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

                                FORM 10-KSB

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


                For the fiscal year ended December 31, 1997

                      Exchange Act File No.:  0-20760


              PETRO UNION, INC. d/b/a Horizontal Ventures, Inc. 
           Exact name of Registrant as specified in its charter


      Colorado                              84-1091986         
State or other jurisdiction        I.R.S. Employer Identification
incorporation or organization                 Number

575 Madison Avenue, Suite 1006
New York, New York                            10022
Address of principal executive offices       Zip Code

Registrant's telephone number, including area code: (212) 605-
0470

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

Securities registered pursuant to Section 12(g) of the Act:
                No Par Value Common Stock.

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such
filing requirements for the past 90 days.                  
YES  (X)     NO ( )

Indicate by check mark if there is no 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 the Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB.             ( X )

Registrant's revenues for its most recent fiscal year: $211,696.

As of April 13, 1998, the aggregate market value of the common
stock of Petro Union, Inc. held by nonaffiliates was
approximately:  $16,270,198.

                                        Number of Shares
                                          Outstanding
    Class                                March 31, 1998 

Common Stock, No par value               1,570,981



                DOCUMENTS INCORPORATED BY REFERENCE
Part III is incorporated by reference into the Company's Proxy
Statement for the annual meeting to be filed during April, 1998. 

Transitional Small Business Disclosure Format.    
Yes      No  ( X )


                                  PART I

Item 1.  Description of Business.

Company Overview

   During 1997, Petro Union, Inc.(the "Company" or the
"Registrant") and all its subsidiaries were essentially dormant
pending reorganization and emergence from bankruptcy. During this
period of dormancy, management focused all its efforts on its
plan of reorganization, acquisitions and mergers, and
restructuring the new combined business to its new plan of
operation and strategy. The Plan of reorganization was approved
in bankruptcy court on August 28th, 1997 and case closed on March
26th, 1998 following successful implementation of all the
objectives under the new management team.

The Company's objective and strategy is firmly focused on its
license to a niche technology developed and patented by Amoco for
horizontal drilling. As the first two licensees of the
technology, the Company's personnel were instrumental in
successfully implementing and applying the technology in the
field and have continued field enhancements to the technology
since inception.

Business Strategy  

The Company's mission is to provide shareholder value through
becoming an industry leader in exploiting declining production
wells by capitalizing on its experience and field knowledge to a
low cost horizontal drilling technology, developed by and
patented by Amoco Corporation, to significantly boost production
rates. Horizontal drilling, used in re-developing older
reservoirs, increases the recoverable oil in place due to various
characteristics, such as, a greater exposure of the reservoir to
the well bore. Primary recovery methods leave over 80% of the oil
in place leaving significant reserves to be exploited. 

The Company has a two-prong approach capitalizing on this niche
technology to obtain its objective and growth: Exploitation &
Production and Contract Services.

Exploitation & Production: Numerous mature fields worldwide are
experiencing declining production and even more have been
abandoned. Even after the latest recovery methods are applied,
vast oil resources are left unrecovered due to unfavorable
economics. The Company having amassed the most experience in the
industry for applying Amoco's technology, has a low risk, high
reward business plan focused on acquiring fields with proven
producing wells and applying this niche technology to exploit and
produce the remaining reserves. By targeting these mature fields
with the entire production infrastructure in place, the Company
substantially reduces the capital costs for production relative
to its drilling program. Furthermore, the existing and historical
production providing actual reservoir performance along with the
comprehensive geological evaluations essentially confirms the
targeted zones eliminating the risks to drilling dry holes.

The Company intends to reactivate existing producing fields that
have reached their economic limit. The application of the its
short radius horizontal drilling technology in untapped
reservoirs within the productive reach of an existing well bore
or in a reservoir that may have inefficient characteristics at
the vertical bore, which can lead to a several fold increase in
production rates. Increasing production rates through such
enhancement programs will provide significantly favorable effects
to the reserve valuations and relative net present value. The
Company made its first such acquisition in September 1997.

The added strain to the operators of such mature fields as a
result of the declining oil prices helps facilitate these
acquisitions under favorable terms and further reduces the
capital requirements to the Company.

Contract Services: In the last three years that the technology
has been commercialized in the industry, the Company has drilled
over forty wells for various clients such as Chevron, Texaco,
Exxon, OXY, Oklahoma Natural Gas to name a few. The Company
intends to continue providing its services to the industry on a
contract basis. Such contract services are to be scheduled with
coordination to the Company's internal drilling programs thus
enhancing the productivity and efficiency of its service rigs and
crews. Contract services are targeted to begin in the late second
quarter of 1998. 

Exploration Strategy: In addition to its exploitation, production
and contract services activities, the Company is building a
portfolio of exploration prospects where the technical expertise
in horizontal drilling adds substantially to its reserve base and
provides for internal drilling programs. Exploration drilling
involves substantially more risk than exploitation and
development drilling which is the Companies primary focus. The
Companies existing prospects have multiple pay objectives and are
commonly located in association with existing producing fields
where the management has expertise or previous experience. The
Company plans to invest a small portion of its cash flow in
exploration ventures.  


Horizontal Drilling: Horizontal drilling has become widely
accepted as a standard option for exploiting oil & gas resources.
The principle advantage of horizontal drilling is that it results
in a substantially greater surface area for drainage, and thus
extraction of the oil from the reservoir. In industry terms this
is referred to as communicating zones of permeability. The unique
method of reentering a well and horizontal drilling patented by
Amoco and licensed to the Company, has the ability to turn while
drilling causing a vertical well to be horizontal in as little as
twenty-five feet. Thus this technology provides considerable
flexibility to the geologists and engineers in designing their
well plans around geological formation and reservoir constraints
to achieve the maximum performance. Furthermore, this technique
facilitates multi-laterals off an existing well bore avoiding
costly drilling of new wells and has considerable advantages in
shallow reservoirs where the traditional horizontal tools cannot
be utilized due to their larger radius requirements and related
economics. 

Drilling horizontal laterals has the potential to: tap fresh oil
by intersecting fractures, penetrating pay discontinuities and
drain up-dip traps, correct production problems such as water
coning, gas coning, and excessive water cuts from hydraulic
fractures which extend below the oil-water contact, and
supplement enhanced secondary and tertiary oil recovery
techniques.

The most common method of drilling a curved borehole utilizes a
mud-motor to rotate the drill bit. This is often too expensive to
be economical for re-entries in mature fields with well bore
casings less than 5 1/2 inches. The lack of a cost-effective method
to increase production in mature wells led Amoco Corporation to
devote significant resources in research and development in this
area. The result was the development of it's patented short
radius horizontal drilling system. The primary advantages of the
Amoco drilling system are its short radius of curvature, costs
approximately one-fifth of mud motors, takes only ten days to
drill and yet provides all the benefits of a horizontal well. 

Short Radius Rotary Steerable Horizontal Drilling:

     The Amoco system is capable of drilling a 3.875" inch hole
from inside 4.5" inch casing, or a 4.5" hole from inside 5.5"
casing and larger.  The radius of curvature ranges from 30 feet
and up, with lateral departures up to 1,000 feet.  Multiple
laterals can be drilled in opposing directions or in the same
direction, with kick-off points spaced a minimum of eight feet
apart.  Compatibility with any circulating medium including mud,
foam or air mist allows for a variety of applications.

     The system consistently drills a predictable radius of
curvature in the desired direction, resulting in a smoother
planar well bore, which facilitates drilling the lateral and
completing the well.  Vertical target accuracy is plus or minus
two feet, and azimuth is plus or minus 20 degrees.

     The system is rotary steerable, and there are no mud motors,
steering tools or MWD tools.  The system is purely mechanical and
very simple in design.

     The Amoco bit is an anti-whirl, bi-center, low-friction PDC
bit. Consistent and reliable angle build and improved directional
control is a result of stabilizing the PDC bit to continually
point along a curved path.  The design of the bit enables it to
cut only in the direction it is pointed. The cutters are
positioned so that they direct a lateral force toward a smooth
pad on the gauge of the bit, which contracts the bore hole and
acts as a bearing by transmitting a restoring force to the bit. 
This force rotates with the bit, continually pushing a side of
the bit that does not have gauge cuter chips against the bore
hole wall.  This design minimizes the side cutting action that is
typically observed with PDC bits and results in consistent well
bore diameter.

     The system drills a curved path by continually pointing the
bit along a tangent to the curved path.  A contact point on the
bit and smooth contact ring at the flexible knuckle joint
establishes two contact points and controls the bit tilt.  Tool
design tilt allows the curve assembly to run smoothly, drill a
hole uniform in diameter, and negates the effects of varying
lithology changes.  Various radii of curvatures are easily
obtained by increasing or decreasing the distance between the two
contact points.

     Azimuth or target direction is established by gyro
orientation of the eccentric deflection sleeve.  Once oriented in
the desired direction, the gyro is released and orientation is
monitored by pump pressures at the surface.  These signals are
monitored throughout the curve drilling process, as repositioning
of the sleeve is required to maintain target direction.

     Lateral drilling is strictly a rotary process.  The lateral
drilling assemblies are not steerable, and there are no
deflection sleeves or orientation signals. At present, there are
two lateral drilling assemblies, and both use the anti-whirl PDC
bit to achieve a smooth well bore and obtain fairly consistent
responses.  Of the two lateral assemblies, one is engineered for
gentle rise wit angle build rates of 7 to 11 degrees per 100
feet. The second is for maintaining inclination, and produces
near-neutral responses of -2 to 2 degrees per 100 feet. The
assemblies work on the same principle as any directional drilling
assembly.  Both have been found to drill with minimal walk, right
or left, but inclination is somewhat sensitive to formation and
weight on the bit.

     The predominate application of short-radius horizontal
drilling is for re-entries, a procedure that requires the
sectional milling of at least 20 feet of casing.  Following
sectioning, a cement kick-off plug is set in the vertical well
bore just below the kick-off depth.  Cement is brought up through
the sectioned interval, and 60 to 100 feet inside the casing.
This multi-purpose plug must provide zone isolation from the
original completion and mechanical strength for the curve
assembly to side track.  Open-hole completions, either from
existing wells or new wells, can be kicked off from formation or
a squeeze cement plug. Torque, weight of the bit, drill-off rate,
and cuttings are monitored during the kick-off procedure as the
bit makes the transition from drilling 100 percent cement to 100
percent formation.  This transition usually occurs after drilling
a minimum of six feet, and can be greater depending on the radius
of curvature.

     With regard to equipment requirements, many types of
workover rigs have been used in conjunction with the system,
ranging from small pole units to five and six axle carriers.
Drilling rigs have been used in several instances, but are not
necessary. A top-drive power swivel, the most predominate of
which is the Bowen 2.5, is used to rotate the drill string and
bit.  A single conductor wireline unit is used for gyro
orientation and to run all electronic and magnetic surveys. 
Circulating and solids control equipment vary depending on
formation conditions.

Management of the Company considers this proprietary technology a
leading edge and a ground floor opportunity as both a producer
and service provider to other producers. It is believed by
management that through the utilization of the system the Company
has the ability to cost-effectively drill lateral completions and
re-entries in shallow oil and gas producing zones where existing
technology has not been available or affordable. As drilling new
wells from the surface is not a necessity and current production
infrastructures can be utilized, it is anticipated that the
economics will be improved. Potential zones such as shale gas and
coalbed methane that contain trillions of cubic feet of untapped
reserves in the United States are believed by management to be
candidates for short radius horizontal drilling technology.
Drilling horizontal laterals has the potential to: tap fresh oil
by intersecting fractures, penetrating pay discontinuities and
drain up-dip traps, correct production problems such as water
coning, gas coning, and excessive water cuts from hydraulic
fractures which extend below the oil-water contact, and
supplement enhanced secondary tertiary oil recovery techniques.

History and Organization

1997 Events: Current management was actively involved in
significant corporate re-structuring focused on creating a
critical mass around the niche technology patented by Amoco and
raising the necessary working capital to implement the new
business strategy. The major milestones during 1997 were:

     April: Takeover control of an Oklahoma company named
Horizontal Ventures Inc (HVI) which was the first licensee of the
Amoco technology. HVI was clearly recognized as the leader of
field applications with a track record of technical success with
major companies in performing horizontal drilling on a contract
basis. It soon became apparent that while the technical aptitude
was impeccable the management had not been able to capitalize on
their technical success and thus the company was not commercially
successful. HVI had the license from Amoco to perform services in
Europe in addition to the U.S.

     June: As part of HVI's strategy to acquire all the field
talent on the Amoco technology, a merger agreement was signed
with Petro Union Inc, pending bankruptcy court approval, which
was the second licensee of the technology and the only other
technically successful company in the field. To facilitate this
merger, the current management successfully negotiated a reverse
merger and thus took control of Petro Union Inc, which had been
in bankruptcy since May 1996.

