarter in
2001.

Oil and Gas Revenues

Oil revenues increased 3% to $20.5 million for the quarter ended June 30, 2002
from $20.0 million for the same quarter of the previous year. Average realized
oil prices for the quarter ended June 30, 2002 were $22.60 per Bbl as compared
to $22.31 per Bbl, including Ecuadorian oil, for 2001. Oil production increased
to 905 MBbls for the quarter ended June 30, 2002 from 898 MBbls for the same
quarter of the previous year. Increased production as a result of the Bargo
merger and the acquisition of properties in south Louisiana made up for
production lost as a result of the Ecuador divestiture.

Gas revenues decreased 19% from $14.1 million reported for the quarter ended
June 30, 2001 to $11.5 million for the quarter ended June 30, 2002. Gas prices
averaged $3.25 per Mcf, or 7% higher, in the three month period ended June 30,
2002 as compared to $3.04 per Mcf in the comparable period of 2001. Gas
production was down 24% compared to the same quarter of 2001 with 3,530 MMcf and
4,631 MMcf for the three month periods ending June 30, 2002 and 2001,
respectively, reflecting the steep production declines of the Gulf of Mexico and
the impact of recent property sales.

The realized prices discussed above include the impact of oil and gas hedges. A
decrease of $66,000 related to hedging activity was reflected in oil and gas
revenues for the three months ended June 30, 2002, while a decrease in oil and
gas revenues of $6.1 million was reflected for the same period of 2001.
Ecuadorian oil production was not hedged.

Gas Plant Revenues

Gas plant revenues were $1.5 million in the quarter ended June 30, 2001. There
were no gas plant revenues in the three months ended June 30, 2002 because these
gas plants were sold in 2001.

Interest and Other Income

Interest and other income decreased significantly to a net expense of $3.6
million in the three months ended June 30, 2002 from a net expense of $331,000
for the three months ended June 30, 2001. The $2.9 million loss on
ineffectiveness of commodity hedges in 2002 as compared to $473,000 for the same
period of 2001 accounts for most of the decrease, while the write off of
approximately $851,000 in receivables in the second quarter of 2002 accounts for
the remainder. As discussed previously, approximately $341,000 of the partner
receivable retained after selling the Ecuador properties, was written off. In
addition, a note receivable from a former executive, secured by stock of the
Company, was reduced to the current market value of the collateral, resulting in
a $359,000 loss.

                                      -25-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Production Expenses

Lease operating expenses increased 15% to $12.3 million in the three months
ended June 30, 2002, from $10.7 million in the three months ended June 30, 2001.
Production taxes increased 48% to $1.5 million in the quarter ended June 30,
2002 from $1.0 million for the same period of the previous year. Production tax
increases reflect the inclusion of the Bargo properties for an entire quarter.
Because most of the Bargo properties were onshore, a larger proportion of the
Bargo production is burdened by production taxes. On a barrel equivalent basis
(BOE), lease operating expenses, excluding production taxes, increased 29% per
BOE for the quarter ended June 30, 2002, from $6.42 per BOE for the three months
ended June 30, 2001. Increased production expenses were primarily attributable
to the inclusion of the properties acquired in the Bargo merger for the entire
quarter.

Transportation Costs

Transportation costs were not significant in either period presented.

Gas Plant Expenses

Gas plant expenses were $662,000 in the quarter ended June 30, 2001. There were
no gas plant expenses in the three months ended June 30, 2002 because these gas
plants were sold in 2001.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization decreased 6% to $10.9 million for the
three months ended June 30, 2002 from $11.6 million for the same period of 2001.
The total for the quarter ended June 30, 2001 included approximately $317,000 of
depreciation on the gas plants that were sold in late 2001 and $268,000 of
goodwill amortization. Neither of these items continued into 2002. Depreciation,
depletion and amortization per BOE has increased 10% to $7.21 per BOE in the
quarter ended June 30, 2002, from $6.56 per BOE in the same period of 2001. This
increase was offset by the decrease in volumes of 10% from the 2001 quarter
level.

General and Administrative Expenses

General and administrative expenses decreased 26% to $2.6 million for the three
months ended June 30, 2002 as compared to $3.5 million for the same period of
fiscal 2001. The general and administrative expense savings is primarily
attributable to reductions in staff and executive pay in 2002.

