<PAGE>

                    U. S. Securities and Exchange Commission
                             Washington, D. C. 20549

                                  Form 10-QSB/A

[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the Quarterly Period Ended September 30, 1996 -------------------

[ ]  Transition  Report  Under  Section 13 or 15(d) of the  Exchange Act For the
transition period from .......... to ..........


                     Commission File Number..........1-12508


                             MAGNUM PETROLEUM, INC.
         Exact name of small business issuer as specified in its charter

Nevada                                                         87-0462881
State or other jurisdiction of                   IRS employer identification No.
Incorporation or organization


           600 East Las Colinas Blvd., Suite 1200, Irving, Texas 75039
                     Address of principal executive offices

                                 (214) 401-0752
                            Issuer's telephone number


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that 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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of September 30, 1996. 13,644,769

Transitional Small Business Disclosure Format      Yes              No     X

Page 1 of 15 pages contained in the sequential numbering system.





                                        1

<PAGE>



                         PART I -- FINANCIAL INFORMATION


Item 1. Financial Statements

The financial  statements of Magnum Petroleum,  Inc. ("Magnum" or the "Company")
required by Item 310(b) of Regulation S-B follow Item 2. Management's Discussion
and Analysis or Plan of Operation.


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

The  following  discussion  and  analysis  should  be read in  conjunction  with
Magnum's  consolidated  financial  statements and the notes associated with them
contained  in its Form  10-KSB  for the  year  ended  December  31,  1995.  This
discussion  should not be construed to imply that the results  discussed  herein
will necessarily  continue into the future or that any conclusion reached herein
will necessarily be indicative of actual operating  results in the future.  Such
discussion represents only the best present assessment by management of Magnum.

On July 21, 1995, Magnum closed a definitive agreement to combine (the "Business
Combination")  with  Hunter  Resources,  Inc.  ("Hunter"),   subject  to  Hunter
shareholder  approval.  Pursuant to the definitive  agreement,  Magnum issued to
Hunter 2,750,000 shares of newly issued  restricted common stock in exchange for
substantially   all  of  the  assets  of  Hunter,   subject  to  its  associated
liabilities.  Hunter's  assets  primarily  consisted  of stock  in  wholly-owned
subsidiaries  and stock  ownership  interests  in  limited  liability  companies
("Hunter Subsidiaries").

On December  19,  1995 to be  effective  December  22,  1995,  Magnum and Hunter
entered into an Agreement and Plan of Reorganization and Plan of Liquidation, as
amended.  The amendment was executed on December 19, 1995 by Hunter shareholders
holding over fifty  percent (50%) of the common stock of Hunter and provided for
the  issuance  to  Hunter of an  additional  2,335,077  shares  of newly  issued
restricted  common  stock  and  111,825  shares  of  Series C  preferred  stock.
Therefore,  the total  consideration paid by Magnum for the Hunter  subsidiaries
was 5,085,077  shares of restricted  common stock and 111,825 shares of Series C
preferred stock.

On October 31,  1996,  Hunter  held a special  meeting of its  shareholders  and
formally approved the Agreement.  This action  represented the last formality in
completing the Business  Combination  and all Magnum shares  previously  held in
escrow  have  been  released  for  distribution  to  the  Hunter   shareholders.
Subsequent  to the Business  Combination,  Magnum has  conducted its oil and gas
operations  and  energy  related  acquisitions  in  conjunction  with the Hunter
Subsidiaries.  Acquisitions  completed  by Magnum and Hunter  after the  initial
agreement, were completed by Magnum Hunter Production, Inc. ("Magnum Hunter"), a
Hunter  Subsidiary.  Hunter and its subsidiaries  were  consolidated in Magnum's
financial statements beginning December 31, 1995.

On June 26, 1996,  Magnum received a commitment from Wells Fargo Bank,  N.A., as
Agent, and Banque Paribas, as Co-agent, (hereinafter collectively referred to as
"Banks")  for a new  credit  facility  for the  benefit  of Magnum  and  several
wholly-owned  subsidiaries.  The  purpose  of the new  line of  credit  is to i)
refinance the Company's  existing  indebtedness  with First  Interstate  Bank of
Texas,  N.A. (a wholly-owned  subsidiary of Wells Fargo Bank, N.A.), ii) finance
the acquisition of oil and gas reserves including the $35.4



                                        2

<PAGE>



million "Panoma  Property"  acquisition,  as discussed below,  from Meridian Oil
Inc. ("Meridian"), a wholly-owned subsidiary of Burlington Resources, Inc., iii)
future  property  development,  and iv)  working  capital  support  and  general
corporate purposes.  The $100 million credit facility is subject to a "Borrowing
Base" determination established from time-to-time by the Banks based upon proven
oil  and  gas  reserves  and  gas  gathering  assets  owned  by  Magnum  and its
subsidiaries.  The availability under the Company's existing credit facility was
increased  from $16  million to $48  million  based upon the value of the assets
associated  with  the  acquisition  of the  Panoma  Properties.  The new  credit
facility  has  given the  Company  the  flexibility  to choose a range of either
"LIBOR" or "Prime" based interest rates options.

