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**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) or the Securities Exchange Act         
of 1934**

**FOR THE QUARTER ENDED MARCH 31, 2001**
**Commission File Number 0-6580**
**PEASE OIL AND GAS COMPANY**(Exact name of small business issuer as specified in its charter)

|**Nevada**(State or other jurisdiction ofincorporation or organization) | **87-0285520**(I.R.S. EmployerIdentification Number)
|----------------------------------------------------------------------- | ----------------------------------------------------

**751 Horizon Court, Suite 203Grand 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
Section13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter periodthat the
registrant was required to file such reports), and (2) has been subject to
such filing requirements or the past
90 days.  Yes X****  No****
       
As of April 15, 2001 the registrant had 1,924,398 shares of its $0.10 par value Common
Stock issuedand outstanding.        
Transitional Small Business Issuer Disclosure Format (check one):  Yes ****  No X

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**TABLE OF CONTENTS**

|PAGE   NUMBER                                                                                            
|---------------------------------------------------------------------------------------------------------
|**PART I - Financial Information**                                                                       
|Item 1.  Unaudited Financial Statements                                                                  
|Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000                                   
|Consolidated Statements of Operations For the Three Months           
      Ended March 31, 2001 and 2000
|Consolidated Statements of Cash Flows for the Three Months           
      Ended March 31, 2001 and 2000
|Notes to Consolidated Financial Statements                                                               
|**Item 2.  Management's Discussion and Analysis**                                                        
|Liquidity, Capital Expenditures and Capital Resources                                                    
|Results of Operations                                                                                    
|Overview                                                                                                 
|Oil and Gas                                                                                              
|General and Administrative                                                                               
|Depreciation Depletion and Amortization                                                                  
|Interest Expense                                                                                         
|Disclosure Regarding Forward-Looking Statements                                                          
|**PART II - Other Information**                                                                          
|Item 1.  Legal Proceedings                                                                               
|Item 2.  Changes in Securities                                                                           
|Item 3.  Defaults Upon Senior Securities                                                                 
|Item 4.  Submission of Matters to a Vote of Security Holders                                             
|Item 5.  Other Information                                                                               
|Item 6.  Exhibits and Reports on Form 8-K                                                                
|**PART III - Signatures**                                                                                

**PART 1- FINANCIAL INFORMATIONITEM 1.  FINANCIAL STATEMENTS**

**PEASE OIL AND GAS COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(unaudited)**

|                                                            | March 31,    | **December 31,**
|----------------------------------------------------------- | ------------ | ----------------
|**ASSETS**                                                  | **2001**     | **2000**        
|**CURRENT ASSETS:**                                         |              |                 
|Cash and equivalents                                        | $  1,258,799 | $  1,407,769    
|Trade receivables, net                                      | 516,721      | 634,107         
|Prepaid expenses and other                                  | 107,960      | 60,144          
|*Total current assets*                                      | 1,883,480    | 2,102,020       
|**OIL AND GAS PROPERTIES, at cost** **(full cost method):** |              |                 
|Unevaluated properties                                      | 2,140,262    | 2,600,657       
|Costs being amortized                                       | 21,870,893   | 19,539,376      
|*Total oil and gas properties*                              | 24,011,155   | 22,140,033      
|Less accumulated amortization                               | (16,901,406) | (15,866,536)    
|*Net oil and gas properties*                                | 7,109,749    | 6,273,497       
|**OTHER ASSETS:**                                           |              |                 
|Office equipment and vehicle                                | 230,624      | 230,624         
|Less accumulated depreciation                               | (200,104)    | (195,508)       
|*Net office equipment and vehicle*                          | 30,520       | 35,116          
|Note receivable, net                                        | 90,000       | 90,000          
|Debt issuance and debt restructuring costs                  | 55,212       | 46,079          
|Deposits and other                                          | 4,995        | 4,995           
|*Total other assets*                                        | 180,727      | 176,190         
|**TOTAL ASSETS**                                            | $  9,173,956 | $  8,551,707    

