<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------

                                    FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended                  December 31, 1999
                               -------------------------------------------------

                                       or


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period ended
                               -------------------------------------------------

                         Commission file number: 0-10990
                                                -----------


                            CASTLE ENERGY CORPORATION
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


          Delaware                                         76-0035225
--------------------------------------------------------------------------------
(State or Other Jurisdiction of                        (I.R.S. Employer
Incorporation or Organization)                         Identification No.)



      One Radnor Corporate Center, Suite 250, 100 Matsonford Road,
                           Radnor, Pennsylvania                    19087
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                         (Zip Code)


Registrant's Telephone Number, Including Area Code        (610) 995-9400
                                                     ---------------------------


--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report)

         Indicate by check X 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes X  No     .
                                           ----    ----

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date: 7,012,887 shares of
Common Stock, $.50 par value outstanding as of February 11, 2000.



<PAGE>





                            CASTLE ENERGY CORPORATION


                                      INDEX

                                                                          Page #
                                                                          ------

Part I.      Financial Information

             Item 1.     Financial Statements:

                         Consolidated Balance Sheets - December 31, 1999
                         (Unaudited) and September 30, 1999................... 1

                         Consolidated Statements of Operations - Three Months
                         Ended December 31, 1999 and 1998 (Unaudited)......... 2

                         Condensed Consolidated Statements of Cash Flows - Three
                         Months Ended December 31, 1999 and 1998 (Unaudited).. 3

                         Consolidated Statements of Stockholders' Equity - Year
                         Ended September 30, 1999 and Three Months Ended
                         December 31, 1999 (Unaudited)........................ 4

                         Notes to the Consolidated Financial Statements
                        (Unaudited) .......................................... 5

             Item 2.     Management's Discussion and Analysis of Financial
                         Condition and Results of Operations................. 11

             Item 3.     Qualitative and Quantitative Disclosures About
                         Market Risk ........................................ 19

Part II.     Other Information

             Item 1.     Legal Proceedings................................... 20

             Item 6.     Exhibits and Reports on Form 8-K.................... 20

Signature    .................................................................21





<PAGE>





PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                            CASTLE ENERGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                                        December 31,       September 30,
                                                                                            1999                1999
                                                                                        ------------       -------------
                                     ASSETS                                              (Unaudited)

Current assets:
<S>                                                                                        <C>                 <C>
    Cash and cash equivalents...................................................         $   12,389          $   22,252
    Restricted cash.............................................................              1,669                 770
    Accounts receivable.........................................................              4,975               5,172
    Marketable securities.......................................................              6,406               4,194
    Prepaid expenses and other current assets...................................                405                 594
    Estimated realizable value of discontinued net refining assets..............                800                 800
                                                                                         ----------          ----------
      Total current assets......................................................             26,644              33,782
Property, plant and equipment, net:
    Natural gas transmission....................................................                 58                  60
    Furniture, fixtures and equipment...........................................                244                 298
    Oil and gas properties, net (full cost method)..............................
      Proved properties.........................................................             28,577              24,765
      Unproved properties not being amortized...................................              2,951               1,862
Other assets....................................................................                 29                  29
                                                                                         ----------          ----------
      Total assets..............................................................         $   58,503             $60,796
                                                                                         ==========          ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Dividend payable............................................................         $      350          $      368
    Accounts payable............................................................              2,574               2,918
    Accrued expenses............................................................                340                 802
    Net refining liabilities retained...........................................              3,204               3,205
                                                                                         ----------          ----------
      Total current liabilities.................................................              6,468               7,293
                                                                                         ----------          ----------
Commitments and contingencies...................................................
Stockholders' equity:
    Series B participating preferred stock; par value - $1.00; 10,000,000 shares
      authorized; no shares issued
    Common stock; par value - $0.50; 25,000,000 shares authorized;
      11,503,904 issued at December 31, 1999 and September 30, 1999 ............              5,752               5,752
    Additional paid-in capital..................................................             67,365              67,365
    Accumulated other comprehensive income - unrealized gains on
      marketable securities, net of taxes.......................................              4,563               2,396
    Retained earnings...........................................................             38,632              38,716
                                                                                         ----------          ----------
                                                                                            116,312             114,229
    Treasury stock at cost - 4,491,017 shares at December 31, 1999 and
        4,282,217 shares at September 30, 1999..................................            (64,277)            (60,726)
                                                                                         ----------          ----------
      Total stockholders' equity................................................             52,035              53,503
                                                                                         ----------          ----------
      Total liabilities and stockholders' equity................................         $   58,503          $   60,796
                                                                                         ==========          ==========
</TABLE>



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

                                       -1-

<PAGE>





                            CASTLE ENERGY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   (Dollars in Thousands Except Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                        Three Months Ended December 31,
                                                                                        -------------------------------
                                                                                            1999                1998
                                                                                            ----                ----

Revenues:
<S>                                                                                      <C>                 <C>
    Natural gas marketing and transmission:
      Gas sales..........................................................                                    $   20,455
                                                                                                             ----------
                                                                                                                 20,455
                                                                                                             ----------

