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

                                    FORM 10-K
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

                         SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

        For the fiscal year ended December 31, 1996 
OR 
[ ] TRANSITION REPORT TO SECTION 13 OR 15(D) OF THE
     SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

    For the transition period from ______________ to ___________________.

                           Commission File No. 0-9946

                               GOLDEN OIL COMPANY
             (Exact name of Registrant as specified in its charter)

           
          DELAWARE                                           84-0836562
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

550 POST OAK BOULEVARD, SUITE 550, HOUSTON, TEXAS            77027
   (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, 
including area code:
                                                             (713) 622-8492

Securities registered pursuant 
to Section 12(b) of the Act:                                  NONE
                                                              ----

Securities registered pursuant 
to Section 12(g) of the Act:

                          COMMON STOCK, $.01 PAR VALUE
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

As of February 7, 1997, there were outstanding 1,424,291 shares of the
Registrant's Common Stock, $.01 par value, and the aggregate market value held
by non-affiliates was approximately $463,029.

DOCUMENTS INCORPORATED BY REFERENCE

        The information called for by Part III, Items 10, 11, 12 and 13 is
incorporated herein by reference to the Registrant's definitive Proxy Statement
to be filed in connection with the Registrant's 1996 Annual Meeting within 120
days from the end of the fiscal year.

                                     1 of 44
<PAGE>
PART I

ITEM 1.    BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS
        Golden Oil Company (the "Company") is a diversified business whose
current scope of operations emphasizes oil and gas production and development.
Since 1988 the Company has strengthened its oil and gas operations through a
number of corporate transactions, primarily involving asset purchases and
mergers. In addition, the Company has undertaken transactions in the commercial
real estate sector, and the Company is considering further diversification.
Subject to a number of factors including the success of its current secondary
recovery project, future prices obtainable for oil and gas production and
properties, the availability of financing and opportunities presented for
corporate transactions, management anticipates that the Company will continue to
reposition itself and to diversify from the independent oil and gas sector.

        Following approval by its stockholders in 1986, the Company implemented
proposals to reincorporate in Delaware, to approve issuance of a new class of
common stock ("Class B Common") and to declare a warrant dividend on its shares
of common stock ("Common Stock"). The Class B Common has certain enhanced voting
rights compared to the Common Stock. As of December 31, 1996 the Company had
outstanding 1,424,291 shares of Common Stock and 22,254 shares of Class B
Common.

        During September 1989, the Company acquired two public oil and gas
exploration and production companies, Regal Petroleum, Ltd. and the former
Golden Oil Company (now named Golden Resources, Inc.), by merging them into
Company subsidiaries. At the Company's Annual Meeting held during December 1989,
stockholders approved a change of the parent corporation's name to Golden Oil
Company. During 1992 the Company purchased the oil and gas related assets of
Cobb Resources Corporation ("Cobb"). The Company's stock is traded on the
National Association of Securities Dealers Automated Quotation System ("Nasdaq")
for small capitalization companies under the symbol "GOCO".

        Within the oil and gas production and development sector, the Company
aims to increase its net reserves, cash flow and scope of operations primarily
through development of Company-operated properties and possible acquisitions.
The Company believes that, in recent years, factors including price volatility
and other unfavorable economic conditions affecting the independent oil and gas
industry have driven operators to seek economies of scale through consolidation
and administrative cost cutting, and to diversify or reposition operations away
from oil and gas exploration and production. Management believes that such
factors may continue in the future.

        Primarily due to acquisitions and development as discussed above, the
Company's estimated proved reserves of oil increased from 152,000 barrels at
December 31, 1988 to 1,614,000 barrels at December 31, 1996 and estimated
reserves of natural gas have increased from 1,040,000 Mcf of gas at December 31,
1988 to 1,463,000 Mcf of gas at December 31, 1996.

        Currently the Company's oil and gas production is concentrated in the
San Juan Basin, New Mexico and Osage County, Oklahoma. In order to improve
return on assets, the Company is focusing on controlling and enhancing the
operating performance of its properties. Also, the Company is concentrating on
development of secondary reserve potential through its waterflood project in its
South Dog Creek field in Osage County, Oklahoma. Since initial discovery and
development by the 
                                       2
<PAGE>
Company in the late 1970s, the South Dog Creek field has produced over 5,000,000
barrels of primary production.

        Primary production of the Company's producing properties is in the
latter stages of economic operation in both Oklahoma and New Mexico. Field work
necessary to develop the South Dog Creek secondary reserve potential, now
classified as "proved undeveloped", continues to be accorded a high operational
priority. The Company has obtained permits from the Environmental Protection
Agency ("EPA") necessary for water injection throughout the field, and has
initiated a limited waterflood injection program. The program involves
converting certain marginally producing wells to water injectors and water
supply wells and reworking other producing wells and well equipment to increase
the wells' fluid volume capacity. The Company is encouraged that its joint
working interest owners, which include companies sophisticated in oil and gas
operations, have elected to join such development. Initial work has been
completed on the Company's principal lease within the field, and water is being
injected at gradually increasing volumes to monitor the effect of injection
pressure on the subsurface formation. Initial water injection rates are planned
at approximately 600 barrels per well per day. To date, the field has not
exhibited any substantial, sustained production response from water injection;
however, this is believed to be due primarily to the low fluid levels injected
to date relative to the cumulative fluid depletion of the field. On a cumulative
basis, approximately 250,000 barrels of water have been injected into the
formation under the current program.

        The Company does not anticipate significant increases in production
volumes until further development occurs. The timing and extent of development
of the waterflood injection project is subject to, among other factors, the
results of production response from the development, the availability of
additional financing for future development and prices obtainable for oil and
gas production. As of December 31, 1996 a substantial majority of the Company's
total proved reserves, approximately $12,000,000 of the Company's pretax
estimated discounted future net revenues, are classified as proved undeveloped
reserves. Since most or all proved undeveloped reserves are related to the
Oklahoma waterflood project, the success or failure of the waterflood project is
of vital importance to the Company's future.

        In recent years, volatility in product prices have caused substantial
fluctuation in the projected value of the Company's estimated future net
revenues from oil and gas production. In the opinion of management, one result
of price fluctuations has been to diminish the general attractiveness of
exploration drilling generally. Other factors, such as governmental tax, general
regulatory and environmental policies, also are believed to have had a negative
impact. Accordingly, management has curtailed or eliminated "wildcat"
exploration drilling by the Company on unproven acreage, while emphasizing
development and extension of proved reserves and field operations. Another
effect of the many adverse economic factors impacting the small oil and gas
sector has been to increase the relative attractiveness of ongoing
diversification and of repositioning of the Company away from the small oil and
gas sector.

DESCRIPTION OF BUSINESS

        OIL AND GAS OPERATIONS. As part of its business activities the Company
owns, acquires and sells oil and gas leases and other mineral interests and
produces oil and gas. In addition, the Company has conducted exploration and
development activities for its own account as well as for joint venture or
partnership accounts. If exploration is undertaken, the Company generally
attempts to include third party participants. The Company has no current plans
to conduct developmental or exploratory drilling 
                                       3
<PAGE>
projects during 1997 other than with respect to further development of its
waterflood injection program.

        GOVERNMENT REGULATION. The domestic production and sale of oil and gas
are subject to regulation by the Department of Energy. Rates of production have
for many years been subject to federal and state conservation laws, and the
petroleum industry has been subject to federal tax laws dealing specifically
with the industry. The Company is subject to various federal, state and local
regulations regarding, among other things, environmental and ecological matters.
While environmental laws may potentially require significant capital outlays, to
date these laws and related regulations have not materially adversely affected
the Company's business.

        EMPLOYEES. As of December 31, 1996, the Company had 12 full time
employees, including field personnel. The Company also regularly employs part
time personnel and retains outside professionals who provide accounting, legal,
engineering and other services.

        COMPETITION. The Company faces intense competition in the search for and
the acquisition of oil and gas reserves; in the marketing of oil and gas
production; and in the raising of funds to purchase or develop oil and gas
properties. The Company's competitors in the oil and gas sector include
companies and individuals, many of which have financial resources, staffs and
facilities substantially greater than those of the Company.

        Despite negative factors such as product price fluctuations, competition
remains intense for acquisition of oil and gas prospects and properties in the
size range which is realistic for the Company to consider. The Company's ability
to sustain or increase its oil and gas operations depends primarily on the
relative success experienced with future development of its existing properties
and upon completing corporate transactions.

        Competitive conditions in marketing the Company's products are
influenced by factors including the volume of production of other domestic crude
oil and of crude oil imports; the proximity of pipelines to producing
properties; the regulation by states of allowable rates of production; and the
regulation by federal authorities of the marketing of oil and natural gas. All
of the foregoing variable factors are influenced by economic and political
forces beyond the Company's control and which cannot be predicted with
assurance.

        ADDITIONAL INFORMATION. The Company's business does not presently
require expenditure of substantial funds for research and development. Sales of
natural gas tend to be influenced by factors including local demand and the
availability of gas transportation. Both oil and gas prices tend to respond to
seasonal weather conditions, with increased sales prices during the colder
winter months. The Company does not believe that any other material aspects of
its business are significantly seasonal in nature. During 1996, sales to three
purchasers accounted for approximately 46%, 34% and 17%, respectively, of the
Company's total revenues. Sales to three purchasers accounted for approximately
55%, 28%, and 14% for the year ended December 31, 1995 and 45%, 23%, and 14% for
the year ended December 31, 1994 of the Company's total revenues. No other
customer accounted for more than ten percent of the Company's total revenues
during those periods. In the opinion of management, if the Company should lose
any of its present customers, other customers for the Company's oil and gas
production would be available on terms substantially similar to those available
from its major customers at this time. Due to volatility in oil prices and the
Company's vulnerability to another severe price downturn as was experienced in
1994, the Company remains alert to opportunities to enter into fixed price oil
contracts. At January 1, 1997 the Company had approximately 20% of its estimated
                                       4
<PAGE>
monthly oil production under a fixed price arrangement with one purchaser at an
average price of $21.17 per barrel. Effective February 1, 1997 the Company
entered into new contractual arrangements to increase the amount of its total
monthly oil production under fixed price arrangements to approximately 60% of
its monthly oil production. The combined fixed price arrangements with the two
purchasers provide an average price of $22.00 per barrel through July 1997.

ITEM 2.    PROPERTIES.

        OFFICE FACILITIES. The Company's headquarters office is located in a
commercial office building at 550 Post Oak Boulevard, Suite 550, Houston, Texas
77027. The Company holds an interest of approximately 23% of a limited
partnership which owns such commercial office building. The Company leases
approximately 3,950 square feet of the total of approximately 54,000 square feet
of office space in the building under a six year lease through December 15,
2002. The Company expects to renew the lease under similar terms upon its
expiration.

