<PAGE>
---------------------------------------------------------------------------

                 U. S. SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                                FORM 10-KSB/A
                            (AMENDMENT NO. 1)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

          For the fiscal year ended December 31, 1998

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

          For the transition period from __________ to ___________

                     Commission File Number: 001-12679

                        ENERGY SEARCH, INCORPORATED
              (Name of Small Business Issuer in Its Charter)

                  TENNESSEE                           62-1423071
       (State or Other Jurisdiction of   (I.R.S. Employer Identification No.)
       Incorporation or Organization)

    280 FORT SANDERS WEST BLVD., SUITE 200
             KNOXVILLE, TENNESSEE                        37922
   (Address of Principal Executive Offices)            (Zip Code)

                              (800) 551-5810
             (Issuer's Telephone Number, Including Area Code)

 Securities registered Pursuant to Section 12(b) of the Exchange Act: NONE

      Securities registered under Section 12(g) of the Exchange Act:
                        COMMON STOCK, NO PAR VALUE

Check whether the issuer has: (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 the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes __X__       No ______

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. [ ]


<PAGE>
The Registrant's total revenues for the year ended December 31, 1998, were
$3,527,854.

As of March 24, 1999, the aggregate market value of the voting and non-
voting common equity held by non-affiliates of the Registrant was
approximately $15,265,904.  This amount is based on the sale price of
$5.125 per share for the registrant's stock as of such date.

As of March 24, 1999, the Registrant had outstanding 4,019,308 shares of
Common Stock, no par value.

Portions of the Registrant's definitive proxy statement to be filed no
later than April 30, 1999 for the Registrant's annual meeting of
shareholders are incorporated by reference into Part III of this Report.

Transitional Small Business Disclosure Format (check one): Yes _____
No __X__

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































<PAGE>
     This Form 10-KSB/A (Amendment No. 1) of Energy Search, Incorporated is
filed solely for the purpose of correcting a number contained in the
Consolidated Statement of Cash Flows for the year ended December 31, 1998.
The "Net cash provided by (used in) operating activities" line item for
December 31, 1998 was listed as $224,823.  The correct number for the "Net cash
provided by (used in) operating activities" line item for December 31,1998 is
$244,823.  This Form 10-KSB/A (Amendment No. 1) contains no other changes to
the Form 10-KSB filed with the Securities and Exchange Commission on March 31,
1999.  

ITEM 7. FINANCIAL STATEMENTS.

The response to this Item is set forth herein in a separate section to this
Form 10-KSB/A (Amendment No. 1), beginning on Page F-1.




































<PAGE>
                                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, thereunto duly authorized.

                                   ENERGY SEARCH, INCORPORATED


Date: April 15, 1999               /s/Richard S. Cooper
                                   Richard S. Cooper






































                                     2
<PAGE>
                ENERGY SEARCH, INCORPORATED AND SUBSIDIARY

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


                                 CONTENTS


REPORT LETTER                                                    F-2


FINANCIAL STATEMENTS

     Consolidated Balance Sheet                                  F-3

     Consolidated Statement of Operations                        F-4

     Consolidated Statement of Stockholders' Equity              F-5

     Consolidated Statement of Cash Flows                        F-6-7

     Notes to Consolidated Financial Statements                  F-8-25


REPORT LETTER                                                    F-27


ADDITIONAL INFORMATION

     Cost Incurred in Oil and Gas Property Acquisition,
       Exploration and Development Activities                    F-28

     Estimates of Natural Gas and Oil Reserves                   F-28-31
















                                     F-1
<PAGE>
                       Independent Auditor's Report



To the Stockholders of
Energy Search, Incorporated and Subsidiary

We have audited the accompanying balance sheet of Energy Search,
Incorporated and Subsidiary, (the Company) as of December 31, 1998 and 1997
and the related statements of operations, stockholders' equity, and cash
flows for the years then ended.  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 financial statements referred to above present fairly,
in all material respects, the financial position of Energy Search,
Incorporated and Subsidiary, as of December 31, 1998 and 1997 and the results
of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.


                                          /s/ Plante & Moran, LLP


Grand Rapids, Michigan
March 12, 1999













                                     F-2
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

<TABLE>
                                                                                 CONSOLIDATED BALANCE SHEET
<CAPTION>
                                                                                     DECEMBER 31,
                                                                              -----------------------------
                                                                                  1998              1997
                                                                              -----------       -----------
                                  ASSETS
<S>                                                                          <C>               <C>
CURRENT ASSETS
    Cash and cash equivalents                                                 $   595,749       $ 2,252,316
    Accounts receivable (Note I)                                                  980,881           976,065
    Other current assets                                                           90,226            91,670
                                                                              -----------       -----------
         Total current assets                                                   1,666,856         3,320,051

OIL AND GAS PROPERTIES
    Proven properties                                                          13,165,858         4,546,833
    Unproven properties                                                           209,616           193,965
    Wells and related equipment                                                11,357,198         8,100,764
    Less accumulated depreciation, depletion and amortization                  (4,467,912)       (3,140,678)
                                                                              -----------       -----------
          Net oil and gas properties                                           20,264,760         9,700,884

OTHER ASSETS
    Other property and equipment - Net (Note C)                                   287,746           363,180
    Investments in related partnerships (Note B)                                1,713,267         1,863,095
    Deferred tax asset (Note D)                                                   886,000           650,400
    Other                                                                         204,780           223,090
                                                                              -----------       -----------
         Total other assets                                                     3,091,793         3,099,765
                                                                              -----------       -----------
         Total assets                                                         $25,023,409       $16,120,700
                                                                              ===========       ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Current portion of long-term debt (Note E)                                $   546,407       $   679,868
    Accounts payable and accrued liabilities                                      632,677         1,356,748
                                                                              -----------       -----------
       Total current liabilities                                                1,179,084         2,036,616

LONG-TERM DEBT - less current portion (Note E)                                  7,703,369           137,595



                                     F-3
<PAGE>
STOCKHOLDERS' EQUITY (Notes F, G, H and J)
    Preferred stock (no par value, 5,000,000 shares authorized;
       issued and outstanding:  175,547 shares of 9%
      redeemable convertible)                                                     847,707                --
    Common stock (no par value, 25,000,000 shares
       authorized; 4,017,308 and 3,768,241 shares issued
       and outstanding at December 31, 1998 and 1997,
       respectively)                                                           17,206,862        15,448,073
    Accumulated deficit                                                        (1,913,613)       (1,501,584)
                                                                              -----------       -----------
       Total stockholders' equity                                              16,140,956        13,946,489
                                                                              -----------       -----------
       Total liabilities and stockholders' equity                             $25,023,409       $16,120,700
                                                                              ===========       ===========
</TABLE>

See Notes to Consolidated Financial Statements.
































