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, 2002

            [ ] 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, 2002 were $1,762,542.
As  of  March  14,  2003,  there were 166,688.64 common shares outstanding.  The
aggregate market value of the voting stock held by non-affiliates was $3,746,212
as  determined  by  the  last  reported  sale  which  was  February  21,  2003.

                      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  25,  2003, in connection with its annual stockholders' meeting to be held
on  May  27,  2003.
Transitional  Small  Business  Disclosure  Format (check one)  Yes       No  X
                                                                    ---     ---

<PAGE>

See  Exhibit  Index  on  Page  45.




                                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                                      21
     Item  8.     Changes in and Disagreements with Accountants
                    on Accounting and  Financial  Disclosure                 45

PART  III
     Item  9.     Directors,  Executive  Officers, Promoters and
                    Control Persons Compliance  with  Section 16(a)
                    of  the  Exchange  Act                                   45
     Item  10.    Executive  Compensation                                    45
     Item  11.    Security Ownership of Certain Beneficial Owners and
                    Management                                               45
     Item  12.    Certain  Relationships  and  Related  Transactions         45
     Item  13.    Exhibits  and  Reports  on  Form  8-K                      45
     Item  14.    Controls  and  Procedures                            .     46




                                        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
risk  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 270,370 gross
acres  equivalent  to  93,358 net acres.  These mineral interests are located in
nine states with 56,668 net acres in the states of Oklahoma  and Texas, the area
of  concentration  for  the  Company  in  its  present  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 2002, $958,996 (57%) of oil and gas sales were
from  royalty  interests as compared to $1,232,461 (51%) in 2001. As a result of
its  mineral  ownership,  in  2002 the Company had royalty interests in 16 gross
(.23  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.

                                        3
<PAGE>

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

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 2002, the
Company  participated  in  the drilling of one development well (1.04% net) on a
leasehold  interest.  The  well  was  completed  as  a  marginal  gas  producer.

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 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 2002 or planned for in 2003, 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,  2001"

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

In  2002,  the  Company had one customer whose total purchases were greater than
10%  of  revenues from oil and gas sales.  The purchases were $175,475 or  10.4%
of  total  oil  and gas sales.  The Company sells most of its oil and gas on the
spot  market  or has 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" for a discussion of
other  business  including  off-balance  sheet  arrangements.

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

At  December  31, 2002, the Company had eight employees, including officers. All
the  Company's  employees  devoted  a  portion  of  their  time  to  duties with
affiliated  companies  and  received  compensation directly from those companies
during  2002.  See  Item  6,  "Management's Discussion and Analysis of Financial
Conditions  and  Results  of  Operations,  subheading "Certain Relationships and
Related  Transactions"  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  41  for  working  interest  reserve  quantity  information.

Since  January  1,  2002,  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 annual 2001 report on Form 10-KSB and Federal income
tax  return  for the year ended December 31, 2001.  Those reserve estimates were
identical.

                                        5
<PAGE>

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,  2002,  2001  and 2000.  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>
  2002        $ 24.59      $  2.86        $ 24.22      $  2.70           $  1.41

  2001        $ 24.21      $  4.35        $ 25.14      $  4.24           $  1.26

  2000        $ 27.31      $  3.26        $ 27.59      $  3.27           $  1.09
</TABLE>

At  December  31,  2002,  the  Company had working interests in 70 gross (8 net)
wells  producing  primarily gas and/or gas liquids (condensates) and had working
interests  in 68 gross (4.4 net) wells producing primarily oil.  These interests
were in 26,704 gross (2,746 net) producing acres.  These wells include 44  gross
(.32  net)  wells  associated  with  secondary  recovery  projects.

36  percent,  or  8,497  barrels of the Company's oil production during 2002 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,  2002.

<TABLE>
<CAPTION>
                                                      Acreage
                                           -----------------------------
                                            Gross                  Net
                                           -------                ------
<S>                                        <C>                    <C>
Non-producing  Mineral  Interests          270,370                93,358
Undeveloped  Leaseholds                     34,124                 6,562
</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, 2000 and thereafter, as to net
productive  and  dry  exploratory  wells  drilled  and  net  productive  and dry
development  wells  drilled.

<TABLE>
<CAPTION>
                    Number  of  Net  Working  Interest  Wells  Drilled
               -------------------------------------------------------
                     Exploratory                      Development
               ---------------------            ----------------------
               Productive        Dry            Productive         Dry
               ----------        ---            ----------         ---
<S>                  <C>        <C>                 <C>            <C>
2002                .96          .47               .01             ---
2001                .65         1.43               .10             ---
2000                .79          .30               ---             ---
</TABLE>

                                        6
<PAGE>

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

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 includes the drilling
of  an exploratory test well using the existing wellbore of one of the producing
wells  to  drill  a  horizontal lateral hole to the test location. The extent of
additional  drilling  is  dependent  upon the information obtained from the test
well.  The  wells  and  leaseholds  for  which the Company paid $224,000, are an
acquisition  for  the year 2003. The Company will participate in the drilling of
the  test  well  and  any  subsequent wells on an actual cost bearing basis. The
operator  anticipates starting operations on the test well on or before April 1,
2003.

In  March,  2003, the operator of a Woods County, Oklahoma producing property in
which  the Company has a 15% working interest proposed an increased density well
in  which  the  Company has agreed to participate.  The well, which should start
not  later  than  the second quarter of 2003, will be drilled under the existing
operating  agreement.

See  Item  6,  under the subheading, "Update of Oil and Gas Exploration Activity
from  December  31,  2001" 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>
            03/31/01                     33                      32
            06/30/01                     34                      33
            09/30/01                     34.25                   33.25
            12/31/01                     33.25                   33.25
            03/31/02                     35                      33.1
            06/30/02                     34.6                    34.1
            09/30/02                     35.2                    33
            12/31/02                     33.2                    32.6
</TABLE>

                                        7
<PAGE>

There was limited public trading in the Company's common stock in 2002 and 2001.
In  2002,  there  were  8  brokered  trades  appearing in the Company's transfer
ledger,  and  in  2001,  there  were  17.

At  March  11,  2003,  the Company had approximately 1,462 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 2002 and $1.50 per share in 2001.
Management will review the amount of the annual dividend to be paid in 2003 with
the  board of directors; however, it intends to recommend a dividend of at least
$1.00  per  share.

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
form  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 engineers consider production
     performance  data,  reservoir  data  and  geological  data available to the
     Company, as well as make 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  error.

                                        8
<PAGE>

     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  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 2003 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 with Mesquite Minerals, Inc., (Mesquite), Mid-American
Oil  Company  (Mid-American),  Lochbuie  Limited Partnership (LLTD) and Lochbuie

                                        9
<PAGE>

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.

The  above  named  officers, directors and employees as a group beneficially own
approximately  34%  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.

Mesquite, Mid-American and LLTD share facilities and employees with the Company.
The  Company  has  been  reimbursed  for  services, facilities and miscellaneous
business  expenses  incurred during 2002 by payment to the Company in the amount
of  $156,678  by  Mesquite,  $110,770  by  Mid-American  and  $73,730  by  LLTD.
Mesquite paid $108,739, Mid-American $76,757 and LLTD $51,171 in salaries to the
employees  of  the  Company  in  2002,  including  amounts to officers, advisory
directors  and  directors of  $84,446 for Mesquite, $59,609 for Mid-American and
$39,739  for  LLTD.

                               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).  JAR
Investments,  LLC is still in the development stage; however, the other 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 the characteristics of an off-balance
sheet  arrangement  as defined by the Securities and Exchange Commission's rules
which  are  effective  for fiscal years ending on or after June 15, 2003.    The
following  discussion  will  include  the  disclosures  required by these rules.

Off-balance  Sheet  Arrangements.
---------------------------------

Broadway  Sixty-Eight, Ltd.  This Oklahoma limited partnership (the Partnership)
was  organized in 1978, and is owner of a commercial office building in Oklahoma
City,  Oklahoma.  The  office  building  is  financed  by a mortgage note with a

                                       10
<PAGE>

balance of $202,186 at December 2002.  The loan matures in 2005 with interest at
New  York  prime  rate and is collateralized by a first mortgage on the land and
building  and  the  assignment of leases and rents.  The Partnership's unaudited
financial statements at December 31, 2002, showed total assets of $1,019,631 and
total  partners'  capital  of  $781,056.  Unaudited net profit for the year then
ended  was  $125,450  on  total  income  of  $392,139.

The  Company  leases  its corporate office from the Partnership, and office rent
expense  for  the year 2002 was approximately $26,000. At December 31, 2002, the
Company  had  a  net  equity  in the Partnership of $257,748 for its 33% limited
partnership  interest.  Although  the Company has invested as a limited partner,
along  with the other limited partners, it has agreed jointly and severally with
all  the  limited  partners  to  reimburse  the  general  partner for any losses
incurred  from  operating  the  Partnership. The indemnity agreement provides no
limitation  to  the  maximum  potential  future  payments. From inception of the
Partnership  in  1978 through March 14, 2003, no such losses have occurred under
this  agreement.