        ESTIMATED OIL AND GAS RESERVE INFORMATION. Steven A. Hiraoka &
Associates, an independent petroleum engineering firm based in Golden, Colorado,
prepared the estimated reserve information for the Company and its wholly owned
subsidiaries for the year ended December 31, 1996. The presentation conforms
with Securities and Exchange Commission ("SEC") reporting regulations, which
require projection of estimated future net revenues based on the prices in
effect at the close of the most recent fiscal year. In conformity with SEC
reporting regulations, the reserve projections at December 31, 1996 were
prepared using an oil price ranging from $23.30 to $24.60 per barrel and gas
prices ranging from $1.89 to $2.75 per Mcf, which prices approximate actual year
end levels. Estimates of proved reserves based on prices in effect at December
31, 1996 have not been filed previously by the Company with, or included in
reports to, any federal authority or agency.

        Reserve estimates and estimated rates of production are inherently
uncertain and imprecise. Accordingly, all reserve data presented is subject to
continued evaluation and revision as additional information becomes available.
In this regard, it should be noted that since 1985 the petroleum industry has
experienced significant volatility in prices obtainable for its oil and gas
production and that such price volatility directly affects the estimated
quantities of oil and gas reserves that are economically recoverable.
                                       5
<PAGE>
        Based on the projected economics using prices prevailing on the closing
day of each respective year, the tables below set forth the Company's estimated
proved and proved developed oil and gas reserves owned by the Company as of the
close of the fiscal years indicated. The estimated proved and proved developed
oil and gas reserves shown below are based on economic assumptions and future
projections. The Company does not believe that such amounts necessarily
represent the reserve volumes or amounts which would be actually recoverable at
the respective dates shown.

<TABLE>
<CAPTION>
                                                                             Proved
                                             PROVED RESERVES           DEVELOPED RESERVES                         
                  AS OF                OIL (BBLS)       GAS (MCF)     OIL (BBLS)  GAS (MCF)
                  -----                ----------       ---------     ----------  ---------
          <S>                          <C>              <C>            <C>        <C>           
          December 31, 1996 (1)        1,613,995        1,462,734      593,756    1,462,734
          December 31, 1995 (2)        1,298,253          880,158      432,133      880,158
          December 31, 1994 (3)        1,477,446        1,209,079      611,326    1,209,079
</TABLE>
(1)     Amounts determined using oil prices ranging from $23.30 to $24.60 per 
        barrel of oil and gas prices ranging from $1.89 to $2.75 per Mcf 
        Includes reserves of approximately 51,000 barrels of oil and 232,000 Mcf
        of gas purchased in 1996 from interest holders in Company-operated 
        properties.

(2)     Amounts determined using oil prices ranging from $17.00 to $17.25 per
        barrel of oil and gas prices ranging from $1.00 to $1.30 per Mcf.

(3)     Amounts determined using an oil price of $17.00 per barrel of oil and
        gas prices ranging from $1.30 to $1.50 per Mcf.

                                       6
<PAGE>
PRESENT VALUE OF ESTIMATED FUTURE NET REVENUES

        The present value of estimated future net revenues before income taxes
of proved reserves (which include reserves attributable to secondary waterflood
production) of the Company at the dates indicated below was computed according
to SEC reporting requirements by discounting the aggregate estimated future net
revenues using a discount factor of 10% per year. For additional information see
the supplemental unaudited oil and gas information.

        The estimated proved and proved developed oil and gas reserves shown
below are based on economic assumptions and future projections. The Company does
not believe that such amounts necessarily represent the reserve volumes or
amounts which would be actually recoverable at the respective dates shown.

<TABLE>
<CAPTION>
                                                 Pretax Estimated Discounted
                                                      FUTURE NET REVENUES
                                                  ---------------------------
               AS OF               Total Proved         Proved Developed        Proved
                                     RESERVES              PRODUCING          UNDEVELOPED

        <S>                      <C>                   <C>                  <C>           
        December 31, 1996 (1)    $  16,758,460         $   4,461,328        $   12,297,130
        December 31, 1995 (2)    $   9,089,704         $   1,924,304        $    7,165,400
        December 31, 1994 (3)    $  10,058,290         $   2,892,890        $    7,165,400
</TABLE>
(1)     Amounts determined using oil prices ranging from $23.30 to $24.60 per
        barrel of oil and gas prices ranging from $1.89 to $2.75 per Mcf.
        Includes proved developed producing reserves with pretax estimated
        discounted future net revenues of approximately $1,082,000 purchased in
        1996 from interest holders in Company-operated properties.
(2)     Amounts determined using oil prices ranging from $17.00 to $17.25 per
        barrel of oil and gas prices ranging from $1.00 to $1.30 per Mcf.
(3)     Amounts determined using an oil price of $17.00 per barrel of oil and
        gas prices ranging from $1.30 to $1.50 per Mcf.

SECONDARY RECOVERY

        In accordance with professional engineering standards, secondary
recovery of oil and gas reserves projected to be obtainable through fluid
injection or other enhanced recovery techniques for supplementing primary
recovery are included as proved undeveloped reserves only after testing by a
pilot project or the operation of an installed program in the reservoir provides
support for the engineering analysis on which the project or program was based.
A preponderance of the Company's total proved reserves as projected above
consist of undeveloped reserve volumes and undeveloped reserve values
attributable to secondary recovery through waterflood development.

        Currently the Company's oil and gas production is concentrated in the
San Juan Basin, New Mexico and Osage County, Oklahoma. The Company is focusing
on controlling and enhancing the operating performance of its properties, and on
development of its waterflood project in its South Dog Creek field in Osage
County, Oklahoma. Since initial discovery and development by the Company, the
South Dog Creek field has produced over 5,000,000 barrels on primary production.
Primary production is in the latter stage of economic operation in both Oklahoma
and New Mexico. Work necessary to develop the field's secondary production
potential is ongoing. The Company has obtained permits from the Environmental
Protection Agency ("EPA") necessary for water injection throughout 
                                       7
<PAGE>
the field. The waterflood development program involves converting certain
marginally producing wells to water injectors and water supply wells and
reworking other producing wells and well equipment to increase the wells' fluid
volume capacity. The Company is encouraged that its joint working interest
owners have elected to join in such development. Initial work has been completed
on a portion of the field, and water is being injected at a gradually increasing
volume to monitor the effect of injection pressure on the subsurface formation.
Initial water injection rates are planned at approximately 600 barrels per well
per day. To date the field has not exhibited any substantial sustained response
from water injection; however, this is believed to be due primarily to the low
fluid levels injected to date relative to the cumulative depletion of the field.
On a cumulative basis, approximately 250,000 barrels of water have been injected
into the formation under the current program. The Company does not anticipate
significant increases in production volumes until further project development
occurs and substantial additional volumes of water have been injected. The
timing and extent of development of the waterflood injection project is subject
to, among other factors, the results of production response, the availability of
additional financing for continued development and prices obtainable for oil and
gas production.

        PRODUCTIVE WELLS AND ACREAGE. As of December 31, 1996, the Company owned
working interests in 225 gross (114.2 net) wells of which there were 210 gross
(104.1 net) oil wells and 15 gross (10.1 net) gas wells. Additionally the
Company held approximately 11,570 gross (5,525 net) producing acres.

        UNDEVELOPED ACREAGE. As of December 31, 1996, the Company held certain
undeveloped oil and gas leaseholds in New Mexico which covered approximately
4,520 gross and 4,140 net acres. The undeveloped acreage is held pursuant to
leases from landowners or governmental entities.

        PRODUCTION, UNIT PRICES AND COSTS. Information with respect to
production volumes, average unit prices and costs for the dates indicated are
set forth below:

                            YEARS ENDED DECEMBER 31,
                  ------------------------------------------------------------- 
                        1996                 1995                   1994
                  ---------------      -----------------     ------------------
                   Oil       Gas         Oil       Gas         Oil        Gas
                 (BBLS)     (MCF)      (BBLS)     (MCF)       (BBLS)     (MCF)

Production       60,998    239,512     58,626    232,655      71,931    322,986
Average Price    $19.56      $1.37     $17.12     $ 0.97      $15.84     $ 1.33

        The average production costs per unit of production (with oil and gas
converted to a common unit of measure based on six Mcf of gas to one barrel of
oil) were $9.49, $8.37 and $8.51 for the years ended December 31, 1996, 1995 and
1994, respectively.

        DRILLING ACTIVITY. The Company did not participate in the drilling of
any exploratory or development wells for the years ended December 31, 1996, 1995
and 1994.

ITEM 3.    LEGAL PROCEEDINGS.

        Neither the Company nor any of its properties is presently a party to
any material litigation, and management knows of no material litigation
presently threatened against the Company or any of its properties.
                                       8
<PAGE>
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        No matters were submitted to vote by security holders during the fourth
quarter of 1996.

PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's Common Stock is traded through the facilities of the
National Association of Securities Dealers, Inc. ("NASDAQ"). The ranges of
reported high and low bid quotations for the Company's Common Stock for each
quarterly period within the two years ended December 31, 1996 are set forth
below. Quotations are as reported by NASDAQ-small cap, the market on which the
Company's Common Stock is traded.

        The quotations listed below do not necessarily represent actual
transactions, but represent quoted prices between dealers without retail markup,
markdown or commissions.


                                            HIGH       LOW
                        QUARTER ENDED       BID        BID
                       ----------------   --------   --------

                       1996

                       December 31          $1.19      $0.25
                       September 30          0.75       0.25
                       June 30               2.50       0.50
                       March 31              0.75       0.25

                       1995

                       December 31          $0.88      $0.25
                       September 30          1.00       0.88
                       June 30               1.00       0.94
                       March 31              1.31       0.81

        As of February 7, 1997 there were approximately 3,755 stockholders of
record of the Company's Common Stock. On March 17, 1997 the Common Stock traded
at $0.20 per share.

        The Company has not paid any cash dividends on its Common Stock and does
not expect to do so in the foreseeable future.
                                       9
<PAGE>
ITEM 6.    SELECTED FINANCIAL DATA.

        The following selected financial information has been derived from, and
is qualified by reference to and should be read in conjunction with, the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
herein, except that data relating to income statement information for the years
ended December 31, 1993 and 1992, and balance sheet information at December 31,
1994 has been derived from previously published financial statements.

<TABLE>
<CAPTION>
                                                -----------------------------------------------------------------------------------
                                                                               YEARS ENDED DECEMBER 31,
                                                -----------------------------------------------------------------------------------
                                                1996               1995               1994              1993               1992
                                                ----               ----               ----              ----                ----    
<S>                                         <C>                <C>                <C>                <C>                <C>        
Revenues ............................       $ 1,536,601        $ 1,279,501        $ 1,612,917        $ 2,218,740        $ 2,484,383

Net earnings (loss)
  before cumulative
  effect of accounting
  change ............................          (186,390)          (573,177)        (1,307,407)        (1,077,143)          (568,107)

Net loss ............................          (226,160)          (573,177)        (1,307,407)        (1,077,143)          (568,107)

Net loss per
     common share ...................             (0.16)             (0.40)             (0.93)             (0.77)             (0.42)

Total assets ........................         3,825,473          3,943,770          4,601,419          6,212,368          7,119,532

Long-term debt
  (including current
     maturities) ....................           199,929            208,619            389,237            642,237            549,000

Stockholders' equity ................       $ 2,085,929        $ 2,287,089        $ 2,840,266        $ 4,164,479        $ 5,345,048
</TABLE>

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS.