                                     F-4
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

<TABLE>
                                                                       CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                               ----------------------------
                                                                                  1998              1997
                                                                               ----------        ----------
<S>                                                                           <C>               <C>
REVENUE
    Oil and gas sales                                                          $2,597,875        $  798,956
    Management fees (Note I)                                                      145,586           264,590
    Net turnkey revenue                                                            67,312           475,936
    Other revenue (Note L)                                                        609,725           693,188
                                                                               ----------        ----------

         Total revenue                                                          3,420,498         2,232,670

OPERATING EXPENSES
    Production costs                                                              661,036           274,571
    Exploration costs                                                             202,718            76,810
    Depreciation, depletion and amortization                                    1,551,685           557,167
    Interest                                                                      392,716           105,735
    General and administrative                                                  1,156,890         1,816,163
                                                                               ----------        ----------

          Total operating expenses                                              3,965,045         2,830,446
                                                                               ----------        ----------

NET (LOSS) FROM OPERATIONS                                                       (544,547)         (597,776)

OTHER INCOME (EXPENSE)
    Program subsidies (Note I)                                                   (192,837)          (80,384)
    Gain on sale of assets                                                             --             4,785
    Equity in income of related partnerships (Note B)                             107,356           123,794
                                                                               ----------        ----------

       Total other income (expense)                                               (85,481)           48,195
                                                                               ----------        ----------

NET (LOSS) BEFORE INCOME TAXES                                                   (630,028)         (549,581)

INCOME TAX BENEFIT (Note D)                                                       235,600           182,300
                                                                               ----------        ----------

NET (LOSS)                                                                     $ (394,428)       $ (367,281)
                                                                               ==========        ==========
                                     F-5
<PAGE>
BASIC NET (LOSS) PER COMMON SHARE                                              $    (0.11)       $    (0.14)
                                                                               ==========        ==========

DILUTED NET (LOSS) PER COMMON SHARE                                            $    (0.11)       $    (0.14)
                                                                               ==========        ==========
</TABLE>

See Notes to Consolidated Financial Statements.









































                                     F-6
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

<TABLE>
                                                                                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
                                                  PREFERRED STOCK             COMMON STOCK
                                              -----------------------    ---------------------
                                                                                                      ACCUMULATED
                                               SHARES      AMOUNT         SHARES        AMOUNT          DEFICIT          TOTAL
                                               ------     ---------     ----------      ------        -----------    -----------
<S>                                         <C>         <C>            <C>           <C>             <C>            <C>
BALANCE-January 1, 1997                       450,000    $ 4,246,160     1,100,000    $     1,200     $(1,074,554)   $ 3,172,806

Issuance of common stock (Note G)                  --             --     1,755,761     11,178,273              --     11,178,273

Conversion of preferred stock A and B to
  common stock (Note F)                      (450,000)    (4,246,160)      900,000      4,246,160              --             --

Exercise of pre-IPO warrants                       --             --        12,480         22,440              --         22,440

Dividends on preferred stock A                     --             --            --             --         (59,749)       (59,749)

Net loss for the year ended December 31,
  1997                                             --             --            --             --        (367,281)      (367,281)
                                            ---------    -----------    ----------    -----------     -----------    -----------
BALANCE - December 31, 1997                        --             --     3,768,241     15,448,073      (1,501,584)    13,946,489

Issuance of common stock (Note G)                  --             --       249,067      1,758,789              --      1,758,789

Issuance of preferred stock (Note F)          175,547        847,707            --             --              --        847,707

Dividends on redeemable convertible
  preferred stock                                  --             --            --             --         (17,601)       (17,601)

Net loss for the year ended December 31,
  1998                                             --             --            --             --        (394,428)      (394,428)
                                            ---------    -----------    ----------    -----------     -----------    -----------
BALANCE - December 31, 1998                   175,547    $   847,707     4,017,308    $17,206,862     $(1,913,613)   $16,140,956
                                            =========    ===========    ==========    ===========     ===========    ===========
</TABLE>

See Notes to Consolidated Financial Statements.






                                     F-7
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

<TABLE>
                                                                       CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                              -----------------------------
                                                                                 1998               1997
                                                                              -----------       -----------
<S>                                                                          <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                    $  (394,428)      $  (367,281)
  Adjustments to reconcile net loss to net cash from (used in)
    operating activities:
     Depreciation, depletion and amortization expense                           1,551,685           557,167
     Dry holes and abandonments of previously
        capitalized oil and gas properties                                         43,033             2,865
     Gain on sale of assets                                                            --            (4,785)
     Equity in income of related partnerships                                    (107,356)         (123,794)
     Increase in deferred taxes                                                  (235,600)         (182,300)
     (Increase) decrease in assets:
            Accounts receivable and due from partnerships                         139,876          (456,070)
            Other current assets                                                    1,444           (25,603)
            Other assets                                                          (29,760)         (167,123)
     Increase (decrease) in liabilities:
            Accounts payable and accrued liabilities                             (724,071)          323,286
            Drilling advances                                                          --        (1,335,124)
                                                                              -----------       -----------

              Net cash provided by (used in) operating
                activities                                                        244,823        (1,778,762)

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of proven properties                                                (6,839,114)       (4,129,663)
  Proceeds from sale of other property and equipment                                   --            10,054
  Purchase of wells and related equipment                                      (3,256,434)       (2,513,051)
  Purchase of other property and equipment                                        (30,951)         (251,244)
  Distributions from affiliated partnerships                                       77,006            92,426
  Contributions to affiliated partnerships                                        (34,510)         (318,100)
  Purchase of oil and gas leases                                                  (15,651)           (7,806)
                                                                              -----------       -----------

               Net cash used in investing activities                          (10,099,654)       (7,117,384)
</TABLE>

See Notes to Consolidated Financial Statements.


                                     F-8
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

<TABLE>
                                                           CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                              -----------------------------
                                                                                 1998               1997
                                                                              -----------       -----------
<S>                                                                          <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Gross proceeds from issuance of common stock                                      --       $13,249,727
     Gross proceeds from issuance of preferred stock                          $   956,500                --
     Payments on stock issuance costs - common stock                              (64,155)       (1,783,066)
     Payments on stock issuance costs - preferred stock                          (117,793)               --
     Proceeds from issuance of long-term debt                                   7,599,093           129,874
     Payment of dividends on preferred stock                                      (17,601)          (59,749)
     Payments on long-term debt                                                  (166,780)         (439,391)
                                                                              -----------       -----------

              Net cash provided by financing activities                         8,198,264        11,097,395
                                                                              -----------       -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (1,656,567)        2,201,249

CASH AND CASH EQUIVALENTS - Beginning of year                                   2,252,316            51,067
                                                                              -----------       -----------

CASH AND CASH EQUIVALENTS - End of year                                       $   595,749       $ 2,252,316
                                                                              ===========       ===========

SUPPLEMENTAL CASH FLOW DISCLOSURE
     Cash paid for interest                                                   $   392,716       $   120,017

     Cash paid for income taxes                                               $   100,370       $    20,391

     Significant noncash activities:
       Issuance of common stock for purchase of properties                    $ 1,822,944       $        --


       Conversion of preferred to common stock (Note F)                       $        --       $ 4,246,160

</TABLE>

See Notes to Consolidated Financial Statements.



                                     F-9
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 DECEMBER 31, 1998 AND 1997

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS - Energy Search, Incorporated and Subsidiary (the
     "Company") consists of Energy Search, Incorporated ("ESI") and Equity
     Financial Corporation ("EFC"), a wholly owned subsidiary acquired May 1,
     1997.

