UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10-KSB

(Mark  One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 2003
            [ } TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                          Commission file number 0-8157

                          THE RESERVE PETROLEUM COMPANY
                 (Name of small business issuer in its charter)

             Delaware                                          73-0237060
(State  or  other  jurisdiction  of                          (IRS  Employer
  incorporation  or  organization)                       identification  number)

              6801 N. Broadway, Suite 300, Oklahoma City, Oklahoma
                                   73116-9092
              (Address of principal executive offices) (Zip Code)
..
                    Issuer's telephone number: (405)848-7551

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

              Securities registered under Section 12(g) of the Act:
                          Common stock $.50 Par Value
                                (Title of Class)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d)  of the Securities Exchange Act  during the past 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 [ ]

Check  if  disclosure of delinquent filers in response to Item 405 of Regulation
S-B  is not contained  in this form, and no disclosure will be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.   [X]

Issuer's  revenues  for the fiscal year ended December 31, 2003 were $2,909,782.
As  of  March  19,  2004,  there were 165,882.64 common shares outstanding.  The
aggregate market value of the voting stock held by non-affiliates was $3,749,871
as  determined  by  the  last  reported  sale  which  was  February  9,  2004.

                      DOCUMENTS INCORPORATED BY REFERENCE

Items  9,  10  and 11 required by Part III, are incorporated herein by reference
to  the  Company's  proxy statement to be mailed to security holders on or about
April  23,  2004, in connection with its annual stockholders' meeting to be held
on  May  25,  2004.
Transitional  Small  Business  Disclosure  Format (check one)  Yes [ ]  No [X]

See  Exhibit  Index  on  Page  44.


<PAGE>


                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----

     Forward  Looking  Statements                                              3

PART  I

     Item  1.     Description  of  Business                                    3

     Item  2.     Description  of  Properties                                  5

     Item  3.     Legal  Proceedings.                                          7

     Item  4.     Submission of Matters to a Vote of Security Holders          7

PART  II

     Item  5.     Market for Common Equity and Related Stockholder Matters     7

     Item  6.     Management's  Discussion  and Analysis  of
                    Financial Condition and Results of Operations              8

     Item  7.     Financial  Statements                                       20

     Item  8.     Changes in and Disagreements with Accountants
                   on Accounting and Financial  Disclosure                    42

     Item  8a.   Controls  and  Procedures                                    42

PART  III

     Item  9.    Directors,  Executive  Officers, Promoters and
                   Control Persons Compliance  with Section  16(a)
                   of  the  Exchange  Act                                     43

     Item  10.   Executive  Compensation                                      43

     Item  11.   Security  Ownership  of  Certain  Beneficial
                   Owners  and Management                                     43

     Item  12.   Certain  Relationships  and Related Transactions             43

     Item  13.   Exhibits  and  Reports  on  Form  8-K                        43

     Item  14.   Principal  Accountant  Fees  and  Services                   44




                                        2
<PAGE>

                          Forward-Looking Statements.
                          ---------------------------

This  report  contains  forward-looking statements.  Actual events and/or future
results  of  operations  may  differ  materially from those contemplated by such
forward-looking  statements.  See  Item 6, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a summation of some of the
risks  and  uncertainties  inherent  in  forward-looking  statements.


                                     PART I
                                     ------

Item  1.  Description  of  Business.

The  Reserve  Petroleum  Company  (the  "Company") is engaged principally in the
exploration  for  and  the development of oil and natural gas properties.  Other
business  segments  are not significant factors in the Company's operations. The
Company  is  a  corporation organized under the laws of the State of Delaware in
1931.

                        Oil and Natural Gas Properties.
                        -------------------------------

For  a  summary of certain data relating to the Company's oil and gas properties
including  production,  undeveloped acreage, producing and dry wells drilled and
recent  activity, see Item 2, "Description of Properties".  For a discussion and
analysis  of  current  and prior years' revenue and related costs of oil and gas
operations, and a discussion of liquidity and capital resource requirements, see
Item 6, "Management's Discussion and Analysis of Financial Condition and Results
of  Operations".

Mineral  Property  Management.
------------------------------

The  Company owns non-producing mineral interests in approximately 269,490 gross
acres  equivalent  to  93,029 net acres.  These mineral interests are located in
nine states with 56,659 net acres in the states of Oklahoma  and Texas, the area
of  concentration  for  the  Company  in its present exploration and development
programs.

Management  continually  reviews  various industry reports and other sources for
activity  (leasing,  drilling, significant discoveries, etc.) in areas where the
Company  has  mineral  ownership.  Based  on  its  analysis  of any activity and
assessment of the potential risk relative to the particular area, management may
negotiate  a lease or farmout agreement and accept a royalty interest, or it may
choose  to  participate  as  a  working interest owner and pay its proportionate
share  of  costs  for  any  exploration  or  development  drilling.

A  substantial amount of the Company's oil and gas revenue has resulted from its
mineral  property  management.  In  2003,  $1,491,672 (52%) of oil and gas sales
were from royalty interests as compared to $958,996 (57%) in 2002.   As a result
of its mineral ownership, in 2003 the Company had royalty interests in 17  gross
(.31  net)  wells  which were drilled and completed as producing wells.  See the
following  paragraphs for a discussion of mineral interests in which the Company
chooses  to  participate  as  a  working  interest  owner.

Development  Program.
---------------------


                                        3
<PAGE>

The development of a drilling program is usually initiated in one of three ways.
The  Company  may  participate  as  a  working interest owner with a third party
operator  in  the  development of non-producing mineral interests which it owns;
along  with  the  joint  interest  operator,  it  may  participate  in  drilling
additional  wells  on  its  producing  leaseholds; or if its exploration program
discussed  below results in a successful exploratory well, it may participate in
the  development  of additional wells on the exploratory prospect.  In 2003, the
Company  participated  in  the drilling of four development wells with two wells
(0.19  net)  completed  as  producers  and  two  as  dry  holes.

Exploration  Program.
---------------------

The  Company's exploration program is normally conducted by purchasing interests
in  prospects  developed  by  independent  third parties, participating in third
party  exploration  of  Company-owned non-producing minerals, developing its own
exploratory  prospects  or  a  combination  of  the  above.

The Company normally acquires interests in exploratory prospects from someone in
the  industry  with whom management has conducted business in the past and/or if
management  has  confidence  in  the  quality  of the geological and geophysical
information  presented  for  evaluation  by  Company  personnel.  If  evaluation
indicates  the  prospect  is  within  the Company's risk limits, the Company may
negotiate  to  acquire  an  interest  in  the  prospect  and  participate  in  a
non-operating  capacity.

The Company develops exploratory drilling prospects by identification of an area
of  interest, development of geological and geophysical information and purchase
of  leaseholds  in the area. The Company may then attempt to sell an interest in
the  prospect to one or more companies in the petroleum industry with one of the
purchasing  companies  functioning  as  operator.

For a summation of exploratory wells drilled in 2003 or planned for in 2004, see
Item 6, "Management's Discussion and Analysis of Financial Condition and Results
of  Operations",  subheading,  "Update  of Oil and Gas Exploration Activity from
December  31,  2002."

Customers.
----------

In  2003,  the  Company had one customer whose total purchases were greater than
10% of revenues from oil and gas sales.  The purchases were $334,582 or 11.7% of
total  oil  and  gas  sales.  The  Company  sells  most of its oil and gas under
short-term  sales  contracts  that  are based on the spot market price.  A minor
amount of oil and gas sales are made under fixed price contracts having terms of
more  than  one  year.

Competition.
------------

The  oil and gas industry is highly competitive in all of its phases.  There are
numerous circumstances within the industry and related market place that are out
of the Company's control such as cost and availability of alternative fuels, the
level  of  consumer  demand,  the extent of other domestic production of oil and
gas, the price and extent of importation of foreign oil and gas, the cost of and
proximity  of  pipelines  and  other  transportation  facilities,  the  cost and
availability  of  drilling rigs, regulation by state and Federal authorities and
the cost of complying with applicable environmental regulations.  The Company is
a  very  minor  factor  in  the industry and must compete with other persons and
companies  having  far  greater  financial  and  other resources.  The Company's
ability  to  participate  in  and/or  develop  viable  prospects, and secure the
financial participation of other persons or companies in exploratory drilling on
these  prospects  is  limited.

                                        4
<PAGE>

Regulation.
-----------

The  Company's  operations  are  affected   in  varying   degrees  by  political
developments and Federal and state laws and regulations.  Although released from
Federal  price  controls,  interstate  sales  of  natural  gas  are  subject  to
regulation  by  the  Federal  Energy  Regulatory Commission (FERC).  Oil and gas
operations  are  affected  by  environmental laws and other laws relating to the
petroleum  industry  and both are affected by constantly changing administrative
regulations.  Rates  of  production  of  oil  and  gas  have for many years been
subject  to  a  variety  of conservation laws and regulations, and the petroleum
industry  is  frequently  affected  by  changes  in  the  Federal  tax  laws.

Generally, the respective state regulatory agencies supervise various aspects of
oil  and  gas operations within the state and transportation of oil and gas sold
intrastate.

Environmental  Protection.
--------------------------

The  operation  of  the various producing properties in which the Company has an
interest  is subject to Federal, state and local provisions regulating discharge
of  materials  into the environment, the storage of oil and gas products as well
as  the  contamination of subsurface formations.  The Company's lease operations
and  exploratory  activity  have  been  and  will  continue  to  be  affected by
regulation  in  future  periods.  However, the known effect to date has not been
material  as  to capital expenditures, earnings or industry competitive position
nor  are  estimated  expenditures  for  environmental  compliance expected to be
material  in  the  coming  year.   Such  expenditures  produce  no  increase  in
productive  capacity  or  revenue  and  require  more  of  management's time and
attention,  a  cost  which  cannot be estimated with any assurance of certainty.

                                 Other Business.
                                 ---------------

See  Item  6,  "Management's Discussion and Analysis of Financial Conditions and
Results  of  Operations", subheading, "Equity Investments" and Item 7, "Notes to
Financial  Statements,"  Note  7,  for  a discussion of other business including
guarantees.

                                   Employees.
                                   ----------

At  December  31, 2003, the Company had nine employees, including officers.  The
Company's  Chief  Financial  Officer  retired  December  31,  2003,  and another
employee  was  promoted  to  that position effective January 1, 2004.  See Proxy
Statement  for  Annual  Stockholders' Meeting for additional information. During
2003, all the Company's employees devoted a portion of their time to duties with
affiliated companies and the Company was reimbursed for the affiliates' share of
compensation   directly  from   those  companies.   See  Item  6,  "Management's
Discussion  and  Analysis  of  Financial  Conditions  and Results of Operations,
subheading  "Certain Relationships and Related Transactions"  and Item 7, "Notes
to  Financial  Statements,"  Note  13,  for  additional  information.

Item  2.    Description  of  Properties.

The  Company's  principal  properties  are  oil  and  natural  gas properties as
described  below.

                        Oil and Natural Gas Operations.
                        -------------------------------

Oil  and  Gas  Reserves.
------------------------

Reference  is made to the unaudited supplemental financial information beginning
on  Page  38  for  working  interest  reserve  quantity  information.


                                        5
<PAGE>

Since  January  1,  2003,  the  Company  has  filed  no reports with any Federal
authority  or  agency  which  included  estimates of total proved net oil or gas
reserves,  except  for its 2002 annual  report on Form 10-KSB and Federal income
tax  return  for the year ended December 31, 2002.  Those reserve estimates were
identical.

Production.
-----------

The  average  sales price of oil and gas produced and, for the Company's working
interests,  the  average  production cost (lifting cost) per equivalent thousand
cubic feet (MCF) of gas production is presented in the table below for the years
ended  December  31,  2003,  2002  and 2001.  Equivalent MCF was developed using
approximate  relative  energy  content.

<TABLE>
<CAPTION>
                     Royalties                          Working  Interests
              --------------------        --------------------------------------------
                   Sales Price               Sales  Price          Average  Production
              --------------------        --------------------
                Oil          Gas            Oil         Gas            Cost  per
              Per Bbl      Per MCF        Per Bbl      Per MCF       Equivalent  MCF
              -------      -------        -------      -------     --------------------
<S>           <C>          <C>            <C>          <C>               <C>
2003          $ 28.72      $  4.82        $ 28.54      $   4.81          $   1.56
2002          $ 24.59      $  2.86        $ 24.22      $   2.70          $   1.41
2001          $ 24.21      $  4.35        $ 25.14      $   4.24          $   1.26
</TABLE>

At  December 31, 2003, the Company had working interests in 90 gross (10.86 net)
wells  producing  primarily gas and/or gas liquids (condensates) and had working
interests  in 71 gross (4.3 net) wells producing primarily oil.  These interests
were in 25,567 gross (2,902 net) producing acres.  These wells include 44  gross
(.32  net)  wells  associated  with  secondary  recovery  projects.

Thirty-eight  percent,  or 8,243  barrels of the Company's oil production during
2003  was  derived  from  royalty  interests  in mature West Texas water-floods.

Undeveloped  Acreage.
---------------------

The  Company's  undeveloped  acreage consists of non-producing mineral interests
and  undeveloped leaseholds.  The following table summarizes the Company's gross
and  net  acres  in  each  at  December  31,  2003.