     August: Management's re-organization plan was approved by
court on August 28th. Petro Union was notified by NASDAQ of being
de-listed. Negotiations begin for the re-acquisition of the Hayes
Field in Illinois.

     September: HVI and Petro Union merger is concluded. NASDAQ
de-listing hearings and appeals continue. The Hayes field lease
is acquired. Negotiations begin on the acquisition of the Cat
Canyon field in California.

     October: Regulation S offering successfully completed for
initial capitalization of the company. $2.55 million was raised
at a price of $10/share with one $15.00 warrant given for every
two shares. The warrants are effective 1/1/98 and expire
12/31/99. Cat Canyon field is acquired.

     November: Regulation S offering successfully completed for
the continued capitalization of the company. $2.265 million was
raised at a price of $10/share. Cat Canyon production operations
were begun. 

     December: Re-listed on Nasdaq. Partial closing of third
Regulation S successfully concluded for continued capitalization
of the company. $1,171 million was raised at a price of $13.875.
First horizontal well was drilled in Cat Canyon.

1998 Event: The management has continued to focus in the first
quarter on its drilling program at Cat Canyon to emphasis the
success of its horizontal drilling niche technology in mature
fields. Two horizontal wells have been drilled with a third in
progress. 

     Petro Union, Inc., was organized under the laws of the State
of Colorado on June 27, 1988 as Kiwi III, Ltd. to complete a
public offering to raise funds to acquire or merge with an
operating business. 

     On September 29, 1989, the Registrant executed an agreement
and plan of reorganization to acquire all of the issued and
outstanding shares of Beat the House Enterprises, Inc. ("BTHE"),
a closely-held Delaware corporation, in exchange for 151,000,000
shares of the Registrant's Common Stock.  BTHE's plans never
successfully materialized and until July 28, 1992 the Registrant
had no operations.

     On July 28, 1992, the Registrant executed an agreement and
plan of reorganization to acquire Petro Union, Inc., an Indiana
corporation, whereby the Registrant acquired 100% of the
outstanding shares of Petro Union, Inc., in exchange for the
issuance of 7,240,000 shares (90.5%) of the Registrant's common
stock.  Kiwi III, Ltd. then changed its name to Petro Union Inc.
to reflect the new business of the Company.  Petro Union has the
following subsidiaries:  Calox, Inc., and American Energy
Corporation.

     On April 10, 1993, the Registrant acquired all of the issued
and outstanding shares of Green Coal Company, Inc. ("Green Coal")
for $100,000 in cash, a promissory note of $2,952,000 originally
payable August 15, 1993, subsequently extended by mutual consent,
1,000,000 shares of the Registrant's restricted common stock
valued at $3,950,000, and a 1% overriding royalty interest.  The
parties to this transaction agreed that, at the time of payment
of the balance due, Registrant could forgive the note due the
former principal shareholder in the amount of $1,052,000 in
exchange for payment in cash of that amount, leaving cash due of
$1,900,000.  As a result of this transaction Green Coal became a
wholly owned subsidiary of the Registrant.  On July 11, 1994, the
Registrant filed a voluntary petition in the United States
Bankruptcy Court of the Western District of Kentucky, seeking to
reorganize Green Coal under Chapter 11 of the United States
Bankruptcy Code.  The filing for protection under the Code was
necessary due to the severe liquidity problems caused by
substantial increases in existing high debt service demands and
lack of profitability on some existing coal contracts.  Due to
these liquidity problems, the Company and Green Coal were unable
to pay the acquisition liabilities due to the former stockholders
of Green Coal. As a result, in August of 1994, the bankruptcy
court returned ownership of Green Coal to the original owners. 

     On May 13, 1996, the Company filed a voluntary petition for
relief pursuant to Chapter 11 of the United States Bankruptcy
Code.  On August 28, 1997, the Bankruptcy Court for the Southern
District of Indiana (the "Court") issued an order confirming the
Company's First Amended Plan of Reorganization (the "Plan").  The
material features of the Plan were as follows:  The Company paid
all of its administrative and priority claims in full.  The
reorganized Company assumed the loans entered into with its two
secured creditors, Ford Motor Credit Company and National City
Bank of Evansville.  The unsecured creditors of the Company
received an aggregate of 100,000 shares of the Common Stock of
the Company (for clarity, the no par value Common Stock is
sometimes referred to herein as the "New Common Stock").  The
holders of the Company's $.125 par value common stock ("Old
Common Stock") received one share of New Common Stock for each
220 shares of Old Common Stock held, and the Old Common Stock was
canceled.  Fractional shares were rounded up.  Accordingly, the
17,537,945 outstanding shares of Old Common Stock were converted
into approximately 80,000 shares of New Common Stock.  

     The Company satisfied the claims of its two
debtor-in-possession financiers, Pembrooke Holding Corporation
("Pembrooke") and International Publishing Holdings, S.A. ("IPH")
as follows.  Pembrooke received $100,000 in cash and 49,999
shares of New Common Stock.  IPH received 40,000 shares of New
Common Stock and a call option exercisable for a period of 36
months to acquire ninety percent of the Company's wholly-owned
subsidiary, Calox Corporation, which holds as its only asset a 
limestone reserve in Monroe County, Indiana.  The purchase price
for such ninety percent interest will be $3.5 million.  

     The Plan provided for issuance of 70,000 shares of New
Common Stock to Randeep S. Grewal, the Company's new Chief
Executive Officer, and 70,000 shares to Richard D. Wedel, the
former C.O.O. of the Company, for services performed by each of
them during bankruptcy proceedings.

     The Plan further provided for a share exchange transaction
by which the shareholders of Horizontal Ventures, Inc., an
Oklahoma corporation ("HVI"), acquired 590,000 shares of New
Common Stock in exchange for all of the issued and outstanding
capital stock of HVI.  Randeep S. Grewal was the President of
HVI.  The share exchange transaction closed on September 9, 1997,
subject to an Agreement to Close which provided that the share
exchange would be terminated and unwound if certain contingencies
were not met within sixty days.  Pending resolution of those
contingencies, the Company suspended issuance of all shares of
New Common Stock.  HVI waived those contingencies on October 10,
1997, and accordingly the Company directed its transfer agent to
issue all shares of New Common Stock on October 15, 1997.  The
Bankruptcy court approved the final accounting and closed the
case on March 26, 1998.

     The Plan also provided for the amendment and restatement of
the Company's Articles of Incorporation (i) to cancel the
existing authorized series of Old Common Stock and $.0001 par
value preferred stock and to authorize the New Common Stock as
the sole class of voting stock; (ii) to fix the number of
directors at five and (iii) to eliminate the liability of
officers and directors to the extent allowed by Colorado law. 
The Company filed Restated Articles of Incorporation with the
Colorado Secretary of State reflecting the foregoing amendments
on September 9, 1997. 

The Business of the Company

Exploitation and Production

California Cat Canyon Field 

The Company acquired a 200 acre lease within the Santa Maria
basin in California. The purchase price was $1.65 million and
included all the formations along with all the infrastructures
that includes two separate gathering systems and 20 well bores of
which ten are producing. The basin was discovered in 1908 with
cumulative production estimated over 300 million barrels and an
estimated 500 million barrels of recoverable oil in place.

Following in-depth evaluations, the Company believes that
significant enhancements focused primarily on its niche short-
radius horizontal drilling know-how can result in sustained
increase of oil production. Based on these evaluations, a
drilling program funded by the Companies financial resources has
been activated that will result in the drilling of six
horizontals and other related re-work programs. The Company has
established a target of 500 barrels of production from this
field, which was producing 35 barrels of oil and had essentially
been abandoned when acquired by the Company.

 
Hayes Field 

The Company re-acquired a 754 acre lease on September 23rd, 1997
from Panhandle Pipeline Company and Gullickson Farms. The lease
is held by drilling a well on a six month cycle commencing
December 1st, 1997 or paying $10,000 by February 1st, 1998. The
Hayes filed was discovered in 1962 and indicates to have  9.9m
barrels of oil in place on the leased acreage with 2.5m barrels
in recoverable oil from techniques such as the Company's
horizontal drilling.

The Company re-entered a well bore and drilled a lateral early
November and thus met its first requirement. In view of the
subsequent acquisition in California where all the gathering
systems are already in place, the management made the decision to
focus its activities in California and thus placed the program in
Illinois on hold until preferable weather conditions in the
summer to commence drilling and completion programs.  

Contract Services

     In 1994, the Company acquired from Amoco Production Company
("Amoco") a U. S. license to Amoco's Patented Slim Hole Short
Radius Horizontal Drilling Technology.  Amoco initiated a project
in 1989 to develop a short radius drilling system for completing
and re-completing wells to enhance the economical production of
oil and gas.  The system has been developed and tested to the
point where, in management's opinion, it can now be offered as a
commercial service to other producers.

     The company assembled one (1) Amoco technology specific set
of horizontal drilling equipment and commenced field operations
late in 1995.  As a result of the acquisition of HVI in October
of 1997 it acquired three additional sets of horizontal drilling
and other related equipment.  The company continues to provide
its horizontal drilling services on a fee basis or  partial fee
plus working interest basis in wells where its technology is
used.

     In the last three years that the technology has been
commercialized in the industry, the Company has drilled over
forty wells for various clients such as Chevron, Texaco, Exxon,
OXY, Oklahoma Natural Gas and Newstar Energy USA, Inc. to name a
few. The Company intends to continue providing its services to
the industry on a contract basis. Such contract services are to
be scheduled with coordination to the Company's internal drilling
programs thus enhancing the productivity and efficiency of its
service rigs and crews. Contract services are targeted to begin
in the late second quarter of 1998. 


Oil and Gas Reserves 

The Companies Oil and Gas properties are primarily based in
California and Illinois though the area of focus since the
acquisitions had been primarily California. The Company engaged
Nederland & Sewell to evaluate the California properties while
the Illinois properties were evaluated by independent engineers
and geologists namely Mr. John Combs and Joseph Wilderman.
Estimates are based on a review of production histories and
geologic reports provided to the independent engineers by the
Company.   

     The present values of estimated future net revenues
(discounted at 10% per annum) shown in the table are not intended
to represent the current market value of the estimated oil and
gas reserves owned by the Registrant. For further information
concerning the present value of future net revenue from these
proved reserves, see the Notes to Consolidated Financial
Statements.  

<TABLE>
<CAPTION>
                                    1997
                                   ______
   
                              Reserves         Future Net
                                                Revenue

                      Oil     Gas     (1)   
                    (bbls)  (mmcf)  Total     Total      PV-10
<S>               <C>      <C>    <C>       <C>          <C>
Proven Developed
Producing          78,329    -     78,329     $96,500     $70,600

Proven Developed
Non-Producing      53,429    -    153,429  $1,841,992    $277,702

Proven 
Undeveloped       321,249    -  2,321,249 $33,080,708  $4,578,798

Total Proven    2,553,007    -  2,553,007 $35,019,200  $4,927,100

Probable        1,846,000    -  1,846,000 $15,177,000  $8,452,400

Total Reserves  4,399,007    -  4,399,007 $50,196,200 $13,379,500

</TABLE>

(1)  Natural gas converted to oil at the ratio of six Mcf of
natural gas to one Bbl of oil.  Natural gas liquids are included
as natural gas in this calculation without adjustment for higher
BTU value.

     There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting future rates of
production and timing of development expenditures, including many
factors beyond the control of the producer.  The reserve data set
forth above represents only estimates.  Reserve engineering is a
subjective process of estimating underground accumulations of oil
and gas that cannot be measured in an exact way, and the accuracy
of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation and
judgment and the existence of development plans.  As a result,
estimates of different engineers often vary.  For example, the
Registrant has substantially increased its proved undeveloped
reserves from initial reserve estimates made at the time of
certain acquisitions.  In addition, results of drilling, testing
and production subsequent to the date of an estimate may justify
revision of such estimates.  Accordingly, reserve estimates are
often different from the quantities of oil and gas that are
ultimately recovered.  Further, the estimated future net revenues
from proved reserves and the present value thereof are based
upon certain assumptions, including geologic success, prices,
future production levels and costs, that may not prove correct
over time.  Predictions about prices and future production levels
are subject to great uncertainty, and the meaningfulness of such
estimates is highly dependent upon the accuracy of the
assumptions upon which they are based.  Oil and gas prices have
fluctuated widely in recent years.  The weighted average sales
price utilized for the purposes of estimating the Registrant's
proved reserves and future net revenues therefrom as of December
31, 1997 was $15.81 per Bbl for oil.