     ESI is engaged in the exploration, development, production and
     marketing of oil and natural gas in the Appalachian Basin area
     including southeastern Ohio and southern West Virginia.  ESI's revenue
     is primarily derived from: the sale of natural gas and crude oil from
     wells in which it has working interest; the transmission of natural
     gas through a pipeline and gathering system owned by an affiliated
     partnership in which ESI has an ownership interest; the management and
     operation of oil and gas wells; and to a lesser extent the drilling
     of oil and gas wells on a contract basis, and the formation and
     management of oil and gas partnerships (Affiliated Drilling
     Partnerships).

     In 1997, ESI transitioned from being primarily a driller-operator for
     syndicated Affiliated Drilling Partnerships to an energy company
     developing reserves for its own account.  The shift of its primary
     operational focus was financed from public funds raised through an
     initial public offering (Note G) and funds raised through a private
     placement.  While the Company anticipates the continued sponsoring of
     Affiliated Drilling Partnerships on a limited basis, management's
     primary focus will be the development of its own reserves and
     acquisition of primarily proved undeveloped properties for
     exploitation.

     EFC is engaged in the operations of providing investment advice and
     brokering and dealing in stocks, bonds, and other securities in the
     east Tennessee region.  EFC uses a clearing broker on a fully
     disclosed basis to execute trades.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
     include the accounts of ESI and its wholly owned subsidiary, EFC,
     since the date of acquisition.  All significant inter-company balances
     and transactions have been eliminated in consolidation.

     ESTIMATES - The preparation of financial statements in conformity with
     generally accepted accounting principles requires management to make

                                     F-10
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     estimates and assumptions that affect the reported amounts of assets
     and liabilities and disclosure of contingent assets and liabilities at
     the date of the financial statements and reported amounts of revenues
     and expenses during the reporting period.  Actual results could differ
     from those estimates.

     OIL AND GAS PROPERTIES - ESI uses the successful efforts method of
     accounting for oil and gas producing activities.  Acquisition costs
     for proved and unproved properties are capitalized when incurred.
     Costs of unproved properties are transferred to proved properties when
     proved reserves are discovered.  Exploration costs, including
     geological and geophysical costs and costs of carrying and retaining
     unproved properties, are charged to expense as incurred.

     Exploratory drilling costs are capitalized initially; however, if it
     is determined that an exploratory well does not contain proved
     reserves, such capitalized costs are charged to expense, as dry hole
     costs, at that time.

     Prior to 1997, wells were drilled with capital raised primarily
     through limited partnerships.  Under the terms of the partnership and
     drilling contracts, ESI did not capitalize intangible drilling costs
     since these costs were the responsibility of the contracting parties.
     Intangible drilling costs are the expense for labor, fuel, repair,
     hauling, rig rental and supplies used in the drilling of a well.  ESI
     does capitalize all tangible drilling costs when incurred, since they
     retain ownership of the well equipment.  Tangible costs are equipment
     such as casing, tubing, pumps, tanks and other equipment installed on
     a well.

     Prior to 1997, the Company incurred certain lease acquisition
     costs (e.g. landman expenses), which were part of the costs of
     acquiring and developing leases for the Affiliated Drilling
     Partnerships, that were offset against turnkey revenues.  In 1998, the
     Company has incurred similar costs; however, some of these costs have
     been incurred and capitalized in connection with properties acquired
     by the Company for its own portfolio.  These costs include indirect
     costs that management believes are related to the acquisition,
     exploration and development of oil and gas properties.  In 1998 and
     1997, the Company capitalized approximately $1,353,000 and $437,000 of

                                     F-11
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     indirect costs, respectively, and in 1998 $166,000 of interest costs
     were capitalized to proven properties.  

     For 1997 and future years, all intangible and tangible drilling costs
     for successful development wells drilled with the Company's capital
     will be capitalized.  Costs incurred to operate and maintain wells and
     equipment and to lift oil and gas to the surface are generally expensed.

     Oil and gas properties that are individually significant are
     periodically assessed for impairment of value, and a loss is
     recognized at time of impairment.  Because the individual wells are
     generally insignificant and the Company's business is primarily
     drilling development wells, the impairment test is performed on a
     field basis.  Proved properties represent purchased working interests
     in producing oil and gas wells, costs to acquire oil and gas leases
     and intangible well development costs.  Oil and gas properties are
     depreciated and depleted by the units-of-production method using
     estimates of proven reserves.  Because of inherent uncertainties in
     estimating proven reserves, estimates of depletion and depreciation
     could change significantly.

     OTHER PROPERTY AND EQUIPMENT - Other property and equipment are
     recorded at cost.  Major additions and improvements are capitalized,
     while repairs, replacements and maintenance that do not improve or
     extend the life of the respective assets are expensed.  Depreciation
     is computed under the double-declining balance method over the
     estimated useful lives.

     INVESTMENTS IN RELATED PARTNERSHIPS - Investments in related
     partnerships are accounted for by the equity method.  ESI, as the
     managing general partner of the oil and gas partnerships, makes
     initial capital contributions to the partnerships in accordance with
     provisions in the respective placement memorandum governing the
     activities of the particular partnership.  Income or losses are
     allocated to the investments according to ESI's ownership interest in
     the partnerships, and distributions or withdrawals are deducted from
     the investments (see Note B for additional partnership information).

     TURNKEY DRILLING REVENUE - ESI enters into contracts with the
     affiliated oil and gas partnerships to drill oil and gas wells under
     turnkey agreements.  Under the terms of the contracts, ESI provides
                                     F-12
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     all tangible well equipment and receives working interests in the
     completed wells.  The partnerships pay all intangible drilling costs
     and receive working interests in the wells.  The partnerships advance
     funds to ESI in order to finance the drilling activity.  ESI initially
     defers the full amount of the drilling advances and recognizes
     drilling revenue as the wells are completed.  Drilling expenses are
     netted against turnkey drilling revenue and were $47,888 in 1998 and
     $2,209,872 in 1997.

     INCOME TAXES - The Company accounts for income taxes following the
     liability method.  A current tax liability or asset is recognized for
     the estimated taxes payable or refundable on tax returns.  Deferred
     tax liabilities or assets are recognized for the estimated future tax
     effect of temporary differences between book and tax accounting and
     operating loss and tax credit carryforwards.  Valuation allowances are
     established when necessary to reduce deferred tax assets to the amount
     expected to be realized.

     FAIR VALUE OF FINANCIAL INSTRUMENTS - A summary of the methods and
     significant assumptions used to estimate the fair value of financial
     instruments is as follows:

     -    SHORT-TERM FINANCIAL INSTRUMENTS - The fair value of short-term
          financial instruments, including cash, trade accounts receivable
          and trade accounts payable, approximate their carrying amounts in
          the financial statements due to the short maturity of such
          instruments.

     -    NOTES PAYABLE AND LONG-TERM DEBT - Based on interest rates
          currently available to the Company for debt instruments with
          similar terms and remaining maturities, the fair values of notes
          payable and long-term debt approximate their carrying amounts in
          the financial statements.

     STOCK OPTIONS AND WARRANTS - The Company has stock option and stock
     warrant plans (Notes H and J).  Options and warrants granted to employees
     are accounted for using the intrinsic value method, under which
     compensation expense is recorded at the amount by which the market
     price of the underlying stock at the grant date exceeds the exercise
     price of an option.  Options and warrants granted to non-employees are
     accounted for using the fair value method.
                                     F-13
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     BASIC NET (LOSS) PER COMMON SHARE - Basic net (loss) per common share
     is based on net (loss) available to common stockholders (net income
     less preferred stock dividends) divided by the weighted average number
     of common shares outstanding during the period.

