```

                                                                                   (audited)           (unaudited)
                                                                                  December 31,           June 30,
                                                                                     2001*                 2002
                                                                                -----------------    ----------------
                                     ASSETS
Current assets:
  Cash and cash equivalents                                                          $  3,351,044        $  2,332,406
  Accounts receivable:
    Oil and gas                                                                         1,420,859           1,643,652
    Others, net of allowance for doubtful account of $0 in
      2001 and $13,660 in 2002                                                            263,819             209,646
    Affiliate                                                                              16,687               3,460
                                                                                     ------------        ------------
                                                                                        1,701,365           1,856,758
Fair value of derivative instruments (Note 8)                                                   -             135,773
Other assets                                                                              207,120             869,372
Investment in Energen common stock-held for sale                                                -          25,673,698
                                                                                     ------------        ------------
          Total current assets                                                          5,259,529          30,868,007
                                                                                     ------------        ------------
Property and equipment, at cost:
  Oil and gas properties, full cost method                                             85,132,345          91,248,900
  Other                                                                                   552,219             644,762
                                                                                     ------------        ------------
                                                                                       85,684,564          91,893,662
  Less accumulated depreciation and depletion                                         (55,854,378)        (58,542,174)
                                                                                     ------------        ------------

          Net property and equipment                                                   29,830,186          33,351,488
                                                                                     ------------        ------------

Other assets, net of accumulated amortization of $131,139 in
  2001 and $45,674 in 2002                                                                 58,754              34,330
Net deferred tax asset                                                                  6,137,670                   -
Investment in First Permian, L.P. (Note 7)                                                473,764             157,471
                                                                                     ------------        ------------
                                                                                     $ 41,759,903        $ 64,411,296
                                                                                     ============        ============
```

```

                                                                                   (audited)           (unaudited)
                                                                                  December 31,           June 30,
                                                                                     2001*                   2002
                                                                                ---------------      ----------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term debt                                               $  2,400,000        $          -
  Accounts payable and accrued liabilities:
    Trade                                                                               3,446,370           2,603,098
    Taxes payable                                                                               -               2,569
    Accrued bonus payable                                                                       -           1,201,172
                                                                                     ------------        ------------

           Total current liabilities                                                    5,846,370           3,806,839
                                                                                     ------------        ------------

Long-term debt, excluding current maturities (Note 3)                                   9,600,000          12,150,000
Net deferred tax liability (Note 5)                                                             -           3,447,163

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 2002 (Note 4)            97,450              97,450
  Common stock -- par value $.01 per share, authorized 60,000,000 shares,
    issued and outstanding 20,663,861 in 2001 and 2002                                    206,639             206,639
  Additional paid-in capital                                                           34,087,498          33,795,148
  Comprehensive income (Note 10)                                                                -              93,359
  Retained earnings (deficit)                                                          (8,078,054)         10,814,698
                                                                                     ------------        ------------

           Total stockholders' equity                                                  26,313,533          45,007,294

Commitments and contingencies (Note 11 and 12)                                                  -                   -
                                                                                     ------------        ------------

                                                                                     $ 41,759,903        $ 64,411,296
                                                                                     ============        ============
```

```

                                                       Three Months Ended June 30  Six Months Ended June 30,
                                                       --------------------------  -------------------------
                                                           2001         2002         2001         2002
                                                       ------------ ------------ ------------ ------------

Oil and gas revenues                                  $  4,791,063 $  2,808,807 $ 12,079,265 $  4,779,998
                                                      ------------ ------------ ------------ ------------
Cost and expenses:
  Lease operating expense                                1,047,527      721,614    2,166,593    1,270,990
  General and administrative, includes $1,471,000
    for incentive awards in 2002                           303,881    1,974,686      602,089    2,324,450
  Depreciation, depletion and amortization               1,617,747    1,333,166    3,295,567    2,687,796
                                                      ------------ ------------ ------------ ------------
                                                         2,969,155    4,029,466    6,064,249    6,283,236
                                                      ------------ ------------ ------------ ------------
Operating income (expense)                               1,821,908   (1,220,659)   6,015,016   (1,503,238)