        Golden Oil Company (the "Company") is a diversified business whose
current scope of operations emphasize oil and gas production and development.
Since 1988 the Company has increased the size and scope of its oil and gas
operations through a number of corporate transactions, primarily involving asset
purchases and mergers. In addition, the Company has undertaken transactions in
the commercial real estate sector, and the Company is considering further
diversification. Subject to a number of factors including the success of its
current secondary recovery project, future prices obtainable for oil and gas
production and properties, the availability of financing and opportunities
presented for corporate transactions, management anticipates that the Company
will continue to reposition itself and to diversify from the independent oil and
gas sector.


        Between December 1988 and December 1996, using oil prices currently
available of $23.30 to $24.60 per barrel, the estimated value of the Company's
undiscounted future net revenues before taxes attributable to proved developed
and undeveloped reserves was estimated by the Company's independent petroleum
engineers to have increased from $4,700,000 to $29,000,000. The Company's
                                       10
<PAGE>
current aims in the oil and gas sector look to expansion of operations primarily
through waterflood development of its proved reserves and acquisitions of
additional interests in the Company's two principal areas of field operation.

        Based on currently prevailing oil prices, the Company expects to
generate cash flows from operations during 1997 sufficient to meet its operating
and budgeted capital requirements. However, in order to continue its project to
develop reserves classified as proved undeveloped and to further its plan for
diversification and repositioning, the Company will be required to make
additional financing arrangements. During early 1996, the Company was advised by
its commercial lenders that additional credit for the Company, or the renewal
and extension of existing bank credit, could not be granted to the Company
unless it could provide an independent third party guarantor. Such guarantor was
required to unconditionally and personally guarantee all principal and interest
loaned to the Company under the credit agreement. After successfully arranging
such guarantee from a principal officer of the Company, the Company completed a
new financing agreement which provided it credit of $400,000 principal amount,
with interest adjusted periodically.

        The Company expects to use proceeds from additional borrowings to
continue the development of the South Dog Creek waterflood program, to meet
working capital requirements, and in connection with purchases of interests in
the Company's principal areas of field operation.

        Prevailing prices obtainable for oil and gas production are dependent on
numerous factors beyond the Company's control including political, economic and
regulatory developments as well as competition from other sources of energy. The
energy markets are historically volatile and there can be no assurance that oil
and gas prices will not be subject to significant fluctuations in the future as
they have been in the past. Regardless of whether oil or gas prices increase or
decline, the Company may elect to enter corporate transactions to divest oil and
gas properties or interests; purchase or dispose of real estate interests;
recapitalize; reposition itself with new sectors of operation; or enter new
financing agreements.

        During the first quarter of 1997 the Company held fixed price oil
contracts for approximately 60% of its monthly oil production. These extend
through July 1997 at an average price at the wellhead of approximately $22.00
per barrel. The Company believes it has entered into these fixed price
arrangements with financially capable purchasers and does not anticipate
nonperformance by the counterparties to such transactions. In the event of
nonperformance by the counterparties, the Company believes that, subject to
future market prices, it will be able to market its production to other parties
under similar or then market value terms and conditions.

        LIQUIDITY AND CAPITAL RESOURCES. The Company's operations during 1996
and 1995 were funded primarily through existing working capital, borrowings
under its credit facilities and internally generated funds from operating
activities. Management anticipates that to meet its major strategic and
operational objectives, the Company will need to arrange new financing through
joint ventures, additional borrowings, asset sales, or other means. There can be
no assurance as to the availability, timing or amount of additional financing
arrangements, or any assurance that the Company's objectives will be achieved.

        Cash flow from operating activities was $289,091 for 1996 versus
$195,389 during 1995. The increase primarily reflects increased oil and gas
revenues due to higher prices prevailing during the period together with
increased production volumes. During this period, the Company purchased a
limited number of interests offered it by interest holders in properties it
operates in New Mexico. 
                                       11
<PAGE>
Additionally, during a period in which the Company has not undertaken any
significant corporate transactions, management was better able to minimize
general and administrative expenses.

        At December 31, 1996 the Company had a working capital deficit of
$989,000 and a current ratio of .38 to 1.00 compared to a working capital
deficit of $973,000 and a current ratio of .34 to 1.00 as of December 31, 1995.
The working capital deficit is relatively unchanged due primarily to the use of
cash generated from operating activities to increase capital expenditures for
the Company's secondary recovery project and, to a lesser extent, to purchases
of additional interests in properties as discussed above.

        In April 1996, the Company entered into a new credit agreement with a
commercial bank in Albuquerque, New Mexico which provided for an increase of the
Company's borrowings from $150,000 to $400,000 and extended the scheduled
maturity of the Company's debt to four years, subject to certain conditions.

        Proceeds from the additional financing have been used primarily to
refinance short-term debt then outstanding, and to fund capital costs. At March
31, 1996 the Company had a working capital deficit of approximately $1,000,000.
In order to obtain financing the Company was required by the commercial bank to
arrange a personal guarantee from a principal officer of the Company covering
all principal, interest and related costs. The Company's management and the bank
were concerned about factors including the Company's lack of liquidity, its
working capital deficit, and the threat of a repeat of the oil price collapse
such as occurred during 1994. As a result of its financial position, the Company
was not able to pay a cash fee for the personal guarantee required by the
commercial bank as a condition of extending credit to the Company. In lieu of
any cash payment, the Company proposed to pay the financing fee by delivering to
the guarantor warrants to purchase unregistered shares of its common stock. On
March 29, 1996 the Board of Directors approved execution by the Company of the
bank credit agreement and the payment and delivery to the guarantor of warrants
to purchase 250,000 unregistered shares of common stock of the Company through
March 2006 at an exercise price of $.20 per share. As of March 28, 1997, the
guarantor had exercised rights to purchase 100,000 shares pursuant to the
warrants. Prior to approving execution of the agreement to obtain bank credit
and the related guarantee arrangements, the Board of Directors retained an
independent investment banking firm to advise concerning the fairness, from a
financial point of view, of terms proposed to be paid for such guarantee. In the
regular course of its business, such investment banking firm renders advice and
opinions regarding mergers, acquisitions, financing arrangements, and cash and
share transactions for small capitalization natural resource companies. The
Board of Directors did not act to approve the transaction until, at a meeting of
Directors held on March 29, 1996, such independent investment bank delivered its
written opinion stating that the proposed transaction was fair, from a financial
point of view, to the Company and its stockholders.

        Under the Company's new credit agreement, the Company is required to
make monthly payments of principal and interest, of approximately $10,400 per
month through April 2000. As of March 28, 1997, the Company had borrowed
$277,000 and had $123,000 remaining available under the agreement.

The Company also maintains a credit facility in the original amount of $100,000
with a commercial bank in Tulsa, Oklahoma and had borrowed $70,000 under such
credit facility. In March 1996, the Company began reducing the principal amount
borrowed under this credit facility by $5,000 each month. Such line of credit
will be fully repaid in April 1997, and is not expected to be renewed.
                                       12
<PAGE>
        In March 1993, an agreement was reached between the Company and Calumet
Oil Company, the principal operators in the South Dog Creek, Oklahoma field,
aimed at enhancing and extending the producing life of the field by injection of
water into the Mississippian formation in ten wells covering four separate
quarter section leases. The operators filed for a water injection permit with
the EPA, and during October 1993, a field-wide water injection permit was
granted by the EPA to the Company and another interest holder and operator.
During the fourth quarter of 1995 the Company initiated a limited waterflood
injection program on one of its operated leases believed to have demonstrated
engineering potential for success. The program involves converting certain
marginally producing and water supply wells to water injectors and reworking
producing wells and well equipment to increase the wells' fluid volume capacity.
The total cost of the initial phase of the waterflood project expended through
December 1996 was approximately $197,000, of which the Company's share was
approximately $146,000. The Company funded its share through internal cash flows
with the balance paid by outside working interest owners who elected to join in
the project. The Company is now gradually increasing the injection of water into
the formation pursuant to the waterflood plan. The Company does not anticipate
significant increases in production volumes until further development occurs. If
production response is achieved, the Company will pursue a field-wide
implementation of the waterflood plan subject to, among other things,
engineering advice and the availability of additional financing. Assuming full
implementation of the waterflood on a fieldwide basis, the Company's share of
the total estimated costs of the waterflood project would be approximately
$750,000 over the next two to three year timeframe.

        Due to factors including certain changes in tax law, adverse changes in
the economics of exploration drilling and the availability to the Company of
alternative uses of capital, during the late 1980s the Company curtailed
exploration activities. If the Company undertakes further exploration programs
in the future, it intends to continue its policy of sharing exploration risks
with third party drilling participants. Certain of the Company's oil and gas
leases require ongoing drilling arrangements for periodic development of proved
reserves. The Company's principal development obligations under such agreements
have been suspended pending clarification of title assignments on certain
federal leases. The Company expects to obtain drilling participation from
industry partners so as to reduce the amount of the Company's future required
drilling commitments. Capital expenditures for development of properties other
than the South Dog Creek field have been curtailed pending additional financing.

        The production and sale of oil and gas are subject to a variety of
federal, state and local government regulations, including regulations
concerning the prevention of waste, the discharge of materials into the
environment, the conservation of natural gas and oil, pollution, permits for
drilling operations, drilling bonds, reports concerning operations, the spacing
of wells, the unitization of pooling of properties and various other matters.
Many jurisdictions have at various times imposed limitations on the production
of gas and oil by restricting the rate of flow for gas and oil wells below the
actual capacity to produce. The Company believes it is in substantial compliance
with current applicable environmental and other governmental laws and
regulations. However, governmental laws and regulations have continued to impose
increasingly strict requirements on companies for water and air pollution
control and solid waste management. As a result, it is likely that the Company
will incur increasing costs for compliance with such regulations in the future.

RESULTS OF OPERATIONS

        1996 COMPARED TO 1995. In the year ended December 31, 1996, oil and gas
revenues from production totaled $1,507,407 compared to $1,245,986 for the
previous year, a net increase of $261,421 or approximately 21.0%. The increase
in oil and gas revenue is primarily attributable to an 
                                       13
<PAGE>
increase in average oil price of $2.44 per barrel from $17.12 per barrel during
1995 to $19.56 per barrel during 1996. Additionally, average gas prices
increased $0.40 per Mcf from $0.97 during 1995 to $1.37 during 1996. Gas
production volumes increased 6,900 Mcf and oil production volumes increased
2,400 barrels during 1996 compared to 1995 reflecting the effects of field
management, weather and production from limited additional purchases of
interests in leases operated by the Company.

        Production costs totaled $957,443 during 1996 compared to $814,841 in
1995, an increase of $142,602 or approximately 17.5%. Oil production volumes
increased to 60,998 barrels during 1996 compared to production volumes of 58,626
barrels in 1995. Gas production volumes increased to 239,512 Mcf during 1996
compared to production volumes of 232,655 in 1995. The increases in both
production costs and volumes produced are attributable to purchases of
additional interests in Company operated properties in New Mexico partially
offset by natural production decline. Production costs per barrel of oil
equivalent increased as a result of increased well maintenance costs incurred in
1996, which are not expected to recur.

