<PAGE>
 
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549


                                   FORM 10-Q


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

           For the quarterly period ended      SEPTEMBER 30, 1997
                                          ---------------------------

                                      OR

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

               For the transition period from________to_________

                        Commission File Number  0-22258


                             AVIVA PETROLEUM INC.
            (Exact name of registrant as specified in its charter)
 

            TEXAS                                        75-1432205
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                      Identification Number)
 
8235 DOUGLAS AVENUE,                                       75225
SUITE 400, DALLAS, TEXAS                                 (Zip Code)
(Address of principal executive offices)

                                (214) 691-3464
             (Registrant's telephone number, including area code)


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.
                                                YES X  NO
                                                   ---   ---               

Number of shares of Common Stock, no par value, outstanding at September 30,
1997, was 31,482,716 of which 10,336,835 shares of Common Stock were represented
by Depositary Shares.  Each Depositary Share represents five shares of Common
Stock held by a Depositary.

                                       1
<PAGE>
 
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
-----------------------------

                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEET
                    (in thousands, except number of shares)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                               September 30,           December 31,
                                                   1997                    1996
                                               -------------           ------------
<S>                                            <C>                     <C> 
ASSETS                                                              
                                                                    
Current assets:                                                     
 Cash and cash equivalents                        $    642                $  2,041            
 Accounts receivable                                 1,865                   3,750
 Inventories                                           596                     721
 Prepaid expenses and other                            239                     282
                                                  --------                --------
   Total current assets                              3,342                   6,794
                                                  --------                --------
 
Property and equipment, at cost (note 2):                                                      
 Oil and gas properties and equipment                                    
 (full cost method)                                 60,661                  58,324
 Other                                                 610                     613
                                                  --------                --------
                                                    61,271                  58,937
   Less accumulated depreciation, depletion                                          
     and amortization                              (41,941)                (23,991)
                                                  --------                --------
                                                    19,330                  34,946
Other assets                                         1,499                   1,204
                                                  --------                --------
                                                  $ 24,171                $ 42,944  
                                                  ========                ========
                                                                         
LIABILITIES AND STOCKHOLDERS' EQUITY                                                
                                                                         
Current liabilities:                                                     
 Current portion of long term debt (note 3)       $  5,800                $  2,780                              
 Accounts payable                                    3,188                   6,271
 Accrued liabilities                                   379                     357
                                                  --------                --------
   Total current liabilities                         9,367                   9,408
                                                  --------                --------
                                                                         
Long term debt, excluding current portion                                
 (note 3)                                            1,965                   5,210
Gas balancing obligations and other                  1,451                   1,404
Deferred foreign income taxes                            -                     692
Stockholders' equity (note 4):                                                                 
 Common stock, no par value, authorized                                                  
  348,500,000 shares; issued 31,482,716 shares       1,574                   1,574
 Additional paid-in capital                         33,376                  33,376
 Accumulated deficit *                             (23,562)                 (8,720)
                                                  --------                --------
   Total stockholders' equity                       11,388                  26,230
                                                                         
Commitments and contingencies (note 6)            --------                --------
                                                  $ 24,171                $ 42,944                              
                                                  ========                ========

</TABLE> 
* Accumulated deficit of $70,057 was eliminated at December 31, 1992 in
   connection with a quasi-reorganization.

See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                     (in thousands, except per share data)
                                  (unaudited)
<TABLE>
<CAPTION>
 
 
                                                             Three Months Ended    Nine Months Ended
                                                               September 30,         September 30,
                                                                                 
                                                                1997      1996         1997      1996
                                                             -------   -------     --------   -------
<S>                                                          <C>        <C>        <C>        <C> 
Oil and gas sales                                            $ 2,249   $ 3,103     $  7,802   $10,512
                                                             -------   -------     --------   -------
                                                                                  
Expense:                                                                          
 Production                                                    1,027     1,149        3,225     3,663
 Depreciation, depletion and amortization                      1,370     1,538        4,655     5,117
 Write-down of oil and gas properties (note 2)                     -         -       13,399         -
 General and administrative                                      311       261        1,063     1,276
 Severance (note 5)                                                -        24            -       196
                                                             -------   -------     --------   -------
                                                                                  
   Total expense                                               2,708     2,972       22,342    10,252
                                                             -------   -------     --------   -------
                                                                                  
Other income (expense):                                                           
 Interest and other income (expense), net                        (53)      107           38       245
 Interest expense                                               (170)     (196)        (498)     (602)
 Debt refinancing expense (note 3)                                 -         -            -      (100)
                                                             -------   -------     --------   -------
                                                                                  
   Total other income (expense)                                 (223)      (89)        (460)     (457)
                                                             -------   -------     --------   -------
                                                                                  
Earnings (loss) before income taxes                             (682)       42      (15,000)     (197)
                                                                                  