<TABLE>
<CAPTION>
                                                      Acreage
                                              -----------------------
                                               Gross             Net
                                              -------          ------
<S>                                           <C>              <C>
Non-producing  Mineral  Interests             269,490          93,029
Undeveloped  Leaseholds                        35,209           7,587
</TABLE>

Net  Productive  and  Dry  Wells  Drilled.
------------------------------------------

The  following table summarizes the net wells drilled in which the Company had a
working interest for the years ended December 31, 2001 and thereafter, as to net
productive  and  dry  exploratory  wells  drilled  and  net  productive  and dry
development  wells  drilled.

                                        6
<PAGE>
<TABLE>
<CAPTION>
                    Number  of  Net  Working  Interest  Wells  Drilled
               -------------------------------------------------------
                     Exploratory                      Development
               ---------------------            ----------------------
               Productive        Dry            Productive         Dry
               ----------        ---            ----------         ---
<S>                  <C>        <C>                 <C>            <C>
     2003            .46        .16                 .19            .28
     2002            .96        .47                 .01            ---
     2001            .65       1.43                 .10            ---
</TABLE>

Recent  Activities.
-------------------

See  Item  6,  under the subheading, "Update of Oil and Gas Exploration Activity
from  December  31,  2002" for a summary of recent activities related to oil and
natural  gas  operations.

Item  3.  Legal  Proceedings.

     There  are  no  material pending legal proceedings affecting the Company or
any  of  its  properties.

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

          Not  Applicable.


                                    PART II

Item  5.  Market  for  Common  Equity  and  Related  Stockholder  Matters.

The  Company's  stock  is  traded  over  the  counter in the United States.  The
following  high and low bid information is quoted  on the pink sheets OTC Market
Report.  Prices  do  not  include  retail  markup,  markdown  or  commission.

<TABLE>
<CAPTION>
                                               Quarterly  Ranges
                                       --------------------------------
         Quarter  Ending               High  Bid               Low  Bid
         ---------------               ---------               --------
<S>                                      <C>                     <C>
            03/31/02                     35.00                   33.10
            06/30/02                     34.60                   34.10
            09/30/02                     35.20                   33.00
            12/31/02                     33.30                   32.60
            03/31/03                     32.65                   32.60
            06/30/03                     33.25                   32.65
            09/30/03                     35.00                   33.25
            12/31/03                     35.00                   35.00
</TABLE>

There was limited public trading in the Company's common stock in 2003 and 2002.
In  2003,  there  were  12  brokered  trades appearing in the Company's transfer
ledger,  and  in  2002,  there  were  8.

At  March  12,  2004,  the Company had approximately 1,467 record holders of its
common  stock.  The  Company paid dividends on its common stock in the amount of
$1.00  per  share  in  the  second  quarter of 2003 and $1.00 per share in 2002.
Management will review the amount of the annual dividend to be paid in 2004 with
the  board of directors; however, it intends to recommend a dividend of at least
$1.00  per  share.

                                        7
<PAGE>

Item  6.  Management's  Discussion  and  Analysis  of  Financial  Condition  and
Results  of  Operations.

Please  refer  to  the  financial statements and related notes in Item 7 of this
Form  10-KSB  to  supplement  this  discussion  and  analysis.

                          Forward-Looking Statements.
                          ---------------------------

In addition to historical information, from time to time the Company may publish
forward-looking  statements  within the meaning of Section 27A of the Securities
Act  of  1933  and  Section  21E  of  the   Securities  Exchange  Act  of  1934.
Forward-looking  statements  give  management's  current  expectations of future
events.  They  include  statements  relating  to  such  matters  as  anticipated
financial performance, business prospects such as drilling of oil and gas wells,
technological  development  and  similar  matters.

Although  management  believes  that  the expectations reflected in such forward
looking  statements  are  based  on reasonable assumptions, a variety of factors
could  cause  the  Company's  actual results and experience to differ materially
from  the  anticipated  results or other expectations expressed in the Company's
forward-looking  statements.  The  risks  and  uncertainties that may affect the
operations,  performance,  development  and  results  of  the Company's business
include,  but  are  not  limited  to,  the  following:

The  Company's future operating results will depend upon management's ability to
employ  and  retain  quality  employees, generate revenues and control expenses.
Any  decline  in operating revenues without corresponding reduction in operating
expenses could have a material adverse effect on the Company's business, results
of  operations  and  financial  condition.

Estimates  of  future  revenues  from  oil  and  gas  sales  are  derived from a
combination  of  factors  which  are subject to significant fluctuation over any
given period of time.  Reserve estimates by their nature are subject to revision
in  the  short-term.  The  evaluating  engineer considers production performance
data,  reservoir  data  and geological data available to the Company, as well as
makes  estimates  of  production  costs,  sale  prices  and  the time period the
property  can be produced at a profit.  A change in any of the above factors can
significantly  change the timing and amount of net revenues from a property. The
Company's  producing  properties are composed of many small working interest and
royalty  interest properties.  As a non-operating owner, the Company has limited
access  to the underlying data from which working interest reserve estimates are
calculated,  and estimates of royalty interest reserves are not made because the
information  required  for  the  estimation  is  not  available.

The  Company has no significant long-term sales contracts for either oil or gas.
For  the most part, the price the Company receives for its product is based upon
the  spot  market   price  which   in  the  past  has   experienced  significant
fluctuations.  Management  anticipates  such price fluctuations will continue in
the  future,  making  any  attempt  at  estimating  future  prices  subject  to
significant  changes.

Exploration  costs  have  been  the  most significant component of the Company's
capital  expenditures  and are expected to remain so, at least in the near term.
Under  the  successful  efforts  method of accounting for oil and gas properties
which  the  Company  uses,  these  costs  are  capitalized  if  the  prospect is
successful,  or  charged  to  operating  costs  and  expenses  if  unsuccessful.
Estimating  the  amount  of  such future costs which may relate to successful or
unsuccessful  prospects  is  extremely  imprecise,  at  best.

The  provisions  for  depreciation,  depletion  and  amortization of oil and gas
properties   constitute   a   particularly    sensitive   accounting   estimate.
Non-producing  leaseholds  are  amortized over the life of the leasehold using a
straight  line  method;  however,  when a leasehold is impaired or condemned, an
appropriate  adjustment  to  the provision is made at that time. Forward-looking


                                        8
<PAGE>

estimates  of  such adjustments are very imprecise. The provision for impairment
of  long-lived assets is determined by review of the estimated future cash flows
from  the individual properties. A significant unforeseen downward adjustment in
future  prices  and/or  potential  reserves could result in a material change in
estimated  long-lived  assets  impairment. Depletion and depreciation of oil and
gas  properties are computed using the units-of-production method. A significant
unanticipated  change in volume of production or estimated reserves would result
in  a  material  unforecasted change in the estimated depletion and depreciation
provisions.

Income  from  available  for  sale  securities  and trading securities have made
substantial contributions to net income in certain prior periods.  Available for
sale  securities and trading securities are used to invest funds until needed in
the  Company's capital investing and financing activities.   Net income has been
materially  affected  in past and current years and could be in the future years
by  utilization  of those funds in operations as well as significant fluctuation
in  the  interest  rates and/or quoted market values applicable to the Company's
available  for  sale  securities  and  trading  securities.

The  Company's trading securities consist primarily of equity securities.  These
securities  are  carried at fair value with unrealized gains and losses included
in earnings.  The equity securities are traded on various stock exchanges and/or
the  NASDAQ  and  over  the  counter  markets.  Therefore,  these securities are
market-risk  sensitive  instruments.  The  stock market is subject to wide price
swings  in  short  periods  of  time.

The  Company  has equity investments in organizations over which the Company has
limited  or  no  control.  These  equity  investments  have  in  the  past  made
substantial  contributions to the Company's net income.  The management of these
entities  could  at  any  time  make decisions in their own best interests which
could  materially affect the Company's net income, or the value of the Company's
investments.  See  "Equity  Investments",  below, in this Item 6 for information
regarding  these  equity  investments.

The  Reserve  Petroleum  Company  undertakes  no  obligation  to publicly revise
forward-looking  statements  to reflect events or circumstances that arise after
the  date  hereof.  Readers should carefully review the information described in
other  documents  the  Company  files  from time to time with the Securities and
Exchange  Commission, including the Quarterly Reports on Form 10-QSB to be filed
by the Company in 2004 and any Current Reports on Form 8-K filed by the Company.
The  Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking  statements.

                Certain Relationships and Related Transactions.
                -----------------------------------------------

The  Company  is  affiliated  by  common  management and ownership with Mesquite
Minerals,  Inc.,  (Mesquite),  Mid-American Oil Company (Mid-American), Lochbuie
Limited  Partnership (LLTD) and Lochbuie Holding Company (LHC). The Company also
owns  interests in certain producing and non-producing oil and gas properties as
tenants  in  common  with  Mesquite,  Mid-American  and  LLTD.

Mason  McLain, Robert T. McLain and Jerry L. Crow, Directors and officers of the
Company,  are  directors and officers of Mesquite and Mid-American.  Kyle McLain
and  Cameron  R.  McLain are sons of Mason McLain who is a more than 5% owner of
the  Company  and  are  advisory  directors  and employees of the Company.  Kyle
McLain  is  a  director  and  employee  of Mesquite and an advisory director and
employee  of  Mid-American.  Cameron  R.  McLain  is  a director and employee of
Mid-American  and  an  advisory director and employee of Mesquite.  Mason McLain
and  Robert  T.  McLain,  who  are brothers, each own an approximate 32% limited
partner  interest  in  LLTD,  and  Mason McLain is president of LHC, the general
partner  of  LLTD.  Robert  T.  McLain  is  not  an employee of any of the above
entities,  and  devotes  only  a small amount of time conducting their business.


                                        9
<PAGE>

The  above  named  officers, directors and employees as a group beneficially own
approximately  36%  of  the   common  stock  of  The  Reserve Petroleum Company,
approximately  30% of the common stock of Mesquite, and approximately 16% of the
common  stock  of  Mid-American.   These  three  corporations each have only one
class  of  stock  outstanding.  Item 7, "Notes to Financial Statements," Note 13
includes  additional  disclosures  regarding  these  relationships.


                               Equity Investments
                               ------------------

The Company has investments in four entities which it accounts for on the equity
method.  In using the equity method, the Company records the original investment
in  an  entity as an asset and adjusts the asset balance for the Company's share
of  any  income  or  loss  as  well   as  any  additional  contributions  to  or
distributions  from  the entity.  The four entities include one Oklahoma limited
partnership,  and  three Oklahoma limited liability companies.  The Company does
not  have actual or effective control of any of the entities.  The management of
these  entities  could  at  any  time make decisions in their own best interests
which  could  materially  effect  the  Company's net income, or the value of the
Company's  investments.

These  entities  are  Broadway  Sixty-Eight,  Ltd.  (33%  limited  partnership
interest),  Millennium  Golf  Properties,  LLC  (9%  ownership),  OKC Industrial
Properties,  LLC (10% ownership) and JAR Investments, LLC (25% ownership). These
entities  collectively  and/or  individually have had a significant effect, both
positively,  and  negatively,  on  the  Company's net income in the past and are
expected  to  in  the future.  Two of these entities have guarantee arrangements
under  which  the  Company  is  contingently  liable.  Item  7,  Note  8  to the
accompanying  financial  statements  includes  related  disclosures.

                        Liquidity and Capital Resources
                        -------------------------------

To  supplement  the  following  discussion please refer to the Balance Sheets on
Pages  21  and 22, and the Statements of Cash Flows beginning on page 25 of this
Form  10-KSB.

In 2003, as in prior years, the Company funded its business activity through the
use  of  internal sources of capital.  For the most part, these internal sources
are  cash  flows  from operations, cash, cash equivalents and available for sale
securities.  When  cash  flows  from operating activities are in excess of those
needed  for other business activities, the remaining balance is used to increase
cash,  cash  equivalents  and/or available for sale securities.  When cash flows
from  operating  activities  are not adequate to fund other business activities,
withdrawals  are  made  from  cash,  cash  equivalents and/or available for sale
securities.  Cash  equivalents are highly liquid debt instruments purchased with
a maturity of three months or less.  Available for sale securities are primarily
US  Treasury  Bills  and  bank  certificates  of  deposits.

In  2003,  net cash provided by operating activities was $1,479,545.   Sales net
of  production,  exploration  and general and administrative costs of $1,215,886
and  net  income  tax  refunds  of  $205,743  accounted  for 96% of the net cash
provided  by operating activities.  The tax refund was from a net operating loss
generated  in  2002  and  carried back to offset prior years taxable income.  In
2003,  net  cash  applied  to investing and financing activities was $1,447,854.
Capitalized  property additions net of disposals of $1,283,344 and dividends and
treasury stock of $181,664 accounted for all of net cash applied.  The remaining
components provided $17,154 of cash flow which offset the net cash applications.
Sales  of  available  for sale securities provided $8,172,552 of gross cash flow


                                       10
<PAGE>

due  to  their six month maturities.  However, none of the funds were needed for
operations  and  the  proceeds  were re-invested in the same type of securities.

In  2002,  cash  utilized  for  capitalized property additions of $1,043,023 and
dividend  payments  and  treasury  stock  purchases  of  $175,545  exceeded cash
provided  by $915,017.  To cover this deficit, the Company reduced cash and cash
equivalents  by  $116,669  and  available  for  sale  securities  by  $798,348.

