_________________________________________________________________

                      U. S. SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549

                                 FORM 10-KSB
                                 (Mark One)

          [X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

                SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
                 For the fiscal year ended December 31, 1995
                                    OR
      [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
  For the transition period from . . . . . . .  to . . . . . . . .

                     Commission File Number:  0-8898
                    MIDCOAST  ENERGY  RESOURCES,  INC.
              (Name of small business issuer in its charter)

               Nevada                                76-0378638
   (State or other jurisdiction  of               (I.R.S.Employer
    incorporation  or organization)             Identification No.)

      1100 Louisiana, Suite 2950
          Houston, Texas                               77002
 (Address of principal executive offices)            (Zip Code)

                 Issuer's telephone number: (713) 650-8900

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:    
               Common Stock, Par Value $.01 Per Share

Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes   X   No ____ Check if there
is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in  definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X
] The revenues for the fiscal year ended December 31, 1995 were $
15,622,290 The aggregate market value of the Common Stock, par
value $.01 per share, held by non-affiliates of Registrant as of
March 28, 1996 was approximately $286,584.  For the purposes of the
determination of the above stated amount only, all directors and
executive officers of the Registrant are presumed to be affiliates.
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13, or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed by
a court. Yes   X    No ____
The number of shares of Common Stock, par value $.01 per share,
outstanding as of March 28, 1996 was 328,557. 

                  DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement to be filed
with the Commission on or before April 30, 1995, are incorporated
by reference into Part III of this Annual Report on Form 10-KSB. 
__________________________________________________________________







                            TABLE CONTENTS

                               Part I
    
Item  1.  Business
Item  2.  Properties
Item  3.  Legal Proceedings
Item  4.  Submission of Matters to a
           Vote of Security Holders                          
       
  

                              Part II

Item  5.  Market for Registrant's Common Equity
           and Related Stockholder Matters                        
            
Item  6.  Management's Discussion and Analysis of                
           Results of Operations
Item  7.  Financial Statements                                    
 
Item  8.  Changes In and Disagreements With
           Accountants on Accounting and
           Financial Disclosure                                   
 
      

                             Part III

Item  9.  Directors, Executive Officers, Promoters
           and Control Persons                                    
  
Item 10.  Executive Compensation                                  

Item 11.  Security Ownership of Certain Beneficial 
           Owners and Management                                  
        
Item 12.  Certain Relationships and Related 
           Transactions 

 

                             Part IV

Item 13.  Exhibits and Reports on Form 8-K .                      
 
       



                                 PART I

ITEM 1. BUSINESS

General

Midcoast Energy Resources, Inc., its subsidiaries and affiliate
companies (referred to collectively as the "Company" or
"Midcoast") is primarily engaged in the construction,
acquisition, and operation of pipelines for the end-use,
transmission, and gathering of natural gas, and crude oil. 
Twenty-one intrastate pipeline systems are owned or operated by
the Company in Alabama, Alaska, Kansas, Louisiana, New York,
Oklahoma, and Texas.  Natural gas marketing operations and oil
and gas production supplement the Companys pipeline business.

The Company became a corporation subject to the Securities and
Exchange Act of 1934, as amended, as a result of its merger with
a publicly-held shell corporation, Nugget Oil Corporation
(Nugget), that had previously filed for protection under
federal bankruptcy laws.  The Company was formed on May 11, 1992,
as a Nevada corporation and in September 1992, became the
successor to Nugget through a merger pursuant to the Nugget Plan
of Reorganization (the Plan or the Nugget Plan) as approved
by the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi Division.  The Nugget Plan included the
contribution of a joint venture's assets to the Company by the
owners of the venture. These assets represented substantially all
of the Company's assets upon completion of the merger.

The Company leases its principal executive offices at Suite 2950,
1100 Louisiana Street, Houston, Texas 77002, and its telephone
number is (713) 650-8900.

                 NATURAL GAS TRANSMISSION AND DISTRIBUTION

General:  As of December 31, 1995, the Company owned an interest
in or operated twenty one intrastate pipeline systems in Alabama,
Alaska, Kansas, Louisiana, New York, Oklahoma, and Texas.  These
systems consist of approximately 162.3 miles of pipeline.

End-Use:  The majority of the Company's revenue is derived from
contracting with industrial end-users or electrical generating
facilities to provide natural gas transportation services to
their facilities through interconnect or by-pass gas pipelines
constructed by the Company.  End-use pipelines provide the
Company's customers with a natural gas supply as an alternative
to their current  energy source, which are usually local
distribution companies (LDCs).  Frequently, the Company is able
to offer its end-use customers rates lower than the customer's
LDC.  The Company's contracts with end-user customers typically
provide for the payment of a transportation fee by the customer
based on the volume of gas transported through the Company's
pipeline. The Company also offers its end-use customers gas
marketing services enabling them to purchase their gas supply
from the Company but without any obligation to do so.  The
Company strives to structure the terms and transportation fees
for its end-use systems in such a way as to provide an acceptable
rate of return regardless of any gas marketing revenues.  Twelve
of the Company's systems are end-use pipelines.  

Transmission:  The Company's transmission pipelines primarily
receive and deliver natural gas to and from other pipelines, but
may also involve some gathering functions.  In September 1995,
the Company significantly expanded its gas transmission pipeline
activities by acquiring Magnolia Pipeline Corporation
("Magnolia") from a subsidiary of The Williams Company, Inc., the
principal asset of which was the Magnolia System, an
approximately 109 mile natural gas transmission line and
compressor station located in central Alabama.  The Company owns
two transmission lines.

Gathering.  The Company's gas gathering systems typically consist
of a network of small diameter pipelines which collect gas or
crude oil from points near producing wells and transport it to
larger pipelines for further transmission.  Gathering systems may
include meters, separators, dehydration facilities, and other
treating equipment owned by the Company or others. The Company
derives revenues from gas gathering systems by transporting gas
or crude oil owned by others through its pipelines for a
transportation fee, by purchasing gas and utilizing its pipelines
to transport the gas to a customer in another location where the
gas is resold or, in certain instances, by purchasing gas and
arranging for the delivery and resale of an equivalent quantity
of gas to a customer not directly served by the Company's
pipelines.  Transactions with customers not directly served by
the Company's pipelines are typically accomplished by entering
into agreements whereby the Company exchanges gas in its
pipelines for gas in the pipelines of other transmission
companies.  The Company currently owns an interest in or operates
seven gas gathering systems.

Pipeline Acquisition and Disposition

In 1994 and 1995 the Company acquired ownership of, or interests
in, four pipelines, three of which were gathering systems and one
of which was a transmission line.  The Company remains actively
engaged in seeking pipeline acquisitions.  The Company plans to
evaluate investments in pipelines which involve not only natural
gas, but also liquefied petroleum gas, as well as both
hydrocarbon and non-hydrocarbon finished products, such as
nitrogen.  Management believes that more acquisition
opportunities will become available as major pipeline companies
divest systems due to regulatory considerations or need to spin-
off smaller non-strategic systems acquired in connection with
larger acquisitions.

The Company's ability to consummate future acquisitions will
depend on the Company's availability of sufficient capital
resources at the time of the acquisition, to finance the
purchase, and to make any capital improvements and repairs to the
system.  New pipeline acquisitions (and newly constructed
systems) may be expected to require additional cash to fund
temporary negative cash flow resulting from the initial
operations of the system and the costs of capital expended for
the newly acquired or constructed system.  Additional cash
requirements stemming from the Company's acquisition and
construction activities will likely require a significant amount
of the Company's available sources of capital and liquidity.

Magnolia Acquisition:  Effective September 8, 1995, the Company
acquired one hundred-percent (100% ) of the outstanding capital
stock of Magnolia Pipeline Corporation, an Alabama corporation
whose principal asset consists of approximately 109 miles of
6 inch to 24 inch gas pipelines and an approximately 4000
horsepower compressor station, located in central Alabama. 
Magnolia was purchased from a subsidiary of The Williams
Companies, Inc. for cash consideration of $3,200,000.  The
Magnolia system is primarily a transmission pipeline with
interconnections to one major interstate pipeline and one major
intrastate pipeline.  The system also includes some gathering
lines which connect coal-seam gas production in the Black Warrior
Basin with the Magnolia system.  There is the potential for
several interconnections to other pipelines in the area which
could greatly enhance Magnolia's revenues and which will be
pursued by the Company.  See Management Certain Transactions 
for information relating to the financing of the Magnolia
acquisition.  See also "Properties."

Five Flags Acquisition and Disposition:  In September 1995, the
Company and Rainbow Investments Company ("Rainbow"), an affiliate
owned by an officer and director of the Company, jointly acquired
one-hundred percent (100%) of the outstanding capital stock of
Five Flags Pipe Line Company ("Five Flags") from Five Flags
Holding Company.  Total cash consideration of $2,052,000 was paid
to Five Flags Holding Company, of which the Company's share was
$1,872,450 for 91.25% of Five Flags capital stock.  In October
1995, the Company and Rainbow jointly sold one-hundred percent
(100%) of the capital stock of Five Flags to an unaffiliated
third party for cash consideration of $4,664,865.  After retiring
the purchase money note, the net proceeds to the Company from the
sale of Five Flags was $2,183,226. 

Construction of New Pipelines

In 1994 and 1995, the Company was involved in the construction of
three pipelines, two of which were end-use systems and one of
which was a gathering system.  The Company remains actively
engaged in seeking situations warranting construction of new end-
use and gathering systems.  Entering into new construction
projects is no different than the search for new acquisitions,
both endeavors depend on the Company's availability of capital
resources at the time the opportunity arises.  Hence, any
significant construction activities will likely limit the
Company's capital resources that may be made available for other
uses at the time the construction project is underway.

Gas Marketing

The Company markets natural gas on the spot market to end-users,
LDCs and other marketers.  Generally, gas is purchased under
contracts that contain terms allowing prices to be determined by
prevailing market conditions.  Concurrently, the Company resells
the gas at higher prices under sales contracts which are
compatible as to term, price escalation, renegotiation and other
material matters.  The Company earns a margin equal to the
difference between the gas purchase price it pays and the sales
price it receives.  Gas marketing is characterized by a high
degree of competition and narrow margins.  These market
conditions may hinder the Company's ability to continue to expand
this portion of its business.

Oil and Gas Properties

The Company owns minor interests in a number of non-operated
working interests in producing and non-producing oil and gas
properties.  For the year ended December 31, 1995, revenues from
the Company's oil and gas properties were less than one-percent
(1%) of its total revenues and at the same date the Company's oil
and gas properties represented less than three percent (3%) of
its total assets.  The Company owns interests in 3,605 gross
acres of oil and gas leases on which are located 13 producing
wells.  In 1995, the Company acquired a twenty-three percent
(23%) working interest in two leases together covering
approximately 1,700 gross acres in Starr County, Texas on which
are located seven (7) active and two (2) shut-in wells previously
owned by Exxon. The Company anticipates that the operator of the
property may recommend further developmental drilling on the
leases, although the extent, timing and cost to the Company of
any such operations is presently unknown.  Although not currently
expected to become a major line of business for the Company,
management expects that acquisition and ownership of non-operated
oil and gas interests will remain a facet of the Company's
business for the foreseeable future.

Markets and Major Customers

The natural gas industry has undergone major transformations,
which have included significant changes in government regulation. 
As a consequence, the industry has experienced a marked increase
in competition and volatility in natural gas prices.  The result
has been an increase in gas sold directly to end-users by
producers and other nontraditional suppliers, and an increasing
reluctance of end-users to enter into long-term contracts. 
Consumers have shown an increased willingness to switch fuels
between gas and oil in response to their relative price
fluctuations, and there is a growing use of gas purchase
contracts that require price adjustments in response to market
conditions.

The Company's single largest customer is a Fortune 500 natural
gas liquids pipeline company.  The Company furnishes natural gas,
for fuel to ten turbine pump stations, and a main fractionation
facility of that customer. During the year ended December 31,
1995 the Company derived over ten percent (10%) of its revenues
from Mid-America Pipeline Company and Westlake Petrochemicals
Corporation which accounted for forty percent (40%) and fourteen
percent (14%) of the Company's revenues, respectively. 

Gas Supply

The Company has historically purchased substantially all of its
gas from unaffiliated third parties.  These purchase contracts
may be affected by factors beyond both the Company's and the gas
suppliers' control such as capacity restraints, temporary
regional supply shortages, and with regard to its gathering
systems, other parties having control over the drilling of new
wells, inability of wells to deliver gas at required pipeline
quality and pressure, and depletion of reserves.

In conjunction with the construction and acquisition of its
gathering systems, evaluations were made of well and reservoir
data furnished by producers to determine the availability of gas
for the systems.  Based on those evaluations, the Company's
management determined that independent evaluations of reserves
dedicated to its systems were unnecessary, and such evaluations
were not obtained.  Accordingly, the Company does not have
estimates of total reserves dedicated to its systems or the rates
at which such reserves are declining.