                                                      ------------ ------------ ------------ ------------
Other income (expense), net:
  Equity in income of First Permian, L.P., includes a
    $31,082,041 gain on sale of substantially all net assets     -   31,082,041            -   30,765,748
  Change in fair value of derivatives                            -      (54,974)           -     (394,832)
  Interest income                                           63,739       16,286       82,788       26,664
  Other income                                              25,207        4,780       50,413       10,777
  Dividend income                                                -      163,378            -      163,378
  Interest expense                                        (247,655)    (158,207)    (474,511)    (311,264)
  Other expense                                            (77,357)    (107,582)    (132,610)    (279,648)
                                                      ------------ ------------ ------------- -----------
    Total other income (expense), net                     (236,066)  30,945,722     (473,920)  29,980,823
                                                      ------------ ------------ ------------- -----------
Income before income taxes                               1,585,842   29,725,063    5,541,096   28,477,585
Income tax expense (benefit), net                          371,169   10,063,560     (309,499)   9,584,833
                                                      ------------ ------------ ------------  -----------
    Net income                                        $  1,214,673 $ 19,661,503 $  5,850,595 $ 18,892,752
                                                      ============ ============ ============ ============
Cumulative preferred stock dividend                   $    146,175 $    146,175 $    292,350 $    292,350
                                                      ============ ============ ============ ============
    Net income available to common stockholders       $  1,068,498  $19,515,328 $  5,558,245 $ 18,600,402
                                                      ============ ============ ============ ============
Net income per common share: (Note 9)
  Basic                                                     $ 0.05       $ 0.94       $ 0.27       $ 0.90
                                                      ============ ============ ============ ============
  Diluted                                                   $ 0.05       $ 0.84       $ 0.25       $ 0.80
                                                      ============ ============ ============ ============
Weighted average common shares outstanding
  Basic                                                 20,433,721   20,663,861   20,426,480   20,663,861
                                                      ============ ============ ============ ============
  Diluted                                               23,826,809   23,541,120   23,758,020   23,571,736
                                                      ============ ============ ============ ============
```

```

                                                                            Six Months Ended June 30
                                                                         -----------------------------
                                                                              2001           2002
                                                                         -------------- --------------

Cash flows from operating activities:
  Net income                                                           $   5,850,595    $ 18,892,752

  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and depletion                                           3,295,567       2,687,796
      Equity in income of First Permian, L.P., net of
         cash distributions of $5,501,703                                          -     (25,264,046)
      Change in fair value of derivative instruments                               -         394,832
      Income tax expense (benefit)                                          (309,499)      9,584,833
      Other, net                                                             (82,392)         24,424
      Changes in assets and liabilties:
      Decrease (increase) in accounts receivables                          1,474,190        (155,393)
      Increase in prepaid expenses and other                                (259,291)       (662,252)
      Increase (decrease) in accounts payable and accrued liabilities        554,104        (840,703)
      Accrued bonus payable                                                        -       1,201,172
      Purchase of derivative instruments                                           -        (530,605)
                                                                       -------------   -------------

        Net cash provided by operating activities                         10,523,274       5,332,810
                                                                       -------------   -------------

Cash flows from investing activities:
  Additions to property and equipment                                     (5,933,076)     (6,781,897)
  Proceeds from disposition of property and equipment                              -         572,799
                                                                       -------------   -------------

        Net cash used in investing activities                             (5,933,076)     (6,209,098)
                                                                       -------------   -------------

Cash flows from financing activities:
  Borrowings from bank line of credit                                              -         865,589
  Payments on bank line of credit                                         (1,427,531)       (715,589)
  Proceeds from exercise of options and warrants                             125,723               -
  Payment of preferred stock dividend                                       (292,350)       (292,350)
                                                                       -------------   -------------

        Net cash used in financing activities                             (1,594,158)       (142,350)
                                                                       -------------   -------------

Net increase (decrease) in cash and cash equivalents                       2,996,040      (1,018,638)

Beginning cash and cash equivalents                                        2,000,826       3,351,044
                                                                       -------------   -------------

Ending cash and cash equivalents                                       $   4,996,866   $   2,332,406
                                                                       =============   =============

Non-cash financing activities:
  Non-cash proceeds from sale of investment                            $           -   $ (25,580,339)
  Unrealized gain on investment in securities                                      -         (93,359)
```

```

Long-term debt consists of the following at June 30, 2002:

Revolving Note payable to bank, at bank's base lending
rate (5.00% at June 30, 2002)                                                $ 12,150,000

Less:  current maturities                                                               -
                                                                             ------------
                                                                             $ 12,150,000
                                                                             ============

Scheduled maturities of long-term debt at June 30, 2002 are as follows:

   June 30, 2002                                                             $          -
   June 30, 2003                                                                3,712,500
   June 30, 2004                                                                4,050,000
