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|UNITED STATES                                                                                                                                                                                                                                                                                                                                            
|SECURITIES AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                                       
|Washington, D.C. 20549                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                         
|FORM 10-KSB                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                         
|(MARK ONE)                                                                                                                                                                                                                                                                                                                                               
|[X]                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                         
|[   ]                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                         
|COMMISSION FILE NUMBER: 0-5525                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                         
|CASTLEGUARD ENERGY, INC.                                                                                                                                                                                                                                                                                                                                 
|(Exact name of Registrant as specified in its charter)                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                         
|Florida
(State or other jurisdiction of 
of incorporation or organization)                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                         
|4625 Greenville Avenue, Suite 203, Dallas, TX
(Address of principal executive offices)                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                         
|(214) 361-1755                                                                                                                                                                                                                                                                                                                                           
|(Registrant's telephone number, including area code)                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                         
|Securities registered pursuant to Section 12(b) of the Act: NONE                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                         
|Securities registered pursuant to Section 12(g) of the Act:                                                                                                                                                                                                                                                                                              
|Common Stock Without Par Value                                                                                                                                                                                                                                                                                                                           
|(Title of Class)                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                         
|Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
|                                                                                                                                                                                                                                                                                                                                                         
|Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of 
Regulation S-B is not contained herein, and will not 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.             
|                                                                                                                                                                                                                                                                                                                                                         
|State the registrant's revenues for its most recent fiscal year: $435,198                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                         
|The aggregate market value on March 16, 2001, of Common shares held by non-affiliates 
was approximately $2,298,000 based on the average closing bid and asked prices of the 
registrant's Common shares on such date, as quoted by the National Quotation Bureau.                                                                                       
|                                                                                                                                                                                                                                                                                                                                                         
|At March 16, 2001, there were 16,891,626 Common shares outstanding.                                                                                                                                                                                                                                                                                      
|______________________________                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                         
|Transitional Small Business Disclosure Format (check one): Yes [   ] No [X]                                                                                                                                                                                                                                                                              



|                              
|------------------------------
|CASTLEGUARD ENERGY, INC.      
|                              
|2000 FORM 10-KSB ANNUAL REPORT
|                              
|Table of Contents             
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|                              
|Item 1.                       
|                              
|                              
|                              
|Item 2.                       
|                              
|Item 3.                       
|Item 4.                       
|                              
|                              
|                              
|                              
|Item 5.                       
|                              
|Item 6.                       
|                              
|Item 7.                       
|                              
|Item 8.                       
|                              
|                              
|                              
|Item 9.                       
|Item 10.                      
|                              
|Item 11.                      
|                              
|Item 12.                      
|                              
|Item 13.                      
|                              
|                              
|Appendix A                    



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ITEM 1 - DESCRIPTION OF BUSINESS

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



(a) GENERAL BUSINESS DESCRIPTION

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

GENERAL

Castleguard Energy, Inc. (the "Company") is an independent energy company engaged in the exploration for and the acquisition, development, exploitation and operation of crude oil and natural gas properties, and in the
production of crude oil and natural gas in North America. The Company's activities are conducted principally in the States of Louisiana, Texas and Alabama.

The Company acquires interests in land and producing properties through acquisition and lease on which it drills and/or has working interests in oil or gas wells in efforts to discover and/or to produce oil and gas.

The Company's executive offices are located at 4625 Greenville Avenue, Suite 203, Dallas, Texas 75206 , telephone (214) 361-1755, facsimile (214) 691-2230.





(b) DESCRIPTION OF BUSINESS - OIL AND GAS OPERATIONS

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

Exploration and Development

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

The Company operates in a highly competitive industry wherein many companies, from large multinational companies to small independent producers, are competing for a finite amount of oil and gas resources. The Company seeks
out properties to explore for oil and gas by drilling and also seeks out producing oil and gas properties that can be purchased.

Management believes that under the right economic conditions, several of the producing properties that the Company owns could have further developmental potential. Certain oil properties currently owned and operated by the
Company may be receptive to enhanced oil recovery procedures.

Operating Activities

The Company contracts with other parties, including officers, directors, principal stockholders or other affiliates of the Company, to act as operator of the oil and gas prospects in which it owns an interest, provided
such transactions are on terms and conditions substantially similar to those offered by nonaffiliated parties. The operator of an oil and gas property supervises production, maintains production records, employs field personnel and performs other
functions required in the production and administration of such property. The fees for such services customarily vary from well to well, depending on the nature, depth and location of the well being operated. Generally, the operator of an oil and gas
prospect is determined by such factors as the size of the working interest held by a participant in the prospect, a participant's knowledge and experience in the geological area in which the prospect is located and geographical considerations. The
Company's wells are drilled by independent drilling contractors.

Developments During Year 2000

In February 2000, the Company participated in the completion of an additional oil well in the Minden Dome area of Louisiana.

In July 2000, the Company completed the private placement of shares pursuant to Regulation S under the Securities Act of 1933, as amended. Shares totaling 4,103,000 were issued for total consideration of $270,900.

In August 2000, the Company acquired an additional 10% working interest in the Minden Dome area, Webster Parish, Louisiana, bringing its total interest to approximately 14%.

In November 2000, the Company acquired a 2.5% working interest in the Cedar Creek prospect in Conecuk County, Alabama.

In December 2000, the Company participated in the completion of an additional producing gas well in the Minden Dome area of Louisiana.



Disclosure Regarding Forward-Looking Statements And Cautionary Statements

Forward-Looking Statements

This Annual Report on Form 10-KSB includes "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of
historical facts included in this Annual Report, including without limitation statements under "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION",
regarding the Company's financial position, business strategy, and plans and objectives of management of the Company for future operations and capital expenditures, are forward-looking statements. Although the Company believes that the expectations
reflected in the forward-looking statements and the assumptions upon which the forward-looking statements are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. Additional statements
concerning important factors that could cause actual results to differ materially from the Company's expectation ("Cautionary Statements") are disclosed below in the "-Cautionary Statements" section and elsewhere in this Annual Report. All written and
oral forward-looking statements attributable to the Company or persons acting on its behalf subsequent to the date of this Annual Report are expressly qualified in their entirety by the Cautionary Statements.

Cautionary Statements

In addition to the other information contained in this Annual Report, the following Cautionary Statements should be considered when evaluating the forward-looking statements contained in this Annual Report.

