|U.S. SECURITIES AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                          
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Washington, D.C. 20549                                                                                                                                                                                                                                                                                                                           
|________________________________                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                 
|FORM 10-Q                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                 
|/X/	Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                 
|For the Quarterly Period Ended September 30, 2002                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                 
|or                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                 
|/ / 	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                 
|For the Transition Period From __________ to ___________                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                 
|______________________                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                 
|Commission File Number 0-7406                                                                                                                                                                                                                                                                                                                    
|______________________                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                 
|PrimeEnergy Corporation                                                                                                                                                                                                                                                                                                                          
|(Exact name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                 
|Delaware                                                                                                                                                                                                                                                                                                                                         
|(State or other jurisdiction of incorporation or organization)                                                                                                                                                                                                                                                                                   
|84-0637348                                                                                                                                                                                                                                                                                                                                       
|(IRS employer identification number)                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                 
|One Landmark Square, Stamford, Connecticut  06901                                                                                                                                                                                                                                                                                                
|(Address of principal executive offices)                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                 
|(203) 358-5700                                                                                                                                                                                                                                                                                                                                   
|(Registrant's telephone number, including area code)                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                 
|(Former name, former address and former fiscal year, if changed since last report)                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                 
|Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes /X/    No  / /
|                                                                                                                                                                                                                                                                                                                                                 
|The number of shares outstanding of each class of the Registrant's Common Stock as of November 14, 2002 was: Common Stock, $0.10 par value, 3,694,031 shares.                                                                                                                                                                                    



|                                                            | PrimeEnergy Corporation                                    |        
|----------------------------------------------------------- | ---------------------------------------------------------- | -------
|                                                            |                                                            |        
|                                                            | Index to Form 10-Q                                         |        
|                                                            |                                                            |        
|                                                            | September 30, 2002                                         |        
|                                                            |                                                            |        
|Part I - Financial Information                              |                                                           
|                                                            |                                                            |        
|Item 1. Financial Statements                                |                                                           
|                                                            |                                                            |        
|                                                            | Consolidated Balance Sheets - September 30, 2002 and       |        
|                                                            | December 31, 2001                                          | 3 - 4  
|                                                            |                                                            |        
|                                                            | Consolidated Statements of Operations for the nine months  |        
|                                                            | ended September 30, 2002 and 2001                          | 5      
|                                                            |                                                            |        
|                                                            | Consolidated Statements of Operations for the three months |        
|                                                            | ended September 30, 2002 and 2001                          | 6      
|                                                            |                                                            |        
|                                                            | Consolidated Statement of Stockholders' Equity for the     |        
|                                                            | nine months ended September 30, 2002                       | 7      
|                                                            |                                                            |        
|                                                            | Consolidated Statements of Cash Flows for the nine months  |        
|                                                            | ended September 30, 2002 and 2001                          | 8      
|                                                            |                                                            |        
|                                                            | Notes to Consolidated Financial Statements                 | 9 - 19 
|                                                            |                                                            |        
|Item 2. Management's Discussion and Analysis of Financial   |                                                           
|                                                            | Condition and Results of Operations                        | 20 - 23
|                                                            |                                                            |        
|Item 3. Quantitative and Qualitative Disclosures About      |                                                           
|                                                            | Market Risk                                                | 24     
|                                                            |                                                            |        
|Part II -  Other Information                                |                                                           
|                                                            |                                                            |        
|Item 1. Legal Proceedings                                   | 25                                                        
|                                                            |                                                            |        
|Item 2. Changes in Securities and Use of Proceeds           | 25                                                        
|                                                            |                                                            |        
|Item 3. Defaults Upon Senior Securities                     | 25                                                        
|                                                            |                                                            |        
|Item 4. Submission of Matters to a Vote of Security Holders | 25                                                        
|                                                            |                                                            |        
|Item 5. Other Information                                   | 25                                                        
|                                                            |                                                            |        
|Item 6. Exhibits And Reports On Form 8-K                    | 25                                                        
|                                                            |                                                            |        
|Signatures                                                  | 26                                                        





2



|PrimeEnergy Corporation

Consolidated Balance Sheets

September 30, 2002 and December 31, 2001
|----------------------------------------------------------------------------------------------
|                                                                                              
|                                                                                              
|                                                                                              
|ASSETS:                                                                                       
|Current assets:                                                                               
|Cash and cash equivalents                                                                     
|Restricted cash and cash equivalents (Note 2)                                                 
|Accounts Receivable (Note 3)                                                                  
|Due from related parties (Note 10)                                                            
|Prepaid expenses                                                                              
|Other current assets (Note 4)                                                                 
|Deferred income taxes (Note 1)                                                                
|                                                                                              
|Total current assets                                                                          
|                                                                                              
|Property and equipment, at cost (Notes 1 and 5):                                              
|Oil and gas properties (successful efforts method):                                           
|Proved                                                                                        
|Unproved                                                                                      
|Furniture, fixtures and equipment                                                             
|including leasehold improvements                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Accumulated depreciation and depletion                                                        
|                                                                                              
|Net property and equipment                                                                    
|                                                                                              
|Other assets                                                                                  
|                                                                                              
|Total assets                                                                                  
|                                                                                              















See accompanying notes to the consolidated financial statements.