On June 28,  1996,  Magnum  closed on the  purchase of 469 natural gas wells and
approximately  427 miles of a gas gathering  pipeline system from Meridian.  The
net purchase price after certain  purchase price  adjustments was  approximately
$35,350,000,  funded by a loan from  Magnum's  Banks.  As the  purchase  was not
completed  until  the end of the  second  quarter  of 1996,  the  Statements  of
Operations for 1996 only include the operating  results of the Panoma Properties
for the third quarter.  The purchase price was allocated based on estimated fair
market  values  resulting  in  the  recording  of  $29,560,000  as oil  and  gas
properties and $5,790,000 as pipelines.  The gas wells and gas gathering  system
are located in the Panhandle of Texas and Western Oklahoma and are more commonly
referred to as the "Panoma Properties."

Results of Operations for the Nine Month Periods in 1996 and 1995

As discussed above, Magnum completed a business  combination with Hunter,  which
for accounting  purposes,  was recorded under the purchase method of accounting.
Hunter's  operations were consolidated  with those of Magnum beginning  December
31, 1995. In addition,  as discussed  above,  the results of operations for 1996
include only the third quarter  operations from the June 28, 1996 acquisition of
the Panoma  Properties.  As such,  the  comparison  of the increases in the 1996
interim and nine month  periods over the  comparable  1995  periods are,  unless
otherwise  stated,  the  result  of the  Hunter  operating  activities  and  the
acquisition of the Panoma Properties.

Magnum  recorded an  operating  profit of  $1,872,000  for the nine month period
ended  September  30,  1996  versus an  operating  loss of  $513,000  during the
previous  year.  This  $2,385,000  improvement  in  operations  can be  directly
attributed to i) the operating  activities of the Panoma Properties  acquired on
June 28, 1996, ii) the operating  activities  associated with the acquisition of
Hunter on  December  22,  1995 and,  iii)  improved  oil and gas sale  commodity
prices.
   
Magnum  realized a net loss after  payment of dividends  on  preferred  stock of
$50,000 during the nine month period ended September 30, 1996, compared to a net
loss of $869,000 for the same period of the preceding  year. The loss per common
share  improved  to $0.004  from a loss per common  share in the 1995  period of
$0.16.
    
Total revenues  increased  1,938% from $485,000  during the nine month period of
1995 to $9,885,000 during 1996. During the nine month period ended September 30,
1996,  revenue from oil and gas sales increased 1,285% to $6,357,000 as compared
to $459,000 for the same period of the prior year.  For the first nine months of
1996,  Magnum  sold  139,874  barrels  of  oil  and  1,596,987  mcf of  gas.  In
comparison,  during  the same nine  month  period of 1995,  Magnum  sold  23,852
barrels of oil and 71,313 mcf of gas. The average oil price of $15.00 per barrel
in 1995 increased to $19.91 per barrel in the 1996 period. The average gas price
of $2.24 per mcf in 1996 increased from $1.42 per mcf in 1995.

Gas gathering and marketing activities in 1996, all of which are a result of the
acquisition of the Panoma  Properties and the combination with Hunter,  provided
revenues of  $3,143,000  and a net profit  from these  activities  of  $514,000.
Expenses directly associated with this activity were $469,000 and $2,160,000,



                                        3

<PAGE>



representing  pipeline operating expenses and purchase of natural gas from third
parties, respectively.

Revenues  from oil field  services  and  commissions  were  $385,000 in the 1996
period as  compared  to $26,000 in the 1995  period.  Related  cost of  services
expense of $521,000 and $26,000 for the 1996 and 1995 period, respectively, were
recognized  resulting in a net loss in 1996 from these activities of $136,000 as
compared to a break-even in 1995.

Lease operating  expenses  amounted to 2,305,000 in 1996 as compared to $145,000
in the 1995 period.  On an equivalent  barrel  basis,  the expense was $5.68 per
barrel  and  $4.06  per  barrel  for  the  respective  1996  and  1995  periods.
Depreciation  and depletion  rose to $1,888,000 in 1996 versus  $138,000 in 1995
due to  the  increased  oil  and  gas  activities  from  the  Panoma  Properties
acquisition and the combination with Hunter.

General  and  administrative  expense  declined  $19,000 to $670,000 in the 1996
period as compared to $689,000 in 1995 due to a reduction  in  professional  and
promotional expenses incurred in 1996. A gain on sale of $143,000 related to the
Company's  securities  previously  held for resale was  recognized in the second
quarter of 1996.
   
Interest  expense rose to $1,550,000 in 1996 from $3,000 in 1995  primarily as a
result of commercial bank  indebtedness  assumed in the combination  with Hunter
and additional  property  acquisitions  completed in 1996,  including the Panoma
Properties  acquisition funded at the end of June 1996. A provision for deferred
income  taxes of  $204,000  (38%  rate) was made  against  before  tax income of
$536,000. The Company is not currently paying income taxes due to utilization of
net operating loss  carryforwards.  Preferred dividends decreased to $382,000 in
1996 from $440,000 in 1995 as Magnum  completed the redemption and conversion of
all of the  outstanding  Series C preferred  stock in the third quarter of 1996,
thereby eliminating any future dividend obligations.