Interest Expense

Interest expense increased 25% to $7.4 million for the three months ended June
30, 2002 from $5.9 million in the same period of 2001. The additional $125.0
million of 10-7/8% subordinated debt issued on May 29, 2001 accounts for the
increased interest expense, but the impact has been reduced by significant
declines in the interest rates paid on bank debt and a $295,000 gain on the
interest rate swap in 2002.

Income Taxes

The provision for federal and state income taxes for the three months ended June
30, 2002 was based upon a 35% effective tax rate. The $4.3 million valuation
allowance on deferred taxes applicable at December 31, 2001 has been increased
to $5.0 million at June 30, 2002, because the Company determined that the
portion of deferred tax asset relating to state taxes generated during the
quarter would not be realized. In assessing the realizability of the deferred
tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Based upon the projection for future state taxable income,
management believes it is more likely than not that the Company will not realize
its deferred tax asset related to state income taxes.

                                      -26-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Six Months Ended June 30, 2001 and 2000

Net Loss

For the six months ended June 30, 2002, the Company reported a loss of $15.4
million or $0.65 per share, while the same period in 2001 had a loss of $2.4
million, or $0.14 per share. Lower commodity prices, a $9.1 million loss on
hedge ineffectiveness, and increased interest expense and lease operating
expense resulting from the May 2001 merger with Bargo were the primary reasons
for the variance.

Oil and Gas Revenues

Oil revenues increased 23% to $39.0 million for the six months ended June 30,
2002 from $31.7 million for the same period of the previous year. Average
realized oil prices for the six month period ended June 30, 2002 were $20.58 per
Bbl as compared to $22.81 per Bbl, including Ecuadorian oil, for the same period
in 2001. Oil production increased to 1,895 MBbls for the six month period ended
June 30, 2002 from 1,388 MBbls for the same period of the previous year.
Increased production in 2002 resulting from the Bargo merger and the acquisition
of properties in south Louisiana made up for production lost as a result of the
Ecuador divestiture.

Gas revenues decreased 38% to $21.2 million reported for the first half of 2002,
from $34.1 million for the first half of 2001. Gas prices averaged $2.96 per
Mcf, or 24% lower, in the six month period ended June 30, 2002 as compared to
$3.92 per Mcf in the comparable period of 2001. Gas production decreased 17% to
7,164 Mmcf in the first half of 2002, from 8,679 Mmcf in the first half of 2001.
The approximately 35% annual production decline on the offshore properties,
combined with the impact of late 2001 and first quarter 2002 property sales, is
evident in this decline. These production declines were partially offset by
inclusion of the Bargo properties' gas production after May 16, 2001.

The realized prices discussed above include the impact of oil and gas hedges. An
increase of $1.6 million related to hedging activity was reflected in oil and
gas revenues for the six months ended June 30, 2002, while a decrease in oil and
gas revenues of $14.9 million was reflected for the same period of 2001.
Ecuadorian oil production was not hedged.

Gas Plant Revenues

Gas plant revenues were $3.1 million in the six months ended June 30, 2001.
There were no gas plant revenues in the six months ended June 30, 2002 because
these gas plants were sold in 2001.

Interest and Other Income

Interest and other income decreased significantly to a net expense of $9.7
million in the six months ended June 30, 2002 from $217,000 income for the six
months ended June 30, 2001. A net loss on ineffectiveness of commodity hedges of
$9.1 million in 2002 versus a net gain of $266,000 reflected in the same period
of 2001 contributed significantly to the decrease. The write off of
approximately $851,000 in receivables in the second quarter of 2002 as compared
to $261,000 in 2001 accounts for the remainder of the decrease. As discussed
previously, approximately $341,000 of the partner receivable retained after
selling the Ecuador properties, was written off. In addition, a note receivable
from a former executive, secured by stock of the Company, was reduced to the
current market value of the collateral, resulting in a $359,000 loss.

                                      -27-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Production Expenses

Lease operating expenses increased 46% to $26.1 million in the six months ended
June 30, 2002, from $17.8 million in the six months ended June 30, 2001.
Production taxes increased 53% to $2.8 million in the six months ended June 30,
2002 from $1.8 million for the same period of the previous year. Production tax
increases reflect the inclusion of the Bargo properties for the entire period of
2002 versus only one and one-half months included in 2001. Because most of the
Bargo properties were on-shore, a larger proportion of the Bargo production is
burdened by production taxes. On a barrel equivalent basis (BOE), lease
operating expenses, excluding production taxes, increased 34% per BOE for the
six months ended June 30, 2002, from $6.29 per BOE for the six months ended June
30, 2001. Increased production expenses were primarily attributable to the
inclusion of the properties acquired in the Bargo merger for the entire period
of 2002 as compared with only one-half a quarter in 2001.