JAR  Investments,  LLC  (JAR).  This Oklahoma limited liability company in which
the  Company  invested  $150,000 in December, 2000 for a 25% interest, is in the
development stage.  In January, 2001, JAR purchased 6.5 acres of commercial real
estate  including  a  freestanding former Food Lion Supermarket of approximately
32,000  square  feet  in  the  metropolitan  Oklahoma  City,  Oklahoma area, for
$1,050,000  with  plans  to  improve  the  property  for sale and/or lease.  The
purchase  was  financed  by  a  $550,000 variable rate mortgage loan and initial
capital  contributions  of  $600,000  from  JAR's  owners.  The  estate  and
improvements  were  appraised  for  $1,320,000.

In  August,  2002  JAR  planned  a  joint  venture with the owners of Tan & Tone
America to develop an approximate 15,000 square foot retail/commercial center on
1.77  acres of JAR's land with a Tan & Tone America store occupying 9,000 square
feet.  The  balance  of  the  space  will  be  available  for lease to shops and
offices.  Tan  &  Tone  America  has  thirteen exercise and tanning locations in
Oklahoma  City  and  central  Oklahoma.

The  joint  venture  was  established  in October, 2002 through the formation of
Main-Eastern,  LLC,  an  Oklahoma  limited  liability  company,  in  which a 70%
management  interest  is owned by JAR and a 30% investor interest will be earned
by the owners of Tan & Tone America by fulfilling the terms of the Main-Eastern,
LLC  operating  agreement.  In  November,  2002 the manager of Main-Eastern, LLC
negotiated  a construction loan with a local Oklahoma City bank in the amount of
$970,000  with  interest  at  New  York prime rate as stated in the "Wall Street
Journal". The interest rate upon inception  of the loan on November 27, 2002 was
4.25%  per  annum.

JAR's  unaudited  financial statements at December 31, 2002, showed total assets
of  $1,034,665  and  total  members'  equity  of  $474,778.   For the year ended
December  31,  2002,  JAR  showed  a net loss of $85,967.  The Reserve Petroleum
Company's  net  equity in JAR was $118,719  at December 31, 2002, as compared to
$132,112  at  December  31,  2001.

The  Company has signed continuing guaranty agreements for the loans of both JAR
and  Main-Eastern,  LLC.  These  guaranty  agreements  are  limited  to  25%  of
outstanding  loan and interest of JAR, or $112,500 at December 31, 2002, and 25%
of  JAR's 70% interest in Main-Eastern LLC's outstanding loan plus all costs and
expenses related to enforcement and collections, or $36,778 at December 31, 2002
for  total  loan guarantees of $149,278.  The maximum potential amount of future
payments  (undiscounted)  the  Company  could  be  required  to  make  under the
guarantees  is  $307,250  plus  costs  and  expenses  related to enforcement and
collections.  JAR's  loan agreement is currently renewed annually because of the
favorable  financing costs and pending a decision by the manager whether to hold
the  property  long-term.  Main-Eastern,  LLC's  loan  agreement  has a 12 month
construction  phase  in  which interest only will be payable monthly.  After the

                                       11
<PAGE>

construction  phase,  a  loan  will  be  set on a 60 month balloon with payments
computed  on  a  15  year  amortization.

Other  Equity  Investments.
---------------------------

OKC  Industrial  Properties, LLC (OKC).  This Oklahoma limited liability company
in  which the Company has a 10% interest was formed in 1992 to purchase and hold
certain  Oklahoma City, Oklahoma metropolitan area real estate as an investment.
At December 31, 2002, the Company's net equity for its 10% ownership interest in
OKC  was  $61,145.  A  review  of OKC's unaudited financial statements disclosed
total  assets  and  total members' equity  of $611,450  at December 31, 2002, as
there  were  no  liabilities.  Net  income  for the year then ended was  $5,585.

Millennium  Golf  Properties,  LLC (Millennium)  This Oklahoma limited liability
Company  in which the Company has a 9% interest originated in 1990.  It owns and
operates  two  golf courses in the Oklahoma City metropolitan area, Coffee Creek
Golf  Course  and  River  Oaks  Golf  Course.  Also,  Millennium  is  developing
residential  real  estate  around  each  golf  course  and  operates  a property
management  company  which  specializes  in  golf  course  management.  In  1999
Millennium  purchased  River  Oaks  Golf Course, an operating golf course, along
with  surrounding  real estate. The River Oaks purchase, renovations and related
real  estate  development  are  financed  by  loans  collateralized  by land and
buildings  of  both  Coffee  Creek  and  River Oaks.  Per review of Millennium's
unaudited  financial  statements  at  December  31,  2002,  these  loans totaled
$2,586,858.   These financial statements also showed total assets of $3,578,011,
and  members'  capital  of  $738,576,  and for the year ended December 31, 2002,
Millennium  had  a  net  loss  of  $303,123 on total revenues of $2,430,726.  At
December  31,  2002, the Company had a net equity of $83,778 for its 9% interest
in  Millennium.

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

To  supplement  the  following  discussion please refer to the Balance Sheets on
Pages  23  and 24, and the Statements of Cash Flows beginning on page 27 of this
Form  10-KSB.

In 2002, 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 2002, net cash provided by operating activities was $303,954.  In addition to
cash  provided by operations, $1,447 was received from property dispositions and
$11,550  from  distributions  by  equity  investments for total cash provided of
$316,951.  Property  additions capitalized totaled $1,043,023, cash payments for
equity  investments  were  $13,400, dividends paid to shareholders were $161,369
and  treasury  stock  purchases  amounted  to  $14,176 for total cash applied of
$1,231,968.  Total  cash  applied  exceeded total cash provided by $915,017.  To
cover  this  $915,017  deficit, the Company reduced cash and cash equivalents by
$116,669  and  available  for  sale  securities  by  $798,348.

In  2001, net cash provided by operating activities was $1,127,454.  In addition
to  the  cash  provided  by  operations,  $67,170  was  received  from  property

                                       12
<PAGE>

dispositions  and $8,250 from distributions by equity investments for a total of
$1,202,874.  Property  additions capitalized totaled $733,106, dividends paid to
shareholders  were  $238,321 and treasury stock purchases amounted to $9,792 for
total  cash  applied of $981,219.  The balance remaining of $221,655 was used to
increase cash and cash equivalents by $100,967 and available for sale securities
by  $120,688.

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

     Trading  securities  decreased  $100,913  (39%)  to  $158,247  in 2002 from
     $259,160  in  2001.  For  the  most  part,  the  decrease was the result of
     recognition  of a decline in fair market value (unrealized loss) of $54,934
     and  realized  losses  of  $47,787.

     Refundable  income  taxes  increased $88,756 (59%) to $238,994 in 2002 from
     150,238  in  2001.  $122,563  of the 2001 balance was refunded in 2002. The
     remaining  2001  balance was credited to 2002 estimated Federal income tax.
     This  credit,  along  with  estimated  capital  loss and net operating loss
     carryback in excess of $210,000 are projected to be refunded to the Company
     in  2003.

The  following  is  a  discussion  of  material changes in cash flow by activity
between the years ending December 31, 2002 and 2001.  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 2002 were
$303,954,  which  when  compared   against  the  $1,127,454  provided  in  2001,
represents a decline of $823,500 or a 73% decrease in net cash flows provided by
operating activities from 2001 to 2002.  For the most part, the decline resulted
because  of  a  decrease  in  oil  and  gas  sales  of  $906,657, an increase in
exploration  costs  charged  to expense of $145,829, an increase in cash paid to
suppliers,  employees  and taxes other than income tax of $18,111, a decrease in
cash  received  from interest income of $210,699 and a decrease in cash received
in  settlement  of  class  action lawsuits of $52,577.  Those reductions in cash
flows  were  partially offset by an increase in cash received from lease bonuses
and  rentals of $71,499, decreased cash paid for production costs of $20,770 and
a  decrease in cash paid for income taxes of $418,667.  Additional discussion of
the  more  significant  items  follows.

Discussion of Selected Material Line Items Resulting in a Decline in Cash Flows.
The  $906,657  (36%)  decrease  in  cash  received  from  oil  and  gas sales to
$1,644,071  in  2002  from $2,550,728 in 2001 was almost totally the result of a
decline 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.

Cash  paid  for exploration costs charged to expense increased $145,829 (38%) to
$529,533  in 2002 from $383,704 in 2001.  This increase is related to an overall
increase  in  exploration  activity  in  2002  over 2001.  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 activity includes substantially all of the
Company's  property  additions  discussed  below under the subheading "Investing
Activities".  In  addition  to  the $529,533 classified as operating activities,
$1,043,023  was  classified  as  investing activities for a total of $1,572,556.
This compares to 2001 cash applied to property additions which included $383,704
classified  as   operating  activities  and  $733,106  classified  as  investing
activities  for  a  total  of  $1,116,810.

                                       13
<PAGE>

Cash  applied  to  general  suppliers,  employees  and  taxes  other than income
increased $18,111 (3%) to $736,364 in 2002.  Most of the increase was the result
of  a  $20,533  increase  in  employees  salaries  and  directors'  fees.

Cash  received  for  interest  earned on cash equivalents and available for sale
securities  decreased  $210,699 (67%) to $103,086 in 2002 from $313,785 in 2001.
The  decrease was the combined result of a decline in the average rate of return
to  2.14%  in  2002  from 6.09% in 2001 and a decrease in the average balance of
cash  equivalents and available for sale securities outstanding to $4,801,048 in
2002  from  $5,144,757  in  2001.