Other  than  cash,  cash  equivalents  and  available for sale securities, other
significant  changes  in  working  capital  include  the  following:

Trading  securities increased $93,420 (59%) to $251,667 in 2003 from $158,247 in
2002.  For  the  most  part,  the  increase  was the result of recognition of an
increase  in fair market value (unrealized gain) of $250,069 and realized losses
of  $152,658.

Refundable  income  taxes  decreased  $204,309  (85%)  to  $34,685  in 2003 from
$238,994  in  2002.  $229,363  of  the  2002  balance  was  refunded  in  2003.

The  following  is  a  discussion  of  material changes in cash flow by activity
between the years ending December 31, 2003 and 2002.  Also see the discussion of
changes in operating results under "Results of Operations" below in this Item 6.

Operating  Activities.
----------------------

As  noted  above,  net  cash flows provided by operating activities in 2003 were
$1,479,545,  which  when  compared  against   the  $303,954  provided  in  2002,
represents  an  increase  of  $1,175,591  or  a  387% increase in net cash flows
provided  by  operating  activities  from  2002 to 2003.  For the most part, the
increase  resulted because of  an increase in oil and gas sales of $1,047,144, a
decrease in exploration costs charged to expense of $343,835, and an increase in
refunds of income taxes of $83,180. Those increases in cash flows were partially
offset by a decrease in cash received from lease bonuses and rentals of $45,136,
increased cash paid for production costs of $98,222, a decrease in cash received
from  interest  income  of $46,664, a decrease in cash received in settlement of
class  action  lawsuits  of  $24,603, and an increase in cash paid to suppliers,
employees  and taxes other than income tax of $89,018.  Additional discussion of
the  more  significant  items  follows.

Discussion  of  Selected  Material  Line  Items Resulting in an Increase in Cash
Flows.  The $1,047,144 (64%) increase in cash received from oil and gas sales to
$2,691,215  in  2003 from $1,644,071 in 2002 was almost totally the result of an
increase  of  both  the  price  and  volume  of  gas  sales.   See  "Results  of
Operations",  below,  for  a price/volume analysis and the related discussion of
oil  and  gas  sales.

Income  taxes refunded increased $83,180 (68%) to $205,743 in 2003 from $122,563
in  2002.  The  2003 refunds were the result of net capital and operating losses
from  2002  carried back to offset prior years taxable income.  The 2002 refunds
were  for  overpayments  of  2001  estimated  Federal  income  taxes.

Cash  paid  for exploration costs charged to expense decreased $343,835 (65%) to
$185,698 in 2003 from $529,533 in 2002.  This decrease is related to an increase
in  successful  exploration  activity  in 2003 over 2002.  This item consists of
unsuccessful  exploratory  drilling  expenditures  as  well  as  geological  and
geophysical  costs  that  are  directly  related  to  the  Company's oil and gas
exploration   drilling   activity.    That   drilling  activity   also  includes


                                       11
<PAGE>

substantially  all of the Company's property additions discussed below under the
subheading  "Investing  Activities".  In  addition to the $185,698 classified as
operating  activities,  $1,317,192  was classified as investing activities for a
total  of  $1,502,890.  This compares to 2002 cash applied to property additions
which  included  $529,533  classified  as  operating  activities  and $1,043,023
classified  as  investing  activities  for  a  total  of  $1,572,556.

Discussion  of  Selected  Material  Line  Items Resulting in an Decrease in Cash
Flows.  Cash  received  from  lease  bonuses  and  rentals  decreased $45,136 to
$35,517 in 2003 from $80,653  in 2002.  For the most part, the decrease in lease
bonus  revenue  was the result of the 2002  sale of a lease on Robertson County,
Texas,  minerals  which the Company owns.  Such sales are generally initiated by
third  parties,  and  there  were  no  similar  sales  in  2003.

Cash  paid  for  production  costs  increased $98,222 (24%) to $504,964 in 2003.
Most of the increase was due to a $76,644 increase in oil and gas production tax
which is related to the $1,047,144 oil and gas sales increase discussed above in
Cash  Flow  Increases.

Cash paid for general suppliers, employees and taxes other than income increased
$89,018  (12%)  to  $825,382  in 2003.  Most of the increase was the result of a
$51,677  increase  in employees salaries and  benefits and a $12,595 increase in
accounting  fees.

Cash  received  for  interest  earned on cash equivalents and available for sale
securities  decreased  $46,664  (45%)  to $56,422 in 2003 from $103,086 in 2002.
The  decrease was the combined result of a decline in the average rate of return
to  1.28%  in  2003  from 1.86% in 2002 and a decrease in the average balance of
cash  equivalents and available for sale securities outstanding to $4,423,599 in
2003  from  $4,801,048  in  2002.

Investing  Activities.
----------------------

Net  cash  applied  to  investing  activities  increased  $1,021,112  (417%)  to
$1,266,190  in  2003  from  $245,078  in  2002.  In  2003,  net  cash flows from
available  for sale securities decreased $790,744 from cash provided of $798,348
in  2002  to cash provided of $7,604 in 2003, as a result of cash withdrawals to
supplement  2002  cash flows provided by operations. No similar withdrawals were
necessary  in  2003  since  2003 operations provided all necessary cash flows as
discussed above. Most of the additional net cash applied to investing activities
is  due  to  a  $274,169  net increase in the application of cash to capitalized
property  additions,  discussed  above.  In  2003,  net  cash  flows  applied to
capitalized  property  was  $1,283,344  as  compared  to  $1,041,576  in  2002.

Financing  Activities.
----------------------

Cash  applied  to financing activities increased $6,119 (3%) to $181,664 in 2003
from  $175,545  in  2002.  Cash flows applied to financing activities consist of
cash dividends on common stock and cash used for the purchase of treasury stock.
In 2003, cash dividends paid on common stock amounted to $157,597 as compared to
$161,369  in 2002.    The decrease was the result of a decrease in the shares of
stock  outstanding  in  2003  from 2002 as the 2003 dividends per share of $1.00
remained  unchanged  from 2002.   Cash applied to the purchase of treasury stock
was  $24,067  in  2003  as  compared  to  $14,176  in  2002.

Forward-Looking  Summary.
-------------------------

The  latest  estimate  of  business  to be done in 2004 and beyond indicates the
projected  activity  can  be  funded  from  cash  flow from operations and other
internal  sources  including  net  working  capital.  The  Company is engaged in
exploratory  drilling.  If  this drilling is successful, substantial development

                                       12
<PAGE>

drilling  may  result.  Also,  should  other  exploration projects which fit the
Company's  risk  parameters  become available, or other investment opportunities
become  known,  capital requirements may be more than the Company has available.
If  so,  external  sources  of  financing  could  be  required.

                              Results of Operations
                              ---------------------

As  disclosed in the Statements of Operations in Item 7, of this Form 10-KSB, in
2003  the  Company  had  net  income  of  $499,886  as compared to a net loss of
$616,876 in 2002.  Net income per share, basic and diluted was $3.00 in 2003, an
increase  of  $6.70  per  share from a net loss of $3.70 in 2002.  Material line
item  changes in the Statements of Operations will be discussed in the following
paragraphs.

Operating  Revenues.
--------------------

Operating  revenues  increased  $1,147,240  (65%)  to  $2,909,782  in  2003 from
$1,762,542  in  2002.  An  increase  in oil and gas sales of $1,170,957 (70%) to
$2,852,846  in  2003  from  $1,681,889 in 2002 was partially offset by a $23,717
decrease  in  lease bonuses and rentals to $56,936 in 2003 from $80,653 in 2002.
The  decrease in lease bonuses and rentals was, for the most part, the result of
the  2002 sale of a lease on Robertson County, Texas, minerals which the Company
owns  with  no similar sales in 2003.  The increase in oil and gas sales will be
discussed  in  the  following  paragraphs.

The  $1,170,957 increase in oil and gas sales was the net result of a $1,113,748
increase  in  gas  sales  plus    a  $52,982  increase in oil sales as partially
offset  by  a  $2,446 decline in miscellaneous oil and gas product sales.    The
following  price and volume analysis is presented to help explain the changes in
oil and gas sales from 2002 to 2003.  Miscellaneous oil and gas product sales of
$8,441  in  2003  and  $10,885  in  2002  are  not  included  in  the  analysis.

<TABLE>
<CAPTION>
                                                  Variance
                                               ----------------
     Production                   2003         Price     Volume       2002
     ----------                 -------       ------     ------     -------
     Oil  -
<S>                             <C>             <C>        <C>       <C>
     Bbls  (000  omitted)           22                      (2)          24

     $(000  omitted)            $  639            94       (41)      $  586

     Unit  Price                $28.65          4.19                 $24.46

     Gas  -

     MCF  (000  omitted)           456                      66          390

     $(000  omitted)            $2,198           929       185       $1,085

     Unit Price                 $ 4.82          2.04                 $ 2.78
</TABLE>

The  $1,113,748  (103%) increase in natural gas sales to $2,198,438 in 2003 from
$1,084,690 in 2002 was the result of an increase in both the price and volume of
sales.  A positive price variance of $928,964 resulted because the average price
received  per thousand cubic feet (MCF) of natural gas sales increased $2.04 per
MCF to $4.82 in 2003 from $2.78 in 2002.  A positive volume variance of $184,784
resulted from an increase in volume sold of 66,468 MCF in 2003 to 456,412 MCF in
2003  from  389,944  in 2002.  The  increase in the volume of production was the
net  result  of  a 67,071 MCF normal decline in production from mature producing
properties as partially offset by production of 99,570 MCF from properties which
first produced in 2003 and 33,969 MCF from properties acquired early in 2003. As
disclosed  in  Supplemental  Schedule  1 of the Unaudited Supplemental Financial
Information  included  in  Item  7,  below,  working  interests  in  natural gas
extensions  and  discoveries  were  not adequate to replace reserves produced in
either 2003 or 2002.  However, purchases of reserves in place in 2003 when added
to  extensions  and  discoveries  for  2003  were  adequate  to replace reserves
produced  in  2003.


                                       13
<PAGE>

The  $52,982  (9%) increase in crude oil sales to $639,296 in 2003 from $586,314
in  2002  was  the result of an increase in the average price per barrel for oil
sales  which  was  partially  offset by a decrease in the oil sales volume.  The
average  price  received per barrel (Bbl) of oil increased $4.19 (17%) to $28.65
per  Bbl  in  2003  from  $24.46 per Bbl in 2002 resulting in an increase in oil
sales  of $93,512.  This increase was partially offset by a decline in oil sales
volumes of 1,657 Bbls to 22,315 Bbls in 2003 from 23,972 Bbls in 2002, resulting
in  a negative volume variance of $40,530.  The negative volume variance was the
net  result  of  a 2,852 Bbls normal decline in production from mature producing
properties as partially offset by production of 1,032 Bbls from properties which
first  produced in 2003 and 163 Bbls from properties acquired early in 2003.  As
disclosed  in  Supplemental  Schedule  1 of the Unaudited Supplemental Financial
Information  included  in  Item 7 below, working interests in oil extensions and
discoveries  were  adequate  to  replace  reserves  produced  in  2003 and 2002.

For  both  oil and gas sales, the price change was mostly the result of a change
in the spot market prices upon which most of the Company's oil and gas sales are
based.  These  spot  market prices have had significant fluctuations in the past
and  these  fluctuations  are  expected  to  continue.

Operating  Costs  and  Expenses
-------------------------------

Operating costs and expenses decreased $333,784 (13%) to $2,288,052 in 2003 from
$2,621,836  in  2002,  primarily  due to a decline in exploration expenses.  The
material  components  of  operating  costs and expenses will be discussed below.

Production Costs.  Production costs increased $104,478 (26%) to $509,482 in 2003
from  $405,004 in 2002.  For the most part, the increase was the net result of a
$76,643 (92%) increase in gross production tax to $159,632 in 2003, from $82,989
in 2002, plus an increase in lease operating expense of $24,673 (9%) to $309,297
in  2003  from $284,624 in 2002. The increase in lease operating expense was the
result  of the additional costs of wells which first produced in late 2002 or in
2003.  Gross  production  taxes  are  state  taxes  which  are  calculated  as a
percentage  of  gross proceeds from the sale of products from each producing oil
and  gas  property;  therefore,  they  tend  to fluctuate with the change in the
dollar  amount  of  revenues  from  oil  and  gas  sales.

Exploration Costs. Under the successful efforts method of accounting used by the
Company,  geological  and geophysical costs are expensed as incurred, as are the
costs  of unsuccessful exploratory drilling. The costs of successful exploratory
drilling  are  capitalized.  Total costs of exploration, inclusive of geological
and  geophysical  costs  were  $1,474,140  in 2003 and $1,584,847 in 2002. Costs
charged  to  operations  were $156,948 in 2003 and $541,824 in 2002 inclusive of
geological  and  geophysical  costs  of  $41,645  in  2003, and $51,082 in 2002.

Update  of  Oil  and  Gas Exploration and Development Activity from December 31,
2002. For the twelve months ended December 31, 2003, the Company participated in
the  drilling  of  6  gross exploratory and 4 gross development working interest
wells  with  net working interests ranging from a high of 18% to a low of 1%. Of
the  six  exploratory  wells, one was plugged, abandoned and charged to expense;
four  were  completed  as producers and one was in process at December 31, 2003,
and  is  currently  being  evaluated  as  a  marginal  oil producer. Of the four


                                       14
<PAGE>

development  wells,  two were plugged, abandoned and charged to expense, and two
were  completed  as producers. In management's opinion, the exploratory drilling
summarized  above  has produced some possible development drilling opportunities
which  could  increase  the  Company's  oil  and  gas  reserves.