Transportation Costs

Transportation costs were not significant in either period presented.

Gas Plant Expenses

Gas plant expenses increased 8% to $1.4 million in the six months ended June 30,
2001. There were no gas plant expenses in the six months ended June 30, 2002
because these gas plants were sold in 2001.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization increased 13% to $22.2 million for the
six months ended June 30, 2002 from $19.6 million for the same period of 2001.
While the totals for the six months ended June 30, 2001 included approximately
$625,000 of depreciation on the gas plants and $268,000 of goodwill
amortization, increase in production volumes and the per BOE rate caused the
overall increase. Depreciation, depletion and amortization per BOE has increased
8% to $7.06 per BOE in the period ended June 30, 2002, from $6.51 per BOE in the
same period of 2001. Production volumes increased on a per BOE basis by 10%.

General and Administrative Expenses

General and administrative expenses totaled $5.2 million in the six months ended
June 30, 2002 as compared to $6.0 million for the same period of fiscal 2001, a
decrease of 13%. The savings is primarily attributable to the reductions in
staff and executive pay in 2002, offset by increases in management fees related
to the integration and operation of the Bargo properties.

Interest Expense

Interest expense increased 54% to $15.1 million for the six months ended June
30, 2002 from $9.8 million in the same period of 2001. The additional $125.0
million of 10-7/8% subordinated debt issued on May 29, 2001 accounts for the
increased interest expense, but the impact has been reduced by significant
declines in the interest rates paid on bank debt and a $255,000 gain on the
interest rate swap in 2002.

                                      -28-

<PAGE>


                         MISSION RESOURCES CORPORATION

               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Income Taxes

The provision for federal and state income taxes for the six months ended June
30, 2002 was based upon a 35% effective tax rate. The $4.3 million valuation
allowance on deferred taxes applicable at December 31, 2001 has been increased
to $5.0 million at June 30, 2002, because the Company determined that the
portion of deferred tax asset relating to state taxes generated during the
quarter would not be realized. In assessing the realizability of the deferred
tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Based upon the projection for future state taxable income,
management believes it is more likely than not that the Company will not realize
its deferred tax asset related to state income taxes.

Forward Looking Statements

This Form 10-Q contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included herein, including without limitation,
statements under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and in the notes to the financial statements
regarding the Company's financial position, capital budget, intent to acquire
oil and gas properties, estimated quantities and net present values of reserves,
business strategy, plans and objectives of management of the Company for future
operations, and the effect of gas balancing, are forward-looking statements.
There can be no assurances that such forward-looking statements will be correct.
Important factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") include the volatility of oil
and gas prices, operating hazards, government regulations, exploration risks and
other factors described in the Company's Form 10-K filed with the Securities and
Exchange Commission. All subsequent written and oral forward-looking statements
attributable to the Company, or persons acting on its behalf are expressly
qualified by the Cautionary Statements.

                                      -29-

<PAGE>


                         MISSION RESOURCES CORPORATION

           Quantitative and Qualitative Disclosures about Market Risk

ITEM 3.

The Company is exposed to market risk, including adverse changes in commodity
prices and interest rates.

Commodity Price Risk - Company produces and sells crude oil, natural gas and
natural gas liquids. As a result, its operating results can be significantly
affected by fluctuations in commodity prices caused by changing market forces.
Company periodically seeks to reduce its exposure to price volatility by hedging
a portion of its production through swaps, options and other commodity
derivative instruments. The Company frequently utilizes a combination of
options, structured as a collar because there are no up-front costs and
protection is given against low prices. Recently, as shown on the following
tables, the Company has entered into some commodity swaps. These hedges assure
that the revenues Company receives on the hedged production will be at prices no
lower than the price floor and no higher than the price ceiling.