     DILUTED NET (LOSS) PER COMMON SHARE - Diluted net (loss) per common
     share is based on net (loss) before dividends divided by the weighted
     average number of common shares outstanding plus dilutive potential
     common shares, outstanding during the period.  Potential dilutive
     shares, consisting of stock options (Note J), warrants (Note H), and
     convertible preferred stock (Note F), were not included in the
     computation of diluted net (loss) per common share in 1998 or 1997
     because to do so would have been antidilutive.

     CASH EQUIVALENTS - The Company considers all highly liquid investments
     with a maturity of three months or less when purchased to be cash
     equivalents.

     RECLASSIFICATIONS - Certain reclassifications have been made to 1997
     amounts to conform to 1998 presentations.

NOTE B - AFFILIATED OIL AND GAS PARTNERSHIPS

     Since 1989, ESI has sponsored the formation of partnerships for the
     purpose of conducting oil and gas exploration, development, and
     production activities on certain oil and gas properties.  Such
     partnerships included the Natural Gas/Tax Credit 1989 L.P., the
     Natural Gas/Tax Credit 1990 L.P., the Natural Gas/Tax Credit 1991
     L.P., the Natural Gas/Tax Credit 1992 L.P., and the Natural Gas/Tax
     Credit 1992-A L.P., all of which were liquidated in 1998 through the
     Company's acquisition of the affiliated partnership working interests
     (Note G).

     ESI has also sponsored the following partnerships:  the Natural Gas
     1993 L.P., the Energy Search Natural Gas 1993-A L.P., the Energy
     Search Natural Gas 1994 L.P., the Energy Search Natural Gas 1994-A
     L.P., the Energy Search Natural Gas 1995 L.P., the Energy Search
     Natural Gas 1995-A L.P., the Energy Search Natural Gas 1996 L.P., the
     Energy Search Natural Gas 1996-A L.P., the Energy Search Natural Gas


                                     F-14
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE B - AFFILIATED OIL AND GAS PARTNERSHIPS (CONTINUED)

     1997 L.P., the Energy Search Natural Gas 1997-A L.P., and the Energy
     Search Natural Gas 1998 L.P.  ESI serves as managing general partner
     of these partnerships and, as such, has full and exclusive
     discretion in the management and control of the partnerships.  The
     turnkey drilling and operating agreements that ESI enters into with
     the partnerships provide that the partnerships pay for the intangible
     drilling costs of the wells at an agreed-upon price per well.  ESI
     provides all tangible equipment required in the drilling, equipping,
     completing and operating of the properties.  Revenue from the
     partnership oil and gas properties is allocated based on the working
     interest ownership percentage of the properties.  ESI's interests in
     the limited partnerships ranges from 1 percent to 9 percent at
     December 31, 1998 and from 0.5 percent to 9 percent at December
     31,1997.

     In 1993, ESI sponsored the formation of the ESI Pipeline Operating
     L.P. (the Operating Partnership), which purchased a portion of ESI's
     gas pipeline and gathering system.  ESI contributed its remaining
     interest in the pipeline system to the new partnership in exchange for
     an ownership interest in the Operating Partnership.  ESI has advanced
     funds to the Operating Partnership for each extension of the pipeline.
     ESI has no legal obligation to continue to advance funds in the
     future.  ESI provided a guaranteed 10 percent return to pipeline
     investors through 1997.  Operations of the pipeline have been
     sufficient to fund the preferential return through 1997.  After
     preferential returns, all cash is used to repay advances used to fund
     pipeline extensions.

     Also, in 1993, ESI sponsored the formation of the ESI Natural Gas
     Pipeline Income L.P. (the Pipeline Partnership).  The Pipeline
     Partnership made a capital contribution to the Operating Partnership
     to finance the initial purchase of ESI's pipeline system.  In turn,
     the Pipeline Partnership received an ownership interest in the
     Operating Partnership.  ESI serves as managing general partner for
     both the Operating Partnership and Pipeline Partnership and, as such,
     has full and exclusive discretion in the management of and control of
     the partnerships.  The Operating Partnership earns revenue by charging
     gas wells a transportation fee based on the volume of gas moved through
     the pipeline system.  Substantially all of these gas wells are operated by


                                     F-15
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE B - AFFILIATED OIL AND GAS PARTNERSHIPS (CONTINUED)

     ESI.  As of December 31, 1998 and 1997, the Pipeline Partnership owned
     approximately 51 percent of the Operating Partnership, with ESI owning
     the remaining 49 percent.

     Total assets and equity of the related partnerships in the aggregate
     were approximately $4,779,900 and $4,737,051, respectively, at
     December 31, 1998, and $5,813,197 and $5,772,464, respectively, at
     December 31, 1997.

     ESI's share of revenue and net income for its equity investees for
     the years ended December 31, 1998 and 1997, are given below.  In
     the case of each equity investee, the net income (loss) from
     continuing operations equals the net income (loss).




























                                     F-16
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------
<TABLE>
                                                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                    DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE B - AFFILIATED OIL AND GAS PARTNERSHIPS (CONTINUED)
<CAPTION>
                                                                                 NET INCOME (LOSS) FROM
                                                     REVENUE                     CONTINUING OPERATIONS
                                         -------------------------------     -----------------------------
           EQUITY INVESTEE                    1998              1997              1998            1997
------------------------------------     -------------      ------------     --------------  -------------
<S>                                      <C>                <C>              <C>            <C>
Energy Search Natural Gas
   Pipeline Income, L.P.                  $    4,673         $       75       $      4,673   $        (79)

ESI Pipeline Operating L.P.                   86,059            117,357             78,978         86,290

Energy Search Natural Gas
   1993 L.P.                                   2,604              4,572              2,596          4,375

Energy Search Natural Gas
   1993-A L.P.                                 5,338              8,931              5,338          8,541

Energy Search Natural Gas
   1994 L.P.                                   5,695             10,684              5,677         10,387

Energy Search Natural Gas
   1994-A L.P.                                   502                656                502            617

Energy Search Natural Gas
   1995 L.P.                                   3,741              6,921              3,741          6,642

Energy Search Natural Gas
   1995-A L.P.                                 3,272              6,454              3,272          6,287

Energy Search Natural Gas
   1996 L.P.                                   1,247                536              1,247            510

Energy Search Natural Gas
   1996-A L.P.                                   360                123                360            105

Energy Search Natural Gas
   1997 L.P.                                     668                118                668            117




                                     F-17
<PAGE>
Energy Search Natural Gas
   1997-A L.P.                                   318                 --                304             --

Energy Search Natural Gas
   1998 L.P.                                      --                 --                 --             --
</TABLE>











































                                     F-18
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE C - PROPERTY AND EQUIPMENT

     The principal categories of property and equipment are as follows:

<TABLE>
<CAPTION>
                                                                                                   DEPRECIABLE
                                                                     1998             1997         LIFE-YEARS
                                                                ---------------  --------------  ---------------
<S> <C>                                                         <C>              <C>                   <C>
     Machinery and equipment                                     $   41,005       $   39,941            5
     Office furniture, equipment
       and software                                                 311,657          281,770            5
     Airplane                                                       165,932          165,932            5
     Vehicles                                                       218,645          218,645            5
                                                                 ----------       ----------

              Total cost                                            737,239          706,288

     Less accumulated depreciation                                  449,493          343,108
                                                                 ----------       ----------

              Net carrying amount                                $  287,746       $  363,180
                                                                 ==========       ==========
</TABLE>

     Depreciation expense totaled $106,385 and $74,750 for the years ended
     December 31, 1998 and 1997, respectively.