The gas transmission operations of the Company are dependent upon
continuing supplies of gas.  The volumes of gas being supplied to
the Company's gathering systems from existing wells can be
expected to decline in the future as gas fields are depleted. 
Additional gas supplies will be needed to maintain or increase
the gas being transported through some of the Company's systems.
The availability of additional gas supplies is generally
uncertain, principally as a result of increasing demand for gas,
the effect of existing and future  governmental regulations on
future exploration for gas, and the amounts of natural gas
transported in interstate and intrastate commerce.  There can be
no assurance that additional gas supplies will become available
in areas serviced by the Company's systems or that the Company
will be able to obtain such gas upon favorable terms.

Competition

The gas transmission, gathering and marketing industries are
highly competitive.  In marketing gas, the Company has numerous
competitors, including marketing affiliates of interstate
pipelines, the major integrated oil companies, and local and
national gas gatherers, brokers and marketers of widely varying
sizes, financial resources and experience.  Local utilities and
distributors of gas are, in some cases, engaged directly, and
through affiliates, in marketing activities that compete with the
Company.

The Company competes against other companies in the transmission,
gathering and marketing businesses for supplies of gas and for
sales customers.  Competition for gas supplies is primarily based
on efficiency, reliability, availability of transportation and
the ability to offer a competitive price for the gas. 
Competition for customers is primarily based upon reliability and
price of deliverable gas.  For customers that have the capability
of using alternative fuels, such as oil and coal, the Company
also competes against companies capable of providing these
alternative fuels at a competitive price.

Government Regulation

Various aspects of the transportation, sale and marketing of
natural gas are subject to or affected by extensive federal
regulation under the Natural Gas Act (NGA), the Natural Gas
Policy Act of 1978 (NGPA), the Natural Gas Wellhead Decontrol
Act of 1989 (Decontrol Act) and regulations promulgated by the
FERC.

Natural Gas Transmission Industry: Historically, interstate
pipeline companies acted as wholesale merchants by purchasing
natural gas from producers, transporting that natural gas from
the fields to their markets, and reselling the natural gas to
local distribution companies and large end-users.  Prior to the
enactment of the NGPA in 1978 and the Decontrol Act of 1989, all
sales of natural gas for resale in interstate commerce, including
sales by producers, were subject to the rates and service
jurisdiction of the FERC under the NGA and NGPA.  However, as a
result of the NGPA and the Decontrol Act, all so-called first
sales' of natural gas were federally deregulated, thus allowing
all types of non-pipeline and non-local distribution sellers to
market their natural gas free from federal controls.  Moreover,
pursuant to Section 311 of the NGPA, the FERC promulgated
regulations by which wholly-intrastate natural gas pipeline
companies could engage in interstate transactions without
becoming subject to the FERC's full rates and service
jurisdiction under the NGA.  At the same time, however, the FERC
has retained its traditional jurisdiction over the activities of
interstate pipelines.  Thus, under the NGA and NGPA, the
transportation and sale of natural gas by interstate pipeline
companies have been subject to extensive regulation, and the
construction of new facilities, the extension of existing
facilities and the commencement and cessation of sales or
transportation services by pipeline companies generally have
required prior FERC authorization.

Commencing in 1985, the FERC adopted regulatory changes that have
significantly altered the transportation, sale and marketing of
natural gas.  These changes were intended to foster competition
in the natural gas industry by, among other things, transforming
the role of the interstate pipeline companies from wholesale
marketers of natural gas to primarily natural gas transporters,
and mandating that interstate pipeline companies provide open and
nondiscriminatory transportation services to all producers,
distributors, marketers and other shippers that seek such
services (so-called "open access" requirements).  As an incentive
to cause the interstate pipeline companies to revamp their
services, the FERC also sought to expedite the certification
process for new services, facilities and operations of those
pipeline companies providing "open access" services.  Throughout
the early years of this process, the FERC's actions in these
areas were subject to extensive judicial review and generated
significant industry comment and proposals for modification to
existing regulations.

In April 1992, the FERC issued its latest and most comprehensive
restructuring ruling, Order No. 636, a complex regulation that
has had a major impact on natural gas pipeline operations,
services and rates.  Among other things, Order No. 636 generally
required each interstate pipeline company to unbundle its
traditional wholesale services and make available on an open and
nondiscriminatory basis numerous constituent services (such as
gathering services, storage services and firm and interruptible
transportation services) and to adopt a new rate making
methodology to determine appropriate rates for those services. 
To the extent the pipeline company or its sales affiliate makes
natural gas sales as a merchant in the future, it will do so
pursuant to a blanket sales certificate that puts those entities
in direct competition with all other sellers pursuant to private
contracts; however, pipeline companies were not required by Order
636 to remain merchants of natural gas, and several of the
interstate pipeline companies have elected to become transporters
only.  The FERC required that each pipeline company develop the
specific terms of service in individual restructuring proceedings
by means of a compliance filing that set forth the pipeline
company's new, detailed procedures.  In subsequent orders, the
FERC largely affirmed the significant features of Order 636 and
denied requests for stay of the implementation of the new rules
pending judicial review.  Order 636, as well as the FERC orders
approving the individual pipeline restructuring proceedings, are
the subject of numerous appeals to the United States Courts of
Appeals.  The outcome of such proceedings and the ultimate impact
that they may have on the Company's business is uncertain.

Regulation of the Company's Facilities:  The Company's operations
can be affected significantly by government regulation.  Its
pipeline systems are regulated by  federal, state and local
regulatory agencies.  These regulations are extremely complex and
subject to changing administrative interpretations.  The
Company's pipeline operations are subject to regulation by the
FERC which is an independent commission within the Department of
Energy that has authority over the transportation and marketing
of various categories of natural gas sold in interstate commerce. 
The production and sale of oil and gas is subject to federal and
state governmental regulations including the imposition of excise
taxes, the prevention of waste, pollution controls and maximum
daily production allowables for oil and gas wells.

The Company's operations are further subject to regulation by
various agencies of the states in which the Company operates. 
State regulatory requirements and policies vary from state to
state. The regulatory requirements of Texas, Kansas, Louisiana,
New York and Alabama have the greatest impact on the Company due
to the concentration of the Company's operations in those states.

The Company's operations in Texas are subject to the Texas Gas
Utility Regulatory Act, as implemented by the Texas Railroad
Commission.  Generally, the Texas Railroad Commission is vested
with authority to ensure that rates charged for natural gas sales
and transportation services are just and reasonable.  The Company
must make filings with the Texas Railroad Commission for all new
and increased rates.

The Company's  operations in Kansas are subject to the
jurisdiction of the Kansas Corporation Commission (the "KCC")
with regard to pipeline safety standards and certification
procedures.  The KCC has granted the Company Certificates of
Public Convenience and Necessity for its pipelines in Kansas.

The State of Louisiana Office of Conservation, Pipeline Division
has safety and certification jurisdiction over the Company's
operations in Louisiana.  The Company was granted Certificates of
Transportation, to Interconnect, and to Construct and Operate its
system in Louisiana.

The State of New York Public Service Commission has safety and
certification jurisdiction over the Company's New York operations
and has granted a Certificate of Public Necessity and Convenience
for the Albany system.

The Company's systems in Alabama are subject to the jurisdiction
of the Federal Energy Regulatory Commission with respect to the
transportation rates under Section 311 (a)(2) of the Natural Gas
Act.  These pipelines are audited on a yearly basis from a safety
standpoint by The Alabama Public Service Commission-Pipeline
Safety Section.

Environmental and Safety Matters:  The Company's activities in
connection with the operation and construction of pipelines and
other facilities for transporting, processing, treating or
storing natural gas and other products are subject to
environmental and safety regulation by numerous federal and state
authorities.  This can include ongoing oversight regulation as
well as construction or other permits and clearances which must
be granted in connection with new projects or expansions.  On the
federal level, these agencies can include the Environmental
Protection Agency, the Occupational Safety and Health
Administration, the U. S. Army Corp of Engineers, the U. S. Fish
and Wildlife Service and others.  State regulatory agencies or
boards can include various air and water quality control boards,
historical and cultural resources offices, fish and game services
and others.  These regulations can increase the cost of planning,
designing, initial installation and the operations of such
facilities. All of these regulations carry a variety of civil and
criminal enforcement measures including monetary penalties,
assessment and remediation requirements and injunctions as to
future compliance.

Employees

As of December 31, 1995, the Company had 9 full time employees. 
The Company is not party to any collective bargaining agreements. 
There have been no significant labor disputes in the past and the
Company considers its relations with employees to be excellent.

ITEM 2. PROPERTIES 

As of December 31, 1995, the Company owns an interest in or
operates twenty-one (21) intrastate end-use pipelines, gathering
systems and gas transmission systems situated in the states of
Alabama, Alaska, Kansas, Louisiana, New York, Oklahoma, and
Texas.  Certain information concerning the Company's pipelines is
summarized in the table below:

<PAGE>
<TABLE>
<CAPTION>
                                                                Average       Daily      Percentage
                                                                 Daily        Volume    Ownership or
                  Date of Acq.                        Length    Volume (1)   Capacity   Interest in
Pipeline System  or Initial Op.   Location           in Miles   (MMBtu/d)    (MMBtu/d)     System    
<S>                              <C>                 <C>        <C>         <C>            <C>              
End-Use:
   Burnet............Dec. 1989    Burnet Co., TX       1.5          481       2,000         100%  
   Conway............Dec. 1989    Butler Co., KS       (5)        8,134      14,000         100% 
   OCPL..............July 1991    Wyandotte, KS        1.0        2,377       5,500         100%         
  
   Turkey Creek......Dec. 1991    Fort Bend Co., TX   16.0          852       2,000         100%
   Cat Springs.......Dec. 1991    Austin Co., TX       1.6           63       2,000         100% 
   Stratton Ridge....Feb. 1992    Brazoria Co., TX     2.0          125       2,000         100%
   Clemens Dome......Feb. 1992    Brazoria Co., TX     (5)          108       2,000         100%
   Tuscaloosa.......Sept. 1992    Tuscaloosa, AL       3.0         (2)        2,000         100%
   Augusta...........July 1993    Butler Co., KS       0.5          212       5,000         100% 
   Lake Charles......Nov. 1993    Calcasieu Parish,LA  1.3        2,649      50,000         100%
   Quindaro..........Nov. 1994    Wyandotte Co., KS    3.0          611      60,000         100%
   Albany............Dec. 1994    Albany Co., NY       0.5        1,243       3,000         100%         
   
       
Transmission:
   H&W...............Oct. 1993    Escambia Co., AL       9       Inactive    15,000         100%
   Magnolia.........Sept. 1995    Central AL           109       16,882     120,000         100%
   
Gathering:
   Tasco Cavasos.....July 1991    Willacy Co., TX      1.6       Inactive     2,000          50%   
   Sinton............July 1992    San Patricio Co.,TX  2.8       Inactive     2,000         100%   
   Fitzsimmons......April 1993    Duval Co., TX        (5)          145       2,000         100%
   Cook Inlet Gas....July 1994    Cook Inlet, AK       2.7       Inactive    15,000         (4)   
   Cook Inlet Oil....July 1994    Cook Inlet, AK       2.7        2,515(3)   20,000(3)      (4)
   Zmeskal...........June 1994    Victoria Co., TX     (5)          167       2,000         100%
   Foss............. Dec. 1994    Custer Co., OK       4.1          444       5,000         100%
</TABLE>
<PAGE>
(1) All volume and capacity information is approximate.  Average
daily volumes are based on total volumes during the year ended
December 31, 1995, except for Magnolia which is based on total volumes
transported for the period August 1995 through December 31, 1995.
(2)Construction suspended pending the outcome of litigation.  See
Legal Proceedings.
(3) Volume is reflected in barrels of oil production per day.
(4) The Company receives throughput charges from these systems but
does not own title to the pipeline.
(5) This system is less than a quarter-mile in length.

The Burnet System supplies an LPG mainline pump station in Burnet
County, Texas with one-hundred percent (100%) of their gas
requirements through a 1.5 mile 3 inch pipeline system containing
two measuring stations and pressure regulating equipment. The
pipeline connects the pump station to Lone Star Gas Company's
intrastate pipeline.  The system was constructed by the Company
and placed in service during December 1989.  The customer has
also frequently purchased its gas supply from the Company since
the inception of the contract.  During 1995, average daily gas
usage at the pump station has been approximately 481 MMBtu/d, all
of which is supplied through the Burnet System which has a
capacity of 2,000 MMBtu/d.

The Conway System supplies a LPG Fractionation facility in Butler
County, Kansas with one-hundred percent (100%) of their gas
requirements through a 4 inch pipeline from an interconnection
with Williams Natural Gas Company's interstate pipeline.  The
system began service during December 1989 and provides gas supply
to the facility.  In August 1993, the Conway system also began
serving an Isomerization unit on a month to month basis and
cumulative daily volumes for the Conway System averaged
approximately 8,134 MMBtu/d for 1995.