    Exploration and production:
      Oil and gas sales..................................................                $    4,085                 391
      Well operations....................................................                       174                  90
                                                                                         ----------          ----------
                                                                                              4,259                 481
                                                                                         ----------          ----------
                                                                                              4,259              20,936
                                                                                         ----------          ----------
Expenses:
    Natural gas marketing and transmission:
      Gas purchases......................................................                                        12,946
      Transportation.....................................................                                           459
      General and administrative.........................................                                            89
      Amortization.......................................................                                         2,366
                                                                                                             ----------
                                                                                                                 15,860
                                                                                                             ----------
    Exploration and production:
      Oil and gas production.............................................                     1,549                 194
      General and administrative.........................................                       498                 247
      Depreciation, depletion and amortization...........................                     1,272                  67
                                                                                         ----------          ----------
                                                                                              3,319                 508
                                                                                         ----------          ----------
    Corporate general and administrative expenses........................                       908               1,113
                                                                                         ----------          ----------
                                                                                              4,227              17,481
                                                                                         ----------          ----------
Operating income.........................................................                        32               3,455
                                                                                         ----------          ----------

Other income:
    Interest income......................................................                       199                 467
    Other income.........................................................                        33                   1
                                                                                         ----------          ----------
                                                                                                232                 468
                                                                                         ----------          ----------
Net income before provision for income taxes.............................                       264               3,923
                                                                                         ----------          ----------
 Provision for income taxes:
        State............................................................                                            39
        Federal..........................................................                         5               1,373
                                                                                         ----------          ----------
                                                                                                  5               1,412
                                                                                         ----------          ----------
Net income...............................................................                $      259          $    2,511
                                                                                         ==========          ==========

Net income per share:
    Basic................................................................                $      .04          $      .28
                                                                                         ==========          ==========
    Diluted..............................................................                $      .04          $      .28
                                                                                         ==========          ==========

 Weighted average number of common and common equivalent shares outstanding:
       Basic.............................................................                 7,127,739           8,822,187
                                                                                         ==========          ==========
       Diluted...........................................................                 7,247,832           9,003,726
                                                                                         ==========          ==========
</TABLE>



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

                                       -2-

<PAGE>





                            CASTLE ENERGY CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                        Three Months Ended December 31,
                                                                                        -------------------------------
                                                                                            1999               1998
                                                                                            ----               ----

<S>                                                                                      <C>                 <C>
 Net cash flow provided by operating activities..........................                $      173          $    4,505
                                                                                         ----------          ----------

Cash flows from investing activities:
    Investment in oil and gas properties.................................                    (6,095)               (186)
    Investment in furniture, fixtures and equipment......................                       (22)                (29)
                                                                                         ----------          ----------
         Net cash (used in) investing activities.........................                    (6,117)               (215)
                                                                                         ----------          ----------

Cash flows from financing activities:
   Dividends paid to stockholders........................................                      (368)               (443)
   Acquisition of treasury stock.........................................                    (3,551)
                                                                                         ----------
         Net cash (used in) financing activities.........................                    (3,919)               (443)
                                                                                         ----------          ----------
Net increase (decrease) in cash and cash equivalents.....................                    (9,863)              3,847
Cash and cash equivalents - beginning of period..........................                    22,252              36,600
                                                                                         ----------          ----------
Cash and cash equivalents - end of period................................                $   12,389          $   40,447
                                                                                         ==========          ==========

Supplemental disclosures of cash flow information are as follows:
   Cash paid during the period:
         Interest........................................................
         Income taxes....................................................                $       25
                                                                                         ==========
</TABLE>




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

                                       -3-

<PAGE>





                            CASTLE ENERGY CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         AND OTHER COMPREHENSIVE INCOME
                   (Dollars in Thousands Except Share Amounts)

<TABLE>
<CAPTION>
                                                Years Ended September 30, 1999 And Three Months Ended December 31, 1999
                                   ------------------------------------------------------------------------------------------------
                                                                              Accumulated
                                                                                 Other
                                       Common Stock      Additional   Compre-   Compre-                   Treasury Stock
                                   --------------------   Paid-In     hensive   hensive   Retained        --------------
                                     Shares     Amount    Capital     Income    Income    Earnings     Shares    Amount      Total
                                     ------     ------    -------     -------   ------    --------     ------    ------      -----

<S>                                <C>           <C>        <C>       <C>         <C>       <C>         <C>         <C>      <C>
Balance - October 1, 1998......    6,803,646    $3,402    $67,122                         $34,836   3,862,917   ($53,807)   $51,553
Stock acquired.................                                                                       419,300     (6,919)    (6,919)
Options exercised..............       25,000        12        243                                                               255
Dividends declared ($.25 per share)                                                        (2,048)                           (2,048)
Stock split retroactively
  applied .....................    4,675,258     2,338                                     (2,338)
Comprehensive income...........
  Net income...................                                     $   8,266               8,266                             8,266
  Other comprehensive income:
     Unrealized gain on marketable
       securities, net of tax..                                         2,396   $2,396                                        2,396
                                                                    ---------
                                                                      $10,662
                                  ----------    ------    -------   =========   ------    -------   ---------    -------     ------
Balance - September 30, 1999...   11,503,904     5,752     67,365                2,396     38,716   4,282,217    (60,726)    53,503
Stock acquired.................                                                                       208,800     (3,551)    (3,551)
Dividends declared ($.05/share)                                                              (343)                             (343)
Comprehensive income...........
  Net income...................                                     $     259                 259                               259
  Other comprehensive income:
     Unrealized gain on marketable
       securities, net of tax..                                         2,167    2,167                                        2,167
                                  ----------    ------    -------   ---------   ------    -------   ---------    -------     ------
Balance - December 31, 1999....   11,503,904    $5,752    $67,365   $   2,426   $4,563    $38,632   4,491,017   ($64,277)   $52,035
                                  ==========    ======    =======   =========   ======    =======   =========    =======    =======
</TABLE>






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

                                       -4-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)
                                   (Unaudited)


Note 1 - Basis of Preparation

         The unaudited consolidated financial statements of Castle Energy
Corporation (the "Company") included herein have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
reclassifications have been made to make the periods presented comparable.
Although certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the Company believes that the disclosures included herein are
adequate to make the information presented not misleading. Operating results for
the three-month period ended December 31, 1999 are not necessarily indicative of
the results that may be expected for the fiscal year ending September 30, 2000
or subsequent periods. These unaudited consolidated financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.