3





|PrimeEnergy Corporation

Consolidated Balance Sheets

September 30, 2002 and December 31, 2001
|----------------------------------------------------------------------------------------------
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|LIABILITIES and STOCKHOLDERS' EQUITY:                                                         
|Current liabilities:                                                                          
|Accounts payable                                                                              
|Current portion of other long-term                                                            
|obligations (Notes 7 and 8)                                                                   
|Accrued liabilities:                                                                          
|Taxes                                                                                         
|Payroll, benefits and related items                                                           
|Interest and other                                                                            
|Due to related parties (Note 10)                                                              
|                                                                                              
|Total current liabilities                                                                     
|                                                                                              
|                                                                                              
|Long-term bank debt (Note 6)                                                                  
|Other long-term obligations (Note 7)                                                          
|Deferred income taxes (Note 1)                                                                
|                                                                                              
|Total liabilities                                                                             
|                                                                                              
|Stockholders' equity:                                                                         
|Preferred stock, $.10 par value,                                                              
|authorized 5,000,000 shares, none issued                                                      
|Common stock, $.10 par value, authorized                                                      
|10,000,000 shares; issued 7,694,970                                                           
|in 2002 and 2001                                                                              
|Paid in capital                                                                               
|Retained earnings                                                                             
|                                                                                              
|                                                                                              
|Treasury stock, at cost, 3,980,139 common shares                                              
|in 2002 and 3,909,102 common shares in 2001                                                   
|                                                                                              
|Total stockholders' equity                                                                    
|                                                                                              
|Total liabilities and equity                                                                  
|                                                                                              

See accompanying notes to the consolidated financial statements.



4



|PrimeEnergy Corporation

Consolidated Statements of Operations

Nine months Ended September 30, 2002 and 2001
(Unaudited)
|-------------------------------------------------------------------------------------------------------------------------
|                                                                                                                         
|                                                                                                                         
|Revenue:                                                                                                                 
|Oil and gas sales                                                                                                        
|District operating income                                                                                                
|Administrative revenue (Note 10)                                                                                         
|Reporting and management fees (Note 10)                                                                                  
|Interest and other income (Note 11)                                                                                      
|                                                                                                                         
|Total revenue                                                                                                            
|                                                                                                                         
|Costs and expenses:                                                                                                      
|Lease operating expense                                                                                                  
|District operating expense                                                                                               
|Depreciation and depletion of oil and gas properties                                                                     
|General and administrative expense                                                                                       
|Exploration costs                                                                                                        
|Interest expense (Note 6)                                                                                                
|                                                                                                                         
|Total costs and expenses                                                                                                 
|                                                                                                                         
|Income from operations                                                                                                   
|Gain on sale and exchange of assets                                                                                      
|                                                                                                                         
|Net income before income taxes                                                                                           
|                                                                                                                         
|Provision for income taxes                                                                                               
|                                                                                                                         
|Net income                                                                                                               
|                                                                                                                         
|                                                                                                                         
|Basic income per common share (Notes 1 and 12)                                                                           
|                                                                                                                         
|Diluted income per common share (Notes 1 and 12)                                                                         













See accompanying notes to the consolidated financial statements.



5



|PrimeEnergy Corporation

Consolidated Statements of Operations

Three Months Ended September 30, 2002 and 2001
(Unaudited)
|--------------------------------------------------------------------------------------------------------------------------
|                                                                                                                          
|                                                                                                                          
|Revenue:                                                                                                                  
|Oil and gas sales                                                                                                         
|District operating income                                                                                                 
|Administrative revenue (Note 10)                                                                                          
|Reporting and management fees (Note 10)                                                                                   
|Interest and other income (Note 11)                                                                                       
|                                                                                                                          
|Total revenue                                                                                                             
|                                                                                                                          
|Costs and expenses:                                                                                                       
|Lease operating expense                                                                                                   
|District operating expense                                                                                                
|Depreciation and depletion of oil and gas properties                                                                      
|General and administrative expense                                                                                        
|Exploration costs                                                                                                         
|Interest expense (Note 6)                                                                                                 
|                                                                                                                          
|Total costs and expenses                                                                                                  
|                                                                                                                          
|Income from operations                                                                                                    
|Gain on sale and exchange of assets                                                                                       
|                                                                                                                          
|Net income before income taxes                                                                                            
|                                                                                                                          
|Provision for income taxes                                                                                                
|                                                                                                                          
|Net income                                                                                                                
|                                                                                                                          
|                                                                                                                          
|Basic income per common share (Notes 1 and 12)                                                                            
|                                                                                                                          
|Diluted income per common share (Notes 1 and 12)                                                                          













See accompanying notes to the consolidated financial statements.



6

PrimeEnergy Corporation



Consolidated Statement of Stockholders' Equity



Nine months Ended September 30, 2002

(Unaudited)



|                              | Common Stock | Paid In    | Retained      | Treasury      |               
|----------------------------- | ------------ | ---------- | ------------- | ------------- | --------------
|                              | Shares       | Amount     | Capital       | Earnings      | Stock         
|                              |              |            |               |               |               
|Balance at December 31, 2001  | 7,694,970    | $769,000   | $11,024,000   | $7,919,000    | $(12,349,000) 
|                              |              |            |               |               |               
|Purchased 71,037 shares of    |              |            |               |               |               
|common stock                  |              |            |               |               | (570,000)     
|                              |              |            |               |               |               
|Net income                    |              |            |               | 1,187,000     |               
|                              | -----------  | ---------- | ------------- | ------------- | --------------
|Balance at September 30, 2002 | 7,694,970    | $769,000   | $11,024,000   | $9,106,000    | $(12,919,000) 
|                              | ========     | =======    | =========     | =========     | ==========    























See accompanying notes to the consolidated financial statements.

