/ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition period from to

---

---

`(audited)         (unaudited)
                                                                              December 31, 2000*    March 31, 2001
                                                                              ------------------    --------------
ASSETS
Current assets:

Cash and cash equivalents                                                              $ 2,000,826      $ 4,941,681

Accounts receivable:

Oil and gas                                                                              4,057,527        3,792,171

Others, net of allowance for doubtful accounts of $51,136 in 2001 and
      in 2000                                                                              319,818          252,497

Affiliate                                                                                   19,569            5,865
                                                                                      ------------      -----------
                                                                                         4,396,914        4,050,533

Other assets                                                                                27,166           42,202

Deferred income taxes                                                                            -          718,168
                                                                                      ------------      -----------
Total current assets                                                                     6,424,906        9,752,584
                                                                                      ------------      -----------

Property and equipment, at cost:

  Oil and gas properties, full cost method                                              72,316,384       74,489,241

  Other                                                                                    372,765          467,624
                                                                                      ------------      -----------

                                                                                        72,689,149       74,956,865
Less accumulated depreciation and depletion                                            (32,742,060)     (34,419,879)
                                                                                      ------------      -----------

     Net property and equipment                                                         39,947,089       40,536,986
                                                                                      ------------      -----------

Other assets, net of accumulated amortization of $55,984 in 2001
     and $114,791 in 2000                                                                   84,442          117,968
                                                                                      ------------      -----------

                                                                                      $ 46,456,437     $ 50,407,538
                                                                                      ============     ============`

`(audited)               (unaudited)
                                                                                December 31, 2000*        March 31, 2001
                                                                                ------------------        --------------
                                                                                                                                                                  ------------              --------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current maturities of long-term debt                                                $ 803,531                $ 1,345,000

Investment liability in First Permian (Note 6)                                        366,765                    366,765

Accounts payable and accrued liabilities:

     Trade                                                                          2,443,773                  2,227,820

    Affiliate                                                                               -                     17,427

Income taxes payable (Note 4)                                                          50,000                     37,500
                                                                                 ------------                -----------

Total current liabilities                                                           3,664,069                  3,994,512
                                                                                 ------------                -----------

Long-term debt, excluding current maturities (Note 2)                              11,624,000                 10,655,000

Stockholders' equity:

     Series A preferred stock - par value $.10 per share (aggregate liquidation
          preference of $26) authorized 50,000 shares                                       -                          -

     Preferred stock - $.60 cumulative convertible preferred stock - par value
          of $.10 per share (aggregate liquidation preference of $10) authorized
          10,000,000 shares, issued and outstanding 974,500 in 2001 and 2000           97,450                     97,450


     Common stock - par value $.01 per share, authorized 60,000,000 shares,
          issued and outstanding 20,428,858 in 2001 and 20,331,858 in 2000            203,319                    204,289

     Additional paid-in surplus                                                    34,238,078                 34,190,844

     Retained earnings (deficit)                                                   (3,370,479)                 1,265,443
                                                                                 ------------                -----------

Total stockholders' equity                                                         31,168,368                 35,758,026

Commitments and contingencies (Note 9)                                                      -                          -
                                                                                 ------------                -----------

                                                                                 $ 46,456,437               $ 50,407,538
                                                                                 ============                ===========`

`Three Months Ended March 31,
                                                                            --------------------------------------------
                                                                               2000                             2001
                                                                            -----------                      -----------

Oil and gas revenues                                                        $ 2,774,591                      $ 7,288,202
Cost and expenses:
   Lease operating expense                                                      613,815                        1,119,065
   General and administrative                                                   197,800                          298,208
   Depreciation, depletion and amortization                                   1,063,469                        1,677,820
                                                                            -----------                      -----------
                                                                              1,875,084                        3,095,093
                                                                            -----------                      -----------

Operating income                                                                899,507                        4,193,109

Other income (expense), net:
   Equity in loss of First Permian, LLC                                        (386,511)                               -
   Interest income                                                               18,755                           19,049
   Other income                                                                   6,461                           25,207
   Interest expense                                                            (342,905)                        (226,857)
   Other expense                                                                 (1,706)                         (55,254)
                                                                            -----------                      -----------

     Total other expense, net                                                  (705,906)                        (237,855)
                                                                            -----------                      -----------

Income before income taxes                                                      193,601                        3,955,254

Income tax benefit, net                                                              -                          (680,668)
                                                                            -----------                      -----------

   Net income                                                                  193,601                         4,635,922

Cumulative preferred stock dividend                                            170,538                           170,538
                                                                           -----------                       -----------

   Net income available to common stockholders                                $ 23,063                       $ 4,465,384
                                                                           ===========                       ===========

Net income per common share:
   Basic                                                                      $ 0.0011                           $ 0.219
   Diluted                                                                    $ 0.0011                           $ 0.196