Income taxes (benefits)                                          124       123         (158)      339
                                                             -------   -------     --------   -------
     Net loss                                                $  (806)  $   (81)    $(14,842)  $  (536)
                                                             =======   =======     ========   =======
Weighted average common shares outstanding                    31,483    31,483       31,483    31,483
                                                             =======   =======     ========   =======  
Net loss  per common share                                   $  (.03)  $     -     $   (.47)  $  (.02)
                                                             =======   =======     ========   =======  
</TABLE> 

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)

<TABLE>  
<CAPTION> 
                                                            Nine Months Ended
                                                              September 30,
                                                           1997          1996
                                                        ----------     --------
<S>                                                      <C>           <C>
Net loss                                                 $(14,842)     $  (536)
Adjustments to reconcile net loss to net cash                     
 provided by operating activities:                                
  Depreciation, depletion and amortization                  4,655        5,117
  Write-down of oil and gas properties                     13,399            -
  Deferred foreign income tax benefits                       (692)        (137)
  Changes in working capital and other                     (1,291)       3,647
                                                         --------      -------
                                                                  
   Net cash provided by operating activities                1,229        8,091
                                                         --------      -------
                                                                  
Cash flows from investing activities:                             
  Property and equipment expenditures                      (2,381)      (6,097)
  Proceeds from sale of assets                                 19           28 
  Other                                                         -          (30)
                                                         --------      -------
                                                                  
   Net cash used in investing activities                   (2,362)      (6,099)
                                                         --------      -------
                                                                  
Cash flows from financing activities -                            
 principal payments on long term debt                        (225)      (2,037)
                                                         --------      -------
Effect of exchange rate changes on cash and                       
 cash equivalents                                             (41)         (28)
                                                         --------      -------
Net decrease in cash and cash equivalents                  (1,399)         (73)

Cash and cash equivalents at beginning of the period        2,041        4,200
                                                         --------      -------
Cash and cash equivalents at end of the period           $    642      $ 4,127
                                                         ========      =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    (in thousands, except number of shares)
                                  (unaudited)



<TABLE>
<CAPTION>
 
 
                                     Common Stock
                                  ------------------
                                                      Additional                    Total
                                    Number             Paid-in    Accumulated   Stockholders'
                                  of Shares   Amount   Capital      Deficit         Equity
                                  ----------  ------  ----------  ------------  --------------
<S>                               <C>         <C>     <C>         <C>           <C>
Balances at December 31, 1996     31,482,716  $1,574     $33,376     $ (8,720)     $ 26,230
Net loss                                   -       -           -      (14,842)      (14,842)
                                  ----------  ------  ----------     --------      --------
                                                                                   
Balances at September 30, 1997    31,482,716  $1,574     $33,376     $(23,562)     $ 11,388
                                  ==========  ======  ==========     ========      ========
 
</TABLE>



See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1. GENERAL

  The condensed consolidated financial statements of Aviva Petroleum Inc. and
  subsidiaries (the "Company") included herein have been prepared by the Company
  without audit, pursuant to the rules and regulations of the Securities and
  Exchange Commission.  Certain information and footnote disclosures normally
  included in financial statements prepared in accordance with generally
  accepted accounting principles have been condensed or omitted pursuant to such
  rules and regulations, although the Company believes that the disclosures
  contained herein are adequate to make the information presented not
  misleading.  These condensed financial statements should be read in
  conjunction with the Company's prior audited yearly financial statements and
  the notes thereto, included in the Company's latest annual report on Form 
  10-K.

  In the opinion of the Company, all adjustments, consisting of normal recurring
  accruals, necessary to present fairly the information in the accompanying
  financial statements have been included. The results of operations for such
  interim periods are not necessarily indicative of the results for the full
  year.

2. PROPERTY AND EQUIPMENT

  Internal general and administrative costs directly associated with oil and gas
  property acquisition, exploration and development activities have been
  capitalized in accordance with the accounting policies of the Company.  Such
  costs totaled $94,000 for the nine months ended September 30, 1997 and $68,000
  for the nine months ended September 30, 1996.

  Unevaluated oil and gas properties totaling $719,000 and $1,066,000 at
  September 30, 1997 and December 31, 1996, respectively, have been excluded
  from costs subject to depletion.  The Company capitalized interest costs of
  $55,000 and $171,000 for the nine-month periods ended September 30, 1997 and
  1996, respectively, on these properties.

  During 1997 the Company wrote down the carrying amount of its oil and gas
  properties as a result of ceiling limitations on capitalized costs as follows
  (in thousands):
<TABLE>
<CAPTION>
 
                United
                States   Colombia   Total
                -------  --------  -------
<S>             <C>      <C>       <C>
 
March 31        $ 1,986  $      -  $ 1,986
 
June 30               -    11,413   11,413
 
September 30          -         -        -
                -------  --------  -------
                $ 1,986  $ 11,413  $13,399
                =======  ========  =======
 
</TABLE>

  The U.S. write-down at March 31, 1997 was primarily due to lower oil and gas
  prices, whereas the Colombian write-down at June 30, 1997 was mainly due to a
  downward revision (523,000 barrels) of the Company's Colombian proved oil
  reserves and lower prices.  A future decrease in the prices the Company
  receives for its oil and gas production or downward reserve adjustments could,
  for either the U.S. or Colombian cost centers, result in a ceiling test write-
  down that is significant to the Company's operating results.