         In the opinion of the Company, the unaudited consolidated financial
statements contain all adjustments necessary for a fair statement of the results
of operations for the three-month periods ended December 31, 1999 and 1998 and
for a fair statement of financial position at December 31, 1999.

Note 2 - September 30, 1999 Balance Sheet

         The amounts presented in the balance sheet as of September 30, 1999
were derived from the Company's audited consolidated financial statements which
were included in its Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.

Note 3 - Discontinued Operations

         From August 1989 to September 30, 1995, several of the Company's
subsidiaries conducted refining operations. By December 12, 1995, the Company's
refining subsidiaries had sold all of their refining assets and the purchasers
had assumed all related liabilities, including contingent environmental
liabilities. In addition, Powerine Oil Company ("Powerine"), one of the
Company's refining subsidiaries, merged into a subsidiary of the purchaser and
is no longer a subsidiary of the Company. The Company's remaining refining
subsidiaries own no refining assets and are in the process of liquidation. As a
result, the Company has accounted for its refining operations as discontinued
operations. Such discontinued refining operations have not impacted the
Company's operations since September 30, 1995 although they may impact the
Company's future operations.

Note 4 - Contingencies/Litigation

        Contingent Environmental Liabilities - Refining

        Until September 30, 1995, the Company, through its subsidiaries,
operated in the refining segment of the petroleum business. As operators of
refineries, certain of the Company's subsidiaries

                                       -5-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)
                                   (Unaudited)


were potentially liable for environmental costs related to air emissions, ground
and water contamination, hazardous waste disposal and third party claims related
to the foregoing. Between September 29, 1995 and December 12, 1995 both of the
refineries owned by the Company's refining subsidiaries were sold to outside
parties. In each case the purchaser assumed all environmental liabilities.
Furthermore, on January 16, 1996, Powerine, the subsidiary that previously owned
a refinery in Santa Fe Springs, California ("Powerine Refinery"), was
effectively acquired by Energy Merchant Corp. ("EMC"), an unrelated party.

        In July of 1996, the Company was named a defendant in a class action
lawsuit concerning emissions from the Powerine Refinery. In April of 1997, the
court granted the Company's motion to quash the plaintiff's complaint based upon
lack of jurisdiction and the Company is no longer involved in the case.

        During fiscal 1998, the Company was informed that the United States
Environmental Protection Agency ("EPA") was investigating offsite acid sludge
waste found near the Indian Refinery and was also investigating and remediating
surface contamination in the Indian Refinery property. The Indian Refinery,
located in Lawrenceville, Illinois, was previously operated by Indian Refinery I
Limited Partnership ("IRLP"), an inactive subsidiary of the Company since
September 30, 1995. Neither the Company nor IRLP was named with respect to these
specific matters.

        In October 1998, the EPA named the Company and two of its subsidiaries,
including IRLP, as potentially responsible parties for the expected overall
clean-up of the Indian Refinery. In addition, eighteen other parties were named
including Texaco Refining and Marketing, Inc., the refinery operator for
approximately 50 years. The Company subsequently responded to the EPA indicating
that it was neither the owner nor operator of the Indian Refinery and thus not
responsible for its remediation.

        In November 1999, the Company received a request for information from
the EPA concerning the Company's involvement in the ownership and operation of
the Indian Refinery. The Company responded to the EPA information request in
January 2000.

        As of February 11, 2000, neither of the refineries had restarted. The
Powerine Refinery has been sold to an unrelated party, which, the Company has
been informed, is seeking financing to restart that refinery. The purchaser of
the Indian Refinery, American Western Refining Limited Partnership ("American
Western"), defaulted on its $5 million note to IRLP, filed a voluntary petition
for bankruptcy in the United States Bankruptcy Court in the District of Delaware
under Chapter 11 of the United States Bankruptcy Code and later sold the Indian
Refinery to another unrelated party. The new owner is in the process of
dismantling much of the Indian Refinery. Estimated undiscounted clean-up costs
for the Indian Refinery are $80,000 to $150,000 according to third parties.

        Although the environmental liabilities related to the Indian Refinery
and Powerine Refinery have been transferred to others, there can be no assurance
that the parties assuming such liabilities will be able to pay them. American
Western, purchaser of the Indian Refinery, filed for bankruptcy and is in

                                       -6-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)
                                   (Unaudited)


the process of liquidation. The current owner of the Indian Refinery is
dismantling it. The current owner of the Powerine Refinery is reported to be
continuing to seek financing to restart that refinery. Furthermore, as noted
above, the Company and two of its subsidiaries have been named by the EPA as
potentially responsible parties for the remediation of the Indian Refinery.

        If funds for environmental clean-up are not provided by former and/or
present owners of the refineries, it is possible that the Company and/or one or
more of its former refining subsidiaries could be named parties in additional
legal actions to recover remediation costs. In recent years, government and
other plaintiffs have often sought redress for environmental liabilities from
the party most capable of payment without regard to responsibility or fault.
Whether or not the Company ultimately prevails in such a circumstance, should
litigation involving the Company or any of its former or current refining
subsidiaries occur, the Company would probably incur substantial legal fees and
experience a diversion of management resources from other operations. A decision
by the U.S. Supreme Court in June 1998, however, supports the Company's
position.