7

|PrimeEnergy Corporation

Consolidated Statements of Cash Flows

Nine months Ended September 30, 2002 and 2001
(Unaudited)
|-------------------------------------------------------------------------------------------------------------------------
|                                                                                                                         
|Cash flows from operating activities:                                                                                    
|Net income                                                                                                               
|Adjustments to reconcile net income to net cash provided by                                                              
|operating activities:                                                                                                    
|Depreciation, depletion and amortization                                                                                 
|Dry hole and abandonment costs                                                                                           
|Gain on sale of properties                                                                                               
|Provision for deferred income taxes                                                                                      
|Changes in assets and liabilities:                                                                                       
|(Increase) decrease in accounts receivable                                                                               
|(Increase) decrease in due from related parties                                                                          
|(Increase) decrease in other assets                                                                                      
|(Increase) decrease in prepaid expenses                                                                                  
|Decrease (increase) in accounts payable                                                                                  
|Decrease (increase) in accrued liabilities                                                                               
|Decrease (increase) in due to related parties                                                                            
|                                                                                                                         
|Net cash provided by operating activities                                                                                
|                                                                                                                         
|Cash flows from investing activities:                                                                                    
|Capital expenditures, including dry hole costs                                                                           
|Proceeds from sale of property and equipment                                                                             
|                                                                                                                         
|Net cash used in investing activities                                                                                    
|                                                                                                                         
|Cash flows from financing activities:                                                                                    
|Purchase of treasury stock                                                                                               
|Increase in long-term bank debt and other long-term obligations                                                          
|Repayment of long-term bank debt and other long-term obligations                                                         
|Proceeds from exercised stock options                                                                                    
|                                                                                                                         
|Net cash provided by (used in) financing activities                                                                      
|                                                                                                                         
|Net increase in cash and cash equivalents                                                                                
|Cash and cash equivalents at the beginning of the period                                                                 
|                                                                                                                         
|Cash and cash equivalents at the end of the period                                                                       
|                                                                                                                         

Supplemental information of non-cash investing and financing activities:

During 2002, the Company recorded additional capital lease obligations in the amount of $54,000 related to

computer equipment.

See accompanying notes to the consolidated financial statements.



8

PrimeEnergy Corporation



Notes to Consolidated Financial Statements



September 30, 2002



(1) Description of Operations and Significant Accounting Policies:

General-



The accompanying unaudited consolidated financial statements included herein, have been prepared by PrimeEnergy Corporation in accordance with accounting principles generally accepted in the United States of America for interim financial information       and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. These financial statements should be read in conjunction with the financial statements and notes thereto which are in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.



The balance sheet at December 31, 2001 presented in this report, has been derived from the audited financial statements at that date but does not include all of the information and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 2001.



The results of the operations for the interim periods may not necessarily be indicative of the results to be expected for the full year.

Nature of Operations-



PrimeEnergy Corporation ("PEC"), a Delaware corporation, was organized in March 1973. PrimeEnergy Management Corporation ("PEMC"), a wholly-owned subsidiary, acts as the managing general partner, providing administration, accounting and tax preparation services for 45 private and publicly-held limited partnerships and 2 trusts (collectively, the "Partnerships"). PEC owns Eastern Oil Well Service Company, EOWS Midland Company, and Southwest Oilfield Construction Company, all of which perform oil and gas field services.  PEC also owns Prime Operating Company, which serves as operator for most of the producing oil and gas properties owned by the Company and affiliated entities. Field service revenues and the administrative overhead fees earned as operator are reported as 'District operating income' on the consolidated statement of operations. PrimeEnergy Corporation and its wholly-owned subsidiaries are herein referred to as the "Company".



The Company is engaged in the development, acquisition and production of oil and natural gas properties.  The Company owns leasehold, mineral and royalty interests in producing and non-producing oil and gas properties across the continental United States, including Colorado, Kansas, Louisiana, Mississippi, Montana, Nebraska, New Mexico,



9

North Dakota, Oklahoma, Texas, Utah, West Virginia and Wyoming.  The Company operates approximately 1,550 wells and owns non-operating interests in over 450 additional wells.  Additionally, the Company provides well-servicing support operations, site-preparation and construction services for oil and gas drilling and re-working operations, both in connection with the Company's activities and providing contract services for third parties.  The Company is publicly traded on the NASDAQ under the symbol "PNRG."



The markets for the Company's products and services are highly competitive, as oil and gas are commodity products and prices depend upon numerous factors beyond the control of the Company, such as economic, political and regulatory developments and competition from alternative energy sources.



Principles of Consolidation-



The consolidated financial statements include the accounts of PrimeEnergy Corporation and its wholly-owned subsidiaries.  All material inter-company accounts and transactions between these entities have been eliminated. Oil and gas properties include ownership interests in the Partnerships.  The statement of operations includes the Company's proportionate share of revenue and expenses related to oil and gas interests owned by the Partnerships.



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.



Estimates of oil and gas reserves, as determined by independent petroleum engineers, are continually subject to revision based on price, production history and other factors.  Depletion expense, which is computed based on the units of production method, could be significantly impacted by changes in such estimates.  Additionally, SFAS No. 144 requires that, if the expected future cash flow from an asset is less than its carrying cost, that asset must be written down to its fair market value.  As the fair market value of a property is generally substantially less than the total future cash flow expected from the asset, small changes in the estimated future net revenue from an asset could lead to the necessity of recording a significant impairment of that asset.