The OCPL System supplies an industrial plant in Wyandotte County,
Kansas with one-hundred percent (100%) of their gas requirements
through a 1 mile 6 inch pipeline system connected to Williams
Natural Gas Company's interstate pipeline.  The system was
constructed by the Company and placed in service during July
1991.  During 1995, average daily gas usage at the plant has been
approximately 2,377 MMBtu/d, all of which is supplied through the
OCPL System which has a capacity of 5,500 MMBtu/d.  The plant is
located in an industrial park with other similar plants nearby
which could be potential customers for the system.

The Turkey Creek System supplies a LPG pump station in Fort Bend
County, Texas with one-hundred percent (100%) of its gas
requirements through a 16 mile 6 inch and 4 inch pipeline system
containing eight measuring stations and pressure regulating
equipment.  The Company also sells a small volume of gas through
this system to a local rice farmer.  Additionally, the system
gathers, transports and redelivers natural gas from several
producing wells to Gulf Coast Natural Gas Company's intrastate
pipeline.  The system was acquired by the Company and placed in
service during December 1991.  The customer has also frequently
purchased its gas supply from the Company since the inception of
the contract.  During 1995, average cumulative daily volumes have
averaged approximately 852 MMBtu/d for the Turkey Creek System
which has a capacity of 2,000 MMBtu/d.

The Cat Springs System supplies a LPG mainline pump station in
Austin County, Texas with one-hundred percent (100%) of their gas
requirements through a 1.6 mile 2 inch pipeline system containing
two measuring stations and pressure regulating equipment.  The
pipeline connects the pump station to Tennessee Gas Pipeline
Company's interstate pipeline.  The system was constructed by the
Company and placed in service during December 1991.  The customer
has also frequently purchased its gas supply from the Company
since the inception of the contract.  During 1995, average daily
gas usage at the pump station has been approximately 63 MMBtu/d,
all of which is supplied through the Cat Springs System which has
a capacity of 2,000 MMBtu/d.

The Stratton Ridge System supplies a LPG mainline pump station in
Brazoria County, Texas with one-hundred percent (100%) of its gas
requirements through a 2 mile 2 inch pipeline system containing a
measuring station and pressure regulating equipment. The pipeline
connects the pump station to Amoco Gas Company's pipeline.  The
system was constructed by the Company and placed in service
during February 1992. The customer has also frequently purchased
its gas supply from the Company since the inception of the
contract.  During 1995, average daily gas usage at the pump
station has been approximately 125 MMBtu/d, all of which is
supplied through the Stratton Ridge System which has a capacity
of 2,000 MMBtu/d.

The Clemens Dome System supplies a LPG mainline pump station in
Brazoria County, Texas with one-hundred percent (100%) of its gas
requirements through a 3 inch pipeline system containing a
measuring station and pressure regulating equipment. The pipeline
connects the pump station to Phillips Natural Gas Company's
Seagas pipeline.  The system also includes 3,000 feet of 6 inch
pipeline that was deeded to Phillips Natural Gas Company as part
of the construction contract.  The system was constructed by the
Company and placed in service during February 1992. The customer
has also frequently purchased its gas supply from the Company
since the inception of the contract.  During 1995, average daily
gas usage at the pump station has been approximately 108 MMBtu/d,
all of which is supplied through the Clemens Dome System which
has a capacity of 2,000 MMBtu/d.

The Tuscaloosa System is a partially completed 3 mile 2.5 inch
pipeline constructed by the Company in September 1992 which
connects a chemical plant in Moundsville, Alabama to the Magnolia
Pipeline.  The system is subject to an agreement, under which the
Company plans to provide the facility plant one-hundred percent
(100%) of its gas requirements.  Completion of the Tuscaloosa
System has been suspended and all costs were written off in 1993
pending the outcome of certain litigation brought by a competitor
of the Company.  See Legal Proceedings.

The Augusta System supplies the City of Augusta's #2 electric
generating power plant in Butler County, Kansas with one-hundred
percent (100%) of their gas requirements through a .5 mile 3 inch
pipeline system connected to Williams Natural Gas Company's
interstate pipeline.  The system was constructed by the Company
and placed in service during July 1993 and provides gas supply to
the plant.  During 1995, average daily gas usage at the plant has
been approximately 212 MMBtu/d, all of which is supplied through
the Augusta System which has a capacity of 5,000 MMBtu/d.  The #2
plant is primarily used for peaking and back-up power generation
utilizing gas fired reciprocating engines.  The load has
historically been seasonal with peak loads during the summer
months. 

The Lake Charles System supplies an ethylene plant in Calcasieu
Parish, Louisiana with a portion of their gas requirements
through a 1.3 mile 8 inch pipeline system connected to Sabine
Pipeline Company's interstate pipeline.  The system was
constructed by the Company and placed in service during November
1993. In addition, the customer has periodically purchased a
portion of its gas supply from the Company.  During 1995, average
daily gas delivered to the plant through the Lake Charles System
has been approximately 2,649 MMBtu/d.  The pipeline has a
capacity of 50,000 MMBtu/d.

The Quindaro System supplies a municipal power plant ("BPU") in
Wyandotte County, Kansas through a 3 mile 8 inch pipeline system
connected to Williams Natural Gas Company's interstate pipeline. 
The system was constructed by the Company and placed in service
during November 1994 and provides one-hundred percent (100%) of
the plant's gas supply.  During 1995, average gas usage at the
plant has been approximately 611 MMBtu/d with peak consumption
during the summer months, all of which is supplied through the
Quindaro System which has a capacity of 60,000 MMBtu/d.  The
Plant is primarily coal fired with natural gas typically utilized
for start-up and/or in the event of disruptions in coal-handling
equipment or the supply of coal.  However, as a result of the
Quindaro system's ability to deliver gas at a higher pressure
than the previous supplier, the plant has begun to utilize a
peaking gas turbine at the facility for supplemental power
generation, and also has plans to convert two oil fired turbines
to natural gas which could increase the overall gas requirements
for the facility.

The Albany System supplies an industrial plant in Albany County,
New York through a .5 mile 3.5 inch pipeline system connected to
Tennessee Gas Pipeline.  The system was constructed by the
Company and placed in service during December 1994 and provides
gas supply to the plant.  During 1995, average gas usage at the
plant has been approximately 1,243 MMBtu/d, all of which is
supplied through the Albany System which has a capacity of 3,000
MMBtu/d.

The H&W System in Escambia County, Alabama connects a gas
sweetening plant with a liquids extraction plant through a 9 mile
6 inch pipeline.  The system is currently not in use.  The
Company is engaged in finding a buyer for the system as it has the
potential to transport gas between the two plants, transport gas
to or for a local gas utility who has a system adjacent to the
east end of the pipeline, or make deliveries to an industrial
end-user who has a pipeline that culminates at the west end of
the pipeline system.  As a result, this pipeline is classified as
an asset held for resale on the balance sheet valued at the lower
of cost or market ($210,447).

The Magnolia System transports gas for several customers in
central Alabama through a system consisting of 75 miles of 24
inch pipeline, 20 miles of 16 inch pipeline, and 14 miles of 8
inch and 12 inch pipeline.  The system also has a compressor
station which has three Saturn gas turbines with C160 gas
compressors, each rated at 1,340 horsepower.  The system was
acquired by the Company from The Williams Companies, Inc. during
September 1995 with an effective date of August 1, 1995.  Average
daily gas volume transported for the period August 1995 to
December 1995 has been approximately 16,882 MMBtu/d.  The system
had an original design capacity of 650,000 MMBtu/d, but based on
the current compressor configuration the daily volume capacity is
120,000 MMBtu/d. and connects coal-seam gas production in the
Black Warrior Basin with Transcontinental Pipeline Co.'s
interstate pipeline.

The Tasco Cavasos System in Willacy County, Texas is an inactive
gathering system which consists of 1.6 miles of 2 inch pipeline. 
There is no book value associated with this system on the
December 31, 1995 financial statements.

The Sinton System is an inactive 2.8 mile 3 inch gas gathering
pipeline located in San Patricio County, Texas.  The prospect for
placing this line in service is uncertain, and is dependent on an
increase in gas exploration in the area.  This system is valued
at $100 on the Company's December 31, 1995 financial statements.

The Fitzsimmons System consists of gas delivery facilities
located in Duval County, Texas which connect a gas well to Valero
Energy's intrastate system.  The Company purchases the gas from
the producer and resells the gas to a third party.

The Cook Inlet Gas and Crude Oil Systems consists of two separate
lines, a 2.7 mile 6 inch natural gas gathering pipeline and a 2.7
mile 8 inch crude oil gathering pipeline. The pipelines were
placed in service during July 1994 and connect the West McArthur
River Unit (WMRU) Production Facility, operated by Stewart
Petroleum Company (Stewart), to a delivery point at the Unocal
Oil Trading Bay Production Facility on the west side of Cook
Inlet near Anchorage, Alaska.  The Company does not own title to
the pipeline but receives a throughput charge from Stewart for
all oil and gas transported through the system for the life of
the WMRU wells, subject to guaranteed minimum volumes by Stewart
for the first two years the pipeline is in service.  The WMRU
presently contains three productive wells which have averaged
2,515 BOPD for the year ending December 31, 1995.  All gas is
presently utilized on site as fuel for production equipment.

The Zmeskal System consists of delivery facilities in Victoria
County, Texas which connect three producing gas wells to an
intrastate gathering system.  During 1995 the wells have averaged
production of 167 MMBtu/d which the Company purchases and resells
to a third party.

The Foss System gathers gas from four Anadarko Basin gas wells in
Custer County, Oklahoma through a 4.1 mile 2 and 4 inch pipeline
system connected to ANR Pipeline Company's interstate pipeline. 
The system was acquired by the Company in December 1994.  A
portion of the gas is purchased and resold while the remainder is
transported for a fee.  The production from these wells has
averaged 444 MMBtu/d in 1995.

ITEM 3.  LEGAL PROCEEDINGS

The Company owns a partially completed pipeline located in
Tuscaloosa County, Alabama which is subject to a gas sales
contract with a third party.  On October 8, 1992, an injunction
was entered by the Circuit Court of Hale County, Alabama
prohibiting the completion of the pipeline pending the outcome of
a complaint filed by Alabama Gas Corporation with the Alabama
Public Service Commission (the APSC).  Based upon this
complaint the APSC has refused to grant the Company certification
for this pipeline, and as a result, the Company elected to write-
off its investment in the system in 1993.  An appeal was filed
with the Montgomery County, Alabama Circuit Court which issued a
favorable ruling on the Company's behalf in August 1994.  This
ruling has been appealed to the Alabama Supreme Court, which is
expected to issue a final ruling during 1996.  If the Montgomery
County Circuit Court ruling is upheld, the pipeline could be
placed in service, however, the Company cannot predict the
likelihood of a favorable ruling or whether it will be able to
recoup its investment in the system.  The Company is not a party
to any other material legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matters during the fourth quarter
of 1995 to a vote of security holders.

                          PART II

ITEM 5.  MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED     
         STOCKHOLDER MATTERS

There is currently no public market for the Company's common
stock.  The Company's common stock is not listed on any exchange,
and there is no recognized market for such stock.  Since less
than 15% of the outstanding shares of common stock of the Company
are held by nonaffiliates, the Company does not expect that a
market for its common stock will develop absent significant
additional issuances of common stock to non-affiliates of the
Company through future offerings.  However, even if the number of
shares of Common Stock held by persons not affiliated with the
Company is substantially increased, there nevertheless can be no
assurance that a trading market for the common stock will
develop.

There can be no assurance as to the liquidity of any markets that
may develop for the common stock, or the price at which holders
may be able to sell the common stock.  Prices for the common
stock will be determined in the marketplace, should a trading
market develop,  and may be influenced by many factors, including
the depth and liquidity of the market for the common stock,
investor perceptions of the Company, interest rates, the market
price of the common stock and general industry and economic
conditions.

As of March 1, 1996, there were approximately 292 shareholders of
the Company's common stock.  The Company has not paid and does
not anticipate paying dividends to holders of common stock in the
immediate future.

There are 1 million shares authorized and 200,000 shares
outstanding of the Company's 5% cumulative preferred stock ("5%
Preferred") at December 31, 1995.  The 5% Preferred will pay
quarterly dividends based on an annual rate of 5% of the stated
liquidation value and is redeemable in whole or in part at the
Company's option at a price per share based on the liquidation
value ($5.91 per share).  The 5% Preferred votes as a separate
class with respect to any change in the preferences or other
rights attributable to the 5% Preferred.  Upon the failure to
declare or pay quarterly dividends for two consecutive quarterly
periods, the holders of the 5% Preferred also have the right to
elect one director until such time as all accrued dividends have
been paid.