Production

     The following table sets forth the average sale price, the
average production cost (lifting costs) and net production to the
Registrant for each of the last three fiscal years of oil and gas
production in the Illinois Basin (Illinois, Indiana, and
Kentucky) per unit of production (oil barrels, Bbl; gas, mcf;):

<TABLE>
<CAPTION>
                                Illinois
                               ___________
                           1995         1996       1997
<S>                      <C>          <C>      <C>
Average Sales Price
 Per Unit:
     Oil                  $16.73       $20.42    $19.21
     Gas                       0            0         0
Lifting Costs Per Unit:
     Oil                  $11.88        $10.94    $6.80
     Gas                       0             0        0
Net Production to
 the Registrant:
     Oil                    1203          1252      450
     Gas                       0             0        0


                               California
                               ___________
                          1995*       1996*       1997
Average Sales Price
 Per Unit:
     Oil                                          $10.55
     Gas                                            --  
Lifting Costs Per Unit:
     Oil                                          $ 5.31
     Gas                                            --  


Net Production to
 the Registrant:
     Oil                                          1,832
     Gas                                            

</TABLE>

*There was no activity in California prior to 1997.


Acreage

     The following table sets forth the gross and net acres of
developed and undeveloped oil and gas leases held by the
Registrant as of December 31, 1997, and includes the
854 net acres owned as of year end.  Undeveloped acreage includes
leasehold interests which may already have been classified as
containing proved undeveloped reserves.

                    Developed Acreage(1)     Undeveloped Acreage
                          
                   Gross       Net     Gross         Net

California          190        150       -            -
Illinois            115         80      754          377
    Total           305        230      754          377

                                  
Drilling Activity

     The following table sets forth the wells drilled and
completed by the Registrant during the periods indicated:

                          Years ended December 31

                   1995            1996            1997
               Gross   Net    Gross    Net     Gross    Net
Development:
     Oil         1    .125     3      .375       2     1.67
     Gas         -       -     -         -       -       -
     Non-
      Productive -       -     -         -       -       -

     Total       1    .125     3      .375       2     1.67



     (1)  Developed acreage is acreage assigned to producing
wells for the spacing unit of the producing formation.  Developed
acreage in certain of the Company's properties that include
multiple formations with different well spacing requirements may
be considered undeveloped for certain formations, but have only
been included as developed acreage in the presentation above.

Development Exploitation Acquisition Expenditures

     The following table sets forth certain information regarding
the costs incurred by the Registrant in its development,
exploration and acquisition activities during the periods
indicated:

                          Years Ended December 31
                         1995           1996           1997
Development
 Costs                   $108,229      $90,000      $ 132,564
                 
Exploration 
 Costs                      -             -             -
Acquisition
 Costs:
 a) Unproved
    Properties           ---              -             -
 b) Proved
    Properties           ---              -          1,650,000

Total Capital
 Expenditure             $108,229      $90,000      $1,782,564



Marketing

     Exploitation, Development and Production. Significant and
lucrative markets exist for the application of the niche
technology for the Companies short radius horizontal drilling
know-how.  Mature fields are in abundance throughout the world
where the operators are faces with declining production,
uncertain oil prices and upcoming costs to abandon and plug the
uneconomic wells at their production rates.  Such an environment
creates a unique market for the Company in being able to acquire
through a conservative selection process.  Primary acquisitions
candidates will have existing production, existing operating
infrastructure and facilities, geological formations conducive to
the technology, well bores and pay zones under ten thousand feet
with sufficient recoverable oil in place.  As an example, the
Company has found that California is a unique opportunity due to
its stringent new drilling regulations.  The Companies activities
are essentially "re-work" negating any lengthy approvals through
the regulatory authorities.  Such an environment has created
"pockets" of opportunity whereby significant recoverable oil has
been left in place by the majors and thereafter operators rather
than attempt a costly endeavor to drill new wells in urban areas. 
The Company intends to pursue such opportunities.

     Service Marketing.  As experienced by the Company, there
exists a substantial market for cost-effective horizontal
drilling.  The Company intends to concentrate its services to
drilling for majors and larger independents on a multi-well
program basis rather than a single well approach for a small
independent.  Past experience has proven that the success of its
short radius drilling program is highly dependent on the thorough
evaluation, planning and discipline at the well bore which the
majors and larger independents value immensely. The Company has
successfully performed services for Texaco, Chevron, OXY, Exxon
to name a few and intends to focus on similar activities.
Additionally, the Company intends to market its service within
Europe where the shallow fields, cost structure, lack of
horizontal drilling application are all ideal characteristics for
an ideal service market. 

Competition

    Despite being a relatively small and young Company,
management believes it has an advantage over its competition due
to its level of field expertise in applying the patented Amoco
Short Radius Horizontal Drilling technology and its ability to
provide these at a fraction of the cost of the competition.
Although, Amoco has provided licenses to others, the Company
feels that its experience and two prong global approach is
sheltered from any of the other licensees who are concentrating
on services within their respective geographical area. The
acquisition criteria is also unique to the application of the
niche short radius horizontal technology and as to the best of
management's knowledge, none of the other licensees are drilling
for their own account, the Company has not felt any competitive
pressure relative to its acquisition strategy to date. 

Regulation

     The following discussion of regulation of the oil and gas
industry is necessarily brief and is not intended to constitute a
complete discussion of the various statutes, rules, regulations
or governmental orders to which operations of the Registrant may
be subject.

Price Controls on Liquid Hydrocarbons

     Oil sold by the Registrant is no longer subject to the Crude
Oil Windfall Profits Tax Act of 1980, as amended, which was
repealed in 1988.  As a result, the Registrant sells oil produced
from its properties at unregulated market prices.

Federal Regulation of First Sales and Transportation of Natural
Gas

     The sale and transportation of natural gas production from
properties owned by the Registrant may be subject to regulation
under various federal and state laws including, but not limited
to, the Natural Gas Act ("NGA") and the Natural Gas Policy Act
("NGPA"), both of which are administered by the Federal Energy
Regulatory Commission ("FERC").  The provisions of these acts and
regulations are complex.  Under these acts, producers and
marketers have been required to obtain certificates from FERC to
make sales, as well as obtaining abandonment approval from FERC
to discontinue sales.  Additionally, first sales ("first sales")
have been subject to maximum lawful price regulation.  However,
the NGPA provided for phased-in deregulation of most new gas
production and, as a result of the enactment on July 26, 1989 of
the Natural Gas Wellhead Decontrol Act of 1989, the remaining
regulations imposed by the NGA and the NGPA with respect to
"first sales" were terminated by not later than January 1, 1993. 
FERC jurisdiction over transportation and sales other than "first
sales" has not been affected.


     Because of current market conditions, many producers,
including the Registrant, are receiving contract prices
substantially below most remaining maximum lawful prices under
the NGPA.  Management believes that most of the gas to be
produced from the Registrant's properties is already
price-deregulated.  The price at which such gas may be sold will
continue to be affected by a number of factors, including the
price of alternate fuels such as oil.  At present, two factors
affecting prices are gas-to-gas competition among various gas
marketers and storage of natural gas.  Moreover, the actual
prices realized under the Registrant's current gas sales
contracts also may be affected by the nature of the decontrolled
price provisions included therein and whether any indefinite
price escalation clauses in such contracts have been triggered by
federal decontrol.

     The economic impact on the Registrant and gas producers
generally of price decontrol is uncertain, but it currently
appears to be resulting in lower gas prices.  Currently, there is
a surplus of deliverable gas in most areas of the United States
and, accordingly, it remains possible that gas prices will
continue to remain at relatively depressed levels or decrease
further.  Moreover, many gas sales contracts provide for price
redetermination upon decontrol, and, as a result, it is possible
that the newly redetermined prices applicable under such
contracts are likely to reflect the lower prices prevalent in
today's market.  Producers such as the Registrant or resellers
may be required to reduce prices in order to assure continued
sales.  It is also possible that gas production from certain
properties may be shut-in altogether for lack of an available
market.

     Commencing in the mid-1980's, FERC promulgated several
orders designed to correct market distortions and to make gas
markets more competitive by removing the transportation barriers
to market access.  These orders have had a profound influence
upon natural gas markets in the United States and have, among
other things, fostered the development of a large spot market for
gas.  The following is a brief description of the most
significant of those orders and is not intended to constitute a
complete description of those orders or their impact.

     On April 8, 1992, FERC issued Order 636, which is intended
to restructure both the sales and transportation services
provided by interstate natural gas pipelines.  The purpose of
Order 636 is to improve the competitive structure of the pipeline
industry and maximize consumer benefits from the competitive
wellhead gas market.  The major function of Order 636 is to
assure that the services non-pipeline companies can obtain from
pipelines is comparable to the services pipeline companies offer
to their gas sales customers.  One of the key features of the
Order is the "unbundling" of services that pipelines offer their
customers.  This means that pipelines must offer transportation
and other services separately from the sale of gas.  The Order is
complex, and faces potential challenges in court.  The Registrant
is not able to predict the effect the Order might have on its
business.

     FERC regulates the rates and services of "natural-gas
companies", which the NGA defines as persons engaged in the
transportation of gas in interstate commerce for resale.  As
previously discussed, the regulation of producers under the NGA
is being gradually phased out.  Interstate pipelines, however,
continue to be regulated by FERC under the NGA.  Various state
commissions also regulate the rates and services of pipelines
whose operations are purely intrastate in nature, although
generally sales to and transportation on behalf of other
pipelines or industrial end-users are not subject to material
state regulation.

      There are many legislative proposals pending in Congress
and in the legislatures of various states that, if enacted, might
significantly affect the petroleum industry.  It is impossible to
predict what proposals will be enacted and what effect, if any,
such proposals would have on the Registrant.

State and Local Regulation of Drilling and Production

     State regulatory authorities have established rules and
regulations requiring permits for drilling, drilling bonds and
reports concerning operations.  The states in which the
Registrant operates also have statutes and regulations governing
a number of environmental and conservation matters, including the
unitization and pooling of oil and gas properties and
establishment of maximum rates of production from oil and gas
wells.  A few states also pro-rate production to the market
demand for oil and gas.

Limestone Reserves

    Indiana   Monroe Field

The Company owns through its wholly owned subsidiary, Calox Inc,
a limestone reserve located in Monroe County, Indiana. The 355
acre property is owned "in fee". That is, the Company own the
land, timber and all the mineral rights associated with the
property. The reserves are made up of Salem limestone, which
produces a high industrial grade calcium oxide or calcium
carbonate used in scrubbing machinery that cleans the gaseous
emissions from coal burning generators. Independent engineering
reports obtained by the Company indicate that there are
73,458,000 tons of proven reserves on the property.

As the Company is focused on its oil and gas activities, this
reserve has been identified as a non-core unit and thus optioned
out. International Publishing Holding (IPH), the Companies
largest shareholder, holds a three year option expiring on
September 9, 2000 to acquire 90% of the shares of Calox for $3.5
million. Thus, the Company will retain a 10% interest in the
reserve, divest itself from its non-oil and gas activity and
attain $3.5 million of funds to invest in its core industry. In
the event, IPH does not exercise their option, the Company is
confident to divesting this lucrative property for at least the
same value to another company.

Limestone Reserves

Independent engineering reports acquired by the Company provide
reserve estimates and their present values analyzed from specific
samples extracted from the property. 

     As per 1997 reserve overview attached.

Location:  Monroe County, Indiana

Means of access:  State Highway 46 to County Road

Title, claim, lease or option description:  Owned in fee warranty
deed

Conditions to obtain or retain the property:  none

Expiration date of lease or option:  N/A

Maps:  Incorporated by reference from the Registrants' fiscal
1992 Form 10-KSB

History of previous operators:  none

Present condition of property:  Timber land

Work completed by Registrant on the property:  Drilling, testing
and engineering

Proposed program of exploration or development:  Develop rock
quarry to produce rock and/or crushed limestone

Current state of exploration or development:  none

Open pit or underground:  Open pit

Source of Power:  Public Service of Indiana

Rock formations and mineralization of existing or potential
economic significance:  Limestone

Proven recoverable reserves:  73,458,000

Quality:  98% CA CO2

Name of person making estimates:  John R. Coombs - geological
engineer

Relationship to Registrant of such person making estimates:  none


Environmental Regulations

     Operations of the Registrant are subject to numerous laws
and regulations governing the discharge of materials into the
environmental or otherwise relating to environmental protection. 
These laws and regulations may require the acquisition of a
permit before drilling commences, prohibit drilling activities on
certain lands lying within wilderness and other protected areas
and impose substantial liabilities for pollution resulting from
drilling operations.  Such laws and regulations may also restrict
air or other pollution resulting from the Registrant's
operations.  Moreover, many commentators believe that the state
and federal environmental laws and regulations will become more
stringent in the future.  For instance, proposed legislation
amending the federal Resource Conservation and Recovery Act would
reclassify oil and gas production wastes as "hazardous waste". 
If such legislation were to pass, it could have a significant
impact on the operating costs of the Registrant, as well as the
oil and gas industry in general.  State initiatives to further
regulate the disposal of oil and gas wastes are also pending in
certain states, including states in which the Registrant has
operations, and these various initiative could have a similar
impact on the Registrant.