Property and Equipment-



The Company follows the "successful efforts" method of accounting for its oil and gas properties.  Under the successful efforts method, costs of acquiring undeveloped oil and gas leasehold acreage, including lease bonuses, brokers' fees and other related costs are capitalized. Provisions for impairment of undeveloped oil and gas leases are based on periodic evaluations. Annual lease rentals and exploration expenses, including geological and geophysical expenses and exploratory dry hole costs, are charged against income as



10

incurred. Costs of drilling and equipping productive wells, including development dry holes and related production facilities, are capitalized.  Costs incurred by the Company related to the exploration, development and acquisition of oil and gas properties on behalf of the Partnerships or joint ventures are deferred and charged to the related entity upon the completion of the acquisition.  To the extent that the Company acquires an interest in the property, an appropriate allocation of internal costs are capitalized as part of the depletable base of the property.



All other property and equipment are carried at cost.  Depreciation and depletion of oil and gas production equipment and properties are determined under the unit-of-production method based on estimated proved recoverable oil and gas reserves.  Depreciation of all other equipment is determined under the straight-line method using various rates based on useful lives.  The cost of assets and related accumulated depreciation is removed from the accounts when such assets are disposed of, and any related gains or losses are reflected in current earnings.



Income Taxes-



The Company records income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".  SFAS No. 109 is an asset and liability approach to accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future consequences of events that have been recognized in the Company's financial statements or tax returns.



Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in the rates expected to be in effect when the temporary differences reverse.  A valuation allowance is established for any deferred tax asset for which realization is not likely.



General and Administrative Expenses-



General and administrative expenses represent costs and expenses associated with the operation of the Company.  Certain of the Partnerships and joint ventures sponsored by the Company reimburse general and administrative expenses incurred on their behalf.



Income per share-



Income per share of common stock has been computed based on the weighted average number of common shares and common stock equivalents outstanding during the respective periods in accordance with SFAS No. 128, "Earnings per Share".



Statements of cash flows-



For purposes of the consolidated statements of cash flows, the Company considers short-term, highly liquid investments with original maturities of less than ninety days to be cash equivalents.



Concentration of Credit Risk-



11

The Company maintains significant banking relationships with financial institutions in the State of Texas.  The Company limits its risk by periodically evaluating the relative credit standing of these financial institutions.  The Company's oil and gas production purchasers consist primarily of independent marketers and major gas pipeline companies.



Hedging-



The Company periodically enters into oil and gas financial instruments to manage its exposure to oil and gas price volatility.  The oil and gas reference prices upon which the price hedging instruments are based reflect various market indices that have a high degree of historical correlation with actual prices received by the Company.



The financial instruments are accounted for in accordance with Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which established new accounting and reporting requirements for derivative instruments and hedging activities.  SFAS No. 133, as amended by SFAS No. 138, requires that all derivative instruments subject to the requirements of the statement be measured at fair market value and recognized as assets or liabilities in the balance sheet.  The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation is generally established at the inception of a derivative.  For derivatives designated as cash flow hedges and meeting the effectiveness guidelines of SFAS No. 133, changes in fair value, to the extent effective, are recognized in other comprehensive income until the hedged item is recognized in earnings.  Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time.  Any change in fair value of a derivative resulting from ineffectiveness or an excluded component of the gain/loss is recognized immediately in the statement of operations.



No significant hedging activities were entered into in the nine months ended September 30, 2002 or 2001.



Recently Issued Accounting Standards-



In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations." SFAS No. 141 is intended to improve the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under a single method - the purchase method. SFAS 141 is effective for all transactions completed after September 30, 2001, except transactions using the pooling-of-interests method that were initiated prior to July 1, 2001. The adoption of SFAS 141 has not had an impact on the Company's consolidated financial statements.



In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This statement applies to intangibles and goodwill acquired after September 30, 2001, as well as goodwill and intangibles previously acquired. Under this statement, goodwill as well as other intangibles determined to have an infinite life will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. This statement



12

is effective for the Company for the first quarter in the fiscal year ending December 31, 2002. The adoption of this statement has not had an impact on the Company's consolidated financial statements.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for fiscal years beginning after September 15, 2002.  Management has not yet determined the impact on the Company's consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. This statement was adopted by the Company in the first quarter of the fiscal year ending December 31, 2002, and did not have a material impact on the Company's financial statements.



In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections." Prior to the adoption of the provisions of SFAS No. 145, generally accepted accounting principles  required gains or losses on the early extinguishment of debt be classified in a company's periodic consolidated statements of operations as extraordinary gains or losses, net of associated income taxes, below the determination of income or loss from continuing operations. SFAS No. 145 changes generally accepted accounting principles to require, except in the case of events or transactions of a highly unusual and infrequent nature, gains or losses from the early extinguishment of debt be classified as components of a company's income or loss from continuing operations. The adoption of the provisions of SFAS No. 145 in 2003 is not expected to affect the Company's financial position or results of operations.



In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 in 2003 is not expected to have an effect on the Company's financial position or results of operations.





(2)  Restricted Cash and Cash Equivalents:

Restricted cash and cash equivalents includes $1,308,000 and $1,174,000 at September 30, 2002 and December 31, 2001, respectively, of cash primarily pertaining to undistributed royalty payments. There were corresponding accounts payable recorded at September 30, 2002 and December 31, 2001 for these liabilities.





