SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)

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

For the Fiscal Year Ended January 31, 2004
                                             OR
(   )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                    EXCHANGE ACT OF 1934

Commission File No. 0-33259

                             ENERGAS RESOURCES, INC.
                     -------------------------------------
                 (Name of Small Business Issuer in its charter)

                Delaware                                    73-1620724
        --------------------------                    ----------------------
         (State of incorporation)                        (IRS Employer
                                                       Identification No.)
      800 Northeast 63rd Street
       Oklahoma City, Oklahoma                                     73105
   ------------------------------------                     ----------------
   (Address of Principal Executive Office)                     Zip Code

Registrant's telephone number, including Area Code: (405)-879-1752
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:

                                        Common Stock
                                      (Title of Class)

Check 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 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.

                                     X
                                    ----     ----
                                    YES       NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.  [X]

The Company's revenues during the year ended January 31, 2004 were $312,022.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company,  (21,253,465  shares)  based upon the  closing  price of the  Company's
common stock on April 30, 2004 was approximately $8,501,386.

Documents incorporated by reference:      None

As of April 30, 2004 the Company had 30,263,001 issued and outstanding shares of
common stock.


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<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING NFORMATION

     This report includes  "forward-looking  statements".  All statements  other
than  statements of historical  facts included in this  Registration  Statement,
regarding the Company's financial  position,  reserve quantities and net present
values, business strategy, plans and objectives of management of the Company for
future  operations and capital  expenditures,  are  forward-looking  statements.
Although  the  Company   believes  that  the   expectations   reflected  in  the
forward-looking  statements and the assumptions upon which such  forward-looking
statements  are  based  are  reasonable,  it can  give no  assurance  that  such
expectations and assumptions will prove to have been correct.  Reserve estimates
are  generally  different  from the  quantities  of oil and natural gas that are
ultimately recovered.









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<PAGE>

                                    GLOSSARY

         The following terms are used throughout this report:

     BBL. One stock tank barrel, or 42 U.S. gallons liquid volume,  usually used
herein in reference to crude oil or other liquid hydrocarbons.

     BOE.  Equivalent  barrels of oil, using the ratio of six Mcf of natural gas
to one Bbl of crude oil, condensate or natural gas liquids.

     BTU. A British  thermal unit which is the amount of heat  required to raise
the temperature of one avoirdupois pound of pure water form 58.5 degrees to 59.5
degrees Fahrenheit under standard conditions.

     DEVELOPED ACREAGE. The number of acres which are allocated or assignable to
producing wells or wells capable of production.

     DEVELOPMENT  WELL.  A well  drilled  as an  additional  well  to  the  same
reservoir as other producing wells on a Lease, or drilled on an offset Lease not
more than one location away from a well producing from the same reservoir.

     EXPLORATORY  WELL. A well drilled in search of a new  undiscovered  pool of
oil or gas, or to extend the known limits of a field under development.

     GROSS ACRES OR WELLS. A well or acre in which a working  interest is owned.
The  number  of gross  wells is the  total  number  of wells in which a  working
interest is owned.

     LEASE. Full or partial  interests in an oil and gas lease,  authorizing the
owner thereof to drill for,  reduce to  possession  and produce oil and gas upon
payment of rentals,  bonuses and/or royalties.  Oil and gas leases are generally
acquired from private landowners and federal and state governments.  The term of
an oil and gas lease  typically  ranges  from  three to ten  years and  requires
annual lease rental  payments of $1.00 to $2.00 per acre.  If a producing oil or
gas well is drilled on the lease prior to the expiration of the lease, the lease
will generally  remain in effect until the oil or gas  production  from the well
ends. The Company is required to pay the owner of the leased  property a royalty
which is usually  between 12.5% and 16.6% of the gross amount  received from the
sale of the oil or gas produced from the well.

     MCF. One thousand cubic feet.

     NET ACRES OR WELLS.  A net well or acre is deemed to exist  when the sum of
fractional  ownership  working interests in gross wells or acres equals one. The
number  of net  wells or acres is the sum of the  fractional  working  interests
owned in gross wells or acres expressed as whole numbers and fractions.



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<PAGE>

     OPERATING  COSTS.  The expenses of  producing  oil or gas from a formation,
consisting  of the costs  incurred  to operate  and  maintain  wells and related
equipment  and  facilities,  including  labor  costs,  repair  and  maintenance,
supplies, insurance, production, severance and other production excise taxes.

     PRODUCING  PROPERTY.  A property (or interest therein) producing oil or gas
in commercial  quantities or that is shut-in but capable of producing oil or gas
in  commercial  quantities,  to which  Producing  Reserves  have been  assigned.
Interests  in a property may include  Working  Interests,  production  payments,
Royalty Interests and other non-working interests.

     PRODUCING RESERVES.  Proved Developed Reserves expected to be produced from
existing completion intervals open for production in existing wells.

     PROSPECT.  An area in which a party owns or intends to acquire  one or more
oil  and  gas  interests,  which  is  geographically  defined  on the  basis  of
geological  data and which is  reasonably  anticipated  to  contain at least one
reservoir of oil, gas or other hydrocarbons.

     PROVED  DEVELOPED  RESERVES.  Proved  developed  oil and gas  reserves  are
reserves  that can be  expected  to be  recovered  through  existing  wells with
existing equipment and operating methods.  Additional oil and gas expected to be
obtained  through the application of fluid injection or other improved  recovery
techniques  for  supplementing  the  natural  forces and  mechanisms  of primary
recovery may be included as "proved developed  reserves" only after testing by a
pilot  project or after the  operation  of an  installed  program has  confirmed
through production response that increased recovery will be achieved.

     PROVED RESERVES.  Proved oil and gas reserves are the estimated  quantities
of crude oil,  natural  gas,  and  natural  gas  liquids  which  geological  and
engineering  data  demonstrate  with  reasonable  certainty to be recoverable in
future  years  from known  reservoirs  under  existing  economic  and  operating
conditions,  i.e.,  prices and costs as of the date the estimate is made. Prices
include consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions.

     (i) Reservoirs are considered proved if economic producibility is supported
by either  actual  production  or conclusive  formation  testing.  The area of a
reservoir considered proved includes (a) that portion delineated by drilling and
defined by gas-oil and/or  oil-water  contacts,  if any; and (b) the immediately
adjoining  portions  not yet  drilled,  but  which can be  reasonably  judged as
economically  productive on the basis of available  geological  and  engineering
data.  In the  absence  of  information  on fluid  contacts,  the  lowest  known
structural  occurrence  of  hydrocarbons  controls the lower proved limit of the
reservoir.

     (ii) Reserves  which can be produced  economically  through  application of
improved  recovery  techniques  (such as fluid  injection)  are  included in the
"proved"  classification  when  successful  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.


                                       4
<PAGE>

     (iii)  Estimates of proved  reserves do not include the following:  (a) oil
that may become available from known reservoirs but is classified  separately as
"indicated  additional  reserves",  (b) crude oil,  natural gas, and natural gas
liquids,  the  recovery  of which is  subject  to  reasonable  doubt  because of
uncertainty as to geology, reservoir  characteristics,  or economic factors; (c)
crude oil,  natural gas,  and natural gas  liquids,  that may occur in undrilled
prospects;  and (d) crude oil, natural gas, and natural gas liquids, that may be
recovered from oil shales, coal, gilsonite and other such sources.

     PROVED  UNDEVELOPED  RESERVES.  Proved undeveloped oil and gas reserves are
reserves that are expected to be recovered from new wells on undrilled  acreage,
or from  existing  wells where a relatively  major  expenditure  is required for
recompletion.  Reserves on undrilled acreage are limited to those drilling units
offsetting  productive  units that are  reasonably  certain of  production  when
drilled.  Proved reserves for other undrilled units can be claimed only where it
can be  demonstrated  with certainty that there is continuity of production from
the  existing  productive   formation.   Proved  undeveloped  reserves  are  not
attributable to any acreage for which an application of fluid injection or other
improved  recovery  technique is contemplated,  unless such techniques have been
proved effective by actual tests in the area and in the same reservoir.

     ROYALTY  INTEREST.  An interest in an oil and gas  property  entitling  the
owner to a share of oil and gas production free of Operating Costs.

     UNDEVELOPED  ACREAGE.  Lease acres on which wells have not been  drilled or
completed to a point that would permit the  production of commercial  quantities
of oil and gas  regardless  of  whether  or not  such  acreage  contains  proved
reserves.  Undeveloped  acreage  should not be confused with  undrilled  acreage
which is "Held by Production" under the terms of a lease.

     WORKING  INTEREST.  The  operating  interest  under a Lease which gives the
owner  the right to drill,  produce  and  conduct  operating  activities  on the
property and a share of production,  subject to all Royalty  Interests and other
burdens and to all costs of  exploration,  development  and  operations  and all
risks in connection therewith.





                                       5
<PAGE>



ITEM 1. DESCRIPTION OF BUSINESS The Company was  incorporated  under the laws of
British Columbia,  Canada on November 2, 1989 and on August 20, 2001 the Company
became domesticated and incorporated in Delaware.

     The Company is involved in the  exploration and development of oil and gas.
The  Company's  activities  are primarily  dependent  upon  available  financial
resources to fund the costs of drilling and completing wells.

     The Company evaluates undeveloped oil and gas prospects and participates in
drilling  activities on those  prospects  which in the opinion of management are
favorable  for  the  production  of  oil or  gas.  If,  through  its  review,  a
geographical  area  indicates  geological  and economic  potential,  the Company
attempts  to  acquire  Leases  or other  interests  in the area and  assemble  a
Prospect.  The Company  normally sells portions of its leasehold  interests in a
Prospect to  unrelated  third  parties,  thus  sharing  risks and rewards of the
exploration and development of the Prospect with the joint owners pursuant to an
operating agreement. One or more Exploratory Wells may be drilled on a Prospect,
and if the results  indicate the presence of  sufficient  oil and gas  reserves,
additional  Development  Wells  may be  drilled  on the  Prospect.  The  Company
typically  seeks  potential  joint  venture  partners  for  development  of  its
Prospects.

     The Company's  corporate  offices are located at 800 Northeast 63rd Street,
Third Floor,  Oklahoma City,  Oklahoma  73105 and its telephone  number is (405)
879-1752. The Company's web site is www.energasresources.com.

PRINCIPAL AREAS OF OPERATION

     The Company  principally  operates  in the Arkoma  Basin in  Oklahoma,  the
Powder River Basin in Wyoming and the Appalachian Basin of Eastern Kentucky.

     The  Company has four gas wells in the Arkoma  Basin  which were  producing
approximately 255 Mcf of gas per day.

     The  Company's  oil  and gas  production  in the  Powder  River  Basin  are
attributable to two wells in Rusty Creek Prospect in Niobrara  County,  Wyoming.
The Company does not intend to drill any additional  wells on this prospect.  As
of January 5, 2004, the Company's two wells in the Rusty Creek Prospect produced
approximately 35 barrels of crude oil per day.

     In August 2003 the Company  acquired 31 producing gas wells,  approximately
28 miles of pipeline,  two compressor  stations and approximately  23,000 leased
and 8,500  optioned  acres.  All of the acquired  properties  are located in the
Appalachian  Basin of eastern  Kentucky.  The Kentucky  properties were acquired
from three private  corporations  for $3,000,000 in convertible  notes. In March
2004 holders of notes in the  principal  amount of  $2,400,000  converted  their
notes into 4,800,000 shares of the Company's common stock. The remaining note in
the principal amount of $500,000  (reflecting a $100,000 payment by the Company)
bears  interest at 8.5% per year and is due in August 2023. At any time prior to





                                       6
<PAGE>

August 1, 2006 all or any part of the unpaid  principal  or interest due on this
note may be converted into shares of the Company's  common stock on the basis of
one  share of  common  stock for every  dollar  of note  principal  or  interest
converted.

DRILLING ACTIVITIES AND PROVEN RESERVES

     During the periods  indicated,  the Company  drilled or participated in the
drilling of the following wells:

                                     Year Ended January 31,
                                    2002            2003              2004
                              Gross     Net    Gross     Net     Gross      Net

Exploratory Wells (1):
  Productive:
   Oil                          --       --       --     --
   Gas                          --       --       --     --      1.00     .875
  Nonproductive                 --       --       --     --      1.00    1.00

Development Wells (1):
  Productive:
   Oil                          --       --       --     --
   Gas                          --       --       --     --         6    5.25
  Nonproductive                 --       --       --     --

Total Wells (1):
  Productive:
   Oil                          --       --       --     --
   Gas                          --       --       --     --         7    6.125
  Nonproductive                 --       --       --     --         1    1


(1)  Each well  completed to more than one producing zone is counted as a single
     well.  The  Company  has royalty  interests  in certain  wells that are not
     included in this table.

     In May  2003 the  Company  arranged  with a  private  investor  to fund the
drilling of two natural gas wells in the Arkoma Basin of eastern  Oklahoma.  The
two wells were drilled in June 2003 and one well was successfully completed as a
gas  well  and  the  other  well  was  a  dryhole.   The  Company  will  receive
approximately  5% of the production from the productive  well,  after payment of
the  Company's  share of  operating  expenses,  until the investor is repaid the
amounts  advanced  to drill and  complete  the wells,  which were  approximately
$490,000. After the amount advanced by the investor has been repaid, the Company
will receive  approximately 25% of the production from the well after payment of
the Company's share of operating expenses

     The following table sets forth, at April 30, 2004, by state and basin,  the
Company's producing wells, Developed Acreage, and Undeveloped Acreage, excluding
service (injection and disposal) wells:


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<PAGE>
                    Productive        Developed           Undeveloped
                    Wells (1)          Acreage            Acreage (2)
                  Gross    Net     Gross       Net       Gross       Net

Oklahoma           5       2.4        -         -            -         -
Wyoming            2        .4       80        32        5,613     3,015
Kentucky          37      32.4    1,480     1,295       21,520    18,830
                 ---     -----    -----     -----      -------    ------
Totals            44      35.2    1,560     1,327       27,133    21,845

(1)  The wells in Oklahoma  and  Kentucky are gas wells and the wells in Wyoming
     are oil wells.
(2)  "Undeveloped  Acreage" includes leasehold interests on which wells have not
     been drilled or completed to the point that would permit the  production of
     commercial  quantities  of natural  gas and oil  regardless  of whether the
     leasehold interest is classified as containing proved undeveloped reserves.