The Company may issue the remaining authorized shares of
preferred stock in one or more classes or series, with the
designations, powers, preferences, and rights thereon as
determined by the Board of Directors.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF       
         OPERATIONS

RESULTS OF OPERATIONS

Operating Revenues:

Operating revenues generated during the twelve months ended
December 31, 1995 totaled approximately $15.6 million dollars as
compared to $15 million dollars in 1994 which represents a 4%
increase in 1995.  The increase is primarily attributable to the
acquisition and subsequent sale of Five Flags Pipe Line Company
("Five Flags") mitigated by a 23% decrease in sales of natural
gas and transportation fees during 1995.

In September 1995, the Company and an affiliate owned by an
officer and director of the Company jointly acquired 100% of the
outstanding capital stock of Five Flags from a non-affiliated
company.  Total cash consideration of $2,052,000 was paid on
September 13, 1995 of which Midcoast's share was $1,872,450 for
91.25% of Five Flags capital stock and the affiliates share was
$179,550 for 8.75% of Five Flags capital stock.

The acquisition of Five Flags stock was made as an investment to
be resold to another non-affiliated company pursuant to an
agreement for purchase and sale of stock dated September 6, 1995. 
On October 2, 1995, Midcoast and the affiliate jointly sold 100%
of the capital stock of Five Flags for cash consideration of
which the Company's share was $4,092,850.

The decrease in sales of natural gas and transportation fees in
1995 revenues is primarily attributable to a decline in gas
marketing transactions.  A decrease in gas marketing transactions
in 1995 is in response to declining profit margins and a focus on
servicing customer gas requirements where the Company has a fixed
asset investment.  Despite the decline in sales of natural gas,
the Company's operating income increased by $2.2 million dollars
over 1994 as discussed in the Earnings section below.

Operating Expenses:

Operating expenses for the year ended December 31, 1995 totaled
approximately $13.1 million dollars, or 11% lower than the
comparable 1994 period.  As explained in the preceding section,
the primary explanation for the decrease can be attributed to
reduced gas marketing transactions mitigated by the cost of
purchasing and subsequently selling Five Flags.

Depreciation, depletion, and amortization expense was
approximately $452,000 in 1995, as compared to $259,000 in 1994. 
The increase in 1995 can be attributed to the acquisition of
Magnolia effective August 1, 1995, the construction of two new
pipelines during the fourth quarter of 1994 and the Company's
investment in Alaska which has been depreciated since July 1994.

General and administrative expenses incurred for the year ended
December 31, 1995 were approximately $785,000, or 8% lower than
1994.  The reduction of general and administrative expenses in
1995 is a result of the Company's ongoing effort to control
expenses and effectively assimilate new business using existing
resources.  

Interest expense totaled approximately $339,000 and $189,000 for
1995 and 1994, respectively.  The Company was servicing an
average of approximately $3.3 million in debt during 1995 as
compared to an average of $2.1 million in debt during 1994.  The
increased debt service in 1995 is attributable to the
construction of two new pipelines during the second quarter of
1994, investing in the Alaskan transmission facility during the
second quarter of 1994 and the acquisition of Magnolia in
September 1995.  Additionally, the interest rates on the
Company's debt are adjusted for any changes to the Prime rate,
and therefore, the increase in interest rates during 1994 and
1995 adversely affected interest costs.

Earnings:

The Company recognized operating income and net income of
approximately $2,569,125 and $2,134,218, respectively, for the
year ended December 31, 1995 as compared to operating income of
$349,414 and a net loss of $32,394 for the year ended December
31, 1994.  Despite a 74% increase in depreciation, depletion and
amortization expense in 1995 and despite sales of natural gas
decreasing by 23% in 1995, operating income increased by
$2,219,711 over 1994.  The decrease in natural gas sales did not
have a significant impact on operating earning because the
decrease is related to gas marketing activities which are
characterized by large dollar sales but small earnings margins. 
The primary factors which contributed to the increase in
operating earnings in 1995 is the revenue generated by the
Company's investment in Alaska, five months of revenue derived
from the acquisition of Magnolia and a $2,183,226 gain on the
sale of Five Flags as discussed in the Operating Revenue section
above.  The Company anticipates that with a full years worth of
operations of Magnolia the Company will again have profitable
operations during 1996.

Business and Growth Strategy:

Midcoast is a company whose officers and employees are dedicated
to building a strong asset-based company in the energy industry. 
The Company's principal growth and business strategy is to
rapidly acquire or build pipelines to serve the end-use market
while also continuing to pursue acquisition opportunities in
transmission and gathering of natural gas, other hydrocarbons and
nonhydrocarbon fluids.  The Company will seek to implement its
strategy by taking advantage of a number of market conditions and
competitive factors, including the following, which management
believes may offer significant opportunities:

(a)    Natural gas users in chemical and manufacturing industries
are seeking alternative suppliers to the LDCs which have been
their source of natural gas for many years.  While many of these
users are small or local facilities, larger national companies
with plants located across the United States are also seeking
non-traditional gas suppliers to replace or augment their current
gas supply requirements at a competitive price.

(b)    Many electrical generating facilities may in the future
consume greater volumes of natural gas than at present due to
more stringent environmental regulations which management
believes will have the effect of reducing their consumption of
coal or fuel oil.  New pipelines will be required to deliver the
increased volumes of natural gas at greater pressures currently
available from existing systems which are necessary to enable
these generation facilities to utilize gas turbines.

(c)     Acquisition opportunities may be presented as a result of
divestitures by major pipeline companies of transmission and
gathering pipelines incidentally acquired by them in connection
with large acquisition transactions.  These spin-off sales may
result when the pipeline system does not fit the seller's overall
system plans or when dictated by regulatory concerns, or for
other strategic reasons.  Management has demonstrated that it is
well positioned to capitalize on such situations due to its
relationship with other pipeline companies and its ability to
react quickly when pipelines become available for purchase as
demonstrated with its acquisition of Magnolia and Five Flags
Pipeline Company.

(d)     The Company typically designs its systems to transport
greater volumes than are initially expected.  As a result, the
Company believes that under existing conditions, its gathering
systems can quickly increase their volumes with little capital
expenditure should additional production be established in these
areas.

As of December 31, 1995, the Company had two executed gas
transportation contracts requiring the construction of pipelines
and related facilities which, if constructed, would cost
approximately $420,000.  These construction obligations are
subject to the Company's obtaining necessary regulatory approvals
and financing.  The Company expects construction of these
projects to begin during the second quarter of 1996. Midcoast's
ability to capitalize on these and other growth opportunities
will depend on the Company's availability of sufficient capital
resources.

Capital Resources and Liquidity:

The Company's primary sources of capital are its cash flows from
operations and borrowings from affiliates and commercial lenders.
For the year ended December 31, 1995, the Company generated cash
flow from operations of 2,360,864 and had $1,046,167 available to
the Company through its credit facilities with commercial
lenders.  At December 31, 1995, the Company has three credit
facilities with availability of funds.

In December 1992, the Company entered into a financing agreement
which included a $400,000 line of credit. In September 1994, the
line of credit was renewed and the available line raised to
$750,000.  The line of credit expires on June 1, 1996, however,
the Company expects that it will be renewed prior to that date.
Borrowings under this credit facility are collateralized by the
Company's non-transportation based accounts receivable and the
entire facility has been personally guaranteed by three major
stockholders who are also officers of the Company.  At December
31, 1995, the Company had $725,000 of available funds under this
credit facility.  

In October 1995, the Company entered into a new financing
agreement with an existing bank lender.  The new agreement
provides for an initial $1,250,000 revolving line of credit with
the amount of available credit being reduced by $20,833 per month
beginning December 1, 1995.  Upon maturity at November 1, 1998,
the balance of principal plus accrued interest then remaining
outstanding and unpaid is payable on full. In connection with
this financing agreement, eight of the Company's pipeline systems
are subject to a negative pledge to keep the pipelines free and
clear of all liens and encumbrances and has been personally
guaranteed by three major stockholders who are also officers of
the Company.  At December 31, 1995, the Company had $121,167 of
available funds under this credit facility.

In December 1995, the Company entered into a new financing
agreement with a bank lender.  The new agreement provides for an
initial $1,500,000 revolving line of credit with the amount of
available credit being reduced by $17,860 per month beginning
February 1, 1996.  Upon maturity at January 15, 1999, the balance
of principal plus accrued interest then remaining outstanding and
unpaid is payable in full.  In connection with this financing
agreement, a $50,000 certificate of deposit and 100% of
Magnolia's stock has been pledged as collateral and Magnolia's
pipeline system is subject to a negative pledge to keep the
pipeline free and clear of all liens and encumbrances and has
been personally guaranteed by three major stockholders who are
also officers of the Company.  At December 31, 1995, the Company
had $200,000 of available funds under this credit facility.

The Company estimates that capital expenditures for 1996 could
range between $420,000 and $7,800,000 based on the status of
various agreements and proposals that were in process as of
December 31, 1995.  At December 31, 1995, the Company was
committed to make capital expenditures of $420,000 during 1996. 
The remaining uncommitted, but planned, 1996 capital expenditures
are entirely discretionary in nature and will be made only if
adequate financing is arranged.

The Company has historically arranged for project financing with
various banks to fund between seventy-five percent (75%) and
ninety percent (90%) of the construction or acquisition costs of
its new projects.  Management of the Company believes that
project financing will be available to the Company to fund at
least seventy-five percent (75%) of the committed 1996
expenditures. The Company intends for the 1996 planned but
uncommitted capital expenditures to be funded from commercial
lenders or sources discussed below, however, no assurances can be
given that any additional financing will be available to the
Company.

As growth opportunities present themselves, management has
utilized and will continue to utilize investment banking firms as
consultants to seek sources of additional funds through new debt
or equity financing. There can be no assurance, however, that the
Company's efforts to raise additional capital or obtain new
financing will be successful. 

Certain of the officers and shareholders have provided financing
to the Company in the past and during the third quarter financed
the Company's investment in Five Flags and in October 1995
partially financed the acquisition of Magnolia.  Based on this
experience, it is management's opinion that additional loans may
be available from certain shareholders if additional capital
cannot be arranged from other sources.

The Company believes that it will be able to meet its obligations
as they become due during 1996 from cash generated from opera-
tions, existing lines of credit, additional project loans to be
arranged or from the other sources discussed above.  


ITEM 7.  FINANCIAL STATEMENTS<PAGE>
                       
                    INDEPENDENT AUDITOR'S REPORT


Board of Directors and Stockholders
Midcoast Energy Resources, Inc. and subsidiaries
Houston, Texas

We have audited the accompanying consolidated balance sheets of
Midcoast Energy Resources, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the related statements of
operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 1995.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.  

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Midcoast Energy Resources, Inc. and subsidiaries as
of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the two-
year period ended December 31, 1995 in conformity with generally
accepted accounting principles.

As discussed in Note 3 to the consolidated financial statements,
the Company changed its method of accounting for transportation
and exchange imbalances.




Hein + Associates LLP
Certified Public Accountants



Houston, Texas
February 12, 1996
<PAGE>
<TABLE>
            MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS

<CAPTION>
                             ASSETS                                 December 31,       December 31,
                                                                        1995               1994
                                                                   ---------------    ---------------
<S>                                                             <C>                <C>                                   
CURRENT ASSETS:
 Cash and cash equivalents                                       $        106,152   $         65,921
 Accounts receivable, no allowance for doubtful accounts                2,319,667          1,996,087
 Asset held for resale                                                    210,447              -      
                                                                   ---------------    ---------------
      Total current assets                                              2,636,266          2,062,008
                                                                   ---------------    ---------------

PROPERTY, PLANT AND EQUIPMENT, at cost:
 Natural gas transmission facilities                                    7,365,421          3,990,406
 Investment in transmission facilities                                  1,284,609          1,284,609
 Oil and gas properties, using the full cost method of accounting         302,293             69,499
 Other property and equipment                                              85,819             84,679
                                                                   ---------------    ---------------
                                                                        9,038,142          5,429,193

ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION                     (831,981)          (434,777)
                                                                   ---------------    ---------------
                                                                        8,206,161          4,994,416

DEFERRED CONTRACT COSTS AND OTHER ASSETS, net of amortization             246,081            215,906
                                                                   ---------------    ---------------
      Total assets                                               $     11,088,508   $      7,272,330
                                                                   ---------------    ---------------

               LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable and accrued liabilities                        $      2,086,138   $      1,943,145
 Current portion of deferred income                                        83,000             83,000
 Short-term borrowing from bank                                            25,000            210,000
 Current portion of long-term debt payable to banks                       540,998            930,692
                                                                   ---------------    ---------------
      Total current liabilities                                         2,735,136          3,166,837
                                                                   ---------------    ---------------