Nature Of The Company's Oil And Gas Business; Absence Of Profits

The Company was formed in 1988, and does not have a history of sustained profit from operations. The development of the Company's business will continue to require substantial expenditures. The Company's future financial
results will depend primarily on its ability to locate hydrocarbons economically in commercial quantities, to provide drilling site and target depth recommendations resulting in profitable productive wells and on the market prices for oil and natural gas.
There can be no assurance that the Company will achieve or sustain profitability or positive cash flows from operating activities in the near future.

Oil And Gas Prices; Marketability Of Production

Even if the Company is able to discover or acquire oil and gas production, of which there is no assurance, the Company's revenues, profitability and liquidity will be highly dependent upon prevailing prices for oil and
natural gas. Oil and gas prices can be extremely volatile and there can be no assurance that current price levels can be sustained. Prices also are affected by actions of state and local agencies, the United States and foreign governments, and
international cartels. These external factors and the volatile nature of the energy markets make it difficult to estimate future prices of oil and natural gas. Any substantial or extended decline in the price of oil and/or natural gas would have a
material adverse affect on the Company's financial condition and results of operations, including reduced cash flow and borrowing capacity. All of these factors are beyond the control of the Company. Sales of oil and natural gas are seasonal in nature,
leading to substantial differences in cash flow at various times throughout the year. The marketability of the Company's gas production, if any, will depend in part upon the availability, proximity and capacity of gas gathering systems, pipelines and
processing facilities. Federal and state regulation of oil and gas production and transportation, general economic conditions, changes in supply and changes in demand all could adversely affect the Company's ability to produce and market oil and natural
gas. If market factors were to change dramatically, the financial impact on the Company could be substantial. The availability of markets and the volatility of product prices are beyond the control of the Company and thus represent a significant risk.

Reliance On Industry Participants

The Company attempts to limit financial exposure on a project by project basis by forming industry alliances where the Company's technical expertise can be complemented with the financial resources and operating expertise of
established companies. If the Company were not able to form these industry alliances, this could limit the Company's ability to fully implement its business plan and could have a material adverse effect on the Company's business, financial condition and
results of operations.

Ability To Discover Reserves

The Company's future success is dependent upon its ability to economically locate oil and gas reserves in commercial quantities. Except to the extent that the Company acquires properties containing proved reserves or
conducts successful exploration and development activities, or both, the proved reserves of the Company, if any, will decline as reserves are produced. The Company's ability to conduct successful exploration and development activities is dependent upon a
number of factors, including its participation in multiple exploration projects and its technological capability to locate oil and gas in commercial quantities. Because the Company may rely upon other industry participants to develop the Company's
exploration projects, no assurances can be given that the Company will have the opportunity to participate in projects which economically produce commercial quantities of hydrocarbons in amounts necessary to meet its business plan or that the projects in
which it elects to participate will be successful. There can be no assurance that the Company's planned projects will result in significant reserves or that the Company will have future success in drilling productive wells at low reserve replacement costs.

Substantial Capital Requirements And Liquidity

In order to continue its oil and gas exploration plans fully, the Company anticipates that it will need additional funding. The Company does not have a steady source of revenue to provide funding to sustain operations. There
is no assurance that the Company will be able to obtain a reliable source of revenue to sustain its operations.

Risk Of Exploratory Drilling Activities

Exploration for oil and natural gas is a speculative business involving a high degree of risk, including the risk that no commercially productive oil and gas reservoirs will be encountered. The cost of drilling, completing
and operating wells is often uncertain and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors including unexpected formation and drilling conditions, pressure or other irregularities in formations, equipment
failures or accidents, as well as weather conditions, compliance with governmental requirement and shortages or delays in the delivery of equipment. There is no assurance that the expenditures made by the Company on its oil and natural gas properties will
result in discoveries of oil or natural gas in commercial quantities. Some test wells, as a consequence, may not ultimately be developed into producing wells and may be abandoned.

Competition

The Company competes in the areas of oil and gas exploration with other companies, many of which may have substantially larger financial and other resources. From time to time, there may be competition for, and shortage of,
exploration, drilling and production equipment and these shortages could lead to an increase in costs and to delays in operations that could have a material adverse effect on the Company. The Company may therefore not be able to acquire desirable
properties or equipment required to develop its properties. Problems of this nature also could prevent the Company from producing any oil and natural gas it discovers at the rate it desires to do so.

General Risks Of Oil And Gas Operations

The nature of the oil and gas business involves a variety of risks, including the risks of operating hazards such as fires, explosions, cratering, and blowouts.

Technology Changes

The oil and gas industry is characterized by rapid and significant technological advancements and introductions of new products and services utilizing new technologies. As new technologies develop, the Company may be placed
at a competitive disadvantage, and competitive pressures may force the Company to implement such new technologies at substantial cost. In addition, other oil and gas finding companies may implement new technologies before the Company, and consequently
such companies may be able to provide enhanced capabilities and superior quality compared with that which the Company is able to provide. There can be no assurance that the Company will be able to respond to such competitive pressures and implement such
technologies on a timely basis or at an acceptable cost. One or more of the technologies currently utilized by the Company or implemented in the future may become obsolete. In such case, the Company's business, financial condition and results of
operations could be materially adversely affected. If the Company is unable to utilize the most advanced commercially available technology, the Company's business, financial condition and results of operations could be materially and adversely affected.

Government Regulations And Environmental Risks

The production and sale of oil and gas are subject to a variety of federal, state and local government regulations including regulation concerning the prevention of waste, the discharge of materials into the environment, the
conservation of oil and natural gas, pollution, permits for drilling operations, drilling bonds, reports concerning operations, the spacing of wells, the unitization and pooling of properties, and various other matters including taxes. Many jurisdictions
have at various times imposed limitations on the production of oil and gas by restricting the rate of flow for oil and gas wells below their actual capacity to produce. During the past few years there has been a significant amount of discussion by
legislators and the presidential administration concerning a variety of energy tax proposals. There can be no certainty that any such measure will be passed or what its effect will be on oil and natural gas prices if it is passed. In addition, many states
have raised state taxes on energy sources and additional increases may occur, although there can be no certainty of the effect that increases in state energy taxes would have on oil and natural gas prices. Although the Company intends to be in substantial
compliance with applicable environmental and other government laws and regulations, there can be no assurance that significant costs for compliance will not be incurred in the future.

Variability Of Operating Results

The Company's operating results, as a small company in the oil and gas industry, may vary significantly during any financial period. These variations may be caused by significant periods of time between each of the Company's
discoveries and developments, if any, of oil or natural gas properties in commercial quantities. These variations may also be caused by the volatility associated with oil and gas prices. See "Oil And Gas Prices; Marketability Of Production".