Weighted average common shares outstanding
   Basic                                                                    20,331,858                        20,419,158
   Diluted                                                                  20,657,727                        23,692,582`

`Three Months Ended March 31,
                                                                                   --------------------------------------
                                                                                      2000                      2001
                                                                                   ------------               -----------
Cash flows from operating activities:
  Net income                                                                          $ 193,601               $ 4,635,922
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and depletion                                                        1,063,469                 1,677,820
    Equity in income from investments in First Permian, LLC                             386,511                         -
    Income taxes                                                                              -                  (718,168)
    Other, net                                                                          (12,563)                  (33,526)
    Changes in assets and liabilities:
    Decrease (increase) in accounts receivables                                         (26,575)                  346,381
    Decrease (increase) in prepaid expenses and other                                    19,499                   (15,036)
    (Decrease) increase in accounts payable and accrued liabilities                     293,018                  (357,201)
                                                                                    -----------               -----------

      Net cash provided by operating activities                                       1,916,960                 5,536,192
                                                                                    -----------               -----------

Cash flows from investing activities:
    Additions to property and equipment                                              (1,048,855)               (2,267,716)
    Proceeds from disposition of property and equipment                                  33,540                         -
    Distribution from First Permian, LLC                                                 67,500                         -
                                                                                    -----------               -----------

      Net cash used in investing activities                                            (947,815)               (2,267,716)
                                                                                    -----------               -----------

Cash flows from financing activities:
    Borrowings from bank line of credit                                                       -                         -
    Payments on bank line of credit                                                    (900,000)                 (427,531)
    Proceeds from exercise of options and warrants                                            -                    99,910
                                                                                    -----------               -----------

      Net cash used in financing activities                                            (900,000)                 (327,621)
                                                                                    -----------               -----------

      Net increase in cash and cash equivalents                                          69,145                 2,940,855
                                                                                    -----------               -----------

Beginning cash and cash equivalents                                                   1,276,417                 2,000,826
                                                                                    -----------               -----------

Ending cash and cash equivalents                                                    $ 1,345,562               $ 4,941,681
Non-cash financing activities:                                                      ===========               ===========
    Accrued preferred stock dividend                                                $   170,538               $   170,538
                                                                                    ===========               ===========`

`Revolving  Facility note payable to bank, at bank's base lending rate (8.5%
     at March 31, 2001)

                                                                                                       $ 12,000,000
     Less: current maturities                                                                             1,345,000
                                                                                                       ------------
                                                                                                       $ 10,655,000
                                                                                                       ============

     Scheduled maturities of long-term debt at March 31, 2001 are as follows:


     March 31, 2002                                                                                     $ 1,345,000
     March 31, 2003                                                                                       3,876,000
     October 1, 2003                                                                                      6,779,000
                                                                                                       ------------
                                                                                                       $ 12,000,000
                                                                                                       ============`

`Type         Volume/Month               Term                        Price                        Commodity
Swap         91,000 barrels             1/1/01/6/30/01              $17.70                       WTI NYMEX
Collar       40,000 barrels             7/01 - 12/02                $18.00 - $28.75              WTI NYMEX
Collar       40,000 barrels             7/01 - 12/02                $19.00 - $24.80              WTI NYMEX`

`Three Months Ended March 31,
                                                                                    -----------------------------------------
                                                                                        2000                          2001
                                                                                    -----------                   -----------
Basic EPS  Computation:
     Numerator -
          Net income                                                                 $  193,601                   $ 4,635,922
          Preferred stock dividends                                                    (170,538)                     (170,538)
                                                                                     ----------                   -----------
          Net income available to common stockholders                                $   23,063                   $ 4,465,384
                                                                                     ==========                   ===========
     Denominator -
          Weighted average common shares outstanding                                 20,331,858                    20,419,158
                                                                                     ==========                   ===========
          Basic earnings (loss) per share                                            $   0.0011                   $     0.219
                                                                                     ==========                   ===========

Diluted EPS Computation:
     Numerator -
          Net income                                                                 $  193,601                   $ 4,635,922
          Preferred stock dividends                                                   (170,538)                             -
                                                                                     ----------                   -----------
          Net income (loss) available to common stockholders                         $   23,063                   $ 4,635,922
                                                                                     ==========                   ===========
     Denominator -
          Weighted average common shares outstanding                                 20,331,858                    20,419,158
          Employee stock options                                                        325,869                       489,180
          Preferred stock                                                                     -                     2,784,244
                                                                                     ----------                   -----------
                                                                                     20,657,727                    23,692,582
                                                                                     ==========                   ===========

Diluted earnings (loss) per share                                                    $   0.0011                   $     0.196
                                                                                     ==========                   ===========`

`Three Months Ended                 Three Months Ended
                                                         ----------------------------------      ------------------------
                                                          9-30-00    12-31-00       3-31-01      3-31-00          3-31-01
                                                         --------    --------       -------      -------          -------

