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

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB 

     |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                                       or
     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

                          Commission File Number 0-6580

                               [GRAPHIC OMITTED]






                            PEASE OIL AND GAS COMPANY
       (Exact name of small business issuer as specified in its charter)


           Nevada                                           87-0285520
  (State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                       Identification Number)
                          751 Horizon Court, Suite 203
                         Grand Junction, Colorado 81506
                    (Address of principal executive offices)
                                 (970) 245-5917
              (Registrant's telephone number, including area code)

     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 past 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No____

     As of May 5,  1999 the  registrant  had  1,688,698  shares of its $0.10 par
value Common Stock issued and outstanding.

Transitional Small Business Issuer Disclosure Format (check one):  Yes ____   
No   X  

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


                                       -1-

<PAGE>



                                TABLE OF CONTENTS
                                                                         PAGE
                                                                        NUMBER

PART I - Financial Information                                         
  Item 1.  Unaudited Financial Statements
     Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998 3
     Consolidated Statements of Operations For the Three Months Ended 
         March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . .4
     Consolidated Statements of Cash Flows For the Three Months Ended 
         March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . .5 
     Notes to Consolidated Financial Statements   . . . . . . . . . . . .  .6
  Item 2.  Management's Discussion and Analysis  . . . . . . . . . . . . . .7
         Liquidity, Capital Expenditures and Capital Resources   . . . . . .7
       Results of Operations  . . . . . . . . .  . . . . . . . . . . . . . .9 
         Overview  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
         Divestment of Rocky Mountain Assets. . . . . . . . . . . . . . . . 9
         Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .9
         Oil and Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
         Well Administration and Other Income  . . . . . . . . . . . . . . .11
         Consulting Arrangement - Related Party . . . . . . . . . . . . . . 11
         General and Administrative   . . . . . . . .  . . . . . . . . . . .12
         Depreciation, Depletion and Amortization  . . . . . . . . . . . . .12
         Interest Expense  .  . . . . . . . . . . . . . . . . . . . . .  . .12
         Impairment Expense - Oil and Gas Properties. . . . . . . . . . . . 13
         Dividends and Net Loss Per Common Share. . . . . . . . . . . . . . 13
      Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
         Disclosure Regarding Forward-Looking Statements . . . . . . . . . .13
         Year 2000 Issue . . . . . . . . . . . . . . . . . . . . . . . . . .14
PART II - Other Information . . . . . . . . . . . . . . . . . . . . . . . . 15
     Item 1.  Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . .15
     Item 2.  Changes in Securities . . . . . . . . . . . . . . .  . . . . .15
     Item 3.  Defaults Upon Senior Securities . . . . . . . . . .  . . . . .16
     Item 4.  Submission of Matters to a Vote of Security Holders. . . . . .16
     Item 5.  Other Information  . . . . . . . . . . . . . . . . . . . . . .16
     Item 6.  Exhibits and Reports on Form 8-K  . . . . . . . . . . . . . . 16
PART III - Signatures . . . . . . . . . . . . . . . . . . . . . .  . . . . .16



                                       -2-

<PAGE>



PART 1 - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                     March 31,     December 31,
                                                      1999              1998    
                                                   (unaudited)
                                     ASSETS

CURRENT ASSETS:
   Cash and equivalents ........................  $    960,339   $   1,049,582
   Trade receivables ...........................       261,241         420,460
   Prepaid expenses and other ..................       178,918         170,687
   Assets held for sale ........................        27,750         100,000
        Total current assets ...................     1,428,248       1,740,729
OIL AND GAS PROPERTIES, at cost
(full cost method):
   Unevaluated properties ......................     2,932,158       2,816,475
   Costs being amortized .......................    16,970,677      16,834,274
        Total oil and gas properties ...........    19,902,835      19,650,749
   Less accumulated amortization ...............   (14,140,265)    (13,883,174)
        Net oil and gas properties .............     5,762,570       5,767,575
 OTHER ASSETS:
   Debt issuance costs, net ....................       287,992         322,551
   Office equipment and vehicles, net ..........        70,352          74,623
   Deposits and other ..........................         7,493           7,493
          Total other assets ...................       365,837         404,667
TOTAL ASSETS ...................................  $  7,556,655    $  7,912,971

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt ..........$      5,908    $      5,825
   Accounts payable, trade ........................    276,886         310,447
   Accrued expenses ...............................    275,795         322,569
         Total current liabilities ................    558,589         638,841
LONG-TERM DEBT, less current maturities: ..........  2,346,542       2,293,261
STOCKHOLDERS' EQUITY:
   Preferred  Stock,  par value $0.01 per share,
       2,000,000  shares  authorized, 106,078  and  
       107,336  shares of Series B 5% PIK Cumulative  
       Convertible Preferred  Stock  issued  and  
       outstanding,   respectively   (liquidation
       preference of $5,303,900 at 3/31/99)              1,061           1,073
   Common Stock, par value $0.10 per share, 
       4,000,000 shares authorized, 1,688,698 
       and 1,601,062 shares issued and 
       outstanding, respectively .................     168,870         160,106
   Additional paid-in capital ..................... 37,704,909      37,811,006
   Accumulated deficit ............................(33,223,316)    (32,991,316)
         Total stockholders' equity ...............  4,651,524       4,980,869
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......$   7,556,655   $   7,912,971