Risks Associated With Management Of Growth

Because of its small size, the Company desires to grow extremely rapidly in order to achieve certain economies of scale. Although there is no assurance that this rapid growth will occur, to the extent that it does occur it
will place a significant strain on the Company's financial, technical, operational and administrative resources. As the Company increases its services and enlarges the number of projects it is evaluating or in which it is participating, there will be
additional demands on the Company's financial, technical and administrative resources. The failure to continue to upgrade the Company's technical, administrative, operating and financial control systems or the occurrence of unexpected expansion
difficulties, including the recruitment and retention of geoscientists and engineers, could have a material adverse effect on the Company's business, financial condition and results of operations.

Dependence On Key Personnel

The Company is highly dependent on the services of Scott Heape and Bob Honea. The loss of the services of Mr. Heape or Mr. Honea could have a material adverse effect on the Company. The Company does not have an employment
contract with Mr. Heape, Mr. Honea or any other director or officer.

Concentration Of Risks; Lack Of Diverse Business Operations

Although the Company is involved in other oil and gas projects, it is concentrating the majority of its oil and gas exploration efforts on the Minden Dome project in Louisiana.  The Company's other exploration projects
are located in this same general area and this lack of diverse business operations subjects the Company to a certain degree of concentration of risks. The future success of the Company may be dependent upon its success in discovering and developing oil
and gas in commercial quantities in the above properties and upon the general economic success of the oil and gas industry.

Certain Definitions

Unless otherwise indicated in this Annual Report, natural gas volumes are stated at the legal pressure base of the state or area in which the reserves are located at 60(degree)Fahrenheit.

As used in this Annual Report, the following terms have the following specific meanings: "Mcf" means thousand cubic feet, "Bcf" means billion cubic feet, "Bbl" means barrel, "MBbl" means thousand barrels.

With respect to information concerning the Company's working interests in wells or drilling locations, "gross" gas and oil wells or "gross" acres is the number of wells or acres in which the Company has an interest, and "net"
gas and oil wells or "net" acres are determined by multiplying "gross" wells or acres by the Company's working interest in those wells or acres. A "working interest" in an oil and gas lease is an interest that gives the owner the right to drill, produce,
and conduct operating activities on the property and to receive a share of production of any hydrocarbons covered by the lease. A working interest in an oil and gas lease also entitles its owner to a proportionate interest in any well located on the lands
covered by the lease, subject to all royalties, overriding royalties and other burdens, to all costs and expenses of exploration, development and operation of any well located on the lease, and to all risks in connection therewith.

A "development well" is a well drilled as an additional well to the same horizon or horizons as other producing wells on a prospect, or a well drilled on a spacing unit adjacent to a spacing unit with an existing well capable of
commercial production and which is intended to extend the proven limits of a prospect. The latter type of development well drilling is known as "step-out drilling". An "exploratory well" is a well drilled to find commercially productive hydrocarbons in an
unproved area, or to extend significantly a known prospect.

"Reserves" means natural gas and crude oil, condensate and natural gas liquids on a net revenue interest basis, found to be commercially recoverable. "Proved developed reserves" includes proved developed producing reserves and
proved developed behind-pipe reserves. "Proved developed producing reserves" includes only those reserves expected to be recovered from existing completion intervals in casing of existing wells when the cost of making such reserves available for
production is relatively small compared to the cost of a new well. "Proved undeveloped reserves" includes those reserves expected to be recovered from new wells on proved undrilled acreage or from existing wells where a relatively major expenditure is
required for recompletion.

Strategy

The Company's business strategy is to enhance shareholder value by leveraging its technical experience and expertise with seismic and subsurface technology to identify exploration and exploitation projects with significant
potential reserves and economic results based on the application of appropriate technology and suitable project risk management. The Company's ongoing goal is to increase its reserve base through a focus on mature hydrocarbon basins where it has
expertise. It is the Company's view point that the systematic application of advanced seismic imaging and detailed subsurface work can significantly reduce drilling risk and enhance financial results. The Company's strategy is to focus on applying seismic
technology to explore properties that lie within these mature basins and that offer oil and gas reserves that would be materially significant to the Company.

The Company has a two-pronged corporate approach for the application of exploration technology in these mature basins. The two components of this strategy are set forth below:

Generation of exploration and exploitation prospects with special emphasis on seismic and subsurface 
        applications to locate structural and stratigraphic play concepts.

Networking through contacts within the industry that have proven records of exploration success.

Exploration and Operating Approach

The Company focuses its technical resources on obtaining the highest quality subsurface image through advanced geological and geophysical methods, which it believes are more likely to result in the cost effective
identification of oil and gas reserves that are materially significant. The Company is committed to providing its technical team with access to the required tools and support necessary to retain a competitive advantage in today's exploration environment.

The Company adheres to a disciplined approach to selective project participation. The Company participates only in those projects that it believes are likely to maximize the return on its capital investment, have significant
reserve growth potential, and have quantifiable risk /reward ratios. The Company believes that these factors result in a positive impact to the finding-cost and production economics. The Company actively and continually manages its portfolio of
exploration and exploitation projects. The aggressive portfolio management enables the Company to maximize the investment of available capital in a limited number of high impact geologic plays and projects.



ITEM 2 - DESCRIPTION OF PROPERTY

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

The Company's properties principally consist of working interests in developed oil and gas properties in Louisiana, Alabama and Texas. Developed properties are those on which sufficient wells have
been drilled to economically recover the estimated reserves calculated for the property.

The Company's net proved reserves, including behind-pipe reserves, as estimated by independent petroleum engineers, Calhoun Blair & Associates, at January 1, 2001 were:

|                               | Crude Oil(BBLS) | Natural Gas(MCF)
|------------------------------ | --------------- | ----------------
|Proved developed producing     | 6,323           | 840,067         
|Proved developed non-producing | 7,429           | 869,264         
|Total                          | 13,752          | 1,709,331       

See Note 10 of the Notes to Financial Statements included in Appendix A to this report for additional information on gas and oil reserves.

At December 31, 2000, the Company owned interests in 5 gross gas wells (.665 net) and 2 gross oil wells (.18 net). The terms "gross" refers to the wells in which a working interest is owned, and the term "net refers to gross
wells multiplied by the percentage of Castleguard's working interest owned therein.

During the two years ended December 31, 2000, Castleguard participated in the drilling of 3 productive wells (.46 net) in 1999 and 2 productive wells (.22 net) in 2000. There was one dry hole drilled in 1999.