        During 1996, the Company's depreciation, depletion and amortization
expense decreased to $325,502 compared to $508,745 for the prior year. The
decrease is primarily attributable to upward revisions of reserve estimates due
to increases in oil and gas prices and the Company changing its depletion method
on producing oil and gas properties from the property-by-property basis to the
field basis of applying the unit-of-production method. The cumulative effect of
the Company changing its method of accounting for depletion reduced income for
the year ended December 31, 1996 by $39,770. See Note 1 to the Consolidated
Financial Statements for a discussion of the change in accounting method for
depletion. Depletion expense per equivalent unit of production decreased to
$2.89 per barrel in 1996 from $4.83 per barrel in 1995. Should oil and gas
prices decrease significantly from prices prevailing at December 31, 1996,
estimated reserves would decline and depletion expense on a unit-of-production
basis would increase significantly.

        During 1996, general and administrative expenses were $387,464 compared
to $431,701 for the prior year, a decrease of $44,237 or 10.0%. The decrease is
attributable to continuing reductions in corporate overhead and increases in
operating fees charged to outside working interests in Company operated
properties.

        The Company reported a net loss on the disposition of oil and gas
properties, equipment, inventory and other assets of $12,023 during 1996
compared to a net gain on the disposition of oil and gas properties, equipment,
inventory and other assets of $12,576 during 1995. The 1996 loss arose from the
writedown of certain field equipment. The 1995 gain arose from the sale of
non-strategic properties which the Company elected to sell due to marginal
production and limited development potential. Additionally, the Company charged
to operations in the prior year $66,142 for previously deferred property
acquisition costs.

        Interest expense decreased to $24,777 in 1996 compared to $31,416 in
1995 due to reductions in average principal amounts of debt outstanding during
1996. Other income (expense) in 1996 primarily reflects the accrual of $25,000
for a guarantee fee in connection with the Company's new credit facility. See
Note 5 to the Consolidated Financial Statements.

        Primarily reflecting the factors discussed above, the Company reported a
net loss for the year ended December 31, 1996 of $226,160 compared to a net loss
of $573,177 for the prior year.
                                       14
<PAGE>
        1995 COMPARED TO 1994. For the year ended December 31, 1995 oil and gas
revenues from production totaled $1,245,986 compared to $1,589,302 for the
previous year, a net decrease of $343,316, or approximately 21.6%. The decrease
in oil and gas revenues is primarily attributable to sales of scattered
non-strategic oil and gas properties in 1994 after the sharp decline during the
first half of 1994 in average oil price postings. As oil prices began to recover
in mid 1994, gas prices dropped sharply and remained depressed throughout the
second half of 1994 and the entire year of 1995.

        The Company took action during 1994 to obtain fixed prices on the
majority of its oil production at prices sufficient to generate positive cash
flows from operations. The Company entered into fixed price contracts in the
first quarter of 1995 at an average net price of approximately $17.00 per barrel
for the majority of its oil production for a period through March 1996. In
February 1996, the Company extended such fixed price contracts for approximately
50% of its oil production at an average net price of $17.01 through December 31,
1996.

        Production costs totaled $814,841 during 1995 compared to $1,070,306 in
1994, a decrease of $255,465 or approximately 23.9%. The decrease is primarily
attributable to sales of non-strategic, marginal producing properties throughout
1994 and a reorganization and reduction of field operations including closing
the Company's Tulsa office in late 1994. Oil production volumes declined to
58,626 barrels during 1995 compared to production volumes of 71,931 barrels in
1994, a decline of 18.5%. Gas production volumes decreased to 232,655 Mcf
compared to 322,986 Mcf during 1994, a decrease of 28.0%. The decreases in both
oil and gas production are attributable to the sales of scattered properties
throughout 1994 and natural production decline.

        During 1995, the Company's depreciation, depletion and amortization
expense decreased to $508,745 compared to $542,367 for the prior year. The
decrease is primarily attributable to a reduction in depletion expense due to
sales of non-strategic properties in 1994. Depletion expense per equivalent unit
of production increased to $4.83 per barrel from $3.98 per barrel in 1994.

        During 1995, general and administrative expenses were $431,701 compared
to $737,870 for the prior year, a decrease of $306,169 or approximately 41.5%.
The decrease is attributable to reductions in personnel and corporate overhead.
Such reductions were acheived through the elimination of administrative costs
associated with the maintenance and reporting requirements of the marginal
properties sold during 1994, the elimination of substantial professional fees to
outside parties and the streamlining of personnel and corporate overhead costs.

        The Company reported a net gain on the disposition of oil and gas
properties, equipment, inventory and other assets of $12,576 during 1995
compared to a net loss on dispositions of $532,208 during 1994. The 1994 loss
arose from the sale of non-strategic properties which the Company elected to
sell due to marginal production or limited development potential. In 1995, the
Company determined that certain property purchases under contract would not be
executed. Therefore, previously deferred property acquisition costs of $66,142
were charged to operations in 1995.

        Interest expense decreased to $31,416 in 1995 compared to $46,844 in
1994 due to reductions in average principal amounts outstanding during 1995.

        Primarily reflecting the factors discussed above, the Company reported a
net loss for the year ended December 31, 1995 of $573,177 compared to a net loss
of $1,307,407 for the prior year.
                                       15
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of
". This standard requires that long-lived assets, including proved oil and gas
properties, be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted SFAS No. 121 in the first quarter of 1996 with
no effect on the operating results or financial condition of the Company.
However, in the event of a substantial downturn, whether temporary or permanent,
in prices obtainable for either oil or gas, such as the industry experienced in
1994, the Company may be required to provide an impairment on the carrying value
of its oil and gas properties.

        In the first quarter of 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS128") and Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" ("SFAS 129"). These statements will be adopted by the Company
effective December 31, 1997. SFAS 128 simplifies the computation of earnings per
common share by replacing primary and fully-diluted presentations with the new
basic and diluted disclosures. SFAS 129 establishes standards for disclosing
information about an entity's capital structure.

        In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation" which encourages, but does not require, employers to
adopt a fair value method of accounting for employee stock-based compensation,
and requires increased disclosures if expense recognition is not adopted. The
Company adopted SFAS 123 in 1996 and did not elect expense recognition for stock
options and therefore implementation of SFAS No. 123 did not have an effect on
the Company's operating results or financial condition.
                                       16
<PAGE>
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                                                          PAGE
Report of Independent Accountants                          18

Consolidated Balance Sheets                                19

Consolidated Statements of Operations                      21

Consolidated Statements of Stockholders' Equity            22

Consolidated Statements of Cash Flows                      23

Notes to Consolidated Financial Statements                 26
                                    17
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Golden Oil Company:

        We have audited the consolidated financial statements and financial
statement schedule of Golden Oil Company as listed in Item 14(a) of this Form
10-K. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

        We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Golden
Oil Company as of December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.

        As described in Note 1 to Consolidated Financial Statements, the Company
changed its method of accounting for depletion of its oil and gas producing
properties effective January 1, 1996.

                                                     COOPERS & LYBRAND L.L.P.

Houston, Texas
March 28, 1997
                             18 
<PAGE>
                               GOLDEN OIL COMPANY

                           Consolidated Balance Sheets

                                                            DECEMBER 31,        
                                                  ------------------------------
               ASSETS                                   1996             1995
                                                        ----             ----
Current assets:
   Cash and cash equivalents .................     $   165,209      $    67,599
   Short-term investments ....................          25,000           24,264
   Accounts receivable:
     Oil and gas sales .......................         290,210          228,844
     Drilling and operations .................          24,023           88,327
       (including allowance for
         doubtful accounts of $91,718
         and $73,118 in 1996
         and 1995, respectively)
     Affiliates and other ....................          55,903           71,524

   Prepaid expenses and other ................          35,997           29,227
                                                   -----------      -----------

     Total current assets ....................         596,342          509,785
                                                   -----------      -----------

Property and equipment, at cost:
   Oil and gas properties
     (using the successful efforts
       method of accounting)
   Producing properties ......................       5,781,349        5,847,201
   Undeveloped leasehold costs ...............         105,000          105,000
                                                   -----------      -----------
     Total oil and gas properties ............       5,886,349        5,952,201

   Pipeline, field and other well
     equipment ...............................         242,902          267,743
   Other property and equipment ..............         468,911          461,125
                                                   -----------      -----------
                                                     6,598,162        6,681,069
Less accumulated depreciation,
   depletion and amortization ................      (3,566,746)      (3,454,413)
                                                   -----------      -----------

     Net property and equipment ..............       3,031,416        3,226,656
                                                   -----------      -----------

Investment, real estate ......................         196,234          205,848

Other assets .................................           1,481            1,481
                                                   -----------      -----------

                                                   $ 3,825,473      $ 3,943,770
                                                   ===========      ===========
                        See Notes to Consolidated Financial Statements.
                                    19
<PAGE>
                               GOLDEN OIL COMPANY

                     Consolidated Balance Sheets (Continued)

                                                             DECEMBER 31,
                                                  ------------------------------
                                                        1996            1995
                                                        ----            ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable and current
   portion of long-term debt .................    $    130,546     $    122,079
   Accounts payable:
     Drilling and operations .................         901,644          986,732
     Production and other ....................         421,252          247,742

   Accrued expenses ..........................         131,496          126,375
                                                  ------------     ------------


     Total current liabilities ...............       1,584,938        1,482,928
                                                  ------------     ------------

Long-term debt ...............................          69,383           86,540
Other liabilities ............................          85,223           87,213

Commitments and contingencies
   (Notes 7 and 8) ...........................            --               --

Stockholders' equity:
   Preferred stock, par value $.01;
     authorized 10,000,000 shares,
     none issued .............................            --               --
   Common stock, par value $.01;
     authorized 15,000,000 shares,
     issued and outstanding 1,424,291
     shares in 1996 and 1995 .................          14,243           14,243
   Class B convertible common stock,
     par value $.01; authorized 3,500,000
     shares; issued and outstanding 22,254
     shares in 1996 and 1995 .................             223              223
   Additional paid-in capital ................      13,864,479       13,839,479

   Accumulated deficit .......................     (11,793,016)     (11,566,856)
                                                  ------------     ------------


     Total stockholders' equity ..............       2,085,929        2,287,089
                                                  ------------     ------------


                                                  $  3,825,473     $  3,943,770
                                                  ============     ============
                            See Notes to Consolidated Financial Statements.
                                       20
<PAGE>
                               GOLDEN OIL COMPANY
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                      --------------------------------------------------------------
                                                                            1996                    1995                    1994
                                                                            ----                    ----                    ----
Revenues:
                                                                                                         
   <S>                                                                  <C>                     <C>                     <C>        
   Oil and gas production ..................................            $ 1,507,407             $ 1,245,986             $ 1,589,302

   Other ...................................................                 29,194                  33,515                  23,615
                                                                        -----------             -----------             -----------


     Total revenues ........................................              1,536,601               1,279,501               1,612,917
                                                                        -----------             -----------             -----------

Costs and expenses:
   Production costs ........................................                957,443                 814,841               1,070,306
   Depreciation, depletion and
     amortization ..........................................                325,502                 508,745                 542,367

   General and administrative ..............................                387,464                 431,701                 737,870
                                                                        -----------             -----------             -----------