                                       -3-

<PAGE>



                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                                                         For The Three Months
                                                            Ended March 31,
                                                           1999          1998
REVENUE:
   Oil and gas sales .............................   $   411,794    $   591,608
   Gas plant, service and supply .................          --          245,268
   Well administration and other income ..........           106         15,654
        Total revenue ............................       411,900        852,530
OPERATING COSTS AND EXPENSES:
   Oil and gas production costs ..................        84,476        320,640
   Gas plant, service and supply .................          --          221,739
   Consulting arrangement-related party ..........        37,750         62,912
   General and administrative ....................       179,660        257,655
   Depreciation, depletion and amortization ......       263,375        353,137
   Impairment expense - oil and gas properties ...          --          478,043
                Total operating costs and expenses       565,261      1,694,126
LOSS FROM OPERATIONS .............................      (153,361)      (841,596)

OTHER INCOME (EXPENSES):
   Interest income ...............................        11,291         67,014
   Interest expense ..............................       (89,930)          (246)
NET LOSS .........................................   $  (232,000)   $  (774.828)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS .......   $  (298,346)   $(1,628,167)
NET LOSS PER COMMON SHARE ........................   $     (0.18)   $     (1.03)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ......................................     1,626,100      1,579,100


                                       -4-

<PAGE>



                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                        For The Three Months
                                                                             Ended March 31, 
                                                                          1999          1998 

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                  <C>          <C>           
   Net loss ......................................................   $  (232,000) $    (774,828)
   Adjustments to reconcile net loss to net cash provided by (used in) operating
      activities:
            Depreciation, depletion and amortization .............       263,375        353,137
            Impairment expense ...................................          --          478,043
            Amortization of debt discount and issuance costs .....        89,393           --
            Changes in operating assets and liabilities:
                   (Increase) decrease in:
                        Trade receivables ........................       159,219        412,068
                        Inventory ................................          --           25,050
                        Prepaid expenses and other assets ........        (8,231)       (37,243)
                    Increase (decrease) in:
                        Accounts payable .........................         6,794        (27,299)
                        Accrued expenses .........................       (46,034)         9,098
            Net cash provided by (used in) operating activities ..       232,516        438,026
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures for property, plant and equipment ........      (294,455)    (3,373,669)
   Proceeds from sale of property and equipment ..................        72,250          7,420
      Net cash provided by (used in) investing activities ........      (222,205)    (3,366,249)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from exercise of warrants ............................          --              939
   Repayment of long-term debt ...................................        (1,469)        (1,597)
   Payment of Series B Preferred Stock Dividends .................       (67,085)          --
   Purchase and retirement of Series B Preferred Stock ...........       (31,000)          --
   Offering costs ................................................          --         (146,765)
      Net cash provided by (used in) financing activities ........       (99,554)      (147,423)
 INCREASE (DECREASE) IN CASH AND EQUIVALENTS .....................       (89,243)    (3,075,646)
 CASH AND EQUIVALENTS, beginning of period .......................     1,049,582      6,547,804

 CASH AND EQUIVALENTS, end of period .............................   $   960,339    $ 3,472,158

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
   Cash paid for interest ........................................   $    70,672    $   100,772

   Cash paid for income taxes ....................................   $      --      $      --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
   AND FINANCING ACTIVITIES:
   Debt incurred for purchase of vehicles ........................   $      --      $    32,609
   (Increase) Decrease in payables for oil & gas exploration
         activities ..............................................       (40,359)     1,072,413
   Capitalized portion of amortized debt discount & issuance costs          --          132,046
</TABLE>

<PAGE>

                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

Note 1 - Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. They do not include all information and notes required by
generally  accepted  accounting  principles for complete  financial  statements.
However,  except as disclosed  herein,  there has been no material change in the
information disclosed in the notes to consolidated financial statements included
in the Annual  Report on Form 10-KSB of Pease Oil and Gas Company (the  Company)
for the year  ended  December  31,  1998.  In the  opinion  of  Management,  all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair  presentation  have  been  included.  Operating  results  for  the  periods
presented are not necessarily indicative of the results that may be expected for
the full year.

The accounting  policies  followed by the Company are set forth in Note 1 to the
Company's  financial  statements in Form 10-KSB for the year ended  December 31,
1998. It is suggested  that these  financial  statements be read in  conjunction
with the financial statements and notes included in the Form 10-KSB.

Note 2 - Dividends and Net Loss Per Common Share:

Net loss per common  share is computed by dividing  the net loss  applicable  to
common  stockholders by the weighted average number of common shares outstanding
during the year.  All  common  stock  equivalents  have been  excluded  from the
computations because their effect would be antidilutive.