At December 31, 2000, the Company was not participating in the drilling of any wells.

The Company's interests in undeveloped acreage is insignificant.



ITEM 3 - LEGAL PROCEEDINGS

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

The Company is not party to any proceedings or actions which management believes might have a material effect upon its financial position or results of operations.



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

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

Not Applicable.





PART II

-------

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

(a) PRICE RANGE OF COMMON SHARES

The principal U.S. market in which the Company's Common Stock ($.001 par value, all of which are one class) has been traded is the Over the Counter Bulletin Board. The Company's common stock is quoted on the OTC Bulletin Board
(Symbol: "MOAT.OB"). The following table sets forth the range of high and low closing bid prices for the Company's Common Stock on a quarterly basis since September 30, 1998 as reported by the National Quotation Bureau, Inc. (which reflect inter-dealer
prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions). As of March 16, 2001 the closing bid for the Company's common stock was $.18 per share.   The foregoing and following information
should not be taken as an indication of the existence of an established public trading market for the Company's Common Stock.

|        | Bid Prices
|------- | ----------
|        | 2000      
|Quarter | High      
|First   | $1.50     
|Second  | .57       
|Third   | .21       
|Fourth  | .16       

Holders

The approximate number of record holders of the Company's Common Stock as of March 16, 2001 was 50, inclusive of those brokerage firms and/or clearing houses holding the Company's common shares for their clientele (with each
such brokerage house and/or clearing house being considered as one holder). The aggregate number of shares of Common Stock outstanding as of March 16, 2001 was 16,891,626 shares, of which 10,574,000 are free trading shares.



Dividends

Current management believes that the Company has not declared any cash dividends on its Common Stock since its inception in 1988. The Company has not declared any cash dividends on its Common Stock since current management
assumed their positions in September 1998 and has no present intention of paying any cash dividends on its Common Stock in the foreseeable future.



ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

The information required hereunder is set forth under "Financial Review" included in Appendix A to this report.



ITEM 7. FINANCIAL STATEMENTS

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

The Financial Statements and related information that constitute Item 7 are included in Appendix A to this report.





ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On May 15, 2000, the Company's Board of Directors appointed Jackson & Rhodes P.C. of Dallas, Texas, as independent accountants replacing KPMG, LLP of New Westminster, B.C., Canada, who had reported on the
Company's financial statements for each of the prior two years ended December 31, 1998 and 1999. The reports did not contain an adverse or disclaimer of opinion, but were qualified on a going-concern basis. The Company and KPMG LLP had no disagreements on
any matter of accounting scope or procedure, which disagreement, if not resolved to the accountants' satisfaction, would have caused the accountants to make reference to the subject matter of the disagreement in connection with its reports.





PART III

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ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

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

The Company's bylaws provide that Directors are to be elected by simple majority vote and are to serve until the annual meeting next following such election or a successor has been duly elected and qualified.
Directors may be removed with or without cause by a majority vote of the stockholders and may be removed for cause by the Board. Vacancies on the board may be filled by the remaining directors or by the stockholders. The executive officers of the Company
are elected by and serve at the discretion of the Board of Directors.

The following sets forth the name, and position of each director and executive officer of the Company:

|OFFICERS           | AGE | CURRENT OFFICE                          
|------------------ | --- | ----------------------------------------
|Scott G. Heape     | 51  | Chairman, Director                      
|Bob G. Honea       | 63  | President, Treasurer/Secretary, Director
|Benton J. Poole    | 49  | Director                                
|G. Neil L. Kennedy | 52  | Director                                



Scott G. Heape

Mr. Heape is President and Founder of H & S Production, Inc. and HSP Geophysical, Inc. He received a B.S. in Geology from Tulane University in 1972. He has engaged in all phases of the oil and gas business
since 1972 where he served as an exploration geologist with Lone Star Producing Company, a wholly owned subsidiary of Lone Star Gas (now part of TXU, Corp.). From 1972 to 1975, Mr. Heape performed extensive geological work for Lone Star in East Texas,
Northern Louisiana, and Southern Arkansas. He joined Bass Enterprises in 1975 and left Bass in 1976 to form H & S Production, Inc., a Texas corporation.

Mr. Heape is a Certified Petroleum Geologist by the American Association of Petroleum Geologists, a Certified Professional Geological Scientist by the Association of Professional Geological Scientists, a member of the
Independent Petroleum Association of America (IPAA), the Society of Independent Professional Earth Scientists (SIPES), the Texas Independent Production and Royalty Owners Association (TIPRO), the East Texas Geological Society and the Dallas Geological
Society.



Bob G. Honea

Mr. Honea has over 30 years of experience in the domestic and international oil field tubular business. During this time, he has dealt with both major and independent oil and gas companies.

Mr. Honea is the President of National Tubular Products, Inc. and NTP Energy, Inc., both of Dallas, Texas.



Benton J. Poole

Mr. Poole received a Bachelor of Business Administration degree from the Texas Tech University in 1973 and a Doctor of Jurisprudence degree from Texas Tech University School of Law in 1976. Mr. Poole has 24
years of experience in the private practice of law, concentrating in oil, gas and mineral law. He is a member of the State Bar of Texas, the American Bar Association and the Dallas Bar Association and is a member of the Oil, Gas and Mineral Law/Energy Law
Section of each.



G. Neil L. Kennedy

Mr. Kennedy is presently Vice President of Raptor Capital Corporation (a public oil and gas company) in Calgary, Canada and previously served as a consultant to Raptor in 1997 and 1998. From 1994 to 1997, Mr.
Kennedy was a consultant to United Rayore Gas Ltd. (a public resource company) in Calgary, Canada. Prior thereto, Mr. Kennedy was Vice President of Fedmet Tubulars in Calgary, Canada.

The Company understands that Messrs. Heape, Honea and Poole failed to file Form 3 and/or Form 4 reports that ought to have been filed in the year 2000.  Those individuals resolved the respective lack of Form 3 and/or Form 4
filings by filing Form 5 reports, disclosing the transactions that were to be disclosed on the Form 3 and/or Form 4 reports.

ITEM 10 - EXECUTIVE COMPENSATION

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

At March 16, 2001, the Company had no salaried employees, either in field operations or office and administrative activities. The Company contracts with other parties, including officers, directors, principal
stockholders or other affiliates of the Company, to perform the office and administrative activities of the Company. The Company also utilizes the services of outside consultants on a contract basis.