Discussion  of  Selected  Material  Line  Items Resulting in an Increase in Cash
Flows.  Cash  received  from  lease  bonuses  and  rentals  increased $71,499 to
$80,653  in  2002 from $9,154 in 2001.  For the most part, the increase in lease
bonus  revenue was the result of the sale of a lease on Robertson County, Texas,
minerals  which  the  Company owns.  Such sales are generally initiated by third
parties.  Cash  refunded  or  paid  for  income taxes changed from cash payments
totaling  $296,104  in  2001 to cash refunds of $122,563 in 2002.  The 2002 cash
refund  was  the  result  of overpaying estimated Federal income taxes for 2001.

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

Net cash applied to investing activities decreased $533,296 (69%) to $245,078 in
2002  from  $778,374  in  2001.  In 2002, net cash flows from available for sale
securities  changed  $919,036  from  cash  applied  of  $120,688 in 2001 to cash
provided of $798,348 in 2002, as a result of cash withdrawals to supplement 2002
cash  flows  provided  by  operations.   The  $919,036 change in cash flows from
available  securities  was  partially  offset  by a $375,640 net increase in the
application  of cash to capitalized property additions.  In 2002, net cash flows
applied  to capitalized property was $1,041,576 as compared to $665,936 in 2001.

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

Cash applied to financing activities decreased $72,568 (29%) to $175,545 in 2002
from  $248,113  in  2001.  Cash flows applied to financing activities consist of
cash dividends on common stock and cash used for the purchase of treasury stock.
In 2002, cash dividends paid on common stock amounted to $161,369 as compared to
$238,321 in 2001.  For  the most part, the decrease was the result of a decrease
in  cash  dividends per share to $1.00 in 2002 from $1.50 in 2001.  Cash applied
to  the  purchase of treasury stock was $14,176 in 2002 as compared to $9,792 in
2001.

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

The  latest  estimate  of  business  to be done in 2003 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
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
2002  the  Company  had  a  net  loss  of  $616,876 as compared to net income of
$268,038  in  2001.  Net  loss per share, basic and diluted was $3.70 in 2002, a
decrease  of  $5.30  per  share from net income of $1.60 in 2001.  Material line
item  changes in the Statements of Operations will be discussed in the following
paragraphs.

                                       14
<PAGE>

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

Operating  revenues  decreased  $681,826  (28%)  to  $1,762,542  in   2002  from
$2,444,368  in  2001.  A  decline  in  oil  and  gas  sales of $753,325 (31%) to
$1,681,889  in  2002  from  $2,435,214 in 2001 was partially offset by a $71,499
increase  in  lease  bonuses and rentals to $80,653 in 2002 from $9,154 in 2001.
The  increase in lease bonuses and rentals was, for the most part, the result of
the sale of a lease on Robertson County, Texas, minerals which the Company owns.
The decrease in oil and gas sales will be discussed in the following paragraphs.

The  $753,325  decrease  in  oil  and gas sales was the net result of a $795,918
decline  in gas sales plus a $2,761 decline in miscellaneous oil and gas product
sales  as  partially  offset  by a $45,354 increase in oil sales.  The following
price  and  volume  analysis is presented to help explain the changes in oil and
gas sales from 2001 to 2002.  Miscellaneous oil and gas product sales of $10,885
in  2002  and  $13,646  in  2001  are  not  included  in  the  analysis.

<TABLE>
<CAPTION>
                                                  Variance
                                               ----------------
     Production                   2002         Price     Volume       2001
     ----------                 -------       ------     ------     -------
     Oil  -
<S>                             <C>          <C>          <C>        <C>
     Bbls (000 omitted)             24          ---          2           22

     $(000 omitted)             $  586          (1)         46       $  541

     Unit Price                 $24.46        (.02)        ---       $24.48

     Gas  -

     MCF (000 omitted)             390          ---        (49)         439

     $(000 omitted)             $1,085        (587)       (209)      $1,881

     Unit  Price                $ 2.78       (1.51)        ---       $ 4.29
</TABLE>

The  $795,918  (42%)  decline  in  natural  gas sales to $1,084,690 in 2002 from
$1,880,608  in 2001 was the result of a decrease in both the price and volume of
sales.  A negative price variance of $587,450 resulted because the average price
received  per thousand cubic feet (MCF) of natural gas sales decreased $1.51 per
MCF to $2.78 in 2002 from $4.29 in 2001.  A negative volume variance of $208,468
resulted  from  a decline in volume sold of 48,593 MCF in 2002 to 389,944 MCF in
2002  from  438,537  in 2001.  The  decrease in the volume of production was the
net  result  of a 100,340 MCF normal decline in production from mature producing
properties as partially offset by production of 51,747 MCF from properties which
first  produced  in  2002.  As  disclosed  in  Supplemental  Schedule  1  of the
Unaudited  Supplemental Financial Information included in Item 7, below, working
interests  natural  gas  extensions and discoveries were not adequate to replace
reserves  produced  in  either  2002  or  2001.

The  $45,355  (8%) increase in crude oil sales to $586,314 in 2002 from $540,959
in  2001 was substantially all the result of an increase in the volume of sales.
The  barrels  (Bbls)  of  sales increased 1,871 to 23,972 in 2002 from 22,101 in
2001  resulting in a positive volume variance of $45,809.  The average price per
Bbl  declined  $0.02  to $24.46 in 2002 from $24.48 in 2002 for a negative price
variance of $454. The positive volume variance was the net result of a 3,020 Bbl
increase  from  production  which first  produced in 2002 as partially offset by
normal  decline  in  the  production  of  more  mature properties of 1,149 Bbls.

                                       15
<PAGE>

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 increased $301,476 (13%) to $2,621,836 in 2002 from
$2,320,360  in  2001, as the Company had an increase in every line item with the
exception of production costs.  The material components of these line items will
be  discussed  below.

Production  Costs.  Production  costs decreased $20,222 (5%) to $405,004 in 2002
from  $425,226 in 2001.  For the most part, the decrease was the net result of a
$57,797 (41%) decrease in gross production tax to $82,989 from $140,786 in 2001,
as  partially  offset by an increase in lease operating expense of $35,896 (14%)
to  $284,624  in 2002 from $248,728 in 2001.  To a great extent, the increase in
lease  operating  expense  was  the  result  of a workover on a mature producing
property  and the additional costs of wells which first produced in late 2001 or
in  2002.  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 $1,565,471 in 2002 and $1,026,946 in 2001.
Costs charged to operations were $541,824 in 2002 and $362,313 in 2001 inclusive
of  geological  and  geophysical  costs  of $51,082 in 2002, and $4,307 in 2001.

     Update of Oil and Gas Exploration Activity from December 31, 2001.      For
the  twelve  months  ended  December  31,  2002, the Company participated in the
drilling  of  15  gross  exploratory  working  interest  wells  with net working
interests  ranging  from  a  high  of  approximately 20% to a low of 1%.  Of the
fifteen  exploratory  wells, six were plugged, abandoned and charged to expense;
one  was  temporarily  abandoned  and  awaiting  a  plugging request, seven were
completed  as  producers  and  one  was  in  process  at  December 31, 2002, and
subsequently  completed  as  a producing gas well.  In management's opinion, the
exploratory  drilling  summarized  above  has  not produced development drilling
opportunities  which  could  significantly  increase  the  Company's oil and gas
reserves.

The  following  paragraphs update oil and gas exploration activity from December
31,  2001  through  March  15,  2003.

     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 is a
     marginal  producing  gas  well. Data indicates the possibility of increased
     production  by  re-completing  the  well  in  another  zone;  however,  no
     additional  drilling  has  been planned.

     In  June,  2001, the Company purchased a 13% working interest in an indrill
     prospect in McClain County, Oklahoma. A test well was drilled in July, 2001
     resulting  in  marginal  oil  production.  In  August,  2002,  the well was
     re-completed  in  two   additional  zones,  with   negative  results.   The
     re-completion  cost approximately $30,000 which was capitalized as a proved
     property  addition.  No  further  drilling  is  planned  on  the  prospect.

                                       16
<PAGE>

     In  September,  2001,  a  step-out  well  in  which the Company has a 19.6%
     working  interest  was  drilled  on  a  shallow  Cimarron County, Oklahoma,
     exploratory  prospect.  After  extensive  testing, the well was temporarily
     abandoned  and  the  operator  has  stated  a  plugging  request  will  be
     distributed.

     In  December, 2001, a test well was completed as a marginal gas producer on
     a step-out prospect in Beckham County, Oklahoma, in which the Company has a
     5%  working  interest.  Additional leaseholds were purchased in the area of
     interest and an offset well was drilled in the second quarter of 2002. Upon
     examination  of  the  open  hole  logs,  it  was plugged and abandoned. The
     initial  test  well's production declined rapidly with it's last production
     in  September,  2002. The operator has stated the well will be proposed for
     plugging  and  abandonment.  No additional drilling is planned. The Company
     had  costs of $38,400 for this prospect in 2002 all of which were expensed.

     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. Offset
     drilling  to  the  first  well  has been proposed for the second quarter of
     2003.  The  Company had costs of $105,028 for this prospect in 2002, $7,788
     of  which  were  capitalized  as  unproved  properties  and  $97,240  were
     capitalized  as  proved  properties.

