SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

                  For the quarterly period ended March 31, 1999

                                       or

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

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

                           Commission File No. 1-14754

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

                            PENDARIES PETROLEUM LTD.
             (Exact name of registrant as specified in its charter)


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

                        PROVINCE OF NEW BRUNSWICK, CANADA
                 (State or other jurisdiction of incorporation)

        Internal Revenue Service - Employer Identification No. 52-2051576

                8 Greenway Plaza, Suite 910, Houston, Texas 77046
                                 (713) 355-2900

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

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

         The total number of shares of the  registrant's  Common Shares,  no par
value, outstanding on March 31, 1999, was 8,829,470.


                                       1
<PAGE>



                            PENDARIES PETROLEUM LTD.


PART I - FINANCIAL INFORMATION                                             PAGE

 Item 1.  Financial Statements

          Consolidated Balance Sheets as of March 31, 1999
          (Unaudited) and December 31, 1998....................................3

          Statements of Consolidated Operations and Deficit for the
          three months ended March 31, 1999 (Unaudited)
          With Comparative Figures for the Preceding Year......................4

          Consolidated Statements of Cash Flows
          for the three months ended March 31, 1999 (Unaudited) With
          Comparative Figures for the Preceding Year...........................5

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

 Item 2.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations..................................9

 Item 3.  Quantitative and Qualitative Disclosures About Market Risk........None


PART II.  OTHER INFORMATION

 Item 1.  Legal Proceedings.................................................None

 Item 2.  Changes in Securities and Use of Proceeds.........................None

 Item 3.  Defaults Upon Senior Securities...................................None

 Item 4.  Submission of Matters to a Vote of Security Holders...............None

 Item 5.  Other Information.................................................None

 Item 6.  Exhibits and Reports of Form 8-K..................................None


SIGNATURES....................................................................15


                                       2
<PAGE>




PART I:                      
           ITEM 1.            FINANCIAL STATEMENTS

                            PENDARIES PETROLEUM LTD.

                           CONSOLIDATED BALANCE SHEETS

                      March 31, 1999 and December 31, 1998

                        (All figures are in U.S. dollars)

<TABLE>
<CAPTION>
                                                                            March 31,         December 31,
                                                                              1999                1998                
                                          ASSETS                           (Unaudited)
CURRENT ASSETS
   <S>                                                                 <C>                   <C>          
   Cash and cash equivalents                                           $       7,326,055     $   7,873,280
   Accounts receivable                                                           149,011           105,750
   Prepaid expenses and other assets                                             253,601           208,451
                                                                       -----------------    --------------

                                                                               7,728,667         8,187,481
                                                                       -----------------    --------------
PROPERTY AND EQUIPMENT
   Oil and gas properties, recorded under the full cost method
     Proved                                                                   10,337,926         7,890,804
     Unproved                                                                 11,019,615        13,238,236
   Furniture, fixtures and office equipment                                      168,166           169,938
   Accumulated depreciation, depletion and amortization                         (691,499)         (644,449)
                                                                       ------------------   --------------

                                   Net property and equipment                 20,834,208        20,654,529
                                                                       -----------------    --------------

                                   Total Assets                        $      28,562,875     $  28,842,010
                                                                       ==================== ==============

                      LIABILITIES AND SHAREHOLDERS' EQUITY 

CURRENT LIABILITIES
   Accounts payable                                                    $          42,429     $      44,627
   Accrued liabilities                                                           129,469           115,235
                                                                       -----------------    --------------

                      Total current liabilities                                  171,898           159,862
                                                                       -----------------    --------------

SHAREHOLDERS' EQUITY
   Common shares
     Authorized, unlimited number of common shares
     Issued 8,829,470 and 8,781,970 common shares, respectively               32,530,051        32,501,842
     Deficit                                                                  (4,139,074)       (3,819,694)
                                                                       ------------------   --------------

                     Total sharesholders' equity                              28,390,977        28,682,148
                                                                       -----------------    --------------

                     Total liabilities and shareholders' equity        $      28,562,875    $   28,842,010
                                                                       =================    ==============
</TABLE>


  The accompanying notes are an integral part of these consolidated statements.

                                       3
<PAGE>


                            PENDARIES PETROLEUM LTD.

                CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

                        (All figures are in U.S. dollars)

                                                                               
                                                                     
                                                                               
<TABLE>
                                                                          
<CAPTION>
                                                                      For the           For the 
                                                                    Three-Month        Three-Month
                                                                    Period Ended       Period Ended
                                                                      March 31,         March 31,
                                                                        1999              1998     
                                                                  ----------------  ---------------
                                                                      (Unaudited)      (Unaudited)
REVENUE
   <S>                                                            <C>               <C>            
   Oil and gas income                                             $        100,791  $       112,854
                                                                  ----------------  ---------------

EXPENSES
   Oil and gas operating expenses                                           95,160           53,444
   General and administrative expenses                                     376,097          534,633
   Depreciation, depletion and amortization                                 47,751           85,166
   Exchange gain                                                           (10,063)            (761)
   Stock option settlement                                                     -            450,000
                                                                  ----------------  ---------------
                                                                           508,945        1,122,482
                                                                  ----------------  ---------------
OTHER INCOME
   Interest income                                                          88,774          178,394
                                                                  ----------------  ---------------


NET LOSS                                                                  (319,380)        (831,234)

DEFICIT, beginning of period                                            (3,819,694)      (1,109,316)
                                                                  ----------------- ----------------

DEFICIT, end of period                                            $     (4,139,074) $    (1,940,550)
                                                                  ================= ================

NET LOSS PER SHARE
   Basic                                                          $           (.04) $          (.09)
                                                                  ================= ================
   Fully diluted                                                  $           (.04) $          (.09) 
                                                                  ================= ================

</TABLE>


  The accompanying notes are an integral part of these consolidated statements.

                                       4
<PAGE>



                            PENDARIES PETROLEUM LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        (All figures are in U.S. dollars)

<TABLE>
<CAPTION>
                                                                       For the          For the
                                                                     Three-Month      Three-Month
                                                                     Period Ended     Period Ended
                                                                       March 31,         March 31,
                                                                         1999              1998     
                                                                      (Unaudited)      (Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
   <S>                                                           <C>                <C>             
   Net Loss                                                      $        (319,380) $      (831,234)
   Items not affecting cash
     Depreciation, depletion and amortization                               47,751           85,166
     Changes in non-cash working capital items-
        Accounts receivable                                                (43,261)         (54,101)
        Accounts payable                                                    (2,198)         (47,296)
        Accrued liabilities                                                 42,443          556,941
        Prepaid expenses and other assets                                  (45,150)         (21,221)
                                                                  -----------------  ---------------

                   Net cash used in operating activities                  (319,795)        (311,745)
                                                                  -----------------  ---------------
      
CASH FLOW USED IN INVESTING ACTIVITIES
   Additions to unproved oil and gas properties                           (228,501)      (1,511,813)
   Additions to furniture, fixtures and office equipment                     1,071          (19,880)
                                                                  ----------------  ----------------

                  Net cash used in investing activities                   (227,430)      (1,531,693)
                                                                  ----------------  ----------------

CASH FLOW FROM FINANCING ACTIVITIES
   Net proceeds from exercise of common stock options                          -             29,500
   Cumulative translation effects                                              -             12,886
                                                                  ----------------  ---------------

                  Net cash provided by financing activities                    -             42,386
                                                                  ----------------  ----------------
  

DECREASE IN CASH AND CASH EQUIVALENTS                                     (547,225)      (1,801,052)

CASH AND CASH EQUIVALENTS, beginning of period                           7,873,280       15,133,285
                                                                  ----------------  ---------------

CASH AND CASH EQUIVALENTS, end of period                          $      7,326,055  $    13,332,233
                                                                  ================  ===============
</TABLE>



  The accompanying notes are an integral part of these consolidated statements.

                                       5
<PAGE>



                            PENDARIES PETROLEUM LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                   (Unaudited)
                        (All figures are in U.S. dollars)


1.   Nature of Operations

     Pendaries Petroleum Ltd.  ("Pendaries" or "the Company"),  a New Brunswick,
     Canada  corporation,  is a holding  company whose primary  interests are in
     exploration,  development  and  production of oil and gas properties in the
     People's Republic of China.

2.   NATURE OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

     The  Company  completed  an  initial  public  offering  and became a public
     company in Canada on December 12, 1996.