The  following  is a summary as of March 19, 2004, updating both exploration and
development  activity  from  December  31,  2002.

In April 2001 a step-out well was completed on a Dewey County, Oklahoma prospect
in  which  the  Company  has  a 17.5% working interest.  The well was a marginal
producing  gas well. In April 2003 the well was re-completed in another zone and
tested  for  oil production.  A pumping unit was installed in June 2003, and the
well  is  a  commercial  oil  and  gas  producer.  Costs  for the year 2003 were
$40,258,  all  of  which  were capitalized as proved properties; however, a long
lived  asset  provision  for  impairment  relating  to  this well of $19,585 was
charged  to  expense.

In  November  2001  the  Company  purchased  a 12.5% working interest in a Payne
County,  Oklahoma  prospect.  A  step-out  well  started  in  January  2002  was
completed  in  March  2002,  equipped  with  a pumping unit and is producing.  A
second  well  was  started  in February 2002 and completed as an oil producer in
April  2002, but experienced a rapid decline.  This second well was re-completed
in another zone as a marginal producer.  An offset to the first well was started
in  March  2003  and  plugged and abandoned in April 2003.  The prospect will be
reevaluated  prior  to  additional  drilling.  Prospect costs for the  year 2003
were  $17,995,  all  of  which  were  expensed  as  exploration  costs.

In  October  2001  the  Company  purchased  an  18% working interest in a Barber
County, Kansas prospect.  Two exploratory wells were drilled in 2002.  The first
well  was completed as a flowing oil well in October 2002.  It was equipped with
a pumping unit in January 2003.  The second well was completed in a gas zone but
did  not  have  adequate  production to justify a pipeline at that time.  It was
shut  in  pending  the  results  of a 3-D seismic survey and possible additional
drilling.  The  survey  was completed and a third well was started in March 2003
and  completed  in April 2003.  Testing indicated the well would be a commercial
gas  well,  a  pipeline  was constructed and sales commenced in August 2003 with
good flow rates.  The second well was also hooked up and is a marginal producer.
Production from the third well has declined and the current zone appears to be a
limited  reservoir, but there are other productive zones behind pipe.  An offset
to the third well  was commenced in August 2003 and completed in October 2003 as
a  marginal  oil  and  gas  producer.  It  appears to also have productive zones
behind  pipe.  A second 3-D seismic survey was conducted in July and August 2003
on  land  adjoining  the  original survey.  This data set has been processed and
evaluated  and  a fifth well is planned for the second quarter of 2004.  For the
year  ended  December 31, 2003, the Company had costs of $242,305 related to the
prospect,  $200,660  of which was capitalized, $4,036 as unproved properties and
$196,624 as proved properties, including $63,825 for the gathering pipeline. The
remaining  $41,645  was  expensed  as  exploration  costs.

In  July  2002 the Company agreed to participate in a one well prospect in Ellis
County, Oklahoma with a 16% working interest.  The well was started in September
2002  and  was  completed as a producing gas well in November 2002.  In February
2003  a  pumping  unit  was  installed  to keep the formation water unloaded and
increase  gas  production.  Even  with  the  pumping  unit,  gas  production has
remained marginal, and the well is scheduled to be re-completed in two shallower
zones  as  soon  as  working  interest approval can be obtained.  Total costs of
$20,900  in  2003  were  capitalized  as  proved properties.  A long lived asset
provision  for impairment related to this well of $74,718 was charged to expense
and  covered  costs  from  2002  as  well  as  2003.

The Company is participating in the development of two Oklahoma prospects with a
50% working interest in each, one in Bryan County and the other in Woods County.
The Bryan County prospect is in the initial development stage.  The Company will


                                       15
<PAGE>

attempt to sell some of its interest prior to drilling a test well.  Drilling is
not  likely  on  the  Bryan County prospect before 3-D seismic is acquired.  The
Woods County prospect was sold with the Company retaining a 16% working interest
in  the  drillsite  and a 17.5% interest in offset acreage.  An exploratory well
was drilled in July 2003 and casing was set.  Logs indicated the presence of two
productive  zones.  A  completion attempt in the lower zone was unsuccessful.  A
second completion attempt in the upper zone resulted in a commercial oil and gas
producer.  An  offset  well  will be commenced in March 2004.  Drilling costs of
$59,805  were  capitalized  as  proved  properties  at  December  31,  2003.

Effective  in  January  2003  the Company entered into a participation agreement
regarding  a  prospect  in  Seminole  County,  Oklahoma.  Under the terms of the
agreement,  the  Company  acquired  a 16% working interest in nine producing gas
wells  and  two  saltwater  disposal  wells.  The  agreement  also  included the
drilling  of  a  horizontal  lateral  using the existing well bore of one of the
producing  wells.  The  operation  was  started in April 2003; difficulties were
encountered  and  part  of the hole was lost.  A completion was attempted in the
remaining  portion  of  the well bore in September 2003, resulting in a marginal
producing gas well.  The Company paid $224,000 for the leaseholds and wells, all
of  which  were  capitalized  as  proved properties in January 2003.  Additional
costs  of $168,175 were incurred after the purchase and have been capitalized as
proved  properties.  Most  of the additional costs resulted from the drilling of
the  horizontal lateral, and a long lived asset provision for impairment related
thereto  of  $131,181  was  charged  to  expense.

In  April  2003  the  Company purchased a 5% working interest in a Dewey County,
Oklahoma  prospect  with  a  leasehold position of approximately 1,415 net acres
outside of the initial drillsite section.  The Company owns approximately 28 net
acres in the drillsite section with which it participated in the drilling of the
initial  test  well.  That  well  was  started  in  August 2003 and completed in
November  2003 as a marginal oil and gas producer.  A second well was started in
February  2004  and  is  in the process of being completed.  Costs for the  year
2003  were $61,173 of which $17,859 of leasehold costs were recorded as unproved
properties  and  $40,618 of exploration cost were recorded as proved properties.
Additionally,  a long lived asset provision for impairment relative to this well
of  $18,914  was  charged  to  expense.

An exploratory well on a Coal County, Oklahoma prospect in which the Company has
an  18%  working interest was commenced in November 2003, drilled to total depth
and  casing  was  set.  After two unsuccessful completion attempts, a third zone
was successfully completed for oil production.  A temporary pumping unit will be
installed  to  test  the zone and see if permanent surface production facilities
are  justified.  Capitalized  costs  as  of  December  31,  2003  were $125,518.

The Company has a 15% working interest in a Woods County, Oklahoma prospect from
which  three  gas  wells have produced almost four billion cubic feet of natural
gas  to  the 100% working interest.  The Company participated in the drilling of
an  infill  well  that  was  started in July 2003 and completed as a dry hole in
August  2003.  Total  costs  of $38,775 were expensed as exploration costs as of
December  31,  2003.

In March 2003 the Company agreed to participate with a fee mineral interest in a
proposed  waterflood  unit  in  Harding  County,  South Dakota.  The unit became
effective  on  June  1,  2003,  with the Company having a 0.96% working interest
during  Phase I and a 4.32% interest during Phase II.  Operations were commenced
in  June  2003  to drill opposing horizontal laterals from an existing wellbore.
The  work  was completed in July 2003 and the well began producing oil.  It will
be  produced  for  several  more  months  and then converted to water injection.


                                       16
<PAGE>

Another horizontal well was started in October 2003.  It was completed and began
pumping  oil  at  a high rate in January 2004.  The original plan was to produce
the well for several months and then convert it to water injection; however, the
high  oil  production  rate  has  led  to  a decision to postpone the conversion
indefinitely.  A second lateral will be drilled from an existing horizontal well
and  then  another  horizontal  well will be drilled from scratch in 2004.  When
this  work  is completed there will be six horizontal oil producers in the unit.
At  that  time  decisions will be made as to when and where water injection will
commence.  The Company had incurred 2003 costs of $31,141 at December  31, 2003,
which  were  capitalized  as  proved  properties.

In  May  2003 the Company purchased for $20,480 a 16% interest in 1,280 acres of
leasehold  located  in  Woods  County, Oklahoma.  In August 2003 an existing dry
hole was re-entered and a completion attempted in a zone that had produced eight
billion  cubic feet of gas in the area.  The completion attempt was unsuccessful
and the well was plugged.  No additional drilling is planned.  Total exploration
costs  of  $36,543  were  expensed  as  of  December  31,  2003, and undeveloped
leasehold  costs  were  fully  impaired.

In  April  2003  the  Company  purchased 114.8 net acres of leasehold in a Dewey
County, Oklahoma prospect. This represents an 8% working interest in the initial
drilling  and  spacing  unit and a 6% interest in offset acreage. An exploratory
well was commenced in April 2003. It reached total depth in July 2003 and casing
was  set. A completion was attempted in the deeper of two potentially productive
zones.  It  was  unsuccessful.  The  other  zone  was  successfully completed in
September  and  October 2003 and sales commenced in October with high flow rates
of  gas  and  gas  condensate.  An  offset well was started in March 2004 and is
currently  drilling.  Additional acreage is being acquired in the area. Drilling
costs  in  2003 of $220,804 were capitalized as proved properties and $36,853 of
costs  were  capitalized  as  unproved  properties.

In  March 2003 the Company agreed to participate with its 19.6% working interest
in  the drilling of a step-out well in Morton County, Kansas.  In September 2003
the Company elected to acquire its share of non-consenting interest in the well,
increasing  its  working  interest to 27.8%.  The well will likely be drilled in
the  second  or  third  quarter  of  2004.

In  November 2003 the Company agreed to farm out 75% of its 16% working interest
in  a  marginal  producing gas well in Hansford County, Texas and to participate
with its remaining 4% interest in the drilling of a horizontal lateral from that
wellbore.  Drilling  commenced  in January 2004 and the well began producing gas
in  February  2004.  If  and  when  payout  occurs,  the Company's interest will
increase  to  7.3%.

In  March 2004 the Company agreed to participate in the drilling of two step-out
wells  on  a  Woods  County,  Oklahoma  prospect  in which it has an 18% working
interest.  One of the wells will be a washdown and deepening of an old dry hole.

In  January  2004  the  Company  agreed to purchase for $94,960 a 7% interest in
leases  covering  54,263  mineral  acres  in Gentry, Harrison, Nodaway and Worth
Counties,  Missouri  and  to  participate in the drilling of three stratigraphic
tests  and  one  core  test in an effort to develop the area for coalbed methane
production.  If  the  data  from  these  tests  look  favorable the project will
proceed  with  a  four  well  pilot  production  test.

In  January  2004  the Company purchased a 15% interest in 1,397.11 net acres of
leasehold  on  a  Canadian  County,  Oklahoma  prospect  for  $94,536 (including
prospect  and geological fees) and agreed to participate in the drilling of five
exploratory  wells.  The  first  well,  in  which the Company has a 7.3% working


                                       17
<PAGE>

interest,  was  started in January 2004 and the second, in which the Company has
an  8.5% working interest, was started in February 2004.  Casing was set on both
wells,  and  both  have  multiple  potential  pay  zones.  The  next three wells
(Company  working interests of 5.9%, 15% and 8.5%) will be drilled in succession
commencing  in  March  2004.  Depending  on the results of the first five wells,
development  drilling  of  up  to  ten  additional  wells  will  proceed.

In  January  2004  the  Company  purchased  a 16% interest in 1,450 net acres of
leasehold  on  an Alfalfa County, Oklahoma prospect for $17,400.  An exploratory
well  was  started  in January 2004 and completed in February 2004 testing water
and  a small amount of gas.  Because of a poor cement job and possible formation
damage  during  drilling,  a  remedial  treatment will be attempted.  Additional
drilling  will  depend  on  the  results.

In  January  2004  the  Company  purchased  a 16% interest in 442.4 net acres of
leasehold  on a Creek County, Oklahoma prospect for $7,076.  An exploratory well
was  commenced  in  January  2004  and  casing was set.  A completion attempt is
currently  underway  in  the  deeper  of  two  potentially  productive  zones.
Additional  drilling  is  likely.

Depreciation,  Depletion,  Amortization  and Valuation Provisions (DD&A).  Major
components are the provision for impairment of undeveloped leaseholds, provision
for  impairment  of  long-lived  assets,  depletion  of producing leaseholds and
depreciation  of  tangible  and  intangible  lease  and  well costs. Undeveloped
leaseholds  are  amortized  over the life of the leasehold using a straight line
method  except  when  the  leasehold is impaired or condemned by drilling and/or
geological interpretation of seismic data; if so, an adjustment to the provision
is  made at the time of impairment.  The provision for impairment of undeveloped
leaseholds  was  $94,369  in  2003  and  $363,656  in 2002.  The decrease in the
provision  for  impairment  is  directly  related  to the increase in successful
exploration  activity  discussed  under  "Exploration  Costs",  above.  The 2003
provision  for  impairment  was  primarily  due  to  the  annual amortization of
undeveloped  leaseholds.   The most significant 2002 impairments were a Stephens
County,  Oklahoma  prospect  on  which  two  exploratory  dry holes were drilled
resulting  in  an  impairment of $208,909, and a Duval County, Texas prospect on
which  an  exploratory  dry  hole was also drilled resulting in an impairment of
$70,493.