     In October, 2001, the Company purchased an 18% working interest in a Barber
     County,  Kansas  prospect.  Two  exploratory  wells  have  been  drilled. A
     pipeline  tap  and meter were installed and began flowing the first well on
     October  1,  2002.  The  second  well  does not have adequate production to
     justify  a pipeline expense. The well was shut in awaiting the results of a
     3D  Seismic  Survey  the interpretation of which was completed in November,
     2002.  In  January,  2003  the operator proposed an additional test well to
     evaluate  the  potential  in the structural closure mapped from the seismic
     data.  The  well  started March 10, 2003. Other wells in the vicinity could
     make  a  pipe-line  to the second well economical. The Company had costs of
     $157,275 in 2002 related to this prospect. Geological and Geophysical costs
     of  $48,386 were expensed as exploration costs, $88,981 were capitalized as
     unproved  properties;  however,  $6,636  of  the  unproved  properties  was
     expensed  in  the  provision  for  impairment  of  undeveloped  leaseholds

     In January, 2002, the Company purchased a 5% working interest in a Stephens
     County,  Oklahoma  prospect on which an exploratory well was in process. In
     July,  2002, the well was determined to be uneconomical and will be plugged
     and abandoned. A second exploratory well was started on May 5, 2002, and on
     August  29,  2002,  the operator proposed to plug and abandon the well as a
     dry  hole and the Company concurred. The prospect is under evaluation prior
     to  further testing. The Company had costs of $613,377 for this prospect in
     2002,  all  of  which  were expensed, $208,909 to impairment of undeveloped
     leaseholds  and  $404,468  to  exploration  costs.

     In  February,  2002,  the  Company  purchased  a  16% working interest in a
     Hansford  County,  Texas  prospect.  The  test  well was completed as a gas
     producer  and  began  production  in  December,  2002. Expenditures in 2002
     totaled  $170,393 for this property all of which were capitalized as proved
     properties.  However, $117,543 was expensed to the provision for impairment
     of  long-lived  assets  because  the  estimated  fair  market  value of the
     property  was  less  than  its  carrying  amount  at  year  end  2002.

                                       17
<PAGE>

     In  April,  2002,  the  Company  acquired a 10% working interest in a Payne
     County,  Oklahoma  prospect.  The  initial  test  well was not a commercial
     producer  and  has been plugged and abandoned. No more drilling is planned.
     Total  2002  costs  of  $20,978 for this prospect were expensed, $14,508 as
     exploration  costs  and  $6,470  as  impairment  of undeveloped leaseholds.

     In  June  2002,  the  Company  acquired  a  16% working interest in a Woods
     County,  Oklahoma,  prospect.  An  exploratory test well was completed as a
     producer  in  July,  2002.  By  early  September,  it  had  stabilized at a
     production  rate  of  about 13 barrels of oil and 50 thousand cubic feet of
     gas  per  day. The well is being evaluated for a stimulation treatment. The
     Company participated in the leasing of 320 acres for a two year term in the
     640  acres  unit  as  "protection" acreage. There are no immediate plans to
     pursue  other leases in the unit. The Company has costs of $58,257 of which
     $3,464  were  capitalized  as  unproved  properties  and  $54,793 as proved
     properties.

     In June, 2002 the Company agreed to participate in a Woods County, Oklahoma
     prospect with an 18% working interest. A test well was started in November,
     2002,  and  completed  as  a gas producer in January, 2003. The Company had
     costs  of  $96,812  in  this  prospect  in  2002,  of  which  $28,719  were
     capitalized  as  unproved  properties  and  $68,093  as  proved properties.

     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. Costs of this prospect totaled $134,316 of which $1,988 were expensed
     as  exploration  costs and $132,328 were capitalized as proved properties.

     In  August  2002,  the  Company agreed to participate as a working interest
     owner  in  an increased density well on a Custer County, Oklahoma leasehold
     in which it has an approximate 1.04% working interest. The well was started
     in  September,  2002,  and  completed  as a gas producer in November, 2002.
     Total  expenditures  of  $13,714  were  capitalized  as  proved properties;
     however  $9,482 was expensed as an increase in the provision for impairment
     of  long-lived  assets  because  the  estimated  fair  market  value of the
     property  at  year  end  2002,  was  less  than  its  carrying  amount.

     In  September,  2002,  the Company agreed to participate in a Duval County,
     Texas, exploratory prospect with a 9% working interest. An exploratory test
     well  was drilled in November, 2002, and plugged and abandoned in December,
     2002. No additional drilling is planned. Total 2002 costs for this prospect
     were  $97,747  all of which were expensed, $27,254 as exploration costs and
     $70,493  as  impairment  of  undeveloped  leaseholds.

     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.  Both  prospects  are  in the initial development stage. The
     Company  will  attempt  to sell some of its interest prior to drilling test
     wells.  Drilling  is  not  likely  on  the  Bryan County prospect before 3D
     seismic  is acquired. In 2002, the Company purchased undeveloped leaseholds
     of  $31,619  for the Woods County prospect which is capitalized as unproved
     properties.  Normal  amortization  of  the undeveloped leasehold balance of
     $63,628  at  year  end  2002  totaled $29,826 for the two prospects and was
     charged  to  expense  by  an  increase  in  the provision for impairment of
     undeveloped  leaseholds.

     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

                                       18
<PAGE>

producing  gas  wells  and  two  saltwater  disposal  wells.  The agreement also
includes the drilling of an exploratory test well using the existing wellbore of
one  of  the  producing  wells  to  drill  a horizontal lateral hole to the test
location.  The  extent  of additional drilling is dependent upon the information
obtained from the test well. The wells and leaseholds for which the Company paid
$224,000,  are  acquisitions  for the year 2003. The Company will participate in
the drilling of the test well and any subsequent wells on an actual cost bearing
basis.  The  operator  anticipates  starting  operations  on the test well on or
before  April  1,  2003.

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 was $363,656 in
2002  and  $94,184  in  2001.  The  increase  in the provision for impairment is
directly  related  to  the  increase  in  exploration  activity  discussed under
"Exploration  Costs",  above.  The  most significant 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 10, 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 2002 and 2001.  The
2002  provision  was  the result of a decline in production of wells which first
produced in 2001 as well as wells completed in 2002 for which the estimated fair
market value of future production was less than the Company's carrying amount in
the  well.  The  2001 provision was to a great extent the result of a decline in
product  prices  which were used in computation of the properties estimated fair
market  value.

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  $240,581 in 2002  and  $249,764  in  2001.

General, Administrative and Other Expenses (G&A).  G&A increased $53,349 (8%) to
$724,820 in 2002 from $671,471 in 2001.  To a great extent, the increase was the
result of an increase in employee salaries and directors' fees of $20,533, legal
fees  of  $14,090  and  officers'  life  insurance  of $24,397.  The increase in
officers'  life  insurance  resulted because a one time adjustment by one of the
carriers  resulted  in  a  reduction  of  2001  net  premiums.

Equity  Earnings  (Loss)  in  Investees.  The following is an analysis of equity
earnings (loss) in investees by entity for the years ended December 31, 2002 and
2001.  See  the  subheading, "Equity Investments", above in this Item 6 for more
information.

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                  2002 Earnings
                                            Net Earnings (Loss)   Over (Under)
                                            -------------------
                                               2002      2001        2001
                                            --------   --------    ---------
<S>                                         <C>        <C>          <C>
     Broadway  Sixty-Eight,  Ltd.           $ 41,398    39,964        1,434
     Millennium  Golf  Properties,  LLC      (30,507)  (23,475)      (7,032)
     OKC  Industrial  Properties,  LC            559       454          105
     JAR  Investment,  LLC                   (26,793)  (17,888)      (8,905)
                                             -------   -------      -------
          Total                             $(15,343)     (945)     (14,398)
                                            ========   =======      =======
</TABLE>


Other Income (Loss), Net.  See Note 11, to the accompanying financial statements
for an analysis of the components of this line item for the years ended 2002 and
2001.  Other  Income  (Loss)  decreased $144,107 to a net loss of $8,091 in 2002
from  net  income  of  $136,016  in  2001.

Realized  and  unrealized  loss on trading securities decreased $40,708 (28%) to
$102,722 in 2002.  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  2002,  the  Company  had realized losses of
$47,788  and  unrealized  losses  of $54,934.  In 2001, the Company had realized
losses  of  $75,720  and  unrealized  losses  of  $67,710.

Accrual  basis  interest income decreased $146,845 (62%) to $89,355 in 2002 from
$236,200  in 2001.  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 2.73% to 1.86% in 2002 from 4.59% in 2001 and the average
balance  outstanding  declined $343,709 to $4,801,048 in 2002 from $5,144,757 in
2001.

Benefit from Income Taxes.  See Note 6, to the accompanying financial statements
for an analysis of the various components of income taxes.  Of note, 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 is the estimated benefit of capital loss
and net operating loss carrybacks of the estimated 2002 Federal income tax loss.
In  2001,  the  Company had an estimated tax benefit of $8,959 as a deferred tax
benefit  of  $36,325  exceeded  current  tax  expense  of  $27,366.












                                       20
<PAGE>

                                                                            Page
                                                                            ----
Item  7.   Financial Statements.

           Index to Financial  Statements.