     The consolidated  interim  financial  statements  included herein have been
     prepared by Pendaries  without audit and reflect all adjustments which are,
     in the opinion of management,  necessary to present a fair statement of the
     results of the interim  period.  These  statements are presented on a basis
     consistent with annual audited consolidated  financial statements.  Certain
     information, accounting policies and footnote disclosures normally included
     in consolidated  financial statements prepared in accordance with generally
     accepted  accounting  principles  have been  omitted,  although the Company
     believes  that  the  disclosures  are  adequate  to  make  the  information
     presented not misleading.  These consolidated  interim financial statements
     should be read in conjunction  with the consolidated  financial  statements
     and the  summary  of  significant  accounting  policies  and notes  thereto
     included in the Company's latest annual financial statements.

     The consolidated  financial  statements  include the accounts of Pendaries,
     Pendaries    Production,    Inc.,    Sino-American    Energy    Corporation
     (Sino-American)  and  Sino-American   Overseas  Energy   Corporation.   All
     significant intercompany transactions and balances have been eliminated.

     The  Company's  registration  statement  filed on Form  20-F  was  declared
     effective by the U.S. Securities and Exchange Commission in June 1998. This
     permitted the Company to list its common shares for trading on the American
     Stock Exchange.

3.       OIL AND GAS PROPERTIES - BOHAI BAY, CHINA

     Laopu Block  Relinquishment  - On March 19,  1999,  the Company  received a
     recommendation   from   Kerr-McGee   Corporation   ("Kerr-McGee"   or   the
     "Operator"),  to terminate the  petroleum  contract (the "PC") on the Laopu
     Block in the Bohai Bay,  China  which  covers  approximately  78,000  gross
     acres.  All  obligations  have been fulfilled on this block and the Company
     has approved the recommendation.

     Block 05/36 - On March 4, 1999,  the Operator and China  National  Offshore
     Oil Corp.  ("CNOOC") agreed to extend the PC on Block 05/36 into its second
     phase which covers the period  March 31, 1999 to February  28, 2001.  Block
     05/36 is located in the Bohai Bay, China and covers  approximately  415,000
     gross  acres.  Under  the  terms of the PC,  the  foreign  contractors  are
     required to  relinquish  25% of the  acreage in the block upon  electing to


                                       6
<PAGE>

     proceed to the second  exploration  phase.  The Operator is negotiating the
     acreage to be  relinquished  with CNOOC at this time.  The Company does not
     believe that the relinquishment will materially affect the future potential
     of the block.  Entry into the second  exploration  phase  carries with it a
     bonus payment to CNOOC of U.S. $250,000 (U.S. $37,500 net to Pendaries) and
     a one well  commitment to be drilled  during the second phase period by the
     foreign contractors.

4.   COMMON SHARES

     Issuance of Stock Options

     In February 1999, certain outside directors of Pendaries were granted stock
     options for a total of 107,100  common  shares.  The exercise price is U.S.
     $0.59 per common share and the options expire on March 9, 2004. On March 9,
     1999,  84,500 stock  options were issued under the February 1999 grant as a
     result of two directors  electing to forego their  respective  stock option
     grants.

     Issuance of Common Shares

     In February  1999,  certain  outside  directors of  Pendaries  were granted
     62,500 common shares as compensation.  The value of the share  compensation
     was U.S.  $36,875 and was accrued at December 31,  1998.  On March 9, 1999,
     47,500  shares of stock  were  issued  under the  February  1999 grant as a
     result  of  two  directors   electing  to  forego  their  respective  stock
     compensation grants. The value of the shares issued was $28,209.

     Stock Option Settlement

     In connection with litigation  with the former  president of  Sino-American
     over the  number  of  stock  options  to which  the  former  president  was
     entitled,  in April 1998, the parties  entered into a Settlement  Agreement
     pursuant to which the former president received $450,000 (which was accrued
     as of March 31,  1998) and agreed to execute a new Stock  Option  Agreement
     reflecting a grant of 100,000  stock  options (the number of stock  options
     the Company claimed had originally been granted) and, with the exception of
     certain  restrictions  not imposed on other option holders,  contains terms
     substantially  similar to those contained in the Stock Option Agreements of
     all other option holders who had been granted options prior to 1996.