Results of Operations for the Three Month Periods in 1996 and 1995

Magnum  realized an operating  profit of  $1,616,000  for the three month period
ended September 30, 1996 versus an operating loss of $86,000 during the previous
year. This $1,702,000 improvement in operations can be directly attributed to i)
the operating  activities of the Panoma  Properties  acquired June 28, 1996, ii)
the operating  activities  associated with the acquisition of Hunter on December
22, 1995, and iii) improved oil and gas sale commodity prices.

Magnum  realized net income,  after payment of dividends on preferred  stock, of
$347,000 during the three month period ended  September 30, 1996,  compared to a
net loss of $216,000 for the same period of the preceding  year.  The income per
common share improved to $.03 from a net loss per share of $.04.
    
Total revenues  increased  3,173% from $163,000 during the third quarter of 1995
to $5,335,000  during the third  quarter of 1996.  During the three month period
ended  September 30, 1996,  revenue from oil and gas sales  increased  2,152% to
$3,536,000  as compared to $157,000  for the same period of the prior year.  For
the three month period of 1996,  Magnum sold 50,036 barrels of oil and 1,108,833
mcf of gas. In  comparison,  during the same three month period of 1995,  Magnum
sold 7,187 barrels of oil and 36,772 mcf of gas. The average oil price of $13.32
per  barrel in 1995  increased  to $21.00  per  barrel in the 1996  period.  The
average gas prices  increased  to $2.24 per mcf in 1996 as compared to $1.67 per
mcf in 1995.

Gas gathering and marketing activities in 1996, all of which are a result of the
acquisition of the Panoma  Properties and the combination with Hunter,  provided
revenues of  $1,615,000  and a net profit  from these  activities  of  $300,000.
Expenses directly associated with this activity were $279,000 and $1,036,000



                                        4

<PAGE>



representing pipeline operating expenses and purchases of natural gas from third
parties, respectively.

Revenues  from oil field  services  and  commissions  were  $184,000 in the 1996
period as  compared  to  $6,000 in the 1995  period.  Related  cost of  services
expense of $194,000 and $16,000 for the 1996 and 1995 period, respectively, were
recognized  resulting  in a net loss from these  activities  of $10,000 for both
periods.

Lease operating  expenses  amounted to $1,179,000 in 1996 as compared to $52,000
in the 1995 period.  On an equivalent  barrel  basis,  the expense was $5.02 per
barrel  and  $3.91  per  barrel  for  the  respective  1996  and  1995  periods.
Depreciation  and depletion  rose to $804,000 in 1996 versus $35,000 in 1995 due
to the increased oil and gas activities from the Panoma  Properties  acquisition
and the combination with Hunter.

General and  administrative  expense  increased  $81,000 to $227,000 in the 1996
three  month  period as  compared  to $146,000 in the same 1995 period due to an
increase in personnel requirements in the 1996 period.
   
Interest  expense  of  $1,051,000  was  realized  in the third  quarter  of 1996
primarily as a result of commercial bank indebtedness assumed in the combination
with Hunter and new  indebtedness  incurred as a result of  additional  property
acquisitions,  including the Panoma Properties  acquisition funded at the end of
June 1996. A provision  for  deferred  income taxes of $204,000 was made against
before tax income of $593,000.  The Company is not currently paying income taxes
due to  utilization  of net operating loss  carryforwards.  Preferred  dividends
decreased  to  $42,000 in 1996 from  $147,000  in 1995 as Magnum  completed  the
redemption and conversion of all of the outstanding  Series C preferred stock in
the third quarter of 1996, thereby eliminating any future dividend obligations.
    
Liquidity and Capital Resources

On June 5, 1996,  Magnum called for  redemption  208,333  shares of its Series C
preferred stock at $10.50 per share, as provided by the terms of the certificate
of designations, plus accrued dividends with an extended redemption date of July
10, 1996.  Terms of the preferred  stock provide for the option by the holder to
convert the  preferred  shares into common stock at the rate of three (3) shares
of common stock for each share of Series C preferred  stock.  294,392  shares of
the preferred  stock were converted for 907,950 shares of common stock including
accrued dividends paid in common stock. Additionally,  8,224 shares of preferred
stock were redeemed  including  the accrued  dividends for cash in the amount of
$88,860.

On July 11, 1996,  Magnum called for the redemption the remaining 322,384 shares
of its Series C preferred stock. The redemption price was $10.50 per share, plus
accrued  dividends  of $.141 per share from July 1, 1996  through  the  extended
redemption date of August 16, 1996, for a total  redemption price of $10.641 per
share.  The Series C preferred  shares could be converted,  at the option of the
holder,  at any time prior to August 16, 1996 into common stock.  302,492 shares
of Series C preferred  stock were  converted into 938,451 shares of common stock
including  the accrued  dividends  paid in common  stock.  Additionally,  19,892
shares of preferred stock were redeemed including the accrued dividends for cash
in the amount of $210,431.