     The  following  table  shows,  as of April 30, 2004 the status of Company's
gross developed and undeveloped acreage.

      Gross Acreage           Held by Production     Not Held by Production

      Oklahoma                           -                       -
      Wyoming                          640                    3180
      Kentucky                      23,000                       -

     Acres Held By Production  remain in force so long as oil or gas is produced
from  the well on the  particular  lease.  Leased  acres  which  are not Held By
Production  require annual rental payments to maintain the lease until the first
to occur of the following: the expiration of the lease or the time oil or gas is
produced from one or more wells drilled on the lease acreage. At the time oil or
gas is produced from wells drilled on the leased acreage the lease is considered
to be Held By Production.

     The Company does not own any Overriding Royalty Interests.

     Title to properties is subject to royalty, overriding royalty, carried, net
profits,  working  and other  similar  interests  and  contractual  arrangements
customary in the oil and gas  industry,  to liens for current  taxes not yet due
and to  other  encumbrances.  As is  customary  in the  industry  in the case of
undeveloped properties, little investigation of record title is made at the time
of  acquisition  (other than a preliminary  review of local  records).  Drilling
title opinions are always prepared before  commencement of drilling  operations;
however, as is customary in the industry.

     The following table sets forth the Company's net production of oil and gas,
average sales prices and average production costs during the periods presented:


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<PAGE>

                                         Year Ended January 31,
Production Data:                  2002           2003          2004

Production - Oil (Bbls)            498            403         949.9
Gas (Mcf)                       29,234         30,683       143,616
Average sales price -
Oil (Bbls)                      $19.65         $26.08        $28.62
Gas (Mcf)                      $  3.24         $ 3.44         $4.86
Average production
    costs per BOE              $  2.93         $ 4.79         $3.74

     Production  costs  may vary  substantially  among  wells  depending  on the
methods of recovery employed and other factors,  but generally include severance
taxes, administrative overhead, maintenance and repair, labor and utilities.

     The Company is not obligated to provide a fixed and determined  quantity of
oil or gas in the future.  During the last three fiscal  years,  the Company has
not had, nor does it now have,  any long-term  supply or similar  agreement with
any government or governmental authority.

     Below are estimates of the Company's net Proved Developed  Reserves and the
present value of estimated future net revenues from such Reserves based upon the
standardized  measure of discounted future net cash flows relating to proved oil
and gas Reserves in  accordance  with the  provisions  of Statement of Financial
Accounting   Standards  No.  69,   "Disclosures  about  Oil  and  Gas  Producing
Activities"  (SFAS No. 69). The  standardized  measure of discounted  future net
cash flows is  determined  by using  estimated  quantities  of Proved  Developed
Reserves and the periods in which they are expected to be developed and produced
based on period-end  economic  conditions.  The estimated  future  production is
priced  at  period-end  prices,   except  where  fixed  and  determinable  price
escalations  are  provided by  contract.  The  resulting  estimated  future cash
inflows  are then  reduced by  estimated  future  costs to develop  and  produce
reserves  based on  period-end  cost  levels.  No  deduction  has been  made for
depletion,  depreciation  or for  indirect  costs,  such  as  general  corporate
overhead. Present values were computed by discounting future net revenues by 10%
per year.

                                              January 31,
                                    2002            2003              2004
                               Oil      Gas      Oil     Gas       Oil     Gas
                             (Bbls)    (Mcf)    (Bbls)   (Mcf)   (Bbls)   (Mcf)
                              ------  ------   ------  -------  -------   ------

Proved reserves               6,842   713,262  3,761  597,773  73,790  4,394,959
Estimated future net cash
  flows from proved oil and
    gas reserves                $1,338,106      $2,147,220      $ 12,908,644

Present value of future net
  cash flows from proved
  oil and gas reserves          $  493,982      $  891,410      $  5,510,762



                                       9
<PAGE>

     In August 2003 the Company  acquired 31 producing gas wells,  approximately
28 miles of pipeline,  two compressor  stations and approximately  23,000 leased
and 8,500  optioned  acres.  All of the acquired  properties  are located in the
Appalachian Basin of Eastern  Kentucky.  As of January 31,2004 the present value
of the  future  cash  flows  attributable  to the  properties  in  Kentucky  was
approximately   $10,302,696   ($6,561,211  in  Proved  Developed   Reserves  and
$3,741,485 in Proved Undeveloped Reserves).

     The Company's  Proved Reserves include only those amounts which the Company
reasonably  expects to recover in the future  from known oil and gas  reservoirs
under existing economic and operating  conditions,  at current prices and costs,
under existing regulatory practices and with existing  technology.  Accordingly,
any changes in prices, operating and development costs, regulations,  technology
or other factors could  significantly  increase or decrease  estimates of Proved
Reserves.

     In general,  the volume of production  from natural gas and oil  properties
owned by the Company declines as reserves are depleted. Except to the extent the
Company acquires  additional  properties  containing proved reserves or conducts
successful exploration and development activities,  or both, the proved reserves
of the Company will decline as reserves are  produced.  Volumes  generated  from
future  activities of the Company are therefore  highly dependent upon the level
of success in acquiring or finding additional reserves and the costs incurred in
doing so.

GOVERNMENT REGULATION

     Various state and federal agencies  regulate the production and sale of oil
and natural gas. All states in which the Company operated impose restrictions on
the drilling, production, transportation and sale of oil and natural gas.

     Under the Natural Gas Act of 1938, the Federal Energy Regulatory Commission
(the "FERC") regulates the interstate  transportation and the sale in interstate
commerce  for resale of natural  gas. The FERC's  jurisdiction  over  interstate
natural gas sales has been substantially  modified by the Natural Gas Policy Act
under which the FERC continued to regulate the maximum selling prices of certain
categories of gas sold in "first sales" in interstate and intrastate commerce.

     Effective January 1, 1993, however,  the Natural Gas Wellhead Decontrol Act
(the "Decontrol  Act")  deregulated  natural gas prices for all "first sales" of
natural gas.  Because "first sales" include typical wellhead sales by producers,
all natural gas produced  from the Company's  natural gas  properties is sold at
market  prices,  subject to the terms of any private  contracts  which may be in
effect. The FERC's  jurisdiction over natural gas transportation is not affected
by the Decontrol Act.

     The  Company's  sales of natural  gas will be affected  by  intrastate  and
interstate gas  transportation  regulation.  Beginning in 1985, the FERC adopted
regulatory  changes  that have  significantly  altered  the  transportation  and
marketing  of natural  gas.  These  changes  are  intended by the FERC to foster
competition by, among other things, transforming the role of interstate pipeline
companies  from  wholesale  marketers  of natural gas to the primary role of gas
transporters.  All natural gas  marketing by the pipelines is required to divest
to a marketing affiliate,  which operates separately from the transporter and in
direct competition with all other merchants.  As a result of the various omnibus




                                       10
<PAGE>

rulemaking   proceedings  in  the  late  1980s  and  the   individual   pipeline
restructuring  proceedings of the early to mid-1990s,  the interstate  pipelines
must    provide     open    and     nondiscriminatory     transportation     and
transportation-related   services  to  all  producers,   natural  gas  marketing
companies,  local  distribution  companies,   industrial  end  users  and  other
customers seeking service. Through similar orders affecting intrastate pipelines
that provide similar interstate  services,  the FERC expanded the impact of open
access regulations to intrastate commerce.

     More  recently,  the FERC has pursued  other policy  initiatives  that have
affected natural gas marketing. Most notable are (1) the large-scale divestiture
of  interstate   pipeline-owned  gas  gathering   facilities  to  affiliated  or
non-affiliated  companies;  (2)  further  development  of  rules  governing  the
relationship  of  the  pipelines  with  their  marketing  affiliates;   (3)  the
publication of standards  relating to the use of electronic  bulletin boards and
electronic  data  exchange by the  pipelines  to make  available  transportation
information  on a timely basis and to enable  transactions  to occur on a purely
electronic  basis;  (4) further  review of the role of the secondary  market for
released  pipeline  capacity and its  relationship to open access service in the
primary  market;  and (5)  development  of  policy  and  promulgation  of orders
pertaining to its  authorization of market-based  rates (rather than traditional
cost-of-service  based  rates)  for  transportation  or   transportation-related
services  upon the  pipeline's  demonstration  of lack of market  control in the
relevant service market.  The Company does not know what effect the FERC's other
activities will have on the access to markets,  the fostering of competition and
the cost of doing business.

     As a result of these changes, sellers and buyers of natural gas have gained
direct access to the particular  pipeline services they need and are better able
to  conduct  business  with a larger  number of  counter  parties.  The  Company
believes these changes generally have improved the access to markets for natural
gas while, at the same time, substantially increasing competition in the natural
gas  marketplace.  The Company cannot predict what new or different  regulations
the FERC and  other  regulatory  agencies  may adopt or what  effect  subsequent
regulations  may  have on  production  and  marketing  of  natural  gas from the
Company's properties.

     In the past,  Congress  has been very  active  in the area of  natural  gas
regulation. However, as discussed above, the more recent trend has been in favor
of  deregulation  and the promotion of  competition in the natural gas industry.
Thus,  in  addition  to  "first  sales"  deregulation,  Congress  also  repealed
incremental  pricing  requirements  and  natural gas use  restraints  previously
applicable.  There are other  legislative  proposals  pending in the Federal and
State legislatures which, if enacted,  would significantly  affect the petroleum
industry.  At the present time, it is impossible to predict what  proposals,  if
any, might actually be enacted by Congress or the various state legislatures and
what effect,  if any, these proposals might have on the production and marketing
of natural gas by the Company.  Similarly,  and despite the trend toward federal
deregulation  of the natural gas industry,  whether or to what extent that trend
will  continue  or  what  the  ultimate  effect  will be on the  production  and
marketing of natural gas by the Company cannot be predicted.

     The  Company's  sales of oil and natural gas liquids are not  regulated and
are at market prices. The price received from the sale of these products will be
affected  by the cost of  transporting  the  products  to  market.  Much of that
transportation is through interstate common carrier  pipelines.  Effective as of
January 1, 1995, the FERC implemented  regulations generally  grandfathering all





                                       11
<PAGE>

previously approved interstate transportation rates and establishing an indexing
system for those rates by which  adjustments are made annually based on the rate
of inflation,  subject to certain conditions and limitations.  These regulations
may tend to  increase  the cost of  transporting  oil and natural gas liquids by
interstate  pipeline,  although the annual  adjustments  may result in decreased
rates in a given  year.  These  regulations  have  generally  been  approved  on
judicial  review.  Every five  years,  the FERC will  examine  the  relationship
between the annual  change in the  applicable  index and the actual cost changes
experienced  by the oil  pipeline  industry.  The Company is not able to predict
with certainty what effect, if any, these relatively new federal  regulations or
the periodic review of the index by the FERC will have on the Company.

     Federal,  state,  and local agencies have  promulgated  extensive rules and
regulations  applicable  to the  Company's  oil  and  natural  gas  exploration,
production  and related  operations.  Most states  require  permits for drilling
operations,  drilling bonds and the filing of reports concerning  operations and
impose other  requirements  relating to the  exploration of oil and natural gas.
Many states also have statutes or regulations  addressing  conservation  matters
including  provisions  for the  unitization  or pooling of oil and  natural  gas
properties,  the  establishment  of  maximum  rates of  production  from oil and
natural gas wells and the  regulation of spacing,  plugging and  abandonment  of
such wells.  The statutes and regulations of some states limit the rate at which
oil and natural gas is produced from the Company's  properties.  The federal and
state  regulatory  burden on the oil and  natural  gas  industry  increases  the
Company's  cost of doing business and affects its  profitability.  Because these
rules and regulations are amended or  reinterpreted  frequently,  the Company is
unable to predict the future cost or impact of complying with those laws.

COMPETITION AND MARKETING

     The Company is faced with strong  competition from many other companies and
individuals  engaged  in the oil and gas  business,  many are very  large,  well
established  energy  companies with  substantial  capabilities  and  established
earnings records. The Company may be at a competitive  disadvantage in acquiring
oil and  gas  prospects  since  it  must  compete  with  these  individuals  and
companies,  many of which have greater financial  resources and larger technical
staffs. It is nearly impossible to estimate the number of competitors;  however,
it is known that there are a large number of companies  and  individuals  in the
oil and gas business.

     Exploration  for  and  production  of  oil  and  gas  are  affected  by the
availability of pipe, casing and other tubular goods and certain other oil field
equipment   including   drilling  rigs  and  tools.  The  Company  depends  upon
independent  drilling  contractors to furnish rigs, equipment and tools to drill
its  wells.  Higher  prices  for oil and gas may  result  in  competition  among
operators for drilling  equipment,  tubular  goods and drilling  crews which may
affect the Company's ability  expeditiously to drill,  complete,  recomplete and
work-over  its wells.  However,  the  Company has not  experienced  and does not
anticipate difficulty in obtaining supplies, materials, drilling rigs, equipment
or tools.



                                       12
<PAGE>

     The Company does not refine or otherwise  process crude oil and  condensate
production.  Substantially all of the crude oil and condensate production of the
Company's wells are sold at posted prices under short-term  contracts,  which is
customary in the industry.