           Report of Independent Certified Public
             Accountants - Grant Thornton LLP                                 22

           Balance Sheets - December 31, 2002 and 2001                        23

           Statements of Operations - Years Ended
             December 31, 2002 and 2001                                       25

           Statement of Stockholders' Equity -
             December 31, 2002 and 2001                                       26

           Statements of Cash Flows - Years Ended
             December 31, 2002 and 2001                                       27

           Notes to Financial Statements                                      29

           Unaudited Supplemental Financial Information                       40













                                       21
<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
(a  Delaware  corporation)  as  of  December  31, 2002 and 2001, 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, 2002 and 2001, 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 14, 2003






                                       22
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                                 BALANCE SHEETS

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                                           December  31,
                                                  -----------------------------
                                                     2002                2001
                                                  -----------       -----------
Current  Assets:
<S>                                               <C>               <C>
     Cash  and  Cash  Equivalents  (Note  2)      $   314,476       $   431,145
     Available for Sale Securities (Notes 2 & 5)    4,273,616         5,071,965
     Trading  Securities  (Notes  2  &  5)            158,247           259,160
     Receivables                                      281,223           247,485
     Refundable  Income  Taxes                        238,994           150,238
     Prepayments  &  Deferred  Income  Taxes           35,480            24,655
                                                  -----------       -----------
                                                    5,302,036         6,184,648
                                                  -----------       -----------

Investments:
     Equity Investments (Notes 2 & 7)                 521,393           534,886
     Other                                             15,298            15,298
                                                  -----------       -----------

                                                      536,691           550,184
                                                  -----------       -----------

Property, Plant & Equipment
  (Notes 2, 8, 10 & 12):
    Oil & Gas Properties, at Cost Based on the
      Successful Efforts Method of Accounting
      Unproved  Properties                            686,650           546,607
      Proved  Properties                            4,911,854         4,605,581
                                                  -----------       -----------

                                                    5,598,504         5,152,188

      Less - Valuation Allowance and Accumulated
        Depreciation, Depletion & Amortization      4,533,490         4,166,076
                                                  -----------       -----------

                                                    1,065,014           986,112
                                                  -----------       -----------

     Other  Property  &  Equipment,  at  Cost         340,497           340,496
       Less - Accumulated Depreciation &
         Amortization                                 172,570           160,533
                                                  -----------       -----------

                                                      167,927           179,963
                                                  -----------       -----------

                                                    1,232,941         1,166,075
                                                  -----------       -----------

Other  Assets                                         585,665           513,804
                                                  -----------       -----------

                                                  $ 7,657,333       $ 8,414,711
                                                  ===========       ===========
</TABLE>

(continued)

See  Accompanying  Notes

                                       23
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                                 BALANCE SHEETS


(concluded)

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

<TABLE>
<CAPTION>
                                                           December  31,
                                                  -----------------------------
                                                     2002                2001
                                                  -----------       -----------
Current  Liabilities:
<S>                                               <C>               <C>
     Accounts  Payable                            $   130,506       $    97,570
     Other  Current  Liabilities  -
       Deferred  Income  Taxes  and  Other             47,218            50,111
                                                  -----------       -----------
                                                      177,724           147,681
                                                  -----------       -----------

Dividends  Payable  (Note  3)                         151,439           140,827
                                                  -----------       -----------


Commitments  &  Contingencies  (Note  7)

Stockholders'  Equity  (Notes  3  &  4)
     Common  Stock                                     92,368            92,368
     Additional  Paid-in  Capital                      65,000            65,000
     Retained Earnings                              7,387,225         8,171,082
                                                  -----------       -----------

                                                    7,544,593         8,328,450

     Less  -  Treasury  Stock,  at  Cost              216,423           202,247
                                                  -----------       -----------
                                                    7,328,170         8,126,203
                                                  -----------       -----------

                                                  $ 7,657,333       $ 8,414,711
                                                  ===========       ===========
</TABLE>



See  Accompanying  Notes

                                       24
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
Operating  Revenues:
<S>                                                 <C>             <C>
     Oil  &  Gas  Sales                             $ 1,681,889     $ 2,435,214
     Lease  Bonuses  &  Other                            80,653           9,154
                                                    -----------     -----------
                                                      1,762,542       2,444,368
                                                    -----------     -----------

Operating  Costs  and  Expenses:
     Production                                         405,004         425,226
     Exploration                                        541,824         362,313
     Depreciation,  Depletion,  Amortization
       &  Valuation  Provisions                         950,188         861,350
     General,  Administrative  and  Other               724,820         671,471
                                                    -----------     -----------
                                                      2,621,836       2,320,360
                                                    -----------     -----------

Income  (Loss)  from  Operations                       (859,294)        124,008

Equity  Loss  in  Investees                             (15,343)           (945)

Other  Income  (Loss),  Net (Note 11)                    (8,091)        136,016
                                                    -----------     -----------

Income  (Loss) before Income Taxes                     (882,728)        259,079

Benefits from Income Taxes (Notes 2 & 6)               (265,852)         (8,959)
                                                    -----------     -----------

Net  Income  (Loss)                                 $  (616,876)    $   268,038
                                                    ===========     ===========

Per  Share  Data  (Note  2):

     Net Income (Loss), Basic and Diluted           $     (3.70)    $      1.60
                                                    ===========     ===========

     Cash  Dividends                                $      1.00     $      1.50
                                                    ===========     ===========

Weighted Average Shares Outstanding,
  Basic and Diluted                                     166,872         167,304
                                                    ===========     ===========
</TABLE>


See  Accompanying  Notes

                                       25
<PAGE>

                          THE RESERVE PETROLEUM COMPANY
                        STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE TWO YEARS ENDED DECEMBER 31, 2002


<TABLE>
<CAPTION>
                                                          Additional
                                            Common          Paid-in         Retained      Treasury
                                             Stock          Capital         Earnings        Stock
                                         ------------     ----------       ----------     ----------
<S>                                      <C>              <C>              <C>            <C>
Balance  at  January  1,  2001           $     92,368     $   65,000       $8,154,158     $(192,455)


     Net  Income                                  ---           ---           268,038           ---

     Cash  Dividends  on Common Stock             ---           ---          (251,114)          ---

     Purchase  of  Treasury  Stock                ---           ---               ---        (9,792)
                                         ------------     ---------        ----------     ---------

Balance  at December 31, 2001                  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)
                                         ============     =========        ==========     =========
</TABLE>



See  Accompanying  Notes



                                       26
<PAGE>

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

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
Cash  Flows  from  Operating  Activities:
  Cash  Received-
<S>                                                 <C>             <C>
    Oil  and  Gas Sales                             $ 1,644,071     $ 2,550,728
    Lease  Bonuses  and  Rentals                         80,653           9,154
    Agricultural  Rentals  & Other                        5,328           5,378
    Cash  Paid-
      Production  Costs                                (406,742)       (427,512)
      Exploration  Costs                               (529,533)       (383,704)
      General Suppliers, Employees and Taxes,
        Other than Income                              (736,364)       (718,253)
      Interest  Received                                103,086         313,785
      Interest  Paid                                    (11,250)        (11,250)
      Settlement  of  Class  Action  Lawsuits            32,927          85,504
      Dividends  Received  on  Trading
        Securities                                        1,024           1,947
      Purchase  of  Trading  Securities                (406,864)       (725,049)
      Sale  of  Trading  Securities                     405,055         722,830
      Income  Taxes Refunded (Paid)                     122,563        (296,104)
                                                    -----------     -----------
        Net  Cash  Provided  by  Operating
          Activities                                    303,954       1,127,454
                                                    -----------     -----------

Cash  Flows  from  Investing  Activities:
  Sale  and  Maturity  of  Available  for
    Sale  Securities                                  9,912,149      11,220,548
    Purchase of Available for Sale Securities        (9,113,801)    (11,341,236)
    Property  Dispositions                                1,447          67,170
    Property  Additions                              (1,043,023)       (733,106)
    Cash Distributions from Equity Investments           11,550           8,250
    Cash  Applied  to  Equity  Investments              (13,400)            ---
                                                    -----------     -----------

        Net Cash Applied to Investing Activities    $  (245,078)    $  (778,374)
                                                    -----------     -----------
</TABLE>


(Continued)

See  Accompanying  Notes

                                       27
<PAGE>

(Concluded)

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

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
Cash  Flows  Applied  to  Financing  Activities:
<S>                                                 <C>             <C>
     Dividends  Paid  to  Shareholders              $  (161,369)    $  (238,321)
     Purchase  of  Treasury  Stock                      (14,176)         (9,792)
                                                    -----------     -----------

       Total Cash Applied to Financing  Activities     (175,545)       (248,113)
                                                    -----------     -----------

Net  Change  in  Cash  and  Cash  Equivalents          (116,669)        100,967
Cash and Cash Equivalents at Beginning of Year          431,145         330,178
                                                    -----------     -----------

Cash and Cash Equivalents at End of Year            $   314,476     $   431,145
                                                    ===========     ===========

Reconciliation of Net Income (Loss) to Net
  Cash  Provided  by  Operating  Activities:
Net  Income  (Loss)                                 $  (616,876)    $   268,038
Net  Income  Increased  (Decreased)  by  -
     Net  Change  in  -
     Unrealized  Holding  Losses
       on  Trading  Securities                           54,934          67,710
     Accounts  Receivable                               (42,455)        118,653
     Interest  and  Dividends  Receivable                13,731          77,585
     Income  Taxes  Refundable/Payable                  (88,756)       (268,738)
     Accounts  Payable                                   47,494           1,035
     Trading  Securities                                 45,979          73,377
     Cash Value of Officers' Life Insurance             (28,153)        (50,613)
     Deferred  Taxes                                    (54,533)        (36,325)
     Gas  Balancing  Liabilities                          2,107             ---
     Equity  Losses  in  Investees                       15,343             945
     Disposition  of  Property  &  Equipment              4,951          14,437
     Depreciation,  Depletion,  Amortization
       and  Valuation  Provisions                       950,188         861,350
                                                    -----------     -----------

Net  Cash Provided  by Operating  Activities        $   303,954     $ 1,127,454
                                                    ===========     ===========
</TABLE>

See  Accompanying  Notes


                                       28
<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  10  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
     7  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.