                                       6
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)


3. LONG TERM DEBT

  On August 6, 1993, the Company entered into a credit agreement with ING (U.S.)
  Capital Corporation ("ING Capital"), secured by a mortgage on substantially
  all U.S. oil and gas assets, a pledge of Colombian assets and the stock of
  three subsidiaries, pursuant to which ING Capital agreed to loan to the
  Company up to $25 million, subject to an annually redetermined borrowing base
  which is predicated on the Company's U.S. and Colombian reserves.  As of
  September 30, 1997, the borrowing base permitted and the outstanding loan
  balance was, $7,765,000.  The outstanding loan balance bears interest at the
  ING Capital prime rate (8.5% at September 30, 1997) plus 1% or, at the option
  of the Company, a fixed rate, based on the London Interbank Offered Rate, for
  a portion or portions of the outstanding debt from time to time.  Commitment
  fees of .5% on the unused credit were payable quarterly until December 31,
  1995, at which time the credit facility converted from a revolving credit
  facility to a term loan.  The terms of the loan, among other things, prohibit
  the Company from merging with another company or paying dividends, limit
  additional indebtedness, general and administrative expense, sales of assets
  and investments and require the maintenance of certain minimum financial
  ratios.  The agreement also requires the Company to maintain a minimum
  consolidated tangible net worth of $22,000,000.

 Since June 30, 1997, the Company has not been in compliance with the above-
 referenced tangible net worth covenant.  ING Capital has, however, waived
 compliance with this covenant pending realization of the Company's
 restructuring plan (see note 7).  In addition, ING has reduced the principal
 payments required for the four months ending November 30, 1997 to $25,000 per
 month and rescheduled repayment of the remaining principal as follows:
 $575,000 per month for the ten months ending September 30, 1998 and $1,965,000
 on October 31, 1998.  At such time as the Company fails to pursue the
 restructuring plan actively, any prior breach of the minimum consolidated
 tangible net worth covenant will be reinstated and monthly payments of
 principal of $575,000 will be required thereafter until maturity of the credit
 on October 31, 1998.  ING Capital has reserved to itself the right to consent
 to the actual terms of the restructuring plan.  See Item 2 (Management's
 Discussion and Analysis of Financial Condition and Results of Operations -
 Liquidity and Capital Resources).

 In March 1996, the Company paid a fee of $100,000 to ING Capital in
 consideration for certain modifications to the Company's credit agreement.

4. STOCKHOLDERS' EQUITY

 At the Annual Meeting of Shareholders held on June 10, 1997, the Company's
 shareholders approved the amendment of the Aviva Petroleum Inc. 1995 Stock
 Option Plan (the "Plan").  The amendment increased the 200,000 shares reserved
 for options to be awarded to non-employee directors to 400,000 shares.  In
 addition, the amendment provides for the grant, on July 1, 1997 and on each
 subsequent July 1, to each non-employee director who has served in such
 capacity for at least the entire preceding calendar year of an option to
 purchase 5,000 shares of the Company's common stock (the "Annual Option
 Awards"), exercisable as to 2,500 shares on the first anniversary of the date
 of grant and as to the remaining shares on the second anniversary thereof.
 Except for the vesting provisions relating to the Annual Option Awards, the
 provisions of the Plan relating to vesting of such options, the determination
 of the exercise prices thereof and other terms of such options remain
 unchanged.

                                       7
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)


 The following is a summary of the activities under the Company's stock option
 plans since December 31, 1996:
<TABLE>
<CAPTION>
 
                                         Number of
                                       Shares Covered
                                         by Options              Price
                                       --------------      ------------------
<S>                                     <C>                <C>      
                                                                 
  Outstanding at December 31, 1996         529,500         $   0.74  -  $9.71
  Granted                                   45,000             0.51  -   0.52
  Expired or cancelled                     (20,000)                      5.93  
                                           -------         ------------------
  Outstanding at September 30, 1997        554,500         $   0.51  -  $9.71
                                           -------         ------------------
 
</TABLE>
 As of September 30, 1997, approximately 445,000 shares were represented by
 options which were exercisable under the plans.

5. SEVERANCE EXPENSE

 The Board of Directors had charged a committee of the Board with the task of
 reviewing the Company's general and administrative expenses and making
 recommendations as to the reduction of such expenses.  On March 18, 1996, the
 Board, acting on one of such committee's recommendations, determined to
 terminate the employment of the Executive Vice President and Chief Operating
 Officer of the Company (the "Officer") effective on June 1, 1996.  In
 connection with the severance arrangements between the Company and the Officer,
 the Company incurred costs of $172,000.
 