NOTE D - INCOME TAXES

     ESI and its subsidiary file a consolidated federal income tax return.
     The following is a summary of the provisions for income taxes for
     years ended December 31:

<TABLE>
<CAPTION>
                                                            1998             1997
                                                          --------         --------
<S> <C>                                                  <C>              <C>
     Deferred tax benefit                                 $235,600         $182,300
                                                          ========         ========
</TABLE>
                                     F-19
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE D - INCOME TAXES (CONTINUED)

     The following is a reconciliation of the statutory federal income tax
     rate to the Company's effective tax rate:

<TABLE>
<CAPTION>
                                                                   1998           1997
                                                                  ------         ------
<S> <C>                                                           <C>            <C>
     Income tax at federal statutory rate                          34.0%          34.0%
     State income tax, net of federal benefit                       6.0%           6.0%
     Other                                                         (2.6)%         (6.8)%
                                                                  -----          -----

     Actual effective tax rate                                     37.4%          33.2%
                                                                  =====          =====
</TABLE>

     The significant components of ESI's deferred tax assets and
     liabilities are as follows:






















                                     F-20
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE D - INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
                                                                      1998            1997
                                                                   ----------      ----------
<S> <C>                                                          <C>             <C>
     Deferred tax assets:
         Allowance for uncollectible accounts                              --     $    59,000
         Accounting for equity investments                         $  128,900         177,000
         Federal net operating loss                                 1,771,100       2,213,800
         State net operating loss                                      99,600         125,800
         Geological and engineering costs                             106,900              --
                                                                   ----------      ----------
            Total deferred tax asset                                2,106,500       2,575,600

     Valuation allowance for deferred tax assets                           --              --

     Deferred tax liabilities:
         Depreciation and pooling of capital                          832,900         784,200
         Intangible drilling costs                                    349,200       1,126,000
         Other                                                         38,400          15,000
                                                                   ----------      ----------
            Total deferred tax liabilities                          1,220,500       1,925,200
                                                                   ----------      ----------
            Net deferred tax asset                                 $  886,000      $  650,400
                                                                   ==========      ==========
</TABLE>

     At December 31, 1998, the Company has federal and state operating
     loss carryforwards of approximately $5,200,000 and $1,700,000
     respectively, that expire in the years 2005 to 2018.  These
     carryforwards are available to offset future taxable income.










                                     F-21
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE E - LONG-TERM DEBT

     Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                        1998               1997
                                                                      ----------         --------
<S> <C>                                                              <C>                <C>
     Line of credit at bank, available balance of
     $7,800,000 and $920,000 at December 31, 1998 and
     1997, respectively.  Collateralized by lien on oil
     and gas property, interest payable at prime plus
     1.25% and 1.75% at December 31, 1998 and 1997
     (a 9.0% and 10.25% effective rate, respectively).
     Principal payments begin September 30, 1999, payable
     in 48 equal monthly payments of principal plus interest          $7,749,776         $650,684

     Note payable to bank, collateralized by equipment,     
     payable in monthly installments of $3,600, including
     interest at prime plus 0.5%, which was 9% at
     December 31, 1997. This note was refinanced in 1998                      --          166,779

     Note payable to bank, collateralized by equipment,
     payable in monthly installments of $8,400, including            
     interest at 7.75%, with any unpaid principal
     balance due December 5, 2003.                                       500,000               --
                                                                      ----------         --------

         Total                                                         8,249,776          817,463

         Less current portion                                            546,407          679,868
                                                                      ----------         --------

         Total long-term debt                                         $7,703,369         $137,595
                                                                      ==========         ========
</TABLE>
     The Company is subject to various loan covenants in connection with
     bank notes payable described above including requirements on its
     tangible net worth, debt to tangible net worth, limits on partnership
     subsidies, restrictions on payment of dividends and general and
     administrative costs.

                                     F-22
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE E - LONG-TERM DEBT (CONTINUED)

     Principal maturities of long-term debt at December 31, 1998 are as
     follows:

<TABLE>
<CAPTION>
<S>                  <C>                                <C>
                      1999                               $  546,407
                      2000                                2,006,182
                      2001                                2,011,880
                      2002                                2,017,944
                      2003                                1,667,363
                                                         ----------

                      Total                              $8,249,776
                                                         ==========
</TABLE>

NOTE F - PREFERRED STOCK

     CLASS A AND B PREFERRED STOCK - Class A and B preferred stock was
     converted to common stock in 1997 in conjunction with the successful
     initial public offering of ESI's common stock.

     REDEEMABLE CONVERTIBLE PREFERRED STOCK - In 1998, the Company
     initiated a private placement offering of up to 800,000 shares of 9%
     redeemable convertible preferred stock.  The offering was terminated
     on December 18, 1998, and the issue price of the preferred stock was
     adjusted to $5.50 per share according to the terms of the offering.
     The Company raised $847,707, net of issue costs of $117,793, and sold
     175,547 shares of preferred stock under the offering.

     The preferred shares enjoy a liquidation and dividend preference over
     the Company's common stock and are convertible to common stock at the
     option of the holder at any time at a rate of 1.0 common share for
     each preferred share converted.  Conversion of the preferred shares to
     common stock will automatically occur in the event the Company is
     acquired or is the subject of a business combination in which
     substantially all assets of the Company are acquired by unaffiliated



                                     F-23
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE F - PREFERRED STOCK (CONTINUED)

     purchasers or greater than 50% of the outstanding beneficial interest
     of the Company's common stock is acquired by unaffiliated purchasers.

     The holders of preferred shares may require the Company to redeem the
     preferred shares if, at any time prior to October 1, 1999, the Company
     publicly announces that it will be acquired or is the subject of a
     business combination, as defined above. The redemption price in such
     an event will be 100% of the issue price of the preferred shares plus
     accrued and unpaid dividends.

     The preferred shares are redeemable at the sole option of the Company
     any time after September 30, 1999, provided the average trading
     closing price for the Company's common stock exceeds 130% of the issue
     price of the preferred shares over any 5 consecutive trading day
     period commencing after September 30, 1999.  The redemption price for
     the preferred shares will be 100% of the issue price for the preferred
     shares, plus accrued but unpaid dividends.  The Company will provide
     the holders of preferred shares 30 days written notice of its intent
     to redeem the preferred shares during which time the holders may, at
     their option, convert their preferred shares to common stock.

NOTE G - COMMON STOCK

     INITIAL PUBLIC OFFERING - In January 1997, the Company registered its
     stock in a public offering of 1,000,000 common shares and raised
     $6,501,491 net of $1,498,509 for underwriter fees, professional fees,
     and various other costs associated with this stock offering.

     REGULATION D OFFERING - On October 27, 1997, the Company completed a
     private offering of 749,961 shares of common stock and raised
     $4,620,867, net of $628,900 for underwriter fees, professional fees,
     and various other costs associated with this stock offering.

