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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                Amendment No. 1

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

 FOR THE QUARTER ENDED JUNE 30, 1997            COMMISSION FILE NO. 0-25214

                          KELLEY OIL & GAS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                  76-0447267
  (STATE OR OTHER JURISDICTION OF                   (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NO.)


               601 JEFFERSON ST.
                  SUITE 1100
                HOUSTON, TEXAS                          77002
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)           (ZIP CODE)

       Registrant's telephone number, including area code: (713) 652-5200

        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 [ ]

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

            TITLE OF CLASS                      OUTSTANDING AT JULY 31, 1997
            --------------                      ----------------------------
             Common Stock                                98,556,094
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<PAGE>
        Kelley Oil and Gas Corporation hereby amends and restates the following
sections of its Quarterly Report on Form 10-Q for the quarter ended June 30,
1997 to include the effect of cumulative preferred stock dividends, whether
declared or not, on net loss applicable to common stock and on loss per share
disclosures:

          Part 1, Item 1.     Financial Statements

          Part 2, Item 6.     Exhibits and Reports on Form 8-K

        See Note 1 in the Notes to Consolidated Financial Statements (Unaudited)
for futher discussion of the restatement.

FORWARD-LOOKING STATEMENTS

        FROM TIME TO TIME, THE COMPANY MAY PUBLISH FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, RELATING TO
MATTERS SUCH AS ANTICIPATED OPERATING AND FINANCIAL PERFORMANCE, BUSINESS
PROSPECTS, DEVELOPMENTS AND RESULTS OF THE COMPANY. ACTUAL PERFORMANCE,
PROSPECTS, DEVELOPMENTS AND RESULTS MAY DIFFER MATERIALLY FROM ANY OR ALL
ANTICIPATED RESULTS DUE TO ECONOMIC CONDITIONS AND OTHER RISKS, UNCERTAINTIES
AND CIRCUMSTANCES PARTLY OR TOTALLY OUTSIDE THE CONTROL OF THE COMPANY,
INCLUDING RATES OF INFLATION, NATURAL GAS PRICES, RESERVE ESTIMATES, RATES AND
TIMING OF FUTURE PRODUCTION OF OIL AND GAS, AND CHANGES IN THE LEVEL AND TIMING
OF FUTURE COSTS AND EXPENSES RELATED TO DRILLING AND OPERATING ACTIVITIES.

        WORDS SUCH AS "ANTICIPATED," "EXPECT," "ESTIMATE," "PROJECT" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS MAY BE MADE IN MANAGEMENT'S STATEMENTS (ORALLY OR IN WRITING)
INCLUDING PRESS RELEASES, AND IN FILINGS OF THE SEC, INCLUDING THIS REPORT.

                                       1
<PAGE>
                  KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
                                      INDEX


PART I.  FINANCIAL INFORMATION                                             PAGE
                                                                           ----
  Consolidated Balance Sheets as of June 30, 1997
    (unaudited) and December 31, 1996 ......................................  3

  Consolidated Statements of Income (Loss) for the three
    months and six months ended June 30, 1997 and 1996 (unaudited)..........  4

  Consolidated Statements of Cash Flows for the six months ended
    June 30, 1997 and 1996 (unaudited)......................................  5

  Notes to Consolidated Financial Statements (unaudited)....................  6

PART II.  OTHER INFORMATION.................................................  8

                                        2
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                  KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                        JUNE 30,    DECEMBER 31,
                                                                          1997          1996
                                                                        --------      ------
                                                                        (UNAUDITED)
<S>                                                                     <C>           <C>
ASSETS:
  Cash and cash equivalents.............................................$     80      $  4,070
  Accounts receivable...................................................  17,472        22,519
  Accounts receivable - drilling programs...............................     668         1,533
  Prepaid expenses and other current assets.............................   1,228         1,347
                                                                        --------      --------
    Total current assets................................................  19,448        29,469
                                                                        --------      --------
  Oil and gas properties, successful efforts method:
    Unproved properties, net............................................  10,712        12,521
    Properties subject to amortization.................................. 362,306       338,794
  Pipelines and other transportation assets, at cost ...................   4,689         4,689
  Furniture, fixtures and equipment.....................................   2,089         1,700
                                                                        --------      --------
                                                                         379,796       357,704
  Less:  Accumulated depreciation, depletion and amortization...........(211,301)     (199,236)
                                                                        --------      --------
    Total property and equipment, net................................... 168,495       158,468
                                                                        --------      --------
  Other non-current assets, net.........................................   1,455         1,290
                                                                        --------      --------
    TOTAL ASSETS........................................................$189,398      $189,227
                                                                        ========      ========

LIABILITIES:
  Accounts payable and accrued expenses.................................$ 28,952      $ 31,093
  Accounts payable - drilling programs..................................     689         4,416
                                                                        --------      --------
    Total current liabilities...........................................  29,641        35,509
                                                                        --------      --------
  Long term debt........................................................ 194,216       184,253
                                                                        --------      --------
    TOTAL LIABILITIES................................................... 223,857       219,762
                                                                        --------      --------