     The market for oil and gas is dependent upon a number of factors beyond the
Company's control, which at times cannot be accurately predicted.  These factors
include the proximity of wells to, and the capacity of,  natural gas  pipelines,
the extent of  competitive  domestic  production and imports of oil and gas, the
availability  of other sources of energy,  fluctuations  in seasonal  supply and
demand,  and  governmental   regulation.   In  addition,  there  is  always  the
possibility  that new  legislation  may be  enacted  which  would  impose  price
controls  or  additional  excise  taxes upon crude oil or natural  gas, or both.
Oversupplies  of natural  gas can be expected to recur from time to time and may
result in the gas producing  wells being shut-in.  Increased  imports of natural
gas,  primarily  from Canada,  have occurred and are expected to continue.  Such
imports may adversely affect the market for domestic natural gas.

     Since  the  early   1970's  the  market   price  for  crude  oil  has  been
significantly affected by policies adopted by the member nations of Organization
of Petroleum Exporting Countries ("OPEC").  Members of OPEC establish prices and
production quotas among themselves for petroleum products from time to time with
the intent of  controlling  the current  global  supply and  consequently  price
levels.  The Company is unable to predict the effect, if any, that OPEC or other
countries will have on the amount of, or the prices  received for, crude oil and
natural gas produced and sold from the Company's wells.

     Gas  prices,   which  were  once   effectively   determined  by  government
regulations,  are now largely  influenced by  competition.  Competitors  in this
market  include  producers,   gas  pipelines  and  their  affiliated   marketing
companies,  independent  marketers,  and providers of alternate energy supplies,
such as residual  fuel oil.  Changes in government  regulations  relating to the
production,  transportation  and  marketing of natural gas have also resulted in
significant  changes  in the  historical  marketing  patterns  of the  industry.
Generally,  these changes have resulted in the  abandonment by many pipelines of
long-term  contracts  for the purchase of natural gas,  the  development  by gas
producers of their own marketing  programs to take advantage of new  regulations
requiring  pipelines to transport  gas for  regulated  fees,  and an  increasing
tendency to rely on short-term contracts priced at spot market prices.

GENERAL

     The  Company  has  never  been a  party  to any  bankruptcy,  receivership,
reorganization,  readjustment  or  similar  proceedings.  Since the  Company  is
engaged  in the oil and gas  business,  it does not  allocate  funds to  product
research and development in the  conventional  sense.  The Company does not have
any  patents,  trade-marks,  or  labor  contracts.  With  the  exception  of the
Company's  oil  and  gas  leases,  the  Company  does  not  have  any  licenses,
franchises,  concessions  or royalty  agreements.  Backlog is not material to an
understanding of the Company's  business.  The Company's business is not subject
to  renegotiation  of profits or termination of contracts or subcontracts at the
election of federal government.


                                       13
<PAGE>

     As of April 30, 2004,  the Company  employed  seven people whose  functions
were  associated  with  management,   engineering,   geology,  land  and  legal,
accounting, financial planning and administration.

     The Company's  offices are located at 800 Northeast  63rd Street,  Oklahoma
City,  Oklahoma.  The 4,800  square feet of office  space is  occupied  under an
unwritten lease, on a month-to-month basis,  requiring rental payments of $3,800
per  month.  The  building  is owned by  George G.  Shaw,  the  Company's  Chief
Executive Officer and a Director.

EMPLOYEES

     At April 30,  2004,  the  Company  employed  seven  people.  The  Company's
employees  worked  in  management,  engineering,  geology,  land and  legal  and
accounting.  In addition,  five  part-time  employees were  responsible  for the
supervision and operation of the Company's  field  activities and providing well
services.

ITEM 2.  DESCRIPTION OF PROPERTY

     The Company's  offices are located at 800 Northeast  63rd Street,  Oklahoma
City,  Oklahoma  and  consist  of  4,800  square  feet  which  is  rented  on  a
month-to-month  basis for $3,800 per month.  The  building is owned by George G.
Shaw, the Company's Chief Executive Officer and a Director.

ITEM 3.  LEGAL PROCEEDINGS.

     In September,  2003 James  Attarian,  a principal  shareholder and a former
director  of the  Company,  as  well  as  several  companies  controlled  by Dr.
Attarian, filed a lawsuit against the Company seeking payment of $360,000 loaned
to the Company by Dr.  Attarian and his  affiliates  plus  $933,000  paid by Dr.
Attarian and his affiliated  companies for shares of the Company's stock and the
costs of drilling unproductive oil and gas wells.

     In February 2004 the Company  settled all  litigation  brought by Dr. James
Attarian and his affiliated companies. The settlement required the Company to:

o    collectively  pay  $500,000  to Mankato  Investments  LLC,  Mankato  Energy
     Partners LLC and Prepaid  Capital LLC, all of which are affiliated with Dr.
     Attarian;

o    issue 350,000 shares of its common stock to Mankato Investments LLC;

o    grant Dr.  Attarian an option to purchase  250,000  shares of the Company's
     common stock at a price of $0.32 per share any time prior to July 15, 2005.

     The shares of the Company's common stock issued to Mankato  Investments LLC
are restricted  securities and do not have any registration  rights. The options
granted to Dr. Attarian are subject to the Company's  Non-Qualified Stock Option
Plan and the shares  issuable  upon the  exercise of the options  will be freely
tradable.


                                       14
<PAGE>

     The settlement  also required the Company to assign to Mankato  Investments
the  Company's  interests in oil and gas leases  covering  approximately  30,000
acres in Fremont  County,  Wyoming.  The  Company  did not have any wells on the
leases assigned to Mankato Investments.

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

         Not Applicable


ITEM 5. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
        OTHER SHAREHOLDER MATTERS.

     Prior to May 7, 2003 the  Company's  common stock was traded  listed on the
Toronto  Venture  Exchange  under the symbol EEG. On March 3, 2003 the Company's
common  stock was listed on the OTC Bulletin  Board under the symbol  EGSR.  The
following table sets forth the high and low sale prices of the Company's  common
stock in U.S.  currency during the periods  presented as reported by the Toronto
Venture  Exchange  and the NASD.  The closing sale prices  reflect  inter-dealer
prices without  adjustment for retail markups,  markdowns or commissions and may
not reflect actual  transactions.  Closing Sale Price Common Stock Quarter Ended
High Low

            April 30, 2001                   $0.19          $0.12
            July 31, 2001                    $0.25          $0.12
            October 31, 2001                 $0.25          $0.12
            January 31, 2002                 $0.16          $0.03

            April 30, 2002                   $0.07          $0.04
            July 31, 2002                    $0.13          $0.03
            October 31, 2002                 $0.13          $0.03
            January 31, 2003                 $0.11          $0.05

            April 30, 2003                   $0.21          $0.05
            July 31, 2003                    $0.46          $0.15
            October 31, 2003                 $0.30          $0.11
            January 31, 2004                 $0.26          $0.15

     On April 30, 2004,  there were  approximately  900 holders of the Company's
common stock.

     The market price of the  Company's  common stock is subject to  significant
fluctuations in response to, and may be adversely  affected by (i) variations in
quarterly  operating  results,  (ii)  developments  in the oil and gas  industry
generally and more particularly  within the  geographically and geological areas




                                       15
<PAGE>

that the Company owns and operates  properties,  and (iii)  general stock market
conditions.

     The Company's common stock is subject to the "penny stock" rules. The penny
stock  trading  rules  impose  additional  duties  and   responsibilities   upon
broker-dealers  and  salespersons  recommending  the purchase or sale of a penny
stock.  Required  compliance with these rules will materially  limit or restrict
the ability to resell the Company's  common stock,  and the liquidity  typically
associated with other publicly traded stocks may not exist.

     During the year ended January 31, 2004 neither the Company,  any officer or
director of the Company, nor any principal  shareholder  purchased any shares of
the  Company's  common stock either from the  Company,  from third  parties in a
private transaction, or as a result of purchases in the open market.

Potential Issuance of Additional Shares.

     As of April 30,  2004 the  Company  had  30,263,001  outstanding  shares of
common stock.

     The following table lists  additional  shares of the Company's common stock
which may be  issued  as the  result of the  exercise  of  outstanding  options,
warrants or convertible notes:

                                                        Number of        Note
                                                         Shares       Reference

   Shares issuable upon exercise of warrants sold in
   private offering                                     4,260,000           A

   Shares issuable upon exercise of options granted
   pursuant to the Company's Incentive and Non-
   Qualified Stock Option Plans.                          250,000           B

   Shares issuable upon the exercise of warrants
   issued to a private investor.                          100,000           C

   Shares issuable upon conversion of promissory note     500,000           D

   Shares issuable upon the exercise of warrants
   issued to a private investor.                        4,000,000           E

   A.    Between  January 1, 2004 and May 10,  2004 the Company  sold  4,260,000
shares  of  common  stock  and  4,260,000  warrants  to  private  investors  for
$1,278,000.  Each  warrant  entitles  the  holder to  purchase  one share of the
Company's common stock at a price of $0.50 per share. The warrants expire on the
earlier of January 31, 2006 or three weeks following written notification by the
Company  that its  common  stock  closed  at or above  $0.85  per share for five
consecutive trading days.


                                       16
<PAGE>

   B.    Options  are  held by Dr.  James  Attarian,  a former  director  of the
Company,  are  exercisable  at a price of $0.32 per share and expire on July 15,
2005. See Item 3 of this report.

   C.   The  warrants  allow  the  holders  to  purchase  100,000  shares of the
Company's  common  stock  at a price  of $0.32  per  share at any time  prior to
November June 30, 2005.

   D.   In August 2003, the Company  acquired oil and gas properties  from three
private corporations for $3,000,000 in convertible notes. At the holder's option
the notes were  convertible  into shares of the Company's  common stock equal in
number to the amount  determined  by dividing  each $1.00 of note  principal  or
accrued  interest to be converted by one. In order to induce the  noteholders to
convert  their notes into common stock,  and thereby  eliminate the debt owed to
the noteholders,  the Company provided the noteholders with an option to convert
their notes at a  conversion  price of $0.50.  In March 2004 holders of notes in
the principal  amount of $2,400,000  converted their notes into 4,800,000 shares
of the  Company's  common  stock.  The company paid  $100,000 on principal  plus
interest  and the  remaining  note in the  principal  amount of  $500,000  bears
interest at 8.5% per year and is due in August 2023. At any time prior to August
1, 2006 all or any part of the unpaid principal or interest due on this note may
be converted into shares of the Company's common stock on the basis of one share
of common stock for every dollar of note principal or interest converted.

   E.   In September  2003 the Company  agreed to sell  2,000,000  shares of its
common stock to a private  investor for $0.15 a share.  For each share purchased
the  Company  agreed to issue one  warrant  to the  investor.  For each  warrant
exercised, the Company will issue a second warrant to the investor. Each warrant
entitles the investor to purchase one share of the  Company's  common stock at a
price of $0.20 per share at any time on or before  September  30,  2004 and at a
price of $0.30 per share at any time after September 30, 2004. All warrants will
expire on September 30, 2005. If the investor  purchasers all 2,000,000  shares,
the investor  could acquire up to 4,000,000  additional  shares of the Company's
common stock. As of April 30, 2004 the investor had purchased  2,000,000  shares
from the Company, had exercised 2,000,000 warrants and was therefore entitled to
warrants to purchase an  additional  2,000,000  shares of the  Company's  common
stock.

     The Company has agreed to file a registration statement with the Securities
and Exchange  Commission  so that the shares  issuable  upon the exercise of the
warrants  referred to in Note A as well as the shares referred to in Note D will
be available for public sale.

     The shares issuable upon the exercise of the options  referred to in Note B
are available for public sale by means of a separate  registration  statement on
Form S-8.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
        OPERATION

RESULTS OF OPERATIONS

     The  factors  that most  significantly  affect  the  Company's  results  of
operations are (i) the sale prices of crude oil and natural gas, (ii) the amount
of production sales, (iii) the amount of lease operating expenses,  and (iv) the




                                       17
<PAGE>

level of interest rates on, and amount of,  borrowings.  Sales of production and
level of  borrowings  are  significantly  impacted by the  Company's  ability to
maintain or increase its production from existing oil and gas properties through
its  exploration and  development  activities.  The following table reflects the
average prices  received by the Company for oil and gas, the average  production
cost per BOE, and the amount of oil and gas produced for the periods presented:

                                           Year Ended January 31,
Production Data:                      2002           2003           2004

Production - Oil (Bbls)               498            403           949.9
Gas (Mcf)                          29,234         30,683         143,616
Average sales price -
   Oil (Bbls)                      $19.65         $26.08          $28.62
Gas (Mcf)                         $  3.24        $  3.44           $4.86
Average production
    costs per BOE                 $  2.93        $  4.79           $3.74

     Prices  received by the Company for sales of crude oil and natural gas have
fluctuated  significantly  from period to period. The fluctuations in oil prices
during these periods reflect market  uncertainty  regarding the inability of the
Organization of Petroleum Exporting Countries ("OPEC") to control the production
of its member  countries,  as well as concerns  related to the global supply and
demand for crude oil. Gas prices received by the Company  fluctuate with changes
in the spot market price for gas, which reached recent record levels in December
2000 in the United  States.  This price  increase was due to demand in excess of
deliverability and higher worldwide energy prices.

     Changes in natural gas and crude oil prices will  significantly  affect the
revenues and cash flow of the wells and the value of the oil and gas properties.
Declines  in the  prices of crude oil and  natural  gas  could  have a  material
adverse  effect on the  success  of the  Company's  operations  and  activities,
recoupment of the costs of acquiring, developing and producing the its wells and
profitability.  The Company is unable to predict whether the prices of crude oil
and natural gas will rise, stabilize or decline in the future.

     Other than the foregoing,  the Company does not know of any trends,  events
or  uncertainties  that have had or are  reasonably  expected to have a material
impact on the Company's net sales, revenues or expenses.