|**LIABILITIES AND STOCKHOLDERS' EQUITY**                            
|--------------------------------------------------------------------
|**CURRENT LIABILITIES:**                                            
|Current maturities of long-term debt:                               
|Convertible Debenture, net                                          
|Other                                                               
|Accounts payable, trade                                             
|Accrued expenses                                                    
|*Total current liabilities*                                         
|**LONG-TERM DEBT,**less current maturities:                         
|*Total liabilities*                                                 
|**REDEEMABLE PREFERRED STOCK:**                                     
|Series C Preferred Stock, par value $0.01 per share, 99,503 shares  
|authorized, issued and outstanding.  (Redeemable for $3,316,767     
|and a Liquidation Preference of $4,975,150 at March 31, 2001)       
|**OTHER STOCKHOLDERS' EQUITY:**                                     
|Undesignated Preferred Stock, par value $0.01 per share, 2.0 million
|shares authorized, of which 1,395,000 have been retired,            
|and 99,503 have been designated as Series C.                        
|Common Stock, par value $0.10 per share, 4,000,000 shares           
|authorized, 1,924,398 shares issued and outstanding.                
|Additional paid-in capital                                          
|Accumulated deficit                                                 
|*Total Other Stockholders' Equity*                                  
|**TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY**                      

**PEASE OIL AND GAS COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)**

|                                                | **For the Three Months**
|----------------------------------------------- | ------------------------
|**Ended March 31,**                            
|**2001**                                        | **2000**                
|**REVENUE:**                                    |                         
|Oil and gas sales                               | $    843,838            
|**OPERATING COSTS AND EXPENSES:**               |                         
|Oil and gas production costs                    | 140,125                 
|General and administrative                      | 176,015                 
|Depreciation, depletion and amortization        | 229,466                 
|Total operating costs and expenses              | 545,606                 
|**INCOME FROM OPERATIONS**                      | 298,232                 
|**OTHER INCOME (EXPENSES):**                    |                         
|Interest and other income                       | 15,919                  
|Interest expense                                | (89,740)                
|**NET INCOME**                                  | 224,411                 
|Preferred Stock dividend charges                | (46,642)                
|**NET INCOME AVAILABLE TO COMMON STOCKHOLDERS** | $    177,769            
|**BASIC:**                                      |                         
|Earnings Per Share                              | $          0.09         
|Weighted Average Shares Outstanding             | 1,924,398               
|**DILUTED:**                                    |                         
|Earnings Per Share                              | $          0.05         
|Weighted Average Shares Outstanding             | 3,575,914               

**PEASE OIL AND GAS COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)**

|                                                                                          | **For the Three Months**
|----------------------------------------------------------------------------------------- | ------------------------
|**Ended March 31,**                                                                      
|**2001**                                                                                  | **2000**                
|**CASH FLOWS FROM OPERATING ACTIVITIES:**                                                 |                         
|Net Income                                                                                | $   224,411             
|Adjustments to reconcile net income to net cash provided by                               |                         
|operating activities:                                                                     |                         
|Depreciation, depletion and amortization                                                  | 229,466                 
|Amortization of debt discount and issuance costs                                          | 89,394                  
|Changes in operating assets and liabilities:                                              |                         
|(Increase) decrease in:                                                                   |                         
|Trade receivables                                                                         | 117,386                 
|Prepaid expenses and other assets                                                         | (47,816)                
|Increase (decrease) in:                                                                   |                         
|Accounts payable                                                                          | 85,526                  
|Accrued expenses                                                                          | 2,492                   
|*Net cash 
provided by operating activities*                                              | 700,859                 
|**CASH FLOWS FROM INVESTING ACTIVITIES:**                                                 |                         
|Capital expenditures for property, plant and equipment                                    | (804,478)               
|Proceeds from redemption of Certificate of Deposit                                        | -                       
|*Net cash used in investing activities*                                                   | (804,478)               
|**CASH FLOWS FROM FINANCING ACTIVITIES:**                                                 |                         
|Repayment of long-term debt                                                               | (1,659)                 
|Deferred debt restructuring costs                                                         | (43,692)                
|*Net cash used in financing activities*                                                   | (45,351)                
|**INCREASE (DECREASE) IN CASH AND EQUIVALENTS**                                           | (148,970)               
|**CASH AND EQUIVALENTS, beginning of period**                                             | 1,407,769               
|**CASH AND EQUIVALENTS, end of period**                                                   | $1,258,799              
|**SUPPLEMENTAL DISCLOSURE OF
      CASH FLOW  INFORMATION:**                              |                         
|Cash paid for interest                                                                    | $     68,957            
|Cash paid for income taxes                                                                | $         -             
|**SUPPLEMENTAL DISCLOSURE OF NON-CASH
      INVESTING  
      AND FINANCING ACTIVITIES:** |                         
|Increase in accounts payable for oil & gas exploration activities                         | $
       256,645        