STOCKHOLDERS' DEFICIT:
  Preferred stock, $1.50 par value, 20,000,000 shares
    authorized at June 30, 1997 and December 31, 1996;
    1,745,431 and 1,745,500 shares outstanding at
    June 30, 1997 and December 31, 1996, respectively
    (liquidation value at June 30, 1997 and December 31, 1996
    of $45,927 and $48,219, respectively)...............................   2,618         2,618
  Common stock, $.01 par value, 200,000,000 shares authorized
    at June 30, 1997 and December 31, 1996, respectively;
    98,495,094 and 98,293,458 shares outstanding at June 30, 1997
    and December 31, 1996, respectively.................................     985           983
  Additional paid-in capital............................................ 273,297       273,096
  Accumulated deficit...................................................(311,359)     (307,232)
                                                                        --------      --------
    TOTAL STOCKHOLDERS' DEFICIT......................................... (34,459)      (30,535)
                                                                        --------      --------
  TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT...........................$189,398      $189,227
                                                                        ========      ========
</TABLE>
See Notes to Consolidated Financial Statements.

                                        3
<PAGE>
                  KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   RESTATED
                                               -----------------------------------------------
                                                THREE MONTHS ENDED          SIX MONTHS ENDED
                                                     JUNE 30,                   JUNE 30,
                                               ---------------------     ---------------------
                                                 1997         1996          1997        1996
                                               --------     --------     --------     --------
<S>                                            <C>          <C>          <C>          <C>
Oil and gas revenues...........................$ 15,642     $ 12,619     $ 34,040     $ 25,323
Gas marketing revenues, net....................     536          314        1,085          708
Interest and other income......................      71          215          234          529
                                               --------     --------     --------     --------
  Total revenues...............................  16,249       13,148       35,359       26,560
                                               --------     --------     --------     --------
Production expenses............................   2,561        2,595        4,931        5,167
Exploration costs..............................     833        1,413        1,882        3,053
General and administrative expenses............   1,807        2,193        3,987        4,826
Interest and other debt expenses...............   6,211        5,911       12,039       12,309
Restructuring expense..........................      --        2,000           --        2,000
Depreciation, depletion and amortization.......   6,085        3,872       12,065        9,553
                                               --------     --------     --------     --------
  Total expenses...............................  17,497       17,984       34,904       36,908
                                               --------     --------     --------     --------
Net income (loss) before income taxes..........  (1,248)      (4,836)         455      (10,348)
Income taxes...................................      --           --           --           --
                                               --------     --------     --------     --------
Net income (loss)..............................  (1,248)      (4,836)         455      (10,348)
Less: Preferred stock dividends................  (1,146)        (688)      (2,291)      (2,291)
                                               ---------    --------     --------     --------
Net loss applicable to common stock............$ (2,394)    $ (5,524)    $ (1,836)    $(12,639)
                                               ========     ========     ========     ========
Loss per share:
  Primary and assuming full dilution:
    Net loss...................................$   (.02)    $   (.06)    $   (.02)    $   (.15)
                                               ========     ========     ========     ========
Average common and common equivalent shares
  outstanding:
  Primary and assuming full dilution...........  98,338       95,391       98,316       81,848
</TABLE>
See Notes to Consolidated Financial Statements.

                                        4
<PAGE>
                  KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       SIX MONTHS ENDED JUNE 30,
                                                                       ------------------------
                                                                         1997           1996
                                                                       ---------      ---------
<S>                                                                    <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)....................................................$    455       $(10,348)
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation, depletion and amortization...........................  12,065          9,553
    Dry hole and impairment costs......................................      --            201
    Accretion and amortization of debt expenses........................   2,128          2,684
    Restructuring expense..............................................      --          1,716
  Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable.........................   5,912         (1,708)
    Decrease (increase) in prepaid expenses and other current assets...     119         (1,313)
    Increase in other non-current assets...............................    (330)        (1,629)
    Decrease in accounts payable and accrued expenses..................  (5,868)        (4,297)
                                                                       --------       --------
  Net cash provided by (used in) operating activities..................  14,481         (5,141)
                                                                       --------       --------
INVESTING ACTIVITIES:
  Capital expenditures................................................. (22,092)       (16,346)
  Proceeds from sale of equipment......................................      --            293
                                                                       --------       --------
  Net cash used in investing activities................................ (22,092)       (16,053)
                                                                       --------       --------
FINANCING ACTIVITIES:
  Proceeds from long term borrowings...................................  42,000          8,000
  Principal payments on long term borrowings........................... (34,000)       (30,000)
  Proceeds from sale of common stock, net..............................     203         43,961
  Dividends on preferred stock.........................................  (4,582)            --
                                                                       --------       --------
  Net cash provided by financing activities............................   3,621         21,961
                                                                       --------       --------
Increase (decrease) in cash and cash equivalents.......................  (3,990)           767
Cash and cash equivalents, beginning of period.........................   4,070          6,352
                                                                       --------       --------
Cash and cash equivalents, end of period...............................$     80       $  7,119
                                                                       ========       ========
</TABLE>
See Notes to Consolidated Financial Statements.