        Litigation

        There have been no material litigation developments since those reported
in Item 3 of the Company's Form 10-K for the year ended September 30, 1999.

Note 5 - New Accounting Pronouncements

         Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), was issued by the
Financial Accounting Standards Board in June 1998. SFAS 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts. Under the standard, entities are required to carry
all derivative instruments in the statement of financial position at fair value.
The accounting for changes in the fair value (i.e., gains or losses) of a
derivative instrument depends on whether it has been designated and qualifies as
part of a hedging relationship and, if so, on the reason for holding it. If
certain conditions are met, entities may elect to designate a derivative
instrument as a hedge of exposures to changes in fair values, cash flows, or
foreign currencies. If the hedged exposure is a fair value exposure, the gain or
loss on the derivative instrument is recognized in earnings in the period of
change together with the offsetting loss or gain on the hedged item attributable
to the risk being hedged. If the hedged exposure is a cash flow exposure, the
effective portion of the gain or loss on the derivative instrument is reported
initially as a component of other comprehensive income (not included in
earnings) and subsequently reclassified into earnings when the forecasted
transaction affects earnings. Any amounts excluded from the assessment of hedge
effectiveness, as well as the ineffective portion of the gain or loss, is
reported in earnings immediately. Accounting for foreign currency hedges is
similar to the accounting for fair value and cash flow hedges. If the derivative
instrument is not designated as a hedge, the gain or loss is recognized in
earnings in the period of change. SFAS 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. The Company anticipates

                                       -7-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)
                                   (Unaudited)


that it will adopt SFAS 133 effective October 1, 2000. The Company has not yet
determined the impact of SFAS 133 on its financial condition or results of
operations.

         All hedging by the Company through June 30, 1999 was applicable to the
Company's gas marketing operations. Hedging transactions applicable to gas
marketing operations terminated on May 31, 1999 when all of the Company's
long-term gas contracts terminated. The Company, however, acquired substantial
oil and gas reserves from AmBrit Energy Corp. ("AmBrit") in June 1999 and began
hedging its crude oil and natural gas production (see Note #6).

         The Company will continue to account for its crude oil and natural gas
hedges pursuant to Statement of Financial Accounting Standards No. 80,
Accounting for Futures Contracts ("SFAS 80") until SFAS 133 becomes effective
for the Company.

Note 6 - Derivative Financial Instruments

         Until June 1, 1999, the Company's natural gas marketing subsidiaries
utilized futures contracts and natural gas basis swaps to reduce their exposure
to changes in the market price of natural gas. Effective May 31, 1999, all
natural gas marketing contracts terminated. As a result of these hedging
transactions, the cost of gas purchases increased $144 for the three month
period ended December 31, 1998.

         On June 1, 1999, the Company acquired all of the oil and gas assets of
AmBrit. In July 1999, the Company hedged approximately 69% of its anticipated
consolidated crude oil production (approximately 32,000 barrels per month) and
approximately 50% of its anticipated consolidated natural gas production
(approximately 300,000 mcf per month) for the period from September 1, 1999 to
July 31, 2000. The Company used futures contracts to hedge such production. The
average hedged prices for crude oil and natural gas, which are based upon
futures prices on the New York Mercantile Exchange, were $20.02 per barrel of
crude oil and $2.64 per mcf of gas. For the three months ended December 31,
1999, oil and gas sales decreased $331 as a result of hedging activities.

Note 7 - Information Concerning Reportable Segments

         During the three month period ended December 31, 1998, the Company
operated in two segments of the energy industry: oil and gas exploration and
production and natural gas marketing. During the three months ended December 31,
1999, the Company operated in only one segment of the energy industry - oil and
gas exploration and production. The Company does not allocate interest income,
interest expense or income tax expense to these segments. The operating income
(loss) achieved by each of the Company's segments was as follows:


                                       -8-

<PAGE>



                   Castle Energy Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
         Three months ended December 31, 1999:

                                                                                                    Operating
                       Segment                             Revenues           Expenses               Income
                       -------                             --------           --------               -------

<S>                                                        <C>                  <C>                  <C>
1.    Oil and gas exploration and
         production.................................       $ 4,259           ($ 3,319)                $  940
                                                           =======            =======                 ======

      Three months ended December 31, 1998:


                                                                                                    Operating
                       Segment                             Revenues           Expenses            Income (Loss)
                       -------                             --------           --------            -------------

1.    Oil and gas exploration and
         production.................................       $   481            ($  508)               ($   27)
2.    Natural gas marketing.........................        20,455            (15,860)                 4,595
                                                           -------            -------                -------
                                                           $20,936           ($16,368)                $4,568
                                                           =======            =======                 ======
</TABLE>


         The individual components of revenue and expenses for each segment are
set forth in the attached "Consolidated Statements of Operations."

         Total assets applicable to each of the Company's two operating segments
were as follows:

<TABLE>
<CAPTION>
                                                                        December 31,            September 30,
                                                                           1999                     1999
                                                                        -------------           -------------

<S>                                                                      <C>                     <C>
Oil and gas exploration and production.............................      $83,291                 $ 79,076
Natural gas marketing..............................................       67,627                   67,720
Corporate and intercompany adjustments.............................      (92,415)                 (86,000)
                                                                         -------                 --------
                                                                         $58,503                 $ 60,796
                                                                         =======                 ========
</TABLE>


Note 8 - Stock Split

         On December 29, 1999, the Company's Board of Directors declared a stock
split in the form of a 200% stock dividend applicable to all stockholders of
record on January 12, 2000. The additional shares were paid on January 31, 2000
and the Company's shares first traded at post split prices on February 1, 2000.
The stock split applied only to the Company's outstanding shares on January 12,
2000 (2,337,629 shares) and did not apply to treasury shares (4,491,017 shares).
As a result of the stock split 4,675,258 additional shares were issued and the
Company's common stock book value was increased $2,338 to reflect additional par
value applicable to the additional shares issued to effect the stock split. All
share changes, including those affecting the recorded book value of common
stock, have been recorded retroactively.