After both redemption  calls,  Magnum  converted  596,884 shares of its Series C
preferred  stock  including  the  accrued  dividends  paid in common  stock into
1,846,401  shares of common  stock and  redeemed  28,116  shares of its Series C
preferred stock including the accrued dividends for $299,291.




                                        5

<PAGE>



At December 31, 1995, Magnum had unproven oil and gas properties with a carrying
value of $842,889 located in predominately three prospects. In the third quarter
of 1996, Magnum successfully completed a well on one prospect and decided to not
attempt  a  well  on  another   prospect.   Accordingly,   the  carrying  values
attributable to these two prospects were transferred to the proven category.  At
September  30, 1996, a balance of $459,000  remained in the unproven oil and gas
properties  representing the one remaining prospect. The remaining property will
be  evaluated  further in the fourth  quarter of 1996 and  management  will then
review the development plans for this property.  If Magnum elects to not develop
the property,  the property  would be made  available for sale and any remaining
costs would be transferred  to the proven  category and depleted over time based
on Magnum's production and reserve base existing at such time.

In 1995 and prior years,  Magnum has been  successful in raising capital through
the  issuance of  preferred  and common  stock.  During  1995,  Magnum  received
proceeds of $249,000  from the  purchase of 20,750  shares of Series C preferred
stock from the exercise of representatives'  warrants. In addition, the exercise
of 833,324  common  stock  purchase  warrants  resulted  in net  proceeds  after
offering costs of $2,840,860.

Prior to the business  combination  with Hunter,  Magnum's  anticipated  capital
expenditures for 1996 on its existing properties were not considered significant
and would be financed by existing working capital.  However, due to the business
combination with Hunter, Magnum now has a budget of approximately $2 million for
exploration  and  production  activities  during 1996.  Magnum has already spent
approximately  $700,000  for the  drilling  of six gas wells in the south  Texas
region and one oil well in West Texas. The remaining  exploration budget of $1.3
million has been  reallocated to a combination of  exploratory  and  development
projects,  specifically proved undeveloped  locations associated with the Panoma
Properties.  The source of financing  for such projects has and will continue to
be a combination  of the  following:  i) existing  available  cash, ii) Magnum's
senior bank line of credit,  iii) third party  investors,  iv) seller  financing
through  production  payments and v) new equity  capital.  At November 12, 1996,
there remained  approximately  $100,000 of available  borrowings  under Magnum's
senior  bank  line of  credit  with an  anticipated  increase  in the  Company's
borrowing base of approximately $7 million under consideration by the Banks.

In  February  1996,  Magnum  entered  into  an  exclusive  arrangement  with  an
investment  banking firm specialized in raising capital for energy companies for
a  private  placement  of  preferred  stock  for as  much as $15  million  to be
completed  during 1996. On October 30, 1996,  Magnum executed a letter agreement
with an  institution  for the issuance of $10 million of  convertible  preferred
stock with a dividend  rate of 8.75% per annum.  The purpose for the $10 million
private   placement  is  to  initially  reduce  Magnum's  existing  senior  bank
indebtedness  and to ultimately fund the capital cost necessary to fully develop
six development and waterflood projects.

Inflation and Changing Prices

During 1995 and the past several years,  Magnum experienced minimal inflation in
oil and natural gas prices with moderate  increases in property  acquisition and
development  costs.  During  1996,  Magnum  has  experienced   somewhat  greater
increases in the  commodity  prices of the natural  resources  produced from its
properties.  The results of operations and cash flow of Magnum has been and will
continue  to be effected to a certain  extent by the  volatility  in oil and gas
prices.  Should Magnum experience a significant  increase in oil and natural gas
prices  over a  prolonged  period,  it would  expect  that there would also be a
corresponding  increase in oil and natural gas finding costs,  lease acquisition
costs and operating expenses.




                                        6

<PAGE>

                                      MAGNUM PETROLEUM, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEET
                                                    (Unaudited)

<TABLE>
<CAPTION>                                                                                   
                                                                                             September 30,
                                                                                                1996
                                                                                     -----------------------------
                                                         
<S>                                                                                  <C>    
                                 
CURRENT ASSETS:
     Cash and cash equivalents                                                           $           1,679,000
     Accounts receivable
      Trade, net of allowance of $134,158                                                            3,492,000
      Due from affiliates                                                                              104,000
   Note receivable from affiliate                                                                      247,000
     Note receivable                                                                                   248,000
     Other current assets                                                                              160,000
     Current portion of long-term note receivable                                                       75,000
          TOTAL CURRENT ASSETS                                                           ----------------------
                                                                                                     6,005,000
                                                                                         ______________________          