YEAR ENDED JANUARY 31, 2004

     Material changes of certain items in the Company's  Statement of Operations
for the year ended  January 31, 2004,  as compared to the same period last year,
are discussed below:


                                       18
<PAGE>

                         Increase (I)
Item                   or Decrease (D)  Reason

Oil and Gas Sales             I         Increase in gas prices and August 2003
                                        acquisition of gas wells in Kentucky

Employee Stock Bonus          I         Shares of common stock issued for
                                        services rendered

Legal and Accounting          I        Legal costs  associated  with oil and gas
                                       drilling   program,  acquisition  of oil
                                       and gas properties in Kentucky and
                                       registration statement on Form S-8

Oil and gas production        I        August 2003 acquisition of gas wells in
                                       Kentucky

Consulting                    I        Use of three consultants  during period
                                       and expense associated with issuance of
                                       stock for past services

Office and General Expense    I        Lease expense for new office equipment

Travel and Promotion          I        Expenses relating to geological  studies
                                       in Kansas, Wyoming, and the acquisition
                                       of  the  Kentucky properties.

Interest Expense             I         Interest expense (8.5% per year) related
                                       to $3,000,000  convertible  note issued
                                       by Company to pay for oil and gas
                                       properties in Kentucky.

YEAR ENDED JANUARY 31, 2003

     Material changes of certain items in the Company's  Statement of Operations
for the year ended  January 31, 2003,  as compared to the same period last year,
are discussed below:

                        Increase (I)
Item                  or Decrease (D)  Reason

Oil and Gas Sales            I         Increase in the price of oil and gas.

Salaries and Benefits        D         Temporary  staff was eliminated and the
  compensation                         paid to some employees was reduced.

                                       19
<PAGE>

Legal and Accounting         D        Less costs  associated  with  amending the
                                      Company's registration statement on Form
                                      10-SB.

Rent                         I        Off-site  space  was  used  for  part of
                                      the  year to store some of the  Company's
                                      records and equipment, plus  rent  due in
                                      the  prior  year  was  paid in the
                                      current year.

Office and General Expense   D        Office expenses were reduced to conserve
                                      cash.

Pipeline Costs               I        Duke Energy increased the charges for
                                      transporting gas through its pipeline.

Interest                     D        Settlement of debt since October  2001
                                      resulted  in  less  interest   expense
                                      during the current year.

OIL AND GAS PRICE FLUCTUATIONS

     Fluctuations  in  crude  oil and  natural  gas  prices  have  significantly
affected the Company's  operations  and the value of its assets.  As a result of
the  instability and volatility of crude oil and natural gas prices and at times
the market  conditions within the oil and gas industry,  financial  institutions
are  selective in the energy  lending area and have  reduced the  percentage  of
existing  reserves  that may qualify for the  borrowing  base to support  energy
loans.

     The Company's  principal  source of cash flow is the production and sale of
its crude oil and natural gas reserves  which are  depleting  assets.  Cash flow
from oil and gas  production  sales depends upon the quantity of production  and
the price  obtained  for such  production.  An  increase  in prices  permits the
Company to finance its operations to a greater extent with internally  generated
funds, may allow the Company to obtain equity financing more easily or on better
terms, and lessens the difficulty of attracting financing from industry partners
and non-industry  investors.  However,  price increases heighten the competition
for Leases and  Prospects,  increase the costs of  exploration  and  development
activities,  and,  because  of  potential  price  declines,  increase  the risks
associated  with the purchase of Producing  Properties  during times that prices
are at higher levels.

     A decline  in oil and gas  prices  (i)  reduces  the cash  flow  internally
generated by the Company which in turn reduces the funds available for servicing
debt and exploring for and  replacing oil and gas reserves,  (ii)  increases the
difficulty of obtaining equity and debt financing and worsens the terms on which
such financing may be obtained, (iii) reduces the number of Leases and Prospects
which  have  reasonable  economic  terms,  (iv) may cause the  Company to permit
Leases to expire  based  upon the value of  potential  oil and gas  reserves  in
relation to the costs of exploration,  (v) results in marginally  productive oil
and gas  wells  being  abandoned  as  non-commercial,  and  (vi)  increases  the
difficulty  of attracting  financing  from  industry  partners and  non-industry
investors.  However,  price  declines  reduce  the  competition  for  Leases and
Prospects and  correspondingly  reduce the prices paid for Leases and Prospects.
Furthermore,  exploration and production costs generally  decline,  although the
decline may not be at the same rate as that of oil and gas prices.



                                       20
<PAGE>

     The Company's  results of operations are somewhat  seasonal due to seasonal
fluctuations in the sales prices for natural gas. Although in recent years crude
oil prices have been generally  higher in the third and fourth fiscal  quarters,
these fluctuations are not believed to be seasonal. Natural gas prices have been
generally higher in the fourth fiscal quarter.

CAPITAL RESOURCES AND LIQUIDITY

     The  Company's  material  sources  and (uses) of cash during the year ended
January 31, 2004 were:

      Cash used in operations                                  $(611,460)
      Loans from shareholder and unrelated third party         $(112,550)
      Sale of common stock                                    $1,002,878)
      Purchase of equipment and oil and gas properties         $(222,942)
      Increase (decrease)  in cash on hand at January 31, 2004   $55,926

     The  Company's  material  sources  and (uses) of cash during the year ended
January 31, 2003 were:

      Cash on hand at February 1, 2002                         $   2,054
      Cash used in operations                                   (364,535)
      Loans from shareholder, related parties and investor       440,544
      Reduction of notes payable                                 (25,458)
      Other                                                      (31,222)
                                                                ---------
      Cash on hand at January 31, 2003                            21,383
                                                                ========

     As a result of the  Company's  continued  losses  and lack of cash there is
substantial  doubt as to the  Company's  ability  to  continue  operations.  The
Company  plans to  generate  profits by  drilling  productive  oil or gas wells.
However,  the Company  will need to raise the funds  required to drill new wells
from third parties willing to pay the Company's share of drilling and completing
the wells.  The Company may also  attempt to raise  needed  capital  through the
private sale of its securities or by borrowing  from third parties.  The Company
may not be successful  in raising the capital  needed to drill oil or gas wells.
In  addition,  any future  wells  which may be drilled by the Company may not be
productive of oil or gas. The  inability of the Company to generate  profits may
force the Company to curtail or cease operations.

     During the years ended January 31, 2003 and 2002, the Company did not spend
any  amounts  on oil and gas  exploration  and  did not  acquire  any oil or gas
properties.  The lack of capital expenditures during the years ended January 31,
2003 and 2002 was  primarily  the result of the  Company's  inability to conduct
exploration  activities during these periods due to a lack of funds.  During the
year  ended  January  31,  2004  the  Company  spent  $920,000  on oil  and  gas
exploration.

     As of January  31,  2004,  the Company  did not have any  material  capital
commitments,  other than funding its operating  losses and repaying  outstanding
debt.  It is  anticipated  that any capital  commitments  that may occur will be




                                       21
<PAGE>

financed  principally  through borrowings from institutional and private lenders
(although  such  additional  financing  has not been  arranged)  and the sale of
shares of the Company's common stock or other equity securities.  However, there
can be no assurance that  additional  capital  resources and financings  will be
available  to the Company on a timely  basis,  or if  available,  on  acceptable
terms.

     As of January  31,  2004 the Company  had  outstanding  loans to  officers,
directors  and others of  approximately  $0.00.  See Item 12 of this  report for
information  concerning  these  loans.  As of this same date the Company did not
have sufficient funds to pay these liabilities. The Company plans to repay these
loans  from  the sale of oil or gas  from  wells  which  may be  drilled  by the
Company, if sufficient capital is available,  or from the proceeds received from
the sale of the Company's  capital stock. Mr. Shaw, who was owed $578,188 by the
Company as of January 31,  2004,  has advised the Company  that he will not look
for  repayment of the amounts  owed to him by the Company  prior to December 31,
2004. The other lenders may at any time file a lawsuit to enforce the collection
of the amounts owed by the Company.

     In August 2003 the Company  acquired 31  producing  gas wells,  a pipeline,
compressor  stations and  approximately  23,000 leased and 8,500  optioned acres
from three private  corporations  for $3,000,000 in convertible  notes. In March
2004 holders of notes in the  principal  amount of  $2,400,000  converted  their
notes into 4,800,000 shares of the Company's common stock. The remaining note in
the principal  amount of $600,000  bears interest at 8.5% per year and is due in
August  2023.  At any time  prior to August 1, 2006 all or any art of the unpaid
principal  or  interest  due on this note may be  converted  into  shares of the
Company's  common  stock on the  basis of one  share of  common  stock for every
dollar of note principal or interest converted.

     Between January 1, 2004 and May 10, 2004 the Company sold 4,260,000  shares
of common stock and 4,260,000 warrants to private investors for $1,278,000. Each
warrant  entitles the holder to puchase one share of the Company's  common stock
at a price of $0.50 per share. The warrants expire on the earlier of January 31,
2006 or three weeks  following  written  notification  by the  Company  that its
common  stock  closed at or above $0.85 per share for five  consecutive  trading
days.

ITEM 7.  FINANCIAL STATEMENTS

      See the financial statements attached to this report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     Effective  January 24, 2002 the Company  retained  Spicer,  Jefferies & Co.
("Spicer") to act as the Company's independent  certified public accountant.  In
this regard  Spicer  replaced  Bedford  Curry & Co. which  audited the Company's
financial statements for the fiscal years ended January 31, 2001, 2000 and 1999.
The report of Bedford  Curry for these  fiscal  years did not contain an adverse
opinion, or disclaimer of opinion and were not qualified or modified as to audit
scope or accounting  principles.  However, the report of Bedford Curry for these
fiscal years was  qualified  with  respect to  uncertainty  as to the  Company's
ability to continue as a going concern.  During the Company's  three most recent
fiscal years and the subsequent interim period ended January 24, 2002 there were




                                       22
<PAGE>

no  disagreements  with Bedford Curry on any matter of accounting  principles or
practices, financial statement disclosure or auditing scope or procedures, which
disagreements,  if not resolved to the  satisfaction of Bedford Curry would have
caused it to make reference to such disagreements in its reports.

     Bedford  Curry  is  based  in  Vancouver,  British  Columbia.  The  Company
dismissed  Bedford Curry due to rules of the Securities and Exchange  Commission
which require the Company's  financial  statements to be audited by  accountants
that are based in the United States. The Company has authorized Bedford Curry to
discuss any matter relating to the Company and its operations with Spicer.

     The change in the Company's  auditors was  recommended  and approved by the
Company's board of directors.

     During the two fiscal years ended January 31, 2001 and  subsequent  interim
period ended January 24, 2002, the Company did not consult with Spicer regarding
the  application  of accounting  principles to a specified  transaction,  either
completed  or proposed,  or the type of audit  opinion that might be rendered on
the  Company's  financial  statements,  or any matter  that was the subject of a
disagreement  or a  reportable  event  as  defined  in  the  regulations  of the
Securities and Exchange Commission.

     Effective  April 8, 2004 Spicer  Jeffries  LLP  resigned  as the  Company's
independent  accountants  as a result  of the  decision  by Spicer  Jeffries  to
discontinue  its  auditing  practice for publicly  traded  corporations.  Spicer
Jeffries audited the Company's  financial  statements for the fiscal years ended
January 31, 2003, 2002 and 2001. The reports of Spicer Jeffries for these fiscal
years did not contain an adverse opinion,  or disclaimer of opinion and were not
qualified or modified as to audit scope or accounting  principles.  However, the
reports of Spicer  Jeffries for these fiscal years was qualified with respect to
uncertainty as to the Company's  ability to continue as a going concern.  During
the Company's two most recent fiscal years and  subsequent  interim period ended
April 8, 2004 there were no disagreements  with Spicer Jeffries on any matter of
accounting  principles or practices,  financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Spicer Jeffries would have caused it to make reference to such  disagreements in
its reports.

     On April 14, 2004 the Company retained Russell & Atkins,  PLC to act as the
Company's independent certified public accountants.  The change in the Company's
auditors was recommended and approved by the board of directors of the Company.

     During the two most  recent  fiscal  years and  subsequent  interim  period
ending April 14, 2004 the Company did not consult with Russel & Atkins regarding
the  application  of accounting  principles to a specified  transaction,  either
completed  or proposed,  or the type of audit  opinion that might be rendered on
the  Company's  financial  statements,  or any matter  that was the subject of a
disagreement  or a  reportable  event  as  defined  in  the  regulations  of the
Securities and Exchange Commission.


                                       23
<PAGE>

ITEM 8A.  CONTROLS AND PROCEDURES

     George Shaw, the Company's Chief Executive  Officer and David W. Young, the
Company's  Chief  Financial  Officer,  have evaluated the  effectiveness  of the
Company's  disclosure  controls and procedures as of a date within 90 days prior
to the filing date of this report (the "Evaluation  Date"); and in their opinion
the  Company's   disclosure   controls  and  procedures   ensure  that  material
information relating to the Company, including its consolidated subsidiaries, is
made known to them by others  within  those  entities,  particularly  during the
period in which this report is being prepared,  so as to allow timely  decisions
regarding required disclosure.  To the knowledge of Mr. Shaw and Mr. Young there
have been no significant  changes in the Company's internal controls or in other
factors  that  could  significantly   affect  the  Company's  internal  controls
subsequent  to the  Evaluation  Date. As a result,  no  corrective  actions with
regard  to  significant  deficiencies  or  material  weakness  in the  Company's
internal controls were required.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

     The  following  table sets forth  information  with  respect to each of the
Company's  executive  officers  and  directors.   The  Company's  directors  are
generally elected at the annual shareholders'  meeting and hold office until the
next  annual  shareholders'  meeting or until their  successors  are elected and
qualified.  The  Company's  executive  officers  are  elected  by our  board  of
directors and serve at its discretion.