**PEASE OIL AND GAS COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)**

**Note 1 - Basis of Presentation:**

The accompanying unaudited condensed consolidated financial statements have been prepared inaccordance
with generally accepted accounting principles for interim financial information.  They donot include all
information and notes required by generally accepted accounting principles for completefinancial statements.
However, except as disclosed herein, there has been no material change in theinformation disclosed in the
notes
to consolidated financial statements included in our Annual Report onForm 10-KSB for the year ended
December 31, 2000.  In our opinion, all adjustments (consisting ofnormal 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 beexpected for the full year.
The accounting policies we followed are set forth in Note 1 to our financial statements in Form10-KSB for
the
year ended December 31, 2000.  We suggest that these financial statements be read inconjunction
with the
financial statements and notes included in the Form 10-KSB.
Note 2 - Debt Financing
ArrangementsLong-Term Debt - Long-term debt at
consists of the following:



March 31,
    December 31,2001
  
    2000Convertible debentures, interest at 10%,
      Original maturity April 2001,  senior and
    unsecured
    $2,782,500
    $2,782,500Less unamortized discount
    (18,278)
    (73,113)Net carrying value
    2,764,222
    2,709,387Note payable to bank, interest at 8.5%, monthly
      payments of $669,  due March 2003, collateralized by a
      vehicle
    14,738
    16,398Total long-term debt
    2,778,960
    2,725,785Less current maturities, net of unamortized
      discount
    (125,622)
    (315,260)Long-term debt, less current
      maturities
    $2,653,338
    $2,410,525


When the Company filed its Annual Report on Form
10-KSB on April 16, 2001, we had reported that
approximately 86%, or $2,401,000,
of the outstanding debentures had been restructured.  These debenture
holders agreed to extend their maturity date for two years, from April 15,
2001 to April 15, 2003, in
exchange for: a) lowering the conversion rate from
$30.00 to $1.75; and b) increasing the interest
rate from 10% to 11% per
annum.  Subsequent to April 16, 2001, an additional $244,500 of the
debenture
was restructured under the same terms and the remaining balance of $137,000
was paid
in full.   Interest will continue to be due and payable on
the restructured debenture on a quarterly
basis. The new conversion rate of
$1.75 represented the current market rate of the Company's
common stock on
the date the restructuring plan was accepted by the majority of the debenture
holders and formally committed to by the Board of Directors. In addition, the
Company agreed that,
subject to certain exceptions, it is prohibited from
incurring indebtedness that is senior to the Debentures
so long as they are
outstanding.