   June 30, 2005                                                                4,050,000
   June 30, 2006                                                                  337,500
                                                                             -------------
                                                                             $ 12,150,000
                                                                             =============
```

```

                                                            Three Months Ended June 30,       Six Months Ended June 30,
                                                           -------------------------------  ------------------------------
                                                                 2001            2002            2001            2002
                                                           --------------- ---------------  --------------  --------------

Net income                                                    $ 1,214,673     $ 19,661,503     $ 5,850,595     $18,892,752
Preferred stock dividend                                         (146,175)        (146,175)       (292,350)       (292,350)
                                                              ------------    ------------     -----------     -----------
 Net income available to common stockholders                  $  1,068,498    $ 19,515,328     $ 5,558,245     $18,600,402
                                                              ============    ============     ===========     ===========
Denominator-
Weighted average common shares outstanding                      20,433,721      20,663,861      20,426,480      20,663,861
                                                              ============    ============     ===========     ===========
Basic earnings per share                                      $       0.05    $       0.94          $ 0.27          $ 0.90
                                                              ============    ============     ===========     ===========
Diluted EPS Computation:
Numerator-
Net income                                                    $  1,214,673     $19,661,503     $ 5,850,595     $18,892,752
Preferred stock dividend                                                 -               -               -               -
                                                              ------------    ------------     -----------     -----------
Net income available to common stockholders                   $  1,214,673     $19,661,503     $ 5,850,595     $18,892,752
                                                              ============    ============     ===========     ===========
Denominator-
Weighted average common shares outstanding                      20,433,721      20,663,861      20,426,480      20,663,861
Employee stock options                                             608,844          93,015         547,296         123,631
Preferred stock                                                  2,784,244       2,784,244       2,784,244       2,784,244
                                                              ------------    ------------     -----------     -----------
                                                                23,826,809      23,541,120      23,758,020      23,571,736
                                                              ============    ============     ===========     ===========
 Diluted earnings per share                                   $       0.05            0.84            0.25            0.80
                                                              ============    ============     ===========     ===========
```

```

                                                            Three Months Ended
                                                  -------------------------------------------
                                                   12-31-01    3-31-02    6-30-02    6-30-01
                                                  ---------- ---------- ---------- ----------
Production and prices:
  Oil (Bbls)                                        28,021     30,161     33,126     39,098
  Natural gas (Mcf)                                589,263    590,650    609,812    934,951
  Equivalent barrels of oil (EBO)                  126,232    128,603    134,761    194,923

  Oil price (per Bbl)                             $  19.86   $  21.20   $  22.29   $  26.50
  Gas price (per Mcf)                             $   2.37   $   2.25   $   3.39   $   4.02
  Price per EBO                                   $  15.44   $  15.33   $  20.84   $  24.58

Results of operations per EBO:
Oil and gas revenues                              $  15.44   $  15.33   $  20.84   $  24.58
Costs and expenses:
  Lease operating expense                             7.11       4.27       5.35       5.37
  General and administrative                          3.02       2.72      14.65       1.56
  Depreciation and depletion                         11.85      10.53       9.89       8.30
  Impairment of oil and gas properties              116.00          -          -          -
                                                  --------   --------   --------   --------
          Total costs and expense                   137.98      17.52      29.89      15.23
                                                  --------   --------   --------   --------
Operating income (loss)                            (122.54)     (2.19)     (9.05)      9.35
                                                  --------   --------   --------   --------
Interest expense, net                                (1.05)     (1.11)     (1.05)     (0.94)
Other income, net                                    (2.95)     (1.29)     (0.76)     (0.27)
Dividend income                                          -          -       1.21          -
                                                  --------   --------   --------   --------
                                                     (4.00)     (2.40)     (0.60)     (1.21)
                                                  --------   --------   --------   --------
Equity in income (loss) of First Permian,L.P.         3.16     (2.46)     230.65          -
Change in fair market value of put option                -     (2.64)     (0.41)          -
                                                  --------   -------    --------   --------
                                                      3.16     (5.10)     230.24          -
                                                  --------   -------    --------   --------
         Pretax income per EBO                     (123.38)    (9.69)     220.59       8.14
Income tax expense (benefit)                        (43.63)    (3.72)      74.68       1.90
                                                  --------   -------    --------   --------
         Net income per EBO                       $ (79.75)  $ (5.97)   $ 145.91   $   6.24
                                                  ========   =======    ========   ========
```

```

                                                               Six Months Ended
                                                  ----------------------------------------

                                                    6-30-00        6-30-01         6-30-02
                                                   ---------      ---------       ---------
Production and prices:
  Oil (Bbls)                                         84,037          74,011           63,287
  Natural gas (Mcf)                               1,227,543       1,944,483        1,200,462
  Equivalent barrels of oil (EBO)                   288,627         398,092          263,364

  Oil price (per Bbl)                               $ 26.93         $ 27.12          $ 21.77
  Gas price (per Mcf)                               $  3.01         $  5.18          $  2.83
  Price per EBO                                     $ 20.69         $ 30.34          $ 18.15
Results of operations per EBO:
Oil and gas revenues                                $ 20.69         $ 30.34          $ 18.15