LONG-TERM DEBT PAYABLE TO:
 Bank                                                                   2,926,947          1,505,771
 Shareholders and affiliates                                            1,033,822            275,000
                                                                   ---------------    ---------------
      Total long-term debt                                              3,960,769          1,780,771
                                                                   ---------------    ---------------

DEFERRED INCOME                                                           235,167            318,167

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY (Note 10):
 5% cumulative preferred stock, $1 par value, 1 million
  shares authorized, 200,000 shares issued and outstanding
  with a liquidation preference of $1,183,665                             200,000            200,000
 Common stock, $.01 par value, 6 million shares authorized,
  328,557 and 314,357 shares issued and outstanding at
  December 31, 1995 and 1994, respectively                                  3,286              3,144
 Paid-in capital                                                       18,836,052         18,751,131
 Accumulated deficit                                                  (14,775,102)       (16,909,320)
 Unearned compensation                                                   (106,800)           (38,400)
                                                                   ---------------    ---------------
      Total stockholders' equity                                        4,157,436          2,006,555
                                                                   ---------------    ---------------
      Total liabilities and stockholders' equity                 $     11,088,508   $      7,272,330
                                                                   ---------------    ---------------






<FN>

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

</FN>
</TABLE>
<TABLE>
     
             MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>


                                                         For The Year Ended
                                                 ----------------------------------
                                                  December 31,       December 31,
                                                      1995               1994
                                                 ---------------    ---------------
<S>                                           <C>                <C>
OPERATING REVENUES:
 Sale of natural gas and transportation fees   $     11,469,394   $     14,901,222
 Sale of pipeline                                     4,092,850             60,586
 Oil and gas revenue                                     60,046              6,902
                                                 ---------------    ---------------
      Total operating revenues                       15,622,290         14,968,710
                                                 ---------------    ---------------

OPERATING EXPENSES:
 Cost of natural gas and transportation charges       9,895,793         13,459,465
 Cost of pipeline  sold                               1,909,624             48,606
 Production of oil and gas                               11,544              2,783
 Depreciation, depletion, and amortization              451,551            259,440
 General and administrative                             784,653            849,002
                                                 ---------------    ---------------
      Total operating expenses                       13,053,165         14,619,296
                                                 ---------------    ---------------

      Operating income                                2,569,125            349,414

NON-OPERATING ITEMS:
 Interest expense                                      (339,324)          (188,623)
 Other income(expense), net                             (36,400)           (13,066)
                                                 ---------------    ---------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
 EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE           2,193,401            147,725

PROVISION FOR INCOME TAXES (Note 11)                       -                   -

CUMULATIVE EFFECT OF A CHANGE IN
 ACCOUNTING PRINCIPLE (Note 3)                             -              (120,936)
                                                 ---------------    ---------------
      Net income                                      2,193,401             26,789

5% CUMULATIVE PREFERRED STOCK DIVIDENDS                 (59,183)           (59,183)
                                                 ---------------    ---------------
NET INCOME (LOSS) APPLICABLE TO
 COMMON SHAREHOLDERS                           $      2,134,218   $        (32,394)
                                                 ---------------    ---------------

NET INCOME (LOSS) PER COMMON SHARE:
 Operations                                    $           6.61   $           0.29
 Accounting change                                         0.00              (0.39)
                                                 ---------------    ---------------
                                               $           6.61   $          (0.10)
                                                 ---------------    ---------------

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES OUTSTANDING                                     322,712            311,716





<FN>
The accompanying notes are an integral part of these consolidated financial statements.
\fn><PAGE>
</TABLE>
<TABLE>
    
                          MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES

                            CONSOLIDATED STATEMENT OF STOCKHOLDERS'EQUITY
                            FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<CAPTION>

                               5% 
                           Cumulative                                                          Total
                           Preferred     Common     Paid-in     Accumulated    Unearned     Stockholders'
                             Stock       Stock      Capital      Deficit     Compensation     Equity
                          ------------ ---------- ----------- -------------  ------------  -------------
<S>                      <C>          <C>        <C>         <C>            <C>            <C>    
BALANCE, January 1, 1994  $  200,000   $   3,063  $18,702,672 $(16,876,926)  $    -         $ 2,028,809

Issuance of 8,000 shares 
of which 1,600 shares are
vested in connection with
employee shareholder
agreements (Note 15)            -             80       47,920        -          (38,400)          9,600

Issuance of 100 shares
in connection with an
employee stock bonus            -              1          539        -             -                540

Net income                      -            -            -        26,789          -             26,789

5% cumulative preferred
stock dividends                 -            -            -       (59,183)         -            (59,183)
                          -----------  ---------- ----------- -------------   ----------   -------------

BALANCE, December 31, 1994  200,000        3,144   18,751,131 (16,909,320)      (38,400)      2,006,555 

Issuance of 13,000 shares
which are subject to a
four year vesting schedule
in connection with an 
employment agreement
(Note 15)                      -             130      77,870       -            (78,000)            -   

Issuance of 1,200 shares
in connection with
employee stock bonuses         -              12       7,051       -               -              7,063

Vesting of 1,600 shares
in connection with
employee shareholder
agreements entered
into in 1994 (Note 15)         -             -           -          -             9,600           9,600


 Net income                    -             -           -       2,193,401           -        2,193,401

5% cumulative preferred
stock dividends                -             -           -         (59,183)          -          (59,183)
                           ----------- ---------- ----------- ------------- ------------  -------------

BALANCE, December 31, 1995 $  200,000  $   3,286  $18,836,052 $(14,775,102) $  (106,800)   $  4,157,436                  
                          ------------ ---------- ----------- ------------- ------------  -------------
<FN>
          The accompanying notes are an integral part of these consolidated financial statements.
</FN>
/TABLE
<PAGE>
<TABLE>
                      MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>

                                                                   For The Year Ended
                                                            ----------------------------------
                                                             December 31,       December 31,
                                                                 1995               1994
                                                            ---------------    ---------------
<S>                                                      <C>                <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss) applicable to common shareholders      $      2,134,218   $        (32,394)
 Adjustments to arrive at net cash provided (used) in
 operating activities:
  Depreciation, depletion and amortization                         451,551            259,440
  Recognition of deferred income                                   (83,000)           401,167  
  Increase in deferred tax asset                                   (43,868)               -   
  Cumulative effect of a change in accounting principle               -               120,936
  Income from oil and gas program investment                          -                (5,575) 
  Issuance of common stock to employees                             16,663             10,140
  Changes in working capital accounts-
  (Increase) decrease in accounts receivable                      (321,155)           339,787
  Increase (decrease) in accounts payable and
   accrued liabilities                                             206,455         (1,596,036)
                                                            ---------------    ---------------

     Net cash provided (used) by operating activities            2,360,864           (514,515)
                                                            ---------------    ---------------


CASH FLOWS FROM INVESTING ACTIVITIES:
 Investment in transmission facilities                                -            (1,284,609)
 Capital expenditures                                           (3,885,282)        (1,088,117)
 Other                                                             (40,655)            (3,917)
                                                            ---------------    ---------------

     Net cash used in investing activities                      (3,925,937)        (2,378,643)
                                                            ---------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Bank debt borrowings                                            5,857,505          5,448,000
 Bank debt repayments                                           (5,011,023)        (3,836,317)
 Proceeds from notes payable to
  shareholders & affiliates                                      3,906,272            591,250
 Repayments on notes payable to
  shareholders & affiliates                                     (3,147,450)          (316,250)
 Proceeds from notes payable                                     3,200,000               -
 Repayments on notes payable                                    (3,200,000)              -
                                                            ---------------    ---------------

     Net cash provided by financing activities                   1,605,304          1,886,683
                                                            ---------------    ---------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                40,231         (1,006,475)
                                                            ---------------    ---------------

CASH AND CASH EQUIVALENTS, beginning of year                        65,921          1,072,396
                                                            ---------------    ---------------

CASH AND CASH EQUIVALENTS, end of year                    $        106,152   $         65,921
                                                            ---------------    ---------------


CASH PAID FOR INTEREST                                    $        323,376   $        177,355
                                                            ---------------    ---------------

CASH PAID FOR INCOME TAXES                                $           -      $           -
                                                            ---------------    ---------------

<FN>
   The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
                     MIDCOAST ENERGY RESOURCES, INC., AND         
                               SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND INFORMATION:

Midcoast Energy Resources, Inc.("Midcoast" or "the Company"), was
formed on May 11, 1992, as a Nevada corporation and, in
September 1992, became the successor to Nugget Oil Corporation
("Nugget"). The merger was accounted for as a pooling of
interests. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly-owned subsidiaries. 
As of December 31, 1995, the Company's subsidiaries include
Magnolia Pipeline Corporation, H&W Pipeline Corporation, Midcoast
Holdings No. One, Inc., Midcoast Marketing, Inc. and Nugget
Drilling Corporation, of which only Magnolia Pipeline Corporation
is currently active. All significant intercompany transactions
and balances have been eliminated.  Investments (reported in
other assets) that are 20% to 50% owned are accounted for using
the equity method of accounting.

Income Taxes

Midcoast and its subsidiaries file a consolidated federal income
tax return.  Midcoast accounts for income taxes under the
provisions of Statement of Financial Accounting Standards (SFAS)
No. 109 - "Accounting for Income Taxes."  Under SFAS 109, the
Company recognizes deferred income taxes for the differences
between the financial and income tax bases of its assets and
liabilities.

Property, Plant and Equipment

Natural gas transmission and distribution facilities and other
equipment are depreciated by the straight-line method at rates
based on the following estimated useful lives of the assets:

       Natural gas transmission facilities         15 - 25 years
       Pipeline right-of-ways                       17.5   years
       Other property and equipment                 3 - 7  years

Repairs and maintenance are charged to expense as incurred;
renewals and betterments are capitalized.

The Company accounts for its oil and gas production activities
using the full cost method of accounting. Under this method of
accounting, all costs, including indirect costs related to
exploration and development activities, are capitalized as oil
and gas property costs.  No gains or losses are recognized on the
sale or disposition of oil and gas reserves, except for sales
which include a significant portion of the total remaining
reserves.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company
considers short-term, highly liquid investments that have a
maturity of three months or less as of the date of purchase as
cash equivalents except for a $50,000 certificate of deposit
which is pledged as collateral on the $1.5 million credit
facility (see Note 7).

Asset Held For Resale

Assets for which the Company anticipates consummating a sales
transaction within one year of the balance sheet date are valued
at the lower of cost or market and classified as current assets.

Transportation and Exchange Imbalances

Transportation and exchange gas imbalance volumes are accounted
for using the sales method of accounting (see Note 3).

Deferred Contract Costs

Costs incurred to construct natural gas transmission facilities
pursuant to long-term natural gas sales or transportation
contracts, which upon completion of construction are assigned to
the contracting party, are capitalized as deferred contract
costs.  These costs are amortized over the life of the initial
contract on a straight-line basis.

Recent Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") issued SFAS No.
121 entitled "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived" Assets to be Disposed of" which is effective for fiscal years
beginning after December 15, 1995. SFAS No. 121 specifies certain events and
circumstances which indicate the cost of an asset or assets may be impaired, 
the method by which the evaluation should be performed, and the method by which 
writedowns, if any, of the asset or assets are to be determined and recognized. 
Management does not believe that adoption of this pronouncement in 1996 will 
have a material impact on the Company's financial condition or operating 
results.

The FASB also issued SFAS No. 123, "Accounting for Stock Based
Compensation", effective for fiscal years beginning after December 15, 1995. 
This statement allows companies to choose to adopt the statements's new rules 
for accounting for employee stock-based compensation plans. For those companies
who choose not to adopt the new rules, the statement requires disclosures as to
what earnings per share would have been if the new rules had been adopted. 
Management intends to adot the disclosure requirements of this statement in
1996.

Use of Estimates

The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting
principles requires the Company's management to make estimates
and assumptions that effect the amounts reported in these
financial statements and accompanying notes.  Actual results
could differ from those estimates.

Earnings Per Common Share

Net income (loss) per share was computed by dividing net income
(loss) applicable to common shareholders by the weighted average
common shares outstanding.  The effect of the change in
accounting principle is reflected separately in the earnings per
share information.

3. ACCOUNTING POLICY CHANGE:

Transportation and exchange imbalances occur when volumes
delivered to a pipeline for transportation are different than
those delivered by the pipeline to its ultimate destination or
during an exchange of gas where amounts exchanged differ. 
Parties to imbalances include producers, marketers, customers and
other pipelines.  Transportation and exchange gas imbalance
volumes were being accounted for using the entitlements method of
accounting.  The Company has elected to change its accounting to
the sales method.  Under the sales method of accounting, the
Company recognizes sales revenue as the customer uses the gas and
recognizes cost of sales as the Company delivers gas to the
pipeline. The effect of this change was to decrease net income by
$120,936 in 1994 and is reflected in the Statement of Operations
on a separate line item labeled "Cumulative Effect of a Change in
Accounting Principle".