5.   MURPHY AGREEMENT

     On April 24, 1998,  Sino-American and the Company entered into an agreement
     with Murphy Exploration & Production Company ("Murphy") to purchase its 45%
     interest in Block 04/36 (the  "Murphy  Agreement"),  which was  extended to
     December 21, 1998 and then to March 22, 1999. The Murphy Agreement provided
     that the Company  would pay a total of $38 million for  Murphy's  interest;
     $35 million of the  consideration  was to be paid in cash and $3 million in
     Pendaries Common Shares.  Due to the adverse change in the condition of the
     oil and gas industry subsequent to the signing of the Murphy Agreement, the
     Company  elected not to go forward with the  agreement  subsequent to March
     22, 1999. The Company's only  obligation in the  transaction was restricted
     to the forfeiture of a  non-refundable  deposit of $1 million made in April
     1998.

                                       7
<PAGE>


6.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     These consolidated financial statements are expressed in U.S.dollars, which
     is the functional  currency in all areas of operation,  and are prepared in
     accordance  with  generally  accepted   accounting   principles  in  Canada
     ("Canadian  GAAP") which conform in all material respects with those in the
     United States  ("U.S.  GAAP") for the years  presented,  except as outlined
     below.

     Oil and Gas Properties

     In Canada, if the net capitalized costs of oil and gas properties in a cost
     center  exceed an amount equal to the sum of estimated  future net revenues
     from  proved  oil and gas  reserves  in the cost  center  and the  costs of
     properties not being amortized,  both adjusted for income tax effects, such
     excess is charged to expense. Also, the total capitalized costs of all cost
     centers are subject to a further recoverability test which includes,  among
     other things,  provision for site  development  and  restoration and future
     general,  administrative  and financial costs.  This is not consistent with
     U.S.  GAAP.  For U.S.  GAAP,  if the net  capitalized  costs of oil and gas
     properties  in a cost center exceed an amount equal to the sum of estimated
     discounted  present value at 10% of future net revenues from proved oil and
     gas  reserves  in the cost  center  and the costs of  properties  not being
     amortized,  both adjusted for income tax effects, such excess is charged to
     expense.  Included  in the  estimated  future net cash  flows are  Canadian
     provincial tax credits expected to be realized beyond the date at which the
     legislation, under its provisions, could be repealed. To date, the Canadian
     provincial  government  has not  indicated  an  intention  to  repeal  this
     legislation.

     If U.S.GAAP had been applied  instead of Canadian  GAAP,  the Company would
     have  recognized an  impairment of its oil and gas  properties in Canada in
     the amount of U.S.$549,555  and $2,195,799 in China in 1998. As a result of
     increased  oil and gas prices  during the quarter  ended March 31, 1999 and
     consideration of the impairment discussed in the preceding sentence,  there
     were no material differences between Canadian GAAP and U.S. GAAP during the
     quarters ended March 31, 1999 and 1998.

                                       8
<PAGE>



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

The following  discussion and analysis  should be read in  conjunction  with the
unaudited  consolidated  financial  statements  included  elsewhere and with the
Company's Form 10-K for the year ended December 31, 1998.

ACCOUNTING POLICIES

The unaudited  consolidated  financial  statements  and notes  thereto  included
herein have been prepared in accordance with Canadian GAAP.

As of March 31, 1999, the Company's  revenues were derived from interest  income
and oil and gas  production  related to its  activities  in Canada.  Accumulated
losses are presented on the balance sheet as "Deficit." The unaudited statements
of operations  present  revenues and expenses for the quarter in comparison with
the same period for the previous  year.  The unaudited  statements of changes in
cash flow shows the inflows and outflows for the period comparatively with those
of the previous year.

The  Company  follows  the  full-cost  method  of  accounting  for  oil  and gas
properties.  Under  this  method,  all costs  incurred  in  connection  with the
exploration  and development of oil and gas reserves are capitalized in separate
cost centers on a  country-by-country  basis.  Such  capitalized  costs  include
contract  and  concession   acquisition;   geological,   geophysical  and  other
exploration  work;  drilling,  completing  and  equipping  oil  and  gas  wells;
constructing  production facilities and pipelines;  and other related costs. The
Company also  capitalizes  interest  costs  related to  unevaluated  oil and gas
properties.

Capitalized  costs  associated  with the  acquisition and evaluation of unproved
properties are excluded from amortization  until it is determined whether proved
reserves  can be  assigned  to  such  properties,  or  until  the  value  of the
properties  is  impaired.  Unproved  properties  are  assessed  periodically  to
determine whether any impairment has occurred.