     Total costs and expenses ..............................              1,670,409               1,755,287               2,350,543
                                                                        -----------             -----------             -----------

                                                                           (133,808)               (475,786)               (737,626)
Gain (loss) on disposition of
property,
   equipment and other assets ..............................                (12,023)                 12,576                (532,208)
Equity in net loss of investments ..........................                 (9,614)                (22,228)                   --
Property acquisition costs .................................                   --                   (66,142)                   --
Interest income ............................................                  1,254                   1,092                    --
Interest expense ...........................................                (24,777)                (31,416)                (46,844)

Other income (expense) .....................................                 (7,422)                  8,727                   9,271
                                                                        -----------             -----------             -----------

Net earnings (loss) before cumulative
   effect of accounting change .............................               (186,390)               (573,177)             (1,307,407)
Cumulative effect of accounting

   change ..................................................                (39,770)                   --                      --
                                                                        -----------             -----------             -----------


Net earnings (loss) ........................................            $  (226,160)            $  (573,177)            $(1,307,407)
                                                                        ===========             ===========             ===========

Per share data:
   Net earnings (loss) before
cumulative
       effect of accounting change .........................                  (0.13)                  (0.40)                  (0.93)

   Cumulative effect of accounting
       change ..............................................                  (0.03)                   --                      --
                                                                        -----------             -----------             -----------

   Net earnings (loss) per common
   share ...................................................            $     (0.16)            $     (0.40)            $     (0.93)
                                                                        ===========             ===========             ===========
Weighted average number of
common shares and common

share equivalents outstanding ..............................              1,424,291               1,424,291               1,404,291
                                                                        ===========             ===========             ===========
</TABLE>
                 See Notes to Consolidated Financial Statements.
                                       21
<PAGE>
                               GOLDEN OIL COMPANY

                 Consolidated Statements of Stockholders' Equity



<TABLE>
<CAPTION>
                                                                                         ADDITIONAL                        TOTAL
                                                 COMMON STOCK      CLASS B COMMON STOCK   PAID-IN        ACCUMULATED   STOCKHOLDERS'
                                               SHARES     AMOUNT     SHARES    AMOUNT     CAPITAL          DEFICIT         EQUITY

<S>                                          <C>          <C>        <C>        <C>     <C>            <C>              <C>        
Balance at December 31, 1993 ............    1,404,291    $14,043     22,254    $223    $13,819,679    $ (9,669,466)    $ 4,164,479


Net earnings (loss) .....................         --         --         --       --            --        (1,307,407)     (1,307,407)


Property dividend .......................         --         --         --       --            --           (16,806)        (16,806)
                                             ---------    -------    -------    ----    -----------    ------------     -----------

Balance at December
31, 1994 ................................    1,404,291     14,043     22,254     223     13,819,679     (10,993,679)      2,840,266

Net earnings (loss) .....................         --         --         --       --            --          (573,177)       (573,177)

Common stock issued
to Directors in lieu
of cash .................................       20,000        200       --       --          19,800            --            20,000
                                             ---------    -------    -------    ----    -----------    ------------     -----------

Balance at December
31, 1995 ................................    1,424,291     14,243     22,254     223     13,839,479     (11,566,856)      2,287,089


Net earnings (loss) .....................         --         --         --       --            --          (226,160)       (226,160)

Warrants issued in
lieu of cash ............................         --         --         --       --          25,000            --            25,000
                                             ---------    -------    -------    ----    -----------    ------------     -----------


Balance at December
                                             =========    =======    =======    ====    ===========    ============     ===========
31, 1996 ................................    1,424,291    $14,243     22,254    $223    $13,864,479    $(11,793,016)    $ 2,085,929
                                             =========    =======    =======    ====    ===========    ============     ===========
</TABLE>
                            See Notes to Consolidated Financial Statements.
                                       22
<PAGE>
                               GOLDEN OIL COMPANY

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                              YEARS ENDED DECEMBER 31,
                                                                            --------------------------------------------------------
                                                                              1996                   1995                   1994
                                                                              ----                   ----                   ----
<S>                                                                         <C>                   <C>                   <C>         
Cash flows from operating activities:
   Net earnings (loss) .........................................            $(226,160)            $(573,177)            $(1,307,407)
   Adjustments to reconcile net
     loss to net cash provided
     by (used in) operating activities:
   Depreciation, depletion
     and amortization ..........................................              325,502               508,745                 542,367
   Equity in net loss of investments ...........................                9,614                22,228                    --
   Charge for deferred property
     acquisition costs .........................................                 --                  66,142                    --
   (Gain) loss on disposition of
     property, equipment and
     other assets ..............................................               12,023               (12,576)                532,208
   Guarantee fee ...............................................               25,000                  --                      --
   Cumulative effect of accounting
     change ....................................................               39,770                  --                      --
Changes in assets and
   liabilities:
     (Increase) decrease in
       accounts receivable, net ................................               18,559                72,924                  (5,379)
     (Increase) decrease in
       prepaid expenses and other ..............................               (6,770)               14,956                    (913)
     Increase (decrease) in
       accounts payable ........................................               88,422                12,057                 (88,006)
     Increase (decrease) in other
       liabilities .............................................               (1,990)               50,000                  (2,067)
     Increase (decrease) in

       accrued expenses ........................................                5,121                34,090                  (3,926)
                                                                            ---------             ---------             -----------

     Net cash provided by (used in)
       operating activities ....................................            $ 289,091             $ 195,389             $  (333,123)
                                                                            ---------             ---------             -----------
</TABLE>
                 See Notes to Consolidated Financial Statements.
                                       23
<PAGE>
                               GOLDEN OIL COMPANY

                Consolidated Statements of Cash Flows (Continued)

<TABLE>
<CAPTION>
                                                                                               YEARS ENDED DECEMBER 31,
                                                                            --------------------------------------------------------
                                                                              1996                     1995                   1994
<S>                                                                          <C>                    <C>                    <C>      
Cash flows from investing activities:
   Proceeds from sale of
     property and equipment ...................................              $  13,621              $  27,579             $ 401,358
   Proceeds from sale of
     investments ..............................................                  --                     --                   30,084
   Increase in short-term
     investments ..............................................                  (736)                  (736)                  (962)
   Additions to oil and gas
     properties ...............................................              (187,087)               (59,344)                  --
   Additions to other property and

     equipment ................................................                (8,589)                (7,280)               (14,301)
                                                                            ---------              ---------              ---------

       Net cash provided by (used in)

         investing activities .................................              (182,791)               (39,781)               416,179
                                                                            ---------              ---------              ---------


Cash flows from financing activities:
   Proceeds from issuance of
     short-term debt ..........................................                 8,467                   --                   25,000
   Proceeds from issuance of
     long-term debt ...........................................               118,693                 86,540                   --

   Payment of debt ............................................              (135,850)              (267,158)              (278,000)
                                                                            ---------              ---------              ---------
       Net cash used in

         financing activities .................................                (8,690)              (180,618)              (253,000)
                                                                            ---------              ---------              ---------

   Net increase (decrease) in cash
     and cash equivalents .....................................                97,610                (25,010)              (169,944)
   Cash and cash equivalents at

     beginning of year ........................................                67,599                 92,609                262,553
                                                                            ---------              ---------              ---------
   Cash and cash equivalents at

     end of year ..............................................             $ 165,209              $  67,599              $  92,609
                                                                            =========              =========              =========
</TABLE>
                            See Notes to Consolidated Financial Statements.
                                       24
<PAGE>
                               GOLDEN OIL COMPANY

                Consolidated Statements of Cash Flows (Continued)

Supplemental Disclosure of Cash Flow Information:

        As more fully discussed in Notes 5 and 7 to the Consolidated Financial
Statements, warrants to purchase 250,000 shares of the Company's common stock
were issued in 1996 in lieu of cash as a guarantee fee for a credit facility for
the Company.

        In accordance with established Company policy, during 1995 the Company
paid Director fees of $20,000 by issuing shares of the Company's Common Stock in
lieu of cash payment.

        As more fully discussed in Note 7 to the Consolidated Financial
Statements, during 1994 accounts receivable from an affiliate of $45,000 were
exchanged for an additional ownership interest in the Company's headquarters
office building.

        Interest charges of $26,187, $37,762 and $42,952 were paid in cash
during 1996, 1995 and 1994, respectively. The Company has a substantial loss
carryforward and was not required to make cash payments for federal income taxes
during 1996, 1995 or 1994.
                                       25
<PAGE>
                               GOLDEN OIL COMPANY

                   Notes to Consolidated Financial Statements

(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of
Golden Oil Company (the "Company") include its wholly owned subsidiaries Regal
Petroleum, Ltd. ("Regal"); Spur Petroleum, Inc. ("Spur"); Golden Oil Holding
Corporation ("Holding"); and Golden Resources, Inc. ("GRI"). The Company
accounts for its commercial real estate investment under the equity method of
accounting. All significant intercompany accounts and transactions have been
eliminated in consolidation.

        OIL AND GAS PROPERTIES. The Company follows the successful efforts
method of accounting for its oil and gas properties. Under the successful
efforts method, costs associated with the acquisition, drilling and equipping of
successful exploratory wells and all developmental costs, including
developmental dry holes, are capitalized and amortized using the
unit-of-production method. Geological and geophysical costs, delay rentals and
drilling costs of unsuccessful exploratory wells are charged to expense as
incurred.

        Proceeds from the sale of an interest in an oil and gas property are
credited to the asset account until all capitalized costs are recovered relative
to that property.

        In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of
". This standard requires that long-lived assets, including proved oil and gas
properties, be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted SFAS No. 121 in the first quarter of 1996. The
adoption of this standard had no effect on the operating results or financial
condition of the Company. However, in the event of a substantial downturn in
prices obtainable for either oil or gas, whether temporary or permanent, such as
the industry experienced in 1994, the Company may be required to provide an
impairment on the carrying value of its oil and gas properties.

        PROPERTY AND EQUIPMENT. Property and equipment are depreciated over
their estimated useful lives which range from three to ten years using the
straight line method. Expenditures for maintenance and repairs which do not
improve or extend the useful lives are charged to operations as incurred, while
expenditures for major renewals and betterments are capitalized. Dispositions of
assets are reflected at their historical cost less accumulated depreciation,
with the resulting net gain or loss reflected in operations currently.

        PER SHARE DATA. Earnings per share of Common Stock are computed by
dividing net earnings by the weighted average number of shares of Common Stock
and common share equivalents outstanding during each period. Options to acquire
shares of Common Stock are included in the computation of earnings per share of
Common Stock to the extent that they are dilutive. Fully diluted earnings per
share is not presented because such data would not be significantly different
from the amounts shown.

        During the first quarter of 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), and Statement
of Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure" ("SFAS 129"). These statements will be adopted by the Company
effective December 31, 1997. SFAS 128 simplifies the computation of earnings per
common
                                       26
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

share by replacing primary and fully-diluted presentations with the new basic
and diluted disclosures. SFAS 129 establishes standards for disclosing
information about an entity's capital structure.

        INCOME TAXES. The Company and its wholly owned subsidiaries join in
filing consolidated federal income tax returns. Investment tax credits are
accounted for by the flow-through method.