     The Registrant has not filed any reports with estimates of
its reserves with any federal authority or agency, other than the
Securities and Exchange Commission and the Department of Energy.

Title to Properties

     Substantially all of the Registrant's property interests are
held pursuant to leases from third parties.  A title opinion is
typically obtained prior to the commencement of drilling
operations on properties.  The Registrant has obtained title
opinions on substantially all of its producing properties and
believes that it has satisfactory title to such properties in
accordance with standards generally accepted in the oil and gas
industry.  The Registrant's properties are subject to customary
royalty interests, liens for current taxes and other burdens
which the Registrant believes do not materially interfere with
the use of or affect the value of such properties.  The
Registrant performs only a minimal title investigation before
acquiring undeveloped properties.

Operational Hazards and Insurance

     The Registrant's operations are subject to the usual hazards
incident to the drilling and production of oil and gas, such as
blowouts, cratering, explosions, uncontrollable flows of oil, gas
or well fluids, fires, pollution, releases of toxic gas and other
environmental hazards and risks.  These hazards can cause
personal injury and loss of life, severe damage to and
destruction of property and equipment, pollution or environmental
damage and suspension of operations.

     The Registrant has $2,000,000 of general liability
insurance.  The Registrant's insurance does not cover every
potential risk associated with the drilling and production of oil
and gas.  In particular, coverage is not obtainable for certain
types of environmental hazards.  The occurrence of a significant
adverse event, the risks of which are not fully covered by
insurance, could have a material adverse effect on the
Registrant's financial condition and results of operations. 
Moreover, no assurance can be given that the Registrant will be
able to maintain adequate insurance in the future at rates it
considers reasonable.

Employees

     At March 31, 1998, the Registrant had 15 employees,
consisting of 12 full-time employees and 3 are part-time
employees.  None of the Registrant's employees are subject to a
collective bargaining agreement.  The Registrant considers its
relations with its employees to be good.

Offices

     The Registrant leases approximately 750 square feet of
office space at 575 Madison Avenue, Suite 1006, New York, New
York, for its executive offices on a one year lease.  The Company
historically operated out of its offices in Evansville, Indiana
in a 750 square foot office. The Company's operations
headquarters is located in Tulsa, Oklahoma, where the Company
leases 1,500 square feet on a month to month basis.  If it were
to require added space, the Registrant believes that additional
space is readily available for lease.  The Registrant also leases
field offices and storage facilities in Spencer County, Indiana,
Santa Monica, California and owns a field office in Kiefer,
Oklahoma.


Item 2.  Description of Properties

     Except for the Kiefer, Oklahoma field office which is owned
in fee, all of the Registrant's property interests are
held pursuant to leases from third parties.  A title opinion is
typically obtained prior to the commencement of drilling
operations on properties.  The Registrant has obtained title
opinions on substantially all of its producing properties and
believes that it has satisfactory title to such properties in
accordance with standards generally accepted in the oil and gas
industry.  The Registrant's properties are subject to customary
royalty interests, liens for current taxes and other burdens
which the Registrant believes do not materially interfere with
the use of or affect the value of such properties.  The
Registrant performs only a minimal title investigation before
acquiring undeveloped properties.

Item 3.  Legal Proceedings.

     On March 11, 1997, HVI commenced a lawsuit in the District
Court for Tulsa County, Oklahoma against David J. LaPrade, a
shareholder, former officer and director, and an organizer of
HVI, and Mr. LaPrade's current employer.  HVI seeks to recover
losses from the alleged breach of fiduciary duty,
misappropriating confidential information and property of HVI,
using it in unfair competition with HVI, interfering with HVI's
existing and prospective relationships with its customers,
interfering with HVI's relationships with its employees, and
conversion of HVI property.  Mr. LaPrade has made counterclaims
against HVI for breach of his employment agreement, libel and
slander, and intentional infliction of emotional distress; he
seeks actual damages in excess of $10,000 and punitive damages in
an unspecified amount.  The Company believes that the ultimate
outcome of this litigation will not have a material adverse
effect on the Company's financial condition or results of
operations.

     On March 24, 1997, Dr. Warren G. Gwartney commenced a
lawsuit in the District Court for Tulsa County, Oklahoma against,
among others, HVI to collect sums allegedly due on a promissory
note in the original principal amount of $50,000 entered into
individually by Mr. LaPrade and another former officer and
employee, A.B.C. Paulsen.  The lawsuit sought repayment of the
$25,000 balance due on the note, plus interest at 9-3/4% from
October 28, 1996, costs and attorney fees.  On September 16,
1997, the Court granted Dr. Gwartney a summary judgment against
Messrs. LaPrade and Paulsen, but denied summary judgment against
HVI.  During the first quarter of 1998 HVI settled the lawsuit by
the payment of $25,000, which was accrued as a liability in the
Company's financial statements as of December 31, 1997.


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

     No matters were submitted to a vote of security holders of
the Registrant during the quarter ending December 31, 1997. 


                                  PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.

     Except for a period from August to December of 1997, the
Registrant's common stock has been quoted on NASDAQ since
February 19, 1993.  On March 31, 1998, there were seven (7)
market makers in the Registrant's securities and the closing bid
quotation was $13.00 per share.  These prices, which are of the
Company's post bankruptcy no par value common stock are believed
to be representative of inter-dealer quotations, without retail
markup, markdown or commissions, but may not represent actual
transactions.  There can be no assurance that a public market for
the Registrant's common stock will be sustained in the future.

                                                 Bid*           
    Quarter Ended                        Low            High 

December 31, 1995                       $ .16           $.16
March 31, 1996                            .19            .22
June 30, 1996                             .13            .13
September 30, 1996                        .25            .31
December 31, 1996                         .19            .25
March 31, 1997                            .19            .25
June 30, 1997                             .03            .09
September 30, 1997                        .03            .03
December 31, 1997                        6.82          19.00
March 31, 1998                          12.00          14.75

*Effective November 8, 1997, a 1 share for 220 share reverse
split approved by the U.S. Bankruptcy court was effected thus
dramatically affecting the per share price of the Company's
stock. 

     On March 31, 1998, there were approximately 485 registered
holders of the Registrant's common stock.  Based on a broker
count, the Company believes at least an additional 1200 persons
are shareholders with street name positions.

     Holders of common stock are entitled to receive such
dividends as may be declared by the Registrant's Board of
Directors.  The Registrant has not yet paid any dividends, and
the Board of Directors of the Registrant presently intends to
pursue a policy of retaining earnings, if any, for use in the
Registrant's operations and to finance expansion of its business. 
With respect to the Common Stock, the declaration and payment of
dividends in the future, of which there can be no assurance, will
be determined by the Board of Directors in light of conditions
then existing, including the Registrant's earnings, financial
condition, capital requirements and other factors.

Item 6.   Management's Discussion and Analysis or Plan of
          Operations

OVERVIEW

In view of significant material changes to the Company during
1997, management believes that the revenue and results of
operations reported herein are not indicative of future
operations and the results thereof.  Furthermore, in accordance
with the pertinent accounting regulations related to the reverse
mergers, the income statements are not reflective of the combined
revenues of the merged companies on an annualized basis but
rather reflect the combined income from the merger date of
September 9, 1997.  Current management was appointed during the
latter part of the third quarter and spent the balance of the
year re-structuring, re-capitalizing, and completing mergers and
acquisitions that all were part of a specific and focused
strategy.  Management has established a clear directive to focus
on capitalizing on its experience with the low cost horizontal
drilling technology developed and patented by Amoco Corporation
and thereafter licensed to the Company.  It is the intent of
management to become a leader in applying this horizontal
drilling technology and exploiting declining production wells on
properties acquired by the Company or on a service basis for
major oil and gas companies such as its clients Texaco, Chevron,
Exxon to name a few.

Since August of 1997 the Company, under its new management,
emerged from bankruptcy, accomplished a strategic merger with
another Amoco technology licensee, re-capitalized through three
private placements, acquired two development properties,
commenced horizontal drilling operations on the newly acquired
Cat Canyon field, continued to perform horizontal drilling
services on a contract basis and optioned out its non-oil and gas
businesses.

     This Annual Report on Form 10-KSB includes certain
statements that may be deemed to be "forward-looking statement"
within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of
1934, as amended.  All statements, other than statements of
historical facts, included in this Form 10-KSB that address
activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future,
including such matters as future capital, development and
exploration expenditures (including the amount and nature
thereof), drilling of wells, reserve estimates (including
estimates of future net revenues associated with such reserves
and the present value of such future net revenues), future
production of oil and gas, repayment of debt, business
strategies, expansion and growth of the Company's operations and
other such matters are forward-looking statements.  These
statements are based on certain assumptions and analyses made by
the Company in light of its experience and its perception of
historical trends, current conditions, expected future
developments and other factors it believes are appropriate in the
circumstances.  Such statements are subject to a number of
assumptions, risks and uncertainties, general economic and
business conditions, the business opportunities (or lack thereof)
that may be presented to and pursued by the Company, changes in
laws or regulations and other factors, many of which are beyond
the control of the Company.  Readers are cautioned that any such
statements are not guarantees of future performance and that
actual results or developments may differ materially from those
projected in the forward-looking statements.


Results of Operations 

Revenues decreased from $604,475 in 1996 to $211,696 in 1997. 
The 65% decline in revenue was as a result of the dormancy state
of the Company through its re-structuring process.  Minimum
operations were maintained with only long-term service contracts
completed.  As during these years the Company was primarily
focused on providing regional horizontal drilling services, the
services were not marketed nationally or overseas.

Cost of sales decreased from $367,419 in 1996 to $247,979.  The
33% decline is directly related to the Company's dormancy state
in 1997.  The decline in the cost of sales is not directly
proportional to the declines in revenue due to a continued re-
furbish program on some of the drilling assets which were
continued to maintain the equipment.

General and administration increased from $594,402 in 1996 to
$780,373 or 31%.  The increase in G&A expenses was primarily
associated with the costs incurred in re-structuring the Company
through bankruptcy and related legal and accounting expenses.

LIQUIDITY AND CAPITAL RESOURCES

During the twelve months ending 1997, the working capital
increased approximately $3.9m or 4122% while the current
liabilities increased from $369,512 in 1996 to $820,327 in 1997. 
The $450,812 increase in current liabilities was primarily due to
the horizontal drilling programs on the Company's Cat Canyon
field in California.  Total liabilities decreased from $910,945
in 1996 to $897,413 or 1.5%.

During the fourth quarter of 1997, the Company successfully
concluded three private placements to re-capitalize the
reorganized Company.  The first two placements were done at $10
per share while the third was concluded at $13 7/8 per share. 
The Company issued a total of 552,470 shares with gross proceeds
of approximately $5,801,518 that resulted in net proceeds of
approximately $5,627,472.

On December 31, 1997 the Company's liquid assets totaled
$3,932,647 which includes cash and cash equivalents, time
deposits and funds held in escrow.  The Company's liquidity
position is primarily due to its successful re-capitalization
activities during the latter half of 1997 through private
placements.  This liquidity position is sufficient to fund the
Company's entire drilling program on its current properties and
meet all its debt obligations during 1998.  Management believes
that cash flow from its drilling programs coupled with the re-
start of the contract services business should provide sufficient
cash flow to the Company during 1998 to meet its ongoing
operational cash flow requirements.

The Company is aggressively pursing additional acquisitions to
add to its exploitation portfolio that add significant
shareholder value and proven reserves resulting from production
gains with the horizontal drilling programs.  The Company has
optioned out its non-oil and gas asset for $3.5 million, which is
expected to add to its capital resources and facilitate
acquisitions.  Additionally, the Company has no significant long-
term debt at present and sees a favorable opportunity to
potentially leverage its assets and its oil and gas reserves for
any additional capital requirements associated to acquisitions if
so needed.

Management anticipates 1998 to be another active year for the
Company in terms of acquisitions as it continues to grow its
exploitation reserve base.  As the established acquisition
criteria requires the properties to be producing assets, such
acquisitions are not anticipated to be capital intensive to the
Company.  Notwithstanding, the Company intends to continue its
exploitation driven horizontal drilling program on any potential
acquisition and thus expects ongoing drilling expenditures.

Inflation

     The Registrant does not believe that inflation will have a
material impact on the Registrant's future operations.

Item 7.  Financial Statements

     Please see accompanying index to Financial Statements
commencing on page F-1.

Item 8.   Changes in and Disagreements With Accountants on
          Accounting and Financial Disclosure
          
          Not applicable
    
Item 13.  Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K

          (a) Exhibits

Exhibit   Description                   Location

2A        First Amended Plan       Incorporated by response to
          of Reorganization        Exhibit 2.1 to Form 8-K filed
                                   for event dated August 28,
                                   1997.