As  discussed  in  Note 11, to the accompanying financial statements, accounting
principles  require  the  recognition of an impairment loss on long-lived assets
used  in  operations  when   indicators  of  impairment  are  present   and  the
undiscounted  cash flows estimated to be generated by those assets are less than
the  assets carrying amount.  Reviews were performed in both 2003 and 2002.  The
2003  provision  was  the result of a decline in production of wells which first
produced in 2002 and wells completed in 2003 for which the estimated fair market
value  of  future  production was less than the Company's carrying amount in the
well.  The  2002  provision was to a great extent the result of similar declines
in  2002.

The  depletion  and  depreciation  of oil and gas properties are computed by the
units-of-production method.  The amount expensed in any year will fluctuate with
the  change  in  estimated  reserves  of  oil  and  gas, a change in the rate of
production  or a change in the basis of the assets.  The provision for depletion
and  depreciation  totaled  $374,060  in  2003  and  $240,581  in  2002.

General, Administrative and Other Expenses (G&A).  G&A increased $67,130 (9%) to
$791,950 in 2003 from $724,820 in 2002.  To a great extent, the increase was the
result  of  an  increase  in  employee  salaries  and  benefits  of $51,677, and
accounting  fees  of  $12,595.

                                       18
<PAGE>

Equity  Income  (Loss)  in  Investees.  The  following  is an analysis of equity
income  (loss)  in investees by entity for the years ended December 31, 2003 and
2002.  See  Note  8  to the accompanying financial statements included in Item 7
below.

<TABLE>
<CAPTION>
                                                                   2003 Income (Loss)
                                             Net Income (Loss)        Over (Under)
                                            -------------------
                                               2003      2002             2002
                                            --------   --------   --------------------
<S>                                         <C>        <C>             <C>
Broadway  Sixty-Eight,  Ltd.                $ 40,019   $ 41,398         $(1,379)
Millennium  Golf  Properties,  LLC            (7,782)   (30,507)         22,725
OKC  Industrial  Properties,  LC                 562        559               3
JAR  Investment,  LLC                        (27,354)   (26,793)           (561)
                                            --------   --------         -------
  Total                                     $  5,445   $(15,343)        $20,788
                                            ========   ========         =======
</TABLE>

Other  Income (Loss), Net.  See Note 12 to the accompanying financial statements
for an analysis of the components of this line item for the years ended 2003 and
2002.  Other  income increased $140,018 to net income of $131,927 in 2003 from a
net  loss  of  $8,091  in  2002.

Realized  and unrealized gain on trading securities increased $200,133 (195%) to
$97,411  in 2003.  Realized gains or losses result when a trading security which
is  owned  is  sold.  Unrealized  gains  or  losses  result  from  adjusting the
Company's  carrying  amount in trading securities owned at the reporting date to
estimated  fair  market  value.  In  2003,  the  Company  had realized losses of
$152,658  and  unrealized  gains of $250,069.  In 2002, the Company had realized
losses  of  $47,788  and  unrealized  losses  of  $54,934.

Accrual  basis  interest  income decreased $37,987 (43%) to $51,368 in 2003 from
$89,355  in  2002.  The decrease was the result of a decline in the average rate
of  return and the average balance outstanding of cash equivalents and available
for  sale securities from which most of interest income is derived.  The average
rate  of  return  fell 0.58% to 1.28% in 2003 from 1.86% in 2002 and the average
balance  outstanding  declined $377,449 to $4,423,599 in 2003 from $4,801,048 in
2002.

Provision  for  (Benefit  from)  Income  Taxes.  See Note 6, to the accompanying
financial  statements for an analysis of the various components of income taxes.
In 2003, the Company had an estimated provision for income taxes of $259,216 all
due  to  a deferred tax provision and no current tax provision.  No 2003 current
income  taxes were provided primarily as a result of accelerated depreciation of
2003  lease  and well equipment additions under provision of the Jobs and Growth
Tax  Relief  Reconciliation Act of 2003.   In 2002, the Company had an estimated
benefit  from  income  taxes of $265,852 as the result of current tax benefit of
$211,319  plus  a  deferred  tax benefit of $54,533. This current tax benefit of
$211,319  in  2002  was  the estimated benefit of capital loss and net operating
loss  carrybacks  of  the  estimated 2002 Federal income tax loss.  As discussed
earlier,  tax  refunds  from  these 2002 benefits were received in October 2003.


                                       19
<PAGE>

Item  7.   Financial  Statements.

     Index  to  Financial  Statements.
                                                                            Page
                                                                            ----

     Report of Independent Certified Public Accountants -
       Grant Thornton LLP                                                     21

     Balance  Sheets  -  December  31,  2003  and  2002                       22

     Statements  of  Operations  -  Years  Ended
       December  31,  2003  and  2002                                         24

     Statement  of  Stockholders'  Equity  -
       December  31,  2003  and  2002                                         25

     Statements  of  Cash  Flows  -  Years  Ended
       December  31,  2003  and 2002                                          26

     Notes  to  Financial  Statements                                         28

     Unaudited  Supplemental  Financial  Information                          37











                                       20
<PAGE>



               Report of Independent Certified Public Accountants
               --------------------------------------------------







Board  of  Directors
The  Reserve  Petroleum  Company

We have audited the accompanying balance sheets of The Reserve Petroleum Company
as  of  December  31,  2003  and 2002, and the related statements of operations,
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility  of  the   Company's   management.    Our
responsibility  is  to express an opinion on these financial statements based on
our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects, the financial position of The Reserve Petroleum Company
as of December 31, 2003 and 2002, and the results of its operations and its cash
flows  for  the  years  then  ended  in  conformity  with  accounting principles
generally  accepted  in  the  United  States  of  America.



GRANT  THORNTON  LLP


Oklahoma  City,  Oklahoma
March  17,  2004



                                       21
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                                 BALANCE SHEETS

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                                           December  31,
                                                  -----------------------------
                                                     2003                2002
                                                  -----------       -----------
Current  Assets:
<S>                                               <C>               <C>
  Cash  and  Cash  Equivalents  (Note  2)         $   346,167       $   314,476
  Available for Sale Securities  (Notes 2 & 5)      4,266,012         4,273,616
  Trading  Securities  (Notes  2  &  5)               251,667           158,247
  Receivables  (Note  2)                              436,703           281,223
  Refundable  Income  Taxes                            34,685           238,994
  Prepayments  &  Deferred  Income  Taxes               5,625            35,480
                                                  -----------       -----------
                                                    5,340,859         5,302,036
                                                  -----------       -----------

Investments:
  Equity  Investments  (Notes 2, 7 & 8)               517,288           521,393
  Other                                                15,298            15,298
                                                  -----------       -----------
                                                      532,586           536,691
                                                  -----------       -----------

Property, Plant & Equipment  (Notes 2, 9 & 11):
  Oil & Gas Properties, at Cost Based on the
    Successful  Efforts  Method  of  Accounting
      Unproved  Properties                            638,630           686,650
      Proved  Properties                            5,568,684         4,911,854
                                                  -----------       -----------
                                                    6,207,314         5,598,504
                                                  -----------       -----------

    Less - Valuation Allowance and Accumulated
      Depreciation,  Depletion  &  Amortization     4,741,435         4,533,490
                                                  -----------       -----------
                                                    1,465,879         1,065,014
                                                  -----------       -----------

  Other  Property  &  Equipment,  at  Cost            344,739           340,497
    Less - Accumulated Depreciation
      & Amortization                                  173,979           172,570
                                                  -----------       -----------
                                                      170,760           167,927
                                                  -----------       -----------
                                                    1,636,639         1,232,941
                                                  -----------       -----------

Other  Assets                                         447,166           585,665
                                                  -----------       -----------

                                                  $ 7,957,250       $ 7,657,333
                                                  ===========       ===========
</TABLE>

(continued)

See  Accompanying  Notes


                                       22
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                                 BALANCE SHEETS


(concluded)

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<CAPTION>
                                                           December  31,
                                                  -----------------------------
                                                     2003                2002
                                                  -----------       -----------
Current  Liabilities:
<S>                                               <C>               <C>
  Accounts  Payable                               $    38,862       $   130,506
  Other  Current  Liabilities  -
    Deferred  Income  Taxes  and  Other               112,414            47,218
                                                  -----------       -----------
                                                      151,276           177,724
                                                  -----------       -----------

Long  Term  Liabilities:
  Dividends  Payable  (Note  3)                       160,307           151,439
  Deferred  Tax  Liability                              8,144              ----
                                                  -----------       -----------
                                                      168,451           151,439
                                                  -----------       -----------




Commitments  &  Contingencies  (Notes  7  &  8)

Stockholders'  Equity  (Notes  3  &  4)
  Common  Stock                                        92,368            92,368
  Additional  Paid-in  Capital                         65,000            65,000
  Retained  Earnings                                7,720,645         7,387,225
                                                  -----------       -----------
                                                    7,878,013         7,544,593

  Less  -  Treasury  Stock,  at  Cost                 240,490           216,423
                                                  -----------       -----------

                                                    7,637,523         7,328,170
                                                  -----------       -----------

                                                  $ 7,957,250       $ 7,657,333
                                                  ===========       ===========
</TABLE>



See  Accompanying  Notes


                                       23
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2003            2002
                                                    -----------     -----------
Operating  Revenues:
<S>                                                 <C>             <C>
  Oil  &  Gas  Sales                                $ 2,852,846     $ 1,681,889
  Lease  Bonuses  &  Other                               56,936          80,653
                                                    -----------     -----------
                                                      2,909,782       1,762,542
                                                    -----------     -----------

Operating  Costs  and  Expenses:
  Production                                            509,482         405,004
  Exploration                                           156,948         541,824
  Depreciation,  Depletion,  Amortization
    &  Valuation  Provisions                            829,672         950,188
  General,  Administrative  and  Other                  791,950         724,820
                                                    -----------     -----------

                                                      2,288,052       2,621,836
                                                    -----------     -----------

Income  (Loss)  from  Operations                        621,730        (859,294)
Equity  Income  (Loss)  in  Investees                     5,445         (15,343)
Other  Income  (Loss) Net, (Note 12)                    131,927          (8,091)
                                                    -----------     -----------

Income  (Loss) before Income Taxes                      759,102        (882,728)
Provision  for (Benefits from) Income
  Taxes  (Notes 2 & 6)                                  259,216        (265,852)
                                                    -----------     -----------

Net  Income  (Loss)                                 $   499,886     $  (616,876)
                                                    ===========     ===========

Per  Share  Data  (Note  2):
  Net  Income  (Loss),  Basic  and  Diluted         $      3.00     $     (3.70)
                                                    ===========     ===========

  Cash  Dividends                                   $      1.00     $      1.00
                                                    ===========     ===========

Weighted  Average  Shares  Outstanding,
  Basic and Diluted                                     166,408         166,872
                                                    ===========     ===========
</TABLE>


See  Accompanying  Notes


                                       24
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                        STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE TWO YEARS ENDED DECEMBER 31, 2003



<TABLE>
<CAPTION>
                                                          Additional
                                            Common          Paid-in         Retained      Treasury
                                             Stock          Capital         Earnings        Stock
                                         ------------     ----------       ----------     ----------
<S>                                      <C>              <C>              <C>            <C>
Balance  at  January  1,  2002           $    92,368      $  65,000        $8,171,082     $(202,247)


  Net  Loss                                     ----           ----          (616,876)          ----

  Cash  Dividends on Common Stock               ----           ----          (166,981)          ----

  Purchase  of  Treasury  Stock                 ----           ----              ----        (14,176)
                                         -----------      ---------        ----------     ----------

Balance  at December 31, 2002                 92,368         65,000         7,387,225       (216,423)


  Net  Income                                   ----           ----           499,886           ----

  Cash Dividends on Common Stock                ----           ----          (166,466)          ----

  Purchase  of Treasury Stock                   ----           ----              ----        (24,067)
                                         -----------      ---------        ----------     ----------

Balance  at  December  31,  2003         $    92,368      $  65,000         $7,720,645    $ (240,490)
                                         ===========      =========         ==========    ==========
</TABLE>




See  Accompanying  Notes


                                       25
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                            STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                      --------------------------
                                                          2003          2002
                                                      -----------   ------------
Cash  Flows  from  Operating  Activities:
  Cash  Received-
<S>                                                   <C>           <C>
    Oil  and  Gas  Sales                              $ 2,691,215   $ 1,644,071
    Lease  Bonuses and Rentals                             35,517        80,653
    Agricultural  Rentals  & Other                          5,198         5,328
  Cash  Paid-
    Production  Costs                                    (504,964)     (406,742)
    Exploration  Costs                                   (185,698)     (529,533)
    General  Suppliers,  Employees  and  Taxes,
      Other than Income                                   (825,382)     (736,364)
  Interest  Received                                       56,422       103,086
  Interest  Paid                                          (11,250)      (11,250)
  Settlement  of  Class  Action  Lawsuits                   8,324        32,927
  Dividends  Received  on  Trading
    Securities                                                428         1,024
  Purchase  of  Trading  Securities                      (654,316)     (406,864)
  Sale  of  Trading  Securities                           658,308       405,055
  Income  Taxes  Refunded,  net                           205,743       122,563
                                                      -----------   -----------
        Net  Cash  Provided  by  Operating
          Activities                                  $ 1,479,545   $   303,954
                                                      -----------   -----------