        The Company recognizes deferred income tax assets and liabilities based
on the expected future tax consequences of temporary differences between the
income tax and financial reporting carrying amounts of assets and liabilities.

        CASH EQUIVALENTS. For purposes of financial statement presentation,
highly liquid instruments purchased with an original maturity of three months or
less are shown as cash equivalents.

        FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company's Notes to Consolidated
Financial Statements include information on fair value of its financial
instruments when such value is different from the book value. The carrying value
of cash and cash equivalents, receivables and accounts payable approximate fair
value due to the short-term maturities of these instruments. The carrying value
of the Company's credit agreements approximate fair value as the interest rates
on such instruments are variable, based on current market.

        SHORT-TERM INVESTMENTS. The Company's short-term investments at December
31, 1996 and 1995 consisted, respectively, of 6 and 12 month certificates of
deposit in federally insured banks for which cost approximated fair market
value.

        USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
See Supplemental Oil and Gas Information (Unaudited).

        RECLASSIFICATIONS. Certain amounts from prior periods have been
reclassified to conform to the presentation format for the Company's 1996
Consolidated Financial Statements with no effect on reported results of
operations.

        ACCOUNTING CHANGE. Effective January 1, 1996 the Company changed its
depletion method on producing oil and gas properties from the
property-by-property basis to the field basis of applying the unit-of-production
method. The field basis provides for the aggregation of wells that have a common
geological reservoir or field. The Company believes that the field basis
provides a better matching of expenses with revenues over the productive life of
the properties and, therefore, that the new method is preferable to the
property-by-property basis. The cumulative effect of this change in accounting
method of $39,770 ($.03 per share) is reported separately in the accompanying
consolidated statements of operations. The net effect of the change in method
had an immaterial effect on depletion expense for 1996. This new method of
computing depletion expense would have had an immaterial impact on results of
operations for the years ended December 31, 1995 and 1994 had it been applied
during those years.
                                       27
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

(2)     OIL AND GAS PRODUCING ACTIVITIES

        Shown below are the historical net capitalized costs and related
accumulated depreciation, depletion and amortization for the Company's oil and
gas properties at the dates indicated. The Company's oil and gas operations are
conducted entirely in the United States.

<TABLE>
<CAPTION>
                                                                                               At December 31,
                                                                      --------------------------------------------------------------
                                                                          1996                     1995                     1994
                                                                          ----                     ----                     ----
<S>                                                                   <C>                      <C>                      <C>   
Oil and gas properties:
   Producing ............................................             $ 5,781,349              $ 5,847,201              $ 5,994,169
   Non-producing ........................................                 105,000                  105,000                  105,000
                                                                      -----------              -----------              -----------
                                                                        5,886,349                5,952,201                6,099,169
Less accumulated depreciation,
   depletion and amortization ...........................              (3,035,795)              (2,957,112)              (2,626,913)
                                                                      -----------              -----------              -----------
   Net oil and gas
     properties .........................................             $ 2,850,554              $ 2,995,089              $ 3,472,256
                                                                      ===========              ===========              ===========
</TABLE>
        Costs incurred in the Company's oil and gas operations and related
accumulated depletion, depreciation and amortization per equivalent unit of
production are shown below. For purposes of determining the equivalent unit of
production, six Mcf of gas production is assumed to be equivalent to production
of one barrel of oil.

<TABLE>
<CAPTION>
                                                                                               At December 31,
                                                                          ----------------------------------------------------------

                                                                              1996                  1995                     1994
                                                                              ----                  ----                     ----   
<S>                                                                        <C>                    <C>                    <C>      
Property acquisition costs:
   Producing ...............................................               $ 88,355               $   --                 $      --
   Non-producing ...........................................                   --                     --                        --
                                                                           --------               --------               -----------

                                                                             88,355                   --                        --
                                                                           ========               ========               ===========
Exploration costs ..........................................                   --                     --                        --
                                                                           ========               ========               ===========
Development costs ..........................................                 98,732                 59,344                      --
                                                                           ========               ========               ===========
Depletion ..................................................                291,852                470,369                   500,424
                                                                           ========               ========               ===========
Depletion per
 equivalent unit of production .............................               $   2.89               $   4.83               $      3.98
                                                                           ========               ========               ===========
</TABLE>
                                       28
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

        The Company's current oil and gas activities consist primarily of the
operation and development of oil and gas properties in Oklahoma and New Mexico.
At December 31, 1996 and 1995 the Company's accounts receivable, which generally
are not collateralized, were primarily from entities and individuals involved in
the oil and gas industry. The Company sells its oil and gas production on
currently available markets and pursuant to contracts with various purchasers.
Generally, the purchasers of the Company's production volumes are established
oil and gas and industrial companies. The Company does not anticipate
nonperformance by the counterparties under such contracts. At January 1, 1997,
the Company had approximately 20% of its estimated monthly oil production under
fixed price arrangements with one purchaser at an average price of $21.17 per
barrel. Effective February 1, 1997, the Company entered into a new fixed price
arrangement which increased the amount of production under fixed price
arrangements to approximately 60% of its monthly oil production. The combined
fixed price arrangements with the two purchasers provide an average price of
$22.00 per barrel through July 1997. During 1996 sales to three purchasers
accounted for approximately 46%, 34% and 17%, respectively, of the Company's
total revenues. For each of the two previous years, sales to three purchasers
accounted for approximately 55%, 28%, and 14% for the year ended December 31,
1995 and 45%, 23%, and 14% for the year ended December 31, 1994 of the Company's
total revenues. No other customer accounted for more than ten percent of the
Company's total revenues during those periods.

(3)     AGREEMENTS TO PURCHASE OIL AND GAS  PROPERTIES

        During the fourth quarter of 1993 the Company entered into an agreement
to purchase proved producing reserves in oil and gas properties in New Mexico's
San Juan Basin under which it paid a nonrefundable deposit of $42,000. Due to
subsequent declines in oil and gas prices, environmental and operational factors
related to these prospective acquisitions, the Company elected not to close on
the transaction. Accordingly, in 1995, the Company charged approximately $24,000
of acquisition-related costs and the $42,000 deposit to 1995 operations.

(4)   INDEBTEDNESS

        In April 1996, the Company entered into a new credit agreement with a
commercial bank in Albuquerque, New Mexico under which the Company increased the
borrowings available to it from $150,000 to $400,000. In addition, the maturity
schedule of the Company's debt was extended to four years, subject to certain
conditions. The new credit agreement bears interest at 2% over the bank's prime
lending rate adjusted periodically. Such interest rate was 9.25% at December 31,
1996. Such credit facility is further collateralized by the Company's New Mexico
oil and gas properties.

        Proceeds from the new credit facility have been utilized to refinance
short-term debt then outstanding, to acquire additional interests in oil and gas
properties offered to the Company by working interest holders on leases in which
the Company is operator, and to pay other payables. At March 31, 1996 the
Company had a working capital deficit of approximately $1,000,000. In order to
obtain the new financing the Company was required by the lending bank to provide
a personal guarantee from a principal officer of the Company for repayment in
full to the bank of all principal, interest and related
                                       29
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

costs. As a result of its financial position, the Company was not able to pay a
cash fee for the personal guarantee required by the lender as a condition of
extending credit to the Company. In lieu of cash payment, the Company proposed
to pay the financing fee by delivering to the guarantor warrants to purchase
unregistered shares of its common stock. On March 29, 1996 the Board of
Directors approved execution by the Company of the bank credit agreement and the
payment and delivery to the guarantor of warrants to purchase 250,000
unregistered shares of common stock of the Company through March 2006 for an
exercise price of $.20 per share. As of March 28, 1997, the guarantor had
exercised rights to purchase 100,000 shares of common stock granted for the
warrants.

        Under the Company's new credit agreement, the Company is required to
make monthly payments of principal and interest, of approximately $10,400
through April 2000. As of March 28, 1997, the Company had borrowed $277,000 and
had $123,000 remaining available under the new credit agreement.

        The Company also maintains a credit facility in the original amount of
$100,000 with a commercial bank in Tulsa, Oklahoma and had borrowed $70,000
under such line of credit facility. The line of credit bears interest at 2% over
the bank's prime lending rate, adjusted periodically. Such interest rate was
8.25% at December 31, 1996. In March 1996, the Company began reducing the
principal amount borrowed under this credit facility by $5,000 each month. Such
line of credit will be fully paid in April 1997 and is not expected to be
renewed. This credit facility is collateralized by the Company's Oklahoma
properties.

(5)   CAPITAL STOCK

        STOCK OPTIONS. The Company has a stock option plan for key employees
(the "Employee Plan "). The Employee Plan is administered by the Stock Option
Committee which is appointed by the Board of Directors. During 1989 the Stock
Option Committee granted options covering 147,000 shares to the Company's
Chairman at an exercise price (market price at the date thereof) of $1.79 per
share which may be exercised in whole or in part through December 21, 1999.
During 1990 the Stock Option Committee granted 49,000 options to other eligible
employees at an exercise price (market price at the date thereof) of $1.79 per
share which may be exercised in whole or in part through April 16, 2000. There
were no options exercised or granted during the years 1996, 1995 or 1994.

        The Company also has a stock option plan covering 14,000 shares for the
Company's non-employee directors (the "Directors' Plan"). Under the Directors'
Plan, each non-employee director will be granted 1,400 shares per year, subject
to prior approval by the Board of Directors, at the market price on the date of
grant. Options covering such shares may be exercised by any time from the date
of grant and all optioned shares must be exercised within five years from the
date of grant. No such options were granted or exercised during the years ended
December 31, 1996, 1995 or 1994.

        STOCK WARRANTS. In connection with the new credit arrangement executed
in April 1996 (See Note 4), the Company issued stock warrants to an officer to
purchase 250,000 unregistered shares of common stock at $0.20 per share as a
guarantee fee in lieu of cash to provide a personal guarantee on the entire debt
including associated interest and other costs. The grant date of such warrants
was March 29, 1996 and they were fully vested at the date of grant. The fair
value of the warrants, estimated to be $25,000, has been reflected as additional
paid-in capital and other income (expense) during 1996. As of March 28,
                                       30
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

1997, the guarantor had exercised rights to purchase 100,000 shares of common
stock available under the warrants.

        CLASS B COMMON STOCK. During 1986, the stockholders of the Company
approved the issuance of a new class of common stock designated Class B Common
Stock ("Class B Common"). The holders of Class B Common, voting as a separate
class, have the right to elect a simple majority of the Board of Directors and
vote as a separate class on major corporate transactions. Holders of the Class B
Common also vote share-for-share with holders of the Common Stock. Class B
Common shares are not publicly traded, and are only transferable to persons
within defined categories of "permitted transferees", but may be converted into
Common Stock at any time on a share-for-share basis.

        PREFERRED STOCK. The Company also has an authorized class of Preferred
Stock, par value $.01, of which there are currently 10,000,000 shares
authorized, with none currently issued or outstanding.