Name                         Age       Position

George G. Shaw               73        President and Chief Executive Officer and
                                       Chairman of the Board
G. Scott Shaw                33        Vice President, Secretary and a Director
David W. Young               54        Chief Financial Officer and a Director

     The  following is a brief  description  of the business  background  of the
Company's executive officers and directors:

     GEORGE G. SHAW is the President,  Chief  Executive  Officer and Chairman of
the Board of  directors of the Company and has held these  positions  since July
1991.  Mr.  Shaw is the  President  of Energas  Corporation  and its  subsidiary
Energas Pipeline Co., Inc., both privately held companies engaged in oil and gas
exploration and gas gathering. Mr. Shaw is the father of G. Scott Shaw.

     G. SCOTT SHAW is the Vice  President  and a director of the Company and has
held these positions since August 1996. Mr. Shaw became the Company's  Secretary
in April 2003. Mr. Shaw graduated from Oklahoma State  University in 1993 with a
Bachelor of Science degree in Biology. Mr. Shaw is the son of George G. Shaw.


                                       24
<PAGE>

     DAVID W.  YOUNG has held the  position  of Chief  Financial  Officer of the
Company  since April 1995.  Mr.  Young has been a director of the Company  since
August 2001.  Mr. Young is a practicing  accountant  and was graduated  from the
University of Central Oklahoma in 1975, with a B.B.S. in accounting.

     The Company does not have a compensation committee.  The Company's Board of
Directors  serves  as the  Company's  Audit  Committee.  David  W.  Young is the
director  serving  as the  Company's  financial  expert.  Since Mr.  Young is an
officer and director of the Company,  Mr. Young is not  independent as that term
is  defined  Section  121(A) of the  Listing  Standards  of the  American  Stock
Exchange.  Mr. Young is a certified  public  accountant and since 1981 Mr. Young
has had his own public accounting firm.

     The  Company  has  adopted  a Code of  Ethics  which is  applicable  to the
Company's principal  executive,  financial,  and accounting officers and persons
performing similar  functions.  The Code of Ethics is available on the Company's
website located at www.energasresources.com

ITEM 10.  EXECUTIVE COMPENSATION

     The  following  table sets forth the  compensation  during the years  ended
January  31,  2004,  2002 and 2001,  paid or  accrued,  to George G.  Shaw,  the
Company's  Chief  Executive  Officer  during those years.  None of the Company's
executive officers received  compensation in excess of $100,000 during the three
years ended January 31, 2004.

                                                                     Long-Term
                                                                    Compensation
                                                                       Awards
                                                                   Common Stock
                                Year Ended   Annual Compensation    Underlying
Name and Principal Position     January 31,  Salary (2) Bonus (3)     Options

George G. Shaw                     2004     $34,000
   President and Chief
    Executive Officer              2003     $33,000        --             --
                                   2002     $33,000        --             --

(1)  The named executive  officer  received  additional  non-cash  compensation,
     perquisites and other personal benefits;  however, the aggregate amount and
     value  thereof did not exceed 10% of the total annual salary and bonus paid
     to and accrued for the named executive officer during the year.
(2)  Dollar  value of base salary  (both cash and  non-cash)  earned  during the
     year.
(3)  Dollar value of bonus (both cash and non-cash) earned during the year.

     The  following  shows the amounts  which the Company  expects to pay to its
officers  during the twelve month period ending  January 31, 2005,  and the time
which the Company's executive officers plan to devote to the Company's business.
The Company does not have employment agreements with any of its officers.


                                       25
<PAGE>


                                   Proposed              Time to Be Devoted
Name                          Compensation            To Company's Business

George G. Shaw                   $60,000                      100%
G. Scott Shaw                    $48,000                      100%
David W. Young                   $24,000                       30%

     The Company does not have any  employment  agreements  with its officers or
employees.  The Company does not maintain any keyman insurance on the life or in
the event of disability of any of its officers.

STOCK OPTION AND BONUS PLANS

     Incentive  Stock Option Plan.  The  Company's  Incentive  Stock Option Plan
authorizes the issuance of up to 2,000,000  shares of the Company's common stock
to persons that  exercise  options  granted  pursuant to the Plan.  Only Company
employees may be granted  options  pursuant to the Incentive  Stock Option Plan.
The option  exercise price is determined by the Company's Board of Directors but
cannot be less than the market price of the  Company's  common stock on the date
the option is granted.

     Non-Qualified  Stock Option Plan. The Company's  Non-Qualified Stock Option
Plan authorizes the issuance of up to 1,000,000  shares of the Company's  common
stock to persons  that  exercise  options  granted  pursuant  to the Plans.  The
Company's employees,  directors, officers, consultants and advisors are eligible
to be granted  options  pursuant to the Plans,  provided  however that bona fide
services must be rendered by such consultants or advisors and such services must
not be in connection  with the offer or sale of securities in a  capital-raising
transaction.  The option  exercise price is determined by the Company's Board of
Directors.

     Stock Bonus Plan. The Company's Stock Bonus Plan allows for the issuance of
up to 4,000,000 shares of common stock. Such shares may consist,  in whole or in
part, of authorized but unissued  shares,  or treasury  shares.  Under the Stock
Bonus Plan,  the  Company's  employees,  directors,  officers,  consultants  and
advisors  are  eligible  to receive a grant of the  Company's  shares,  provided
however that bona fide services must be rendered by  consultants or advisors and
such services must not be in connection  with the offer or sale of securities in
a capital-raising transaction.

Summary

     The  following  table  shows the  weighted  average  exercise  price of the
outstanding   options   granted   pursuant  to  the   Company's   Incentive  and
Non-Qualified  Stock  Option  Plans  as of  December  31,  2003.  The  Company's
Incentive  and  Non-Qualified  Stock  Option  Plans  were  not  approved  by the
Company's shareholders.


                                       26
<PAGE>

                                                            Number of Securities
                                                             Remaining Available
                             Number                          For Future Issuance
                          of Securities                         Under Equity
                          to be Issued    Weighted-Average   Compensation Plans
                          Upon Exercise    Exercise Price  (Excluding Securities
                          of Outstanding    of Outstanding      Reflected in
Plan Category               Options  [a]       Options            Column (a))

Incentive Stock                   --              --              2,000,000
   Option Plan

Non-Qualified Stock Option
 Plan                        250,000           $0.32                750,000

     The  following  sets  forth  certain  information  as  of  April  30,  2004
concerning the stock options and stock bonuses  granted by the Company  pursuant
to the Plans.  Each option  represents  the right to  purchase  one share of the
Company's common stock.

                                 Total      Shares                   Remaining
                                Shares    Reserved for   Shares       Options/
                               Reserved   Outstanding   Issued As      Shares
Name of Plan                  Under Plans   Options    Stock Bonus   Under Plans

Incentive Stock Option Plan   2,000,000          --          --      2,000,000
Non-Qualified Stock Option
  Plan                        1,000,000     250,000          --        750,000
Stock Bonus Plan              4,000,000          --   1,270,000      2,730,000

     The  following  table  summarizes  the  options and stock  bonuses  granted
pursuant to the Plans as of April 30, 2004:

Incentive Stock Options
                                                                    Options
          Shares Subject   Exercise   Date of    Expiration      Exercised as of
           To Option        Price      Grant   Date of Option    April 30, 2004

                                None

Non-Qualified Stock Options
                                                                         Options
          Shares Subject   Exercise   Date of    Expiration      Exercised as of
           To Option        Price      Grant   Date of Option    April 30, 2004

             250,000        $0.32     6-30-03      7-15-05             --



                                       27
<PAGE>

Stock Bonuses

     Name             Shares Issued as Stock Bonus               Date Issued

Taylor Dillard                 350,000                           10/30/03
Hiram Kelly                    350,000                           10/30/03
Sherman Formhals               100,000                           10/30/03
David Young                    100,000                           10/30/03
Jerry Parry                    100,000                           10/30/03
George Shaw                    100,000                           10/30/03
Scott Shaw                     100,000                           10/30/03
Vicki Webb                      30,000                           10/30/03
Patricia Harris                 20,000                           10/30/03
Ronnie Webb                     20,000                           10/30/03
                             ---------
                             1,270,000
                             =========

Other Warrants and Convertible Securities

     See Item 5 of this  report for  information  concerning  other  outstanding
options and warrants.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table shows the beneficial  ownership of the Company's common
stock  as of April  30,  2004 by (i)  each  person  who is known to us to be the
beneficial  owner of more than 5%,  (ii)  each of our  directors  and  executive
officers,  and (iii) all of our executive officers and directors as a group. All
persons  listed  have sole  voting and  investment  power with  respect to their
shares unless otherwise  indicated,  and there are no family relationships among
the Company's  executive  officers and directors,  except that George G. Shaw is
the father of G. Scott Shaw. For purposes of the following  table, the number of
shares and percent of  ownership  of the  Company's  common stock that the named
person  beneficially owns includes shares of the Company's common stock that the
person has the right to acquire on or before June 30, 2004 from the  exercise of
stock options or otherwise.

                                                 Shares            Percent of
                                              Beneficially        Outstanding
Name and address                                 Owned               Shares

George G. Shaw
Third Floor, 800 Northeast 63rd Street
Oklahoma City, Oklahoma 73105                  6,776,956 (1)          22.7%

G. Scott Shaw                                    463,780              1.5%
800 Northeast 63rd Street
Oklahoma City, Oklahoma 73105

David W. Young                                        --                --
800 Northeast 63rd Street
Oklahoma City, Oklahoma 73105


                                       28
<PAGE>

Clare LLC
401 South LaSalle, Suite 302
Chicago, Illinois 60605                               --                --

Executive Officers and Directors as a group
 (three persons)                               7,240,736             24.2%

(1)  Includes  (i)  2,024,916  shares  held  by  Energas  Corporation  of  which
     1,759,680 of these shares are subject to a time-release  escrow  agreement,
     and (ii) 3,460,320 shares held by Energas Pipeline Co., Inc. are subject to
     a time-based  escrow  agreement and (iii) 1,585,000  shares of common stock
     held by Mr.  Shaw.  The shares  held under the  escrow  agreements  will be
     released from escrow in 12 six month  installments  commencing on March 21,
     2002  (initially  four  installments  of  290,000  shares of  common  stock
     followed by eight installments of 580,000 shares of common stock). Mr. Shaw
     controls Energas Corporation and Energas Pipeline Co., Inc.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In December  2000,  Mankato  Investments  LLC purchased  275,675  shares of
common stock and common stock purchase warrants  exercisable for the purchase of
275,675  shares of common  stock  for $.33 per share on or before  December  21,
2002. The Company  received  proceeds from this sale of $60,350.  In April 2001,
Jurassic  Capital LLC purchased  384,550 shares of common stock and common stock
purchase warrants exercisable for the purchase of 384,550 shares of common stock
for $.195 per share on or before April 11, 2003. The Company  received  proceeds
from this sale of $74,733.  Mankato Investments LLC and Jurassic Capital LLC are
controlled by James H. Attarian, a former director of the Company.

     In February 1999 the Company borrowed $300,000 from Mankato Investments LLC
to fund lease acquisitions and the exploration and development. The loan was due
April 1, 2002 and  beginning  April 1, 2002 the loan bears  interest  at 12% per
year. As of August 31, 2002 this loan was in default.  As partial  consideration
for this loan, the Company issued  warrants for the purchase of 60,000 shares of
the Company's  common stock at a price of $0.28 per share.  These  warrants were
exercised in September 2000.

     During the year ended  January 31, 2001,  the Company  received  additional
loans of $60,000 from Mankato  Investments  LLC. The loan proceeds were used for
operating expenses.  The loans are non-interest  bearing,  were due May 13, 2002
and are in default.  As of May 14, 2003 Mankato  Investments  had not instituted
proceedings to collect the amounts owed by the Company.

     During the year ended January 31, 2002 the Company issued 400,070 shares of
its common stock to Mankato  Investments LLC in payment of $138,800  advanced to
the Company by Mankato Investments. The $138,800 in advances were in addition to
the $360,000 owed by the Company to Mankato.


                                       29
<PAGE>

     Based  upon  Rule  144  forms  filed  with  the   Securities  and  Exchange
Commission,  the Company believes that  substantially all of the shares owned by
Mankato  Investments,  Jurassic Capital, and Dr. Attarian have been sold, or are
in the process of being sold, in the public market.

     See "Legal  Proceedings"  for  information  concerning  the  settlement  of
lawsuits filed by Dr. Attarian against the Company.

     The Company's  offices are located at 800 Northeast  63rd Street,  Oklahoma
City, Oklahoma.  The office space is occupied under an unwritten  month-to-month
lease requiring rental payments of $3,800 per month to George Shaw, the owner of
the building. During the years ended January 31, 2004, 2003 and 2002 the Company
paid rent of $45,600, $61,803 and $40,797,  respectively.  In addition, Mr. Shaw
owns Energas  Pipeline Company that operates the natural gas gathering system to
which the Company's four wells in Atoka County,  Oklahoma are connected.  During
the years ended  January  31,  2004,  2003 and 2002,  Energas  Pipeline  Company
received  $16,592,  $14,428  and  $13,765,  respectively,  for its  services  in
operating the gathering system.

     As of January 31, 2004 the Company had borrowed approximately $578,188 from
George Shaw and entities  controlled by Mr. Shaw.  These loans are  non-interest
bearing,  unsecured,  and do not have  fixed  terms of  repayment.  The  amounts
borrowed  from  Mr.  Shaw and his  affiliates  were  used to fund the  Company's
operations.

     The  Company  believes  that the rent paid to Mr. Shaw and the terms of the
other transactions  between the Company and its officers and directors discussed
above were fair and  reasonable and were upon terms as least as favorable as the
Company could have obtained from unrelated third parties.