 On July 25, 1996, the above mentioned committee was dissolved and its function
 was assumed by the entire Board of Directors.  In the third quarter of 1996,
 the Company incurred an additional $24,000 of severance expense relating to the
 termination of certain employees affected by the cost reduction program.
 
6. COMMITMENTS AND CONTINGENCIES
 
 The Company, along with its co-owner (referred to collectively as the "Co-
 owners"), is engaged in an ongoing development and exploration program on
 concessions in Colombia.
 
 The contract obligations of the Santana concession have been met.  The Co-
 owners have, however, completed one development well in 1997 and anticipate
 drilling one additional development well and recompleting certain existing
 wells on the Santana concession during 1998.  As of September 30, 1997, future
 development costs are estimated at approximately $1.2 million, net to the
 Company's interest, for these expenditures.
 
 The Co-owners have completed a 3-D seismic survey over the Mary and Miraflor
 fields in the Santana concession and such data continues to be interpreted.
 The preliminary results confirm the presence of several prospects and leads
 previously identified from 2-D seismic data.  Depending on the results of the
 final seismic interpretation, the Co-owners may decide to drill an exploratory
 well in 1998 on the Santana concession.  The Company has not, at this time,
 committed itself to drill such a well.
 

                                       8
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)


 The Co-owners have completed their seismic obligations for the first two years
 of the La Fragua concession and were obligated to acquire additional seismic
 data for the third year.  The Co-owners determined, however, that it was not
 technically justified to explore this concession further and, accordingly,
 requested and received from Ecopetrol a change of commitment that would allow
 the Co-owners to substitute certain exploratory expenditures within the Santana
 concession for the remaining seismic commitment on the La Fragua concession.
 The indigenous people of the new commitment area, however, objected to the
 proposed exploratory work and the Co-owners were not able to comply with the
 new commitment.  The Co-owners requested and Ecopetrol has agreed to allow the
 Co-owners to surrender the concession without further expenditure.  All
 unevaluated costs relating to the La Fragua concession have been transferred
 into the Colombian amortization base.

 Seismic obligations for the first two years of the Yuruyaco concession have
 also been satisfied with the completion of a 2-D seismic program in January
 1997.    The interpretation of this seismic data has failed to establish any
 significant prospects and, accordingly, the Co-Owners intend to surrender the
 concession rather than proceeding into the third contract year.  All
 unevaluated costs relating to the Yuruyaco concession have been transferred
 into the Colombian amortization base.

 The Company's aggregate estimated future expenditures for 1997 and 1998,
 including the above referenced development costs and certain other
 miscellaneous projects, were $1.8 million at September 30, 1997.  The Company's
 ability to fund these expenditures is dependent upon the success of the
 Restructuring Plan described in note 7 and the continued deferral of current
 payments under the Company's debt repayment schedule with ING Capital.
 Moreover, any substantial increases in the amounts of the above referenced
 expenditures could adversely affect the Company's ability to fund these
 activities.
 
 Failure to fund certain of these capital expenditures could, under either the
 concession agreements or joint operating agreements with the Company's Co-
 owner, or both, result in the forfeiture of all or part of the Company's
 interest in these Colombian concessions.
 
 The Company plans to fund these exploration and development activities using
 cash provided from operations and proceeds from the issuance of common stock
 and additional long-term debt which is part of the Company's Restructuring Plan
 as described in note 7.  Risks that could adversely affect the Company's plans
 include, among others, failure to accomplish the Restructuring Plan, delays in
 obtaining the required environmental approvals and permits, increases in
 required expenditures as a result of inflation or cost overruns, interruptions
 of production, failure to produce the reserves as projected, or a decline in
 the sales prices of oil and gas.  Depending on the results of the exploration
 and development activities, substantial expenditures which have not been
 included in the Company's plan may be required.  The outcome of these matters
 cannot be projected with certainty.  See note 7.
 
 Under the terms of the contracts with Ecopetrol, 25% of all revenues from oil
 sold to Ecopetrol is paid in Colombian pesos which may only be utilized in
 Colombia.  To date, the Company has experienced no difficulty in repatriating
 the remaining 75% of such payments, which are payable in U.S. dollars.
 

                                       9
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)
                                        
 
 Activities of the Company with respect to the exploration, development and
 production of oil and natural gas are subject to stringent federal, state and
 local environmental laws and regulations including but not limited to the Oil
 Pollution Act of 1990 ("OPA 90"), the Outer Continental Shelf Lands Act, the
 Federal Water Pollution Control Act, the Resource Conservation and Recovery
 Act, and the Comprehensive Environmental Response, Compensation, and Liability
 Act. Such laws and regulations have increased the cost of planning, designing,
 drilling, operating and abandoning wells. In most instances, the statutory and
 regulatory requirements relate to air and water pollution control procedures
 and the handling and disposal of drilling and production wastes. Although the
 Company believes that compliance with environmental laws and regulations will
 not have a  material adverse effect on the Company's operations or earnings,
 risks of substantial costs and liabilities are inherent in oil and gas
 operations and there can be no assurance that significant costs and
 liabilities, including civil or criminal penalties for violations of
 environmental laws and regulations, will not be incurred. Moreover, it is
 possible that other developments, such as stricter environmental laws and
 regulations or claims for damages to property or persons resulting from the
 Company's operations, could result in substantial costs and liabilities.  For
 additional discussions on the applicability of environmental laws and
 regulations on the Company's operations, see the Company's prior audited yearly
 financial statements and the notes thereto included in the Company's latest
 annual report on Form 10-K.