13

(3)  Accounts Receivable:

Accounts receivable at September 30, 2002 and December 31, 2001 consisted of the following:













|                             | September 30, | December 31,   
|---------------------------- | ------------- | ---------------
|                             | 2002          | 2001           
|                             |               |                
|Joint Interest Billing       | $             | 989,000        
|Trade Receivables            |               | 1,085,000      
|Oil and Gas Sales            |               | 1,889,000      
|Other                        |               | 557,000        
|                             |               | ---------------
|                             |               | 4,520,000      
|Less, Allowance for doubtful |               |                
|accounts                     |               | (339,000)      
|                             |               | ---------------
|                             | $             | 4,181,000      
|                             |               | =========      





(4)  Other Current Assets:

Other current assets at September 30, 2002 and December 31, 2001 consisted of the following:











|                        | September 30, | December 31, 
|----------------------- | ------------- | -------------
|                        | 2002          | 2001         
|                        |               |              
|Tax overpayments        | $             | --           
|Field service inventory |               | 246,000      
|Other                   |               | 114,000      
|                        |               | -------------
|Total                   | $             | 360,000      
|                        |               | =========    





During 2001, the Company estimated that its liability for the 2001 tax year would be approximately $1,000,000, and made estimated tax payments accordingly.  Due primarily to a significant investment in tax deductible intangible drilling costs along with a sharp





14

drop in oil and gas prices, the actual tax liability was substantially less.  The Company filed for tax refunds during the second quarter of 2002, all of which have been collected as of September 30, 2002.







(5)  Property and equipment:

Property and equipment at September 30, 2002 and December 31, 2001 consisted of the following:







|                                        | September 30, | December 31,    
|--------------------------------------- | ------------- | ----------------
|                                        | 2002          | 2001            
|                                        |               |                 
|                                        |               |                 
|Proved oil and gas properties at cost   | $             | 70,367,000      
|Unproved oil and gas properties at cost |               | 1,174,000       
|Less, accumulated depletion             |               |                 
|and depreciation                        |               | (46,073,000)    
|                                        |               | ----------------
|                                        |               | 25,468,000      
|                                        |               |                 
|Furniture, fixtures and equipment       |               | 8,655,000       
|Less, accumulated depreciation          |               | (4,966,000)     
|                                        |               | ----------------
|                                        |               | 3,689,000       
|                                        |               | ----------------
|Total net property and equipment        | $             | 29,157,000      
|                                        |               | ==========      





(6)  Long-Term Bank Debt:

The Company has been party to a series of credit agreements with its primary lender or its predecessors since 1983.  The current agreement, entered into in April 1995, provides for borrowings under a Master Note.  Advances under the agreement, as amended, are limited to the borrowing base as defined in the agreement.  The borrowing base is re-determined by the lender on a semi-annual basis.  Since the beginning of 1999, the borrowing base has ranged from $18.95 million to $23.7 million.  The credit agreement provides for interest on outstanding borrowings at the bank's base rate, as defined, payable monthly, or at rates ranging from 1.5% to 2% over the London Inter-Bank Offered Rate (LIBO rate) depending upon the Company's utilization of the available line of credit, payable at the end of the applicable interest period.



The combined average interest rates paid on outstanding borrowings subject to interest at the bank's base rate and on outstanding borrowings bearing interest based upon the LIBO rate were 3.90% during the first nine months of 2002 as compared to 6.59% during the





15

same period of 2001.  As of September 30, 2002 and December 31, 2001, the total outstanding borrowings were $21 million and $16.95 million, respectively, with an additional $1 million and $6.05 million available. As of September 30, 2002 and December 31, 2001, respectively, $19.5 million and $16.95 million of the outstanding borrowings were accruing interest at the LIBO rate option.



The Company's oil and gas properties as well as certain receivables and equipment are pledged as security under the loan agreement. The agreement requires the Company to maintain, as defined, a minimum current ratio, tangible net worth, debt coverage ratio and interest coverage ratio, and restrictions are placed on the payment of dividends and the amount of treasury stock the Company may purchase.



(7) Other Long-Term Obligations:



Other long-term obligations at September 30, 2002 and December 31, 2001 consisted of the following:





|                               | September 30, | December 31,  
|------------------------------ | ------------- | --------------
|                               | 2002          | 2001          
|                               |               |               
|Due under oil and gas property |               |               
|purchase (Note 8)              | $             | 100,000       
|Capital lease obligations      |               | 64,000        
|                               |               |               
|Less, current portion          |               | (121,000)     
|                               |               | --------------
|                               | $             | 43,000        
|                               |               | =========     

(8) Contingent Liabilities:



In connection with the purchase of oil and gas properties located in various counties in Oklahoma in November of 1999, the Company is committed to pay contingent consideration to the seller based upon the performance of the properties purchased. As of December 31, 2001, the total amount of contingent consideration estimated to be paid under the agreement was $225,000, all of which was included in 'Other long-term obligations' on the Balance Sheet.  As of September 30, 2002, the total estimated liability was $100,000.



PEMC, as managing general partner of the affiliated Partnerships is responsible for all Partnership activities, including the review and analysis of oil and gas properties for acquisition, the drilling of development wells and the production and sale of oil and gas from productive wells.  PEMC also provides the administration, accounting and tax preparation work for the Partnerships and is liable for all debts and liabilities of the affiliated Partnerships, to the extent that the assets of a given limited Partnership are not sufficient to satisfy its obligations.