PROPERTY, PLANT AND EQUIPMENT                                                        
     Oil and gas properties, full cost method                                     
           Unproved                                                                                    459,000
          Proved                                                                                    69,983,000
     Pipelines                                                                                       7,002,000
     Other property                                                                                    364,000
                                                                                          --------------------
          TOTAL PROPERTY, PLANT AND EQUIPMENT                                                       77,808,000                 
     Accumulated depreciation, depletion and impairment                                             (3,806,000)
                                                                                          --------------------            
          NET PROPERTY, PLANT AND EQUIPMENT                                                         74,002,000                
                                                                                                                     
OTHER ASSETS 
     Deposits and other assets                                                                         494,000    
     Long-term notes receivable, net of imputed interest                                                48,000 
                                                                                          --------------------         
                                                                                                                 
                                            TOTAL ASSETS                                 $          80,549,000
                                                                                         =====================  
                                                                                                       

                                                                                                       

                                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Trade accounts payable and accrued liabilities                                       $           3,936,000 
    Suspended revenue payable                                                                          867,000
    Current maturities of long-term debt                                                             6,022,000
                                                                                         ---------------------
     TOTAL CURRENT LIABILITIES                                                                      10,825,000

LONG-TERM LIABILITIES                                                                                
   Long-term debt                                                                                   41,250,000 
   Production payment liability                                                                        231,000 
   Deferred income taxes                                                                             3,329,000

                                                                                                     
STOCKHOLDERS' EQUITY                                                                                   
     Preferred stock - $.001 par value; 10,000,000 authorized,                                        
         216,000  designated as Series A; 80,000  shares issued and  outstanding                           -
     Common stock - $.002 par value; 50,000,000 shares authorized,
       14,240,564 shares issued and outstanding                                                        28,000
   Additional paid-in capital                                                                      30,182,000                  
       Accumulated deficit                                                                         (5,295,000)
                                                                                         ---------------------      
       Receivable from stockholders                                                                       -              
                                                                                                   24,915,000             
                                                                                                                 
      Treasury stock (595,795 shares of common stock)                                                  (1,000) 
                                                                                         ---------------------
                                                                
                 TOTAL STOCKHOLDERS' EQUITY                                                        24,914,000 
                                                                                         ---------------------

            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $          80,549,000               
                                                                                         =====================               
                                                                             
                                                                             
                                                                               
 </TABLE>                                                                      
                                                                    
The accompanying  notes are an integral part of these consolidated
financial statements.





                                        7

<PAGE>




                                      MAGNUM PETROLEUM, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)


<TABLE>
<CAPTION>
   

                                                                     Three Months Ended                    Nine Months Ended
                                                                        September 30,                        September 30,    
                                                            -----------------------------------------------------------------------
                                                                   1996              1995               1996               1995
                                                             -----------------------------------------------------------------------
<S>                                                          <C>                <C>                    <C>          <C>     
OPERATING REVENUES:
     Oil and gas sales                                         $     3,536,000   $       157,000       $6,357,000 $        459,000
     Gas gathering and marketing                                     1,615,000                 -        3,143,000             -
     Oil field services and commissions                                184,000             6,000          385,000           26,000
                                                             -----------------------------------------------------------------------

 TOTAL OPERATING REVENUE                                             5,335,000           163,000        9,885,000          485,000
                                                             -----------------------------------------------------------------------

OPERATING COSTS AND EXPENSES:
     Lease operating                                                 1,179,000            52,000        2,305,000          145,000
     Pipeline operating                                                279,000                 -          469,000             -
     Purchases of natural gas                                        1,036,000                 -        2,160,000             -
     Costs of services                                                 194,000            16,000          521,000           26,000
     Depreciation and depletion                                        804,000            35,000        1,888,000          138,000
     General and administrative                                        227,000           146,000          670,000          689,000
                                                             -----------------------------------------------------------------------

 TOTAL OPERATING COSTS & EXPENSES                                    3,719,000           249,000        8,013,000          998,000
                                                             -----------------------------------------------------------------------

OPERATING PROFIT (LOSS)                                              1,616,000           (86,000)       1,872,000         (513,000)
     Gain (loss) on sale of assets                                           -           (18,000)         143,000          (33,000)
     Interest income                                                    20,000            35,000           51,000          120,000
     Other income                                                        8,000                 -           20,000             -
     Interest expense                                               (1,051,000)                -       (1,550,000)          (3,000)
      
                                                            -----------------------------------------------------------------------
     Net Income (Loss) befor income taxes                              593,000           (69,000)         536,000          429,000
     Provision for deferred income taxes                              (204,000)                -         (204,000)            -     
                                                            -----------------------------------------------------------------------
NET INCOME (LOSS)                                                      389,000           (69,000)         332,000         (429,000)
     Dividends Applicable to Preferred Stock                           (42,000)         (147,000)        (382,000)        (440,000)
                                                             -----------------------------------------------------------------------

INCOME (LOSS) APPLICABLE TO COMMON SHARES                      $       347,000   $    (216,000)   $       (50,000)   $    (869,000)
                                                               ===============   ==============   ================  ============== 
                                                             