3A        Articles of Incorpora-   Incorporated by reference
          tion and Bylaws          to Exhibit No. 3 to the
                                   Registrant's Registration
                                   Statement (#33-24265-LA)

3B        Amended Articles         Incorporated by reference
          of Incorporation         to Exhibit No. 2B of 
                                   Registrant's Form 8
                                   Registration Statement
                                   (File #0-20760)

4         Specimen of Securities   Incorporated by reference
                                   to Exhibit Nos. 1A and 1B of
                                   Registrant's Form 8-A/A
                                   Registration Statement
                                   (File #0-20760)

10E       Post-Petition Loan       Incorporated by reference to
                                   Agreement  
                                   Exhibit 10E to 10-KSB dated
                                   December 31, 1996.

10F       Amended Post-Petition    Incorporated by reference to
                                   Loan Agreement 
                                   Exhibit 10-F to 10-KSB dated
                                   December 31, 1996.

10G       Horizontal Drilling      Incorporated by reference to
                                   Services Letter Exhibit 10-G to 10-KSB dated
                                   Agreement December 31, 1996.

10H       Agreement and Plan       Incorporated by reference to
                                   of Acquisition Exhibit 10.1 to Form 8-K for
                                   event dated August 11, 1997.

10I       Randeep S. Grewal        Incorporated by reference to
          Employment Agreement     Exhibit 10.1 to Form 8-K for
                                   event dated August 28, 1997.

10J       Post Petition Loan       Incorporated by reference to
                                   Agreement Exhibit 10.1 to Form 8-K for
                                   event dated August 28, 1997.

10K       Cat Canyon Lease         Included herewith
                                   Purchase Agreement            


(b)  One report on Form 8-K dated October 10, 1997 concerning the
sale of certain securities in reliance of an exemption provided
by Regulation S was filed during the last quarter of the year
covered by this report.


  
                         PETRO UNION, INC.
            INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
                  REQUIRED BY ITEM 8 AND ITEM 14
    
  
  FINANCIAL STATEMENTS                                      PAGE
  
  
  Reports of Independent Public Accountants                  F-2
  
  Consolidated Balance Sheet as of December 31, 1997         F-3
  
  Consolidated Statements of Operations for the Two
     Years Ended December 31, 1997 and 1996                  F-4
  
  Consolidated Statements of Stockholders' Equity for
     the Two Years Ended December 31, 1997 and 1996          F-5
  
  Consolidated Statements of Cash Flows for the Two 
     Years Ended December 31, 1997 and 1996                  F-6
  
  Notes to Consolidated Financial Statements                 F-7
  
  
  FINANCIAL STATEMENT SCHEDULES (1)
  
                 
     (1)  Schedules are omitted because of the absence of the
  conditions under which they are required, or because the
  information required by such omitted schedule is contained in
  the consolidated financial statements or the notes thereto.

              PETRO UNION, INC., dba HORIZONTAL VENTURES, INC.
              Index to Financial Statements and Schedules 
                       Required by Item 8 and Item 14 








ITEM                                        PAGE 


Report of Independent Certified 
Public Accountants                          F-2

Consolidated Balance Sheets 
as of December 31, 1997                     F-3 

Consolidated Statements of 
Operations For The Years 
Ended December 31,1997 and 1996             F-5 

Consolidated Statements of 
Owners' Equity For The
Years Ended December 31,1997 
and 1996                                    F-6 

Consolidated Statements of 
Cash Flows For The
Years Ended December 31,1997 
and 1996                                    F-7 

Notes to Financial Statements               F-9 





     NOTE:  Schedules are omitted because of the absence of the
     conditions under which they are required, or because the
     information required by such schedules is contained in the
     financial statements or notes thereto.

Bateman & Co., Inc.
     P.C.
Certified Public Accountants 

                                    5 Briardale Court
                                    Houston, TX 77027-2904        
                                    (713) 552-9800
                                    Fax (713) 552-9700
                                    www.batemanhouston.com

                  INDEPENDENT AUDITORS' REPORT


To The Stockholders and Board of Directors 
Petro Union, Inc., dba Horizontal Ventures, Inc.

We have audited the accompanying consolidated balance sheet of
Petro Union, Inc. (a Colorado corporation), dba Horizontal
Ventures, Inc., as of December 31, 1997, and the related
consolidated statements of operations, owners' equity (deficit),
and cash flows for the years ended December 31, 1997 and 1996.
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 generally accepted
auditing standards.  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 Petro Union, Inc., dba Horizontal Ventures, Inc., as of
December 31, 1997, and the results of its operations and its cash
flows for the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles. 



                              BATEMAN & CO., INC., P.C.

Houston, Texas
April 14, 1998
                              F - 2
                                
     PETRO UNION, INC., dba HORIZONTAL VENTURES, INC.(Note 1)     
                             Consolidated Balance Sheet
                                     December 31, 1997
                                
                                
                                            ASSETS
                                
                        Current assets:
      Cash and cash equivalents                   $2,318,952
                     Time deposits and funds 
      held in escrow                               1,613,695
                       Accounts receivable:
                      Trade, net of allowance 
       for doubtful accounts of $74,092              17,181 
        Other                                         3,433
                                                 ___________ 
        Total current assets                      3,953,261
                                                 ___________
                                
              Properties and equipment, at cost, 
                net of accumulated depreciation 
   and depletion of $597,926                      6,794,847 
                                                 ___________
                                
                         Other assets:
                     Deposits, prepayments, 
      and deferred charges                            54,514
                                                  ___________
        Total other assets                            54,514
                                                 ____________
          Total assets                           $10,802,622
                                                 ____________
                                
                    LIABILITIES AND STOCKHOLDERS' EQUITY
                                
                      Current liabilities:
                   Current maturities of long 
     term notes                                     $21,782 
                      Accounts payable and 
     accrued expenses                               271,045 
     Other current liabilities                      527,500 
                                                   _________
       Total current liabilities                    820,327 
                                                   _________
                    Noncurrent liabilities:
                     Long term note payable, 
      net of current maturities                       77,086
                                                   _________
        Total noncurrent liabilities                  77,086
                                                   _________
          Total liabilities                          897,413
                                                   _________
                                
    Commitments and contingencies                       -   
                                
                     Stockholders' equity:
                   Common stock, no par value, 
                  50,000,000 shares authorized,
     1,558,843 shares issued and outstanding     11,588,073 
     Accumulated deficit                         (1,682,864)
                                                _____________
       Total owners' equity (deficit)             9,905,209 
                    Total liabilities and owners' 
         equity                                 $10,802,622 
                                


The accompanying notes are an integral part of these financial
statements.





                                F-3

       PETRO UNION, INC., dba HORIZONTAL VENTURES, INC. (Note 1) 
            Consolidated Statements of Operations 
          For The Years Ended December 31, 1997 and 1996 


                                Years Ended December 31,
                                1997              1996 

Revenues                     $211,696           $604,475 
Cost of revenues              247,979            367,419 
                            ___________        __________
  Gross profit                (36,283)           237,056 
                            ___________        __________
                              
General and 
administrative expenses:
  Salaries and wages          213,213            235,701
  Depreciation and 
  amortization                 24,016             19,174
  Rentals                      31,262              9,891
  Taxes, other than on 
  income                       16,059             21,737 
  Other administrative 
  expenses                    495,823            307,899 
                           ____________       ____________
    Total general and 
    administrative 
    expenses                  780,373            594,402 
                           ____________       ____________
  Loss from operations       (816,656)          (357,346)
                           ____________       ____________

Other income (expense):
  Gain (loss) on 
  sale of assets              (21,062)            15,091
  Interest income              11,873                 61 
  Interest expense            (25,271)           (34,939)
                           ___________        ____________
    Net other income 
    (expense)                 (34,460)           (19,787)
                            __________        _____________
    Loss before taxes 
    on income                (851,116)          (377,133)
Provision for 
taxes on income                  -                  -   
    Net loss                $(851,116)         $(377,133)
                            ===========       ==============

Loss per share 
of common stock               $(1.44)          $(4.70)
                           ============       =============
The accompanying notes are an integral part of these financial
statements.
                               F-5

              PETRO UNION, INC., dba HORIZONTAL VENTURES, INC. (Note 1)
                   Consolidated Statements of Owners' Equity (Deficit) 
                    For The Years Ended December 31, 1997 and 1996


                           Series A                             Capital
                         Preferred       Capital In Accum-   Contributed 
         Common Stock      Stock           Excess of mulated   by Limited
         Shares    Amount  Shares  Amount   Par Value  Deficit   Partners Total

Balance, 
December 
31, 1995 1,200   1,200     -       -         -      (454,615)   760,000  306,585

Change in 
par value 
from 1.00 
per share 
to $.01 
per share              (1,188)                        1,188                    -

Stock issued 
for services  2,490      25                           2,257               2,282

Partner's 
capital 
interest 
issued for 
services                                                         58,000   58,000

Net loss                                                 (377,133)     (377,133)
              _______  _______ _______ _______  _______  _________ _____________

Balance, 
December 31, 
1996          3,690      37     -       -      3,445  (831,748)  818,000(10,266)

Stock issued 
for 
services     30,000    300                                                  300 

Stock issued 
in exchange  
for subordinated 
convertible 
debentures, 
and net assets 
of limited 
partnership 725,770  7,258                   1,398,831         (818,000) 588,089

Stock issued 
for cash                     3,000,000 30,000  570,000                   600,000
              _______ ______ _________  _____  _______      _______ ____ _______

Balance prior 
to reverse 
merger with 
Petro 
Union, Inc. 759,460  7,59   3,000,000 30,000 1,972,276 (831,748)  -    1,178,123

Effect of 
reverse merger  
with Petro 
Union, Inc. 240,805 6,174,675 (3,000,000)(30,000)(1,972,276)          4,172,399 

Stock issued 
for cash in 
Reg "S" 
offerings   552,470 5,801,518                                         5,801,518

Less, Related 
offering costs       (454,837)                                         (454,837)

Issuance of 
stock to retire 
note payable 
to related 
party         6,108    59,122                                             59,122

Net loss                                                    (851,116)  (851,116)
            _______ __________ __________ _______ ______    ________ ___________

Balance, 
December 31,
1997      1,558,843 $11,588,073    -      $ -     $ -  $(1,682,864)$- $9,905,209
          ========= =========== ======== ======== ===================== =======



 The accompanying notes are an integral part of these financial statements.





                                      F-6 
      PETRO UNION, INC., dba HORIZONTAL VENTURES, INC. (Note 1)
                 Consolidated Statements of Cash Flows 
          For The Years Ended December 31, 1997 and 1996


                                     Years Ended December 31, 
                                       1997            1996
                                     _________        _______ 

Cash flows from operating activities:
  Net (loss)                        $(851,116)      $(377,133)
  Adjustments to reconcile 
  net loss to net cash provided
  (used) by operations:
     Depreciation and amortization    177,426         121,708
     (Gain) loss on sale of assets     21,062         (15,091)
     Stock and partners' capital 
     interests issued
     for services                         300          60,282 
     (Increase) decrease in 
     accounts receivable               66,040         (35,705)
     (Increase) decrease in 
     accounts receivable, 
     employees                          3,953          (3,953)
     (Increase) in accounts 
     receivable, related parties          -             1,200 
     (Increase) in accounts 
     receivable, other                 (3,433)            -   
     Increase (decrease) in 
     accounts payable and accrued
     expenses                         136,716         109,955 
                                   _____________    __________
  Net cash (used) by 
  operating activities               (449,052)       (138,737)
                                   ____________     __________

Cash flows from 
investing activities:
  (Increase) in time deposits 
  and funds held in escrow         (1,613,695)           -   
  (Increase) in property 
  and equipment                    (2,157,320)       (381,215)
  Proceeds from sale of 
  property and equipment               55,181          86,672 
  (Increase) decrease in 
  deposits and prepayments              1,286          (8,066)
                                   ___________      ___________
  Net cash (used) by 
  investing activities             (3,714,548)       (302,609)
                                    __________      ____________

Cash flows from 
financing activities:
  Increase (decrease) in 
  due to related parties               -              (36,785)
  Proceeds from notes payable          -              161,959 
  Repayments of notes payable        (206,084)       (150,589)
  Proceeds from loan 
  from related party                   59,122            -   
  Increase in other current 
  liabilites, incurred to
  finance acquisition of property 
  and equipment                       500,000            -   
  Change in customer payments 
  received in advance                 (30,000)        30,000
  Proceeds from subordinated 
  convertible debentures                -            433,231 
  Proceeds from sale of 
  stock, net of expenses            5,946,681            -   
  Stock issued for net 
  assets of limited 
  partnership                         972,858            -   
  Less, Partners' prior 
  capital contributions              (818,000)           -   
  Other                                51,517            -
                                  ______________   ___________   
    Net cash provided by 
    financing activities            6,476,094        437,816
                                  ______________   ___________
    Net increase (decrease) 
    in cash and cash 
    equivalents                     2,312,494         (3,530)

Cash and cash equivalents:
  Beginning of period                   6,458          9,988 
                                  _____________    __________
  End of period                    $2,318,952         $6,458
                                  =============    ==========

Non-cash financing and 
investing activities:
  Stock issued for services             $300          $2,282 
  Partners' capital 
  interests issued for 
  services                             -              58,000 
  Stock issued for 
  subordinated convertible 
  debentures                         433,231             -   
  Stock issued for net 
  assets of limited 
  partnership                        972,858             -   
  Property and equipment 
  acquired by issuance of 
  notes payable                      500,000          20,159 
  Property and equipment 
  acquired in reverse merger
  with Petro Union, Inc., 
  net of debt assumed              4,120,882 

Supplementary cash flow data:
  Interest paid                      26,324           33,886 
  Income taxes paid                    -                 -   









The accompanying notes are an integral part of these financial
statements.