                                       -9-

<PAGE>




Note 9 - Subsequent Events

         In January 2000, the Company invested $500 in notes due from Penn
Octane Corporation ("Penn Octane"), a public company involved in the
transportation and sale of liquid petroleum gas in Northern Mexico. The notes
are due on December 15, 2000 and bear interest at 9% payable semi-annually. The
notes are secured by certain assets of Penn Octane. In addition, the Company
received options to acquire 31,250 shares of the common stock of Penn Octane at
$4.00 per share. If the notes are not repaid by September 15, 2000, the Company
is entitled to receive options to acquire an additional 31,250 shares of Penn
Octane common stock at $4.00 per share. This investment in Penn Octane notes is
in addition to the Company's previous investment in the common stock of Penn
Octane.

                                      -10-

<PAGE>


                            Castle Energy Corporation
                   (Dollars in Thousands Except Per Unit Data)
                                   (Unaudited)


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

RESULTS OF OPERATIONS

         As noted previously, the Company had discontinued its refining
operations by September 30, 1995. During the quarter ended December 31, 1998,
the Company was engaged in natural gas marketing and oil and gas exploration and
production. During this period revenues from natural gas marketing operations
aggregated $20,455 while those from the Company's exploration and production
operations aggregated only $481. On May 31, 1999, the Company's natural gas
marketing operations ended because of the contractual expiration of the
Company's subsidiaries' natural gas marketing gas contracts. On June 1, 1999,
however, the Company acquired all of the oil and gas assets of AmBrit. The
production associated with AmBrit's oil and gas properties approximated 425% of
the Company's oil and gas production prior to the acquisition. As a result of
the foregoing the Company was engaged in only exploration and production for the
quarter ended December 31, 1999 and comparison of the Company's operations for
the quarter ended December 31, 1998 with those for the quarter ended December
31, 1999 is neither meaningful nor applicable to the Company's expected future
operations. Accordingly, we have analyzed and discussed the Company's
exploration and production operations for the quarter in terms of key statistics
and ratios and discussed the significance of such statistics and ratios to the
Company's future exploration and production operations. Conversely, for the
other components of operations and net income (corporate general and
administrative expenses, other income and income tax provisions) we have
continued to compare fiscal 1999 results with fiscal 1998 results because
changes in these components are not substantially related to the Company's
change in emphasis from natural gas marketing to exploration and production.
Instead, changes in these components are primarily related to other factors.

         Exploration and Production

         Key exploration and production data for the quarter ended December 31,
1999 are as follows:


                                                              Three Months Ended
                                                              December 31, 1999
                                                              ------------------
Production Volumes:

      Barrels of crude oil (net)..................................       91,714
      Mcf (thousand cubic feet) of natural gas (net)..............    1,108,491
      Mcf equivalents (net) *.....................................    1,658,775

Oil/Gas Prices:- Crude Oil/Barrel:
         Gross....................................................   $    19.41
         Hedging effects..........................................        (0.89)
                                                                      ----------
         Net of hedging...........................................   $    18.52
                                                                      ==========


                                      -11-

<PAGE>


                            Castle Energy Corporation
                   (Dollars in Thousands Except Per Unit Data)
                                   (Unaudited)


                                                              Three Months Ended
                                                              December 31, 1999
                                                              ------------------
         Natural Gas/Mcf:
         ---------------
         Gross......................................................... $  2.38
         Hedging effects...............................................   (0.23)
                                                                         ------
         Net of hedging................................................ $  2.15
                                                                        =======

Oil and Gas Production Expenses/Mcf Equivalent......................... $  0.93
                                                                        =======

Depreciation, Depletion and Amortization Per Mcf Equivalent............ $  0.72
                                                                        =======


------------
*    Barrels of crude oil have been converted to MCF based upon
     relative energy content of 6 MCF of natural gas per barrel of
     crude oil.

         Production volumes slightly exceeded those estimated by the Company's
independent petroleum reserve engineers in their reports as of September 30,
1999. Such volumes averaged 997 barrels of crude oil and 12,048 mcf of natural
gas per day for the quarter. During the quarter the Company invested $6,095 in
the acquisition of oil and gas reserves and new drilling. Most of this
investment occurred near the end of the quarter and did not significantly
increase production for the quarter but is expected to increase production in
the future.

         For the quarter, the average price received per barrel of crude oil,
net of an $.89/barrel loss due to hedging, was $18.52. The hedging loss resulted
because the Company had hedged approximately 69% of its expected crude oil
production using fixed price sales contracts based upon New York Mercantile
Exchange prices at a lower price than the price it paid several months later to
buy offsetting crude oil contracts and settle its hedges. The Company believes
that the average price it receives for its crude oil production is approximately
$2.00 less than the average price for crude oil traded on the New York
Mercantile Exchange.