                                        5
<PAGE>
                  KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

        The accompanying unaudited interim consolidated financial statements of
Kelley Oil & Gas Corporation (the "Company") have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
in accordance with generally accepted accounting principles for interim
financial information. These financial statements reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair statement in
all material respects of the results for the interim periods presented. The
results of operations for the periods ended June 30, 1997 are not necessarily
indicative of results to be expected for the full year. The accounting policies
followed by the Company are set forth in Note 1 to the financial statements in
its Annual Report on Form 10-K for the year ended December 31, 1996. These
unaudited consolidated interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's 1996 Annual Report on Form 10-K.

        Certain 1996 financial statement items have been reclassified to conform
to the 1997 presentation.

        The Company has restated net loss applicable to common stock and net
loss per common share on the Consolidated Statements of Income (Loss) for the
three months and six months ended June 30, 1997 and 1996 to include the effect
of cumulative preferred stock dividends, whether declared or not. These amounts,
as previously reported, included the effect of preferred stock dividends only
when declared. The restatement for the three months ended June 30, 1997 and 1996
changes previously reported net loss applicable to common stock from $(5.8)
million and $(4.8) million to $(2.4) million and $(5.5) million, respectively
and changes previously reported net loss per common share from $(0.06) and
$(0.05) to $(0.02) and $(0.06), respectively. The restatement for the six months
ended June 30, 1997 and 1996 changes previously reported net loss applicable to
common stock from $(4.1) million and $(10.3) million to $(1.8) million and
$(12.6) million, respectively and changes previously reported net loss per
common share from $(0.04) and $(0.13) to $(0.02) and $(0.15), respectively.

NOTE 2 - PREFERRED STOCK

        In January 1996, the Company suspended the payment of the quarterly
dividend on its $2.625 Convertible Exchangeable Preferred Stock (the "Preferred
Stock") scheduled for February 1, 1996. On April 15, 1997, the Board of
Directors of the Company declared a dividend of $2.625 per preferred share
(approximately $4.6 million) which was paid on May 1, 1997. Future dividends on
the Preferred Stock are prohibited under the Company's existing credit facility.
As of June 30, 1997, $2.3 million or $1.31 per share in dividends were in
arrears, increasing the total liquidation value to $45.9 million or $26.31 per
share.

NOTE 3 - EARNINGS PER SHARE

        In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings Per
Share." SFAS 128 establishes standards for computing and presenting earnings per
share ("EPS") and applies to entities with publicly held common stock or
potential common stock. This statement simplifies the standards for computing
EPS previously found in Accounting Principles Board Opinion No. 15, "Earnings
Per Share," and makes them comparable to international EPS standards. This
statement is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. This statement requires restatement of all prior-period EPS data
presented. Considering the guidelines as prescribed by SFAS 128, management
believes that the adoption of this statement will not have a material effect on
EPS and thus pro forma EPS, as suggested for all interim and annual periods
prior to required adoption, have been omitted.

NOTE 4 - LEGAL PROCEEDINGS

        As previously disclosed, following Kelley Oil's announcement of the
initial proposal for the consolidation in August 1994, four separate lawsuits
were filed against Kelley Oil and its directors relating to the consolidation.
In November 1994, Kelley Oil entered into a memorandum of understanding with the
plaintiffs in three of the lawsuits, providing for a proposed settlement based
on a revised consolidation proposal negotiated by a special committee of Kelley
Oil's non-management directors and the settling plaintiffs. A stipulation and
agreement of compromise, settlement and release reflecting the terms of the
proposed settlement was filed in the United States District Court for the
Southern District of Texas on November 23, 1994. At a hearing held on the same
date, the court approved the consolidation of all four lawsuits and the
certification of a Unitholder class requested by the settling parties. On March
3, 1995, following a hearing on the fairness of the settlement, the court
entered a final order approving the settlement, dismissing the consolidated
lawsuits with prejudice and reducing the award of attorneys' fees and

                                        6
<PAGE>
disbursements contemplated by the stipulation to $1.5 million, plus interest
from March 3, 1995 through the payment date. On April 29, 1997, the U.S. Court
of Appeals for the Fifth Circuit affirmed the final judgment and order of the
District Court. On August 4, 1997, the Company made a cash payment of $1.7
million which included $0.2 million of interest (fully accrued at June 30,
1997).

                                        7
<PAGE>
                           PART II. OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits:

               EXHIBIT
               NUMBER                     EXHIBIT
               -------                    -------
                 27     Amended Financial Data Schedule (included only in the
                        electronic filing of this document)

        (b)    Reports on Form 8-K:

               No reports on Form 8-K were filed by the Registrant during the
               second quarter of 1997.

                                        8
<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.


                                       KELLEY OIL & GAS CORPORATION



Date: March 27, 1998                   By: /s/ DAVID C. BAGGETT
                                           David C. Baggett
                                           Senior Vice President and
                                           Chief Financial Officer
                                           (Duly Authorized Officer)
                                           (Principal Financial Officer)

                                        9