Costs and expenses:
  Lease operating expense                              4.27            5.44             4.83
  General and administrative                           1.59            1.51             8.83
  Depreciation and depletion                           7.91            8.28            10.21
                                                    -------         -------          -------
            Total costs and expense                   13.77           15.23            23.87
                                                    -------         -------          -------
Operating income (loss)                                6.92           15.11            (5.72)
                                                    -------         -------          -------
Interest expense, net                                 (2.29)          (0.98)           (1.08)
Other income, net                                      0.16           (0.21)           (1.02)
Dividend income                                           -               -             0.62
                                                    -------        --------         --------

                                                      (2.13)          (1.19)           (1.48)
                                                    -------        --------          -------
 quity in income (loss) of First Permian, L.P.        (1.72)              -           116.82
Change in fair market value of put option                 -               -            (1.50)
                                                    -------        --------         --------
                                                      (1.72)              -           115.32
                                                    -------        --------         --------
           Pretax income per EBO                       3.07           13.92           108.12
Income tax expense (benefit)                              -           (0.78)           36.39
                                                    -------         -------          -------
          Net income per EBO                        $  3.07         $ 14.70          $ 71.73
                                                    =======         =======          =======
```

```

                                                           Three Months Ended              Six Months Ended
                                                    ----------------------------------- -----------------------
                                                      12-31-01    3-31-02     6-30-02     6-30-01     6-30-02
                                                    ----------- ----------- ----------- ----------- -----------

Oil and gas revenues                                    100.0%      100.0%      100.0%      100.0%      100.0%
Costs and expenses:
  Lease operating expense                                46.1        27.9        25.7        17.9        26.6
  General and administrative                             19.5        17.7        70.3         5.0        48.6
  Depreciation and depletion                             76.7        68.7        47.5        27.3        56.2
  Impairment of oil and gas properties                  751.4           -           -           -           -
                                                    ---------    --------    --------    --------    --------

     Total costs and expenses                           893.7       114.3       143.5        50.2       131.4
                                                    ---------    --------    --------    --------    --------

Operating income                                       (793.7)      (14.3)      (43.5)       49.8       (31.4)
                                                    ---------    --------    --------    --------    --------

Interest expense, net                                    (6.8)       (7.2)       (5.1)       (3.2)       (6.0)
Other income, net                                       (19.1)       (8.4)       (3.7)       (0.7)       (5.6)
Dividend income                                             -           -         5.8           -         3.4
                                                    ---------    --------    --------    --------    --------

                                                        (25.9)      (15.6)       (3.0)       (3.9)       (8.2)
                                                    ---------    --------    --------    --------    --------

Equity in earnings (loss) of First Permian, L.P.         20.4       (16.0)    1,106.6           -       643.6
Change in fair market value of put option                   -       (17.2)       (2.0)          -        (8.3)
                                                    ---------    --------    --------    --------    --------

                                                         20.4       (33.2)    1,104.6        (3.9)      635.3
                                                    ---------    --------    --------    --------    --------

     Pretax income                                     (799.2)      (63.1)    1,058.1        45.9       595.7
Income tax expense (benefit)                           (282.6)      (24.3)      358.3        (2.6)      200.5
                                                    ---------    --------    --------    --------    --------

     Net income                                        (516.6)      (38.8)      699.8        48.5       395.2
                                                    =========    ========    ========    ========    ========
```

```

                                       June          June          June         June                       Fair
                                       2003          2004          2005         2006         Total         Value
                                    ------------  ------------ ------------- ------------ ------------  ------------
                                                              (In 000's, except interest rates)

Variable rate debt:
  Revolving facility (secured)           $3,713        $4,050        $4,050         $337      $12,150       $12,150
    Average interest rate                  4.75%         4.75%         4.75%        4.75%
```

```

                                                                    Floor     Cost of        Fair Value
             Period                 Commodity         Mcf Volume    Price      Floor         @ 6-30-2002
--------------------------------- ---------------    ------------   ------  ----------      ------------

April 2002 thru October 2002       natural gas         1,470,000    $ 2.40   $ 391,105         $   8,190

April 2003 thru October 2003       natural gas           700,000    $ 3.00   $ 139,500         $ 127,583
                                                                             ---------         ---------

                                                                             $ 530,605         $ 135,773
                                                                             =========         =========
```

```

          NAME                               VOTES CAST FOR               VOTES WITHHELD
     -------------------                     --------------               --------------
     Thomas R. Cambridge                        18,149,521                    518,359
     Dewayne E. Chitwood                        18,158,706                    509,174
     Larry Oldham                               18,149,776                    518,104
     Martin B. Oring                            17,934,731                    733,149
     Charles R. Pannill                         18,081,021                    586,859
     Jeffrey G. Shrader                         18,246,501                    421,379
```

```

          VOTES CAST FOR                     VOTES CAST AGAINST                       ABSTENTIONS
          --------------                     ------------------                       -----------
            18,127,421                            533,993                                6,466
```