 On March 25, 1997, the United States Department of the Interior Minerals
 Management Service ("MMS") promulgated a proposed rule that would implement the
 recently amended OPA 90 financial responsibility requirements.  For offshore
 facilities that have a worst case oil spill potential of more than 1,000
 barrels, the OPA 90 amendments provide that the amounts of financial
 responsibility that must be demonstrated by most facilities range from $10
 million to $35 million, with higher amounts, up to $150 million, in certain
 limited instances where the MMS believes such a level is justified by the risks
 posed by the quantity or quality of oil that is handled by the facility.   The
 proposed rule would implement the financial responsibility criteria set forth
 in amended OPA 90 based on a "worst case" oil spill discharge volume calculated
 for the facility.  The Company cannot predict whether these financial
 responsibility requirements under the OPA 90 amendments or proposed rule will
 result in the imposition of substantial additional annual costs to the Company
 in the future or otherwise materially adversely effect the Company, but the
 impact is not expected to be any more burdensome to the Company than it will be
 to other similarly situated companies involved in oil and gas exploration and
 production in the Gulf of Mexico.
 
 In July 1997, the Company received a response from the Louisiana Department of
 Environmental Quality ("LDEQ") regarding the Company's request to extend the
 date by which it must comply with the state-wide prohibition against discharges
 of produced waters to coastal waters offshore Louisiana.  A state-wide
 prohibition against such discharges went into effect on July 1, 1997.  In
 accordance with the LDEQ's response, the Company has installed a LDEQ-approved
 diffuser system designed to minimize the potential for exceeding water quality
 standards resulting from the discharge of produced water. Additionally, the
 LDEQ instructed the Company to adhere to an approved produced water discharge
 termination schedule which includes the submission of quarterly reports and
 scheduling the commencement of produced water injection into underground
 formations by December 1, 1997.

                                       10
<PAGE>
 
                     AVIVA PETROLEUM INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)


  On October 17, 1997, the Company submitted to the LDEQ a revised produced
  water discharge termination schedule that would extend the deadline to cease
  discharges of produced water from December 1, 1997, to September 1, 1998. The
  Company is currently awaiting the LDEQ's response. In the event that this
  extension is not granted by the LDEQ, then effective December 1, 1997, the
  Company will be required to curtail or even cease production from its Breton
  Sound leases until such time as the produced water can be reinjected into
  suitable underground formations. Management does not expect that compliance
  with the LDEQ's directive to reinject the produced water will have a material
  adverse effect on the Company or its operations. 

  The Company is involved in certain litigation involving its oil and gas
  activities, but unrelated to environmental contamination issues. Management of
  the Company believes that these litigation matters will not have any material
  adverse effect on the Company's financial condition or results of operations.
  
7. RESTRUCTURING PLAN

  On July 8, 1997, the Company engaged Merrick Capital Corporation ("Merrick")
  to act as its financial advisor in order to identify and accomplish certain
  strategic corporate objectives (the "Restructuring Plan").  Such objectives
  currently include the private placement of ten million new shares of the
  Company's common stock for $5 million in cash, the procurement of $15 million
  of mezzanine financing and the negotiation of a $25 million oil and gas
  reserve based credit facility.

  The Company, together with Merrick, is currently engaged in negotiations with
  various parties relating to transactions designed to accomplish the foregoing
  objectives.
 
  ING Capital has agreed to waive compliance with the Company's minimum
  consolidated tangible net worth requirement of $22 million and to defer the
  predominant portion of each monthly payment through November 1997 under the
  Company's debt repayment schedule while the Company is pursuing the
  Restructuring Plan (see note 3).  Also, see Item 2 (Management's Discussion
  and Analysis of Financial Condition and Results of Operations - Liquidity and
  Capital Resources).

                                       11
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------------------------------------------------------------------------------
OF OPERATIONS.
--------------

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
------------------------------------------------------------------------------
30, 1996
--------
<TABLE>
<CAPTION>
 
 
                                   United States   Colombia
                                    Oil     Gas       Oil     Total
                                  ------- -------  --------- -------
       <S>                         <C>    <C>      <C>        <C>
       (Thousands)
 
       Revenue - 1996              $456   $ 606     $2,041    $3,103
                                                              
       Volume variance              (77)   (457)        84      (450)
                                                              
       Price variance               (50)     43       (406)     (413)
                                                              
       Other                          -       9          -         9
                                   ----   -----     ------    ------
                                                              
       Revenue - 1997              $329   $ 201     $1,719    $2,249
                                   ====   =====     ======    ======
 
</TABLE>

Colombian oil volumes were 106,000 barrels in the third quarter of 1997, an
increase of 4,000 barrels as compared to the third quarter of 1996. Such
increase is the result of a 42,000 barrel increase primarily due to the
completion of two development wells in the latter part of 1996 and one
development well completed in June 1997 partially offset by a 38,000 barrel
decrease resulting from normal production declines.