16

As a general partner, PEMC is committed to offer to purchase the limited partners' interests in certain of its managed Partnerships at various annual intervals.  Under the terms of a partnership agreement, PEMC is not obligated to purchase an amount greater than 10% of the total partnership interest outstanding.  In addition, PEMC will be obligated to purchase interests tendered by the limited partners only to the extent of one hundred fifty (150) percent of the revenues received by it from such partnership in the previous year.  Purchase prices are based upon annual reserve reports of independent petroleum engineering firms discounted by a risk factor.  Based upon historical production rates and prices, management estimates that if all such offers were to be accepted, the maximum annual future purchase commitment would be approximately $500,000.



The Company owns approximately a 27% interest in a limited partnership which owns a shopping center in Alabama.  The Company is a guarantor on a mortgage secured by the shopping center.  The Company believes the cash flow from the center is sufficient to service the mortgage.  The market value of the center is currently substantially higher than the balance owed on the mortgage.  If the partnership were unable to pay its obligations under the mortgage agreement, the maximum amount the Company is committed to pay is $400,000.



The Company is subject to environmental laws and regulations.  Management believes that future expenses, before recoveries from third parties, if any, will not have a material effect on the Company's financial condition.  This opinion is based on expenses incurred to date for remediation and compliance with laws and regulations which have not been material to the Company's results of operations.



(9)  Stock Options and Other Compensation:

In May 1989, non-statutory stock options were granted by the Company to key executive officers for the purchase of shares of common stock.  At September 30, 2002 and 2001, options on 767,500 were outstanding and exercisable at prices ranging from $1.00 to $1.25.



As of September 30, 2002, PEMC had a marketing agreement with its current President to provide assistance and advice to PEMC in connection with the organization and marketing of oil and gas partnerships and joint ventures and other investment vehicles of which PEMC serves as general or managing partner.  The Company had a similar agreement with its former Chairman.  Although that agreement has expired, as of September 30, 2002, the former Chairman was still entitled to receive certain payments relating to partnerships formed during the time the agreement was in effect. In October 2002, the President and former Chairman sold and assigned all rights, title and interest related to the Partnerships under all marketing agreements to the Company. The President has been and continues to be entitled to a percentage of the Company's carried interest related to the joint ventures.

(10) Related Party Transactions:





17

PEMC is a general partner in several oil and gas Partnerships in which certain directors have limited and general partnership interests. As the managing general partner in each of the Partnerships, PEMC receives approximately 5% to 15% of the net revenues of each Partnership as a carried interest in the Partnerships' properties.

The Partnership agreements allow PEMC to receive management fees for various services provided to the Partnerships as well as reimbursement for certain costs incurred on behalf of the Partnerships, including property acquisition and development costs. Reimbursement of general and administrative overhead is reported in the statements of operations as administrative revenue.



Due to related parties at September 30, 2002 and December 31, 2001 primarily represent receipts collected by the Company, as agent, from oil and gas sales net of expenses. Receivables from affiliates consist of reimbursable general and administrative costs, lease operating expenses and reimbursements for property acquisitions, development and related costs.



Treasury stock purchases in the first nine months of 2002 and 2001 included shares acquired from related parties.  Purchases in the first nine months of 2002 and 2001 include approximately 29,000 shares purchased for a total consideration of $234,000 in 2002, and 165,000 shares purchased for a total consideration of $1,160,000 in 2001.





(11) Other Income:



Included in 'Interest and other income' for the period ending September 30, 2002 are proceeds of $350,000 received in February, 2002 in settlement of a claim for additional drilling costs incurred by the Company in prior years as a result of a third party's negligence.

(12) Income per share:

Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock.  The following reconciles amounts reported in the financial statements:





|                   | Nine months Ended  | Nine months Ended 
|------------------ | ------------------ | ------------------
|                   | September 30, 2002 | September 30, 2001
|                   |                    |                   
|                   | Net
Income         | Number of         
|                   | Shares             | Amount            
|Net income per     |                    |                   
|common share       | $                  | 1,187,000         
|Effect of dilutive |                    |                   
|securities:        |                    |                   
|Options            |                    |                   
|                   |                    | ---------------   
|Diluted net income |                    |                   
|per common share   | $                  | 1,187,000         
|                   |                    | =========         

18





|                   | Three Months Ended | Three Months Ended
|------------------ | ------------------ | ------------------
|                   | September 30, 2002 | September 30, 2001
|                   |                    |                   
|                   | Net
Income         | Number of         
|                   | Shares             | Amount            
|Net income per     |                    |                   
|common share       | $                  | 642,000           
|Effect of dilutive |                    |                   
|securities:        |                    |                   
|Options            |                    |                   
|                   |                    | -------------     
|Diluted net income |                    |                   
|per common share   | $                  | 642,000           
|                   |                    | =========         







































































19

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This discussion should be read in conjunction with the financial statements of the Company and notes thereto. The Company's subsidiaries are defined in Note 1 of the financial statements. PEMC is the managing general partner or managing trustee in numerous Limited Partnerships and Trusts (collectively, the "Partnerships").



LIQUIDITY AND CAPITAL RESOURCES



The Company feels that it has the ability to generate sufficient amounts of cash to meet long-term liquidity needs, as well as debt service.  The Company's goal is to generate increased cash flows by increasing its reserve base through continued acquisition, exploration and development. By increasing its reserve base, the Company's borrowing ability is increased due to additional properties available as collateral. Capital expenditures during 2002 were financed by internally generated funds, additional bank borrowings and cash balances available at the prior year-end.