                                       29
<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 2002 and two purchasers in 2001 whose purchases were in excess
     of 10% of total oil and gas sales. In 2002, the purchases were $175,475, or
     10.4%  of  total  oil  and  gas  sales  by  the one purchaser. In 2001, the
     purchases  were $332,916, or 14%, by one purchaser, and $320,891, or 13% by
     the  other.

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

     The  preparation  of  the financial statements in conformity with generally
     accepted  accounting  principles  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.





                                       30
<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,  2001,  $.50
     par  value  stock,  400,000
<S>                                    <C>            <C>           <C>
     shares  authorized                184,735.28     17,296.55     167,438.73

     Purchase  of  stock                      ---        306.00        (306.00)
                                       ----------     ---------     ----------

     December  31,  2001,  $.50
     par  value  stock,  400,000
     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
                                       ==========     =========     ==========
</TABLE>

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

     At  December  31,  2002 and 2001, 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,  2002:

<TABLE>
<CAPTION>
<S>                                                 <C>
     Due  within  one  year  or  less               $     4,073,616
                                                    ===============

     Due  within  one  to  five  years              $       200,000
                                                    ===============
</TABLE>

     In  2002,  a  sale  of a U.S. Treasury bill for $299,911 resulted in an $89
     loss.  In  2001  an  early  withdrawal  of  $100,000 from a no penalty bank
     certificate  of  deposit  resulted  in  no  gain  or  loss.

     As  to  the  trading securities held at year end, unrealized trading losses
     included  in  earnings  were  $54,934  in  2002  and  $67,710  for  2001.





                                       31
<PAGE>

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

     Components  of  deferred  taxes  follow:

<TABLE>
<CAPTION>
                                                           December  31,
                                                  -----------------------------
                                                     2002                2001
                                                  -----------       -----------
     Assets:
<S>                                               <C>               <C>
          Leasehold  Costs                        $   202,861     $   159,763
          Gas  Balancing  Receivable                   52,379          52,379
          Long-Lived  Asset  Impairment               215,180         256,524
          Marketable  Securities                       69,155          50,478
          Equity  Investments  and  Other               8,271           4,092
                                                  -----------     -----------
               Total  Assets                          547,846         523,236

          Valuation  Allowance                            ---             ---
                                                  -----------     -----------

               Total  Assets,  Net  of
                 Valuation  Allowance                 547,846         523,236
                                                  -----------     -----------

     Liabilities
       Receivables                                     39,301          31,448
       Intangible  Development  Costs                 325,063         362,839
                                                  -----------     -----------

               Total  Liabilities                     364,364         394,287
                                                  -----------     -----------


     Net  Deferred  Tax  Asset                    $   183,482     $   128,949
                                                  ===========     ===========

     Change in Valuation Allowance for the Year   $       ---     $       ---
                                                  ===========     ===========
</TABLE>


     The  following table summarizes the current and deferred portions of income
     tax expense.
<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
     Current  Tax  Provision  (Benefit):
<S>                                                 <C>             <C>
          Federal                                   $  (211,319)    $    27,366
          State                                             ---             ---
                                                    -----------     -----------
                                                       (211,319)         27,366
      Deferred  Benefit                                 (54,533)        (36,325)
                                                    -----------     -----------

Total  Benefit                                      $  (265,852)    $    (8,959)
                                                    ===========     ===========
</TABLE>


                                       32
<PAGE>



     The  total  benefit  from  income  tax  expressed as a percentage of income
     (loss)  before  income  tax  was  30% in 2002 and 3% in 2001. These amounts
     differ  from  the  amounts  computed  by  applying the statutory US Federal
     income  tax  rate  of  35% for 2002 and 2001 to income before income tax as
     summarized  in  the   following  reconciliation:

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
     Computed  Federal  Tax
<S>                                                 <C>             <C>
          Provision  (Benefit)                      $  (308,955)    $    90,678

     Increase  (Decrease)  in  Tax  From:

          Allowable Depletion in Excess of Basis            ---         (75,342)

          Non-conventional  Fuel Credit                     ---          (9,191)

          Corporate  Graduated  Tax  Rate
               Structure                                 40,850         (10,216)

          Dividend  Received  Deduction                    (251)           (477)

          Other                                           2,504          (4,411)
                                                    -----------     -----------

     Benefit  from  Income  Tax                     $  (265,852)    $    (8,959)
                                                    ===========     ===========

     Effective  Tax  Rate                                    30%              3%
                                                    ===========     ===========
</TABLE>












                                       33

<PAGE>

Note 7 - INVESTMENTS  AND  RELATED  COMMITMENTS  AND  CONTINGENT  LIABILITIES
         --------------------------------------------------------------------

     The  Company  has a 33% interest in Broadway Sixty-Eight, Ltd., an Oklahoma
     limited partnership (the Partnership). The Partnership had assets in excess
     of  liabilities  of  $781,056  and $690,606, at December 31, 2002 and 2001,
     respectively,  and  its  net income for the periods then ended was $125,450
     and  $121,103.

     The  Partnership  was  organized for the purpose of owning and operating an
     office  building  which  was  constructed  in Oklahoma City, Oklahoma, at a
     total  cost for the land and building of approximately $2,300,000. Although
     the  Company  invested  as  a limited partner, along with the other limited
     partners,  it  agreed  jointly  and  severally  with  all the 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  office  building  is  financed  by  a  mortgage loan with a balance of
     $202,186  at  December  31, 2002. The loan matures in 2005 with interest at
     New  York prime rate. The loan is collateralized by a first mortgage on the
     land  and  building,  and  the  assignment  of  leases  and  rents.

     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,  2002  and  2001.

     The  Company  has  a  9%  interest  in   Millennium  Golf  Properties,  LLC
     (Millennium),  an  Oklahoma  limited liability company. Millennium 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.  River Oaks Golf Course, purchased in 1999, has
     been  extensively  renovated.  The  River  Oaks  purchase,  renovations and
     related real estate development are financed by loans collateralized by the
     land  and  buildings of both Coffee Creek and River Oaks. The loans totaled
     $2,586,858  at  December  31, 2002. At December 31, 2002, the Company's net
     equity  in  Millennium  was $83,778 as compared to $114,285 at December 31,
     2001.

     In  December,  1992, the Company invested $90,000 for a 10% interest in OKC
     Industrial Properties, L.L.C., (OKC) an Oklahoma limited liability company,
     which  was  formed  to purchase and hold certain Oklahoma City metropolitan
     area  real estate as an investment. At December 31, 2002, the Company's net
     equity in the limited liability company was $61,145, compared to $60,588 at
     December  31, 2001.

     In  December, 2000, the Company invested $150,000 for a 25% interest in JAR
     Investment,  LLC,  an Oklahoma limited liability company. The LLC purchased
     Oklahoma  City metropolitan area real estate to be improved for sale and/or
     lease. The purchase price of $1,050,000 was financed by a $550,000 variable
     rate  mortgage  loan  with  the  initial rate at 8.5% and the LLC's initial
     capital contributions of $600,000 towards the purchase price, closing costs
     and  interest  maintenance  reserve.

     In  October 2002  JAR entered into a joint venture with the owners of Tan &
     Tone America to develop an approximate 15,000 square foot retail/commercial
     center  on  1.77  acres  of  JAR's  land. The joint venture was established

                                       34
<PAGE>

     through  the  formation of Main-Eastern, LLC, an Oklahoma limited liability
     company,  in  which  a  70%  management  interest is owned by JAR and a 30%
     investor  interest  will be earned by the owners of Tan and Tone America by
     fulfilling  the  terms  of  the  Main-Eastern,  LLC operating agreement. In
     November,  2002, the manager of Main-Eastern LLC, negotiated a construction
     loan  with  a  local,  Oklahoma  City,  bank in the amount of $970,000 with
     interest at New York prime rate as stated in the "Wall Street Journal". The
     rate  upon  inception of the loan on November 27, 2002 was 4.25% per annum.

     The Company has signed continuing guaranty agreements for the loans of both
     JAR  and Main-Eastern, LLC. These guaranty agreements are limited to 25% of
     outstanding loan and interest of JAR, or $112,500 at December 31, 2002, and
     25%  of  JAR's 70% interest in Main-Eastern LLC's outstanding loan plus all
     costs  and  expenses  related to enforcement and collections, or $36,778 at
     December  31,  2002,  for  total  loan  guarantees of $149,278. The maximum
     potential  amount  of  future  payments (undiscounted) the Company could be
     required  to make under the guarantees is $307,250, plus costs and expenses
     related  to  enforcement and collections. JAR's loan agreement is currently
     renewed  annually  because  of  the favorable financing costs and pending a
     decision  by  the   manager  whether  to   hold  the   property  long-term.
     Main-Eastern,  LLC's  loan  agreement  has a 12 month construction phase in
     which  interest only will be payable monthly. After the construction phase,
     a  loan  will  be  set on a 60 month balloon with payments computed on a 15
     year  amortization.