     Transactions  with  the  Company's  officers,   directors,   and  principal
shareholders  may continue  and may result in conflicts of interest  between the
Company and these  individuals.  Although these persons have fiduciary duties to
the Company and its  shareholders,  there can be no assurance  that conflicts of
interest  will  always be  resolved  in favor of Company  and its  shareholders.
Neither  the  Company's   Articles  of  Incorporation  nor  Bylaws  contain  any
provisions for resolving potential or actual conflicts of interest.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

Exhibit No.  Description of Exhibit                               Page Number

  3.1        Certificate of Incorporation                             *

  3.2        Bylaws                                                   *

  3.3        Certificate of Domestication in Delaware                 *



                                       30
<PAGE>

  4.1        Form of Certificate of Common Stock                      *

  4.6       Escrow Amendment Agreement among Registrant,
            Pacific Corporate Trust Company, Energas
            Corporation and Energas Pipeline Company                  *

  4.7       Escrow Agreement, dated September 20, 1991,
            among Registrant,  Pacific Corporate Trust
            Company, Energas Corporation and Energas Pipeline
            Company                                                   *

  4.8       Registration Rights Agreement, dated July 18, 2001
            between Registrant and Clare, LLC                         *

  4.9      Escrow Amendment Agreement, dated April 13, 1994,
           among Registrant,  Pacific Corporate Trust Company,
           Energas Corporation and Energas Pipeline Company           *

10.7       Gas Purchase  Agreement, dated March 1, 1991 between
           Registrant and Energas Pipeline Company.                   *

10.8       Gas Purchase Agreement, dated March 1, 1991 between
           Registrant and Energas Pipeline  Company.                  *

10.9       Gas Gathering  Agreement,  dated July 1, 1992
           between Energas Pipeline  Company,  Inc.
           and A.T. Gas Gathering Systems, Inc.                       *

10.10      Gas Purchase  Agreement,  dated February 13, 1997,
           between  Panenergy Field Services, Inc. and Energas
           Pipeline Company.                                          *

10.11      Gas  Purchase  Agreement, dated October 1, 1999,
           between  Registrant  and Ozark Gas Gathering, L.L.C.       *

16.         Letter regarding change in certifying public
            accountant.                                              **

21.         Registrant's Subsidiaries                                 *

31.         Rule 13a-14(a)/15d-14(a) certifications                ______

32.         Section 1350 certifications                             _____

*    Incorporated  by  referenced  to the same exhibit  filed with the Company's
     initial registration statement on Form 10-SB.


                                       31
<PAGE>

**   Incorporated  by  reference to the same  exhibit  filed with the  Company's
     report on Form 8-K dated April 8, 2004.

     During the three months ended January 31, 2004 the Company did not file any
reports on Form 8-K.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Spicer Jeffries LLP served as the Company's  independent public accountants
during the fiscal year ended January 31, 2002 and 2003. The following table sets
forth the  aggregate  fees billed to the Company  during the years ended January
31, 2003 and 2004 by Spicer Jeffries LLP.

                                    2003         2004

Audit Fees                       $13,938       $17,500
Audit-Related Fees                    --            --
Financial Information Systems         --            --
Design and Implementation Fees        --            --
Tax Fees                              --            --
All Other Fees                        --            --

     Audit fees represent amounts billed for professional  services rendered for
the audit of the Company's  annual  financial  statements and the reviews of the
financial  statements  included in the Company's Forms 10-Q for the fiscal year.
Before Spicer  Jeffries LLP was engaged by the Company to render audit services,
the engagement was approved by the Company's Board of Directors.

     Effective  April 8, 2004 Spicer  Jeffries  LLP  resigned  as the  Company's
independent  accountants  as a result  of the  decision  by Spicer  Jeffries  to
discontinue its auditing practice for publicly traded corporations.

     On April 14, 2004 the Company retained Russell & Atkins,  PLC to act as the
Company's independent certified public accountants.











                                       32
<PAGE>




ENERGAS RESOURCES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2004 and 2003





<PAGE>



                                   RUSSELL & ATKINS, PLC

                                                     5809 North Grand, Suite D
Dennis Atkins                                        Oklahoma City, OK 73118
Casey Russell                                        Telephone: (405) 07-8743
Member SEC                                           Fax: (405) 607-8744
Practice Section                                     E-mail: HARCPAS@hotmail.com

-------------------------------------------------------------------------------

To the Board of Directors
Energas Resources, Inc.

We have audited the consolidated balance sheets of Energas Resources, Inc. as of
January  31,  2004 and  2003  and the  consolidated  statements  of  operations,
stockholders' (deficit) and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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 of our opinion.

In our opinion,  these consolidated  financial statements present fairly, in all
material  respects,  the  financial  position of Energas  Resources,  Inc. as of
January 31, 2004 and 2003 and the results of its  operations  and its cash flows
for the years then ended in  accordance  with  accounting  principles  generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has not generated sufficient cash flows from
operations and has suffered  operating losses since inception.  These conditions
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's  plans in this regard are also  discussed in Note 1. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


/s/ Russell & Atkins, PLC
---------------------------
Oklahoma City, Oklahoma
May 17, 2004

<PAGE>

                            ENERGAS RESOURCES, INC.
                           CONSOLIDATED BALANCE SHEETS
                           January 31, 2004 and 2003

                                                   Year Ended     Year Ended
                                                       2004          2003
                                                   -----------------------------
                      Assets
Cash and Cash Equivalents                             77,309        21,383
Accounts Receivable                                  152,330           700
                                                     ---------------------
               Total Current Assets                  229,639        22,083

Property and Equipment, Net (Note 3)               3,691,836       505,595
                                                   -----------------------
                   Total Assets                   $3,921,475      $527,678
                                                  ========================

      Liabilities and Stockholders' (Deficit)

Accounts Payable and Accrued Expenses                369,297       270,002
Due to Related Parties and Shareholders (Note 7)   1,080,229     1,007,404
Investor Advance                                     373,915       168,000
Current Portion of Long Term Debt                    157,391        34,542
                                                   ------------------------
             Total Current Liabilities            $1,980,832    $1,479,948

Long-Term Debt - Less Current Portion              2,950,375            --
                                                   ------------------------
                 Total Liabilities                $4,931,207    $1,479,948

              Stockholders' (Deficit)

Commons Stock, $.001 Par Value 100,000,000
 shares authorized; 33,163,001 and 26,143,00
 shares issued and outstanding                        33,163        26,143
Additional Paid in Capital                         8,644,157     7,621,777
Deficit                                           (9,687,052)   (8,600,190)
                                                   ------------------------
           Total Stockholders' (Deficit)          (1,009,732)     (952,270)
                                                   -------------------------

    Total Liabilities and Stockholders' Deficit   $3,921,475     $ 527,678
                                                   ========================








                                       1
<PAGE>



                            ENERGAS RESOURCES, INC.
                     CONSOLIDATED STATEMENT OF OPERATIONS
           As of and for the Years Ending January 31, 2004 and 2003

                                         Year Ended           Year Ended
                                            2004                 2003
                                         ---------------------------------------
                Revenues
Oil and Gas Sales                         $ 296,657           $ 116,031
Pipeline Revenues                            15,365              15,808
Gain from Debt Refinancing                        -              10,904
                                         -------------------------------
             Total Revenues                 312,022             142,743

                Expenses
Salaries and Benefits                       393,862             254,567
Depreciation and Depletion                   36,701              30,885
Legal and Accounting                        143,602              86,637
Rent                                         45,600              61,803
Oil and Gas Production                      315,109              26,544
Consulting                                  246,721              32,682
Office and General                           41,668              28,622
Travel and Promotion                            359              16,530
Telephone                                    16,477              17,924
Regulatory Fees                               3,537               6,952
Pipeling Costs                                3,000              20,793
Interest Expense                            152,248              45,596
                                         -------------------------------
             Total Expenses               1,398,884             629,535
                                         -------------------------------

                Net Loss                $(1,086,862)          $(486,792)
                                        ================================

Loss Per Share - Basic and Diluted      $     (0.04)          $   (0.02)
                                         ===============================

Weighted Average Shares Outstanding      28,667,028          26,143,001
                                         ==============================



                                       2
<PAGE>



                             ENERGAS RESOURCES, INC.
                            CONSOLIDATED STATEMENT OF CASH FLOWS
            As of and for the Years Ending January 31, 2004 and 2003

                                                       Year Ended    Year Ended
                                                          2004          2003
                                                         ----------------------
          Cash Flows From Operating Activities
Net Loss From Operating Activities                    $(1,086,862)   $(486,792)
Adjustments to reconcile net loss to net cash
 provided by operating activities Depreciation
  and Depletion                                            36,701       30,885

  Amortization of discount and debt issuance costs                       2,444

  Gain on settlement of past due note payable                          (10,904)
   Stock Paid for Consulting                               50,000
   Employee Bonus and Stock Bonus                         279,400
   Stock Issued for Debt                                  100,000
   Interest Capitalized                                   107,766
(Increase) Decrease in Accounts Receivable               (151,630)       6,092

   Prepaid Expenses                                                        214

   Other Assets                                                          4,000
Increase (Decrease) in Accounts Payable and
   Accrued Expenses                                        53,165       89,526
                                                         ----------------------
     Net Cash Flows From Operating Activities            (611,460)    (364,535)

          Cash Flows From Financing Activities
Increase (Decrease) in Due to Related Party and
        Stockholders                                       55,450      272,544
Payments on Notes Payable                                       -      (25,458)
Sale of Common Stock                                    1,002,878
Proceeds From Investor Advance                           (168,000)     168,000
                                                       -----------------------
   Net Cash Provided (Used) by Financing Activities       890,328      415,086

           Cash Flows From Investing Activities
Purchase of Property and Equipment                       (222,942)     (31,222)
                                                        -----------------------
   Net Cash Provided (Used) in Investing ctivities       (222,942)     (31,222)
                                                        -----------------------

           Increase (Decrease) in Cash                     55,926       19,329
Cash at Beginning of Year                                  21,383        2,054
                                                       ------------------------
Cash at End of Year                                    $   77,309     $ 21,383
                                                      ========================

Supplemental Information:
   Interest Paid in Cash                                       -
   Income Taxes Paid in Cash                                   -
Non-Cash Transactions:
   Stock Issued for Consulting and Employee
   Compensation and Bonuses                              329,400
   Stock Issued to Settle Debt Obligations               100,000
    Interest Expense Added to the Pincipal Balance
      of Long Term Debt                                  107,765
   Settlement of Accrued Interest for Note Payable                      10,000
                                                       ------------------------
                                                       $ 537,165       $10,000
                                                      =========================

                                       3
<PAGE>



                                                       Year Ended    Year Ended
                                                          2004          2003
                                                      -------------------------
Cash and Cash Equivalents                                77,309        21,383
Accounts Receivable                                     152,330           700
Property and Equipment, Net (Note 3)                  3,691,836       505,595

                      Total Assets                   $3,921,475      $527,678
                                                     =========================

         Liabilities and Stockholders' (Deficit)
Accounts Payable and Accrued Expenses                   323,167       270,002
Due to Related Parties and Shareholders (Note 7)      1,162,854     1,007,404

Investor Advance                                                      168,000
Current Portion of Long Term Debt                       387,044        34,542
                                                      ------------------------
                Total Current Liabilities             1,873,065     1,479,948

Long-Term Debt Less Current Portion                   3,058,142             -
                                                    -------------------------

                    Total Liabilities                 4,931,207     1,479,948

                 Stockholders' (Deficit)
Commons Stock, $.001 Par Value 100,000,000 Shares
     Authorized and 33,163,001 and 26,143,00
     shares issued and outstanding                      33,163         26,143
Additional Paid in Capital                           8,644,157      7,621,777
Deficit                                             (9,687,052)    (8,600,190)
                                                    --------------------------
              Total Stockholders' (Deficit)         (1,009,732)      (952,270)
                                                    --------------------------

    Total Liabilities and Stockholders' Deficit    $ 3,921,475      $ 527,678
                                                   ===========================






                                       4
<PAGE>



                                  ENERGAS RESOURCES, INC.
                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
                  As of and for the Years Ending January 31, 2004 and 2003



<TABLE>
<S>                                           <C>            <C>         <C>            <C>
                                                Common Stock         Additional
                                          -------------------------    Paid In       Accumulated
                                             Shares        Amount      Capital         Deficit
                                          -------------------------------------------------------
        Balances, January 31, 2002        $ 26,143,001      26,143   $7,621,777      $(8,113,398)

Net Loss                                                                                (486,792)
                                          -------------------------------------------------------
        Balances, January 31, 2003        $ 26,143,001      26,143   $7,621,777      $(8,600,190)

Stock issued for consulting (4/9/03 @
     $.10 per share)                           500,000         500       49,500
Private Placement (6/30/03 @$.05 per
     share)                                  1,000,000       1,000       49,000
Private Placement (9/10/03 @$.15 per
     share)                                  2,000,000       2,000      298,000
Settlement of debt for stock (9/29/03 @
     $.10 per share)                         1,000,000       1,000       99,000
Stock bonus (10/16/03 @ $.22 per share)        700,000         700      153,300
Employee stock plan (10/16/03 @ $.22 per
     share)                                    570,000         570      124,830
Exercise of stock warrants (1/31/04 @
     $.20 per share)                         1,250,000       1,250      248,750

Net Loss                                                                              (1,086,862)
                                          --------------------------------------------------------
        Balances, January 31, 2004        $ 33,163,001      33,163   $8,644,157       (9,687,052)
                                          ========================================================

</TABLE>






                                       5
<PAGE>




                         ENERGAS RESOURCES, INC.
                   SUPPLEMENTAL INFORMATION (UNAUDITED)
                  Years Ended January 31, 2004 and 2003


Capitalized Costs Relating to Oil and Gas Producing
Activities at January 31,                              2004           2003
                                                     -------         -------