The following tables detail all hedges of future production outstanding at June
30, 2002:

     Oil Hedges

<TABLE>
<CAPTION>
                                                                                               NYMEX          NYMEX
                     Period                 BBLS         Total BBLS           Type             Price          Price
                                           Per Day                                             Floor         Ceiling
               -----------------------------------------------------------------------------------------------------
               <S>                         <C>           <C>                <C>               <C>            <C>
               July 2002-Sep. 2002           4,500       414,000             Collar           $25.00         $26.50
               July 2002-Sep. 2002             500        46,000             Collar           $25.00         $27.00
               Oct. 2002-Dec. 2002           4,500       414,000             Collar           $25.00         $25.50
               Oct. 2002-Dec. 2002             500        46,000             Collar           $25.00         $25.90
               Jan. 2003-Mar. 2003           3,500       315,000              Swap            $24.80           n/a
               Jan. 2003-Mar.2003              500        45,000              Swap            $24.92           n/a
               Apr. 2003-June 2003           3,500       318,500              Swap            $24.30           n/a
               Apr. 2003-June 2003             500        45,500              Swap            $24.37           n/a
               July 2003-Sep. 2003           3,000       276,000              Swap            $23.95           n/a
               July 2003-Sep. 2003             500        46,000              Swap            $23.94           n/a
               Oct. 2003-Dec. 2003           3,000       276,000              Swap            $23.59           n/a
               Oct. 2003-Dec. 2003             500        46,000              Swap            $23.58           n/a

     Gas Hedges

                                                                                               NYMEX          NYMEX
                     Period                  MCF         Total MCF            Type             Price          Price
                                           Per Day                                             Floor         Ceiling
               -----------------------------------------------------------------------------------------------------
               July 2002-Sep. 2002           9,800       901,600             Collar            $3.00          $6.60
               July 2002-Sep. 2002          10,000       920,000             Collar            $2.50          $3.55
               Oct. 2002-Dec. 2002           8,500       782,000             Collar            $3.40          $7.00
               Jan. 2003-Mar. 2003          10,000       920,000             Collar            $3.00          $4.65
               Apr. 2003-June 2003           5,000       455,000             Collar            $3.00          $4.02
               Apr. 2003-June 2003           5,000       455,000             Collar            $3.00          $3.97
               July 2003-Sep. 2003          10,000       920,000             Collar            $3.00          $4.10
               Oct. 2003-Dec. 2003          10,000       920,000             Collar            $3.00          $4.65
</TABLE>

These commodity derivative instruments expose the Company to counterparty credit
risk to the extent the counterparty is unable to meet its monthly settlement
commitment to Company. The Company believes it selects creditworthy
counterparties to its hedge transactions. Each of Company's counterparties have
long term senior unsecured debt ratings of at least A/A2 by Standard & Poor or
Moody's.

                                      -30-

<PAGE>


                         MISSION RESOURCES CORPORATION

           Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk - The Company may enter into financial instruments such as
interest rate swaps to manage the impact of interest rates. Effective September
22, 1998, Company entered into an eight and one-half year interest rate swap
agreement with a notional value of $80.0 million. Under the agreement, Company
receives a fixed interest rate and pays a floating interest rate, subject to a
cap, based on the simple average of three foreign LIBOR rates. Floating rates
are re-determined for a six-month period each April 1 and October 1. After April
1, 2002, the floating rate is capped at 12.375%. The floating rate for the
period from April 1, 2002 to October 1, 2002 is 11.3%. The Company's exposure to
changes in interest rates primarily results from short-term changes in the LIBOR
rates. A 10% change in the floating LIBOR rates would change interest costs to
the Company by $862,000 per year. This agreement is not held for trading
purposes. The swap provider is a major financial institution, and the Company
does not anticipate non-performance by the provider. The Company marks the swap
value to market quarterly, recording changes in value as additional interest
expense of $295,000 and $71,000 for the three months ended June 30, 2002 and
2001, respectively.

                                      -31-

<PAGE>


                         MISSION RESOURCES CORPORATION

                           PART II. OTHER INFORMATION


ITEM 1. Legal Proceedings

          None

ITEM 2. Changes in Securities and Use of Proceeds

          None.

ITEM 3. Defaults Upon Senior Securities

          None.