As of March 16, 2001 there have been no salaries paid to any of the officers or Directors of the company. Directors have not been compensated in cash for acting in their capacity as Directors. Directors are reimbursed for their
accountable expenses incurred in attending meetings and conducting their duties.

In January 2001, in consideration of services performed, the Company issued 200,000 shares of its common stock to each of Mr. Heape, Mr. Honea, Mr. Poole and one financial consultant. Also in January 2001, the Company issued
300,000 shares of its common stock to each of Mr. Honea and Mr. Heape in consideration of their respective extension of personal guarantees on a loan to the Company, from Bank of Oklahoma, N.A.  In aggregate, the Company issued 1,400,000 shares
to these persons.



ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

The following table sets forth, as of March 16, 2001, information with respect to (1) any person known by the Company to own beneficially more than five percent (5%) of the Company's Common Stock, (2) the shares of
Common Stock beneficially owned by each officer and director of the Company, and (3) the total of the Company's Common Stock beneficially owned by the Company's officers and directors as a group. Except as noted in the footnotes, it is the belief of the
Company that each stockholder listed below holds the sole voting and investment power with regard to the shares owned beneficially by such stockholder:

|Name of Beneficial Owner                          | Number of Shares
Beneficially Owned | Approximate Percent
of Common Stock Outstanding(1)
|------------------------------------------------- | ----------------------------------- | --------------------------------------------------
|Scott G. Heape
Dallas, Texas                      | 1,828,166(2)                        | 10.82%                                            
|                                                  |                                     |                                                   
|Bob G. Honea
Dallas, Texas                        | 1,520,000(3)                        | 9.00%                                             
|                                                  |                                     |                                                   
|G. Neil Kennedy
Calgary, British Columbia         | 200,000                             | 1.18%                                             
|                                                  |                                     |                                                   
|Benton J. Poole
Dallas, Texas                     | 577,200(4)                          | 3.42%                                             
|                                                  |                                     |                                                   
|All officers and directors
as a group (4 persons) | 4,125,366                           | 24.42%                                            
|                                                  |                                     |                                                   

(1)

(2)

(3)

(4)



ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

In 1999, the Company acquired a working interest in oil and gas leases on property located in Navarro County, Texas, and related seismic data from H&S Production, Inc. a company wholly owned by the Company's
Chairman, Scott Heape. The purchase was for $50,000 and 1,500,000 shares of the Company's common stock.

In the third quarter of 2000, the Company's Board of Directors voted unanimously to sell the oil and gas leases and seismic data back to H&S Production in return for the consideration originally paid.



In January, 2001, the Company's directors entered into an agreement with H & S Production, Inc. (a company wholly owned by the Company's Chairman, Scott Heape) to participate in a farmout agreement covering leasehold
interests in the Mings Chapel Field in East Texas whereby the Company has the opportunity to participate in up to three development wells. The first of these wells was drilled in the first quarter of 2001 and is expected to commence production in April 2001
 .



PART IV



ITEM 13 - EXHIBITS AND REPORTS

(a) Financial Statements

The following items appear in the Financial Information section included in Appendix A to this report.



|Financial Review             
|-----------------------------
|                             
|Independent Auditor's Reports
|                             
|Financial Statements:        
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             



(b) Exhibits

-----------



|ExhibitNo. | Item                                                                                                               
|---------- | -------------------------------------------------------------------------------------------------------------------
|3.1        | Certificate of Incorporation of Gladstone Energy, Inc. incorporated by reference from the 1999 10KSB (Exhibit 3.1).
|3.2        | Amended and Restated By-Laws of Castleguard Energy, Inc.                                                           
|10.1       | Loan Agreement from Castleguard Energy, Inc., as Borrower, and Bank of Oklahoma, N.A. as Bank.                     
|27.1       | Financial Data Schedule.                                                                                           









SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|               | CASTLEGUARD ENERGY, INC.            
|-------------- | ------------------------------------
|               |                                     
|               |                                     
|March 28, 2001 | /s/ Bob G. Honea                    
|               | BY: Bob G. Honea, Director/President







Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

|BOB G. HONEA/s/     Bob G. Honea       | Director/President
Corporation Secretary | March 28, 2001
|-------------------------------------- | ---------------------------------------- | --------------
|                                       |                                          |               
|SCOTT HEAPE/s/     Scott Heape         | Director                                 | March 28, 2001
|                                       |                                          |               
|BENTON POOLE/s/     Benton Poole       | Director                                 | March 28, 2001
|                                       |                                          |               
|G. NEIL KENNEDY/s/     G. Neil Kennedy | Director                                 | March 28, 2001



|APPENDIX A                    
|------------------------------
|                              
|CASTLEGUARD ENERGY, INC.      
|                              
|INDEX TO FINANCIAL INFORMATION
|                              
|DECEMBER 31, 2000             
|                              
|                              
|                              
|                              
|                              
|                              
|Financial Review              
|                              
|Independent Auditors' Report  
|                              
|Independent Auditors' Report  
|                              
|Financial Statements:         
|                              
|                              
|                              
|                              
|                              
|                              
|                              
|                              
|                              
|                              
|                              



















CASTLEGUARD ENERGY, INC.

Financial Review





The following is a discussion and comparison of the financial condition and results of operations of the Company as of and for the twelve months ended December, 2000 ("2000") compared with the twelve months ended December,
1999 ("1999") and 1999 compared to 1998. This discussion should be read in conjunction with the Company's Financial Statements, the notes related thereto, and the other financial data included elsewhere in this Annual Report on Form 10-KSB.



Overview

The Company's management team came to the Company in the second half of 1998, changed the nature and purpose of its business, negotiated a conclusion to certain business involvements, and, developed a business plan to acquire and develop oil and
gas working interests in collaboration with others. A great deal of 1999 was consumed in repositioning the Company, acquiring working interests and disposing of interests lacking future potential.

During the year 2000, the Company continued to acquire working interests, participate in new wells and search for new opportunities.

2000 Results of Operations Compared with 1999

Net income of $86,222 ($.01 per share) for 2000 was significantly improved over a net loss of $(319,777) ($(.02) per share) for 1999, as the Company commenced its new business plan following a year of reorganizing in 1999.
Revenues increased 760% year over year driven by increased volumes of hydrocarbon sales and higher prices. Oil volumes increased to 2,327 barrels from 1,548 barrels in 1999 and gas volumes increased to 68,580 MCF from 9,213 MCF in 1999. Average gas prices
in 2000 were $3.89 per MCF compared to $2.35 per MCF in 1999. Oil prices averaged $28.43 per barrel in 2000 compared to $20.58 per barrel in 1999. Increased revenues were substantially in excess of operating costs and interest related to debt
incurred to acquire an additional interest in the Minden field in Louisiana.