     AFFILIATED PARTNERSHIP ROLL-UP - Effective June 30, 1998, the Company
     closed the acquisition of working interests (the "Subject Interests")
     in a total of 145 gross natural gas or oil wells that were being operated
     by the Company.  The Subject Interests were owned by the following
     affiliated partnerships:  the Natural Gas/Tax Credit 1989 L.P., the
     Natural Gas/Tax Credit 1990 L.P., the Natural Gas/Tax Credit 1991


                                     F-24
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE G - COMMON STOCK (CONTINUED)

     L.P., the Natural Gas/Tax Credit 1992 L.P., and the Natural Gas/Tax
     Credit 1992-A L.P.  The Company paid aggregate purchase consideration
     amounting to $2,223,941 for the Subject Interests, which was comprised
     of $1,716,748 in Company common stock (221,453 shares) and $507,193 in
     cash.

     The Company's acquisition of the Subject Interests from affiliated
     partnerships followed a group of smaller transactions (the "Minor
     Interest Acquisitions") pursuant to which the Company acquired minor
     working interests and overriding royalty interests in the wells from
     nine individuals.  The Minor Interest Acquisitions had an effective
     date of April 16, 1998. The Company paid aggregate purchase
     consideration amounting to $227,740 for the Minor Interest
     Acquisitions, which was comprised of $106,197 in Company common stock
     (10,114 shares) and $121,543 in cash.

NOTE H - STOCK WARRANT PLANS

     SERIES A WARRANTS - As part of ESI's public offering, the Board of
     Directors issued 1,000,000 Series A warrants included in units that
     consist of one share of common stock and one Series A warrant.  The
     Board issued additional Series A warrants consisting of 100,000 units
     pursuant to the Underwriters' over-allotment option, and 100,000
     "representative's" warrants pursuant to Underwriters' compensation.
     An equivalent number of shares of common stock has been authorized and
     reserved for issuance upon exercise of such Series A warrants.

     Each Series A warrant entitles the holder to purchase one share of
     common stock at an exercise price of $9.60 per unit exercisable at any
     time after February 28, 1998, until January 30, 2002.  The Series A
     warrants could not be traded separately until July 24, 1997.  The
     warrants are subject to redemption by the Company at a price of $.05
     per Series A warrant on 30 days written notice at any time after July
     24, 1998, provided that the closing sale price per share for the
     common stock has equaled or exceeded 200 percent of the offering price
     per unit for 20 consecutive trading days within the 30-day period
     immediately preceding such notice.




                                     F-25
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE H -  STOCK WARRANT PLANS (CONTINUED)

     REGULATION D WARRANTS - As part of ESI's private offering of common
     stock that took place in October 1997, 74,996 warrants were issued to
     unaffiliated parties pursuant to the Placement Agent Agreement.  The
     warrants entitle each holder to purchase one share of common stock and
     are exercisable at $7 per share at any time up to October 27, 2002.
     The number, type of security and the exercise price is subject to
     adjustment upon occurrence of certain events including consolidation,
     merger, subdivision or combination of shares and issuance of stock
     dividends.  None of these warrants have been exercised at December 31,
     1998.

     The following is a summary of stock warrant activity:

<TABLE>
<CAPTION>
                                                   NUMBER OF      EXERCISE
                                                   WARRANTS        PRICE      EXPIRATION DATE
                                                   ------------------------------------------
<S> <C>                                           <C>             <C>        <C>
     Outstanding - January 1, 1997                         -       $   -

        Granted                                    1,200,000        9.60      January 30, 2002

        Granted                                       74,996        7.00      October 27, 2002
                                                   ---------

     Outstanding - December 31, 1997 and 1998      1,274,996
                                                   ---------
</TABLE>

     None of the consideration received in the above stock offerings
     was specifically allocated to the warrants.

NOTE I -  RELATED-PARTY TRANSACTIONS

     Because of the nature of ESI's business, a significant number of
     transactions are with related parties.




                                     F-26
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE I -  RELATED PARTY TRANSACTIONS (CONTINUED)

     During 1998 and 1997, ESI received $115,200 and $1,156,800, respectively,
     from affiliated oil and gas partnerships for drilling costs which were
     the responsibility of the affiliated oil and gas partnerships.  Included
     in accounts receivable at December 31, 1998 and 1997 is $59,002 and
     $781,553 respectively, due from affiliated partnerships.

     In its role as operator of the oil and gas wells owned by various
     related partnerships, ESI charges a monthly wellhead and
     administrative fee of between $100 and $300 for each producing well.
     These fees totaled $110,856 and $239,433 for 1998 and 1997,
     respectively.  In its role as general partner of the Operating
     Partnership (Note B), ESI charges the partnership a management fee of
     $2,500 and $5,000 per month for 1998 and 1997, respectively.  These fees
     totaled $35,000 and $60,000 for 1998 and 1997, respectively.

     Subsequent to December 31, 1998 the Company issued a note totaling 
     $225,000 to three officers for their interests in various properties
     and their rights to invest in future properties.

     The Company, in its discretion and given the business environment
     existing at the time, chose not to collect certain amounts due from
     partnerships and also paid certain expenses due to others on behalf of
     partnerships.  ESI is under no legal or contractual obligation to
     continue this activity, and there is no expectation that it will
     continue in future years.
















                                     F-27
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE I -  RELATED PARTY TRANSACTIONS (CONTINUED)

     The following is a summary of expenses paid on behalf of the
     partnerships and advances forgiven for the years ended December 31:

<TABLE>
<CAPTION>
                                                                1998            1997
                                                              --------        --------
<S> <C>                                                      <C>             <C>
     Expenses paid on behalf of partnership                   $192,837        $ 80,384
                                                              ========        ========

     Advances forgiven                                        $    820        $ 11,728
                                                              ========        ========
</TABLE>

     ESI has the contractual right to charge partnership administrative
     fees and production operating fees in excess of the aggregate amounts
     charged to the partnerships during 1998 and 1997.

NOTE J - EMPLOYEE BENEFIT AND STOCK-BASED COMPENSATION PLANS

     EMPLOYEE BENEFIT PLAN - The Company sponsors a simplified employee
     pension plan (SEP) for qualifying employees.  Employee contributions to
     individual retirement plans may not exceed the greater of 15 percent of
     employee earnings or $22,500 per year per employee.  The Company
     contributed $38,792 and $25,370 to the SEP during 1998 and 1997,
     respectively.

     NON-EMPLOYEE OPTIONS - The Company issued 2,500 options each to the
     two outside directors during both 1998 and 1997.  Options issued in
     1998 and 1997 entitle the holder to purchase one share of common
     stock at an exercise price of $5.25 and $6.50, respectively, and the
     options expire January 30, 2002.  The Company also issued 2,500
     options to an outside consultant in 1998 for past services rendered.
     The options entitle the holder to purchase one share of common stock
     at an exercise price of $6.50 and expire January 30, 2002.  During
     1998 and 1997, $6,700 and $2,400, was charged to expense related to
     these non-employee options, respectively.



                                     F-28
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE J - EMPLOYEE BENEFIT AND STOCK-BASED COMPENSATION PLANS (CONTINUED)

     EMPLOYEE OPTION PLAN - The Company has a fixed employee stock-based
     compensation plan under which the Company granted options for 55,650
     shares of restricted common stock in 1997.  The exercise price of
     each option is $6.50 per share.  The options expire January 30, 2002
     and vest immediately upon grant.