The balance of the debentures that were
restructured have been classified as long-term debt on the December31, 2000
and March 31, 2001 balance sheets in accordance with SFAS No. 6 titled
"Classification ofShort-Term Obligations Expected to be
Refinanced".**Note 3 -** **Preferred Stock Restructuring**
Pease Oil and Gas Company (the "Company") has the authority to issue up to 2,000,000 shares ofPreferred
Stock of which 1,395,000 shares have been retired as of March 31, 2001.  The remainingPreferred Stock
may be issued in such series and with such preferences as determined by the Boardof Directors.
In December 1997, the Board of Directors "designated" 145,300 shares as the Series B 5% PIKCumulative
Convertible Preferred Stock (the "Series B Preferred Stock") and on December 31, 1997,the Company
issued 113,333 shares of Series B Preferred Stock for $5,666,650.
The Series B Preferred Stock was convertible into common stock at a 25% discount to the market price.This
discount feature became hyper-dilutive when the common stock price decreased beginning shortlyafter its
issuance in December 1997. Based on the average price of the common stock during the firstthree months of
2000, the outstanding Series B could have been converted into approximately 16.6million shares
of common,
or over 90% of the common equity after a conversion.  Obviously, theCompany's
common stockholders
would have been left with very little ownership.
In November 2000, following extensive negotiations, six institutional holders, holding approximately94% of the
Series B Preferred stock with a stated value of over $4.97 million, exchanged their SeriesB for
a new class of
non-voting, non-convertible, preferred stock designated as the "Series C"Preferred stock. The Series C
Preferred must be redeemed, at its stated value, on December 31, 2005.However, the Company may, at its
election, redeem the Series C at a 33% discount (or approximately$3.13 million if all of it is redeemed), either
in whole or in part, through December 31, 2003.
TheCompany redeemed the remaining 6% of the Series B
Preferred at a 33% discount, or $210,833.Therefore,
as of the date of this report, there is no outstanding
hyper-dilutive Series B Preferred Stock. In connection with this restructuring, all the holders of the Series B Preferred stock waived all of thedividends
in arrears (the Company had not paid any dividends on the Series B Preferred stocksince September 1, 1999). 
The Series C Preferred Stock will receive dividends at a rate of 5% perannum
starting in the second quarter
of 2001 (these dividends started to accrue on April 1, 2001).
As an inducement for the Series B Preferred stockholders to restructure their investment and grant adiscounted redemption feature, the 
Company issued warrants to acquire up to 1,763,800 shares ofcommon
stock exercisable at $0.50 per share. These warrants will expire on December 31, 2003.

**PEASE OIL AND GAS COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)**

**Note 4 - Net Income Available to Common Stockholders**

The net income available to common stockholders is determined by deducting any dividends accruing tothe
benefit of the preferred stockholders from our net income.  Accordingly, a reconciliation of netincome available
to common stockholders is as follows:

**For the Three Months****Ended March 31,****2001**
    
    **2000**Net Income
    $224,411
    
    $129,974Imputed Dividends for the Series C Preferred Stock
    (46,642)
    
    -Dividends in Arrears for the Series B Preferred Stock
    -
    
    (66,141)Net Income Available to Common Stockholders
    $177,769
    
    $  63,833


|                                                                            | For the Three Months Ended March
      31,
|--------------------------------------------------------------------------- | ------------------------------------------
|                                                                            | 2001                                      
|BASIC                                                                       | Income                                    
|Income available to common 
      stockholders                              | $ 177,769                                 
|EFFECT OF DILUTIVE
    SECURITIES                                           |                                           
|Assumed exercise of dilutive 
      warrants and options                    | -                                         
|Assumed conversion of the Series B 
      preferred stock                   | -                                         
|DILUTED                                                                     |                                           
|Income available to common
      stock  including assumed
      conversions | $ 177,769                                 

For the three months ending March 31, 2000, the "diluted" earnings per common share assumes that theSeries B preferred stock, which 
was restructured in November 2000, was converted into common stockusing
an assumed conversion price of $0.3281 per share (this represents the price the Series B preferredstock
could have converted into using the market price of the common stock on March 31, 2000).
As of March 31, 2001, there were 2,486,080 options and warrants outstanding.  Of that total, 2,388,800had
a dilutive effect on the 2001 earnings per share calculation and resulted in 1,651,516 incrementalweighted
average shares outstanding under the treasury stock method for the three months ended March31, 2001. 
The remaining 97,280 options were excluded from the calculation of diluted earningsper share
in 2001 because they would have been anti-dilutive.

**ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS**
Liquidity, Capital Expenditures and Capital ResourcesAt March 31, 2001, our cash balance was $1,258,799 with a positive working capital 
position of$1,006,569,
compared to a cash balance of $1,407,769 and a positive working capital position of$1,447,952 at
December 31, 2000.  The change in our cash balance is summarized as follows:

|Cash balance at December 31, 2000               | $1,407,769
|----------------------------------------------- | ----------
|Sources of Cash:                                |           
|Cash provided by operating activities           | 700,859   
|Uses of Cash:                                   |           
|Capital expenditures for exploration activities | (804,478) 
|Debt restructuring costs                        | (43,692)  
|Repayment of long term debt                     | (1,659)   
|Total uses of cash                              | (849,829) 
|Cash balance at March 31, 2001                  | $1,258,799

|                                         |                      | **Internal** |                 |        
|---------------------------------------- | -------------------- | ------------ | --------------- | -------
|**Category:**                            | **Program Operator** |              | **Other**      
|**NEG**                                  |                      | **Parallel** |                 | **AHC**
|Acquisition of unproved
      properties | $      -             |              | $
       25,961 |        
|Exploration costs                        | -                    |              | 437,272         |        
|Development and workovers                | 262,513              |              | -               |        
|Capitalized interest                     | -                    |              | -               |        
|Total                                    | $262,513             |              | $463,233        |        
|Percent                                  | 25%                  |              | 44%             |        

|                            | **Estimated Investment**             
|--------------------------- | -------------------------------------
|**Area**                    | **Operator**                         
|Formosa, Texana, and Ganado | Parallel Petroleum, Inc. ("Parallel")
|East Bayou Sorrel           | National Energy Group, Inc. ("NEG")  
|Maurice Prospect            | Amerada Hess Corporation ("AHC")     
|Total                       |                                      

**RESULTS OF OPERATIONS** **Overview**Our largest source of operating revenue is from the sale of produced oil, natural gas, and natural gasliquids. 
Therefore, the level of our revenues and earnings are affected by prices at which natural gas,oil and natural
gas liquids are sold.  Therefore, our operating results for any prior period are notnecessarily
indicative of future
operating results because of the fluctuations in price and productionlevels.
**Oil and Gas**Operating statistics for oil and gas production for the periods presented are as follows:

|                                         | **For the Three Months**
|---------------------------------------- | ------------------------
|**Ended March 31,**                     
|**2001**                                 |                         
|**Production:**                          |                         
|Oil (bbls)                               | 7,902                   
|Gas (Mcf)                                | 92,167                  
|BOE (6:1)                                | 23,265                  
|**Average Sales Price:**                 |                         
|Oil (per bbl)                            | $  
       27.78        
|Gas (per Mcf)                            | 6.77                    
|Per BOE (6:1)                            | 36.27                   
|**Operating Margins;**                   |                         
|**Revenue -**                            |                         
|Oil                                      | $  219,522              
|Gas                                      | 624,316                 
|Total Revenue                            | 843,838                 
|**Costs** -                              |                         
|Lifting Costs                            | (77,100)                
|Production taxes                         | (63,025)                
|Total Costs                              | (140,125)               
|**Operating Margin**                     | $ 703,713               
|**Operating Margin Percent**             | 83%                     
|**Production Costs per BOE before DD&A** | $ 
           6.02      
|**Change in Revenue Attributable to :**  |                         
|Production                               | $(306,493)              
|Price                                    | 351,333                 
|Total Increase in Revenue                | $   44,840              