         In December 1999 and January 2000, crude oil prices increased
significantly. Whereas, the Company has hedged the sale of 154,000 barrels of
crude oil at an average price of $19.66 per barrel for the period from January
1, 2000 to July 31, 2000, the current average price for a barrel of crude oil
during this period is $26.57. If the Company were to settle these contracts at
the average $26.57 price, its oil sales would decrease by $1,064. As a result,
during this period, the Company expects that any higher prices it receives in
the field for the 154,000 barrels that have been hedged will be offset by
hedging losses. Since the Company expects to produce approximately 250,000
barrels during this seven-month period ended July 31, 2000, the Company
currently remains unhedged on the excess 96,000 barrels for the seven months
ended July 31, 2000 and for all expected production thereafter. The Company is
currently considering hedging some or all of such anticipated crude oil
production. To the extent such anticipated production is not hedged, crude oil
sales will depend upon the field

                                      -12-

<PAGE>


                            Castle Energy Corporation
                   (Dollars in Thousands Except Per Unit Data)
                                   (Unaudited)


prices at which the Company sells its crude oil. In the last year such prices
have increased over 50% and in recent years such price have changed
significantly over short periods of time. The Company thus remains exposed to
crude oil price risks on this unhedged expected crude oil production.

         For the quarter, the average price received per mcf of natural gas was
$2.15, net of a $.23/mcf hedging loss. For the quarter, the Company produced an
average of approximately 12,000 mcf per day. As a result of acquisitions and new
drilling near the end of the quarter, the Company expects that future natural
gas production will average approximately 13,000 mcf/day for the remainder of
fiscal 2000. The Company has not hedged such anticipated natural gas production
and thus remains exposed to future increases or decreases in natural gas prices.
If prices increase, the Company's natural gas sales are expected to increase.
Conversely, if such prices decrease, the Company's natural gas sales are
expected to decrease. Although natural gas prices have recently increased
significantly as a result of several factors, including colder weather, there
can be no assurance that such prices will not decrease in the future. Natural
gas prices have frequently changed significantly over short periods in recent
years.

         Oil and gas production expenses for the quarter averaged $.93 per Mcf
equivalent produced. During fiscal 1999, oil and gas production expenses per mcf
equivalent averaged $.88. The Company believes that this relatively high unit
cost results from the fact that a higher proportion of the properties acquired
from AmBrit are operated by outside parties who charge operating fees to operate
the related wells in which the Company has an interest and that some of these
operating fees are high. The Company is currently considering selling several
marginal properties in which it has an interest and believes that such sales, if
consummated, would reduce the production cost per mcf equivalent in the future.
Furthermore, the Company has recently completed a higher than normal number of
non capitalized repairs and maintenance operations on wells acquired from AmBrit
and believes that the level of repairs and maintenance may decrease as a result
in the future. Finally, oil and gas production expenses, especially
non-capitalized repairs, generally do not occur evenly throughout the year and
are best compared on an annual or on a cumulative basis. Nevertheless, there can
be no assurance that production expenses will decrease absolutely or per mcf
equivalent produced in the future. Since the Company has acquired several new
properties and drilled several wells in the quarter, such expenses will increase
simply because the Company owns interests in more producing wells and larger
interests in some existing wells.

         The depletion rate per mcf equivalent produced for the quarter was
determined to a large extent by the price the Company paid for AmBrit's oil and
gas properties. The rate will change based primarily upon the cost at which the
Company acquires or drills for and finds oil and gas reserves in the future and
the Company's estimated proved oil and gas reserves. The Company's independent
reservoir engineers evaluate the Company's reserves annually in conjunction with
the Company's annual audit.


                                      -13-

<PAGE>


                            Castle Energy Corporation
                   (Dollars in Thousands Except Per Unit Data)
                                   (Unaudited)



         Other Components of Operations

         Corporate, general and administrative expenses decreased $205 or 18.4%
from the quarter ended December 31, 1998 to the quarter ended December 31, 1999
primarily because of decreased insurance and legal costs. The $205 decrease in
corporate, general and administrative expenses was, however, offset by an
increase of $251 in exploration and production general and administrative
expenses. A significant portion of the general and administrative expenses
allocated to corporate overhead in fiscal 1998 have been allocated to
exploration and production general and administrative costs in fiscal 1999 and
are expected to be so allocated in the future.

         Interest income decreased $268 or 57.4% from the first quarter of
fiscal 1998 to the first quarter of fiscal 1999. The decrease is primarily
attributable to a decrease in the average balance of cash outstanding during the
periods being compared.

         The tax provision for the quarter ended December 31, 1998 essentially
represents the amortization of the Company's net deferred tax asset at an
effective rate of 36% of pre-tax book income. The tax provision for the quarter
ended December 31, 1999 essentially represents Federal alternative minimum taxes
at an effective rate of 2%. The Company has not recorded its tax provision at a
higher tax rate because it has sufficient Federal and state tax carryforwards to
offset pre-tax income and because it did not record a net deferred tax asset to
amortize at September 30, 1999 as it did at September 30, 1998 because it
determined that future taxable income was less certain given the Company's large
exploratory and wildcat drilling programs and contingent environmental
liabilities and other factors. The 2% Federal alternative minimum tax is payable
despite the Company's tax carryforwards which offset regular Federal corporate
tax. The Company anticipates that for fiscal 2000 its existing tax carryforwards
will offset Federal and state taxes otherwise due on pre-tax income with the
exception of Federal alternative minimum taxes. If future events change the
Company's estimate concerning the probability of utilizing its tax assets,
appropriate adjustments will be made when such a conclusion is reached.