4. PIPELINE ACQUISITION AND SUBSEQUENT SALE:

In September 1995, the Company and an affiliate owned by an
officer and director of the Company jointly acquired 100% of the
outstanding capital stock of Five Flags Pipe Line Company ("Five
Flags") from a non-affiliated company.  Total cash consideration
of $2,052,000 was paid on September 13, 1995 of which Midcoast's
share was $1,872,450 for 91.25% of Five Flags capital stock and
the affiliates share was $179,550 for 8.75% of Five Flags capital
stock. The principal asset of Five Flags consisted of
approximately 57 miles of natural gas pipelines located in
Escambia and Santa Rosa Counties, Florida.  The investment was
financed by an officer and director of the Company as discussed
in Note 8 herein.

The acquisition of Five Flags stock was made as an investment to
be resold to another non-affiliated company pursuant to an
agreement for purchase and sale of stock dated September 6, 1995.
On October 2, 1995, Midcoast and the affiliate jointly sold 100%
of the capital stock of Five Flags for cash consideration of
which the Company's share was $4,092,850.  A portion of the
proceeds from the sale were used to repay the related party
promissory note of $1,872,450 plus accrued interest.  The
remainder of the proceeds were used to partially finance
Midcoast's acquisition of Magnolia Pipeline Corporation as
discussed in Note 5 herein.

5. PIPELINE CONSTRUCTION AND ACQUISITIONS:

Construction of a three mile pipeline in Kansas City, Kansas
commenced in July 1994.  The pipeline was constructed pursuant to
a long-term transportation agreement and was completed in
November 1994 at a cost of $1,114,000.  The project is being
partially funded by the customer through prepaid transportation
fees of $415,000 with the remainder being funded through long-
term bank financing (see Note 7) and cash generated from operations.
The prepaid transportation fees are classified as liabilities on the
Company's balance sheet under the caption "Deferred Income".  The
fees are being recognized as income over the life of the
contract.

In April 1994, the New York Department of Public Services gave
approval for the issuance of a certificate of public convenience
and necessity which allows for the construction of a pipeline
providing natural gas transportation to an industrial customer in
Albany, New York pursuant to a long-term transportation
agreement. The pipeline was completed in December 1994 at a cost
of $294,000.  The construction was financed through cash
generated from operations and long-term bank financing  (see Note
7).

In June 1995, Midcoast  acquired a 23% working interest in two
oil and gas production leases located in Starr County, Texas,
which together comprise approximately 1,700 acres.  The $194,000
purchase price was partially funded by a $173,822 loan from an
affiliated company owned by certain officers and directors of the
Company (See Note 8 for further discussion).  As consideration
for advising the Company in the acquisition of the working
interest, a consultant to the Company was assigned one percent of
the Company's working interest.  In addition, a one-half percent
working interest was assigned to the affiliated company which
extended the loan for the acquisition.

In September 1995, Midcoast acquired 100% of the outstanding
capital stock of Magnolia Pipeline Corporation ("Magnolia"), an
Alabama corporation, from Williams Holdings of Delaware, Inc.
("Williams")  a non-affiliated company.  The acquisition was made
pursuant to the Agreement for Sale and Purchase of Stock dated
July 27, 1995 and had an effective date of August 1, 1995.  The
acquisition was accounted for under the purchase method of
accounting.  The total purchase price of $3,200,000 was allocated
to property, plant, and equipment as the principal asset of
Magnolia consists of approximately 109 miles of natural gas
pipeline located in central Alabama. Initially, the acquisition
was financed by Midcoast issuing a $500,000 subordinated
debenture ("Debenture") and a $2,700,000 nonrecourse promissory
note ("Note") to Williams.  The Debenture accrued interest at 10%
and had a final maturity of September 15, 1996 but was redeemable
at the option of Midcoast.  The Note was non-interest bearing and
was due on October 9, 1995.  However, the Debenture and the Note
were paid in full on October 2, 1995 using the proceeds from the
sale of Five Flags (see Note 4) and borrowing $1,200,000 from an
affiliate owned by an officer and director of the Company (see
Note 8).  In December 1995 the $1,200,000 related party note was
repaid using a new $1,500,000 credit facility with a commercial
lender (see Note 7).

6. INVESTMENTS:

In March 1994, the Company signed an agreement to fund $1,265,000
which represents half of the construction costs of a crude oil
gathering pipeline and a natural gas gathering pipeline near Cook
Inlet, Alaska.  The agreement provided for the funds to be
advanced in five payments due upon the completion of certain
stages of the pipeline construction.  In consideration for the
Company's contribution of funds for construction, Midcoast
receives a throughput fee based on the volumes of barrels/MCF
transported through the pipelines.  These fees are subject to
certain minimum guaranteed volumes for the first two years which
began upon completion of the pipeline in July 1994.  The payments
were being financed with available cash on hand and through
short-term loans with an affiliated company owned by certain
officers and directors of the Company. The short-term loans were
replaced with long-term bank project financing in May 1994 (see
Note 7).

<PAGE>
<TABLE>
    7. DEBT OBLIGATIONS:

     At December 31, 1995 and 1994, the Company had outstanding
debt obligations as follows (in thousands):

<CAPTION>
                                                                  
                                                                    December 31, 1995           December 31, 1994 
                                                                   Current       Long-Term     Current      Long-Term
                                                                  -----------   -----------   ----------   -----------
<S>                                                               <C>           <C>           <C>           <C> 
Note payable to a bank under a term loan bearing interest at the
banks prime rate plus 1%, principal of $30,435 and accrued interest
are payable in 35 monthly installments,  with a final lump sum
payment of the remaining unpaid principal due December 1, 1995     $    -        $     -       $     365     $     304

Note payable to a bank under a $750,000 working capital line of
credit expiring on June 1, 1996 which the Company expects will
be renewed prior to that date.  Advanced and unpaid principal
bears interest at the banks prime rate plus 1% (10.5% at December
31, 1995) which is accrued and paid monthly                            25             -              210            -

Note payable to a bank under a term loan bearing interest at the
banks prime rate plus 1%, principal and accrued interest are
payable in 32 monthly installments of $12,720,  with a final maturity of
December 15, 1996                                                       -             -              134           145

Note payable to a bank under a term loan bearing interest at the
banks prime rate plus 1% (9.5% at December 31, 1995) principal and 
accrued interest are payable in 60 monthly installments of $6,915,
with a final maturity of October 13, 1999                              59           215               57           270

Note payable to a bank under a term loan bearing interest at the
banks prime rate plus 1% (9.5% at December 31, 1995) principal of 
$3,438 and accrued interestare payable in monthly installments,
with a final lump sum payment of the remaining unpaid principal
due February 15, 1997                                                  41            79               42           120

Note payable to a bank under a term loan bearing interest at the
banks prime rate plus 1.5% (10% at December 31, 1995) principal
of $27,778 and accrued interest are payable in 36 monthly 
installments,  with a final maturity of December 15, 1997             333           333              333           667

Revolving credit line with a bank under a $1.25 million reducing
promissory note bearing interest at the banks prime rate plus 1.5%
(10% at December 31, 1995) Available credit is reduced monthly
by $20,833 beginning December 1, 1995. Accrued interest and any
principal amounts as may be required to cause the outstanding 
principal to not exceed the amount of credit then available are
payable monthly, with a final maturity of November 1, 1998            108         1,000               -             - 

Revolving credit line with a bank under a $1.5 million reducing
promissory note bearing interest at the banks prime rate plus 1%
(9.5% at December 31, 1995). Available credit is reduced monthly
by $17,860 beginning February 1, 1996. Accrued interest and any
principal amounts as may be required to cause the outstanding
principal to not exceed the amount of credit then available are
payable monthly, with a final maturity of January 15, 1999             -          1,300              -             -

Note payable to an affiliate owned by certain officers and
directors bearing interest at the Mercantile Bank, Corpus Christi  
prime rate (9.5% at December 31, 1995). Principal and accrued 
interest are due in full at maturity on April 1, 1997)                 -            200              -            275   

Note payable to an affiliate owned by certain officers and
directors bearing interest at the Mercantile Bank, Corpus Christi 
prime rate plus 1% (10.5% at December 31, 1995). Monthly payments 
equal to 25% of the net revenue derived from the Starr County oil 
and gas production acquisition (see Note 6) shall be allocated to 
interest then principal. Any remaining principal and accrued 
interest shall be due in full at maturity on April 1, 1997             -            174              -             -

Note payable to an affiliate owned by an officer and director
bearing interest at the Mercantile Bank, Corpus Christi prime rate 
plus 5% (14.5% at December 31, 1995). Principal and accrued interest 
are due in full at maturity on January 1, 1997                         -            660              -             -
                                                                    ---------   -----------    ----------   -----------
                                                                    $   566     $ 3,961       $   1,141    $    1,781
                                                                    ---------   -----------    ----------   -----------
</TABLE>
<PAGE>
In December 1992, the Company entered into a financing agreement
with a bank under which the Company could borrow up to
$1,800,000. This credit facility included a term loan of
$1,400,000 which was payable in 36 monthly installments, the first
35 installments being the amount of $30,435 principal plus
accrued interest, and the 36th and final installment being the
amount of the balance of principal ($334,775) plus accrued
interest then remaining outstanding and unpaid. In conjunction
with obtaining a new debt facility with another bank as discussed
in a subsequent paragraph, the term loan was repaid in full on
October 31, 1995.  

In addition to the term loan discussed above, the Company had a
line of credit of $400,000 under the bank financing agreement. 
In September 1994, the line of credit was renewed and the
available line raised to $750,000.  The line of credit expires on
June 1, 1996, however, the Company expects that it will be
renewed prior to that date. Borrowings under this credit facility
are collateralized by the Company's non-transportation based
accounts receivable and the entire facility has been personally
guaranteed by three major stockholders who are also officers of
the Company.  At December 31, 1995, the Company had $725,000 of
available funds under this credit facility.  

In July 1993, the same bank provided the Company with an
additional $360,000 facility under which the Company obtained
advances of funds as needed for construction of pipelines. In
conjunction with obtaining a new debt facility with another bank
as discussed in a subsequent paragraph, the term loan was repaid
in full on October 31, 1995.  

In May 1994, the Company obtained a $1,000,000 credit facility
for financing of the Company's investment in transmission
facilities in Alaska.  Under this facility, the Company was able
to repay the short-term loans of $316,250 advanced by an
affiliate owned by certain officers and directors, as discussed
in Note 8 herein, as well as obtain the funds as needed for the
Company's investment in Alaska.  The agreement called for monthly
payments of accrued interest  with the principal due in full at
maturity on January 15, 1996.  Borrowings under this facility
bore interest at the banks prime rate.  Affiliates owned by
certain officers and directors of the Company pledged U.S.
Treasury Bills and Certificates of Deposit as collateral for this
facility for which they were compensated as discussed in Note 8. 
In December 1994, this facility was repaid and replaced with a
long-term financing agreement with a new bank.  Under the new
agreement, principal and accrued interest are paid in 36 monthly
installments.  This facility is secured by the throughput fee the
Company is receiving on its investment in Alaska (see Note 6).

In October 1994, the Company obtained $335,000 under a long-term
financing from a bank.  The funds were utilized to partially
finance the construction of a three mile pipeline in Kansas City,
Kansas.  In connection with this financing agreement, one of the
Company's pipeline systems is subject to a negative pledge to
keep the pipeline free and clear of all liens and encumbrances
and has been personally guaranteed by three major stockholders
who are also officers of the Company.  

In November 1994, $165,000 was extended by a bank to partially
finance the construction of a pipeline in Albany, New York. 
Under this agreement, the term loan is payable in monthly
installments of $3,438 principal plus accrued interest and the
final installment on February 15, 1997 being the amount of the
balance of principal ($75,625) plus accrued interest then
remaining outstanding and unpaid. In connection with this
financing agreement, one of the Company's pipeline systems is
subject to a negative pledge to keep the pipeline free and clear
of all liens and encumbrances and has been personally guaranteed
by three major stockholders who are also officers of the Company.

In October 1995, the Company entered into a new financing
agreement with an existing bank lender.  The new agreement
provides for an initial $1,250,000 revolving line of credit with
the amount of available credit being reduced by $20,833 per
month.  Upon maturity at November 1, 1998, the balance of
principal plus accrued interest then remaining outstanding and
unpaid is payable on full. The funds were used to repay existing
bank debt.  In connection with this financing agreement, eight of
the Company's pipeline systems are subject to a negative pledge
to keep the pipelines free and clear of all liens and
encumbrances and has been personally guaranteed by three major
stockholders who are also officers of the Company.  At December
31, 1995, the Company had $121,167 of available funds under this
credit facility.