     JAR's  financial  statements  at  December 31, 2002, showed total assets of
     $1,034,665  and  total  members'  equity  of  $474,778.  For the year ended
     December  31,  2002,  JAR incurred a net loss of $85,967. The Company's net
     equity in JAR was $118,719 at December 31, 2002, as compared to $132,112 at
     December  31,  2001.

Note 8 -  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,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
     Acquisition  of  Properties
<S>                                                 <C>             <C>
          Unproved                                  $   461,636     $   163,002

          Proved                                    $       ---     $       ---

     Exploration  Costs                             $ 1,103,835     $   863,944

     Development  Costs                             $    20,485     $    66,058
</TABLE>


Note 9 - FINANCIAL  INSTRUMENTS
         ----------------------

     The following table includes various estimated fair value information as of
     December  31,  2002  and  2001,  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.

                                       35
<PAGE>

     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.

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

<TABLE>
<CAPTION>
                                              2002                    2001
                                      ---------------------   ---------------------
                                      Carrying    Estimated   Carrying    Estimated
                                       Amount    Fair Value    Amount    Fair Value
                                      --------   ----------   --------   ----------
     Financial  Assets
<S>                                  <C>         <C>         <C>         <C>
       Cash and Cash Equivalents     $  314,476  $  314,476  $  431,145  $  431,145
       Available for Sale Securities  4,273,616   4,273,616   5,071,965   5,071,965
       Trading  Securities              158,247     158,247     259,160     259,160
     Financial  Liabilities
          Dividends  Payable           (161,439)   (161,439)   (155,827)   (155,827)
</TABLE>


Note 10 - 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 $333,914 for the year ended December 31, 2002,
     and  $507,565  for  the  year  ended December 31, 2001, are included in the
     Statements  of  Operations  in  the  line  item,  Depreciation,  Depletion,
     Amortization  and  Valuation Provisions.


                                       36
<PAGE>

Note 11 - OTHER  INCOME  (LOSS),  NET
          ---------------------------

     The  following is an analysis of the components of Other Income (Loss), Net
     for  the  years  ended  2002  and  2001:

<TABLE>
<CAPTION>
                                                         2002         2001
                                                     -----------  -----------
       Realized  and  Unrealized  (Loss)
<S>                                                  <C>          <C>
         On  Trading  Securities                     $ (102,722)  $ (143,430)
         Gain  (Loss)  on  Asset  Sales                   1,247      (14,437)
         Interest  Income                                89,355      236,200
         Settlements of Class Action Lawsuits            32,926       85,504
         Agricultural  Rental  Income                     5,600        5,600
         Dividend  and  Other  Income                     1,024        2,050
         Interest  and  Other  Expenses                 (35,521)     (35,471)
                                                     ----------   ----------
              Other Income (Loss), Net               $   (8,091)  $  136,016
                                                     ==========   ==========
</TABLE>




                                       37
<PAGE>

Note 12 - FUTURE  EFFECT  OF  RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS
          ----------------------------------------------------------------

     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.
     Subsequently,  the  asset  retirement  cost  should be allocated to expense
     using  a  systematic  and  rational  method.  SFAS No. 143 is effective for
     fiscal  years  beginning  after June 15, 2002. The Company has assessed the
     impact of SFAS No. 143. Based on the results of the assessment, the Company
     does  not  believe  the  impact  of  this statement will be material to its
     financial  position  or  results  of  operations.

     Accounting  for  Costs  Associated  with  Exit  or  Disposal  Activities
     ------------------------------------------------------------------------

     In  June  2002,  the  FASB  issued  Statement  146, "Accounting  for  Costs
     Associated  with  Exit  or  Disposal  Activities".  This statement requires
     entities  to  recognize  costs  associated with exit or disposal activities
     when  liabilities  are  incurred  rather than when the entity commits to an
     exit  or disposal plan, as currently required. Examples of costs covered by
     this  guidance  include  one-time  employee  termination benefits, costs to
     terminate  contracts  other  than  capital  leases,  costs  to  consolidate
     facilities  or  relocate  employees,  and  certain  other  exit or disposal
     activities.  This  statement  is effective for fiscal years beginning after
     December  31,  2002,  and  will  impact any exit or disposal activities the
     Company  initiates  after  that  date.


     Accounting  for  Debt  Extinguishments
     --------------------------------------

     In  April  2002,  the  FASB  issued  Statement  145,  "Rescission  of  FASB
     Statements  4,  44,  and  64, Amendment of FASB Statement 13, and Technical
     Corrections"  (SFAS  145).  Among  other provisions, SFAS 145 rescinds FASB
     Statement  4,  Reporting  Gains  and  Losses  from  Extinguishment of Debt.
     Accordingly,  gains  or  losses  from  extinguishment of debt should not be
     reported  as  extraordinary items unless the extinguishment qualifies as an
     extraordinary  item  under  the  criteria  of  Accounting  Principles Board
     Opinion  30,  "Reporting the Results of Operations-Reporting the Effects of
     Disposal  of  a  Segment  of  a  Business,  and  Extraordinary, Unusual and
     Infrequently  Occurring  Events and Transactions" (APB 30). Gains or losses
     from  extinguishment  of  debt,  which  do not meet the criteria of APB 30,
     should  be  reclassified  to income from continuing operations in all prior
     periods  presented. The provisions of SFAS 145 will be effective for fiscal
     years beginning after May 15, 2002. The Company has not previously reported
     such  extraordinary items and does not anticipate that any reclassification
     will be required.

     Accounting  for  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 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 applies prospectively to guarantees the Company issues or
     modifies  subsequent  to  December  31,  2002,  but  has certain disclosure
     requirements effective for interim and annual periods ending after December
     15,  2002. The Company has historically issued guarantees only on a limited
     basis  and  does  not  anticipate FIN 45 will have a material effect on its
     2003  financial  statements. Disclosures required by FIN 45 are included in
     Note  7  to  these  financial  statements.

     Variable  Interest  Entities
     ----------------------------

     In  January  2003,  the  FASB  issued  FASB  Interpretation  46  (FIN  46),
     "Consolidation of  Variable  Interest  Entities.    FIN  46  clarifies  the
     application  of  Accounting  Research  Bulletin  51, Consolidated Financial
     Statements",  for  certain  entities  that do not have sufficient equity at
     risk  for  the  entity   to  finance  its  activities  without   additional
     subordinated  financial  support  from  other  parties  or  in which equity
     investors  do  not  have  the  characteristics  of  a controlling financial
     interest  ("variable interest entities"). Variable interest entities within
     the  scope  of  FIN  46

                                       38
<PAGE>

     will  be  required  to  be  consolidated  by their primary beneficiary. The
     primary  beneficiary  of a variable interest entity is determined to be the
     party  that  absorbs a majority of the entity's expected losses, receives a
     majority  of  its  expected returns, or both. FIN 46 applies immediately to
     variable  interest entities created after January 31, 2003, and to variable
     interest  entities  in  which  an enterprise obtains an interest after that
     date. It applies in the first fiscal year or interim period beginning after
     June 15, 2003, to variable interest entities in which an enterprise holds a
     variable  interest that it acquired before February 1, 2003. The Company is
     in  the  process  of  determining  what impact, if any, the adoption of the
     provisions  of  FIN 46 will have upon its financial condition or results of
     operations.  Certain transitional disclosures are required by FIN 46 in all
     financial  statements  initially  issued  after  January  31, 2003 if it is
     reasonably  possible  that  a  variable interest holder will be required to
     consolidate  an  existing  variable interest entity upon application. Based
     on  the  Company's  current  analysis  the   Company  is  not  the  primary
     beneficiary  of  any  variable  interest  entity  at  December  31,  2002.
























                                       39
<PAGE>







                  UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION



























                                       40

<PAGE>
                                                         SUPPLEMENTAL SCHEDULE 1


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

<TABLE>
<CAPTION>
                                                      Year  Ended  December  31,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
Oil  &  Natural  Gas  Liquids  (Bbls)
<S>                                                 <C>             <C>
     Proved  Developed  and
       Undeveloped  Reserves
         Beginning  of  Year                             34,598          30,179

         Revisions  of  Previous  Estimates              (4,810)         (2,405)

         Extensions  and  Discoveries                     9,919          13,819

         Production                                      (8,526)         (6,995)

         Sale  of  Reserves  in  Place                      ---             ---
                                                    -----------     -----------
         End  of  Year                                   31,181          34,598
                                                    ===========     ===========

     Proved  Developed  Reserves
          Beginning  of  Year                            34,598          30,179

          End  of  Year                                  31,181          34,598

Gas  (MCF)

     Proved  Developed  and  Undeveloped
          Reserves  Beginning  of  Year               1,149,390       1,353,127

          Revisions  of  Previous  Estimates            (12,031)        (56,495)

          Extensions  and  Discoveries                  120,453         118,997

          Production                                   (187,432)       (266,239)

          Sale  of Reserves in Place                        ---             ---
                                                    -----------     -----------

          End  of  Year                               1,070,380       1,149,390
                                                     ==========     ===========

     Proved  Developed  Reserves
          Beginning of Year                           1,149,390       1,353,127

          End  of  Year                               1,070,380       1,149,390
</TABLE>


(continued)

See  notes  on  next  page

                                       41
<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  15,446 Bbls of oil and 202,512 MCF of gas for the year
          ended December 31, 2002, and 17,549 Bbls of oil and 214,298 MCF of gas
          for  the  year  ended  December  31,  2001.