INCOME (LOSS) PER COMMON SHARE                                 $          0.03   $        (0.04)  $             -   $        (0.16)
                                                             -----------------------------------------------------------------------

 
Common Shares Used In Per Share Calculation                         12,924,967         5,734,269         12,084,041       5,383,238
                                                                    ==========         =========         ==========       =========
                                                             
















    
</TABLE>


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



                                        8

<PAGE>


                     MAGNUM PETROLEUM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
   
                                                                                                        Nine Months Ended
                                                                                                           September 30,
                                                                                               -------------------------------------

                                                                                                      1996              1995
                                                                                               -------------------------------------


<S>                                                                                            <C>                  <C>             
CASH FLOWS FROM OPERATING ACTIVITIES:

NET INCOME (LOSS)                                                                              $          332,000   $     (429,000)
     Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
          Depreciation and depletion                                                                    1,888,000          138,000
          Deferred income tax provision                                                                   204,000             -
          (Gain) loss on sale of assets                                                                  (143,000)              -
          Change in assets and liabilities                                                                                  23,000
               (Increase) decrease in securities available for sale                                            -           (56,000)
               (Increase) decrease in accounts receivable                                              (2,211,000)          62,000
               (Increase) decrease in notes receivable                                                   (106,000)            -
               (Increase) decrease in other current assets                                               (160,000)          55,000
               (Increase) decrease in costs in excess of billings on uncompleted drilling contracts             -            1,000
               (Increase) decrease in deposits and other assets                                          (376,000)        (476,000)
               Increase (decrease) in trade accounts payable and accrued liabilities                    2,653,000             -
               Increase (decrease) in suspended revenue payable                                            73,000             -
               Increase (decrease) in other liabilities                                                  (290,000)           3,000
               Increase (decrease) in dividends payable                                                        - 
                                                                                               -------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES                                                    1,864,000         (679,000)
                                                                                                         
                                                                                               ------------------------------------
                                                                                                                         
CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from the sale of assets                                                                     188,000             -
     Additions to property and equipment, net                                                         (38,787,000)      (1,216,000)
     Deposits for acquisition of properties and equipment                                                       -         (200,000)
     Costs related to corporations acquired                                                                     -          (87,000)
                                                                                               -------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES                                                                (38,599,000)      (1,503,000)
                                                                                               -------------------------------------
  
                                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of common and preferred stock, net of offering costs                                -        3,332,000
     Payments received on notes receivable from shareholders                                                    -           63,000
     Proceeds from long-term debt borrowings                                                           55,313,000             -
     Payments of principal on notes payable                                                           (17,653,000)         (37,000)
     Payments on production payment liability                                                             (57,000)            -
     Payments for redemption of preferred stock                                                          (295,000)            -
     Dividends paid                                                                                      (438,000)        (437,000)
                                                                                               -------------------------------------
NET CASH PROVIDED BY (USED FOR)  FINANCING ACTIVITIES                                                  36,870,000        2,921,000  

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                          135,000          739,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                          1,544,000        1,645,000
                                                                                               -------------------------------------
 CASH AND CASH EQUIVALENTS, END OF PERIOD                                                         $     1,679,000   $    2,384,000
                                                                                               -------------------------------------
                                                                                               
                                                                                        
                                                                                                        
                                                                                               

    
</TABLE>                                                                   



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




                                        9

<PAGE>


                     MAGNUM PETROLEUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996
                                   (Unaudited)

(1) MANAGEMENT'S REPRESENTATION

The  consolidated  balance  sheet as of  September  30, 1996,  the  consolidated
statements of operations for the three and nine months ended  September 30, 1996
and 1995, and the  consolidated  statements of cash flows for the three and nine
month  periods  then ended are  unaudited.  In the  opinion of  management,  all
necessary  adjustments  (which include only normal recurring  adjustments)  have
been made to present  fairly the financial  position,  results of operations and
changes in cash flows for the three and nine month periods.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  It is suggested that these condensed  financial
statements  be read in  conjunction  with the  financial  statements  and  notes
thereto  included in the  December  31,  1995  annual  report on Form 10-KSB for
Magnum Petroleum,  Inc. ("Magnum").  The results of operations for the three and
nine month periods ended  September 30, 1996 are not  necessarily  indicative of
the operating results for the full year.

The accompanying  consolidated  financial statements include the accounts of the
Company  and  its  wholly-owned   subsidiaries.   All  significant  intercompany
transactions and balances have been eliminated in  consolidation.  Certain items
have been reclassified to conform with the current presentation. The Company has
changed the presentation  format for the  consolidated  statements of cash flows
from the direct method to the indirect method.

During 1995,  Magnum  changed its  accounting  method for oil and gas activities
from the successful  efforts method to the full cost method. The comparable 1995
amounts in the financial statements included herein have been restated to comply
with the full cost method.