Depreciation, depletion and amortization increased 178% from 1999 as a result of the substantially larger production volumes for gas and oil. Administrative costs rose as a result of costs incurred in compensating
Directors of the Company by issuing 600,000 shares of the Company's common stock for services provided.

Interest and other financing costs reflect the costs of financing the additional Minden Dome interest purchased in August 2000, including a partial year's cost of 600,000 common shares issued to two Directors for guaranteeing the bank debt.

1999 Results of Operations Compared to 1998

Because of the reorganization and redirection of the Company's business plan, neither 1999 nor 1998 were indicative of present operations nor would normal comparisons be meaningful or reflective of the new business plan.

Reserves

The Company's net proved oil and gas reserves at January 1, 2000 compared with January 1, 2001 and changes in the years 1999 and 2000 are set forth below as estimated by independent petroleum engineers.

|                                                                          | 2000      | 1999   
|------------------------------------------------------------------------- | --------- | -------
|                                                                          | Gas       | Oil    
|                                                                          | (MCF)     | (BBL)  
|Reserves at beginning of year                                             | 260,946   | 7,177  
|Added by exploration and development,
                   net of revisions | 1,287,178 | 5,262  
|Added by acquisition                                                      | 229,787   | 3,340  
|Less production                                                           | (68,580)  | (2,327)
|                                                                          |           |        
|Reserves at year end                                                      | 1,709,331 | 13,752 

Castleguard's business plan of acquiring and developing new reserves through drilling participation achieved excellent results in calendar 2000. Natural gas reserves increased 1.45 BCF after production, or
555%, additions exceeded production more than 22 times. Oil reserves increased 92% year over year.



Liquidity and Capital Resources

During year 2000, Castleguard entered into a bank credit facility with a commercial bank to fund the acquisition of an increased interest in the Minden field in Louisiana. A substantial part of the Company's recent
increase in production is attributable to Minden. Additional funds were provided by the completion of a private placement of the Company's common stock; 4,103,000 shares were issued for $270,900. After a review of the costs of development and prospects of
a working interest in a project in Navarro County, Texas, the Board of Directors voted to sell back (for the consideration originally paid) to a company controlled by Castleguard's chairman such working interest and seismic data related thereto, thus
avoiding the capital costs for development.

Essentially all of the Company's cash flow from year 2000, after changes in working capital, was used for drilling projects in the Minden field. The Company expects to continue to apply all of its cash flow to fund new
projects and additional development wells. Executing the Company's business plan in the future will require additional funds from additional debt and/or equity financings, sales of existing properties, industry alliances, or other sources. The lack of
additional funding will limit the Company's deal flow in the future. Management believes cash flows from existing properties will more than adequately fund current operating requirements.



Fourth Quarter Results

Fourth quarter 2000 net loss was $(30,199) ($ (.00) per share), compared with a net loss of $(154,726) ($(.01) per share) for 1999 fourth quarter. The improvement from 1999 reflects the continued execution of the
Company's business plan to acquire and develop interests in producing properties that will improve Castleguard's cash flow and profitability. The previously described accrual for shares of stock issued in January 2001 to the Corporation's directors in
lieu of cash compensation reduced fourth quarter operating results by $60,000 and reduced net income by $87,000 after costs of shares issued to Directors for guaranteeing the Company's debt.

Sales volumes of natural gas were 25,353 MCF in the fourth quarter of 2000 at an average price of $5.14 versus 6,054 MCF in 1999 at an average price of $2.27. Similarly, oil volumes in the fourth quarter of 2000 were 681
barrels at $31.95 per barrel versus 203 barrels at an average price of $20.56 in 1999.





INDEPENDENT AUDITORS' REPORT





Board of Directors

Castleguard Energy, Inc.



We have audited the accompanying balance sheet of Castleguard Energy, Inc. as of December 31, 2000 and the related statements of operations, changes in stockholders' equity and cash flows for the year 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 audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 audit provides 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 Castleguard Energy, Inc. as of December 31, 2000 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.









Jackson & Rhodes P.C.



Dallas, Texas

March 14, 2001







KPMG



INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders

Castleguard Energy, Inc.

Dallas, Texas



We have audited the accompanying balance sheet of Castleguard Energy, Inc., (A Development Stage Company), as of December 31, 1999, and the related statements of operations, changes in stockholders' equity and cash flows for the year 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 audit.

We conducted our audit in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit 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 audit provides 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 Castleguard Energy, Inc., (A Development Stage Company) as of December 31, 1999, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted accounting principles in the United States.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no established source of revenue. This raises substantial doubt about
its ability to continue as a going concern. Management's plan in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Chartered Accountants



New Westminster, Canada

March 24, 2000











|CASTLEGUARD ENERGY INC.                                  
|---------------------------------------------------------
|STATEMENTS OF OPERATIONS                                 
|For the Years Ended December 31, 2000 and 1999           
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|Oil and gas sales                                        
|                                                         
|                                                         
|Expenses:                                                
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|Other income                                             
|                                                         
|                                                         
|                                                         
|                                                         
|Net income (loss)                                        
|                                                         
|Basic earnings (loss) per common share                   
|                                                         
|Weighted average number of 
    common shares outstanding



See accompanying notes to financial statements.



|CASTLEGUARD ENERGY INC.                       
|----------------------------------------------
|STATEMENTS OF CASH FLOWS                      
|For the Years Ended December 31, 2000 and 1999
|                                              
|                                              
|Cash flows from operating activities:         
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Cash flows from investing activities:         
|                                              
|                                              
|                                              
|                                              
|                                              
|Cash flows from financing activities:         
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Supplemental information:                     
|                                              

Non-cash activities:

In 1999, the Company acquired a working interest in an oil and gas property in exchanged for 1,500,000 
shares of common stock in the amount of $750,000. The working interest was sold back in 2000 (Note 5).
The Company also issued shares from the subscriptions received of $100,900 and $204,489, respectively
during 2000 and 1999.