Cash  Flows  from  Investing  Activities:
  Sale  and  Maturity  of  Available  for
    Sale  Securities                                    8,172,552     9,912,149
  Purchase of Available  for Sale Securities           (8,164,948)   (9,113,801)
  Property  Dispositions                                   33,848         1,447
  Property  Additions                                  (1,317,192)   (1,043,023)
  Cash Distributions from Equity Investments               11,550        11,550
  Cash Applied to Equity Investments                       (2,000)      (13,400)
                                                      -----------   -----------
      Net Cash Applied to Investing Activities        $ 1,266,190)  $  (245,078)
                                                      -----------   -----------
</TABLE>



(Continued)

See  Accompanying  Notes


                                       26
<PAGE>

(Concluded)

                          THE RESERVE PETROLEUM COMPANY
                            STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                      --------------------------
                                                          2003          2002
                                                      -----------   ------------
Cash  Flows  Applied  to  Financing  Activities:
<S>                                                   <C>           <C>
  Dividends  Paid  to  Shareholders                   $  (157,597)  $  (161,369)
  Purchase  of  Treasury  Stock                           (24,067)      (14,176)
                                                      -----------   -----------
    Total Cash Applied to Financing Activities           (181,664)     (175,545)
                                                      -----------   -----------

Net Change in Cash and Cash Equivalents                    31,691      (116,669)

Cash and Cash Equivalents at Beginning of Year            314,476       431,145
                                                      -----------   -----------

Cash and Cash Equivalents  at  End  of  Year          $   346,167    $  314,476
                                                      ===========    ==========

Reconciliation  of  Net  Income  (Loss)  to  Net
  Cash  Provided  by  Operating  Activities:
Net  Income  (Loss)                                   $   499,886    $ (616,876)

Net  Income  Increased  (Decreased)  by  -
    Net  Change  in  -
  Unrealized  Holding  (Gains)  Losses
    on  Trading  Securities                              (250,069)       54,934
  Accounts  Receivable                                   (160,626)      (42,455)
  Interest  and  Dividends  Receivable                      5,054        13,731
  Income  Taxes  Refundable/Payable                       204,309       (88,756)
  Accounts  Payable                                       (39,775)       47,494
  Trading  Securities                                     156,649        45,979
  Cash  Value of Officers' Life Insurance                 (15,128)      (28,153)
  Deferred  Taxes                                         259,216       (54,533)
  Gas  Balancing  Liabilities                              (2,394)        2,107
  Equity  (Income)  Losses  in  Investees                  (5,445)       15,343
  Disposition  of  Property  &  Equipment                  (1,804)        4,951
  Depreciation,  Depletion,  Amortization
    and  Valuation  Provisions                            829,672       950,188
                                                      -----------   -----------
Net  Cash  Provided  by Operating Activities          $ 1,479,545   $   303,954
                                                      ===========   ===========
</TABLE>

See  Accompanying  Notes


                                       27
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                          NOTES TO FINANCIAL STATEMENTS


Note  1  -  NATURE  OF  OPERATIONS
            -----------------------

     The  Company  is  principally  engaged  in  oil and natural gas exploration
     and  development  with  an  area  of  concentration  in Texas and Oklahoma.

Note  2  -  SUMMARY  OF  ACCOUNTING  POLICIES
            ---------------------------------

     Property  and  Equipment
     -------------------

     Oil  and gas properties are accounted for on the successful efforts method.
     The  acquisition, exploration and development costs of producing properties
     are capitalized. All costs relating to unsuccessful exploration, geological
     and geophysical costs, delay rentals and abandoned properties are expensed.
     Lease  costs  related to unproved properties are amortized over the life of
     the lease and are assessed periodically. Any impairment of value is charged
     to expense.

     Depreciation,  depletion  and  amortization  of  producing  properties  is
     computed on the units-of-production method on a property-by-property basis.
     The  units-of-production  method  is based primarily on estimates of proved
     reserve  quantities.  Due  to  uncertainties  inherent  in  this estimation
     process, it is at least reasonably possible that reserve quantities will be
     revised  in  the  near term.

     Other  property  and  equipment  is  depreciated  on  the  straight-line,
     declining-balance  or  other  accelerated  methods.

     The  following  estimated  useful lives are used for the different types of
     property:

<TABLE>
<CAPTION>
<S>                                            <C>
          Buildings  and  improvements         10  to  20  years
          Office  furniture  &  fixtures        5  to  10  years
          Automotive  equipment                 5  to   8  years
</TABLE>

     Impairment losses are recorded on long-lived assets used in operations when
     indicators  of  impairment  are  present  and  the  undiscounted cash flows
     estimated  to  be  generated  by  those  assets  are  less than the assets'
     carrying  amount.  See  Note  11  for  discussion  of  impairment  losses.

     Investments
     -----------

     The  Company  accounts  for  its  investments  in a partnership and limited
     liability  companies on the equity basis and adjusts the investment balance
     to agree with its equity in the underlying assets of the entities. See Note
     8  for  additional information.

     Trading  securities,  which  consist  primarily  of  equity securities, are
     carried  at  fair  value  with  unrealized  gains  and  losses  included in
     operations.

     Available  for  sale  securities,  which consist primarily of US Government
     securities,  are  carried  at  fair  value with unrealized gains and losses
     reported  as  a  component  of  other  comprehensive income, when material.


                                       28
<PAGE>

     Cash  &  Cash  Equivalents
     --------------------------

     The  Company  considers all highly liquid debt instruments purchased with a
     maturity  of  three  months  or  less  to  be cash equivalents. The Company
     maintains  its  cash  in  bank  deposit  accounts which at times may exceed
     federally  insured  limits.  The  Company believes it is not exposed to any
     significant  credit  risk on  such  accounts.

     Income  Taxes
     -------------

     Deferred  income  taxes  are  provided  for  significant  carryforwards and
     temporary differences using the liability method. See Note 6 for additional
     information.

     Net  Income  (Loss)  Per  Share
     -------------------------------

     Net  Income  Loss  per share is calculated based on the weighted average of
     the  number  of  shares  outstanding  during  the  year.

     Concentrations  of  Credit  Risk  and  Major  Customers
     -------------------------------------------------------

     The  Company's receivables relate primarily to sales of oil and natural gas
     to  purchasers  with  operations in Texas and Oklahoma. The Company had one
     purchaser  in  2003 and 2002 whose purchases were in excess of 10% of total
     oil  and gas sales. In 2003, the purchases were $334,582, or 11.7% of total
     oil  and  gas  sales  by  the  one  purchaser.  In 2002, the purchases were
     $175,475,  or  10.4%  of  total  oil  and  gas  sales.

     Use  of  Estimates
     ------------------

     The  preparation  of the financial statements in conformity with accounting
     principles  generally  accepted  in  the  United States of America requires
     management  to  make  estimates  and  assumptions  that  affect the amounts
     reported in the financial statements and accompanying notes. Actual results
     could  differ  from  those  estimates.

     Revenue  Recognition  and  Receivables
     --------------------------------------

     Oil and gas sales and resulting receivables are recognized when the product
     is  delivered  to  the  purchaser  and  title has transferred. Sales are to
     credit-worthy  major  energy  purchasers  with  payments generally received
     within  60  days  of  transportation  from  the  well site. The Company has
     historically  had  little, if any, uncollectible receivables; therefore, an
     allowance  for  uncollectible  accounts  is  not  required.

     Gas  Balancing
     --------------

     Gas  imbalances  are  accounted for under the sales method whereby revenues
     are  recognized  based on production sold. A liability is recorded when the
     Company's  excess  takes  of  natural  gas  volumes  exceed  its  estimated
     remaining recoverable reserves (over produced). No receivables are recorded
     for  those  wells where the Company has taken less than its ownership share
     of  gas  production  (under produced).

Note  3  -  DIVIDENDS  PAYABLE
            ------------------

     Dividends  payable  include  amounts  that are due to stockholders whom the
     Company  has  been  unable  to locate and uncashed dividend checks of other
     stockholders.

                                       29
<PAGE>

Note  4  -  COMMON  STOCK
            -------------

     The  following  table  summarizes  the  changes  in common stock issued and
     outstanding:

<TABLE>
<CAPTION>
                                                      Shares  of
                                         Shares        Treasury         Shares
                                         Issued         Stock        Outstanding
                                       ----------     ----------     -----------
     January  1,  2002,  $.50
     par  value  stock,  400,000
<S>                                    <C>            <C>           <C>
     shares  authorized                184,735.28     17,602.55     167,132.73
     Purchase  of  stock                     ----        443.00        (443.00)
                                       ----------     ---------     ----------

     December  31,  2002,  $.50
     par  value  stock,  400,000
     shares  authorized                184,735.28     18,045.55     166,689.73
     Purchase  of  stock                     ----        752.09        (752.09)
                                       ----------     ---------     ----------

     December  31,  2003,  $.50
     par  value  stock,  400,000
     shares  authorized                184,735.28     18,797.64     165,937.64
                                       ==========     =========     ==========
</TABLE>


Note  5  -  INVESTMENTS  IN  DEBT  AND  EQUITY  SECURITIES
            ----------------------------------------------

     At  December  31,  2003 and 2002, the difference between the aggregate fair
     value  and  amortized  cost  basis  of  available  for  sale securities was
     immaterial;  therefore,  reporting of comprehensive income is not required.
     The available for sale securities by contractual maturity are as follows at
     December  31,  2003:

<TABLE>
<CAPTION>
<S>                                                 <C>
     Due  within  one  year  or  less               $     4,266,012
                                                    ===============
</TABLE>

     In 2003, an early bank redemption of a $200,000 no penalty bank certificate
     of  deposit resulted in no gain or loss. In 2002, a sale of a U.S. Treasury
     bill  for  $299,911  resulted  in  an  $89  loss.

     As  to  the  trading  securities held at year end, unrealized trading gains
     (losses) included in earnings were $250,069 in 2003 and ($54,934) for 2002.


                                       30
<PAGE>

Note  6  -  INCOME  TAXES
            -------------

     Components  of  deferred  taxes  follows:
<TABLE>
<CAPTION>
                                                            December  31,
                                                      -------------------------
                                                          2003          2002
                                                      -----------   ------------
     Assets
<S>                                                   <C>           <C>
       Leasehold  Costs                               $   162,824   $   202,861
       Gas  Balancing  Receivable                          52,379        52,379
       Long-Lived  Asset  Impairment                      229,175       215,180
       Marketable  Securities                                ----        69,155
       Equity  Investments  and  Other                     11,761         8,271
                                                      -----------   -----------
           Total  Assets                                  456,139       547,846

     Liabilities
       Marketable  Securities                              15,910          ----
       Receivables                                         51,681        39,301
       Intangible  Development  Costs                     464,282       325,063
                                                      -----------   -----------
           Total  Liabilities                             531,873       364,364
                                                      -----------   -----------

     Net  Deferred  Tax  (Liability) Asset            $   (75,734)  $   183,482
                                                      ===========    ==========
</TABLE>

     The  following table summarizes the current and deferred portions of income
     tax expense.

<TABLE>
<CAPTION>
                                                            December  31,
                                                      -------------------------
                                                          2003          2002
                                                      -----------   ------------
     Current Tax Provision (Benefit):
<S>                                                   <C>           <C>
       Federal                                        $      ----   $  (211,319)
       State                                                 ----          ----
                                                      -----------   -----------
                                                             ----      (211,319)
     Deferred Provision (Benefit)                         259,216       (54,533)
                                                      -----------   -----------

     Total Provision (Benefit)                        $   259,216   $  (265,852)
                                                      ===========   ===========
</TABLE>


                                       31
<PAGE>

     The total provision for (benefit from) income tax expressed as a percentage
     of  income  (loss)  before  income  tax  was  34 % in 2003 and 30% in 2002.
     These amounts differ from the amounts computed by applying the statutory US
     Federal  income  tax  rate of 35% for 2003 and 2002 to income (loss) before
     income  tax  as summarized  in  the  following  reconciliation:

<TABLE>
<CAPTION>
                                                       Year Ended December  31,
                                                      -------------------------
                                                          2003          2002
                                                      -----------   ------------
     Computed  Federal  Tax
<S>                                                   <C>           <C>
       Provision  (Benefit)                           $   265,685   $  (308,955)
       Increase  (Decrease)  in  Tax  From:
         Corporate  Graduated  Tax  Rate
           Structure                                       (7,626)       40,850
         Dividend  Received  Deduction                        (99)         (251)
         Other                                              1,256         2,504
                                                      -----------   -----------

     Provision  for (Benefit from)  Income Tax        $   259,216   $  (265,852)
                                                      ===========   ===========

     Effective  Tax  Rate                                      34%           30%
                                                      ===========   ===========
</TABLE>

Note  7  -    ACCOUNTING  FOR  GUARANTEES  AND  ASSET  RETIREMENT  OBLIGATIONS
              ----------------------------------------------------------------

     Guarantees
     ----------

     In  November  2002,  FASB  Interpretation  45, "Guarantor's  Accounting and
     Disclosure  Requirements  for  Guarantees, Including Indirect Guarantees of
     Indebtedness  of  Others" (FIN 45), was issued. FIN 45 requires a guarantor
     entity,  at  the  inception  of  a  guarantee  covered  by  the measurement
     provisions of the interpretation, to record a liability for the fair market
     value  of  the  obligation undertaken in issuing the guarantee. The Company
     previously  did not record a liability when guaranteeing obligations unless
     it  became  probable  that  the  Company  would  have  to perform under the
     guarantee. FIN 45 applied prospectively to guarantees the Company issues or
     modifies  subsequent  to December 31, 2002. The Company historically issues
     guarantees  only  on  a  limited  basis  but  has  issued  such  guarantees
     associated  with  the Company's equity investments in Broadway Sixty-Eight,
     Ltd  and JAR Investment, LLC. Disclosures required by FIN 45 and the effect
     of  guarantees  issued  in  2003  are  discussed  in Note  8.