The net loss  applicable  to common  stockholders  is  determined  by adding any
dividends accruing to the benefit of the preferred stockholders to the net loss.
The dividends  included for this  calculation  include:  1) paid  dividends;  2)
accrued but unpaid dividends;  and 3) any imputed dividends  attributable to the
beneficial  conversion feature.  Accordingly,  the net loss applicable to common
stockholders  includes  the  following  charges  associated  with  the  Series B
Preferred Stock that was issued on December 31, 1997:

                                          For the Three Months Ended March 31,
                                                 1999                  1998
         Dividends declared                $    66,346          $     70,833
         Imputed non-cash dividend                -                  782,506    
                  Total                    $    66,346           $   853,339    

The Series B Preferred  Stock became  convertible  into common stock on April 1,
1998 at a conversion  price equal to a 12% discount to the average trading price
of the common stock prior to conversion. This discount increased monthly through
March 1999 when the discount  topped out at 25% (this  discount is  considered a
"beneficial  conversion  feature").  This additional  non-cash  imputed dividend
charge included in the net loss applicable to common stockholders represents the
intrinsic  value of the discount  applicable  through the period  presented.  No
additional  non-cash imputed dividend charges will be incurred in future periods
since the  conversion  discount  topped out at 25%  during the first  quarter of
1999.  The holders of the Series B  Preferred  Stock are  entitled to  dividends
equal to $2.50 per annum,  payable  quarterly  in cash or  additional  shares of
Series B Preferred Stock at the option of the Company.



                                       -5-

<PAGE>



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS

Liquidity,  Capital  Expenditures  and Capital  Resources At March 31, 1999, the
Company's cash balance was $960,339 with a positive  working capital position of
$869,659,  compared  to a cash  balance of  $1,049,582  and a  positive  working
capital position of $1,101,888 at December 31, 1998. The change in the Company's
cash balance is summarized as follows:

 Cash balance at December 31, 1998                         $  1,049,582
 Sources of Cash:
       Cash provided by operating activities                    232,516
   Proceeds from the sale of property and equipment              72,250
          Total Sources of Cash                                 304,766
 Uses of Cash:
   Capital expenditures for exploration activities             (292,439)
   Series B Preferred Stock dividends                           (67,085)
   Purchase and retirement of Series B Preferred Stock          (31,000)
       Capital expenditures for office equipment                 (2,016)
   Repayment of long term debt                                   (1,469)
          Total uses of cash                                   (394,009)
   Cash balance at March 31, 1999                          $    960,339 

As noted,  most of the  Company's  uses of cash  were  deployed  in  exploration
activities  in the Gulf Coast which are  summarized  as follows (the  difference
between the total cash paid for  exploration  activities  in the above table and
the amount  illustrated  below,  relates to the changes in  accounts  payable at
December 31, 1998 and March 31, 1999):
 <TABLE>
 <CAPTION>
                                                             PROGRAM OPERATOR 
                                     NEGX       Parallel      AHC        Other     Total          %
Category:
<S>                                <C>         <C>         <C>         <C>         <C>           <C>
  Successful Wells .............   $   --      $   --      $ 94,537    $   --      $ 94,537      38%
  Exploratory Dry Holes ........       --        15,545        --          --        15,545       6%
  Land, G&G Costs on Seismic
     Programs ..................     13,283      54,191        --          --        67,474      27%
  Capitalized Interest .........       --          --          --        68,610      68,610      27%
  Other Exploration Costs ......       --          --          --         5,914       5,914       2%
         Total Exploration Costs   $ 13,283    $ 69,736    $ 94,537    $ 74,524    $252,080     100%
         Percent ...............         5%         28%         37%         30%        100%
</TABLE>

The  anticipated  capital  requirements  for 1999 related to the Company's  Gulf
Coast  exploration  program are more thoroughly  discussed in the Company's 1998
Annual  Report on Form  10-KSB.  There have been no  significant  changes in the
expected  capital  requirements  as of the date of this  report  and  under  the
existing commitments, will be at least $380,000 for the remainder of 1999.

In 1999 the  Company  will focus its  activities  on  cultivating  its  existing
exploration  program in the Gulf Coast  region,  principally  in  Louisiana  and
Texas.  This  activity  will focus on what the Company  considers its three core
areas in the Gulf Coast, which are:

1. The East Bayou  Sorrel  Area in  Iberville  Parish,  Louisiana,  operated  by
National Energy Group, Inc. ("NEGX");

2. The Maurice Prospect in Fayetteville Parish,  Louisiana,  operated by Amerada
Hess Corporation ("AHC"); and

3. The Formosa,  Texana and Ganado 3-D prospects  encompassing  130,000 acres in
and around Jackson County, Texas, operated by Parallel Petroleum ("Parallel").

                                       -6-

<PAGE>



In December 1998 National Energy Group,  Inc. filed an Involuntary  Petition for
an Order and Relief under Chapter 11 of Title 11 of the United States Bankruptcy
Code in United  States  Bankruptcy  Court for the  Northern  District  of Texas,
Dallas  Division.  As  operator of the East Bayou  Sorrel  field,  which  yields
approximately 50% of the Company's current  production,  the bankruptcy petition
might adversely  affect future  development or operation of the field;  however,
the Company  does not expect that its interest in the field or  production  from
currently existing wells will be affected.