     In addition, the Company has granted options for 22,500 shares of
     restricted common stock under the fixed employee stock-based
     compensation plan in 1998.  The exercise price of each option is
     $8.00 per share.  The term of the options is five years starting in
     1998 and the warrants vest at 4,500 shares per year.

     OFFICER WARRANT PLAN - The Company also has a fixed executive officer
     stock-based compensation plan under which executive officers have
     been granted warrants for the purchase of up to 450,000 shares of
     restricted common stock.  The exercise price of each warrant is $8.00
     per share, which equaled the market price of the Company's stock on
     the date of grant.  The term of the warrants is five years starting in
     1997 and the warrants vest at 30,000 shares per officer per year.

     The Company applies intrinsic value accounting to its fixed stock-
     based compensation plans.  Accordingly, no compensation cost has been
     recognized for the fixed plans in 1998 and 1997.  Had compensation
     cost been determined using the fair value method, net loss would have
     been $(551,517) and $(476,563) for 1998 and 1997, respectively, and
     basic and fully diluted loss per share would have been $(.15) and $(.18)
     for 1998 and 1997, respectively.  The fair value of the warrants and
     options was determined using the Black-Scholes model with application
     of an additional 30 percent discount due to the fact that the shares are
     restricted.  Assumptions made in estimating the fair value include:
     risk-free interest rate of 6 percent, expected expiration of the
     warrants of January 30, 2002, expected price volatility of 20 percent
     and dividend yield of 0 percent.








                                     F-29
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE J - EMPLOYEE BENEFIT AND STOCK-BASED COMPENSATION PLANS (CONTINUED)

     The following is a summary of the status of the fixed stock-based
     compensation plans during 1998.

<TABLE>
<CAPTION>
                                                                                 WEIGHTED
                                                                                 AVERAGE
                                                         NUMBER OF SHARES     EXERCISE PRICE
                                                        ------------------    --------------
<S> <C>                                                     <C>                  <C>
     Outstanding at January 1, 1997                            27,950             $ 3.57

       Granted                                                505,650               7.84

       Expired                                                (15,470)             10.00

       Exercised                                              (12,480)              3.59
                                                             --------             ------

     Outstanding - December 31, 1997                          505,650               7.84

       Granted                                                 22,500               8.00
                                                             --------             ------

     Outstanding - December 31, 1998                         $528,150             $ 7.84
                                                             ========             ======

     Exercisable at December 31, 1998                        $240,150             $ 7.65
                                                             ========             ======

     Weighted average per share fair value
     of options granted during 1998                          $   1.66
                                                             ========
</TABLE>







                                     F-30

<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE J - EMPLOYEE BENEFIT AND STOCK-BASED COMPENSATION PLANS (CONTINUED)

     The following is a summary of the status of the fixed options
     outstanding at December 31, 1998.
<TABLE>
<CAPTION>
                  OUTSTANDING OPTIONS                                           EXERCISABLE OPTIONS
     ------------------------------------------------             ---------------------------------------------
                                           WEIGHTED                                                  WEIGHTED
                                           AVERAGE                                                   AVERAGE
         EXERCISE                         REMAINING                 EXERCISE                        REMAINING
          PRICE            NUMBER      CONTRACTUAL LIFE              PRICE            NUMBER     CONTRACTUAL LIFE
         --------          ------      ----------------             --------          ------     ----------------
<S>     <C>              <C>                 <C>                    <C>              <C>                <C>
         $6.50             55,650             4                      $6.50             55,650            4

         $8.00            472,500             4                      $8.00            184,500            4
</TABLE>

NOTE K - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

     As general partner in various affiliated oil and gas partnerships, the
     Company is subject to contingencies that may arise in the normal
     course of business of these partnerships.  Management is of the
     opinion that liabilities, if any, related to such contingencies that
     may arise would not be material to the financial statements.

     CONCENTRATIONS OF CREDIT RISK - The Company extends credit to
     affiliated partnerships in the normal course of business.  Within this
     industry, certain concentrations of credit risk exist.  ESI, in its
     role as operator of co-owned properties, assumes responsibility for
     payment to vendors for goods and services related to joint operations
     and extends credit to these partnerships as co-owners of these
     properties.

     This concentration of credit risk may be similarly affected by changes
     in economic or other conditions and may, accordingly, impact the
     Company's overall credit risk.  However, management believes that its
     accounts receivable are well diversified, thereby reducing potential
     risk to the Company.



                                     F-31
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE K - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (CONTINUED)

     GEOGRAPHIC CONCENTRATION - The Company plans to increase its oil and
     gas reserves by continued developmental drilling in southeastern Ohio
     in the area serviced by its gas gathering system, its Dupont Field and
     its Beaver Coal Company Lease in Wood and Raleigh counties, West
     Virginia, respectively.  The Company may also undertake activities
     elsewhere in the Appalachian Basin and the mid-continent region of the
     United States.  It plans to drill an increasing number of wells for
     its own account, while at the same time continuing to drill wells with
     future affiliated drilling partnerships to be syndicated on a private
     placement basis.

NOTE L - BUSINESS SEGMENTS

     The Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
     ENTERPRISE AND RELATED INFORMATION, in 1997 which changes the way the
     Company reports information about its operating segments.  The
     information for 1997 has been restated from the prior year's
     presentation in order to conform to the 1998 presentation.

     The Company's operations are classified into two principal industry
     segments.  Oil and gas operations and brokerage services.  The oil and
     gas operations are conducted entirely through Energy Search, Incorporated
     which is the primary industry segment.  The brokerage services are
     conducted exclusively through Equity Financial Corporation. See Note A
     for a description of the operations and accounting policies of each
     Company. The following is a summary of segment information for 1998
     and 1997.














                                     F-32

<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE L - BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                         OIL & GAS         BROKERAGE
                  1998                   OPERATIONS        SERVICES         TOTALS
     --------------------------------    -----------       --------       -----------
<S> <C>                                 <C>               <C>            <C>
     Revenues                            $ 2,956,832       $463,666       $ 3,420,498

     Segment profit (loss)                  (387,043)        (7,385)         (394,428)

     Intersegment revenue                         --          9,600             9,600

     Total assets                         24,888,353        135,056        25,023,409

     Capital expenditures                 10,142,150             --        10,142,150

     Equity method income                    107,356             --           107,356

     Interest expense                        392,716             --           392,716

     Depreciation, depletion
       and amortization                    1,545,631          6,054         1,551,685
</TABLE>


















                                     F-33
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     DECEMBER 31, 1998 AND 1997 (CONTINUED)

NOTE L - BUSINESS SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                         OIL & GAS         BROKERAGE
                  1997                   OPERATIONS        SERVICES         TOTALS
     --------------------------------    -----------       --------       -----------
<S> <C>                                 <C>               <C>            <C>
     Revenues                            $ 1,640,139       $592,531       $ 2,232,670

     Segment profit (loss)                  (494,371)       127,090          (367,281)

     Intersegment revenue                         --         92,400            92,400

     Total assets                         15,810,516        310,184        16,120,700

     Capital expenditures                  6,901,159            605         6,901,764

     Equity method income                    123,794             --           123,794

     Interest expense                        105,735             --           105,735

     Depreciation, depletion
       and amortization                      552,471          4,696           557,167
</TABLE>


















                                     F-34
<PAGE>












                          ADDITIONAL INFORMATION
===========================================================================



































                                     F-35
<PAGE>







To the Stockholders of
Energy Search, Incorporated and Subsidiary


We have audited the financial statements of Energy Search, Incorporated and
Subsidiary for the years ended December 31, 1998 and 1997.  The accompanying
schedules of Costs Incurred in Oil and Gas Producing Activities and Estimates
of Natural Gas and Oil Reserves on pages F-28 through F-31 are not a
required part of the basic financial statements of Energy Search, Incorporated,
but constitute additional supplementary information required by the
Financial Accounting Standards Board.  We have applied certain limited
procedures, which consisted principally of inquiries of management regarding
the methods of measurement and presentation of the supplementary information.
However, we did not audit the information and express no opinion on it.