                           F-7

<PAGE>
      Petro Union, Inc. dba Horizontal Ventures, Inc. (Note 1)      
         Notes to Consolidated Financial Statements
               December 31, 1997 and December 31, 1996
                                                 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of business and organization - Petro Union, Inc.      
("PUI"), dba Horizontal Ventures, Inc., is engaged in        
contract drilling of oil and gas wells and in development of oil
and gas properties for its own account. Its executive offices are
located in New       York, New York, and it has field offices in
Tulsa, Oklahoma and Evansville, Indiana.  It offers its services
primarily in the western, midwestern, and southwestern United
States.  It has oil and gas properties in California and oil,
gas, and limestone properties in the midwestern United States. 

Petro Union was a debtor in possession under Chapter 11 of the
U.S. Bankruptcy Code until August 28, 1997, at which time the
Bankruptcy Court approved its plan of reorganization.  As a part
of its plan of reorganization, PUI agreed to acquire all the
outstanding stock of Horizontal Ventures, Inc. ("HVI").  The
acquisition of HVI was completed on September 9, 1997, and after
the acquisition, HVI shareholders owned more than 50% of the
outstanding shares of PUI.  Therefore, pursuant to the rules of
the Securities and Exchange Commission, the transaction has been
accounted for as a "reverse merger."  Accordingly, the
accompanying consolidated statements of operations and
consolidated statements of cash flows reflect the historical
operations and cash flows of HVI (including those of PUI after
September 9, 1997, the effective date of the merger), whereas
previous reports filed by the Company reflected operations and
cash flows of PUI.  Horizontal Ventures, Inc. and Petro Union,
Inc. completed a statutory merger under the laws of the State of
Colorado effective December 31, 1997.  The name of the merged
entity, Petro Union, Inc., is intended to be changed to
Horizontal Ventures, Inc. when approved by shareholders. 

Horizontal Ventures, Inc. (the "Company") was organized under the
laws of the State of Oklahoma on September 2, 1994.  It was
engaged in organizational activities through the end of 1994, and
commenced operations in 1995.  On December 23, 1994, the Company
organized an Oklahoma limited partnership, Horizontal Ventures
1995 Limited Partnership (the "Limited Partnership"), in which it
was the sole general partner.  The Limited Partnership commenced
operations in 1995.  The Company retained a 20.83% interest in
the Limited Partnership for its services in forming and managing
the entity, and limited partners received the remaining interests
in exchange for cash contributions of $760,000.  As the sole
general partner, the Company maintained operational control over
the activities of the Limited Partnership.  As indicated below,
the Limited Partnership was merged into the Company effective
January 1, 1997 in an exchange of Company stock for the limited
                           F-9
partners' interests, which was accounted for using the companies'
historical accounting bases, similar to pooling of interests
accounting.

Basis of presentation - The accounting and reporting policies of
the Company conform to generally accepted accounting principles. 

Principles of combination - Pursuant to guidance contained in
Statement of Position Number 78-9 issued by the Accounting
Standards Division of the American Institute of Certified Public
Accountants, the Limited Partnership is considered to be a
wholly-owned subsidiary of the Company for 1995 and 1996, the
periods during which it existed.  Accordingly, the financial
statements for December 31, 1996 include the accounts and
transactions of the Company and the Limited Partnership. As
indicated below, the Limited Partnership was merged into the
Company effective January 1, 1997, and its assets and liabilities
are thereafter included in the Company's accounts, using their
historical bases similar to pooling of interests accounting.  The
consolidated financial statements also include the accounts and
transactions of Calox, Inc. a subsidiary of Petro Union, whose
principal asset is nonproducing limestone reserves, and HVI Cat
Canyon, Inc. All significant intercompany accounts and
transactions have been eliminated in the accompanying
consolidated financial statements.

Uses of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the reporting period.  Actual results could differ from
those estimates.  

Cash and cash equivalents - The Company considers all highly
liquid investments purchased with an original maturity of three
months or less to be cash equivalents.

Fair value of financial instruments and derivative financial
instruments - The Company has adopted Statement of  Financial
Accounting Standards number 119, Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments. 
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, other current
liabilities and notes payable, approximate fair value because of
the short maturity of these items.  These fair value estimates
are subjective in nature and involve uncertainties and matters of
significant judgment, and , therefore, cannot be determined with
precision.  Changes in assumptions could significantly affect
these estimates.  At June 30, 1997 and December 31, 1996, the
Company had no derivative financial instruments.

Accounts receivable - The Company provides an allowance for
uncollectible receivables when it is determined that collection
is doubtful.  Substantially all of the Company's trade
receivables are from its directional drilling services.  

Concentrations of credit risk - Substantially all of the
Company's accounts receivable are from companies engaged in the
oil and gas business, and concentrated in the Southwestern United
States.  Generally, the Company does not require collateral for
its accounts receivable.  The Company has performed services for
only a limited number of customers each period; therefore, each
customer may be considered a major customer.

Properties and equipment - Properties and equipment are stated at
cost.  The Company follows the "full-cost" method of accounting
for oil and gas property and equipment costs.  Under this method,
all productive and nonproductive costs incurred in the
acquisition, exploration, and development of oil and gas reserves
are capitalized.  Such costs include lease acquisitions,
geological and geophysical services, drilling, completion,
equipment, and certain general and administrative costs directly
associated with acquisition, exploration, and development
activities.  General and administrative costs related to
production and general overhead are expensed as incurred.  No
gains or losses are recognized upon the sale or disposition of
oil and gas properties, except in transactions that involve a
significant amount of reserves.  The proceeds from the sale of
oil and gas properties are generally treated as a reduction of
oil and gas property costs.  Fees from associated oil and gas
exploration and development partnerships, if any, will be
credited to oil and gas property costs to the extent they do not
represent reimbursement of general and administrative expenses
currently charged to expense.  

Future development, site restoration, and dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions
and are amortized to expense as the Company's capitalized oil and
gas property costs are amortized.  The Company's properties are
all onshore, and the Company expects that the salvage value of
the tangible equipment offsets any site restoration and
dismantlement and abandonment costs. 

The provision for depreciation, depletion, and amortization of
oil and gas properties is computed on the unit-of-production
method.  Under this method, The Company computes the provision by
multiplying the total unamortized costs of oil and gas properties
- including future development, site restoration, and
dismantlement and abandonment costs, but excluding costs of
unproved properties - by an overall rate determined by dividing
the physical units of oil and gas produced during the period by
the total estimated units of proved oil and gas reserves.  This
calculation is done on a country by country basis for those
countries with oil and gas production.  The Company currently has
production in the United States only.  The cost of unproved
properties not being amortized is assessed quarterly to determine
whether the value has been impaired below the capitalized cost. 
Any impairment assessed is added to the cost of proved properties
being amortized.  To the extent costs accumulated in the
Company's international initiatives will not result in the
addition of proved reserves, any impairment would be charged to
income upon such determination.  

At the end of each quarterly reporting period, the unamortized
cost of oil and gas properties, net of related deferred income
taxes, is limited to the sum of the estimated future net revenues
from proved properties using current prices, discounted at 10%,
and the lower of cost or fair value of unproved properties,
adjusted for related income tax effects ("Ceiling Limitation"). 
This calculation is done on a country by country basis for those
countries with proved reserves.  Currently the Company has proved
reserves in the United States only. 

The calculation of the Ceiling Limitation and provision for
depreciation, depletion, and amortization is based on estimates
of proved reserves.  There are numerous uncertainties inherent in
estimating quantities of proved reserves and in projecting the
future rates of production, timing, and plan of development.  The
accuracy of any reserves estimate is a function of the quality of
available data and of engineering and geological interpretation
and judgment.  Results of drilling, testing, and production
subsequent to the date of the estimate may justify revision of
such estimate.  Accordingly, reserves estimates are often
different from the quantities of oil and gas that are ultimately
recovered.  

Depreciation for all other property and equipment is provided
over estimated useful lives using the straight line method of
depreciation for financial reporting purposes and the accelerated
cost recovery system for income tax purposes.  Renewals and
betterments are capitalized when incurred.  Costs of maintenance
and repairs that do not improve or extend asset lives are charged
to expense.

The Company's investment in limestone reserves will be amortized
on a unit-of-production basis as the reserves are mined and
produced.  Since the acquisition of the limestone reserves in
1993, there has been no development or production of these
properties.   Management has determined that there is no
impairment in value of the reserves at December 31, 1997.

License agreements and organization expenses - The Company has
acquired certain licenses for the use of horizontal drilling
technology developed by Amoco Corporation.  License agreements
and organization expenses are amortized over a fifteen and five
year life respectively using the straight line method of
amortization.  Amortization charged to operations was $16,593
(1997),  and $16,510 (1996). 

Environmental expenditures - If and when remediation of a
property is probable and the related costs can be reasonably
estimated, the environmentally-related remediation costs will be
expensed and recorded as liabilities.  If recoveries of
environmental costs from third parties are probable, a receivable
will be recorded.  Management is not currently aware of any
required remediation.
 
Revenue recognition - For financial reporting purposes, revenues
from drilling operations are recognized in the accounting period
which corresponds with the performance of the service to the
customer.  Revenue from oil and gas production is recognized in
the period in which the product is sold.  The related costs and
expenses are recognized when incurred.

Federal income tax - The Company follows SFAS No. 109,
"Accounting for Income Taxes",  which accounts for income taxes
using the liability method.  Under SFAS No. 109, deferred tax
liabilities and assets are determined based on differences
between the financial statement and tax basis of assets and
liabilities using enacted tax rates expected to be in effect for
the year in which the differences are expected to reverse.  The
net change in deferred tax assets and liabilities is reflected in
the statement of operations.  The primary differences between
financial reporting and tax reporting relate to the availability
of a net operating loss carryover, the use of accelerated methods
of depreciation for income tax purposes, and the taxation of the
Limited Partnership's operations to its individual partners. 


NOTE 2 - MERGER OF PETRO UNION, INC. AND HORIZONTAL VENTURES,
INC.:
On June 13, 1997, Horizontal Ventures, Inc. and Petro Union, Inc.
entered into an agreement under which all of the outstanding
common and preferred shares of HVI would be acquired by Petro
Union.  Petro Union was also engaged in performing contract
drilling services using the licensed Amoco technology, and its
stock had been listed on the NASDAQ SmallCap Market. Petro Union
was subject to supervision in the U.S. Bankruptcy Court for the
Southern District of Indiana under Chapter 11 of the U.S.
Bankruptcy Code, and the agreement with HVI was part of Petro
Union's Plan of Reorganization.  On August 28, 1997, the
Bankruptcy Court approved the Plan, the principal points of which
are as follows:

- The par value of Petro Union stock was converted from $.125 par
value to no par value.

- All secured debt was paid according to the terms previously
contracted for.
- Unsecured creditors in class C-1 received 20,000 shares of new
Petro Union no par value stock in satisfaction of their claims,
and unsecured creditors in class C-2 received 80,000 shares of
new Petro Union no par value stock in satisfaction of their
claims. 
- The priority post-petition promissory note of Pembrooke Holding
Co., in the amount of $150,000 was paid with $100,000 in cash and
the issuance of 49,999 shares of new Petro Union no par value
stock valued at $50,000. 
- Existing shareholders of Petro Union received new Petro Union
no par value stock in the ratio of 1 new share for each 220
shares of old stock. 
-Randeep C. Grewal, CEO of Horizontal Ventures, Inc. and Richard
D. Wedel, President of Petro Union received 70,000 shares each of
new Petro Union no par value stock valued at $20,000 each, or
$40,000 in total. 
- International Publishing Holding, S.A. ("IPH"), a Luxembourg
societe  anonyme, loaned $200,000 to Petro Union secured by 50%
interest in its nonproducing limestone reserves;  the loan was
then be converted into 40,000 shares of new Petro Union no par
value stock.
- Petro Union issued 590,000 shares of new no par value stock for
all the outstanding common and preferred stock of Horizontal
Ventures, Inc. 

After the Plan was consummated on September 9, 1997, Horizontal
Ventures' shareholders owned approximately 63% of the new Petro
Union no par value stock. 