      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, 2002 and 2001. 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.














                                       42
<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,
                                                    ---------------------------
                                                        2002            2001
                                                    -----------     -----------
<S>                                                 <C>             <C>
Future  Cash  Inflows                               $ 5,107,094     $ 3,105,709
Future  Production  and
     Development  Costs                              (1,644,296)     (1,204,474)

Future  Income  Tax  Expense                           (970,771)       (516,700)
                                                    -----------     -----------
Future  Net  Cash  Flows                              2,492,027       1,384,535

     10%  Annual  Discount  for
     Estimated  Timing  of  Cash  Flows                (760,160)       (419,950)
                                                    -----------     -----------

Standardized  Measure  of  Discounted
     Future  Net  Cash  Flows                       $ 1,731,867     $   964,585
                                                    ===========     ===========
</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.



                                       43
<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,
                                                    ----------------------------
                                                        2002            2001
                                                    -----------     -----------
Standardized  Measure,
<S>                                                 <C>             <C>
     Beginning  of  Year                            $   964,585     $ 3,376,431

     Sales  and  Transfers,  Net  of
       Production  Costs                               (371,849)       (858,264)

     Net  Change  in  Sales  and  Transfer
       Prices,  Net  of  Production  Costs            1,093,861      (2,993,953)

     Extensions,  Discoveries  and  Improved
       Recoveries,  Net  of  Future  Production
       and  Development  Costs                          338,546         257,921

     Revisions  of  Quantity  Estimates                 (66,647)        (86,434)

     Accretion  of  Discount                            132,452         476,937

     Net Change  in  Income  Taxes                     (314,656)      1,033,010

     Changes  in  Production  Rates
       (Timing)  and  Other                             (44,425)       (241,063)
                                                    -----------     -----------

Standardized  Measure,
     End  of  Year                                  $ 1,731,867     $  964,585
                                                    ===========     ==========
</TABLE>




                                       44
<PAGE>


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

Not  Applicable


                                    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, 2003 in
connection  with  its  annual  stockholders' meeting to be held on May 27, 2003.

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

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.
<TABLE>
<CAPTION>
Exhibit                                            S.E.C.               Exhibit
Reference       Description                    Report  (Date)           Number             Page

     3.1     *Restated Certificate of
              Incorporation  dated
<S>                                            <C>                        <C>               <C>
              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

    99        Chief  Executive  Officer's
              Certification  pursuant  to
              Section 906 of the Sarbanes-
              Oxley  Act  of  2002             10-KSB  (12/02)           99.1               50


                                       45
<PAGE>

    99        Chief  Financial  Officer's                                                   51
              Certification  pursuant  to
              Section 906 of the Sarbanes-
              Oxley  Act  of  2002             10-KSB  (12/02)           99.2
</TABLE>


(b).          Reports  on  Form  8-K.

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

Item  14.     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 Company's disclosure controls and procedures were evaluated by the Principal
Executive Officer and the Principal Financial Officer on January 6, 2003, a date
within 90 days of the filing date of 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.
       --------------------------------

There  have been no significant changes in the Company's internal controls or in
other  factors  that could significantly affect these controls subsequent to the
date  of  their  evaluation,  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.


                                       46
<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)



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




                                       /s/     Jerry L. Crow
                                       -----------------------------------------
                                   By:         Jerry L. Crow, 2nd Vice President
                                   (Principal Financial and Accounting  Officer)


Date:  March  25,  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  W.  McLain                   /s/     Jerry  L.  Crow
-----------------------------------         ------------------------------------
Mason  W.  McLain  (Director)               Jerry  L.  Crow  (Director)
March  25,  2003                            March  25,  2003



/s/     Robert  L.  Savage                  /s/  William  M.  Smith
-----------------------------------         ------------------------------------
Robert  L.  Savage  (Director)              William  M.  Smith  (Director)
March  25,  2003                            March  25,  2003




                                       47
<PAGE>
                                 CERTIFICATIONS


I,  Mason  McLain,  certify  that:

1.   I have  reviewed  this  annual  report  on  Form  10-KSB  of  The  Reserve
     Petroleum  Company;

2.   Based  on  my  knowledge,  this  annual report  does not contain any untrue
     statement  of  material  fact or omit to state a material fact necessary to
     make  the  statements  made, in light of the circumstances under which such
     statements  were made, not misleading with respect to the period covered by
     this  annual report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included in this annual report, fairly present in all material
     respects  the financial condition, results of operations, and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and  I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
        information relating  to  the  registrant,  including  its  consolidated
        subsidiaries, is made known  to  us  by  others  within  those entities,
        particularly during the period in which  this  annual  report  is  being
        prepared;

     b) evaluated the  effectiveness of the registrant's disclosure controls and
        procedures as of a  date within 90 days prior to the filing date of this
        annual report  (the  "Evaluation  Date")'  and

     c) presented in  this annual report our conclusions about the effectiveness
        of the disclosure controls  and procedures based on our evaluation as of
        the Evaluation  Date;

5.   The registrant's  other certifying  officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent functions):

     a) all  significant  deficiencies   in  the design or operation of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for   the  registrant's  auditors  any  material  weakness  in  internal
        controls;  and

     b) any  fraud,  whether  or not material, that involves management or other
        employees  who have a significant  role  in  the  registrant's  internal
        controls;  and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether  or  not there were significant changes in internal
     controls  or  in  other  factors  that  could significantly affect internal
     controls  subsequent  to  the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  March  25,  2003
       ----------------

                                           /s/  Mason  McLain
                                           -------------------------------------
                                           Mason  McLain
                                           Principal  Executive  Officer


                                       48
<PAGE>
                                 CERTIFICATIONS


I,  Jerry  L.  Crow,  certify  that:

1.   I have  reviewed  this  annual  report  on  Form  10-KSB  of  The  Reserve
     Petroleum  Company;

2.   Based  on  my  knowledge,  this  annual report  does not contain any untrue
     statement  of  material  fact or omit to state a material fact necessary to
     make  the  statements  made, in light of the circumstances under which such
     statements  were made, not misleading with respect to the period covered by
     this  annual report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included in this annual report, fairly present in all material
     respects  the financial condition, results of operations, and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and  I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
        information relating  to  the  registrant,  including  its  consolidated
        subsidiaries, is made known  to  us  by  others  within  those entities,
        particularly during the period in which  this  annual  report  is  being
        prepared;

     b) evaluated the  effectiveness of the registrant's disclosure controls and
        procedures as of a  date within 90 days prior to the filing date of this
        annual report  (the  "Evaluation  Date")'  and

     c) presented in  this annual report our conclusions about the effectiveness
        of the disclosure controls  and procedures based on our evaluation as of
        the Evaluation  Date;

5.   The registrant's  other certifying  officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent functions):

     a) all  significant  deficiencies   in  the design or operation of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for   the  registrant's  auditors  any  material  weakness  in  internal
        controls;  and

     b) any  fraud,  whether  or not material, that involves management or other
        employees  who have a significant  role  in  the  registrant's  internal
        controls;  and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether  or  not there were significant changes in internal
     controls  or  in  other  factors  that  could significantly affect internal
     controls  subsequent  to  the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  March  25,  2003
       ----------------
                                      /s/  Jerry  L.  Crow
                                      ------------------------------------------
                                      Jerry  L.  Crow
                                      Principal Financial and Accounting Officer


                                       49
<PAGE>

                                                                    Exhibit 99.1




                            CERTIFICATION PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



Pursuant  to  18 U.S.C.  1350 (as adopted pursuant to  906 of the Sarbanes-Oxley
Act  of  2002),  I,  the  undersigned,  hereby  certify  that  to the best of my
knowledge  the Annual Report on Form 10-KSB of The Reserve Petroleum Company for
the  fiscal year ended  December 31, 2002 (the "Report") fully complies with the
requirements  of  section  13(a) or 15(d) of the Securities Exchange Act of 1934
and  that  the  information  contained  in  the  Report  fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Company.





Date:     March  25,2003                  /s/  Mason  McLain
                                          --------------------------------------
                                          Mason  McLain,  President
                                          (Chief  Executive  Officer)














                                       50
<PAGE>


                                                                    Exhibit 99.2




                            CERTIFICATION PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



Pursuant  to  18 U.S.C.  1350 (as adopted pursuant to  906 of the Sarbanes-Oxley
Act  of  2002),  I,  the  undersigned,  hereby  certify  that  to the best of my
knowledge the  Annual Report on Form 10-KSB of The Reserve Petroleum Company for
the  fiscal year ended  December 31, 2002 (the "Report") fully complies with the
requirements  of  section  13(a) or 15(d) of the Securities Exchange Act of 1934
and  that  the  information  contained  in  the  Report  fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Company.









Date:      March  25,  2003           /s/  Jerry  L.  Crow
                                      ------------------------------------------
                                      Jerry  L.  Crow
                                      2nd  Vice  President,  Secretary/Treasurer
                                      (Chief  Financial  Officer)






                                       51