If the net  capitalized  costs of oil and gas properties in a cost center exceed
an amount equal to the sum or estimated  future net revenues from proved oil and
gas reserves in the cost center and the costs of properties not being amortized,
both  adjusted  for income tax effects,  such excess is charged to expense.  The
total   capitalized   costs  of  all  cost  centers  is  subject  to  a  further
recoverability  test which  includes,  among other things,  provisions  for site
development and restoration,  and future general,  administrative  and financial
costs.

Substantially  all of the  Company's  exploration,  development  and  production
activities are conducted  jointly with others,  and  accordingly,  the Company's
financial statements reflect only its proportionate interest in such activities.

The Company owns an interest in  producing  oil and gas  properties  in Alberta,
Canada.  Depletion is provided based on the Company's  proportionate interest of
production in respect of proved reserves.

The Company  currently has no producing  oil and gas  properties in the People's
Republic  of  China.  Therefore,  related  capitalized  costs  of  oil  and  gas
properties are not currently subject to depletion.

                                       9
<PAGE>

CHINESE TAXES

The  Company's  future net income,  as defined  under  Chinese law, from Chinese
sources,  will be subject to Chinese  corporate  income tax at a rate of 33%. In
accordance  with the terms of the tax treaty  between the U.S.  and China,  such
taxes are creditable to U.S.corporate income taxes.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1999 and 1998:

The Company  incurred a net loss of $319,380 and $831,234 for the quarters ended
March 31, 1999 and 1998,  respectively.  The $511,854 decrease in net loss was a
result of the following:

Oil and gas income from the  Company's  properties  located in Alberta,  Canada,
decreased  from  $112,854 in the first  quarter ended March 31, 1998 to $100,791
for the same  period  in 1999.  The  $12,063  decrease  was due to lower oil and
natural gas prices.

Interest income  decreased by $89,620 from $178,394 in the first quarter of 1998
to $88,774 in the first  quarter of 1999.  The decrease was due to the reduction
of cash available for investment in 1999.

Oil and gas operating  expenses  increased from $53,444 for the first quarter of
1998 to $95,160 for the same period in 1999.  The  increase  was due to workover
operations carried out in 1999 on a well located in the Wintering Hills Field in
Alberta,  Canada.

General and administrative expenses decreased from $534,633 in the first quarter
of 1998 to $376,097 in the first quarter of 1999. The $158,536  decrease was due
primarily to decreased  salaries and related  costs,  cost savings in connection
with the closing of the Toronto  office in 1998,  and reduced  outside legal and
professional costs.

During  the three  months  ended  March  31,  1998,  the  Company  recorded  the
settlement  of  litigation  with  the  former  president  of  its  wholly  owned
subsidiary,  Sino-American Energy Corporation,  over the number of stock options
to which the former  president  was  entitled,  and in April  1998,  the parties
entered  into a  Settlement  Agreement  pursuant  to which the former  president
received $450,000 and agreed to execute a new Stock Option Agreement  reflecting
a grant of 100,000  stock  options  (the  number of stock  options  the  Company
claimed  had  originally  been  granted)  and,  with the  exception  of  certain
restrictions not imposed on other option holders,  contains terms  substantially
similar to those  contained in the Stock Option  Agreements  of all other option
holders who had been granted  options  prior to 1996.  The  $450,000  settlement
amount was charged to expense as of March 31, 1998.  There were no such expenses
in the first quarter of 1999.

LIQUIDITY AND CAPITAL RESOURCES

From inception  (July 5, 1994) the Company's  capital by year is shown below. Of
the total,  $30,977,761  represents  cash raised by  issuance of common  shares,
$1,325,000  represents  oil and gas  properties  paid for by  issuance of common
shares, and $227,290 represents services paid for by issuance of common shares.

                                       10
<PAGE>
<TABLE>


<CAPTION>
                   Common
                   Share           Exercise of      Exercise of
     Period        Equity           Warrants          Options          Total
     ------        ------           --------          -------          -----

<S>    <C>      <C>                 <C>            <C>             <C>         
Year - 1995     $ 3,287,500         $    -         $       -       $  3,287,500
Year - 1996      22,812,658              -             20,000        22,812,658                                        
Year - 1997          68,000         944,488         5,196,115         6,208,603
Year - 1998         131,081              -             42,000           173,081                                        
Year - 1999          28,209              -                 -             28,209
               ------------        --------        ----------      ------------
      Totals    $26,327,448        $944,488        $5,258,115      $ 32,530,051
                ===========        ========        ==========      ============
</TABLE>