     Asset  Retirement  Obligations
     ------------------------------

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
     No.  143,  "Accounting  for  Asset  Retirement  Obligations."  SFAS No. 143
     requires  entities  to  record  the  fair value of a liability for an asset
     retirement  obligation  in  the  period  in  which  it  is  incurred  and a
     corresponding  increase  in  the  carrying amount of the related long-lived
     asset, unless such items are immaterial. Subsequently, the asset retirement
     cost should be allocated to expense using a systematic and rational method.
     The  Company  has  assessed  the  impact  of  SFAS No. 143 and based on the
     results  of  the  assessment  believes  the  impact  of  this  statement is
     immaterial  to  its  financial  position  and  results  of  operations.

                                       32
<PAGE>

Note  8  -  INVESTMENTS  AND  RELATED  COMMITMENTS  AND  CONTINGENT  LIABILITIES
            --------------------------------------------------------------------
            INCLUDING  GUARANTEES
            ---------------------

     The  carrying  value  of  Equity  Investments  consist  of the following at
     December  31:
<TABLE>
<CAPTION>
                                         Ownership %      2003        2002
                                         -----------   ---------   ---------
<S>                                          <C>       <C>         <C>
     Broadway Sixty-Eight, Ltd.              33%       $ 286,218   $ 257,749
     JAR  Investment,  LLC                   25%          91,365     118,719
     Millennium Golf Properties, LLC          9%          75,996      83,778
     OKC  Industrial  Properties,  L.L.C.    10%          63,709      61,147
                                                       ---------   ---------

                                                       $ 517,288   $ 521,393
                                                       =========   =========
</TABLE>

     Broadway  Sixty-Eight,   Ltd.,   an  Oklahoma   limited   partnership  (the
     Partnership),  owns  and  operates  an  office  building  in Oklahoma City,
     Oklahoma.  Although  the  Company invested as a limited partner, along with
     the  other limited partners, it agreed jointly and severally with all other
     limited  partners  to reimburse the general partner for any losses suffered
     from  operating  the  Partnership.  The  indemnity  agreement  provides  no
     limitation  to  the  maximum potential  future  payments.

     The Company leases its corporate office from the Partnership. The operating
     lease  under  which the space was rented expired December 31, 1994, and the
     space  is  currently  rented on a year-to-year basis under the terms of the
     expired  lease.  Rent  expense  for  lease of the corporate office from the
     Partnership  was approximately $26,000 for each of the years ended December
     31,  2003  and  2002.

     JAR  Investment,  LLC,  (JAR)  an Oklahoma limited liability company, holds
     Oklahoma  City metropolitan area real estate to be improved for sale and/or
     lease.  JAR owns a 70% management interest in Main-Eastern, LLC (M-E), also
     an  Oklahoma limited liability company. M-E was formed in 2002 to establish
     a joint venture to develop a retail/commercial center on a portion of JAR's
     real  estate.

     The  Company has a guarantee agreement limited to 25% of JAR's 70% interest
     in  M-E's  outstanding  loan  plus  all  costs  and  expenses  related  to
     enforcement  and  collection,  or  $168,348 at December 31, 2003. This loan
     matures  November  27,  2008. Because the guarantee of the M-E loan has not
     been  modified  subsequent  to December 31, 2002, no liability for the fair
     value  of  the  obligation  is  required to be recorded by the Company. The
     maximum  potential  amount  of  future  payments (undiscounted) the Company
     could  be required to make under the M-E guarantee at December 31, 2003 was
     $169,750  plus  costs  and  expenses related to enforcement and collection.

     The Company has a continuing guaranty agreement relating to a JAR bank loan
     with  an  outstanding  balance  of $574,497 at December 31, 2003. This loan
     matures  May  22,  2009.  The  maximum  liability  of the Company under the
     guaranty  will  not  exceed  25%  of  all  indebtedness under the loan. The
     maximum  potential  amount  of  future  payments (undiscounted) the Company
     could  be  required  to  make  is  $143,624  plus  all cost and expenses of
     enforcement  of  the  guaranty  and  collection  and sale of the collateral
     securing  the  guaranty.  The note is collateralized by commercial property
     owned  by  JAR  with  an  appraised  value  of  $1,300,000  on  the date of
     appraisal,  April  16,  2003.  The Company's 25% ownership interest in this
     appraised  value  is  $325,000,  or  more  than twice the maximum potential
     undiscounted  liability  under  the guaranty agreement. Management believes
     the  fair value of the Company's obligation under this continuing guarantee
     is  nominal.


                                       33
<PAGE>

     Millennium  Golf  Properties,  LLC,  an Oklahoma limited liability company,
     owns  and  operates  two Oklahoma City area golf courses, Coffee Creek Golf
     Course  and  River  Oaks  Golf  Course.  It is also involved in real estate
     development  around  each golf  course.

     OKC  Industrial  Properties, L.L.C., an Oklahoma limited liability company,
     holds certain Oklahoma City metropolitan area real estate as an investment.


Note  9  -  COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND
            --------------------------------------------------------------------
            DEVELOPMENT  ACTIVITIES
            -----------------------

     All  of  the  Company's  oil  and gas operations are within the continental
     United States. In connection with its oil and gas operations, the following
     costs  were incurred:

<TABLE>
<CAPTION>
                                                       Year Ended December  31,
                                                      -------------------------
                                                          2003          2002
                                                      -----------   ------------
     Acquisition  of  Properties
<S>                                                   <C>           <C>
       Unproved                                       $   148,656   $    461,636
       Proved                                         $   224,000   $       ----

     Exploration  Costs                               $   428,374   $  1,103,835

     Development  Costs                               $   580,531   $     20,485
</TABLE>


Note  10  -  FINANCIAL  INSTRUMENTS
             ----------------------

     The following table includes various estimated fair value information as of
     December  31,  2003  and  2002,  which  pertains to the Company's financial
     instruments  and does not purport to represent the aggregate net fair value
     of  the Company. The carrying amounts in the table below are the amounts at
     which  the  financial instruments are reported in the financial statements.

     All of the Company's financial instruments are held for purposes other than
     trading,  except  for  trading  securities.

     The  following methods and assumptions were used to estimate the fair value
     of  each  class  of  financial  instruments  for which it is practicable to
     estimate  that value:

     1.  Cash  and  Cash  Equivalents
         ----------------------------

     The  carrying  amount approximates fair value because of the short maturity
     and  highly  liquid  nature  of  those  instruments.

     2.  Available  for  Sale  Securities
         --------------------------------

     The  estimated  fair  values  are  based  upon  quoted  market  prices.

     3.  Trading  Securities
         -------------------

     The  estimated  fair  values  are  based  upon  quoted  market  prices.


     4.  Dividends  Payable
         ------------------

     The  carrying amount approximates fair value. Fair value is the amount that
     will  be  paid  on  demand  at  the  reporting  date.


                                       34
<PAGE>

     The  carrying  amounts and estimated fair values of the Company's financial
     instruments  are  as  follows:

<TABLE>
<CAPTION>
                                              2003                    2002
                                      ---------------------   ---------------------
                                      Carrying    Estimated   Carrying    Estimated
                                       Amount    Fair Value    Amount    Fair Value
                                      --------   ----------   --------   ----------
     Financial  Assets
<S>                                  <C>         <C>         <C>         <C>
       Cash and Cash  Equivalents    $  346,167  $  346,167  $  314,476  $  314,476
       Available for Sale Securities  4,266,012   4,266,012   4,273,616   4,273,616
       Trading  Securities              251,667     251,667     158,247     158,247

     Financial  Liabilities
       Dividends  Payable              (170,307)   (170,307)   (161,439)   (161,439)
</TABLE>

Note  11  -  LONG-LIVED  ASSETS  IMPAIRMENT  LOSS
             ------------------------------------

     Certain  oil  and  gas producing properties have been deemed to be impaired
     because  the  assets,  evaluated  on  a property-by-property basis, are not
     expected  to recover their entire carrying value through future cash flows.
     Impairment  losses  totaling $348,923 for the year ended December 31, 2003,
     and  $333,914  for  the  year  ended December 31, 2002, are included in the
     Statements  of  Operations  in  the  line  item,  Depreciation,  Depletion,
     Amortization  and  Valuation Provisions.

Note  12  -  OTHER  INCOME  (LOSS),  NET
             ---------------------------

     The  following is an analysis of the components of Other Income (Loss), Net
     for the  years  ended  2003  and  2002:

<TABLE>
<CAPTION>
                                                           2003          2002
                                                        ---------    -----------
     Realized  and  Unrealized  Gain  (Loss)
<S>                                                     <C>          <C>
     On  Trading  Securities                            $  97,411    $ (102,722)
     Gain  (Loss)  on  Asset  Sales                       (19,615)        1,247
     Interest  Income                                      51,368        89,355
     Settlements  of  Class  Action  Lawsuits               8,324        32,926
     Agricultural  Rental  Income                           5,600         5,600
     Dividend  and  Other  Income                             428         1,024
     Interest  and  Other  Expenses                       (11,589)      (35,521)
                                                        ---------     ---------

       Other  Income  (Loss),  Net                      $ 131,927     $  (8,091)
                                                        =========     =========
</TABLE>


Note  13  -  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.
             ---------------------------------------------------

     The  Company is affiliated by common management and ownership with Mesquite
     Minerals,  Inc.,  (Mesquite),  Mid-American  Oil  Company  (Mid-American),
     Lochbuie Limited Partnership (LLTD) and Lochbuie Holding Company (LHC). The
     Company  also owns interests in certain producing and non-producing oil and
     gas  properties  as tenants in common with Mesquite, Mid-American and LLTD.


                                       35
<PAGE>

     Mesquite,  Mid-American  and LLTD share facilities and employees, including
     executive  officers,  with the Company. The Company has been reimbursed for
     services,  facilities  and  miscellaneous business expenses incurred during
     2003  by  payment  to  the  Company  in the amount of $159,738 by Mesquite,
     $112,756  by Mid-American and $75,171 by LLTD. Reimbursements for 2002 were
     $156,628  by  Mesquite,  $110,720  by  Mid-American  and  $73,730  by LLTD.
     Included  in the 2003 amounts, Mesquite paid $120,033, Mid-American $84,729
     and  LLTD  $56,486  for  their  share  of  salaries.  In 2002, the share of
     salaries  paid  by  Mesquite  was  $84,446,  Mid-American $59,609, and LLTD
     $39,739.

Note  14  -  FUTURE  EFFECT  OF  RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS
             ----------------------------------------------------------------

     In  May  2003,  the FASB issued Statement of Financial Accounting Standards
     No. 150, "Accounting for Certain Financial Instruments with Characteristics
     of  both  Liabilities  and  Equity"  ("SFAS 150"). SFAS No. 150 changes the
     accounting for certain financial instruments that, under previous guidance,
     could be classified as equity or "mezzanine" equity, by now requiring those
     instruments   to  be   classified  as   liabilities   (or  assets  in  some
     circumstances).  Further,  SFAS  No.  150 requires disclosure regarding the
     terms  of  those  instruments  and settlement alternatives. The guidance in
     SFAS  No.  150 generally is effective for all financial instruments entered
     into  or  modified  after  May 31, 2003, and was otherwise effective at the
     beginning  of  the  first interim period beginning after June 15, 2003. The
     Company  has evaluated SFAS No. 150 and determined that it does not have an
     impact  on  its  financial  reporting  and  disclosures.

     In  January  2003,  the  Financial Accounting Standards Board (FASB) issued
     Interpretation  No.  46  ("FIN  46"),  "Consolidation  of Variable Interest
     Entities"  (VIEs),  which  is  an  interpretation  of  Accounting  Research
     Bulletin  (ARB)  No.  51,   "Consolidated  Financial  Statements."  FIN  46
     addresses  the  application  of  ARB  No.  51  to VIEs, and generally would
     require  that  assets,  liabilities and results of the activity of a VIE be
     consolidated  into  the  financial  statements  of  the  enterprise that is
     considered the primary beneficiary. This interpretation applies immediately
     to  VIEs  created  after  January  31, 2003, and to VIEs in which a company
     obtains  an  interest  after  that  date.  The  Company  has not created or
     obtained  an  interest in any VIEs in 2003. In addition, the interpretation
     becomes applicable on December 31, 2003 for special purpose entities (SPEs)
     created prior to February 1, 2003. As of December 31, 2003, the company had
     no  SPEs  for which it was considered the primary beneficiary. For non-SPEs
     in  which  a  company  holds  a  variable  interest that it acquired before
     February  1,  2003,  the   FASB  has   postponed  the  date  on  which  the
     interpretation will become applicable to December 31, 2004. The Company has
     determined  the  adoption  of the provisions of FIN 46, as later revised by
     FIN  46  (R), will not have a material effect on its financial condition or
     results  of  operations.