In December 1995, the Company entered into a new financing
agreement with a bank lender.  The new agreement provides for an
initial $1,500,000 revolving line of credit with the amount of
available credit being reduced by $17,860 per month.  Upon
maturity at January 15, 1999, the balance of principal plus
accrued interest then remaining outstanding and unpaid is payable
in full.  The funds were used to repay $1,200,000 in debt owed to
an affiliate for partially financing the Magnolia acquisition
(see Note 5) and other working capital needs. In connection with
this financing agreement, a $50,000 Certificate of Deposit and all of
Magnolia's stock has been pledged as collateral. Also, Magnolia's
pipeline system is subject to a negative pledge to keep the pipeline free
and clear of all liens and encumbrances and has been personally guaranteed 
by three major stockholders who are also officers of the Company. 
At December 31, 1995, the Company had $200,000 of available funds
under this credit facility.

In December 1994, an affiliate owned by certain officers and
directors of the Company provided a working capital loan of
$275,000 of which $75,000 was repaid during 1995.  The loan
matures on April 1, 1997. No collateral was required to obtain
this loan.

In May 1995, an affiliate owned by certain officers and directors
of the Company provided a $173,822 loan to partially finance the
acquisition of a 23% working interest in oil and gas production
from two leases located in Starr County, Texas.  The loan matures
on April 1, 1997.  No collateral was required to obtain this
loan, although, in additional consideration for obtaining the
loan, the affiliated company was assigned a one-half percent
working interest in the oil and gas properties.

In December 1995, an affiliate owned by an officer and director
of the Company provided a working capital loan of $660,000.  No
collateral was required to obtain this loan.

The Company is in compliance with various normal covenants and
certain financial ratios as required by its financing agreements.

The aggregate maturities of long-term debt for the five years
following December 31, 1995 are as follows:

                                        For the Year Ending
                                      December 31   (In Thousands)


                                         1996         $      541  
                                         1997              1,972  
                                         1998              1,036  
                                         1999                953  
                                         2000                 -  


                                  Total               $    4,502  



8. RELATED PARTY TRANSACTIONS:

In addition to the $275,000 working capital loan provided in
December 1994 as discussed in Note 7 herein, an affiliate owned
by certain officers and directors of the Company provided short-
term loans to fund the Company's investment in Alaska until long-
term bank financing was obtained.  During 1994, short- term loans
of $316,250 were extended and subsequently repaid including
interest of $4,005 which was accrued at the prime rate plus 5%.

Affiliates owned by certain officers and directors of the Company
extended the collateral to obtain the long-term bank financing
for the Alaska investment.  In consideration for extending the
collateral, the Company assigned a five percent net revenue
interest on the net income derived from the Company's investment
in the oil and natural gas gathering pipelines near Cook Inlet,
Alaska.  However, the five percent net revenue interest applies
only after all costs associated with the investment have been
recouped by the Company.  As a result, no amounts have yet been
paid under the assignment of the net revenue interest.

The Five Flags acquisition discussed in Note 4 above was financed
by an officer and director of the Company.  A $1,872,450
promissory note was executed by the Company and called for
monthly payments of interest beginning April 1, 1996 until
December 31, 1996 at which time both principal any accrued
interest would be due in full.  Interest accrued at the prime
rate plus 2%.  However, the note plus accrued interest of
approximately $10,500 was repaid in full on October 2, 1995 using
the proceeds from the sale of the Five Flags investment.

In addition to the $660,000 working capital loan provided in
December 1995 as discussed in Note 7 herein, $1,200,000 was
borrowed from an affiliate owned by an officer and director of
the Company on October 2, 1995.  These funds were used in
conjunction with the remainder of the sales proceeds of Five Flags
to fully retire the $500,000 Debenture and $2,700,000 Note due for the
acquisition of Magnolia.  The loan agreement called for interest to be 
accrued at the prime rate plus 5% and was due monthly beginning April 1,
1996.  The loan was to mature on January 31, 1997, however, upon
consummation of the new $1,500,000 bank credit facility in
December 1995, the note plus accrued interest of $35,260 was
repaid in full.

As additional consideration for extending the $1,200,000 loan,
Midcoast granted the affiliate a 5% net revenue interest in
Magnolia's earnings before interest, income taxes and
depreciation to be paid on a monthly basis.  At December 31,
1995, no amounts have yet been paid under the assignment of the
net revenue interest.  Midcoast has the right to repurchase this
net revenue interest from the affiliate for a cash payment of
$25,000.  However, the repurchase amount is increased an
additional $25,000 on November 1, 1995 and each following month
up to a maximum of $500,000.
 
9. COMMITMENTS AND CONTINGENCIES:
           
Gas Transportation Contracts

As of December 31, 1995, the Company had two executed gas
transportation contracts requiring the construction of pipelines
and related facilities which, if constructed, would cost
approximately $420,000. These construction obligations are subject
to the Company's obtaining necessary regulatory approvals and
financing. 
The Company expects construction of these projects to begin during
the second quarter of 1996.  Financing of the projects is
expected to be derived from one of the Company's existing bank
lenders.

Employment Contracts

The Chief Executive Officer and President of the Company, has an
employment agreement with the Company which terminates in
December 1997 pursuant to which he receives a base annual salary
of $125,000 adjusted for salary increases the Board of Directors
may approve. In 1994 and 1995, two key employees of the Company
entered into three and four year employment agreements,
respectively. These agreements may be terminated by mutual
consent or at the option of the Company for cause, death or
disability.  In the event termination is due to death, disability
or defined changes in the ownership of the Company, the full
amount of compensation remaining to be paid during the term of
the agreement will be paid to the employee or their estate, after
discounting at 12% to reflect the current value of unpaid
amounts. 

10. CAPITAL STOCK:
 
At December 31, 1995, the Company has authorized 6 million shares
of common stock of which 328,557 shares were issued and
outstanding.  There are 17,800 shares issued and outstanding at
December 31, 1995 which are subject to a vesting schedule in
conjunction with employee shareholder agreements entered into
during 1994 and 1995 (see Note 15).

There are 1 million shares authorized and 200,000 shares
outstanding of the Company's 5% cumulative preferred stock ("5%
Preferred") at December 31, 1995.  The 5% Preferred pays
quarterly dividends based on an annual rate of 5% of the stated
liquidation value and is redeemable in whole or in part at the
Company's option at a price per share based on the liquidation
value ($5.91 per share).  The 5% Preferred votes as a separate
class with respect to any change in the preferences or other
rights attributable to the 5% Preferred.  Upon the failure to
declare or pay quarterly dividends for two consecutive quarterly
periods, the holders of the 5% Preferred also have the right to
elect one director until such time as all accrued dividends have
been paid.

The Company may issue the remaining authorized shares of
preferred stock in one or more classes or series, with the
designations, powers, preferences, and rights thereon as
determined by the Board of Directors.

11. INCOME TAXES:

The Company has a net operating loss ("NOL") carryforward of
approximately $15.1 million expiring in various amounts from 1999
through 2008.  In addition, the Company has an investment tax
credit (ITC) carryforward of approximately $354,000 which expires
primarily in 1997.  These loss carryforwards were generated by
the Company's predecessor.  The ability of the Company to utilize
the carryforwards is dependent upon the Company maintaining
profitable operations and staying in compliance with certain
Internal Revenue Service ("IRS") code provisions and regulations
associated with a change in shareholder control.  Failure to
adhere to these IRS requirements could result in a significant
limitation of the Company's ability to utilize its NOL and ITC
carryforwards and could also result in a loss of utilization
altogether.

Under SFAS No. 109, deferred tax assets or liabilities are
computed based on the difference between the financial statements
and income tax bases of assets and liabilities using the enacted
tax rates.  The tax effect of significant temporary differences
representing deferred tax assets and liabilities at December 31,
1995 and 1994, are as follows (in thousands):
                      
                                                      December 31, 
                                                   1995        1994

Net operating and capital loss carryforwards    $ 5,124      $ 5,183
Investment tax credit carryforwards                 354          354
Alternative minimum tax credits                      44           -
Financial basis of assets in excess of tax basis   (644)        (644)
Valuation allowance                              (4,834)      (4,893)

Net deferred tax assets                         $    44      $    -


A reconciliation of the 1995 and 1994 provision for income taxes to
the statutory United States tax rate is as follows (in thousands):

                                                      December 31,
                                                   1995        1994

Federal tax computed at statutory rate           $  771       $  50
Utilization of net operating loss carryforwards    (771)        (50)
Actual provision                                 $   -        $  -

12. MAJOR CUSTOMERS:

For the years ended December 31, 1995 and 1994, the Company derived
over 10% of its sales of natural gas and transportation fees from
Mid-America Pipeline Company and Westlake Petrochemicals
Corporation.  They accounted for 40% and 14% during 1995, and 42%
and 21% during 1994, respectively.

13. CONCENTRATION OF CREDIT RISK:

The Company derives revenue from gas transmission and gathering
services for commercial companies located in Alabama, Alaska,
Kansas, Louisiana, New York, Oklahoma, and Texas. Two of Midcoast's
largest customers account for 49% or approximately $1.13 million of
the outstanding accounts receivable at December 31, 1995.  The
Company performs ongoing evaluations of its customers and generally
does not require collateral.  The Company assesses its credit risk
and provides an allowance for doubtful accounts for any accounts
which it deems doubtful of collection.  At December 31, 1995, no
provision for doubtful accounts was required.

The Company maintains deposits in banks which may exceed the amount
of federal deposit insurance available.  Management periodically
assesses the financial condition of the institutions and believes
that any possible deposit loss is minimal.
 
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of trade receivables
and liabilities, notes payable to affiliates and various banks. 
The Company believes the carrying value of these financial
instruments approximate their estimated fair value.

15. EMPLOYEE BENEFITS:

The Company issued a total of 14,200 and 8,100 common shares,
respectively, of the Company's common stock to certain key
employees in 1995 and 1994, respectively.  Of the shares issued in
1995 and 1994, 13,000 and 8,000 respectively were issued in
connection with shareholder agreements with certain employees.  The
shares vest in equal amounts: the 13,000 shares over a four year
period and the 8,000 shares over a five year period.  The shares
were valued at the estimated fair market value on the date of
issuance.  Compensation expense is being recognized rateably over
the vesting period. 

In addition, employment agreements were entered into in 1995 and in
1994 which are further discussed in Note 9 herein.  

16. SUBSEQUENT EVENT:

On February 28, 1996, the Company and Resource Energy Development
Company, L.L.C. ("Resource"), an unaffiliated third party, jointly
formed Pan Grande Pipeline, L.L.C. ("Pan Grande") a Texas Limited
Liability Company each owning a 50% interest. The companies joined
together for the purpose of acquiring, owning and operating
pipelines.  On March 1, 1996, Pan Grande acquired six gas gathering
systems consisting of approximately 74 miles of pipeline located in
Texas from an unaffiliated third party.  Cash consideration of
$1,000,000 was paid by Pan Grande for the systems.  Pan Grande
financed $800,000 of the acquisition with a credit facility
obtained from a commercial lender. Midcoast as 50% owner of Pan
Grande has guaranteed 50% of the loan value.  The remaining
$200,000 of the purchase price was obtained through equal $100,000
capital contributions from Midcoast and Resource.  Midcoast will
act as manager of Pan Grande and operate the systems.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON         
         ACCOUNTING AND FINANCIAL DISCLOSURE

On March 17, 1994, Midcoast Energy Resources, Inc. (the "Company")
engaged the firm of Hein + Associates LLP, Houston, Texas, as
auditors to examine the books and accounts of the Company for the
fiscal year ending December 31, 1993.  In connection therewith, on
March 18, 1994, the Company and Arthur Andersen & Co., the
Company's prior principal independent account, mutually agreed that
Arthur Andersen & Co. would be replaced by Hein + Associates LLP as
the Company's principal independent accountant.  The decision to
replace Arthur Andersen & Co. and engage new auditors was
recommended and approved by the Board of Directors of the Company. 
The decision to engage Hein + Associates LLP was largely based upon
financial considerations.

The prior reports of Arthur Andersen & Co., on the Company's
financial statements did not contain any adverse opinion or
disclaimer of opinion, and were not modified as to uncertainty,
audit scope or accounting principles.

There were no disagreements with Arthur Andersen & Co., whether or
not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which, if not resolved to Arthur Andersen & Co.'s satisfaction,
would have caused it to make reference to the subject matter of the
disagreement in connection with its report.

                                PART III
ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL    
          PERSONS

ITEM 10.  EXECUTIVE COMPENSATION

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND     
                           MANAGEMENT

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Items 9, 10, 11 and 12 is incorporated
herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission in connection
with its Annual Shareholders' Meeting to be held on May 13, 1996.


                                Part IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-KSB

(a) 1.    Financial Statements

          All financial statements of Midcoast Energy Resources,
Inc. and subsidiaries are listed under Item 7 beginning on Page 22
of this Form 10-KSB.

    2.    Exhibits

          The following instruments are included as exhibits to
this report.  Those exhibits below incorporated by reference herein
are indicated as such by the information supplied in the
parenthetical thereafter.  If no parenthetical appears after an
exhibit, copies of the instrument have been included herewith.
 