*Comparison of Oil and Gas Production for the Three Months Ended March 31, 2001 & 2000:*Oil production decreased by 15,170 
bbls and total BOE production decreased 8,540 BOE for the threemonths ended March 31, 2001, when compared to the same period in 2000, primarily because theSchwing
# 1 well, located in the East Bayou Sorrel field, was shut-in for the entire first quarter of 2001.During the first
three months of 2000, the  Schwing # 1 produced 13,015 net bbls of oil (114,256 gross)and
12,890 net Mcf
of gas (113,160 gross) representing 56% of the Company's oil production and48% of the Company's total
BOE production for that quarter.  The Schwing # 1  has been shut in due toapparent formation problems that
started in September 2000, when sand began showing up in theproduction fluids.  At that time, in order to
mitigate the sand, NEG (the operator of the well)immediately
cut the production rate back to approximately
500 bbls per day and 500 Mcf per day.The well
produced at that level until late December 2000 when the
sand emulsion reappeared andproduction ceased. 
Remedial efforts, utilizing coiled tubing, were attempted to
clean out the well boreand restore
production, however, those efforts failed. The Company is currently evaluating a plan to sidetrack the well to an up-dip location in the productivereservoir.  This procedure, 
if successful, would accomplish two objectives: 1) it would place the newbottom
hole location away from the apparently damaged producing interval; and 2) it would relocate the"take
point"
of this reservoir to an up-dip location to recover the "attic" oil that could not have beenrecovered from the
present bottom hole location even if the well bore had not sanded up.  Althoughneither the Company or its
independent reservoir engineers, Netherland, Sewell and Associates, Inc.,believe that the current
circumstances
impair the existing proved reserves attributable to this well in theCib Haz 3 formation, the loss
of the
production has and will continue to have an immediate and negativeimpact on the Company's cash
flows until such time remedial efforts can be successfully conducted.Even
then, there can be no assurance
that the sidetrack or other potential operations, will ultimatelybe successful in restoring this interval to
sustained
production.  Should the sidetrack operation, orother remedial procedure, ultimately be unsuccessful,
it
would have a negative impact on our estimatedreserves, future production and future cash flows. 
The total net reserves as of December 31, 2000, in the Schwing #1 attributable to the troubled interval
(the Cib Haz 3 formation) are 58,848 BOE,representing approximately 9% of the Company's total proved
reserves.  This well has other logged pay(behind pipe proved reserves) up hole in the Cib Haz 2 sand
formation which will be produced afterthe Cib Haz 3 is depleted or otherwise abandoned.  The Company
anticipates the sidetrack or otherprocedure may be attempted in June or July depending on rig availability
and other factors. The 39,770 Mcf increase in net gas production during the first quarter of 2001, when compared to thesame period in 2000, is 
primarily attributable to the success enjoyed with our exploratory drilling inJackson
County, Texas,  whereby 9 discovery wells were completed during the last half of 2000 andthe first quarter
of 2001.  These wells collectively produced over 69,530 net Mcf during the first quarterof
2001 and have
helped offset the loss of production from the Schwing # 1.
*Comparison of Oil and Gas Revenue for the Three Months Ended March 31, 2001 & 2000*:
Oil and gas revenue for the three months ended March 31, 2001, when compared to the same period in2000, increased by $44,840 
primarily because of the substantially higher prices received for natural gasin
2001 (there was not a significant difference in the average price received for oil during the periodspresented).  We received an average 
price of $6.67 per Mcf of gas during the first quarter of 2001compared to $2.95 for the same period in 2000 representing a $3.72, or 126%, increase per Mcf in2001. 
Much of the gain associated with higher gas prices was offset by the net decrease in oilproduction in the
first
quarter of 2001 which was discussed in previous paragraphs.
*Well Completions and Significant Recompletions in 2001*:
An exploratory well that commenced drilling in October 2000 in our Maurice
prospect area, located in
Lafayette Parish, Louisiana, recently logged more than
67-ft of net pay in five sand intervals. The bottom
6-ft of the deepest sand interval
was recently perforated and tested at an initial rate of 7,200 Mcf and 300
bbls of condensate per day. However, shortly after the well was placed on production
in this 6-ft interval,
the flowing tubing pressure began rapidly declining
indicating either a smaller than anticipated reservoir
and/or possible depletion
in that sand interval. Based on AHC's recommendation (AHC is the operator
of
the well), the other 61-ft of logged pay is currently being perforated to
further evaluate the well.
Accordingly, the economic benefit of this well cannot
be determined until these additional perforating
procedures are complete and the
well has produced for some period of time. The Company has a 9.5%
working
interest in this well.
This year, through the date of this report, we have participated in the
drilling of seven exploratory wells
located in or around Jackson County, Texas,
within the prospect areas operated by Parallel. Of these
seven wells, four have
been commercially productive, two were dry and one is currently being completed.
The Company has a 12.5% working interest in all of these wells.