U.S. oil volumes were 18,000 barrels in 1997, down approximately 4,000 barrels
from 1996.  This decrease  resulted primarily from the sale of the Company's
U.S. onshore properties on December 23, 1996.  U.S. gas volumes before gas
balancing adjustments were 65,000 thousand cubic feet (MCF) in 1997, down
222,000 MCF from 1996.  Such decrease is the result of a 232,000 MCF decrease
resulting from the U.S. onshore property sale, partially offset by new
production from a development well completed at Main Pass 41 during October
1996.

Colombian oil prices averaged $16.19 per barrel during the third quarter of
1997.  The average price for the same period of 1996 was $20.01 per barrel.  The
Company's average U.S. oil price decreased to $18.02 per barrel in 1997, down
from $20.73 per barrel in 1996.  In 1997 prices have been lower than in the
third quarter of 1996 due to a general decrease in world oil prices.  U.S. gas
prices averaged $2.24 per MCF in 1997 compared to $1.97 per MCF in 1996.

In addition to the above-mentioned variances, U.S. gas revenue increased
approximately $9,000 as a result of gas balancing adjustments.

Operating costs decreased approximately 11%, or $122,000.  Of such decrease,
approximately $223,000 resulted from the sale of the U.S. onshore properties
offset by a $78,000 increase for the Colombia properties and a $23,000 increase
for the U.S. offshore properties.  Depreciation, depletion and amortization
("DD&A") decreased by 11%, or $168,000 primarily as a result of lower levels of
production.

General and administrative ("G&A") expenses increased $50,000 during the third
quarter of 1997 as a result of lower drilling overhead charged to operations in
the current quarter compared with the third quarter of 1996.

                                       12
<PAGE>
 
Interest expense decreased $26,000 in the third quarter of 1997, primarily as a
result of lower average outstanding balances of long term debt.

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1996
----
<TABLE>
<CAPTION>
 
 
                                   United States    Colombia
                                    Oil     Gas        Oil     Total
                                 -------- --------  --------- --------
       <S>                       <C>      <C>       <C>       <C>
       (Thousands)
 
       Revenue - 1996            $1,446   $ 1,896    $7,170   $10,512
                                                     
       Volume variance             (261)   (1,426)     (632)   (2,319)
                                                     
       Price variance               (21)      132      (521)     (410)
                                                     
       Other                          -        19         -        19
                                 ------   -------    ------   -------
                                                     
       Revenue - 1997            $1,164   $   621    $6,017   $ 7,802
                                 ======   =======    ======   =======
 
</TABLE>

Colombian oil volumes were 337,000 barrels in the first nine months of 1997, a
decrease of 33,000 barrels as compared to the first nine months of 1996.  Such
decrease is the result of a 68,000 barrel decrease due to the Company's net
revenue interest declining from 18% to 12.6% in June 1996 when cumulative
production from the Santana concession reached the 7 million barrel threshold
specified in the risk-sharing contract, and a 81,000 barrel decrease resulting
from normal production declines, partially offset by a 116,000 barrel increase
primarily due to the completion of two development wells in the latter part of
1996 and one development well completed in June 1997.

U.S. oil volumes were 60,000 barrels in 1997, down approximately 13,000 barrels
from 1996.  Such decrease was mainly due to the U.S. onshore property sale.
U.S. gas volumes before gas balancing adjustments were 205,000 MCF in 1997, down
676,000 MCF from 1996. Of such decrease, approximately 705,000 MCF was due to
the U.S. onshore property sale, partially offset by new production from a
development well completed at Main Pass 41 during October 1996.

Colombian oil prices averaged $17.83 per barrel during the first nine months of
1997.  The average price for the same period during 1996 was $19.37 per barrel.
The Company's average U.S. oil price decreased to $19.38 per barrel in 1997,
down from $19.74 per barrel in 1996.  U.S. gas prices averaged $2.24 per MCF in
1997 compared to $2.00 per MCF in 1996.

In addition to the above-mentioned variances, U.S. gas revenue increased
approximately $19,000 as a result of gas balancing adjustments.

Operating costs decreased approximately 12%, or $438,000.  Of such decrease,
approximately $676,000 resulted from the sale of the U.S. onshore properties,
offset by a $144,000 increase for the U.S. offshore properties and a $94,000
increase for the Colombian properties.  DD&A decreased by 9%, or $462,000,
primarily due to lower levels of production.