See accompanying notes to financial statements.



|CASTLEGUARD ENERGY INC.                          
|-------------------------------------------------
|BALANCE SHEETS                                   
|December 31, 2000 and 1999                       
|                                                 
|                                                 
|ASSETS                                           
|                                                 
|Current assets:                                  
|                                                 
|                                                 
|                                                 
|                                                 
|Petroleum and natural gas interests, net (Note 4)
|                                                 
|Office equipment, net                            
|                                                 
|Other assets                                     
|                                                 
|                                                 
|                                                 
|LIABILITIES & STOCKHOLDERS' EQUITY               
|                                                 
|Current liabilities:                             
|                                                 
|                                                 
|                                                 
|                                                 
|Long-term liabilities                            
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|Stockholders' equity:                            
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 







See accompanying notes to financial statements.



|CASTLEGUARD ENERGY INC.                       
|----------------------------------------------
|STATEMENTS OF STOCKHOLDERS' EQUITY            
|For the Years Ended December 31, 2000 and 1999
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Balance, December 31, 1998                    
|                                              
|Issuance of stock                             
|Cash proceeds                                 
|Interest in property                          
|                                              
|Net income                                    
|                                              
|Balance, December 31, 1999                    
|                                              
|Issuance of stock for cash                    
|                                              
|Reverse property acquisition                  
|                                              
|Purchase of treasury stock                    
|                                              
|Net income                                    
|                                              
|Balance, December 31, 1999                    



See accompanying notes to financial statements.



CASTLEGUARD ENERGY, INC

NOTES TO FINANCIAL STATEMENTS

December 31, 2000 and 1999

1.    Description of Business

Castleguard Energy, Inc. is an independent energy company engaged in the exploration for and the acquisition, development, exploitation and operation of crude oil and natural gas properties, and in the production of crude oil and
natural gas in North America. The Company's activities are conducted principally in the states of Louisiana, Texas and Alabama.

2.    Summary of Significant Accounting Policies

Use of Estimates and Assumptions

Management uses estimates and assumptions in preparing its financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Actual results could vary from the estimates that were used.

Basis of Presentation

The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of
business. At December 31, 2000, the Company had a working capital deficiency of $199,548 and an accumulated deficit of $312,743. The Company is in the process of growing through the acquisition of oil and gas interests (Note 4). The Company intends to
finance this growth through the issuance of common stock and external debt. Future operations are dependent on the Company's ability to obtain financing from share issuances and external debt to finance acquisitions of property and on its ability to
achieve earnings from its acquired operations.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers any short-term cash investments with an original maturity of three months or less to be a cash equivalent.

Net Income (Loss) Per Weighted Average Share

Basic Net income (loss) per weighted average share is calculated using the weighted average number of shares of common stock outstanding.

Oil and Gas Sales

Petroleum and natural gas sales are recognized upon delivery to the metered point upstream of the pipeline connection.

Property and Equipment

The Company utilizes the full-cost method of accounting for oil and gas properties, which involves capitalizing all acquisitions, exploration and development costs incurred for the purpose of finding oil and gas reserves, including
the costs of drilling and equipping productive well, dry hole costs, lease acquisition costs and delay rentals. The Company also capitalizes the portion of general and administrative costs which can be directly identified with acquisition, exploration or
development of oil and gas properties. Costs associated with unevaluated properties are excluded from amortization. Unevaluated property costs are transferred to evaluated property costs at such time as wells are completed on the properties, the
properties are sold, or management determines these costs to have been impaired. cost of properties, including future development, site restoration, dismantlement and abandonment costs, which have proved reserves and those which have been determined to be
worthless, are depleted on the unit of production method based on proved reserves. Additionally, the capitalized costs of oil and gas properties cannot exceed the present value of the estimated net cash flow from its proved reserves, together with the
lower of cost or estimated fair value of its undeveloped properties (the full cost ceiling). Transactions involving sales of reserves in place, unless extraordinarily large portions of reserves are involved, are recorded as adjustments to accumulated
depreciation, depletion and amortization.

Upon the acquisition or discovery of oil and gas properties, management estimates the future net costs to be incurred to dismantle, abandon and restore the property using geological, engineering and regulatory data available. Such cost
estimates are periodically updated for changes in conditions and requirements. Such estimated amounts are considered as part of the full cost pool for purposes of amortization upon acquisition or discovery. Such costs are capitalized as oil and gas
properties as the actual restoration, dismantlement and abandonment activities take place.

Office equipment is recorded at cost and depreciated on a straight-line basis over its estimated useful life of two years.

Tangible equipment is recorded at cost and depreciated on a straight-line basis over its estimated useful life of seven years.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial  statement carrying 
amounts of existing assets  and liabilities and their respective tax bases

Income Taxes (Continued)

and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

3.    Subscriptions Received

At December 31, 1999, the Company had received $100,900 in subscriptions for the issuance of 1,003,000 shares through private placement.

During 2000, the outstanding 1999 subscriptions were exchanged for common stock..

4.    Petroleum and Natural Gas Interests

The following table discloses certain financial date relative to the Company's evaluated oil and gas producing activities, which at December 31, 2000 are all located in the United States.

|                                         | 2000        | 1999       
|---------------------------------------- | ----------- | -----------
|                                         |             |            
|                                         | Total       | Canada     
|Costs incurred during year:              |             |            
|Capitalized:                             |             |            
|Purchases of producing properties        | $   840,557 | $     9,220
|Exploration costs                        | 111,141     | 7,607      
|Development costs                        | 54,715      | 21,619     
|                                         | $1,006,413  | $38,446    
|                                         |             |            
|Petroleum and natural gas interests:     |             |            
|Balance, beginning of year               | $ 1,142,638 | $   141,352
|Additions                                | 1,006,413   | 38,446     
|Sales                                    | (750,000)   | (179,798)  
|Balance, end of year                     | $1,399,051  | $-         
|                                         |             |            
|Accumulated depletion and amortization   |             |            
|Balance, beginning of year               | $    25,342 | $       -  
|Provision for depletion and amortization | 55,461      | -          
|Gain on sale of interests                | -           | -          
|Balance, end of year                     | $80,803     | $-         
|                                         |             |            
|Net capitalized costs                    | $1,318,248  | $-         
|Amortization and depletion per barrel    | $4.03       |            



During 1999, the Company sold all of its interests in its Canadian petroleum and natural gas interests to a non-related entity. The net book value of the assets disposed were $179,798 and proceeds received were $52,488 resulting in
a loss of $127,310.

Also, during 1999, the Company sold some of its interests in its United States petroleum and natural gas interests to a non-related company. The net book value of the assets disposed were $171,153 and proceeds received were $177,003
resulting in a gain of $5,850. The gain was recorded as adjustment to accumulated depletion and amortization.

5.    Related Party Transactions

The Company received oil and gas revenue and incurred lease operating expenses from properties owned by H & S Production, a company owned by the Chairman of the Board, totaling $17,155 and $30,824 during 1999. At December 31,
1999, the Company owed H & S Production $14,387, relating to operating activities.