(2) RECENT EVENTS

During the three and nine months ended  September  30, 1996,  41,500  shares and
62,050  shares of Series B preferred  stock were  converted to 20,711 shares and
30,986 shares of common stock, respectively.

On June 26, 1996,  Magnum received a commitment from Wells Fargo Bank,  N.A., as
Agent, and Banque Paribas, as Co-agent, (hereinafter collectively referred to as
"Banks")  for a new  credit  facility  for the  benefit  of Magnum  and  several
wholly-owned  subsidiaries.  The  purpose  of the new line of  credit  was to i)
refinance the Company's  existing  indebtedness  with First  Interstate  Bank of
Texas,  N.A. (a wholly-owned  subsidiary of Wells Fargo Bank, N.A.), ii) finance
the  acquisition  of oil and gas reserves  including  the $35.4  million  Panoma
Property acquisition as discussed below from Meridian Oil Inc.  ("Meridian"),  a
wholly-owned  subsidiary of Burlington  Resources,  Inc.,  iii) future  property
development, and iv) working capital support and general corporate purposes. The
$100  million  credit  facility is subject to a "Borrowing  Base"  determination
established  from  time-to-time  by the  Banks  based  upon  proven  oil and gas
reserves  and gas  gathering  assets owned by Magnum and its  subsidiaries.  The
availability under the Company's existing credit facility was increased from $16
million to $48 million  based upon the value of the assets  associated  with the
acquisition  of the Panoma  Properties.  The new credit  facility  has given the
Company the  flexibility  to choose a range of either  "LIBOR" or "Prime"  based
interest rates options.

On June 28,  1996,  Magnum  closed on the  purchase of 469 natural gas wells and
approximately  427 miles of a gas gathering  pipeline system from Meridian.  The
net purchase price after certain  purchase price  adjustments was  approximately
$35,350,000,  funded by a loan from  Magnum's  Banks.  As the  purchase  was not
completed  until  the end of the  second  quarter  of 1996,  the  Statements  of
Operations for 1996 only include the operating  results of the Panoma Properties
for the  third  quarter.  The  initial  purchase  price was  allocated  based on
estimated  fair market values  resulting in the recording of  $29,560,000 as oil
and gas properties and $5,790,000 as pipelines.  The gas wells and gas gathering
system are located in the  Panhandle of Texas and Western  Oklahoma and are more
commonly referred to as the "Panoma Properties."

On June 5, 1996,  Magnum called for  redemption  208,333  shares of its Series C
preferred stock at $10.50 per share, as provided by the terms of the certificate
of designations, plus accrued dividends with an extended redemption date of July
10, 1996.  Terms of the preferred  stock provide for the option by the holder to
convert the  preferred  shares into common stock at the rate of three (3) shares
of common stock for each share of Series C preferred  stock.  294,392  shares of
the preferred  stock were converted for 907,950 shares of common stock including
accrued dividends paid in common stock. Additionally,  8,224 shares of preferred
stock were



                                       10

<PAGE>



redeemed including the accrued dividends for cash in the amount of $88,860.

On July 11, 1996,  Magnum called for the redemption the remaining 322,384 shares
of its Series C preferred stock. The redemption price was $10.50 per share, plus
accrued  dividends  of $.141 per share from July 1, 1996  through  the  extended
redemption date of August 16, 1996, for a total  redemption price of $10.641 per
share.  The Series C preferred  shares could be converted,  at the option of the
holder,  at any time prior to August 16, 1996 into common stock.  302,492 shares
of Series C preferred  stock were  converted into 938,451 shares of common stock
including  the accrued  dividends  paid in common  stock.  Additionally,  19,892
shares of preferred stock were redeemed including the accrued dividends for cash
in the amount of $210,431.

After both redemption  calls,  Magnum  converted  596,884 shares of its Series C
preferred stock including the accrued  dividends into 1,846,401 shares of common
stock and redeemed 28,116 shares of its Series C preferred stock for $299,291.








                                       11

<PAGE>



PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings

NONE

Item 2.  Changes in Securities

NONE

Item 3.  Defaults Upon Senior Securities

NONE

Item 4.  Submission of Matters to a Vote of Security Holders

NONE

Item 5.  Other Information

NONE

Item 6. Exhibits and Reports on Form 8-K

(a)    Reports on Form 8-K

Item     Items                   F/S Included    Date of Event     Date Filed
No.      Reported  
-----    --------------          ------------    -------------     ----------

2        Acquisition of Assets                   June 28, 1996   July 12, 1996

7        Financial Statements Schedule of Fin.   June 28, 1996   August 14, 1996
                              Statements Attached

7       Amended Financial     Schedule of Fin.   June 28, 1996   August 16, 1996
        Statements            Statements Attached


7       Amended Financial    Schedule of Fin.   July 21, 1995 September 12, 1996
        Statements           Statements Attached







                                       12

<PAGE>



                        SCHEDULE OF FINANCIAL STATEMENTS

I.     Form 8-K/A filed August 13, 1996 and amended August 16, 1996

(a)    Financial Statements of the Properties Acquired:

     Independent  Auditor's  Report
     Historical  Summary of  Revenue  and Direct Operating  Expenses for the
     Year Ending  December 31, 1995 and 1994 and the
     Three Months Ending March 31, 1996 and 1995 Notes to Historical  Summary of
     Revenues and Direct Operating Expenses for theYear Ending December 31, 1995
     and 1994 and the Three Months Ending March 31, 1996 and 1995

(b)    Pro forma financial information:  

           Pro Forma Consolidated Financial Information (unaudited) 
               as of March 31, 1996
           Pro Forma Consolidated Statement of Operations (unaudited)
               For the Twelve Months Ended December 31, 1995
           Pro Forma Consolidated Statement of Operations (unaudited)
               For the Three Months Ended March 31, 1996
           Notes to Unaudited Pro Forma Consolidated Financial Statements


II.    Form 8-K/A-2 filed September 12, 1996

a]         Financial Statements of Businesses Acquired:

           Accountants' Report of Hein+Associates LLP, dated April 14, 1995
                      Audited Consolidated Balance Sheet of Hunter Resources,
                      Inc. and Subsidiaries as of December 31, 1994
           Audited Consolidated Statements of Operations for Hunter 
                      Resources, Inc. and Subsidiaries for the Years Ended 
                      December 31,1994 and 1993
           Audited Consolidated Statements of Stockholders' Equity for 
                      Hunter Resources, Inc. and Subsidiaries for the Years
                      Ended December 31, 1994 and 1993
           Audited Consolidated Statements of Cash Flows for Hunter 
                      Resources, Inc. and Subsidiaries for the Years Ended 
                      December 31, 1994 and 1993

           Unaudited Consolidated Balance Sheet of Hunter Resources, Inc. 
                      and Subsidiaries as of September 30, 1995
           Unaudited Consolidated Statements of Operations for Hunter 
                      Resources, Inc. and Subsidiaries for the Quarters and
                      Nine Months Ended September 30, 1995 and 1994
           Unaudited Consolidated Statements of Cash Flows for Hunter 
                      Resources, Inc. and Subsidiaries for the Quarters and
                      Nine Months Ended September 30, 1995 and 1994

b]         Pro Forma Financial Information:

           Consolidated Pro Forma Financial Information (unaudited)
           Consolidated Pro Forma Balance Sheet at September 30, 1995(unaudited)
           Consolidated Pro Forma Statement of Operations
                      For the Twelve Months Ended December 31, 1994 (unaudited)
           Consolidated Pro Forma Statement of Operations
                      For the Nine Months Ended September 30, 1995 (unaudited)
           Notes to Pro Forma Consolidated Statements of Operations (unaudited)


c]         Restated Consolidated Financial Statements:



                                       13

<PAGE>



           Accountants' Report of  HANSEN,  BARNETT &  MAXWELL,  a  Professional
                      Corporation,  dated March 26, 1995,  except for Note 2, as
                      to which the date is September 29, 1995
          Audited Restated Consolidated Balance Sheet of Magnum Petroleum, Inc.
                      and Subsidiary as of December 31, 1994 and Unaudited
                      Consolidated Balance Sheet of Magnum Petroleum, Inc. and
                      Subsidiary as of September  30, 1995
           Audited Consolidated Statements of Operations for Magnum Petroleum, 
                      Inc. and Subsidiary for the Years Ended December 31, 1994
                      and 1993 and Unaudited Consolidated Statements of
                      Operationsfor Magnum Petroleum, Inc. and Subsidiary for
                      the Nine Months Ended September 30, 1995 and 1994
           Audited Consolidated Statements of Stockholders' Equity for Magnum
                      Petroleum, Inc.and Subsidiary for the Years Ended
                      December 31, 1994 and 1993  and Unaudited Consolidated
                      Statements of Stockholders' Equity for Magnum Petroleum, 
                      Inc.and Subsidiary for the Nine Months Ended September 30,
                      1995
           Audited Consolidated Statements of Cash Flows for Magnum Petroleum,
                      Inc. and Subsidiary for the Years Ended December 31, 1994
                      and 1993 and Unaudited Consolidated Statements of Cash 
                      Flows for Magnum Petroleum, Inc. and Subsidiary for the 
                      Nine Months Ended September 30, 1995








                                       14

<PAGE>


                                    SIGNATURE

     In accordance with the requirements of the Exchange Act, the Registrant has
     caused  this  Form  10-QSB  Report  to be  signed  on  its  behalf  by  the
     undersigned, thereunto duly authorized.

MAGNUM PETROLEUM, INC.



By /s/ Gary C. Evans
--------------------------------------
      Gary C. Evans
      President and Chief Executive Officer                                     
      March 17, 1997




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


Name and Signature                          Title                               

/s/ Gary C. Evans                          President and Chief Executive Officer
--------------------------------------
Gary C. Evans


/s/ David S. Krueger                        Vice President and
----------------------------------------    Chief Accounting Officer
David S. Krueger                            

Date: March 17, 1997
<PAGE>