The Company recorded write-downs to the carrying amounts of its U.S. and
Colombian oil and gas properties of $1,986,000 and $11,413,000 at March 31, 1997
and June 30, 1997, respectively.  The U.S. write-down at March 31 was primarily
due to lower oil and gas prices, whereas the Colombian write-down at June 30 was
mainly due to a downward revision (523,000 barrels) of the Company's Colombian
proved oil reserves and lower prices.

                                       13
<PAGE>
 
G&A expenses declined $213,000 as a result of a cost reduction program
implemented by the Company during the first quarter of 1996.  This program has
targeted all categories of G&A.  The largest decreases, however, have resulted
from reductions in the number of employees, officers and directors of the
Company.

The Company incurred $196,000 of severance expense in the first nine months of
1996 relating to the termination of the Executive Vice President and Chief
Operating Officer of the Company and certain other employees.  For more
information regarding such terminations see Note 5 of Notes to Condensed
Consolidated Financial Statements.  The Company has not incurred any such
severance expense in 1997.

Interest expense was $104,000 lower, primarily as a result of lower average
balances outstanding in 1997.

Debt refinancing expense of $100,000 in 1996 represents a fee paid to ING
Capital in consideration for certain modifications to the Company's credit
agreement.  See Note 3 of Notes to Condensed Consolidated Financial Statements.

Income taxes were $497,000 lower in 1997 primarily due to Colombian deferred tax
benefits resulting from the write-down of the carrying amount of the Company's
Colombian oil and gas properties.  See Note 2 of Notes to Condensed Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Since December 31, 1996, costs incurred in oil and gas property acquisition,
exploration and development activities by the Company totaled approximately $2.4
million, almost all of which was incurred in Colombia.  These activities were
funded by cash provided by operating activities.

As described in Note 6 of Notes to Condensed Consolidated Financial Statements,
the Company has aggregate remaining estimated capital expenditures for 1997 and
1998 of $1.8 million at September 30, 1997.  Delays in obtaining the required
environmental approvals and permits on a timely basis and construction delays
could both, through the impact of inflation, increase the required expenditures.
Cost overruns resulting from factors other than inflation could also increase
the required expenditures.  Historically, the inflation rate of the Colombian
peso has been in the range of 20-30% per year.  Devaluation of the peso against
the U.S. dollar has historically been slightly less than the inflation rate in
Colombia.  The Company has historically funded capital expenditures in Colombia
by converting U.S. dollars to pesos at such time as the expenditures have been
made.  As a result of the interaction between peso inflation and devaluation of
the peso against the U.S. dollar, inflation, from the Company's perspective, has
not been a significant factor.  During 1994, the first half of 1995, and 1996,
however, devaluation of the peso was substantially lower than the rate of
inflation of the peso, resulting in an effective inflation rate in excess of
that of the U.S. dollar.  There can be no assurance that this condition will not
occur again or that, in such event, there will not be substantial increases in
future capital expenditures as a result.  Due to Colombian exchange controls and
restrictions and the lack of an effective market, it is not feasible to hedge
against the risk of net peso inflation against the U.S. dollar and the Company
has not done so.

The Company is a party to a credit agreement with ING (U.S.) Capital Corporation
("ING Capital") pursuant to which the borrower thereunder may borrow up to $25
million, subject to a borrowing base the determination of which is predicated on
the Company's U.S. and Colombian reserves and which is redetermined annually.
As of September 30, 1997, the borrowing base permitted and the outstanding loan
balance was $7,765,000.  Borrowings under the credit agreement bear interest at
the ING Capital prime rate (8.5% at September 30, 1997) plus 1% per annum or, at
the Company's option, a fixed rate based on the London Interbank Offered Rate
for a portion or portions of the outstanding indebtedness.  The borrower under
the credit agreement is Neo Energy, Inc., a wholly owned subsidiary of the
Company and the owner of the Company's interests in the Colombian concessions.
The indebtedness under the credit agreement is guaranteed by the Company and
certain other subsidiaries, including the wholly owned subsidiary that is the
owner of substantially 

                                       14
<PAGE>
 
all of the Company's domestic oil and gas properties. The loan, among other
things, prohibits the payment of dividends by the Company and requires the
maintenance of certain financial ratios. In addition, the Company is required by
the terms of the credit agreement to maintain a minimum consolidated tangible
net worth of $22,000,000.
 
As a result of the write-downs of the capitalized costs of the Company's oil and
gas properties and equipment reflected in the accompanying Condensed
Consolidated Financial Statements, the Company has not been in compliance with
its minimum consolidated tangible net worth covenant since June 30, 1997.
Moreover, the Company's estimates of its cash flow through December 31, 1997
indicated that it would be unable to meet its then existing principal repayments
scheduled for the five months ending December 31, 1997.
 