The  Company  does have an  unsecured  claim in the  bankruptcy  proceeding  for
various  amounts which the Company  believes were paid to National Energy Group,
Inc. as operator in connection with the drilling of existing  wells.  Collection
of these  amounts  may be  delayed  or may not  occur,  pending  disposition  of
National  Energy Group,  Inc.'s  reorganization  proceeding.  The total claim is
approximately  $80,000.  However,  no amount has been  recorded in the financial
statements as of March 31, 1999.

Under the existing commitments related to these three areas, the following table
summarizes the range of expected capital  requirements for the remainder of 1999
by program: Estimated Investment Operator Minimum Maximum

East Bayou Sorrel Area                       $       -           $   400,000
Formosa, Texana, and Ganado Prospects           130,000              430,000
Maurice Prospect                                250,000              500,000
      Total                                  $  380,000          $ 1,330,000 

Given the range of potential capital requirements for the remainder of 1999, the
Company's  current and anticipated  cash position may not be sufficient to cover
the  future  working  capital  and  exploration  obligations.  The  Company  has
vigorously  explored  various  alternatives  for additional  sources of capital.
However, with the hyper-dilutive potential of the outstanding Series B Preferred
Stock (should the holders elect to convert into common  stock),  the Company has
been  unable to  attract  additional  equity  capital.  For  example,  using the
Company's  recent  common  stock price of $0.40,  and  applying  the  applicable
discount of 25%, should all the holders of the Series B Preferred Stock elect to
convert into common stock, the Company would be required to issue  approximately
17.7 million shares in the conversion. This would represent approximately 90% of
the then outstanding common shares.  Presently, the Company has only 4.0 million
shares  of  common  stock  authorized  and is  obligated  under the terms of the
Preferred  Stock Agreement to seek approval of additional  authorized  shares at
its next meeting of  stockholders  to allow for conversion  should the Preferred
stockholders  choose to do so.  However,  it cannot be  determined  at this time
whether  or not  additional  common  shares  will be  authorized  by the  common
shareholders and if not, what the consequences may be.

In September 1998, the Company engaged San Jacinto Securities,  Inc. ("SJS"), an
investment  banking  firm  located in Dallas,  Texas,  to assist the  Company in
pursuing various strategic alternatives. Their efforts have focused primarily on
seeking  a  potential  merger  candidate  for the  Company.  Although  no formal
agreement has been reached,  the Company is engaged in an ongoing  dialogue with
several potential  candidates.  However,  no assurance can be given at this time
whether or not a merger  transaction will eventually occur,  what  consideration
may be offered  to the  Company  in such a  transaction,  or whether an offer to
merge will be accepted by the Company or its shareholders. In exchange for their
services, SJS has been paid a $150,000  non-refundable cash fee and will receive
an additional 3% of the merger value in excess of $5.0 million  should it occur.
In addition,  should a merger occur, the Company will be obligated to pay out of
its  existing   working   capital   approximately   $225,000  to  the  Company's
President/CFO  in connection with the severance terms included in his employment
agreement.

The collapse of the oil market has significantly  impaired the marketability and
value of the Company's  existing assets,  hindered  negotiations for a potential
merger and limited the ability to raise additional capital. Therefore, it cannot
be  determined  at this time what courses of action will  ultimately be taken by
the Company. If a merger cannot be

                                       -7-

<PAGE>



consummated  within a reasonable period of time and under reasonable terms, then
the Company may have to seek additional financing. However, the Company's common
stock was delisted from the Nasdaq SmallCap  electronic market system on January
14,  1999 for  failure to  maintain  an average  bid price of at least $1.00 per
share.  The  stock is now  listed  on the  over-the-counter  market  on the NASD
Bulletin Board (OTC BB). It is believed that this delisting will have a material
negative  impact on the Company's  ability to raise  additional  equity capital.
Therefore,  it is unclear  at this time what  alternatives  for  future  working
capital  will be  available,  or to what  extent the  potential  dilution to the
existing  shareholders  may be.  If  additional  sources  of  financing  are not
ultimately  available,  the  company may have to  consider  other  alternatives,
including  the sale of existing  assets,  cancellation  of existing  exploration
agreements,  farmouts, joint ventures, restructuring under the protection of the
Federal Bankruptcy Laws and/or liquidation.

RESULTS OF OPERATIONS

Overview
The Company's  largest source of operating  revenue is from the sale of produced
oil, natural gas, and natural gas liquids. Therefore, the level of the Company's
revenues  and  earnings  are  affected by prices at which  natural  gas, oil and
natural gas liquids are sold. Therefore, the Company's operating results for any
prior period are not necessarily  indicative of future operating results because
of the  fluctuations  in natural gas, oil and natural gas liquid  prices and the
lack of  predictability  of those  fluctuations as well as changes in production
levels.

Divestment  of Rocky  Mountain  Assets  
During the fourth quarter of 1997, the Company's  Board of Directors  determined
that the Company's long-term strategy had shifted to exploration and development
activities  in the Gulf Coast region and that the Rocky  Mountain  assets should
ultimately be divested.  This  divestment was  substantially  completed in 1998.
Accordingly,  the Rocky Mountain  revenues,  costs,  operating  margins and cash
flows  historically  generated and  discussed  under the captions "Oil and Gas",
"Gas Plant, Service and Supply", and "Well Administration and Other Income" will
no  longer  be part of the  Company's  future  operations.  Since  these  assets
included a significant portion of the Company's historical operations,  the sale
of these assets has and will have an immediate and material  negative  impact on
the Company's future cash flows and results of operations.