The State Lease # 2102, which is one of the three wells located in the East Bayou Sorell field, hasproduced from the Cib 
Haz 3 sand formation since its initial completion in October 1998.  This intervalbecame depleted in March 2001 and the well was recompleted up-hole in the Cib Haz 2 sand formationin April 2001.  On an 8/8's 
basis, this well is currently producing approximately 500 bbls of oil and 500Mcf
of gas per day - a rate significantly higher than the 43 bbls of oil and 70 Mcf of gas per dayaveraged during
the first quarter of 2001.  We own approximately a 15.9% working interest in this well.
*Comparison of Production Costs for the Three Months Ended March 31, 2001 and 2000:*

Lifting costs increased by $3,301 during the three months ended March 31, 2001, when compared to thesame period in 2000, primarily 
because of the additional discovery wells in Jackson County, Texas, thatwere previously discussed.  
Production taxes decreased $26,254 during the first three months of 2001, when compared to the sameperiod in 2000, primarily because the 
total severance tax for our oil revenue was less in 2001 because ofthe net decrease in oil production.  Our average severance tax burden is approximately 12% for oilrevenue
and approximately 6% for gas revenue.  Accordingly, since our oil revenue, which has thehigher
severance
tax burden, was down during 2001, the corresponding severance tax liability wasalso down.
*Exploration Outlook:* We will continue to exploit our assets within the Jackson County, Texas area where we expect as manyas six (6) additional Frio 
and Yegua prospects may be proposed over the next six to nine months,depending on a number factors, including but not limited to, weather and rig availability.  
Parallel has also announced that a Regional Study of the Wilcox trend (examining depths between14,000' and 18,000' below the surface), 
has recently been completed, where at least twelve (12)Wilcox prospects covering approximately 25,000 acres have been identified. Although the 8/8's costs todrill a Wilcox objective is between $3.0 
and $4.0 million, and there is a higher degree of risk associatedwith depth and reservoir quality, Parallel believes the reserve potential is considerable.  Within theRegional
Wilcox Study, at least four (4) of the identified prospects are covered, either in whole or inpart,
within the
Texana Area of Mutual Interest (the "Texana AMI") where we have a 12.5% workinginterest. 
The total
acreage within the Texana AMI for the identified Wilcox prospects is over 8,000acres
and we have
recently acquired substantially all of our proportionate share of the correspondingleases
(with terms of two
or three years).  This Regional Wilcox study, as it relates to the TexanaAMI,
appears extremely attractive
based on the preliminary studies and may provide our Companywith new
opportunities in the future.**General and Administrative**As expected, there was not a significant difference in total general and administrative expenses betweenthe
periods presented. **Depreciation, Depletion and Amortization**Depreciation, Depletion and Amortization ("DD&A") for the periods presented consisted of the
following:

|                                              | **For the Three Months**
|--------------------------------------------- | ------------------------
|**Ended March 31,**                          
|**2001**                                      | ****                    
|Oil and Gas Properties                        | $   224,870             
|Furniture, Fixtures and Equipment             | 4,596                   
|Total                                         | $ 
       229,466       
|DD&A for the oil and gas properties, per BOE: | $         9.67          

|                                                | **For the Three Months**
|----------------------------------------------- | ------------------------
|**Ended March 31,**                            
|**2001**                                        |                         
|Interest paid or accrued                        | $  68,957               
|Amortization of debt discount                   | 54,834                  
|Amortization of debt issuance costs             | 34,559                  
|Total interest incurred                         | 158,350                 
|Interest capitalized for exploration activities | (68,610)                
|Interest expense                                | $  89,740               

(b)    
Reports on Form 8-K:  We have not filed any reports on Form 8-K for the period covered by            
 
this report.

**SIGNATURES**

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report tobe signed
on its behalf by the undersigned, thereunto duly authorized.
                                         
                               **PEASE OIL AND GAS COMPANY**

Date: May 21, 2001                          
                 By: /s/ Patrick J. Duncan                                  
                                 
     Patrick J. Duncan                                
                                         
President and Principal Accounting Officer