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

A proxy statement was sent to all shareholders of record as of April 9, 2002 for
the following matters which were voted on at the annual meeting of shareholders
held on May 21, 2002:

Election of Board of Directors:
     Douglas G. Manner, 15,153,992 shares in favor, 2,043,509 shares abstaining,
     and no shares voting against. Judy Ley Allen, 16,710,651 shares in favor,
     486,850 shares abstaining, and no shares voting against. Timothy Goff,
     16,365,569 shares in favor, 831,932 shares abstaining, and no shares voting
     against. Robert Rooney, 16,709,151 shares in favor, 488,350 shares
     abstaining, and no shares voting against. Jonathon Clarkson, 16,010,546
     shares in favor, 1,186,955 shares abstaining, and no shares voting against
     J. P. Bryan, 16,667,109 shares in favor, 530,392 shares abstaining, and no
     shares voting against. D. Martin Phillips, 16,317,451 shares in favor,
     880,050 shares abstaining, and no shares voting against.

No other matters were brought up at the meeting.

A copy of the proxy statement was filed with the Securities and Exchange
Commission on April 18, 2002 and is incorporated herein by reference.

ITEM 5. Other Information

          None.

ITEM 6. Exhibits and Reports on Form 8-K

        a. Exhibits.

          The following exhibits are filed with this Form 10-Q and they are
          identified by the number indicated.

          2.1  Agreement and Plan of Merger, dated January 24, 2001, between
               Bellwether Exploration Company and Bargo Energy Company
               (incorporated by reference to Exhibit 2.1 to the Company's
               Current Report on Form 8-K, filed January 25, 2001).

          3.1  Certificate of Incorporation of Bellwether Exploration Company
               (incorporated by reference to Exhibit 3.1 to the Company's
               Registration Statement on Form S-1 No. 33-76570).


                                      -32-

<PAGE>


                         MISSION RESOURCES CORPORATION

                           PART II. OTHER INFORMATION


3.2  Certificate of Amendment to Certificate of Incorporation (incorporated by
     reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for
     the fiscal year ended June 30, 1997).

3.3  Certificate of Designation, Preferences and Rights of Series A Preferred
     Stock (incorporated by reference to Exhibit 1 to the Company's Registration
     Statement on Form 8-A dated September 19, 1997).

3.4  By-laws of Bellwether Exploration Company (incorporated by reference to
     Exhibit 3.2 to the Company's Registration Statement on Form S-1 No.
     33-76570)

3.5  Amendment to Article II, Section 2.2 of Bellwether Exploration Company's
     Bylaws (incorporated by reference to Exhibit 3.5 to the Company's Annual
     Report on Form 10-K for the transition period ended December 31, 1997).

3.6  Amendment to Bellwether Exploration Company's bylaws adopted on March 27,
     1998 (incorporated by reference to Exhibit 3.6 to the Company's Annual
     Report on Form 10-K for the transition period ended December 31, 1997).

4.1  Specimen Stock Certificate (incorporated by reference in Exhibit 4.1 to the
     Company's Registration Statement on Form S-1, File No. 33-76750.

10.1 First Amendment to the Credit Agreement by and among Company and JPMorgan
     Chase Bank, as Administrative Agent, BNP Paribas, as Syndication Agent,
     First Union National Bank and Fleet National Bank, as Co-Documentation
     Agent, and the Lenders Signatory thereto, dated May 29, 2001 (filed
     herewith).

10.2 Second Amendment to the Credit Agreement by and Company and by and among
     Company and JPMorgan Chase Bank, as Administrative Agent, BNP Paribas, as
     Syndication Agent, First Union National Bank and Fleet National Bank, as
     Co-Documentation Agent, and the Lenders Signatory Hereto, dated March 28,
     2002 (filed herewith).

10.3 Separation Agreement between Douglas G. Manner and Mission Resources
     Corporation dated effective July 31, 2002 (filed herewith).

99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Executive Officer
     of the Company (filed herewith).

99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Financial Officer
     of the Company (filed herewith).


   b. Reports on Form 8-K

     (i)  Current Report on Form 8-K filed with the Securities and Exchange
          Commission on June 6, 2002, regarding the resignation of Tim J. Goff
          from the Company's board of directors.

                                      -33-

<PAGE>


                          MISSION RESOURCES CORPORATION

                           PART II. OTHER INFORMATION


                          MISSION RESOURCES CORPORATION

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.

                                MISSION RESOURCES CORPORATION
                                -----------------------------
                                        (Registrant)


Date:   August 14, 2002         By:    /s/
                                       Robert L. Cavnar
                                       Chief Executive Officer

Date:   August 14, 2002         By:    /s/
                                       Jonathan M. Clarkson
                                       Chief Financial Officer


                                      -34-