/s/ Plante & Moran, LLP


Grand Rapids, Michigan
March 12, 1999




















                                     F-36
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                      SUPPLEMENTARY INFORMATION (UNAUDITED)

COST INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND
DEVELOPMENT ACTIVITIES

The following costs are comprised of both capitalized and expensed costs
included in the balance sheet and income statement.

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                  --------------------------
                                                     1998            1997
                                                  ----------      ----------
<S>                                              <C>             <C>
Property acquisition costs                        $4,560,556      $1,535,173
                                                  ==========      ==========

Exploration costs                                 $  218,369      $   84,616
                                                  ==========      ==========

Developments costs                                $6,607,991      $5,683,356
                                                  ==========      ==========
</TABLE>

ESTIMATES OF NATURAL GAS AND OIL RESERVES

The following estimates of proven developed natural gas and oil reserve
quantities and related standardized measure of discounted net cash flow are
estimates prepared by an independent petroleum engineer on behalf of the
Company's engineer as of December 31, 1998 and 1997.  They do not purport
to reflect realizable values or fair market values of ESI's reserves.  ESI
emphasizes that reserve estimates are inherently imprecise and that
estimates of new discoveries are more imprecise than those of producing oil
and gas properties.  Accordingly, these estimates are expected to change as
future information becomes available.

Proven reserves are estimated reserves of crude oil (including condensate
and natural gas liquids) and natural gas that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions.  Proven developed reserves are those expected to be recovered
through existing wells, equipment and operating methods.



                                     F-37
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                      SUPPLEMENTARY INFORMATION (UNAUDITED)

ESTIMATES OF NATURAL GAS AND OIL RESERVES (CONTINUED)

The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas to the estimated future production
of proven oil and gas reserves, less estimated future expenditures (based
on year-end costs) to be incurred in developing and producing the proven
reserves, less estimated future severance tax expenses and assuming
continuation of existing economic conditions.  The estimated future net
cash flows are then discounted using a rate of 10 percent per year to
reflect the estimated timing of the future cash flows.

<TABLE>
<CAPTION>
                                                                          OIL (BBL)             GAS (MCF)
                                                                          ---------           ------------
<S>                                                                      <C>                 <C>
Proven, developed and undeveloped reserves:

    January 1, 1997                                                         16,736              15,692,300
       Revisions and other changes                                         (12,583)             (1,608,121)
       Extensions and discoveries                                               --               4,649,023
       Purchases and sales of reserves                                      20,600              12,099,800
       Production                                                           (1,129)               (223,025)
                                                                          --------            ------------

    December 31, 1997                                                       23,624              30,609,977
                                                                          --------            ------------
       Revisions and other changes                                           3,576              (3,450,274)
       Extensions and discoveries                                               --              11,606,732
       Purchases and sales of reserves                                      24,585               5,788,007
       Production                                                           (7,231)             (1,061,388)
                                                                          --------            ------------
    December 31, 1998                                                       44,554              43,493,054
                                                                          ========            ============
Proven developed reserves <F1>:
    December 31, 1997                                                       23,624              11,192,017
    December 31, 1998                                                       44,554              15,990,954

Equity interest in proven reserves <F2>:
    December 31, 1997                                                          268                 138,228
    December 31, 1998                                                          103                 124,326
-------------------------


                                     F-38
<PAGE>
<FN>
<F1> These reserves are owned directly by the Company.
<F2> These are reserves owned indirectly by the Company through its interests
in affiliated partnerships.
</FN>
</TABLE>











































                                     F-39
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                      SUPPLEMENTARY INFORMATION (UNAUDITED)

ESTIMATES OF NATURAL GAS AND OIL RESERVES (CONTINUED)

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                      ------------------------------
                                                                          1998              1997
                                                                      ------------      ------------
<S>                                                                  <C>               <C>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE PRETAX NET CASH FLOWS

     Future cash inflows                                              $121,902,800      $105,929,500
     Future production costs                                           (23,279,515)      (18,076,980)
     Future development costs                                          (21,171,030)      (16,710,350)
                                                                      ------------      ------------

     Future pretax net cash flows                                       77,452,255        71,142,170
     10% annual discount for estimated timing of cash flows            (46,690,672)      (38,780,970)
                                                                      ------------      ------------

     Standardized measure of discounted future pretax net
        cash flows relating to proven oil and gas reserves            $ 30,761,583      $ 32,361,200
                                                                      ============      ============

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

     Future cash inflows                                              $121,902,800      $105,929,500
     Future production costs                                           (23,279,515)      (18,076,980)
     Future development costs                                          (21,171,030)      (16,710,350)
     Future income taxes                                               (23,610,860)      (22,149,426)
                                                                      ------------      ------------

     Future net cash flows                                              53,841,395        48,992,744
     10% annual discount for estimated timing of cash flows            (29,975,411)      (24,897,377)
                                                                      ------------      ------------

     Standardized measure of discounted future net cash flows
        relating to proven oil and gas reserves                       $ 23,865,984      $ 24,095,367
                                                                      ============      ============

ESI's share of equity method investors' standardized measure
of discounted future cash flows                                       $    124,376      $    181,570
                                                                      ============      ============
</TABLE>
                                     F-40
<PAGE>
ENERGY SEARCH, INCORPORATED AND SUBSIDIARY
---------------------------------------------------------------------------

                                      SUPPLEMENTARY INFORMATION (UNAUDITED)

ESTIMATES OF NATURAL GAS AND OIL RESERVES (CONTINUED)

The following reconciles the change in the standardized measure of
discounted future net cash flows for the year ended December 31,

<TABLE>
<CAPTION>
                                                                                 1998             1997
                                                                             ------------      ------------
<S>                                                                         <C>               <C>
Beginning of year                                                            $ 24,095,367      $ 15,172,758
Sales of oil and gas produced, net of production costs                         (2,444,574)         (524,385)
Extensions, discoveries, and improved recovery -
     Less related costs                                                         9,806,445         4,853,796
Revisions of previous quantity estimates                                       (2,632,622)         (394,343)
Changes in prices                                                             (12,778,261)        1,231,832
Net change from purchases and sales of minerals in place                        6,498,274        10,716,000
Net change in income taxes                                                     (1,461,434)      (11,258,007)
Accretion of discount                                                          (2,409,537)       (1,517,276)
Other                                                                           5,192,326         5,814,992
                                                                             ------------      ------------
End of year                                                                  $ 23,865,984      $ 24,095,367
                                                                             ============      ============
</TABLE>



















                                     F-41