The Company has been party to a series of credit agreements with its primary lender or its predecessors since 1983.  The current agreement, entered into in April 1995, provides for borrowings under a Master Note.  Advances under the agreement, as amended, are limited to the borrowing base as defined in the agreement.  The borrowing base is re-determined by the lender on a semi-annual basis.  Since the beginning of 1999, the borrowing base has ranged from $18.95 million to $23.7 million.  The credit agreement provides for interest on outstanding borrowings at the bank's base rate, as defined, payable monthly, or at rates ranging from 1.5% to 2% over the London Inter-Bank Offered Rate (LIBO rate) depending upon the Company's utilization of the available line of credit, payable at the end of the applicable interest period.



The combined average interest rates paid on outstanding borrowings subject to interest at the bank's base rate and on outstanding borrowings bearing interest based upon the LIBO rate were 3.90% during the first nine months of 2002 as compared to 6.59% during the same period of 2001.  As of September 30, 2002 and December 31, 2001, the total outstanding borrowings were $21 million and $16.95 million, respectively, with an additional $1 million and $6.05 million available. As of September 30, 2002 and December 31, 2001, respectively, $19.5 million and $16.95 million of the outstanding borrowings were accruing interest at the LIBO rate option.



Advances pursuant to the agreement are limited to the borrowing base as defined in the agreement.  Most of the Company's oil and gas properties as well as certain receivables and equipment are pledged as security under this agreement. Under the Company's credit agreement, the Company is required to maintain, as defined, minimum current, tangible net worth, debt coverage and interest coverage ratios.



The Company spent approximately $8,626,000 on the acquisition, exploration and development of oil and gas properties in the first nine months of 2002, including $651,000 spent to repurchase limited partner interests from investors in the oil and gas partnerships.



The Company also spent approximately $921,000 on field service equipment, and $162,000 on computer hardware and software in the first nine months of 2002.



20

The Company spent $570,000 in the first nine months of 2002 to acquire treasury stock.



Most of the Company's capital spending is discretionary and the ultimate level of spending will be dependent on the Company's assessment of the oil and gas business, the availability of capital, the number of oil and gas prospects, and oil and gas business opportunities in general.



RESULTS OF OPERATIONS



The Company had net income of $1,187,000 for the nine months ended September 30, 2002 as compared to net income of $5,206,000 in the first nine months of 2001. The Company had net income of $642,000 in the third quarter of 2002 as compared to net income of $630,000 in the third quarter of 2001.



The change in net income for the nine- month period of 2002 as compared to the same period in 2001 is primarily attributable to significantly lower oil and gas prices during 2002 along with increased exploration costs associated with increased drilling activities.



Oil and gas sales of $12,824,000 for the first nine months of 2002 represented a 32% decrease in sales compared to the first nine months of 2001.  Third quarter 2002 oil and gas sales of $5,017,000 represented a 1% decrease in sales compared to the same period in 2001.  The tables below summarize production, prices and revenue in the periods under discussion.



|                        | Nine months Ended                                      | Three Months Ended                                     
|----------------------- | ------------------------------------------------------ | -------------------------------------------------------
|                        | September  30,                                         | September 30,                                          
|                        | ------------------------------------------------------ | -------------------------------------------------------
|                        |                                                        |                                                        
|                        | 2002                                                   | 2001                                                   
|                        |                                                        |                                                        
|Barrels of Oil Produced | 240,499                                                | 227,224                                                
|Average Price Received  | $22.5525                                               | $26.2287                                               
|                        | ---------------                                        | ---------------                                        
|Oil Revenue             | $5,424,000                                             | $5,960,000                                             
|                        | ---------------                                        | ---------------                                        
|Mcf of Gas Produced     | 2,650,232                                              | 2,731,406                                              
|Average Price Received  | $2.7924                                                | $4.7025                                                
|                        | ---------------                                        | ---------------                                        
|Gas Revenue             | $7,400,000                                             | $12,845,000                                            
|                        | ---------------                                        | ---------------                                        
|Total Oil & Gas Revenue | $12,824,000                                            | $18,805,000                                            
|                        | =========                                              | =========                                              
|                        |                                                        |                                                        





| |  | 
| |  | 

Changes in production are due to the natural decline curves of properties offset by production from properties added during 2001 and the first nine months of 2002.



Projects in Oklahoma, including the East Wakita and DSR Projects, accounted for approximately 10,800 barrels and 155,000 Mcf of production during the first nine months of 2002 over the amounts produced during the same period of 2001. These same projects accounted for an additional 4,300 barrels and 76,000 Mcf of production during the third quarter of 2002 over amounts produced during the third quarter in 2001.  Likewise, new West Texas projects added approximately 18,500 barrels and 43,000 Mcf of production during the first nine





21

months of 2002, and 10,600 barrels and 35,500 Mcf during the third quarter of 2002 over the amounts produced during the same periods in 2001.  The Company's share of Partnership production increased by approximately 1,500 barrels and 88,000 Mcf during the first nine months of 2002 compared to the first nine months of 2001 as a result of interests purchased in 2001 and 2002.



Administrative revenue for the first nine months of 2002 was $1,105,000 as compared to $1,172,000 in 2001. Amounts received in both years from certain Partnerships are substantially less than the amounts allocable to those Partnerships under the Partnership agreements.  The lower amounts reflect PEMC's efforts to limit costs incurred and the amounts allocated to the Partnerships.



Lease operating expense declined by 6% in both the nine and three month periods ended September 30, 2002 as compared to the same periods of 2001 due to reduced production tax expense related to the decline in product prices offset by the lease operating expenses of new properties, including additional Partnership interests.



Other income increased by $393,000 during the first nine months of 2002 as compared to the same period of 2001, due primarily to proceeds received in February 2002 in settlement of a claim for additional drilling costs incurred by the Company in prior years as a result of a third party's negligence.