(6)     INCOME TAXES

        At December 31, 1996 the Company had aggregate net operating loss
carryforwards of approximately $10,800,000 which expire at various dates through
the year 2011, and net investment tax credit carryforwards of approximately
$229,000 which expire at various dates through the year 2000. In connection with
ownership changes resulting from certain transactions, the utilization of the
net operating loss and net investment tax credit carryforwards are limited under
Sections 382 and 383 of the Internal Revenue Code to a maximum of approximately
$7,552,000. Certain other restrictions may also exist as to the utilization of
such carryforwards. At December 31, 1996 the Company also has available federal
statutory depletion and capital loss carryforwards.

        The components of the Company's deferred tax assets and liabilities at
December 31, 1996 and 1995 are as follows:

                                                            Deferred Tax
                                                         Assets (Liabilities)
                                                   -----------------------------
                                                        1996              1995
                                                        ----              ----

Accounts receivable ..........................     $    33,332      $    24,860
Accrued expenses .............................            --             (1,190)
Oil and gas properties (net) .................        (377,493)        (378,565)
Investment in real estate ....................          44,148           40,880
Net operating losses .........................       3,680,175        3,746,594
Capital losses ...............................         335,504          326,257
Investment tax credit ........................          77,788          102,962
Percentage depletion .........................       1,096,443        1,067,025
                                                   -----------      -----------
Deferred tax asset (liability) ...............       4,889,897        4,928,823
Valuation allowance ..........................      (4,889,897)      (4,928,823)
                                                   -----------      -----------
Deferred  tax assets  (liabilities),net ......     $      --        $      --   
                                                   ===========      ===========
                                       31
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

        The Company's valuation allowance increased (decreased) by approximately
($39,000), $96,000, and $442,000 for 1996, 1995 and 1994, respectively. The
decrease in the valuation allowance in 1996 is attributable to the expiration of
prior year tax loss carryforwards partially offset by current year net operating
loss carryforwards.

 (7)  CERTAIN TRANSACTIONS

        In connection with the Company's real estate investment through a
limited partnership ("Partnership") in its headquarters commercial office
building, on October 17, 1996, the Company put up its pro rata share of $25,000
as a guarantor under a $100,000 standby letter of credit. Other investors,
including an officer of the Company with an ownership interest in the
Partnership, provided the remaining $75,000 guarantee under such standby letter
of credit. This letter of credit was required by the Partnership's first
mortgage lender as a condition to extension and modification of the mortgage
term until April 1, 1997. Such extension was required in order to provide time
to execute a new mortgage agreement with the existing lender or a new
institutional lender.

        On March 18, 1997, the Partnership executed a loan commitment with a new
lender. The Partnership anticipates that it will close the transaction in late
April 1997. At present, the Partnership is seeking to modify the present loan
extension to extend to May 1997. In the event the Partnership is unable to
obtain an additional extension such loan could be deemed by the lender to be in
default. If the new loan is not closed by May 1, 1997, the present lender has
the right to present and exercise on the $100,000 letter of credit and the
Company would be required to honor its pro rata share thereof until the new loan
is funded. Although no assurances can be made as to the lender's actions, the
Company believes that the Partnership will be able to modify the term of the
extension to provide for a mutually agreeable closing date.

        At December 31, 1994 accounts receivable from an affiliate of $45,000
were exchanged for an additional ownership interest in the Company's
headquarters office building. The Company's interest in the building is
approximately 23% after such exchange and, as a result, the Company changed its
method of accounting for this investment to the equity method beginning on
January 1, 1995. Under a six year lease through December 15, 2002 the Company
leases approximately 3,950 square feet of office space in the building of a
total of approximately 54,000 square feet.

        In connection with establishment of a new electronic data processing and
management reporting system, the Company is jointly and severally liable for a
computer hardware and software lease together with a related party that is also
jointly and severally liable for the lease obligation. The lease has a term of
five years through January, 1999 and provides for monthly payments of $3,050, of
which one-half will be paid by the Company. The Company anticipates that it will
share use of the hardware and additional software throughout such term.
                                    32
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Continued)

(8)     COMMITMENTS AND CONTINGENCIES

        At December 31, 1996 the aggregate future minimum lease payments under
the Company's noncancellable operating leases are:

                         1997                    $  68,235
                         1998                       68,235
                         1999                       51,735
                         2000                       50,235
                         2001                       50,235
                         Thereafter                 48,142
                                                ----------
                          Total                  $ 336,817
                                                ==========

        Rent expense for the years ended December 31, 1996 was $55,500 and
$57,900 for the years ended December 31, 1995 and 1994.

                End of Notes to Consolidated Financial Statements
                                    33
<PAGE>
SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

        The following quantity and discounted estimates of future net cash flows
are based on prices as of the respective year ends. No price escalation was
assumed. Operating costs, production taxes, royalties and estimated future
capital expenditures to complete development of the proved reserves were
deducted in determining the quantity and discounted estimates of future net cash
flows. Such costs were estimated based on current costs and were not adjusted to
anticipate increases due to inflation or other factors. No deductions were made
for general overhead, depreciation or other indirect costs. The following table
reflects estimated quantities of proved oil and gas reserves. These reserves
have been reduced for royalty interests owned by others. These reserves are all
located in the United States and have been estimated by the Company's petroleum
engineers. The Company considers such estimates to be reasonable; however, due
to inherent uncertainties, estimates of underground reserves are imprecise and
subject to change over time as additional information becomes available.
                                       34
<PAGE>
        The estimated proved and proved developed oil and gas reserves shown
below are based on economic assumptions and future projections. The Company does
not believe that such amounts necessarily represent the reserve volumes or
amounts which would be actually recoverable at the respective dates shown.

<TABLE>
<CAPTION>
                                                             ANALYSIS OF CHANGES IN PROVED RESERVES
                                                                    YEARS ENDED DECEMBER 31,
                                     ----------------------------------------------------------------------------------------       
                                             1996                             1995                               1994
                                     ---------------------           ----------------------              --------------------

                                 
                                     Oil               Gas             Oil              Gas              Oil              Gas
                                    (BBLS)            (MCF)          (BBLS)            (MCF)            (BBLS)           (MCF)
                                    -----             -----          ------            -----            ------           -----      
<S>                               <C>                <C>            <C>              <C>              <C>              <C>      
PROVED DEVELOPED AND
  UNDEVELOPED RESERVES:
Beginning of year ............    1,298,253          880,158        1,477,446        1,209,079        1,601,749        2,722,202
Revisions of previous
estimates ....................      325,640          589,788         (120,367)(4)      (96,266)          34,619         (469,511)
Sales of minerals in place....         --               --               (200)            --            (86,991)        (720,626)
other additions ..............         --               --               --               --               --               --

Production ...................      (60,998)        (239,512)         (58,626)        (232,655)         (71,931)        (322,986)

Purchase of minerals in place        51,100          232,300             --               --               --               --
                                 ----------       ----------       ----------       ----------       ----------       ----------
End of year ..................    1,613,995(1)     1,462,734(1)     1,298,253(2)       880,158(2)     1,477,446(3)     1,209,079(3)
                                 ==========       ==========       ==========       ==========       ==========       ==========

PROVED DEVELOPED
  RESERVES:


Beginning of year ............      432,133          880,158          611,326        1,209,079          672,437        2,525,202
                                 ==========       ==========       ==========       ==========       ==========       ==========

End of year ..................      593,756(1)     1,462,734(1)       432,133(2)       880,158(2)       611,326        1,209,079(3)
                                 ==========       ==========       ==========       ==========       ==========       ==========
</TABLE>
(1)     In accordance with the reporting regulations of the SEC, total estimated
        reserves at December 31, 1996 reflect oil and gas prices prevailing at
        year end ranging from $23.30 to $24.60 per barrel of oil and $1.89 to
        $2.75 per Mcf of gas. Oil prices at December 31, 1996 were higher than
        currently prevailing prices and, in management's opinion, were not
        indicative of prices likely to prevail throughout 1997. As of March 15,
        1997, the Company is obtaining a price of approximately $21.00 per
        barrel of oil on sales of oil not subject to fixed price contracts. Use
        of such March 15, 1997 prices in the above projections would have
        decreased total reserves recoverable as of December 31, 1996.

        In March 1993, an agreement was reached between the two principal
        operators in the South Dog Creek field (Calumet Oil and the Company ) to
        enhance and extend the producing life of the field by injection of water
        into the Mississippian formation in ten wells covering four separate
        quarter section leases. Calumet Oil and the Company filed for a water
        injection permit with the EPA and during October 1993, a field-wide
        water injection permit was granted by the EPA to Calumet Oil and the
        Company. Initial work has been completed on a portion of the field and
        water is currently being injected at a gradually increasing rate. The
        total cost of the initial phase of the waterflood project was
        approximately $197,000 of which the Company's share was approximately
        $146,000. After full implementation the Company's share of the total
        costs of the waterflood project are expected to be approximately
        $750,000. The Company funded its initial share of the waterflood project
        costs incurred during 1995 and 1996 using cash from operations.

(2)      Amounts computed using oil prices ranging from $17.00 to $17.25 per
         barrel and gas prices ranging from $1.00 to $1.30 per Mcf.

(3)      The Company used an oil price of $17.00 per barrel and gas prices
         ranging from $1.30 to $1.50 per Mcf.

(4)      In 1995, the Company made certain revisions to estimated future lease
         operating expenses.
                                       35
<PAGE>
                  STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET
                         CASH FLOWS AND CHANGES THEREIN

        The standardized measure of discounted future net cash flows and changes
therein relating to proved oil and gas reserves is as follows:
<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                           -------------------------------------------------------

                                                                                 1996                1995                1994
                                                                           ----------------     --------------      --------------
<S>                                                                        <C>                   <C>                <C>         
  Future cash inflows ..................................................   $ 43,560,590          $ 23,201,780       $ 26,877,040
  Future production and
     development costs .................................................    (14,541,524)           (8,143,653)        (9,677,222)


  Future income tax expenses ...........................................     (6,265,135)           (3,161,915)        (3,735,514)
                                                                           ------------          ------------       ------------

  Future net cash flows ................................................     22,753,931            11,896,212         13,464,304

  10% annual discount for

     estimated timing of
       cash flows ......................................................     (8,517,599)           (4,690,122)        (5,364,457)
                                                                           ------------          ------------       ------------

  Standardized measure of
      discounted future net ............................................   $ 14,236,332(1)(4)    $  7,206,090(2)    $  8,099,847(3)
      cash flows .......................................................   ==============        ==============     ================
</TABLE>
Future net cash flows were computed using year-end prices and costs, and
year end statutory tax rates that relate to existing proved oil and gas
reserves.

(1)     In accordance with the reporting regulations of the SEC, total estimated
        reserves at December 31, 1996 reflect oil and gas prices prevailing at
        year end ranging from $23.30 to $24.60 per barrel of oil and $1.89 to
        $2.75 per Mcf of gas. Oil prices at December 31, 1996 were higher than
        currently prevailing prices and, in management's opinion, were not
        indicative of prices likely to prevail throughout 1997. As of March 15,
        1997, the Company is obtaining a price of approximately $21.00 per
        barrel of oil on sales of oil not subject to fixed price contracts. Use
        of such March 15, 1997 price in the above projections would have
        decreased estimated future net cash flows as of December 31, 1996.