Pro-forma summary statements of operations, combining Petro
Union, Inc., and Horizontal Ventures, Inc., are as follows,
assuming the merger had occurred January 1, 1996:

                            Year Ended December 31, 1997          
                 Petro
                       Union,
                       Inc.         Petro Union,  Pro-Forma
                     (January 1     Inc., dba
                     through        Horizontal
                     September,     Ventures,
                     9, 1997        Inc.          
                   ______________ _____________ __________

Revenues             $311,798       $211,696     $523,494
Cost of revenues      237,801        247,979      485,780
                    __________      _________    _________
  Gross profit         73,997        (36,283)      37,714

General and 
administrative
expenses              264,550        780,373    1,044,923 
                     __________    _________    __________
  (Loss) from 
  operations         (190,553)      (816,656)  (1,007,209)
Other income 
(expense)              (7,933)       (34,460)     (42,393)
                     __________    __________   ___________
  (Loss) before 
  tax                (198,486)      (851,116)  (1,049,602)
Provision for 
taxes                    -             -            -
                     __________    _________    __________
  Net (loss)        ($198,486)     ($851,116) ($1,049,602)
                    ===========    ==========   ==========

                           Year Ended December 31, 1996
                     Petro         Horizontal
                     Union,        Ventures,
                     Inc.            Inc.         Pro-Forma
                   _________     ___________    ___________
                            
Revenues             $403,968      $604,475    $1,008,443
Cost of revenues      239,008       367,419       606,427
                  ___________   ___________   ___________
  Gross profit        164,960       237,056       402,016

General and 
administrative
expenses             354,299        594,402       948,701
                 ____________   ____________ ____________
  (Loss) from 
  operations        (189,339)      (357,346)     (546,685)
Other income 
(expense)            (81,462)       (19,787)     (101,249)
                 ____________   _____________ ____________
  (Loss) from 
  continuing 
  operations 
  before tax        (270,801)      (377,133)     (647,934)
Provision for 
taxes                  -              -             -
                  __________    _____________ ____________
  Net (loss) 
  from 
  continuing
  operations       (270,801)       (377,133)     (647,934)
                  __________    _____________ ____________
Loss from 
discontinued
operations      (24,092,791)          -       (24,092,791)
                 ___________    _____________ _____________
  Net (loss)   ($24,363,592)      ($377,133) ($24,740,725)
                ============    ============= =============

NOTE 3 - ACQUISITION OF HORIZONTAL VENTURES 1995 LIMITED
PARTNERSHIP AND RETIREMENT OF SUBORDINATED CONVERTIBLE
DEBENTURES:
In December, 1994, the Company organized a limited partnership,
Horizontal Ventures 1995 Limited Partnership, in which the
Company was the sole general partner, retaining an interest of
20.83% for its services in organizing the Limited Partnership. 
Limited partners contributed $760,000 in 1995 for the limited
partners' interests.  The Limited Partnership commenced
operations in 1995.  In 1996, one of the limited partners
performed services for the Company and the Limited Partnership,
and was given credit for an additional capital contribution of
$58,000 for such services.  

Substantially all drilling operations of the combined entities
were conducted through the Limited Partnership, while the
Company's role was to manage the Limited Partnership and perform
administrative functions.  Due to the Company's control over the
Limited Partnership, the Limited Partnership is deemed to be a
subsidiary of the company for the purposes of financial
reporting.  

On October 4, 1996, the then six limited partners, along with an
officer and shareholder of the Company, loaned the Company
$433,231, evidenced by subordinated convertible debentures.  The
debentures bore a stated interest rate of 30% per annum, were
unsecured, and were due October 4, 1999.  The holders had the
right to convert the debentures into shares of the Company's
common stock within thirty days of maturity at the rate of 1
share of stock for each $1.00 of debt.  

The Company issued 2,280 shares of its common stock to the six
limited partners as partial consideration for making the loans. 
The transaction was valued at $1 per share, or $2,280.

By agreement with the limited partners, the interest on the
debentures was waived by the limited partners.  Accordingly no
interest was accrued and none is reflected in the accompanying
financial statements.  

In early 1997, one of the limited partners, International
Publishing Holding, S.A. ("IPH"), a Luxembourg societe  anonyme,
acquired all of the limited partners' interests and all of the
debentures from the other limited partners and debenture holders. 
Then, effective January 1, 1997, the Company issued 725,770
shares of its common stock to IPH in exchange for the net assets
of the Limited Partnership and in exchange for cancellation of
the subordinated convertible debentures, and the Limited
Partnership was merged into the Company using the companies'
historical accounting bases similar to pooling of interests
accounting.  

The net loss of the respective entities for the years ended
December 31, 1996 and 1995 were as follows:

                                1996             1995
                               _______         ________
Horizontal Ventures, Inc.   ($123,371)         ($53,601)
Horizontal Ventures 
1995 Limited Partnership     (320,887)         (473,879)
                            ___________      ____________
  Subtotal                   (444,258)         (527,480)
Less, Horizontal 
Ventures, Inc.'s 
share of partnership 
loss, eliminated in 
consolidation                  67,125           104,696
                            ___________      _____________
  Net loss                  ($377,133)        ($422,784)
                            ===========      =============

NOTE 4 - PROPERTY AND EQUIPMENT:
A summary of the Company's property and equipment is as follows:

                           December 31,     December 31,
                                  1997             1996
                          ______________   _____________
Proved oil and gas 
properties:
  Leasehold costs            $2,034,190       $  -
  Intangible 
  development costs             132,564          -
  Lease and well 
  equipment                     133,675          -
  Storage facilities 
  and gathering 
  systems                      62,908            -
                          ______________   ____________
    Total                   2,363,337            - 
Nonproducing 
limestone reserves          3,500,000            -
                           ____________    ____________
    Total mineral 
    interests               5,863,337            -
Land and buildings            135,826         85,814
Drilling equipment          1,183,546        638,382
Transportation equipment      162,111        135,442
Office and computer 
equipment                      47,953         17,434
                           ___________     ____________
  Subtotal                  7,392,773        877,072
Less, Accumulated 
depreciation                  597,926        142,418
                           __________      ___________
  Net property 
  and equipment            $6,794,847       $734,654
                           ==========      ===========

Depreciation charged against income was $160,833 (1997), and
$105,198 (1996). 

In the fourth quarter of 1997, HVI Cat Canyon, Inc., a subsidiary
of the Company, acquired certain proven oil and gas properties
located in California, known as the Cat Canyon properties.  Total
consideration was $1,650,000, payable $900,000 in cash at closing
and and additional $250,000 for each of three wells to be drilled
into the Sisquoc formation on the property.  At December 31,
1997, one of the wells had been drilled and completed, and the
first installment of $250,000 had been paid.  A second well had
been commenced, but not completed until early 1998.  The third
well was completed in early 1998, and the remaining balance of
$500,000 was paid; the accrued balance of $500,000 is included in
other current liabilities on the accompanying balance sheet.  All
three wells have been placed on production in 1998, and
additional drilling on the property is expected throughout 1998. 

In November and December, 1997, the Company drilled, but did not
place on production, a horizontal well on its Hayes lease in
Illinois.  


NOTE 5 - COMMITMENTS AND CONTINGENCIES:
The Company is obligated on an operating lease for office space
requiring rentals of $1,106 per month, and expiring in April,
2000.  The Company has an option to renew the lease for an
additional one year period at the market rate.  Aggregate
commitments under the lease at December 31, 1997 were as follows:

                                          Amount
Year ending December 31: 
   1998                                   $13,272
   1999                                   13,272
   2000                                    4,424
                                         _________
    Total                                $30,968
                                         

Rent expense included in the accompanying statements of
operations was $31,262 (1997), and $9,891 (1996).   The Company
also occupies offices under a month to month lease requiring
monthly rentals approximating $2,000.  

In October 1994, the Company licensed certain directional
drilling technology from Amoco Corporation, a major oil
corporation.  The license requires minimum annual payments of
$15,000 per year or $1,500 per well drilled under the license,
whichever is greater, and the amounts are adjusted periodically
for inflation.  The minimum amount had been adjusted to $1,630
effective January 1, 1996 and $1,639 effective January 1, 1997. 
The Company incurred license payments approximating $20,000 for
the year ended December 31, 1997, and $19,900 for 1996. 
Quarterly settlements are required under the license, and Amoco
has the right to terminate the license for non-payment.  If Amoco
were to terminate the Company's license, it could have an adverse
affect on the Company's operations.  
NOTE 6 - FEDERAL INCOME TAXES:
The Limited Partnership filed a U.S. Partnership Income Tax
Return for the years ended December 31, 1996 and 1995. 
Accordingly, its income (loss) was taxable to (deductible by) the
limited partners. Petro Union and HVI will file a consolidated
U.S. Corporation Income Tax Return for calendar year 1997, as a
result of their merger.  

A summary of the principal differences between book and taxable
income is as follows:

                                   Taxed To
                        _________________________________
                         Limited       The                        
                 Partners    Company
                                                   Total
                        __________   _________    ________
Year ended 
December 31, 1997:
Net (loss) of HVI           -       ($851,116)   ($851,116)
Net (loss) of 
Petro Union                          (198,486)    (198,486)
                                   ___________   __________
  Combined                         (1,049,602)  (1,049,602)
                                   ===========   ==========
  Rounded to                       (1,050,000)  (1,050,000)
Permanent differences                   6,600        6,600
Timing differences:
  Depreciation                       (60,000)      (60,000)
  Net operating loss 
  carryover                      (36,900,000)  (36,900,000)
                       ______   ______________ ____________
  Taxable (loss)          -     ($38,003,400) ($38,003,400)
                       ======   ============== ============       
 

Calendar year 1996:                          
Net (loss) - 
see Note 2          ($253,762)     ($123,371)    ($377,133)
Permanent 
differences             3,747          1,793         5,540
Timing differences:
  Depreciation        (60,944)       (16,038)      (76,982)
  Net operating 
  loss carryover         -           (89,548)      (89,548)
                    __________   ____________   ___________
  Taxable (loss)    ($310,959)     ($227,164)    ($538,123)
                    ==========   ============= ============

The Company follows SFAS No. 109, "Accounting for Income Taxes"
in accounting for deferred Federal income taxes.  Pursuant to the
requirements of SFAS No. 109, the Company has recorded deferred
tax assets and liabilities, using an expected tax rate of 35%, as
follows:

                            December 31,    December 31,
                                   1997            1996
                            ____________    ___________
Deferred tax asset 
(liability) attributable 
to:
  Net operating loss 
  carryover                 $13,300,000       $79,500
  Accumulated 
  depreciation                  (96,000)       (7,700)
                            ____________     _________
    Subtotal                 13,204,000        71,800
Less, Valuation 
allowance                   (13,204,000)      (71,800)
                            ____________     _________
  Net deferred tax asset      $  -            $  -
                            ============     =========

As indicated above, a significant net operating loss carryover
has been incurred in prior years, primarily by Petro Union. 
Management has not yet determined the extent to which the net
operating loss will be limited, if any, as a result of the
merger.  The net operating loss expires, if unused, as follows:

     Expires in:         Amount
        2007            $214,000
        2008           7,236,400
        2009           4,551,900
        2010             510,700
        2011          24,437,600
        2012           1,103,400
                      ___________
       Total        $38,054,000
                   =============

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:

                            December 31,    December 31,
                                   1997            1996
                           _____________    ___________
Accounts payable, trade        $265,862       $123,604
Accrued royalty payable, 
Amoco Corporation                 -             19,900
Other accruals and 
payables                          5,183         18,325
                              __________      _________
  Total                        $271,045       $161,829
                              ==========      =========


NOTE 8 - NOTES PAYABLE:
Details of long term notes payable are as follows:

                           December 31,     December 31,
                                  1997             1996
                           ____________    _____________
Note to investment 
company dated June 9,
1995, payable $1,006 
monthly including
10.50% interest, 
due in June, 2005, 
collateralized by land 
and building costing 
$85,814                      $62,489          $67,700 
Note to bank dated 
February 28, 1995,
payable $549 monthly 
including 9.99% interest, 
due in March 2000, 
collateralized by 
vehicle costing $25,757      13,305           18,500 
Note to bank dated 
October 18, 1996,
payable $456 monthly 
including 12.50% interest, 
due in November 2001, 
collateralized by vehicle 
costing $36,830               6,198           19,917 
Note to bank dated 
July 30, 1996, payable
$4,000 monthly plus 12% 
interest, due in July, 
1997,collateralized by 
all remaining equipment         -             54,280 
Note to bank dated 
February 28, 1995,
payable $400 monthly 
including 9.99% interest, 
due in March 2000 but 
paid in April 1997, 
collateralized by 
vehicle costing $18,741 
which was disposed of in
April 1997                      -           13,468
Note to automobile 
finance company dated
April 21, 1995, 
payable $673 monthly
including 16.2% imputed 
interest, due in
April, 2000, 
collateralized by 
vehicle costing $27,410      16,876
                           _________     _____________
    Total                    98,868        173,865 
Less, Amount due 
within one year             (21,782)       (65,663)
                           _________     _____________
    Net long term 
    portion                 $77,086       $108,202
                           =========     =============
Maturities of long term notes are as follows:

                            December          December
Due during year                  31,               31,
ending December 31:            1997              1996
                            ___________     ___________
     1998                     $22,253        $25,160
     1999                      20,741         20,995
     2000                      12,724         14,187
     2001                       7,917         12,627
Thereafter                     35,233         35,233
                            ___________    ____________
    Total                     $98,868       $173,865
                            ===========    ============

NOTE 9  - LITIGATION:
At December 31, 1997, the Company was the plaintiff in a lawsuit
against David J. LaPrade, a shareholder, former officer and
director, and an organizer of the Company, and Mr. LaPrade's
current employer.  The Company seeks to recover losses from
alleged breach of fiduciary duty, misappropriating confidential
information and property of the Company, using it in unfair
competition with the Company, interfering with the Company's
existing and prospective relationships with its customers,
interfering with the Company's relationships with its employees,
and conversion of Company property.   Mr. LaPrade has made
counterclaims against the Company for breach of his employment
agreement, libel and slander, and intentional infliction of
emotional distress; he seeks actual damages in excess of $10,000
and punitive damages in an unspecified amount.  Management
believes that its claims against Mr. LaPrade will be successful
and that it will recover damages; moreover, management believes
that Mr. LaPrade's counterclaim will not result in a material
liability to the company.   The accompanying financial statements
do not include provision for any loss which might result from Mr.
LaPrade's counterclaim, nor do they include any asset that might
result from the Company's claims against Mr. LaPrade. 