         Earnings per Share

         On December 29, 1999, the Company's Board of Directors declared a stock
split in the form of a 200% stock dividend applicable to all stockholders of
record on January 12, 2000. The effect of the stock split was to triple the
number of shares outstanding. The stock split did not apply to the Company's
treasury stock. The stock split is reflected retroactively in share amounts and
earnings per share computations in the accompanying financial statements.

         In addition, since January 1, 1999, the Company has reacquired 628,100
shares of its common stock. As a result of these share acquisitions, earnings
per outstanding share have been higher than would be the case if no shares had
been repurchased.

LIQUIDITY AND CAPITAL RESOURCES

         All statements other than statements of historical fact contained in
this report are forward- looking statements. Forward-looking statements in this
report generally are accompanied by words

                                      -14-

<PAGE>


                            Castle Energy Corporation
                   (Dollars in Thousands Except Per Unit Data)
                                   (Unaudited)


such as "anticipate," "believe," "estimate," or "expect" or similar statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations will prove correct. Factors that could cause the Company's results
to differ materially from the results discussed in such forward-looking
statements are disclosed in this report.

         During the quarter ended September 31, 1999, the Company generated $173
from operating activities. During the same period the Company invested $6,095 in
oil and gas properties and $3,551 to reacquire shares of its common stock. In
addition, it paid $368 in stockholder dividends. At December 31, 1999, the
Company had $12,389 of unrestricted cash, $20,176 of working capital and no
long-term debt.

         Discontinued Refining Operations

         Although the Company's former and present subsidiaries have exited the
refining business and third parties have assumed environmental liabilities, if
any, of such subsidiaries, the Company and several of its subsidiaries remain
liable for contingent environmental liabilities (see Item 3 to the Company's
Form 10-K for the year ended September 30, 1999 and Note 4 to Part I of this
Form 10-Q.)

         Expected Sources and Uses of Funds

         As of February 11, 2000, the estimated future cash expenditures of the
Company for the next two fiscal years consist of the following:

         a.   Investments in Oil and Gas Properties and Other Energy Sector
              Ventures




              1.   Development drilling on existing acreage..............$ 3,300
              2.   South Texas exploratory drilling ventures.............. 5,400
              3.   Romanian concession ................................... 1,900
                                                                         -------
                                                                         $10,600
                                                                         =======

              If the initial drilling results in the South Texas drilling
              ventures are less favorable than anticipated, the Company expects
              to be able to reduce this drilling commitment by approximately
              $4,000. Conversely, if the initial results are better than
              expected the Company may participate in the drilling of more wells
              than budgeted above. If the initial wildcat Romanian wells are
              successful, the Company may also increase its investment in that
              country significantly and could conceivably spend $10,000-$15,000
              if new oil and gas fields are discovered.

              While the Company anticipated drilling up to 100 new wells in its
              Appalachian drilling joint venture, the Company has participated
              in the drilling of only twenty wells to date. Based upon the
              results achieved to date, the Company expects that it will
              participate in only a few additional Appalachian wells each year
              rather than in the number originally planned.


                                      -15-

<PAGE>


                            Castle Energy Corporation
                   (Dollars in Thousands Except Per Unit Data)
                                   (Unaudited)


              In addition, the Company is currently pursuing several other
              possible material investments in the energy sector. These possible
              investments include drilling ventures, the acquisition of oil and
              gas properties and oil and gas companies, as well as the
              acquisition of pipelines and gas marketing operations. Although
              most of these possible investments involve domestic properties,
              some involve investments overseas. Although the Company has
              recently concluded several transactions and believes it can
              conclude several additional transactions on terms favorable to the
              Company, there can be no assurance that such will be the case. Oil
              and gas prices have recently increased significantly and many
              potential sellers have decided not to sell or have not been forced
              to sell by their lenders. In addition, several sellers have raised
              the price for the oil/gas properties they are selling given
              currently high oil and gas prices and the acquisition of such
              properties at such high prices would not be in the Company's best
              interest. In addition, several large oil and gas companies have
              significantly more resources than the Company and other parties
              may be willing to pay more than the Company for a given
              acquisition.

         b.   Repurchase of Company Shares - as of February 11, 2000, the
              Company had repurchased 4,491,017 of its shares of common stock at
              a cost of $64,277. The Company's Board of Directors previously
              authorized the repurchase of up to 4,750,000 shares to provide an
              exit vehicle for investors who want to liquidate their investment
              in the Company. The decision whether to repurchase additional
              shares and/or to increase the repurchase authorization above
              4,750,000 shares will depend upon the market price of the
              Company's stock, tax considerations, the number of stockholders
              seeking to sell their shares and other factors.

              The treasury shares repurchased by the Company through December
              31, 1999 were not affected by the Company's stock split.

         c.   Recurring Dividends - the Company's Board of Directors adopted a
              policy of paying a $.20 per share annual dividend ($.05 per share
              quarterly) in June of 1997. The Company expects to continue to pay
              such dividend until the Board of Directors, in its sole
              discretion, changes such policy.

         At December 31, 1999, the Company had available the following sources
of funds:


Unrestricted cash - December 31, 1999................................... $12,389
Line of credit - energy bank............................................  30,000
Marketable securities...................................................   6,406
                                                                         -------
                                                                         $48,795
                                                                         =======

         In addition, the Company anticipates significant future cash flow from
exploration and production operations.


                                      -16-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                             (Dollars in thousands)
                                   (Unaudited)


         Risks

         The estimated sources of funds are subject to most of the risks
enumerated below. The realization from the sale of the Company's investment in
Penn Octane is dependent on the market value of such stock and the Company's
ability to liquidate its Penn Octane stock investment at or near market values.
Since Penn Octane is thinly capitalized and traded, liquidation of a large
volume of Penn Octane stock, such as that owned by the Company, without
significantly lowering the market price may be impossible.