In February 1999, the Company acquired a 8% working interest in oil and gas leases covering approximately 10,000 acres in Navarro County, Texas as well as 40 sq. miles of 3D seismic on this property from H & S Production in exchange
for 1,500,000 shares of common stock at a fair value of $750,000 and $50,000, respectively, for a total cost of $800,000. In the third quarter of 2000, the Company's Board of Directors voted unanimously to sell the oil and gas leases and seismic data back
to H & S Production for the consideration originally paid.

The loans payable at December 31, 1999 of $56,000 include $28,000 due to H & S Production and $28,000 due to the president of the Company. The loans were interest free and were repaid prior to March 31, 2000.

6.    Income Taxes

#### There was no income tax expense attributable to income from continuing operations for the years ended December 31, 2000 and 1999 This differed from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax
income from continuing operations as a result of the following:



|                                                  | 2000     | 1999     
|------------------------------------------------- | -------- | ---------
|Computed "expected" tax (benefit)                 | $ 29,315 | $(57,335)
|Increase (decrease) in income tax resulting from: |          |          
|Change in the beginning-of-year balance           |          |          
|of the valuation allowance for deferred           |          |          
|tax assets allocated to income tax expense        | (29,315) | 57,335   
|                                                  | $ -      | $ -      

#### 

#### 

#### The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 2000 and 1999 are presented below:



|                                 | 2000     | 1999    
|-------------------------------- | -------- | --------
|Deferred tax assets:             |          |         
|Net operating loss carryforwards | $ 55,279 | $ 84,594
|Less valuation allowance         | (55,279) | (84,594)
|Net deferred tax assets          | $ -      | $ -     

#### The valuation allowance for deferred tax assets as of December 31, 2000 and 1999 was $55,279 and $84,594, respectively. The net change in the total valuation allowance for the years ended December 31, 2000 and 1999 was a (decrease)
increase of ($29,315) and $57,335, respectively. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management has fully provided a valuation allowance
for the deferred tax assets.

#### At December 31, 2000, the Company has net operating loss carryforwards for federal income tax purposes of approximately $156,000 which are available to offset future federal taxable income, if any, through 2006.

#### 7.    Long-Term Debt

#### On September 1, 2000, the Company borrowed $1,040,000 from a commercial bank to acquire certain oil and gas properties in Louisiana. Principal is payable $30,000 per month plus interest at the bank's prime rate plus one percent. The
note is collateralized by the entire interest in the Minden oil and gas properties acquired and guaranteed by two directors of the Company. Maturities of the debt are as follows:



|2001 |  | $360,000
|---- |  | --------
|2002 |  | 360,000 
|2003 |  | 215,415 

#### 

#### 8.    Commitments and Contingencies

Concentration of Credit Risk

The Company invests its cash and certificates of deposit primarily in deposits with major banks. Certain deposits, at times, are in excess of federally insured limits. The Company has not incurred losses related to its cash.

Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have
been determined by the Company, using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents and notes and accounts
payable approximate carrying value due to the short-term maturity of the instruments.

9.    Stockholders' Equity

See Note 5 for information regarding the Company's withdrawal in 2000 from a 1999 transaction amounting to 1,500,000 shares.

During 2000, the Company issued 1,003,000 common shares for $100,900 in subscriptions received during 1999 and 3,100,000 shares for $170,000 of subscriptions received in 2000.

During 2000, the Company agreed to issue 1,400,000 common shares for services rendered by third parties and directors. The shares were not issued until January 2001; therefore, the Company has accrued the cost of the shares as follows:





|Issued to     | For                 | Shares  | Amount  
|------------- | ------------------- | ------- | --------
|Consultant    | Consulting          | 200,000 | $13,000 
|Director      | Legal services      | 200,000 | 20,000  
|Director      | Geological services | 200,000 | 20,000  
|Director      | Management services | 200,000 | 20,000  
|Directors (2) | Debt guarantees     | 600,000 | 60,000  
|              |                     |         | $133,000

The shares were valued based on the value the shares were trading in the public market at the date issued. The non-employee shares were discounted due to the restricted nature and relatively illiquid market for the shares.

10.   Oil and Gas Reserve Information - Unaudited

The Company's net proved oil and gas reserves at December 31, 2000 have been estimated by independent petroleum consultants in accordance with guidelines established by the Securities and Exchange Commission. Accordingly, the
following reserve estimates are based upon existing economic and operating conditions at December 31, 2000.

10.   Oil and Gas Reserve Information - Unaudited (Continued)

There are numerous uncertainties inherent in estimating quantities of proved reserves and in providing the future rates of production and timing of development expenditures. The following reserve data represents estimates only and
should not be construed as being exact. In addition, the discounted future net cash flows should not be construed as the current market value of the Company's oil and gas properties or the cost that would be incurred to obtain equivalent reserves.

The following table sets forth an analysis of the Company's estimated quantities of net proved and proved developed oil and gas reserves (including behind-pipe reserves), all located in the United States (Mcfs represents thousand cubic
feet).



|                     | Proved Developed Reserves
|-------------------- | -------------------------
|                     | 2000                     
|                     | Oil in                   
|                     | Barrels                  
|Proved producing     | 6,323                    
|Proved non-producing | 7,429                    
|                     | 13,752                   

At December 31, 1999, the Company also had proved undeveloped reserves amounting to 4,340 barrels of oil and 844,606 Mcf of gas.

The following table presents the standardized measure of future net cash flows related to proved oil and gas reserves together with changes therein, as defined by FASB. The oil, condensate and gas price structure utilized to project
future net cash flows reflects current prices at December 31, 2000 and 1999, and has been escalated only where known and determinable price changes are provided by contracts and law. Future production and development costs are based on current costs with
no escalations. Future net cash flows are the estimated future gross revenue less estimated production and ad valorem taxes, income taxes, operating expenses and capital expenditures. They do not consider business risks, or profit on investment.



|                                                             | 2000        | 1999       
|------------------------------------------------------------ | ----------- | -----------
|Future cash flows                                            | $ 7,860,446 | $ 2,385,572
|Future production and development costs                      | (490,029)   | (379,960)  
|Income taxes                                                 | 2,395,743   | (171,273)  
|Future net cash flows                                        | $ 4,974,674 | $ 1,834,339
|10% annual discount                                          | (1,378,601) | (714,970)  
|Standardized measure of discounted 
   future net cash flows | $ 3,596,073 | $ 1,119,369