Total Revenue
Total Revenue from all operations was as follows:

                                           For the Three Months Ended March 31,
                                                   1999               1998
                                              Amount      %      Amount      % 

Oil and gas sales                           $  411,794  100%  $   591,608   69%
Gas plant, service and supply                     -               245,268   29%
Well administration and other income               106   Nil       15,654    2%
     Total revenue                         $   411,900  100%  $   852,530  100%

The  decrease  in total  revenue,  along with any known  trends or changes  that
effect  revenue  on  a  line-by-line  basis,  are  discussed  in  the  following
paragraphs under their respective captions.



                                       -8-

<PAGE>



Oil and Gas  Operating  statistics  for oil and gas  production  for the periods
presented are as follows:

                                              For the Three Months
                                                 Ended March 31,
                                                1999          1998
Production:
   Oil (Bbls)
        Rocky Mtns ...........................    --          18,795
        Gulf Coast ...........................  18,171         9,896
             Combined Total ..................  18,171        28,691
   Gas (Mcf)
        Rocky Mtns ...........................    --          84,967
        Gulf Coast ........................... 107,356        30,955
              Combined Total ................. 107,356       115,922
   BOE (6:1)
        Rocky Mtns ...........................    --          32,956
        Gulf Coast ...........................  36,064        15,055
              Combined Total .................  36,064        48,011
Average Collected Price:
   Oil (per Bbl)
        Rocky Mtns ...........................    --       $   13.43
        Gulf Coast ...........................   10.87         14.79
              Combined Average ...............   10.87     $   13.90
   Gas (per Mcf)
         Rocky Mtns ..........................    --       $    1.44
         Gulf Coast ..........................    2.00          2.27
              Combined Average ...............    2.00     $    1.66
   Per BOE (6:1)
         Rocky Mtns ..........................    --       $   11.38
         Gulf Coast ..........................   11.42         14.38
              Combined Average ...............   11.42     $   12.32

 Operating Margins:
    Rocky Mtns:
        Revenue -
                 Rocky Mtns. - Oil ...........    --       $ 252,420
                 Rocky Mtns. - Gas ...........    --         122,639
                                                  --         375,059
        Costs ................................    --        (292,705)
                 Operating Margin ............    --       $  82,354
                 Operating Margin Percent ....    --              22%
Gulf Coast:
        Revenue -
                 Gulf Coast - Oil ............ 197,534     $ 146,317
                 Gulf Coast - Gas ............ 214,260        70,232
                                               411,794       216,549
        Costs ................................ (84,476)      (27,935)
                 Operating Margin ............ 327,318     $ 188,614
                 Operating Margin Percent ....      79%           87%


                                       -9-


Oil and Gas continued:
                                                   For the Three Months
                                                       Ended March 31,
                                                    1999           1998
Combined Totals:
        Revenue ..............................   $ 411,794     $ 591,608
        Costs ................................     (84,476)     (320,640)
                 Operating Margin ............   $ 327,318     $ 270,968
                 Operating Margin Percent ....          79%           46%
Production Costs per BOE before DD&A:
        Rocky Mtn Region .....................   $    --       $    8.88
        Gulf Coast Region ....................        2.34          1.86
                 Combined Average ............   $    2.34     $    6.68
Change in Revenue Attributable to:
        Production ...........................   $(160,455)
        Price ................................     (19,359)
Total Decrease in Revenue ....................   $(179,814)

The operating costs per BOE for the Gulf Coast properties increased in 1999 when
compared to the same period in 1998,  primarily because certain state production
tax relief  initiatives  for the wells in E.  Bayou  Sorrel  expired.  These tax
relief measures  allowed for no production taxes to be paid during the first two
years on a qualified deep or discovery well in Louisiana.

Gas Plant,  Service and Supply 
As previously  discussed,  the Company sold these assets in 1998.  However,  the
historical operating results are as follows:

                                                 For the Three Months
                                                    Ended March 31,
                                                 1999           1998
     Revenue                                     $ -        $ 245,268
     Cost                                          -         (221,739) 
           Operating Margin                      $ -        $  23,529 
           Operating %                             -              10%

Well  Administration  and Other Income 
This  revenue  primarily  represents  the revenue  generated  by the Company for
operating oil and gas properties.  The decrease in 1999 when compared to 1998 is
primarily attributed to the sale of the Rocky Mountain oil and gas properties in
1998.  The Company is  currently a  non-operator  and expects  very little other
income in future periods.

Consulting  Arrangement - Related Party 
In March 1996 the Company  entered into a three-year  consulting  agreement with
Beta Capital Group, Inc. ("Beta").  Beta, located in Newport Beach,  California,
specializes  in emerging  companies  with both capital needs and market  support
requirements.  Beta's chairman,  Steve Antry, has been a director of the Company
since August  1996.  The  consulting  agreement  with Beta  provided for minimum
monthly cash payments of $17,500 plus reimbursement for out-of-pocket  expenses.
The contract ended in February 1999.