         The Company thus expects that it can fund all of its present drilling
commitments from its own unrestricted cash. The Company can also use its
unrestricted cash and future cash flow, as well as up to $30,000 from its line
of credit, to acquire additional oil and gas properties and to conduct
additional drilling. As a result, the Company believes it has available the
financing to make additional future acquisitions of up to approximately
$40,000-$50,000 while still funding its existing drilling commitments. The
Company has also negotiated with several potential industry partners who may
provide financing if the Company decides to make an acquisition for prices in
excess of these amounts.

         The foregoing discussions do not contemplate any adverse effects from
the risk factors listed below:

         a.    Contingent environmental liabilities.

         b.    Litigation - Long Trusts litigation and Rex Nichols litigation.

         c.    Reserve price risk - the effect of price changes on unhedged oil
               and gas production.

         d.    Exploration and production reserve risk - the effect of not
               finding the oil and gas reserves sought during new drilling -
               especially given the high percentage of exploratory drilling in
               which the Company is participating.

         e.    Reserve risk - the effect of differences between estimated and
               actual reserves and production.

         f.    Public market for Company's stock.

         g.    Future of the Company.

         h.    Foreign operation risks. Since the Company has already incurred
               $1,550 and expects to spend at least $2,000 in the next year to
               drill a Romanian concession, the Company's interests are subject
               to certain foreign country risks over which the Company has no
               control - including political risk, the risk of additional
               taxation and the possibility that foreign operating requirements
               and procedures may reduce estimated profitability.

         i.    Other risks including general business risks, insurance claims
               against the Company in excess of insurance recoveries, tax
               liabilities resulting from tax audits, drilling risks and
               litigation risk.

                                      -17-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                             (Dollars in thousands)
                                   (Unaudited)


         The Company spent approximately $120 and devoted significant management
resources to insure that it did not have any Year 2000 problems. No such
problems materialized.

         Readers should refer to the Management Discussion and Analysis of
Financial Condition and Results of Operations Section of the Company's Form 10-K
for the fiscal year ended September 30, 1998 for a description of the
aforementioned risk factors.

         If any or several of these risks materialize, the Company's estimated
financial position, cash flow and results of operations will probably be
adversely impacted and the impact may be material. Given the number and variety
of risks and the litigiousness of today's corporate world, it is reasonably
possible that one or more of these risks may adversely impact the Company's
operations.


                                      -18-

<PAGE>


                   Castle Energy Corporation and Subsidiaries
                             (Dollars in thousands)
                                   (Unaudited)



Item 3.      QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

         At December 31, 1999, the Company had hedged 154,000 barrels of crude
oil that it expects to produce from January 1, 2000 to July 31, 2000 using
futures contracts. The average hedged price (based upon prices on the New York
Mercantile Exchange ("NYMEX")) for these hedged barrels is $19.66 per barrel.
The current average settlement price for crude oil for this time period is
$26.57 per barrel. Accordingly, if the Company settled all of its crude oil
hedges at the current settlement price, its crude oil sales would decrease by
approximately $1,064. Although the price the Company receives for its production
is less than NYMEX pricing due to location basis differentials, the Company's
management believes that NYMEX pricing is highly correlated to its production
field prices. Accordingly, management expects that any changes in NYMEX prices
will be offset by similar changes in the field prices the Company receives for
is production. If NYMEX prices increase or decrease ten percent, management
expects that the Company's field prices would also increase or decrease
approximately ten percent.

         Excluding the 154,000 barrels of hedged crude oil production above,
which constitute approximately 62% of the Company's expected crude oil
production during this period, the Company has not hedged its remaining expected
crude oil production or any of expected natural gas production. As a result, the
Company remains at risk with respect to such unhedged expected production. If
oil and gas market prices increase, oil and gas sales applicable to the unhedged
production will increase. If oil and gas market prices decrease, oil and gas
sales related to such unhedged production will decrease.


                                      -19-

<PAGE>




                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

        For information regarding lawsuits, reference is made to Item 3 of the
Company's Form 10-K (Annual Report) for the fiscal year ended September 30,
1999. Also see Note 4 to the attached December 31, 1999 financial statements
included in Part I.

Item 6.  Exhibits and Reports on Form 8-K

   (A)   Exhibits:
         Exhibit 10.133 - Asset Acquisition Agreement between Castle Exploration
                          Company, Inc., Deerlick Creek Partners, I., L.P. and
                          Deven Resources, Inc. effective September 1, 1999
         Exhibit 10.134 - Purchase and Sale Agreement, dated December 15, 1999,
                          between Whiting Park Production, Ltd. and Castle
                          Exploration Company, Inc.
         Exhibit 10.135 - Asset Acquisition Agreement between Castle Exploration
                          Company, Inc. and American Refining and Exploration
                          Company, Deven Resources Inc., CMS/Castle Development
                          Fund I L.P., Effective as of October 1, 1999
         Exhibit 11.1 -   Statement re: Computation of Earnings Per Share
         Exhibit 27 -     Financial Data Schedule

   (B)  Reports on Form 8-K:  None



                                      -20-

<PAGE>





                                   SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


       Date:  February 13, 2000                       CASTLE ENERGY CORPORATION
              -----------------



                                                      /s/Richard E. Staedtler
                                                      --------------------------
                                                      Richard E. Staedtler
                                                      Chief Financial Officer
                                                      Chief Accounting Officer



                                      -21-