(2)      Amounts computed using oil prices ranging from $17.00 to $17.25 per
         barrel and gas prices ranging from $1.00 to $1.30 per Mcf.
(3)      Amounts computed using an oil price of $17.00 per barrel and gas prices
         ranging from $1.30 to $1.50 per Mcf.
(4)     The realization of the discounted cash flows associated with the
        Company's proved undeveloped reserves in the South Dog Creek field are
        dependent on, among other things, the availability of financing to
        complete development and the success of production response from the
        waterflood injection program.
                                       36
<PAGE>
        The following are the principal sources of change in the standardized
measure of discounted future net cash flows:
<TABLE>
<CAPTION>
                                                                                        YEARS ENDED DECEMBER 31,
                                                                     -----------------------------------------------------------
                                                                         1996                    1995                   1994
                                                                     -------------          -------------            -----------
<S>                                                                  <C>                     <C>                    <C>        
Standardized measure of
   discounted future net
     cash flows, beginning of
       year .............................................            $ 7,206,090             $ 8,099,847            $ 7,525,451
Sale of oil and gas
   produced, net of
     production costs ...................................               (549,964)               (413,988)              (499,928)

Net changes in prices and
   production costs .....................................              3,338,005                (443,613)             2,257,584

Purchases of minerals in
   place ................................................              1,082,136                    --                     --

Sales of minerals in place ..............................                   --                    (2,339)              (847,690)

Extensions and discoveries ..............................                   --                      --                     --

Revisions of previous quantity
   estimates ............................................              5,752,713              (1,051,461)               (57,470)

Net change in income taxes ..............................             (3,313,257)                207,659             (1,030,645)


Accretion of discount ...................................                720,609                 809,985                752,545
                                                                     -----------             -----------            -----------

Standardized measure of
   discounted future net
     cash flows, end of year ............................            $14,236,332 (1)         $ 7,206,090(2)         $ 8,099,847 (3)
                                                                     ===========             ===========            ===========
</TABLE>
        Future net cash flows were computed using year end prices and costs, and
year end statutory tax rates that relate to existing proved oil and gas
reserves.

(1)     In accordance with the reporting regulations of the SEC, total estimated
        reserves at December 31, 1996 reflect oil and gas prices prevailing at
        year end ranging from $23.30 to $24.60 per barrel of oil and $1.89 to
        $2.75 per Mcf of gas. Oil prices at December 31, 1996 were higher than
        currently prevailing prices and, in management's opinion, were not
        indicative prices likely to prevail in 1997. As of March 15, 1997, the
        Company is obtaining a price of approximately $21.00 per barrel of oil
        on sales of oil not subject to fixed price contracts. Use of such March
        15, 1997 price in the above projections would have decreased estimated
        future net cash flows as of December 31, 1996.
(2)      Amounts computed using oil prices ranging from $17.00 to $17.25 per
         barrel and gas prices ranging from $1.00 to $1.30 per Mcf.
(3)      Using an oil price of $17.00 per barrel and gas prices ranging from
         $1.30 to $1.50 per Mcf.
                                       37
<PAGE>
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
            FINANCIAL DISCLOSURE.

        None.

PART III
ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        The definitive Proxy Statement in connection with the 1996 Annual
Meeting of Stockholders to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is incorporated herein by reference.

ITEM 11.     EXECUTIVE COMPENSATION.

        The definitive Proxy Statement in connection with the 1996 Annual
Meeting of Stockholders to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is incorporated herein by reference.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The definitive Proxy Statement in connection with the 1996 Annual
Meeting of Stockholders to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is incorporated herein by reference.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The definitive Proxy Statement in connection with the 1996 Annual
Meeting of Stockholders to be filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934 is incorporated herein by reference.
                                       38
<PAGE>
PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
                                                                            PAGE
        (A)    1.     The following consolidated financial statements
                      are included in Part II, Item 8:

                      Report of Independent Accountants.......................18

                      CONSOLIDATED FINANCIAL STATEMENTS:
                      Consolidated Balance Sheets as of
                      December 31, 1996 and 1995..............................19
                      Consolidated Statements of Operations for the
                      years ended December 31, 1996, 1995 and 1994............21
                      Consolidated Statements of Stockholders' Equity
                      for the years ended December 31, 1996, 1995 and
                      1994....................................................22
                      Consolidated Statements of Cash Flows for the
                      years ended December 31, 1996, 1995 and 1994............23

                      Notes to Consolidated Financial Statements..............26

               2.     FINANCIAL STATEMENT SCHEDULES:

                      Schedule II Valuation and Qualifying Accounts...........42

                      All other schedules are omitted because they are not
                  applicable or the information is included in the financial
                  statements and notes included herewith.

        (B)           REPORTS ON FORM 8-K

                      No reports on Form 8-K were filed during the Company's
                  last fiscal quarter of 1996.

        (C)           EXHIBITS

                      The following exhibits are filed as part of this report.
                      Where such filing is made by incorporation by reference to
                      a previously filed statement or report, such statement or
                      report is identified in parenthesis.
               3.     ARTICLES OF INCORPORATION AND BYLAWS
               3.1     Articles of Incorporation (incorporated by reference to
                       Exhibit 3 of Form 10-K for the year ended December 31,
                       1985).
               3.2     Bylaws (incorporated by reference to Exhibit 3 of Form
                       10-K for the year ended December 31, 1985).
                                       39
<PAGE>
        10.       MATERIAL CONTRACTS

        10.1      Pinnacle Petroleum, Inc. Amended and Restated Employees' Stock
                  Option Plan (incorporated by reference from Exhibit I to
                  Pinnacle Petroleum, Inc. Proxy Statement dated November 29,
                  1989).

        10.2      Directors' Stock Option Plan (incorporated by reference from
                  Exhibit II to Pinnacle Petroleum, Inc. Proxy Statement dated
                  November 29, 1989).

        10.3   Agreement and Plan for Merger by and between Golden Oil Company,
               Golden Oil Holding Corporation and Cobb Resources Corporation
               dated November 28, 1990 (incorporated by reference from Exhibit 1
               to Form 8-K dated November 28, 1990).

        10.4   Stock Option Agreement between Golden Oil Company and Cobb
               Resources Corporation dated November 28, 1990 (incorporated by
               reference from Exhibit 2 to Form 8-K dated November 28, 1990).

        10.5      Directors Agreement among George O. Lotspeich, B. W. Miller,
                  Malcolm G. Colberg, William J. Mayhew, Frank J. Yeager, Ralph
                  T. McElvenny, Jr., Anthony B. Petrelli and Golden Oil Company
                  dated November 28, 1990 (incorporated by reference from
                  Exhibit 4 to Form 8-K dated November 28, 1990).

        10.6   Asset Purchase Agreement, dated April 5, 1991, by and between
               Golden Oil Company, Cobb Resources Corporation and Chace Oil
               Company, Inc. (incorporated by reference from Exhibit 10.13 to
               Cobb Resources Corporation Form 10-K for the year ended June 30,
               1991).

        10.7   Shareholders Agreement, dated as of April 5, 1991, between Golden
               Oil Company, Cobb Resources Corporation, Horace F. McKay, Jr.
               George O. Lotspeich and Frank J. Yeager (incorporated by
               reference from Exhibit 10.15 to Cobb Resources Corporation Form
               10-K for the year ended June 30, 1991).

        10.8      Amendment No. 1 to Directors Agreement, dated as of April 5,
                  1991, between Golden Oil Company and Malcolm G. Colberg,
                  George O. Lotspeich, William J. Mayhew, Ralph T. McElvenny,
                  Jr., B. W. Miller, Anthony B. Petrelli and Frank J. Yeager
                  (incorporated by reference from Exhibit 10.17 to Cobb
                  Resources Corporation Form 10-K for the year ended June 30,
                  1991).

        10.9      Amendment No. 1 to Asset Purchase Agreement, dated June 25,
                  1991, by and between Golden Oil Company, Cobb Resources
                  Corporation and Chace Oil Company, Inc. (incorporated by
                  reference from Exhibit 10.14 to Cobb Resources Corporation
                  Form 10-K for the year ended June 30, 1991).

        10.10     Amendment No. 2 to Asset Purchase Agreement, dated as of
                  September 30, 1991, by and between Golden Oil Company, Cobb
                  Resources Corporation and Chace Oil Company, Inc.
                  (incorporated by reference from Exhibit 10.18 to Cobb
                  Resources Corporation 10-K for the year ended June 30, 1991).
                                       40
<PAGE>
        10.11  Stock Purchase Agreement, dated October 16, 1992, by and between
               Golden Oil Company, Cobb Resources Corporation, and Charles Cobb
               IV (incorporated by reference from Exhibit 10.11 to Form 10-K for
               the year ended December 31, 1992).

        10.12     Warrant to Purchase Shares of Common Stock, dated March 29,
                  1996 by and between Golden Oil Company and Ralph T. McElvenny,
                  Jr. (filed herewith).

        10.13.    Note Agreement dated April 12, 1996 by and between Golden Oil
                  Company, Ralph T. McElvenny, Jr. and Western Bank of
                  Albuquerque, New Mexico (filed herewith).

        22.1   SUBSIDIARIES OF THE COMPANY (filed herewith).
                                       41
<PAGE>
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                            Additions
                                              Additions     Charged to
                               Balance at     Charged to      Other                       Balance
                                Beginning     Costs and      Accounts      Deductions    at End of
        DESCRIPTION             OF PERIOD      EXPENSES      DESCRIBE     DESCRIBE (1)     PERIOD
        -----------             ---------      --------      --------     ------------     ------
<S>                               <C>            <C>                 <C>           <C>      <C>          
Year Ended December 31,
1994
   Allowance for doubtful
                                                                                          
     accounts                     $52,363        37,000              --            --       $89,363
                                  -------        ------            ------        ------     -------

Year Ended December 31,
1995
   Allowance for doubtful
                                                                                          
     accounts                      $89,363          --                --       (16,245)     $73,118
                                   -------        ------            ------      ------      -------


Year Ended December 31,
1996
   Allowance for doubtful
                                                                                          
     accounts                      $73,118        22,153              --        (3,553)       $91,718
                                   -------        ------            ------       ------       -------

</TABLE>
(1)     Accounts written off, net of recoveries and allowance adjustment.
                                       42
<PAGE>
                               GOLDEN OIL COMPANY

                                   SIGNATURES

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

                                                    GOLDEN OIL COMPANY



Date:   March 31, 1997                      By:     /S/ RALPH T. MCELVENNY, JR.
                                                    Ralph T. McElvenny, Jr., 
                                                    Director Chief Executive 
                                                    Officer


                                            By:     /S/ JEFFREY V. HOUSTON
                                                    Jeffrey V. Houston
                                                    Principal Financial and 
                                                    Accounting Officer

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


Date:   March 31, 1997                      By:     /S/ DARRYL L. EMMERT
                                                    Darryl L. Emmert, Director


Date:   March 31, 1997                      By:     /S/ RALPH T. MCELVENNY, JR.
                                                    Ralph T. McElvenny, Jr., 
                                                    Director Chief Executive
                                                    Officer

Date:   March 31, 1997                      By:     /S/ FRANK J. YEAGER
                                                    Frank J. Yeager, Director

                                       43