Unproved oil and gas properties                      $234,093       $234,093
Proved oil and gas properties                       3,509,485        337,341
                                                    ------------------------
                                                    3,743,578        571,434
Less accumulated depreciation, depletion,
amortization and impairment                          (103,668)       (72,783)
                                                    ------------------------

Net capitalized costs                               $3,639,910      $498,651
                                                    ========================

Costs Incurred in Oil and Gas Producing Activities
For the Year Ended January 31,                         2004           2003
                                                     -------         -------

Property acquisition costs Proved                   $3,000,000             -

     Unproved                                                -       $29,880

Exploration costs                                     $490,000             -

Development costs                                     $430,000             -

Amortization rate per equivalent barrel of
    production                                        $   4.51         $4.57

Results of Operations for Oil and Gas Producing
   Activities For the Year Ended January 31,           2004           2003
                                                     -------         -------

Oil and gas sales                                     $296,657      $116,031

Gain on sale of oil and gas properties                       -             -

Gain on sale of oil and gas leases                           -             -
Production costs                                      (315,109)      (26,544)
Exploration expenses                                         -             -
Depreciation, depletion, and amortization              (30,885)      (25,211)
                                                    ------------------------
                                                       (49,337)       64,276
Income tax expense                                           -             -
                                                    ------------------------
Results of operations for oil and gas producing
    activities (excluding corporate overhead and
   financing costs)                                   ($49,337)      $64,276
                                                    ========================


                                       6
<PAGE>



                             ENERGAS RESOURCES, INC.
                      SUPPLEMENTAL INFORMATION (UNAUDITED)
                      Years Ended Janaury 31, 2004 and 2003


<TABLE>
<S>                                               <C>       <C>         <C>       <C>
                                                      2004                2003
                                              ----------------------------------------
                                                  Oil       Gas        Oil      Gas
                                                (Bbls)    (Mcf)      (Bbls)    (Mcf)
Proved developed and undeveloped reserves
     Beginning of year                            3,761   597,773     6,8427   13,262
     Revisions of previous estimates                                  (2,678) (84,806)

     Improved recovery                            5,714         -          -        -
     Purchase of minerals in place                  635   156,917          -        -

     Extensions and discoveries                       -         -          -        -
     Production                                    (950) (143,616)      (403) (30,683)

     Sales of minerals in place                       -         -          -        -
                                               ----------------------------------------
End of year                                       9,160   611,074      3,761  597,773
                                               ========================================

Proved developed reserves
     Beginning of year                            3,761   597,773      6,842  713,262
     End of year                                  9,160   611,074      3,761  597,773

</TABLE>




                                                           2004       2003
Standardized Measure of Discounted Future Net
Cash Flows-

     Future cash inflows                              $  3,625,280  $2,976,046
     Future production costs                            (1,019,332)   (828,826)
     Future development costs                                    -           -
     Future income tax expenses                                  -           -
                                                        ----------------------
     Future net cash flows                               2,605,948   2,147,220
          10% annual discount for estimated              1,493,407   1,255,810
timing of cash flows                                    (         ) (         )
                                                        ----------------------
     Standardized measures of discounted
     future net cash flows relating to proved
     oil and gas reserves                               $1,112,541  $ 891,410
                                                        ======================


                                       7
<PAGE>



                             ENERGAS RESOURCES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 2004 AND 2003

NOTE 1 - NATURE OF OPERATIONS

Energas Resources, Inc. was originally incorporated in 1989 in British Columbia,
Canada as a public company listed on the Canadian Venture Exchange. In 2001, the
Company registered as a Delaware  corporation  becoming a United States domestic
corporation.  In 2002, its registration  statement filed with the Securities and
Exchange  Commission  became  effective  and its stock is traded in the Over the
Counter (OTC) market.

The Company is  primarily  engaged in the  operation,  development,  production,
exploration  and  acquisition  of petroleum  and natural gas  properties  in the
United States through its wholly-owned  subsidiary,  A.T. Gas Gathering Systems,
Inc., an Oklahoma  corporation  ("AT Gas").  AT Gas owns a natural gas gathering
system, located in Oklahoma,  which serves the Company's wells for delivery to a
mainline  transmission  system.  All of  the  Company's  oil  and  gas  property
interests are leased.

Although the Company has taken steps to verify title to resource  properties  in
which it has an interest,  in accordance with industry standards for the current
stage of exploration of such  properties,  these procedures do not guarantee the
Company's title.  Property title may be subject to unregistered prior agreements
and title may be affected by undetected defects.

On August 1, 2003, the Company entered into agreements to acquire  producing oil
and gas  properties  located in  Kentucky  from three  private  corporations  in
exchange for $3,000,000 in  convertible  notes.  All  properties  were initially
transferred  into TGC,  Inc.  ("TGC") (a Kentucky  corporation)  and 100% of the
outstanding shares of TGC were subsequently  transferred into Energas Resources,
Inc. The notes are  convertible  at a rate of one share of common stock for each
$1.00 of principal  converted.  The  properties  consist of 31 producing  wells,
approximately 28 miles of pipeline,  two compressor  stations and  approximately
23,000 leased and 8,500 optioned acres.

The Company is in the process of acquiring and developing  petroleum and natural
gas properties with adequate  production and reserves to operate  profitability.
As of January 31, 2004, it had a working  capital  deficiency of $1,643,426  and
incurred an operating loss of $1,086,862 for the year then ended.  The Company's
ability to continue as a going concern is dependent upon obtaining financing and
achieving  profitable  levels of  operations.  The Company is currently  seeking
additional  funds and additional  resource  property  interests  through private
placements of equity and debt  instruments.  There can be no assurance  that its
efforts will be successful.

The  consolidated  financial  statements  do not give effect to any  adjustments
which  would be  necessary  should the  Company be unable to continue as a going
concern  and  therefore  be required  to realize  its assets and  discharge  its
liabilities  in the normal  course of business at amounts  different  from those
reflected in these consolidated financial statements.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of  consolidation  - The  consolidated  financial  statements  include the
accounts of the Company and its wholly-owned  subsidiaries,  AT Gas and TGC. All
significant intercompany items have been eliminated in consolidation.


                                       8
<PAGE>


Use of estimates in the preparation of financial statements - The preparation of
financial statements in conformity with accounting principles generally accepted
in the United  States of  America  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.

Revenue  recognition  - Oil and natural gas  revenue is  recognized  at the time
title is transferred to the customer.  Pipeline revenue is earned as a gathering
fee at the time the gas is delivered to the customer.

Petroleum and natural gas properties - The Company  employs the full cost method
of  accounting  for  petroleum  and  natural  gas  properties  whereby all costs
relating to exploration and development of reserves are capitalized.  Such costs
include land  acquisition  costs,  geological and  geophysical  costs,  costs of
drilling both productive and non-productive wells and related overhead.

Capitalized costs, excluding costs relating to unproven properties, are depleted
using the  unit-of-production  method based on  estimated  proven  reserves,  as
prepared  by  an  independent  engineer.  For  the  purposes  of  the  depletion
calculation,  proven  reserves are  converted to a common unit of measure on the
basis of their  approximate  relative  energy  content.  Investments in unproved
properties  are not  amortized  until the proved  reserves  associated  with the
projects can be determined or until impairment  occurs. If an assessment of such
properties  indicates that properties are impaired,  the amount of impairment is
added to the capitalized cost base to be amortized.

In applying the full-cost method,  the Company performs a ceiling test to ensure
that capitalized costs net of accumulated  depletion do not exceed the estimated
future net revenues from  production of proven  reserves.  The carrying value of
the  properties  is compared  quarterly to estimated  future net cash flows from
production  or proven  reserves.  The present  value of future net revenue  from
proved reserves is estimated, using a 10% discount rate, based on current prices
less estimated future development and production costs. In addition, the cost of
properties not being  amortized and the lower of cost or estimated fair value of
unproven  properties  included  in the  costs  being  amortized  is added to the
present  value of the future net  revenues  and this amount is adjusted  for the
related tax effects for the purposes of computing the ceiling.  During the years
ended  January  31, 2004 and 2003,  the  Company  recognized  no  impairment  to
properly state its capitalized costs under the full cost method.

Proceeds on disposal of  properties  are normally  applied as a reduction of the
capitalized  costs without  recognition  of a gain or loss,  unless such amounts
would significantly alter the relationship  between capitalized costs and proved
reserves  of oil and  gas,  in which  case  gain or loss  would  be  recognized.
Abandonment of properties are accounted for as adjustments of capitalized  costs
with no loss recognized,  unless such adjustment would  significantly  alter the
relationship  between  capitalized  costs  and  proved  reserves  of oil and gas
attributable to a cost center.

Long-lived  assets - The Company  reviews its  long-lived  assets for impairment
whenever changes in circumstances  indicate that the carrying amount of an asset
may not be  recoverable.  For  purposes  of  evaluating  the  recoverability  of
long-lived  assets,  the  recoverability   test  is  performed  using  estimated
undiscounted net cash flows to be generated by the asset.


                                       9
<PAGE>

Equipment - Office  equipment,  furniture and fixtures and software are recorded
at cost and depreciated  using the declining balance method over useful lives of
3 to 5 years. Pipeline costs are depreciated using the straight-line method over
a period of 3 years.

Environmental  liabilities - The Company  expenses or capitalizes  environmental
costs  depending  on their  future  economic  benefit.  Costs that  relate to an
existing condition caused by past operations with no future economic benefit are
expensed.  Liabilities  for  future  expenditures  of a  non-capital  nature are
recorded when future  environmental  expenditures  and/or  remediation is deemed
probable and the costs can be reasonably estimated. Costs of future expenditures
for  environmental  remediation  obligations are not discounted to their present
value.  During the years ended January 31, 2004 and 2003, the Company spent $-0-
on plugging  and filling  well holes,  removing  drilling  anchors,  hauling and
disposing  of water and drilling  mud,  filling mud pits,  surface  leveling and
reseeding and general site clean up.

Financial  instruments - The Company's  financial  instruments  consist of cash,
accounts  receivable,  accounts  payable,  loans  payable,  and  amounts  due to
shareholder.  It is  management's  opinion  that the  Company is not  exposed to
significant  interest,  currency  or  credit  risk  arising  from its  financial
instruments and that their fair values approximate their carrying values, unless
otherwise noted.

Foreign currency translation - Foreign currency is translated in accordance with
Statement of Financial  Accounting Standards No. 52, which provides the criteria
for  determining  the  functional  currency  for  entities  operating in foreign
countries.  The Company has  determined  its  functional  currency is the United
States  (U.S.)  dollar since  substantially  all of its  operations  are in U.S.
dollars.  Financial statements of previous periods presented in Canadian dollars
have been  translated to U.S.  dollars at rates  prevailing  during the year for
revenue  and  expense  items and at  year-end  rates for assets and  liabilities
except for fixed assets and prepaid expenses which are translated at the rate in
effect  at  the  time  of  their  acquisition.   The  net  effects  of  currency
translations were not material in any period.

Earnings per share - The Company follows SFAS No. 128;  Earnings per Share,  for
computing and presenting earnings per share, which requires, among other things,
dual  presentation  of basic and diluted  earnings  per share on the face of the
statement of operations.  Basic EPS is computed by dividing income  available to
common  shareholders by the weighted average number of common shares outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if
securities,  options or warrants were  exercised or converted into common shares
or resulted in the issuance of common  shares that then share in the earnings of
the  entity.  For the years  ended  January  31,  2004 and 2003,  no  options or
warrants  were  considered  common  stock  equivalents  as their effect would be
anti-dilutive.

Stock-based  compensation  - In October  1995,  the FASB  issued  SFAS No.  123,
"Accounting for Stock-Based Compensation." SFAS No. 123 encourages, but does not
require,  companies  to record  compensation  expense for  stock-based  employee
compensation  plans at fair  value.  The  Company has elected to account for its
stock-based  compensation  plans using the intrinsic value method  prescribed by
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees" (APB No. 25). Under the provisions of APB No. 25,  compensation  cost
for stock options is measured as the excess,  if any, of the quoted market price
of the  Company's  common stock at the date of grant over the amount an employee
must pay to acquire the stock.

Concentration  - The Company sells all of its oil and gas  production  through a
related company operating its wells, Energas Pipeline Company.  Energas Pipeline
Company  currently  sells the production to Conoco and Duke Energy.  The Company
has determined that other customers for its production could replace its current
exclusive customers on a timely basis.


                                       10
<PAGE>

Cash and cash  equivalents  - For purposes of the  statement of cash flows,  the
Company  considers all highly liquid debt instruments  purchased with a maturity
of three months or less to be cash equivalents.

Income  taxes - Income  taxes are  accounted  for under the asset and  liability
method.  Deferred tax assets and  liabilities  are  recognized for future timing
differences   between  the  financial   statement  carrying  amounts  and  their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary differences are expected to be recovered.

Recent  pronouncements - In April 2002, the Financial Accounting Standards Board
("FASB") issued SFAS No. 145,  "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB  Statement No. 13, and Technical  Corrections."  Such standard
requires  any  gain or  loss on  extinguishments  of debt to be  presented  as a
component of continuing  operations  (unless specific  criteria are met) whereas
SFAS No. 4 required that such gains and losses be classified as an extraordinary
item in determining net income. The adoption of SFAS 145 did not have a material
effect on 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." Such standard requires costs associated with
exit or disposal activities (including restructurings) to be recognized when the
costs are  incurred,  rather than at a date of commitment to an exit or disposal
plan.  SFAS No. 146 nullifies EITF Issue No. 94-3,  "Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including  Certain Costs Incurred in a  Restructuring)."  Under SFAS No. 146, a
liability  related to an exit or disposal  activity is not recognized until such
liability  has  actually  been  incurred;  whereas  under EITF Issue No. 94-3, a
liability  was  recognized  at the time of a  commitment  to an exit or disposal
plan.  The  provisions  of this  standard  are  effective  for exit or  disposal
activities  initiated  after December 31, 2002. The adoption of SFAS 146 did not
have a  material  effect on the  Company's  financial  position  or  results  of
operations.