    3.1   Certificate of Incorporation of Midcoast Energy
Resources, Inc.(Midcoast Form 10-KSB for the fiscal year ended
December 31, 1992).

    3.2    By-Laws of Midcoast Energy Resources, Inc. (Midcoast
Form 10-KSB for the fiscal year ended December 31, 1992).

    4.1    Restated Certificate of Voting Powers, Designations,
Preferences, Limitations, Restrictions and Relative Rights of the
5% Cumulative Preferred Stock of Midcoast Energy Resources, Inc.
(Midcoast Form 10-KSB for the year ended December 31, 1993).

    4.2    Shareholder Agreement by and between Midcoast Energy
Resources, Inc. and Midcoast Natural Gas, Inc., Stevens G. Herbst
and Kenneth B. Holmes, Jr., dated November 16, 1992 (Midcoast Form
10-KSB for the fiscal year ended December 31, 1992).
          
    4.3    Shareholder Agreement by and between Midcoast Energy
Resources, Inc., and Bill G. Bray dated April 30, 1994. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

    4.4    Shareholder Agreement by and between Midcoast Energy
Resources, Inc., and Duane S. Herbst dated April 30, 1994.
(Midcoast Form 10-KSB for the year ended December 31, 1994).

    4.5    Shareholder Agreement by and between Midcoast Energy
Resources, Inc., and Richard A. Robert dated April 30, 1994.
(Midcoast Form 10-KSB for the year ended December 31, 1994).

    4.6    Shareholder Agreement by and between Midcoast Energy
Resources, Inc., and Iris J. Berthelot, II dated April 30, 1994.
(Midcoast Form 10-KSB for the year ended December 31, 1994).

   10.1    Employment Agreement by and between Midcoast Energy
Resources, Inc., and Dan C. Tutcher dated January 1, 1993 (Midcoast
Form 10-KSB for the year ended December 31, 1992).

   10.2    Amendment dated April 1, 1993 to the Employment
Agreement by and between Midcoast Energy Resources, Inc., and Dan
C. Tutcher dated January 1, 1993 (Midcoast Form 10-KSB for the year
ended December 31, 1993).
                 
   10.3    Employment Agreement by and between Midcoast Energy
Resources, Inc., and Richard Robert dated April 30, 1994. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

   10.4    Employment Agreement by and between Midcoast Energy
Resources, Inc., and Bill G. Bray dated July 1, 1994. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

   10.5    Revolving Loan and Credit Agreement dated December 8,
1992, by and between New First City, Texas - Corpus Christi and
Midcoast Energy Resources, Inc. (Midcoast Form 8-K dated January 1,
1993).

   10.6    First Amendment to Revolving Loan and Credit Agreement
dated December 8, 1992 by and between New First City, Texas -
Corpus Christi, N.A. and Midcoast Energy Resources, Inc. dated
January 6, 1993 (Midcoast Form 10-KSB for the year ended December
31, 1993).

   10.7    Second Amendment to Revolving Loan and Credit Agreement
dated December 8, 1992 by and between Mercantile Bank, N.A.
formerly known as New First City, Texas - Corpus Christi, N.A. and
Midcoast Energy Resources, Inc., dated August 15, 1993 (Midcoast
Form 10-KSB for the year ended December 31, 1993).

   10.8    Third Amendment to Revolving Loan and Credit Agreement
dated December 8, 1992 by and between Mercantile Bank, N.A.
formerly known as New First City, Texas-Corpus Christi, N.A. and
Midcoast Energy Resources, Inc., dated September 1, 1994. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

   10.9    Allonge and Amendment No. One to Promissory Note dated
December 8, 1992 by and between Mercantile Bank, N.A. formerly
known as New First City, Texas - Corpus Christi, N.A. and Midcoast
Energy Resources, Inc. dated April 29, 1993 (Midcoast Form 10-KSB
for the year ended December 31, 1993).

   10.10    Allonge and Amendment No. Two to Promissory Note dated
December 8, 1992 by and between Mercantile Bank, N.A. formerly
known as New First City, Texas - Corpus Christi, N.A. and Midcoast
Energy Resources, Inc. dated June 16, 1993 (Midcoast Form 10-KSB
for the year ended December 31, 1993).

   10.11    Allonge and Amendment No. Three to Promissory Note
dated December 8, 1992 by and between Mercantile Bank, N.A.
formerly known as New First City, Texas - Corpus Christi, N.A. and
Midcoast Energy Resources, Inc. dated August 15, 1993 (Midcoast
Form 10-KSB for the year ended December 31, 1993).

   10.12    Promissory Note dated July 1, 1993 by and between
Mercantile Bank, N.A. and Midcoast Energy Resources, Inc. including
related Security Agreement and Continuing Unlimited Guaranty
Agreements also dated July 1, 1993 (Midcoast Form 10-KSB for the
year ended December 31, 1993).

   10.13    First Amendment to Security Agreement dated July 1,
1993 by and between Midcoast Energy Resources, Inc., and Mercantile
Bank, N.A. dated September 1, 1994.  (Midcoast Form 10-KSB for the
year ended December 31, 1994).

   10.14    Promissory Note dated April 19, 1994 by and between
Mercantile Bank, N.A. and Midcoast Energy Resources, Inc.,
including related Security Agreements also dated April 19, 1994.
(Midcoast Form 10-KSB for the year ended December 31, 1994).

   10.15    Revolving Credit Promissory Note dated September 1,
1994 by and between Mercantile Bank, N.A. and Midcoast Energy
Resources, Inc. (Midcoast Form 10-KSB for the year ended December
31, 1994).

   10.16    Promissory Note dated December 1, 1994 by and between
American National Bank including related Non-Standard Financing
Agreement, Security Agreement and Commercial Guarantee Agreements
also dated December 1, 1994. (Midcoast Form 10-KSB for the year
ended December 31, 1994).

   10.17    Promissory Note dated March 21, 1994 by and between
Texline Gas Company and Midcoast Energy Resources, Inc.. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

   10.18    Promissory Note dated April 1, 1994 by and between
Texline Gas Company and Midcoast Energy Resources, Inc.. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

   10.19    Promissory Note dated December 30, 1994 by and between
Texline Gas Company and Midcoast Energy Resources, Inc.. (Midcoast
Form 10-KSB for the year ended December 31, 1994).

   10.20    Assignment of Net Revenue Interest dated July 1, 1994
by and between Texline Gas Company and Midcoast Energy Resources,
Inc.. (Midcoast Form 10-KSB for the year ended December 31, 1994).

   10.21    Assignment of Net Revenue Interest dated July 1, 1994
by and between Rainbow Investments Co. and Midcoast Energy
Resources, Inc.. (Midcoast Form 10-KSB for the year ended December
31, 1994).

   10.22    Agreement for Purchase and Sale of Stock dated November
20, 1992, by and between Harbert Holdings No. One, Inc., and
Midcoast Energy Resources, Inc. (Midcoast Form 8-K dated January 1,
1993, as Exhibit 2.1).                                            
    
   10.23    Agreement for Purchase and Sale of Stock dated July 15,
1993 by and between Midcoast Holdings No. One, Inc. and Sunshine
Interstate Pipeline Partners (Midcoast Form 8-K dated September 2,
1993).

   10.24    Agreement dated March 31, 1994 by and between Midcoast
Energy Resources, Inc., and Stewart Petroleum Company (Midcoast
Form 10-KSB for the year ended December 31, 1993).

   10.25    Agreement for Purchase and Sale of Stock dated
September 6, 1995, by and between Midcoast Holdings No. One, Inc.
and KOCH Gateway Pipeline Company. 

   10.26    First Amendment to Agreement for Purchase and Sale of
Stock dated September 6, 1995, by and between Midcoast Holdings No.
One, Inc. and KOCH Gateway Pipeline Company dated October 2, 1995. 

   10.27    Agreement for Purchase and Sale of Stock dated
September 13, 1995, by and between Five Flags Holding Company and
Midcoast Holding No. One, Inc. 

   10.28    Agreement for Purchase of Stock dated September 13,
1995, by and between Midcoast Holdings No. One, Inc. and Rainbow
Investments Company. 

   10.29    Agreement for Purchase and Sale of Stock dated July 27,
1995, by and between Williams Holdings of Delaware Inc. and
Midcoast Holdings No. One, Inc. (Midcoast Form 8-K dated September
22, 1995).

   10.30    Subordinated Debenture dated September 8, 1995 by and
between Midcoast Energy Resources, Inc. and Williams Holdings of
Delaware, Inc. (Midcoast Form 8-K dated September 22, 1995).

   10.31    Nonrecourse Promissory Note dated September 8, 1995 by
and between Midcoast Holdings No. One, Inc. and Williams Holdings
of Delaware, Inc. (Midcoast Form 8-K dated September 22, 1995).

   10.32    Allonge and Amendment No. One to Revolving Credit 
Promissory Note dated September 1, 1994, by and between Mercantile
Bank, N.A. and Midcoast Energy Resources, Inc. dated September 22,
1995.   

   10.33    Allonge and Amendment No. Two to Revolving Credit 
Promissory Note dated September 1, 1994, by and between Mercantile
Bank, N.A. and Midcoast Energy Resources, Inc. dated November 1,
1995.

   10.34    Fourth Amendment to Revolving Loan and Credit Agreement
dated December 8, 1992 by and between Mercantile Bank, N.A.
formerly known as New First City, Texas - Corpus Christi, N.A. and
Midcoast Energy Resources, Inc. dated November 1, 1995. 
 
   10.35    Revolving Credit Agreement dated October 31, 1995 by
and between American National Bank and Midcoast Energy Resources,
Inc. including related Revolving Credit Promissory Note, Security
Agreement, Non-Standard Financing Statement and Commercial
Guarantee Agreements also dated October 31, 1995.
 
   10.36    Loan Agreement dated October 3, 1995 by and between
Midcoast Energy Resources, Inc. and Rainbow Investments Company
including related Promissory Note and Security Agreement also dated
October 3, 1995.

   10.37    Assignment of Net Revenue Interest dated October 3,
1995, by and between Midcoast Energy Resources, Inc. and Rainbow
Investments Company.

   10.38    Loan Agreement dated September 13, 1995, by and between
Midcoast Energy Resources, Inc. and Stevens G. Herbst including
related Promissory Note, Security Agreements and Guaranty Agreement
also dated September 13, 1995.

   10.39    Promissory Note dated May 30, 1995 by and between
Midcoast Energy Resources, Inc. and Texline Gas Company.

   10.40    Employment Agreement by and between Midcoast Energy
Resources, Inc. and I.J. Berthelot, II dated April 17, 1995.   

   10.41    Amendment to Employment Agreement dated April 17, 1995
by and between Midcoast Energy Resources, Inc. and I.J. Berthelot,
II dated December 8, 1995.

   10.42    Credit Agreement dated December 20, 1995 by and between
Compass Bank - Houston and Magnolia Pipeline Corporation including
related Financing Statement, Subordination Agreement, Security
Agreements, Promissory Note, and Guaranty Agreements.

   10.43   Operating Agreement of Pan Grande Pipeline, L.L.C. by 
and between Midcoast Holdings No. One, Inc. and Resource Energy
Development, L.L.C. dated February 28, 1996.

   16.1    Letter dated March 22, 1994, from Arthur Andersen & Co.
as to change in certifying accountant  (Midcoast Form 8-K dated
March 17, 1994).

   18.1    Preferability letter from Hein + Associates, independent
public accountants, regrding change in accounting principle.      
            
   22.1    Schedule listing subsidiaries of Midcoast Energy
Resources, Inc..

   27.1    Financial Data Schedule for the year ended December 31,
1995.

(b)    Reports on Form 8-K

A report on Form 8 was filed during the fourth quarter of 1995. 
Such report was filed on November 16, 1995 and was filed as
Amendment No. 1 to the report on Form 8-K dated September 22, 1995.

The
amendment was filed to include the financial statements required as
a result
ofthe acquisition of Magnolia Pipeline Corporation.








                                    Signatures


     In accordance with Section 13 or 15 (d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the

undersigned, thereto duly authorized.

MIDCOAST ENERGY RESOURCES, INC.
(Registrant)


BY: /s/ Dan C. Tutcher       
     Dan C. Tutcher
     Chief Executive Officer



Date:  March 27, 1996



     In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and in
the capacities on March 28, 1996.


Signatures                             Capacity in Which Signed   
   


 /s/ Dan C. Tutcher                    Chairman of the Board 
(Dan C. Tutcher)                       Chief Executive Officer    
                                       and President


 /s/ Stevens G. Herbst                 Executive Vice President 
(Stevens G. Herbst)                    and Director


 /s/ Kenneth B. Holmes, Jr.            Vice President and Director
(Kenneth B. Holmes, Jr.)



 /s/ Richard A. Robert                 Controller
(Richard A. Robert)