During the same periods, the Company incurred capital expenditures as follows:
<TABLE>
<CAPTION>
                 Oil and Gas      Oil and Gas         Furniture,
                  Properties       Properties         Fixtures and
     Period         Canada           China            Equipment         Total

<S>    <C>      <C>            <C>                  <C>            <C>                                 
Year - 1995     $        -     $  3,597,631         $  59,758      $  3,657,389                        
Year - 1996       1,966,088       2,981,853            62,613         5,010,554
Year - 1997              -        7,739,641           105,286         7,844,927                              
Year - 1998              -        4,843,827           (57,719)        4,786,108                             
Year - 1999              -          228,501            (1,772)          226,729
                -----------    ------------         ---------      ------------
      Totals    $ 1,966,088    $ 19,391,453         $ 168,166      $ 21,525,707
                ===========    ============         =========      ============
</TABLE>
After capital  expenditures and funds used in operations the Company had cash of
$7,326,055  at March 31,  1999.  There is no credit  facility  with a  financial
institution or any other outstanding debt.

YEAR 2000 DISCLOSURE
The Year 2000 issues  relate to the problems  associated  with the  inability of
computer programs and equipment to properly calculate,  store or use dates after
December 31, 1999.  Hardware  and  software  systems  which only use a two-digit
convention for keeping track of dates would  improperly  interpret the Year 2000
as  the  Year  1900.  Errors  of  this  type  can  result  in  system  failures,
miscalculations and the disruption of operations, including, among other things,
a  temporary  inability  to process  transactions,  send  invoices  or engage in
similar normal  business.  In response to the Year 2000 issues,  the Company has
developed  a  strategic  plan  divided  into  the  following  phases:  inventory
assessment and review of vendor  representations,  in-house testing, third party
integration and development of a contingency plan.

The  Company  has  completed  this  initial  assessment  phase by  compiling  an
inventory   listing  of  all   in-house   systems  and   reviewing   all  vendor
representations  regarding  the Year 2000 that the Company has received to date.
The licensor of the Company's  in-house  software system has certified that such
software is programmed to properly address Year 2000 scenarios. In addition, the
initial   assessment  has  shown  that  less  critical   in-house  software  and
non-information  technology  or  equipment  is either not date  sensitive  or is
capable of addressing the Year 2000. Based on the initial review and reliance on
vendor representations, the Company is predicting that all such in-house systems
will perform their  respective  functions in a customary  manner when faced with
Year 2000  scenarios.  In addition,  the Company has  determined  that functions
which have been  out-sourced to third parties,  consisting  mainly of processing
needs,  are  performed  by systems  purchased  within the last few years and are
programmed to recognize the Year 2000.

                                       11
<PAGE>

The Company  conducted its in-house  testing phase,  reviewing core systems and
core-non-information  technology.  To date, the Company has not  encountered any
system  disruption during testing,  and therefore,  the Company expects that the
performance  of such  systems will not be  substantially  disrupted by Year 2000
scenarios. However, being primarily involved in the acquisition, development and
exploration of oil and gas internationally, the "mission critical" equipment and
technology of the operators of the Company's  properties  rely on external power
sources, such as electricity,  supplied by third parties. The Company is relying
upon  representations by these operators that no material disruption of services
are anticipated as a result of the Year 2000. However, the most reasonably worst
case Year 2000  scenario for the Company  would  involve a  disruption  of third
party services affecting the productivity of core equipment,  which could result
in  substantial  decrease in the  Company's oil and gas  production.  Such event
could  result  in a  business  interruption  that  could  affect  the  Company's
production payments from its Alberta properties.

In addition to its  internal  review and testing,  the Company is  communicating
with its third party suppliers, service providers and customers to determine the
status of their Year 2000 compliance  programs.  The Company has received and is
relying on Year 2000  readiness  reports  periodically  issued by various  third
parties, such as financial services providers. The Company will continue to have
formal  communications  with its significant  suppliers and business partners to
determine  the  extent to which the  Company is  vulnerable  to either the third
parties'  or  its  own  failure  to  correct  Year  2000  issues.   Third  party
notification  and  integration  is  expected to be  completed  during the second
quarter  of  1999.  To  date,  approximately  75% of these  third  parties  have
responded  and have  provided  favorable  representations  as to their Year 2000
readiness.  These third parties have received similar  representations  from the
Company.  While there can be no guarantee that the systems of other companies on
which the Company relies will be timely converted or that the conversion will be
compatible  with the Company's  systems,  based on  representations  received to
date,  the  Company  does not  foresee  material  disruptions  in the  Company's
business as a result of Year 2000 issues involving third parties.