Accordingly, on July 8, 1997, the Company engaged Merrick Capital Corporation
("Merrick") to act as its financial advisor in order to effect the Restructuring
Plan described in Note 7 to the Condensed Consolidated Financial Statements.
Pending effectuation of the Restructuring Plan, ING Capital has waived
compliance by the Company with its minimum consolidated tangible net worth
covenant and has reduced the principal payments required for the four months
ending November 30, 1997 to $25,000 per month and rescheduled repayment of the
remaining principal as follows:  $575,000 per month for the ten months ending
September 30, 1998 and $1,965,000 on October 31, 1998.  At such time as the
Company fails to pursue the Restructuring Plan actively, any prior breach of the
minimum consolidated tangible net worth covenant will be reinstated and monthly
payments of principal of $575,000 will be required thereafter until maturity of
the credit on October 31, 1998. The Company, together with Merrick, is currently
engaged in negotiations with various parties relating to transactions designed
to accomplish the objectives of the Restructuring Plan.  ING Capital has
reserved to itself the right to consent to the actual terms of the Restructuring
Plan.
 
If the Restructuring Plan is not effected, management of the Company will
endeavor to obtain additional capital by means of equity issues or sales of
assets.  Only additional equity issues will, however, assist the Company in
meeting the existing minimum consolidated tangible net worth covenant if then
reinstated.  There is no assurance that ING Capital would, under such
circumstances, waive prior defaults under the Company's minimum consolidated
tangible net worth covenant even if management were able to secure additional
capital through the issuance of equity. The Company is not currently exploring
alternative sources of equity capital.

Other risks that could adversely affect the Company's plans include, among
others, delays in obtaining the required environmental approvals and permits,
increases in required expenditures as a result of inflation or cost overruns,
interruptions of production, failure to produce the reserves as projected, or a
further decline in the sales prices of oil and gas.  Depending on the results of
the exploration and development activities, substantial expenditures which have
not been included in the Company's plan may be required.  The outcome of these
matters cannot be projected with certainty.  For information regarding the risks
relating to the Company's business, see Note 6 of Notes to Condensed
Consolidated Financial Statements and the Company's Annual Report on Form 10-K.

With the exception of historical information, the matters discussed in this
quarterly report contain forward-looking statements that involve risks and
uncertainties.  Although the Company believes that its expectations are based on
reasonable assumptions, it can give no assurance that such expectations will be
realized.  Important factors that could cause actual results to differ
materially from those in the forward-looking statements herein include the
timing and extent of changes in commodity prices for oil and gas, the extent of
the Company's success in discovering, developing and producing reserves,
political conditions in Colombia, conditions of the capital markets and equity
markets during the periods covered by the forward-looking statements and its
ability to effect the Restructuring Plan, as well as other factors.

                                       15
<PAGE>
 
PART II - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

a) Exhibits
-----------

10.1  Aviva Petroleum Inc. 1995 Stock Option Plan, as amended (filed as Appendix
      A to the Company's definitive Proxy Statement for the Annual Meeting of
      Shareholders dated June 10, 1997, and incorporated herein by reference).

10.2  Amendment to the ING Capital Credit Agreement dated August 12, 1997 (filed
      as exhibit 10.2 to the Company's quarterly report on Form 10-Q for the
      quarter ended June 30, 1997, File No. 0-22258 and incorporated herein by
      reference).

10.3  Amended and Restated Aviva Petroleum Inc. Severance Benefit Plan dated
      September 30, 1997.

27.1  Financial Data Schedule.

b) Reports on Form 8-K
----------------------

The Company filed the following Current Reports on Form 8-K during and
subsequent to the end of the third quarter:

Date of 8-K         Description of 8-K
-----------         ------------------

July 10, 1997       Submitted a copy of the Company's Press Release dated July
                    10, 1997, reporting on the Company's Colombian activities.

                                       16
<PAGE>
 
                                   SIGNATURES
                                   ----------

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

                                         AVIVA PETROLEUM INC.



Date:  November 12, 1997                 /s/ Ronald Suttill
                                         -------------------------------------
                                         Ronald Suttill
                                         President and Chief Executive Officer
 



                                         /s/ James L. Busby
                                         -------------------------------------
                                         James L. Busby
                                         Treasurer and Secretary
                                         (Chief Accounting Officer)

                                       17
<PAGE>
 
                               INDEX TO EXHIBITS


Exhibit
Number    Description of Exhibit
------    ----------------------

 *10.1    Aviva Petroleum Inc. 1995 Stock Option Plan, as amended (filed as
          Appendix A to the Company's definitive Proxy Statement for the Annual
          Meeting of Shareholders dated June 10, 1997, and incorporated herein
          by reference).

 *10.2    Amendment to the ING Capital Credit Agreement dated August 12, 1997
          (filed as exhibit 10.2 to the Company's quarterly report on Form 10-Q
          for the quarter ended June 30, 1997, File No. 0-22258 and incorporated
          herin by reference).

**10.3    Amended and Restated Aviva Petroleum Inc. Severance Benefit Plan dated
          September 30, 1997.
 

**27.1    Financial Data Schedule.


------------- 
*   Previously Filed
** Filed Herewith

                                      18