     In  November  2003,  the  Emerging  Issues  Task  Force or EITF of the FASB
     reached  a  consensus  on  one  issue with respect to EITF Issue 03-1, "The
     Meaning  of  Other-Than-Temporary Impairment and its Application to Certain
     Investments,"  thereby  requiring  certain   quantitative  and  qualitative
     disclosures  for  securities  accounted for under SFAS No. 115, "Accounting
     for  Certain  Investments in Debt and Equity Securities," that are impaired
     at  the balance sheet date but for which an other-than-temporary impairment
     has  not  been recognized. Adoption of EITF Issue 03-1, which was effective
     on  December  31,  2003,  did not require additional disclosures because no
     such  impairment  existed  at  December  31,  2003.


                                       36
<PAGE>












                  UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION























                                       37
<PAGE>


                           SUPPLEMENTAL SCHEDULE 1


                          THE RESERVE PETROLEUM COMPANY
                 WORKING INTERESTS RESERVE QUANTITY INFORMATION
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                     Year  Ended  December  31,
                                                    ---------------------------
                                                        2003             2002
                                                    ----------       ----------
Oil  &  Natural  Gas  Liquids  (Bbls)
  Proved  Developed  and
    Undeveloped  Reserves
<S>                                                 <C>              <C>
      Beginning  of  Year                               31,181           34,598
      Revisions  of  Previous  Estimates                   533           (4,810)
      Extensions  and  Discoveries                      29,280            9,919
      Production                                        (8,424)          (8,526)
      Purchases  of  Reserves  in  Place                 1,035             ----
                                                    ----------       ----------
    End  of  Year                                       53,605           31,181
                                                    ==========       ==========
    Proved  Developed  Reserves
      Beginning  of  Year                               31,181           34,598
      End  of  Year                                     53,605           31,181

Gas  (MCF)
  Proved  Developed  and  Undeveloped
    Reserves  Beginning  of  Year                    1,070,380        1,149,390
    Revisions  of  Previous  Estimates                (125,250)         (12,031)
    Extensions  and  Discoveries                       196,260          120,453
    Production                                        (232,748)        (187,432)
    Purchases  of  Reserves  in  Place                 180,760             ----
                                                    ----------       ----------
      End  of  Year                                  1,089,402        1,070,380
                                                    ==========       ==========

  Proved  Developed  Reserves
    Beginning of Year                                1,070,380        1,149,390
    End  of  Year                                    1,089,402        1,070,380
</TABLE>


(continued)

See  notes  on  next  page

                                       38
<PAGE>

                                                         SUPPLEMENTAL SCHEDULE 1



                          THE RESERVE PETROLEUM COMPANY
                 WORKING INTERESTS RESERVE QUANTITY INFORMATION
                                  (Unaudited)


(Concluded)


Notes  1.  Estimates  of  royalty  interests  reserves  have  not  been included
           because the  information required for the estimation of said reserves
           is  not available.  The Company's  share of  production from  its net
           royalty interests was 13,891 Bbls of oil and  217,462 MCF  of gas for
           the year ended December 31, 2003, and 15,446 Bbls  of oil and 202,512
           MCF of gas for the year ended December 31, 2002.

       2.  The preceding table sets  forth  estimates  of  the  Company's proved
           developed  oil  and gas reserves, together  with the changes in those
           reserves as prepared  by  the Company's  engineer for the years ended
           December 31, 2003 and 2002.  All  reserves  are  located  within  the
           United  States.

       3.  The  Company emphasizes  that the reserve volumes shown are estimates
           which  by  their  nature  are  subject to  revision in the near term.
           The estimates have been made by utilizing  geological  and  reservoir
           data,  as  well as actual production performance  data  available  to
           the  Company.  These estimates are  reviewed annually and are revised
           upward or downward, as warranted by additional performance  data.















                                       39
<PAGE>

                                                         SUPPLEMENTAL SCHEDULE 2




                          THE RESERVE PETROLEUM COMPANY
            STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
                      RELATING TO PROVED WORKING INTERESTS
                              OIL AND GAS RESERVES
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                           At  December  31,
                                                      -------------------------
                                                          2003          2002
                                                      -----------   -----------
<S>                                                   <C>           <C>
Future  Cash  Inflows                                 $ 6,656,376   $ 5,107,094

Future  Production  and
  Development  Costs                                   (2,288,742)   (1,644,296)

Future  Income  Tax  Expense                           (1,201,565)     (970,771)
                                                      -----------   -----------

Future  Net  Cash  Flows                                3,166,069     2,492,027

  10%  Annual  Discount  for
  Estimated  Timing  of  Cash  Flows                     (925,321)     (760,160)
                                                      -----------   -----------

Standardized  Measure  of  Discounted
  Future  Net  Cash  Flows                            $ 2,240,748   $ 1,731,867
                                                      ===========   ===========
</TABLE>

Estimates  of  future net cash flows from the Company's proved working interests
oil  and  gas  reserves are shown in the table above.  These estimates, which by
their  nature  are subject to revision in the near term,  are based on prices in
effect  at  year  end,  with  no  escalation,  except for fixed and determinable
amounts  attributable  to  gas  under  provisions  of the Natural Gas Policy Act
(NGPA).  The development and production costs are based on year-end cost levels,
assuming  the  continuation  of  existing  economic  conditions.  Cash flows are
further  reduced  by  estimated future income tax expense calculated by applying
the  current  statutory  income  tax  rates  to  the  pretax net cash flows less
depreciation  of the tax basis of the properties and depletion applicable to oil
and  gas  production.








                                       40
<PAGE>

                                                         SUPPLEMENTAL SCHEDULE 3


                          THE RESERVE PETROLEUM COMPANY
              CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE
        NET CASH FLOWS FROM PROVED WORKING INTERESTS RESERVE QUANTITIES
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                     Year  Ended  December  31,
                                                    ---------------------------
                                                        2003             2002
                                                    ----------       ----------
Standardized  Measure,
<S>                                                 <C>              <C>
  Beginning  of  Year                               $ 1,731,867      $  964,585

  Sales  and  Transfers,  Net  of
    Production  Costs                                  (924,239)       (371,849)

  Net  Change  in  Sales  and  Transfer
    Prices,  Net  of  Production  Costs                 336,417       1,093,861

  Extensions,  Discoveries  and  Improved
    Recoveries,  Net  of  Future  Production
    and  Development  Costs                             855,969         338,546

  Revisions  of  Quantity  Estimates                   (134,955)        (66,647)

  Accretion  of  Discount                               240,646         132,452

  Net Change  in  Income  Taxes                        (175,879)       (314,656)

    Purchases  of  Reserves  in Place                   252,584            ----

  Changes  in  Production  Rates
    (Timing)  and  Other                                 58,338         (44,425)
                                                    ------------     ----------
Standardized  Measure,
  End  of  Year                                     $ 2,240,748      $1,731,867
                                                    ============     ==========
</TABLE>



                                       41
<PAGE>

Item  8.    Changes  in  and  Disagreements  with  Accountants on Accounting and
Financial  Disclosure.

Not  Applicable

Item  8A.  Controls  and  Procedures

a)  Evaluation  of  Disclosure  Controls  and  Procedures.
    ------------------------------------------------------

As  directed  by  Section  302(a)  of  the Sarbanes-Oxley Act of 2002, effective
August  29,  2002,  the  Securities  and Exchange Commission (SEC) adopted rules
requiring  a reporting company's principal executive and financial officers each
to  certify,  among  other  things,  that they are responsible for establishing,
maintaining  and  regularly   evaluating  the  effectiveness  of  the  reporting
company's  disclosure  controls  and procedures.  For purposes of the new rules,
disclosure controls and procedures are defined by the SEC as "controls and other
procedures of an issuer that are designed to ensure that information required to
be  disclosed  by  the  issuer in the reports filed or submitted by it under the
Exchange  Act  is  recorded, processed, summarized and reported, within the time
periods  specified  in  the  Commission's  rules  and  forms".  The  SEC further
explains,  "disclosure  controls  and  procedures  include,  without limitation,
controls  and  procedures  designed  to  ensure  that information required to be
disclosed  by  an  issuer  in  its  Exchange  Act  reports  is  accumulated  and
communicated  to  the issuer's management, including its principal executive and
financial  officers, as appropriate to allow timely decisions regarding required
disclosure."

The  effectiveness  of  the  Company's  disclosure  controls and procedures were
evaluated by the Principal Executive Officer and the Principal Financial Officer
as  of  the  end  of  the  period  covered  by  this  10-KSB. The scope of their
evaluation  included  the  following  categories  of  review:   overall  control
environment,  risk assessment capabilities, specific control activities, quality
of  information  and  communication,  and performance monitoring. Based on their
evaluation  it  is their conclusion that the effectiveness of the Company's said
disclosure  controls  and  procedures  is  satisfactory.

b)  Changes  in  Internal  Controls  Over  Financial  Reporting.
    ------------------------------------------------------------

There  have been no significant changes in the Company's internal controls or in
other  factors  that  could  significantly  affect  these controls that occurred
during  the  fourth  quarter of the period covered by this report, including any
corrective  actions  with   regard  to  significant  deficiencies  and  material
weakness.  All internal control systems have inherent limitations, including the
possibility  of  circumvention  and  overriding  of controls, and therefore, can
provide  only  reasonable  assurance  as  to financial statement preparation and
safeguarding  of  Company  assets.



                                       42
<PAGE>

                                    PART III


Items  9,  10,  and  11  are  incorporated  by  reference to the Company's proxy
statement  to  be  mailed  to  security  holders  on  or about April 25, 2004 in
connection  with  its  annual  stockholders' meeting to be held on May 25, 2004.

Item  12.   Certain  Relationships  and  Related  Transactions.
            See  Item  6,   "Management's  Discussion  and Analysis of Financial
            Conditions and Results  of  Operations"  and  Item  7,  Note  13  to
            Financial  Statements

Item  13.   Exhibits  and  Reports  on  Form  8-K.

(a)         Exhibits

The  following documents are exhibits to this Form 10-KSB.  Each document marked
by  an  asterisk is hereby incorporated herein by reference to the same document
previously  filed  with  the  Securities  and  Exchange  Commission.

Exhibit                                          S.E.C.        Exhibit
Reference  Description                       Report (Date)     Number       Page
---------  -----------                       -------------     -------     -----
3.1        *Restated  Certificate  of
            Incorporation  dated
            November  1,  1988               10-KSB (12/96)      3.1         39


           *Amended As of November  14,
            2000  By-Laws  dated
            November  1,  1988               10-KSB (12/00)      3.2(a)      38

3.2        *Resolution Amending By-Laws
            November  14,  2000              10-KSB (12/00)      3.2(b)      48

31          Chief  Executive  Officer's
            Certification  pursuant  to
            Section 302 of the Sarbanes-
            Oxley  Act  of  2002              10-KSB (12/03)    31.1         46

31          Chief Financial and Accounting
            Officer's Certification
            pursuant to Section 302 of
            the  Sarbanes-Oxley Act of 2002   10-KSB (12/03)    31.2         47

32          Chief Executive Officer's and
            Chief  Financial  Officer's
            Certification  pursuant  to
            Section 906 of the Sarbanes-
            Oxley  Act  of  2002              10-KSB (12/03)    32.1         48


                                       43
<PAGE>


(b).     Reports  on  Form  8-K.

No  reports  on  Form  8-K  have  been  filed  with  the Securities and Exchange
Commission  during  the  year  of  the  period  covered  by  this  report.

Item  14.  Principal  Accountant  Fees  and  Services
           ------------------------------------------

Incorporated  by  reference  to  Company's  proxy  statement  to  be  filed with
Securities and Exchange Commission pursuant to Regulation 14A within 120 days of
the  end  of  the  Company's  year  2003






























                                       44
<PAGE>


                                   SIGNATURES


In  accordance  with  Section  13  or  15(d)  of the Securities Exchange Act the
registrant  caused  this  report  to be signed on its behalf by the undersigned,
thereunto  duly  authorized.

                                  THE  RESERVE  PETROLEUM  COMPANY
                                           (Registrant)



                                 By:/s/Mason  W.  McLain
                                    -------------------------------------------
                                    Mason  W.  McLain,  President
                                    (Principal  Executive  Officer)




                                    /s/James  L.  Tyler
                                    -------------------------------------------
                                    James  L.  Tyler,  2nd  Vice  President
                                    (Principal Financial and Accounting Officer)


Date:  March  19,  2003


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been  signed below by the following persons on behalf of the Registrant and
in  the  capacities  and  on  the  dates  indicated:


/s/  Mason  McLain                         /s/  Jerry  L.  Crow
---------------------------------          -------------------------------------
Mason  W.  McLain  (Director)              Jerry  L.  Crow  (Director)
March  19,  2004                           March  19,  2004



/s/  Robert  L.  Savage                    /s/  William M. Smith
---------------------------------          -------------------------------------
Robert  L.  Savage  (Director)             William  M.  Smith  (Director)
March  19,  2004                           March  19,  2004




                                       45