On December 31, 2002, the FASB issued SFAS No. 148,  "Accounting for Stock-Based
Compensation--Transition  and  Disclosure."  This standard  amends SFAS No. 123,
"Accounting for Stock-Based  Compensation,"  to provide  alternative  methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based  employee  compensation.  This standard also requires  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on  reported  results.  The  adoption  of SFAS 148 did not have a  material
effect on the Company's financial position or results of operations.

SFAS No. 149 " Amendment of Statement 133 on Derivative  Instruments and Hedging
Activities".  This  statement  amends and  clarifies  financial  accounting  and
reporting for derivative  instruments embedded in other contracts  (collectively
referred  to  as  derivatives)  and  for  hedging  activities  under  SFAS  133,
"Accounting for derivative instruments and hedging activities".

SFAS No. 150 "Accounting for certain financial  instruments with characteristics
of both  liabilities and equity".  This statement  establishes  standards how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics of both liabilities and equity.


                                       11
<PAGE>

NOTE 3 - PROPERTY AND EQUIPMENT


                                                     Accumulated        Net
                                                    Depreciation/   Book Value
                           Cost       Depletion       2004            2003
Unproved oil and gas
  properties            $ 234,093     $       -      $  234,093     $  234,093
Proved oil and gas
  Properties            3,509,485       103,668       3,405,817        264,558
Office equipment           19,976        17,785           2,191          6,944
Truck                      24,120        24,120               -              -
Pipeline and equipment     74,485        24,750          49,735              -
Computer software           2,400         2,400               -              -
                    ___________________________________________________________
                      $ 3,864,559     $ 172,723      $3,691,836     $  505,595

Oil and gas properties are accounted for using the full cost method as discussed
in Note 2.  Depletion  was $30,885  and $25,211 for the years ended  January 31,
2004 and 2003, respectively.

NOTE 4 - NOTES PAYABLE

                                                           2004          2003

Note payable to individual, bearing interest at 12%,
  payments of $5,000 monthly, due March 6, 2003,
  secured by personal guarantee of Company's
  President and 200,000 shares of his stock in the
  Company                                             $   13,492     $  34,542
                                                      ==========     =========

NOTE 5 - COMMON STOCK

The Company has authorized capital of 100,000,000 common shares with a $.001 par
value. The issued shares are as follows:

                                    2004                    2003
                                   Number       Amount      Number       Amount

Balance, beginning of year       26,143,001   $7,647,920  26,143,001  $7,647,920
Shares issued for:
  Services                        1,770,000      329,400           -           -
  Private placement, net of
  legal costs                     3,000,000      350,000           -           -
  Warrants exercised, net of
  legal costs                     1,250,000      250,000           -           -
  Settlement of debt              1,000,000      100,000           -           -
                                -----------  -----------   ---------  ----------
Balance, end of year             33,163,001  $ 8,677,320  26,143,001 $ 7,647,920
                                 ==========  ===========  ========== ===========

In April 2003,  the Company  issued  500,000  shares of common stock at $.10 per
share in exchange for services  valued at $50,000.  In October 2003, the Company
issued  1,270,000  shares of common stock at $.22 per share to ten  employees as
compensation for services valued at 279,400.


                                       12
<PAGE>

In June 2003,  the Company issued  1,000,000  shares of common stock at $.05 per
share in exchange for cash of $50,000.  In September  2003,  the Company  issued
2,000,000  shares of common  stock at $.15 per share in  exchange  for  $300,000
cash.

In September 2003, the Company issued  1,000,000  shares of common stock at $.10
per share for the relief of $100,000 of debt.

In October 2003, a related party exercised warrants to purchase 1,250,000 shares
of common stock at a price of $.20 per share for a total of $250,000.

Options and warrants - The Company has issued stock  options and stock  warrants
as follows:

                    Outstanding   Granted   Exercised  Outstanding
        Exercise    January 31,     or         or      January 31,  Expiration
          Price         2002    (Cancelled)  Expired     2003          Date

Warrants: $ 0.32     275,675         -      (275,675)         -       12/31/02
          $ 0.20     384,550         -             -    384,550       04/07/03

Options:  $ 0.32                250,000                  50,000       07/15/05

Warrants: $ 0.20     384,550          -     (384,550)         -       04/07/03*
          $ 0.32                100,000            -    100,000       06/30/05
        $0.20/0.30 2,000,000          -            -  2,000,000      9/30/04-05

   *Expired unexercised

The Company is offering for sale a Private  Placement  under an  exemption  from
registration  provided by Regulation D of Section 4(2) of the  Securities Act of
1933.  Such  Offering is for a total of 500 units at $3,000 per unit.  Each unit
consists  of  10,000  shares  of  common  stock at a price of $.30 per share and
10,000  warrants  exercisable  at $.50 per  share for two  years  following  the
Offering  closing  date.  The  total  proceeds  to the  Company,  net  of  sales
commissions  of  $150,000,  assuming  all  500  units  will  be  sold,  will  be
$1,350,000.

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company had oil and gas sales and pipeline  revenue of $237,498 and $131,839
during the years ended January 31, 2004 and 2003 from Energas  Pipeline  Company
("EPC"),  which is owned by the President of the Company.  EPC purchases oil and
gas at the wellhead  from the Company,  generating  oil and gas sales,  and then
resells to Conoco and Duke Energy.  EPC also pays a gathering fee to the Company
recorded as pipeline revenue.

The Company incurred oil and gas production and pipeline costs to Energas Corp.,
a company owned by the  President of the Company,  in the amounts of $47,100 and
$47,337 for the years ended January 31, 2004 and 2003.


                                       13
<PAGE>

In addition, the Company leases office space on a month-to-month basis from Shaw
Construction  Company,  owned by the President of the Company, and incurred rent
expense in the amount of $45,600 and $61,803  during the years ended January 31,
2004 and 2003.

NOTE 7 - DUE TO RELATED PARTIES AND NOTE PAYABLE TO SHAREHOLDER

                                                          2004           2003

Open advances from related corporation owned by
  Company's President, non-interest bearing          $ 742,810      $ 444,686

Note payable to shareholder, bearing interest at
  12%, due April, 2002, unsecured                      280,000        300,000

Advance from shareholder, non-interest bearing               -        100,000

Note payable to shareholder, non-interest bearing,
  due May 2002, unsecured                                    -         60,000

Open advances from Company's President,
  non-interest bearing                                  18,927         48,718

Advance from shareholder, non-interest bearing               -         29,000

Note payable to shareholder, bearing interest
  at 10%, due August 2002, unsecured                    25,000         25,000
                                                    ----------       ---------
                                                    $1,066,737     $1,007,404
                                                   ===========     ===========

NOTE 8 - INVESTOR ADVANCE PAYABLE

During the year ended  January 31, 2003,  the Company  entered into an agreement
with an investor  seeking to acquire an interest in its oil and gas  properties.
Pursuant to this agreement,  the Company received a total of $168,000 during the
year ended January 31, 2003. An additional $205,915 was received during the year
ended January 31, 2004 from three  investors.  The Company has not yet completed
the transfer of any interests in its oil and gas  properties to theses  investor
and, accordingly,  the funds received are recorded as a current liability in the
accompanying consolidated financial statements.

NOTE 9 - LONG TERM DEBT
                                                         2004           2003
Note payable to private corporation, secured by
oil and gas properties, interest at 8.5%, convertible
to common stock at a rate of one share for each
dollar owed, due in 240 monthly installments
including principal and interest in the amount
  of $12,972.70 beginning September 1, 2003        $ 1,553,883      $         -




                                       14
<PAGE>

NOTE 9 - LONG TERM DEBT (cont'd)
                                                         2004           2003
Note payable to private corporation, secured by
oil and gas properties, interest at 8.5%, convertible
to common stock at a rate of one share for each
dollar owed, due in 240 monthly installments
including principal and interest in the amount
  of $8,678.23 beginning September 1, 2003            1,035,922             -

Note payable to private corporation, secured by
oil and gas properties, interest at 8.5%, convertible
to common stock at a rate of one share for each
dollar owed, due in 240 monthly installments
including principal and interest in the amount
  of $4,339.12 beginning September 1, 2003              517,961            -

                                                    $ 3,107,766      $     -
          Less: Current Portion                        (157,391)
                                                     ----------      -------
                                                   $  2,950,375      $     -
                                                   ============     ========


Maturities of long-term  debt for the next five years ending  January 31, are as
follows:

2006  $54,011
2007   58,784
2008   63,980
2009   69,636
2010   75,791


NOTE 10 - INCOME TAXES

The  Company has  approximately  $6,682,000  of net  operating  losses  expiring
through 2024 that may be used to offset future taxable income but are subject to
various  limitations  imposed by rules and  regulations of the Internal  Revenue
Service. The net operating losses are limited each year to offset future taxable
income,  if any,  due to the change of ownership  in the  Company's  outstanding
shares of common  stock.  In addition,  at January 31, 2004,  the Company had an
unused Canadian net operating loss carry-forward of approximately  $395,000 USD,
expiring  through 2008.  These net operating loss  carry-forwards  may result in
future  income  tax  benefits  of  approximately  $2,673,000;  however,  because
realization  is uncertain  at this time, a valuation  reserve in the same amount
has been  established.  Deferred  income  taxes  reflect  the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.



                                       15
<PAGE>


Significant  components of the Company's  deferred tax liabilities and assets as
of January 31, 2004 and 2003 are as follows:

                                                2004           2003

            Deferred tax liabilities        $       --       $       --

            Deferred tax assets
                 Net operating losses      $ 2,673,000       $2,294,000

            Valuation allowance for
                 deferred tax assets        (2,673,000)      (2,294,000)
                                           ------------      -----------
                                          $         --      $         --
                                          =============     ============

The valuation allowance increased $379,000 and increased $126,303 for the period
ending January 31, 2004 and 2003, respectively.

NOTE 11 - CONTINGENCIES

The  Company  is  subject  to  federal,  state  and local  laws and  regulations
governing  environmental  quality and pollution control.  During the years ended
January 31, 2004 and 2003,  the Company  spent $-0- on plugging and filling well
holes,  removing drilling  anchors,  hauling and disposing of water and drilling
mud, filling mud pits, surface leveling and reseeding and general site clean up.
Although the Company  believes that  compliance with  environmental  regulations
will not have a material adverse effect on its operations,  risks of substantial
costs and liabilities  are inherent in oil and gas production,  and there can be
no  assurance  that  significant  costs  and  liabilities,   including  criminal
penalties,  will not be incurred.  Through the date of this report,  the Company
has no asserted or  unasserted  environmental  claims or no  liability  has been
accrued in the accompanying balance sheets.

Litigation  - As of January 31, 2004,  the Company had no pending or  threatened
litigation other than the settlement detailed in Note 12.

NOTE 12 - SUBSEQUENT EVENTS

During the period from February 1, 2004 through May 14, 2004, the Company sold a
total of 443 units of its Private  Placement  for a total of $1,329,000 of which
$1,275,000 has been  received.  The Company has also settled two lawsuits with a
shareholder and his related  companies for a total of $500,000 in cash,  350,000
shares of the Company's  common stock and 250,000 options with an exercise price
of $.32 with an expiration date of June 15, 2005.




                                       16
<PAGE>


                             ENERGAS RESOURCES, INC.
                      SUPPLEMANTAL INFORMATION (UNAUDITED)
                      Years Ended January 31, 2004 and 2003



The following  estimates of proved and proved developed  reserve  quantities and
related standardized measure of discounted net cash flow are estimates only, and
do not  purport  to  reflect  values or fair  market  values  of the  Company's'
reserves. The Company emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise that those of producing
oil and gas properties.  Accordingly,  these estimates are expected to change as
future information becomes available.  All of the Company's reserves are located
in the United States.

Proved  reserves are estimated  reserves of crude oil (including  condensate and
natural gas  liquids)  and  natural gas that  geological  and  engineering  data
demonstrate  with  reasonable  certainty to be  recoverable in future years from
known  reservoirs  under  existing  economic and  operating  conditions.  Proved
developed  reserves are those expected to be recovered  through  existing wells,
equipment, and operating methods.

The  standardized  measure of  discounted  future net cash flows is  computed by
applying  year-end  prices of oil and gas (with  consideration  of price changes
only to the extent  provided by contractual  arrangements)  to estimated  future
production of proved oil and gas reserves,  less estimated  future  expenditures
(based on year-end  costs) to be incurred in developing and producing the proved
reserves, less estimated future income tax expenses (based in year end statutory
rates, with consideration of future tax rates already legislated) to be incurred
on continuation of existing economic  conditions.  The estimated future net cash
flows are then  discounted  using a rate of ten  percent a year to  reflect  the
estimated timing of the future cash flows.





                                       17
<PAGE>





                                   SIGNATURES

     In accordance  with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned,  thereunto
duly authorized on the17th day of May 2004.

                                  ENERGAS RESOURCES, INC.

                                  By /s/ George G. Shaw
                                     -----------------------------
                                    George G. Shaw, President and Chief
                                    Executive Officer

                                  By /s/ David W. Young
                                     ----------------------------
                                     David W. Young, Chief Financial Officer

     In  accordance  with the Exchange  Act,  this Report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.

                                     Title                    Date

/s/ George G. Shaw
-----------------------
George G. Shaw                      Director             May 17, 2004

/s/ G. Scott Shaw
-------------------------
G. Scott Shaw                       Director             May 17, 2004

/s/ David W. Young
---------------------
David W. Young                      Director             May 17, 2004






<PAGE>


                             ENERGAS RESOURCES, INC.

                                   FORM 10-KSB

                                    EXHIBITS