The Company receives reimbursement for costs incurred related to the evaluation, acquisition and development of properties in which interests are owned by its joint venture partners, related partnerships and trusts.  To the extent that these costs are expended by PEMC, such reimbursements reduce total general and administrative expenses.  To the extent that these costs are expended at the district level, the reimbursements reduce total district operating expense.  Such reimbursement totaled $150,000 during the first nine months of 2002, as compared to $303,000 received in the same period of 2001.



General and administrative expenses decreased by $436,000, or 13%, in the first nine months of 2002, This decrease is primarily due to reduced compensation costs in 2002 offset by reduced cost reimbursements described above.



District operating income for the first nine-month period of 2002 decreased by $1,608,000, or 12%, compared to the same period in 2001. Third quarter 2002 district operating income declined by $539,000, or 12% compared to the third quarter of 2001. Decreases in both periods reflect decreased utilization of equipment and lower rates charged for services related to the change in commodity prices.  District operating expense in 2002 declined in the first nine months by $315,000 and in the third quarter by $295,000 as compared to the same periods in 2001. This decrease in both periods was due to reduced compensation costs in 2002 partially offset by increased depreciation expense on field equipment purchased in the fourth quarter of 2001 and in 2002.



Depreciation and depletion of oil and gas properties decreased by 20% or $765,000 for the nine months ended September 30, 2002, and by 9% or 126,000 for the three months ended







22

September 30, 2002 as compared to the same periods in the previous year. This decrease is related to the reduced net cost basis of producing properties as a result of prior year depletion charges.



Exploration costs of $789,000 in the first nine months of 2002 were incurred in the drilling of three prospects located in Wharton, Harris and Gaines Counties, Texas. Exploration costs of $439,000 in the first nine months of 2001 were primarily attributable to dry hole costs associated with three wells, one drilled in Calhoun County, Texas, one in Grant County, Oklahoma and one in Zavala County, Texas. The 2002 drilling activities in Harris and Gaines Counties, Texas were performed in the third quarter, accounting for the increase of $264,000 as compared to the third quarter of 2001.

Interest expense of $564,000 for the first nine months of 2002 represents a decrease of 23% from the same period in 2001. Interest expense for the third quarter of 2002 decreased by $8,000, or 4% from the amount expensed during the third quarter of 2001. Both decreases are due to significantly lower interest rates in 2002.



Tax expense declined by $1,617,000 for the first nine months of 2002, and by $260,000 for the third quarter of 2002 as compared to the same periods of 2001, reflecting the reduced net income for the nine month period in 2002, as well as $1,682,000 in deferred tax liability, a non-cash item, recorded in the third quarter of 2001.



This Report contains forward-looking statements that are based on management's current expectations, estimates and projections.  Words such as "expects," "anticipates," "intends," "plans," "believes," "projects" and "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and are subject to the safe harbors created thereby.  These statements are not guarantees of future performance and involve risks and uncertainties and are based on a number of assumptions that could ultimately prove inaccurate and, therefore, there can be no assurance that they will prove to be accurate.  Actual results and outcomes may vary materially from what is expressed or forecast in such statements due to various risks and uncertainties.  These risks and uncertainties include, among other things, the possibility of drilling cost overruns and technical difficulties, volatility of oil and gas prices, competition, risks inherent in the Company's oil and gas operations, the inexact nature of interpretation of seismic and other geological and geophysical data, imprecision of reserve estimates, and the Company's ability to replace and expand oil and gas reserves. Accordingly, stockholders and potential investors are cautioned that certain events or circumstances could cause actual results to differ materially from those projected.























23

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The Company is exposed to interest rate risk on its line of credit, which has variable rates based upon the lender's base rate, as defined, and the London Inter-Bank Offered rate.  Based on the weighted average balances outstanding during the first nine months of 2002, a hypothetical 2% increase in the applicable interest rates would have increased interest expense for the nine month period ended September 30, 2002 by approximately $278,000.



Oil and gas prices have historically been extremely volatile, and have been particularly so in recent years.  The Company did not enter into significant hedging transactions during the first nine months of 2002. Declines in domestic oil and gas prices could have a material adverse effect on the Company's revenues, operating results, estimates of economically recoverable reserves and the net revenue there from.

























































































24

PART II - OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS

From time to time, the Company is party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.

Item 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS

None

Item 3.	DEFAULTS UPON SENIOR SECURITIES

None

Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



No matters were submitted to a vote of security holders during the period covered in this report.



Item 5.	OTHER INFORMATION

None

Item 6. EXHIBITS AND REPORTS ON FORM 8K



1. Exhibit 99: Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
2. Reports on From 8-K:  No reports on Form 8-K were filed by the Company during the nine months ended September 30, 2002.































25





SIGNATURES





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









|                  | PrimeEnergy Corporation                   
|----------------- | ------------------------------------------
|                  | (Registrant)                              
|                  |                                           
|                  |                                           
|                  |                                           
|November 14, 2002 | /s/ Charles E. Drimal, Jr.                
|(Date)            | ------------------------------            
|                  | Charles E. Drimal, Jr.                    
|                  | President                                 
|                  | Principal Executive Officer               
|                  |                                           
|                  |                                           
|                  |                                           
|November 14, 2002 | /s/ Beverly A. Cummings                   
|(Date)            | -------------------------------           
|                  | Beverly A. Cummings                       
|                  | Executive Vice President                  
|                  | Principal Financial and Accounting Officer

































26