                                      -10-

<PAGE>



General and Administrative  
The decrease in general and  administrative  ("G&A")  expenses of  approximately
$78,000  during the first  quarter of 1999 when  compared  to the same period in
1998 is summarized as follows:

$   45,000      -    Net reduction of payroll costs substantially 
                     attributed to the elimination of administrative
                     positions.
    15,000      -    Legal and accounting.
    10,000      -    Travel and entertainment costs.
     5,000      -    Consulting services.
     3,000      -    All other, net.
$   78,000

The Company has and will take steps to  significantly  reduce  future G&A costs,
and expects "core" G&A costs in 1999 to be approximately  $60,000 to $80,000 per
month.  However,  additional  amounts  may be incurred  in  connection  with the
efforts to find, evaluate and consummate a future merger transaction.

Depreciation, Depletion and Amortization
Depreciation,  Depletion and Amortization  ("DD&A") for the periods presented by
cost center consisted of the following:
                                             For the Three Months Ended March 31
                                                           1999         1998  
         Oil and Gas Properties - Gulf Coast          $   257,091     $ 134,167
         Oil and Gas Properties - Rocky Mountains            -          102,919
         Gas Plant, Service and Supply Operations            -          103,959
         Furniture and Fixtures                             6,284        12,092
                                                       -----------     --------
           Total                                      $   263,375     $ 353,137
                                                        ==========     ========

DD&A for the oil and gas  properties,  per BOE, for the periods  presented is as
follows:

         Gulf Coast                                   $     7.13      $    8.92
         Rocky Mountains                                     -             3.12
         Combined Total                                     7.13           4.94

DD&A for the oil and gas  properties  is  computed  based on one full  cost pool
using the total estimated reserves at the end of each period presented and prior
to applying the ceiling test discussed  later in this section under  "Impairment
Expense".  The estimated  portion of DD&A for the Gulf Coast is illustrated here
for analysis purposes only.

Interest Expense
Total interest  incurred,  and its allocation,  for the periods  presented is as
follows:
                                           For the Three Months Ended March 31, 
                                                   1999                1998    
                                              --------------       -------------
     Interest paid or accrued                  $   69,147         $   98,261
     Amortization of debt discount                 54,834             80,946
     Amortization of debt issuance costs           34,559             51,101 
                                              --------------       -------------
           Total interest incurred                158,540            230,308
     Interest capitalized for exploration
     activities                                  ( 68,610)          (230,062)
                                              --------------       -------------
           Interest expense                    $   89,930         $      246 
                                               ============        ============

The lower  interest  incurred  in 1999 when  compared  to 1998 is  substantially
attributed to the reduction of outstanding  debt. In connection with the sale of
the Rocky  Mountain  assets in 1998, the Company paid down $1.2 million (or 30%)
of  the  outstanding  convertible  debentures.   This  reduced  the  outstanding
principal from $4.0 million to $2.8 million.



<PAGE>



Impairment - Oil and Gas Properties
The Company uses the full cost method of accounting for oil and gas  activities.
The full  cost  method  regards  all  costs  of  acquisition,  exploration,  and
development  activities  as  being  necessary  for the  ultimate  production  of
reserves.  All of those costs are incurred with the knowledge  that many of them
relate to  activities  that do not result  directly  in finding  and  developing
reserves.  However,  the  benefits  obtained  from the  prospects  that do prove
successful, together with benefits from past discoveries, may ultimately recover
the costs of all activities,  both successful and unsuccessful.  Thus, all costs
incurred in those  activities  are  regarded  as  integral  to the  acquisition,
discovery,  and development of reserves that ultimately  result from the efforts
as a whole  and are  thereby  associated  with the  Company's  proved  reserves.
Establishing a direct  cause-and-effect  relationship between costs incurred and
specific reserves discovered,  which is the premise under successful efforts, is
not relevant to the full cost concept.  However,  the costs  accumulated  in the
Company's full cost pool are subject to a "ceiling", as defined by Regulation SX
Rule 4-10(e)(4).  As prescribed by the  corresponding  accounting  standards for
full  cost,  all the  accumulated  costs in  excess  of the  ceiling,  are to be
expensed by a charge to impairment. The Company incurred an impairment charge of
$478,043  during  the  first  quarter  of 1998 as a result  of dry holes and the
continuing  collapse of oil and gas prices  between  December 31, 1997 and March
31, 1998 that  substantially  lowered the  "ceiling"  of the full cost pool.  No
impairment charge was recognized during the first quarter of 1999.

Dividends and Net Loss Per Common Share
Net loss per common  share is computed by dividing  the net loss  applicable  to
common  stockholders by the weighted average number of common shares outstanding
during the year.  All  common  stock  equivalents  have been  excluded  from the
computations because their effect would be antidilutive.