Production and prices:
    Oil (Bbls)                                             42,317      38,784         34,914      39,283            34,914
    Natural gas (Mcf)                                     733,621     860,651      1,009,532     570,504         1,009,532
    Equivalent barrels of oil (EBO)                       164,587     182,226        203,169     134,367           203,169

    Oil price (per BBL)                                   $ 29.53     $ 32.38        $ 27.81     $ 26.70           $ 27.81
    Gas price (per Mcf)                                    $ 3.97      $ 6.67         $ 6.25      $ 3.02            $ 6.25
    Price per EBO                                         $ 25.29     $ 38.42        $ 35.87     $ 20.65           $ 35.87

    Results of operations per EBO:
    Oil and gas revenues                                  $ 25.29     $ 38.42        $ 35.87     $ 20.65           $ 35.87
    Costs and expenses:
    Lease operating expense                                  4.49        6.19           5.51        4.57              5.51
    General and administrative                               1.11        3.03           1.47        1.47              1.47
    Depreciation and depletion                               7.89        9.10           8.26        7.91              8.26
                                                          -------     -------        -------     -------           -------
        Total costs and expenses                            13.49       18.32          15.24       13.95             15.24
                                                          -------     -------        -------     -------           -------

Operating income                                            11.80       20.10          20.63        6.70             20.63
                                                          -------     -------        -------     -------           -------

Interest expense, net                                       (1.67)      (1.50)         (1.02)      (2.41)            (1.02)
Other income, net                                            0.22        0.71         (0.15)        0.04             (0.15)
                                                          -------     -------        -------     -------           -------

                                                            (1.45)      (0.79)         (1.17)      (2.37)            (1.17)
                                                          -------     -------        -------     -------           -------

Equity in earnings (loss) of First Permian, LLC             (0.03)           -              -      (2.88)                -
                                                          -------     -------        -------     -------           -------

                                                            (1.48)      (0.79)         (1.17)      (5.25)            (1.17)
                                                          -------     -------        -------     -------           -------

        Pretax income per EBO                               10.32       19.31          19.46        1.45             19.46

Income tax expense (benefit)                                    -        0.71         (3.35)           -             (3.35)
                                                          -------     -------        -------     -------           -------

        Net income per EBO                                $ 10.32     $ 18.60        $ 22.81      $ 1.45           $ 22.81
                                                          =======     ======         =======     =======           =======


Net operating cash flow before working capital
   adjustments                                            $ 18.24     $ 28.41        $ 27.72     $ 12.24           $ 27.72
                                                          =======     =======        =======     =======           =======`

`Three  Months Ended                  Three Months  Ended
                                                               ----------------------------------    --------------------------
                                                                9-30-00      12-31-00    3-31-01      3-31-00          3-31-01
                                                               ---------     --------   ---------    ---------        ---------
Oil and gas revenues                                            100.0%        100.0%       100.0%      100.0%          100.0%
Costs and expenses:
     Lease operating expense                                     17.7          16.1         15.4        22.1            15.4
     General and administrative                                   4.4           7.9          4.1         7.1             4.1
     Depreciation and depletion                                  31.2          23.7         23.0        38.3            23.0
                                                               ------        ------      -------     -------          ------
          Total costs and expenses                               53.3          47.7         42.5        67.5            42.5
                                                              -------       -------      -------     -------          ------

Operating income                                                 46.7          52.3         57.5        32.5            57.5
                                                              -------       -------      -------     -------          ------

Interest expense , net                                           (6.6)         (3.9)        (2.9)       (11.7)          (2.9)
Other income, net                                                 0.8           1.9         (0.4)         0.2           (0.4)
                                                              -------       -------      -------      -------         ------

                                                                 (5.8)         (2.0)        (3.3)      (11.5)           (3.3)
Equity in earnings (loss) of First Permian, LLC                  (0.1)             -           -       (13.9)              -
                                                              -------       -------      -------     -------          ------

                                                                 (5.9)         (2.0)        (3.3)      (25.4)           (3.3)
                                                              -------       -------      -------     -------          ------

Pretax income                                                    40.8          50.3         54.2         7.1            54.2

Income tax expense (benefit)                                        -           1.9         (9.4)          -            (9.4)
                                                              -------       -------      -------     -------          ------

Net income                                                       40.8          48.4         63.6         7.1            63.6
                                                              =======       =======      =======     =======          ======`

`March        March        October                       Fair
                                                     2002         2003          2003          Total          Value
                                                    --------    --------      --------      --------      ---------
                                                                (In 000's, except interest rates)

Variable rate debt:
Revolving facility (secured)                         $ 1,345      $ 3,876       $ 6,779      $ 12,000      $ 12,000
Average interest rate                                   8.5%         8.5%          8.5%`