During its assessment,  the Company has taken steps to prevent  anticipated Year
2000  disruptions  and  intends  to  prepare,  if such a plan is called  for,  a
contingency  plan to  address  any  anticipated  disruption  caused by Year 2000
scenarios once the bulk of the readiness  surveys have been  received.  Although
the effects of Year 2000 issues cannot be predicted with certainty, to date, all
systems tested have performed  adequately,  and therefore,  the Company believes
that the potential  impact,  if any, of such disruption  will, at most,  require
employees to manually complete  otherwise  automated tasks of calculations.  The
Company  does not expect  that any  additional  training  would be  required  to
perform  these tasks on a manual  basis.  The Company does not believe that such
event  would  materially  affect  the  Company's  ability to  continue  business
activities,  although  performing  such  tasks may  require  additional  time or
personnel.  In addition,  if needed,  the Company will  identify and arrange for
other vendors,  purchasers and third party  contractors to provide such services
in order to maintain normal business operations.

It may not be economically  feasible for the operator to maintain a separate and
duplicate  secondary  power supply for every major  component of the  operator's
"mission  critical"  equipment.  Therefore,  unanticipated  prolonged  losses of
certain  services could cause  material  disruptions  for which no  economically
feasible contingency plan has been developed.

The Company  has,  and will  continue  to,  utilize  both  internal and external
resources to complete  tasks and perform  testing  necessary to address the Year
2000 issues. The Company has not incurred,  and does not anticipate that it will
incur, any significant  costs relating to the assessment and remediation of Year
2000 issues.

                                       12
<PAGE>

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

The  statements  contained  in this  Quarterly  Report on Form 10-Q  ("Quarterly
Report")  that  are  not  historical  facts,  including,  but  not  limited  to,
statements  found in this  Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations,  are  forward-looking  statements,  as that
term is defined in Section 21E of the  Securities  and Exchange Act of 1934,  as
amended, that involve a number of risks and uncertainties.  Such forward-looking
statements  may be or may concern,  among other  things,  capital  expenditures,
drilling activity, acquisition plans and proposals and dispositions, development
activities, cost savings, production efforts and volumes,  hydrocarbon reserves,
hydrocarbon  prices,  liquidity,   regulatory  matters  and  competition.   Such
forward-looking  statements  generally are  accompanied by words such as "plan,"
"estimate,"  "expert,  " "predict,  " "anticipate,  " "projected,  " "should,  "
"assume,  " "believe,  " or other words that  convey the  uncertainty  of future
events or outcomes. Such forward-looking  information is based upon management's
current  plans,  expectations,  estimates  and  assumptions  and is subject to a
number of risks and uncertainties that could significantly affect current plans,
anticipated  actions,  the timing of such  actions and the  Company's  financial
condition and results of operations. As a consequence, actual results may differ
materially from expectations,  estimates or assumptions  expressed in or implied
by any forward-looking statements made by or on behalf of the Company. Among the
factors that could cause actual results to differ  materially are:  fluctuations
of the prices  received or demand for the  Company's  oil and natural  gas,  the
uncertainty  of  drilling  results  and reserve  estimates,  operating  hazards,
acquisition  risks,  requirements  for  capital,  general  economic  conditions,
competition and government  regulations,  as well as the risks and uncertainties
discussed in this Quarterly Report, including,  without limitation, the portions
referenced  above,  and the  uncertainties  set  forth  from time to time in the
Company's other public reports, filings and public statements.

                                       13
<PAGE>



                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings - N/A

Item 2.  Changes in Securities - N/A

Item 3.  Defaults Upon Senior Securities - N/A

Item 4.  Submission of Matters to a Vote of Security Holders - N/A

Item 5.  Other Information - N/A

Item 6.  Exhibits and Reports on Form 8-K - N/A


                                       14
<PAGE>



SIGNATURES

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

                                          PENDARIES PETROLEUM LTD.



Date:   April 21, 1999                    By:   /s/Bobby J. Fogle             
                                          -----------------------
                                                Bobby J. Fogle
                                                Vice President, Finance and
                                                Chief Financial Officer


                                      

                                       15

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