The net loss  applicable  to common  stockholders  is  determined  by adding any
dividends accruing to the benefit of the preferred stockholders to the net loss.
The dividends  included for this  calculation  include:  1) paid  dividends;  2)
accrued but unpaid dividends;  and 3) any imputed dividends  attributable to the
beneficial  conversion feature.  Accordingly,  the net loss applicable to common
stockholders  includes  the  following  charges  associated  with  the  Series B
Preferred Stock that was issued on December 31, 1997:

                                           For the Three Months Ended March 31, 
                                              1999                 1998      
                                           -------------       -----------------
         Dividends declared                $    66,346          $   70,833
         Imputed non-cash dividend                -                782,506    
              Total                        $    66,346          $  853,339

The Series B Preferred  Stock became  convertible  into common stock on April 1,
1998 at a conversion  price equal to a 12% discount to the average trading price
of the common stock prior to conversion. This discount increased monthly through
March 1999 when the discount  topped out at 25% (this  discount is  considered a
"beneficial  conversion  feature").  This additional  non-cash  imputed dividend
charge included in the net loss applicable to common stockholders represents the
intrinsic  value of the discount  applicable  through the period  presented.  No
additional  non-cash imputed dividend charges will be incurred in future periods
since the  conversion  discount  topped out at 25%  during the first  quarter of
1999.  The holders of the Series B  Preferred  Stock are  entitled to  dividends
equal to $2.50 per annum,  payable  quarterly  in cash or  additional  shares of
Series B Preferred Stock at the option of the Company.



<PAGE>


OTHER MATTERS

Disclosure Regarding Forward-Looking Statements
This  report on Form 10-QSB  includes  "forward-looking  statements"  within the
meaning  of  Section  27A of  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of historical
facts included in this report, including,  without limitation,  statements under
"Business and Properties" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" 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 and the assumptions upon which such
forward-looking  statements are based are believed to be reasonable. The Company
can give no assurance that such  expectations  and assumptions  will prove to be
correct.  Reserve  estimates of oil and gas properties  are generally  different
from the  quantities  of oil and natural gas that are  ultimately  recovered  or
found. This is particularly true for estimates applied to exploratory prospects.
Additionally,  any statements contained in this report regarding forward-looking
statements  are subject to various known and unknown  risks,  uncertainties  and
contingencies,  many of which are beyond the control of the Company. Such things
may cause actual  results,  performance,  achievements or expectations to differ
materially  from  the   anticipated   results,   performance,   achievements  or
expectations.  Factors that may affect such forward-looking  statements include,
but are not limited to: the Company's ability to generate  additional capital to
complete its planned drilling and exploration activities;  risks inherent in oil
and gas acquisitions,  exploration,  drilling, development and production; price
volatility of oil and gas;  competition;  shortages of  equipment,  services and
supplies;  government regulation;  environmental matters; financial condition of
the other companies participating in the exploration, development and production
of oil and gas programs;  and other matters  beyond the  Company's  control.  In
addition, since all of the prospects in the Gulf Coast are currently operated by
other parties, the Company may not be in a position to control costs, safety and
timeliness of work as well as other critical factors  affecting a producing well
or exploration and development activities.  All written and oral forward-looking
statements  attributable  to  the  Company  or  persons  acting  on  its  behalf
subsequent to the date of this report are expressly  qualified in their entirety
by this disclosure.

Year 2000 Issue
The  Company  has  conducted a review of its  computer  systems to identify  the
systems that could be affected by the "Year 2000"  issue.  The Year 2000 problem
is the result of computer  programs  being  written using two digits rather than
four to define the  applicable  year.  Any of the  Company's  programs that have
time-sensitive  software may recognize a date using `00' as the year 1900 rather
than  the  year  2000.   This  could  result  in  a  major  system   failure  or
miscalculations.

The Company  does not believe  that the Year 2000  problem  will pose a material
operations  problem for the Company.  The Company's  computer software providers
have assured the Company that all of the  Company's  software is or will be Year
2000 compliant  (i.e. will function  properly in the year 2000 and beyond).  The
Company's  accounting software providers have asserted they will provide written
assurance that its products are or will be Year 2000 compliant. To the Company's
knowledge, after investigation,  no "imbedded technology" (such as microchips in
an electronic control system) of the Company poses a material Year 2000 problem.

Because  the  Company  believes  that  it has no  material  internal  Year  2000
problems,  the  Company  has not  expended  and  does  not  expect  to  expend a
significant amount of funds to address Year 2000 issues. It is Company policy to
continue to review its suppliers' Year 2000 compliance and require  assurance of
Year 2000  compliance  from new suppliers;  however,  such  monitoring  does not
involve a significant cost to the Company.

The  Company is  materially  dependent  on Plains  Marketing,  L.P.  ("Plains"),
National Energy Group, Inc. ("NEG") and Amerada Hess Corporation ("AHC") for the
delivery and payment of the  Company's oil and natural gas.  These  companies in
turn are dependent on various third party vendors for delivery and payment.  The
Company has or will request  written  assurances  from Plains,  NEG and AHC that
they have  examined  their  Year 2000  issues.  However,  as of the date of this
report,  the Company has not received a response.  The Company will  continue to
request such  assurance  but it should be  emphasized  that no assurance  can be
given at this time that Plains,  NEG or AHC, or their third party vendors are or
will be Year 2000 compliant.