Also at December 31, 1997, the Company was a defendant in a
lawsuit by Dr. Warren G. Gwartney to collect for sums due on a
promissory note in the original principal amount of $50,000
entered into individually by Mr. LaPrade and another former
officer and employee, A.B.C. Paulsen.  The lawsuit seeks
repayment of the $25,000 balance due on the note, plus interest
at 9-3/4% from October 28, 1996, costs and attorney fees.  During
the first quarter of 1998, the Company settled the lawsuit by the
payment of $25,000, which has been accrued at December 31, 1997
and included among Other current liabilities in the accompanying
balance sheet. 

At December, 1997, the Company had trade accounts receivable
approximating $74,000 from several debtors, some of whom have
refused to pay.  Although no lawsuits have been filed to collect
these debts, management is currently continuing to have
discussions with the debtors in an effort to resolve any disputes
and collect the amounts due.  In one case, the Company has a lien
against an oil and gas property, and in another it has received a
written promise to pay the amount due.  If continuing efforts are
unsuccessful, the Company intends to pursue its claims through
other legal actions, and believes it will be successful.  An
allowance for doubtful accounts of $74,092 has been provided for
any uncollectible amounts, and management believes it will be
adequate to absorb any losses. 


NOTE 10 - RELATED PARTY TRANSACTIONS:
From time to time, certain officers, directors, or limited
partners have loaned funds to the Company.  At December 31, 1997,
the Company was indebted to related parties as follows:

                                          December 
                                          31, 1997
                                        _____________
Advance from shareholder 
and former President, 
not evidenced by a promissory
note, unsecured, currently due              $2,500
                                        ============

The Company has an agreement with Grupo de Creacion, Ltd.
("GDC"), a Gibraltar corporation and a shareholder of the
Company, for financial consulting services.  Pursuant to the
agreement, GDC assisted the Company in arranging three "Reg S"
securities offerings during 1997, resulting in proceeds of
approximately $5,800,000 for the sale of Company stock.  As
compensation, GDC receives a negotiated commission of not less
than 7% of any financing up to $10 million, and reduced
percentages over that amount; in addition, it receives an
overriding royalty of 2% of all oil and gas production received
by the Company during the term of the agreement.  The agreement
expires December 31, 2004.  GDC received commissions of
approximately $337,400 for completed financings in 1997, and
overriding royalty approximating $500.

The Company's Chairman and CEO also receives an overriding
royalty of 2% of all oil and gas production received by the
Company during the term of his employment.  

On March 12, 1998, an officer of the Company resigned and entered
into an agreement providing for certain severance benefits and
mutual covenants.  The Company agreed to pay the former officer a
severance payment of $50,000, and agreed to loan him $100,000 at
prime, payable in full in six months, secured by stock in the
Company.

NOTE 11 - ADVERTISING:
The Company expense the production costs of advertising the first
time the advertising takes place.  The Company has not engaged in
direct response advertising through December 31, 1997.  There was
no prepaid advertising reported as assets at December 31, 1997 or
1996.  Advertising expense approximated $4,100 (1997), and $7,900
(1996).


NOTE 12 - YEAR 2000 COMPUTER COSTS:
The Company does not utilize any proprietary computer software. 
Instead, it uses commercially available software programs from
vendors such as Microsoft Corporation and Peachtree.  The Company
has been advised that the software it uses is Year 2000
compliant.  Accordingly, it does not expect to incur significant
expense in converting software to be Year 2000 compliant. 

NOTE 13 - STOCK OPTIONS AND WARRANTS:
On September 9, 1997, the Company's Chairman and CEO was granted
options to purchase an aggregate of 150,000 shares of the
Company's no par value common stock at an option price of $5 per
share, exercisable at the rate of 30,000 shares per year, with
the first such installment becoming exercisable September 9,
1998, and an additional 30,000 share on each succeeding September
9 thereafter.  A similar option was granted the Company's
President, but the option lapsed upon his resignation in 1998.  
No compensation expense was recorded in connection with the
granting of these options.  A summary of the outstanding options
follows:


                                                 Weighted
                                                 Average
                                                 Exercise
                                    Shares       Price
                                   __________   _________
Options outstanding, 
January 1, 1997                        -    
Options granted                     300,000        $5.00
Options terminated                     -
Options exercised                      -
                                  -----------    
Options outstanding, 
December 31, 1997                   300,000         5.00
                                  

The Company also granted warrants to purchase common stock to the
purchasers of shares from one of the 1997 "Reg S" offerings.  A
summary is as follows:



Date Granted     Number of   Option  Effective  Expiration 
                 Shares       Price   Date        Date
_________________________________________________________
September 29,   127,750     $15.00  January 1,  December
        1997                              1998   31, 1998

NOTE 14 - TIME DEPOSITS AND FUNDS HELD IN ESCROW AND RESTRICTED
CASH:
Time deposits and funds held in escrow consisted of the
following:

                                         December 31,
                                                1997
                                       ______________
Time deposit, 5%, matures 
June, 1998                                 $100,000
Time deposit, 4.28 %, 
matures May, 1998                            32,178
Funds held by escrow 
agent for partially
closed "Reg S" offering, 
completed in January, 1998                  981,517
Funds held by escrow agent 
for balance due
on purchase of Cat Canyon 
leases                                     500,000
                                     ________________
  Total                                 $1,613,696
                                     


In the ordinary course of business, the Company has to
occasionally place funds in certificates of deposit and pledge
these certificates to various third parties to guarantee the
Company's performance pursuant to various contracts.  As of
December 31, 1997, a certificate of deposit in the amount of
$32,178 was pledged or otherwise restricted.


NOTE 15 - EARNINGS PER SHARE:
The Company has adopted Statement of Financial Accounting
Standards number 128, Earnings Per Share, which establishes new
standards for computing and presenting earnings per share.  Basic
income per share has been computed using the weighted average
number of common shares outstanding during the respective
periods.  Basic income per share has been retroactively restated
in all periods presented to give recognition to the adoption of
Statement number 128. In computing average outstanding shares,
the Company has converted Horizontal Ventures shares outstanding
prior to the merger to equivalent Petro Union shares on a prorata
basis.  The Statement provides that diluted earnings per share be
computed by considering the effect of outstanding options and
warrants.  However, it further provides that diluted earnings per
share is the same as basic earnings per share in instances where
a loss from continuing operations has been incurred. 
Accordingly, diluted earnings per share has not been presented.  

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

The accompanying table presents information concerning the
Company's oil and gas producing activities and is prepared in
accordance with Statement of Financial Accounting Standards No.
69, "Disclosures about Oil and Gas Producing Activities."  Also
shown, in a comparative format, is similar information about the
Company's investment in limestone reserves.

The Company acquired its limestone reserves in July, 1992 through
the acquisition of Calox, Inc.  The Company has not commenced
production and development activities on these acquired reserves. 
The following summarizes activity related to these reserves:

                        LIMESTONE              OIL
                         RESERVES           RESERVES
                     _________________   ______________
Capitalized costs:
  Proved reserves        $3,500,000       $1,963,337
  Unproved reserves                          400,000
                      _____________     _____________
                         3,500,000         2,363,337
Less, 
Accumulated 
depreciation,
depletion and 
amortization                  -             (57,598)
                        ____________      ____________
   Balance,  
   December 31, 1997   $ 3,500,000       $2,305,739
                        ============      ============ 


                         LIMESTONE           OIL
                         RESERVES          RESERVES
                           (TONS)          ( BBLS)
                      _____________     ______________
Proved reserves, 
December 31, 1995        73,458,000        1,827,000
Production                  -                   (615)
Change in Estimates         -                  -
                       _____________    _____________
Proved reserves, 
December 31, 1996        73,458,000        1,826,385
          
Purchases of 
minerals in place           -                728,734
Production                  -                 (2,112)
                       ____________     _______________
Proved reserves, 
December 31, 1997        73,458,000        2,553,007 
                       ============     ===============
          
Proved developed reserves:
  December 31, 1996         -                 94,287
  December 31, 1997         -                231,758
          

The accompanying table reflects the standardized measure of
discounted future net cash flows relating to the Company's
interests in proved reserves:


                                              OIL AND
December 31, 1996:             LIMESTONE       GAS
                             ____________   __________
Future cash inflows          $367,290,000  $32,874,000

Future costs:
  Development                 (18,000,000)  (3,000,000)
  Production                 (202,374,000) (21,003,000)
                             ____________   ___________
Future net cash flows 
before income taxes           146,916,000    8,871,000 
Future income taxes           (44,075,000)  (2,600,000)
                             ____________   ____________
Future net cash flows 
after income taxes            102,841,000    6,271,000 
Discount at 10% per annum     (77,699,000)  (2,400,000)
                             ____________ ______________
Standard measure of 
discounted future net 
cash flows                   $25,142,000    $3,871,000
                             ============= ==============


                                              OIL AND
December 31, 1996:             LIMESTONE       GAS
                             ____________   __________

Future cash inflows         $367,290,000   $40,103,600

Future costs:
  Development                (18,000,000)   (5,281,800)
  Production                (202,374,000)  (23,805,600)
                            _____________ _______________
Future net cash 
flows before income 
taxes                        146,916,000    11,016,200
Future income taxes          (44,075,000)   (3,304,800)
                            _____________ ______________
Future net cash 
flows after income 
taxes                        102,841,000     7,711,400
Discount at 10% 
per annum                    (77,699,000)   (2,400,000)
                           _____________ ________________
Standard measure of 
discounted future 
net cash flows               $25,142,000    $4,610,300
                           ============= ===============

Future cash inflows are computed by applying year-end prices of
oil and gas and limestone relating to the year-end quantities of
those reserves.  Future development and production costs are
computed by independent consultants by estimating the
expenditures to be incurred in developing and producing proved
limestone and oil and gas reserves at the end of the year, based
on year-end costs and assuming continuation of existing economic
conditions.

Future income tax expenses are computed by applying the
appropriate statutory tax rates to the future pretax net cash
flows relating to proved reserves, exclusive of the tax basis of
the properties involved.  The future income tax expense gives
effect to permanent differences and tax credits, but does not
reflect the impact of continuing operations.  Future income tax
expense has been reduced by estimated future nonconventional fuel
source income tax credits to be utilized.
     
The 10% annual discount is applied to reflect the timing of the
future net cash flows.  The standardized measure of discounted
cash flows is the future net cash flows less the computed
discounts.
<PAGE>
                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                              PETRO UNION, INC. dba HORIZONTAL    
                              VENTURES, INC.


Dated: April 15, 1998     By: /s/ Randeep S. Grewal,



     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.


     Signature               Capacity                  Date


/s/ Randeep S. Grewal
______________________
Randeep S. Grewal            Chief Executive          4/15, 1998
                                                 Officer, Chief
                             Financial Officer,
                             Chief Accounting
                             Officer and Director
/s/ Donald A. Christensen
______________________
Donald A. Christensen        Director                 4/15, 1998

/s/ Jan F. Holtrop
______________________
Jan F. Holtrop               Director                 4/15, 1998

/s/ Dirk Van Keulen
______________________
Dirk Van Keulen              Director                 4/15, 1998