In the event that one or more of the Company's vendors,  including Plains,  NEG,
AHC and their respective vendors, were to have a material Year 2000 problem, the
Company believes that the foreseeable consequences would be a temporary delay in
revenue collection caused by an interruption in computerized billing (and not an
interruption in the actual flow of the Company's oil or natural gas),  which may
have a substantial impact on the Company's ability to conduct operations.
The Company does not have any contingency plan to address this possibility.





<PAGE>






PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The  Company  may from time to time be  involved  in various  claims,  lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract  incidental to the operation of its business.  The Company is
not currently involved in any such incidental litigation which it believes could
have a  materially  adverse  effect on its  financial  condition  or  results of
operations.

Item 2. Changes in Securities

(a) and (b): not applicable

(c)   Recent sales of unregistered  securities.  The Company issued and sold the
      following  securities  without  registration  under the  Securities Act of
      1933, as amended  ("Securities  Act"),  during the quarter ended March 31,
      1999 and through the date of this Report.

         1.    On January 28,1999 the Company issued 16,209 shares of its common
               stock upon conversion of 200 shares of Series B Preferred  Stock.
               The  Certificates  representing the shares issued upon conversion
               bear  a   restrictive   legend   prohibiting   transfer   without
               registration  under the Securities Act or the  availability of an
               exemption from  registration.  The shares issued upon  conversion
               were  registered  by the  Company  for  resale by the  holders in
               Registration  No.  333-44305.  The Company  relied  upon  Section
               3(a)(9) of the  Securities  Act of 1933, as amended,  in claiming
               exemption from the  registration  requirements  of the Securities
               Act for issuance of the securities upon conversion.

         2.    On March 1, 1999 the Company  issued  30,759 shares of its common
               stock upon conversion of 233 shares of Series B Preferred  Stock.
               The  Certificates  representing the shares issued upon conversion
               bear  a   restrictive   legend   prohibiting   transfer   without
               registration  under the Securities Act or the  availability of an
               exemption from  registration.  The shares issued upon  conversion
               were  registered  by the  Company  for  resale by the  holders in
               Registration  No.  333-44305.  The Company  relied  upon  Section
               3(a)(9) of the  Securities  Act of 1933, as amended,  in claiming
               exemption from the  registration  requirements  of the Securities
               Act for issuance of the securities upon conversion.

         3.    On March 23, 1999 the Company  issued 40,668 shares of its common
               stock upon conversion of 250 shares of Series B Preferred  Stock.
               The  Certificates  representing the shares issued upon conversion
               bear  a   restrictive   legend   prohibiting   transfer   without
               registration  under the Securities Act or the  availability of an
               exemption from  registration.  The shares issued upon  conversion
               were  registered  by the  Company  for  resale by the  holders in
               Registration  No.  333-44305.  The Company  relied  upon  Section
               3(a)(9) of the  Securities  Act of 1933, as amended,  in claiming
               exemption from the  registration  requirements  of the Securities
               Act for issuance of the securities upon conversion.

      In connection with the issuance of the above noted securities, the Company
      relied upon Section 4(2) of the Securities  Act in claiming  exemption for
      the registration  requirement of the Securities Act. All of the persons to
      whom the  securities  were  issued  had full  information  concerning  the
      business and affairs of the Company and acquired the shares for investment
      purposes.   Certificates   representing  the  securities   issued  bear  a
      restrictive  legend  and stop  transfer  instructions  have  been  entered
      prohibiting   transfer  of  the  securities   except  in  compliance  with
      applicable securities law.




<PAGE>



Item 3. Defaults Upon Senior Securities

(a)   There has been no material default in the payment of principal,  interest,
      or any other material  default,  with respect to any  indebtedness  of the
      small business issuer during the period covered by this report.

(b)   There has been no  material  default in the payment of  dividends  for any
      class of preferred stock during the period covered by this report.

Item 4. Submission of Matters to a Vote of Security Holders

No matter was  submitted  to a vote of  Company's  security  holders  during the
period covered by this report.

Item 5. Other Information

On April 26, 1999,  at the request of Mr.  Duncan and Mr.  Antry,  the Company's
Executive  Committee was  dissolved by the Board of  Directors.  The request was
made because Messrs.  Duncan and Antry did not feel the Executive  Committee was
being utilized and any significant  transactions were already being addressed by
the full Board.

There is no other information  reportable under this item for the period covered
by this report.

Item 6. Exhibits and Reports on Form 8-K

(a) The following exhibits are filed with this report:

    (1) Exhibit 27,  "Financial  Data  Schedule" - for the quarter ended 
        March 31, 1999.

(b) There were no reports on Form 8-K filed  during the quarter  ended March 31,
1999:



                                   SIGNATURES

In  accordance  with  Section 13 or 15 (d) of the Exchange  Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                 PEASE OIL AND GAS COMPANY

Date: May 10, 1999                  By: /s/ Patrick J. Duncan
                                    Patrick J. Duncan
                                    President, Chief Financial Officer
                                    and Principal Accounting Officer

Date: May 10, 1999                  By: /s/ William F. Warnick
                                    William F. Warnick
                                    Chairman of the Board