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

                     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, 2000

                          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 12, 2000 the registrant had 1,731,398 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, 2000 and
         December 31, 1999                                               3
         Consolidated Statements of Operations For the Three Months
         Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . 4
         Consolidated Statements of Cash Flows For the Three Months
         Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . 5
         Notes to Consolidated Financial Statements   . . . . . . . . . .6-7
       Item 2.  Management's Discussion and Analysis  . . . . . . . . .  8
                 Liquidity, Capital Expenditures and Capital Resources   8
            Results of Operations  . . . . . . . . .  . . . . . . . . . .10
             Overview  . . . . . . . . . . . . . . . . . . . . . . . . . 10
             Oil and Gas . . . . . . . . . . . . . . . . . . . . . . . . 10
             Consulting Arrangement - Related Party . . . . . . . . . . .11
             General and Administrative   . . . . . . . .  . . . . . . . 11
             Depreciation, Depletion and Amortization  . . . . . . . . . 11
             Interest Expense  .  . . . . . . . . . . . . . . . . . . . .12
                 Impairment Expense - Oil and Gas Properties. . . . . . .12
          Other Matters . . . . . . . . . . . . . . . . . . . . . . . . .12
                 Disclosure Regarding Forward-Looking Statements . . . . 12
PART II - Other Information . . . . . . . . . . . . . . . . . . . . . .  13
       Item 1.  Legal Proceedings  . . . . . . . . . . . . . . . . . . . 13
         Item 2.  Changes in Securities . . . . . . . . . . . . . . . . .13
         Item 3.  Defaults Upon Senior Securities . . . . . . . . . . . .13
         Item 4.  Submission of Matters to a Vote of Security Holders  . 13
         Item 5.  Other Information  . . . . . . . . . . . . . . . . . . 13
         Item 6.  Exhibits and Reports on Form 8-K  . . . . . . . . . . .13
PART III - Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .14



                                       -2-

<PAGE>



PART 1 - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         March 31,     December 31,
                                                           2000            1999
                                                     -------------    ------------
                                                       (unaudited)
                                     ASSETS

CURRENT ASSETS:
<S>     <C>    <C>    <C>    <C>    <C>    <C>
   Cash and equivalents ...........................   $    909,426    $    724,354
   Trade receivables, net .........................        537,498         402,847
   Prepaid expenses and other .....................         71,735          76,349
                                                      ------------    ------------
        Total current assets ......................      1,518,659       1,203,550
                                                      ------------    ------------
OIL AND GAS PROPERTIES, at cost (full cost method):
   Unevaluated properties .........................      2,370,527       2,281,732
   Costs being amortized ..........................     18,383,965      18,278,461
                                                      ------------    ------------
        Total oil and gas properties ..............     20,754,492      20,560,193
   Less accumulated amortization ..................    (15,115,115)    (14,868,287)
                                                      ------------    ------------
        Net oil and gas properties ................      5,639,377       5,691,906
                                                      ------------    ------------
 OTHER ASSETS:
   Debt issuance costs, net .......................        149,756         184,315
   Office equipment and vehicles, net .............         49,269          54,198
   Deposits and other .............................          4,995           7,493
                                                      ------------    ------------
          Total other assets ......................        204,020         246,006
                                                      ------------    ------------
TOTAL ASSETS ......................................   $  7,362,056    $  7,141,462
                                                      ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt ...........   $      4,764    $      6,352
   Accounts payable, trade ........................        206,821         140,554
   Accrued expenses ...............................        105,412         134,539
                                                      ------------    ------------
         Total current liabilities ................        316,997         281,445
                                                      ------------    ------------
LONG-TERM DEBT, less current maturities: ..........      2,561,286       2,506,218
                                                      ------------    ------------
STOCKHOLDERS' EQUITY:
   Preferred Stock,  par value  $0.01 per share, 2,000,000
   shares  authorized, 105,828 shares of  Series B 5% PIK
   Cumulative  Convertible  Preferred Stock issued and
   outstanding (liquidation preference of $5,445,248 at
   March 31, 2000) .........................                 1,058           1,058
   Common Stock, par value $0.10 per share, 4,000,000
   shares authorized, 1,731,398 shares issued and
   outstanding .....................................       173,140         173,140
   Additional paid-in capital ......................    37,636,191      37,636,191
   Accumulated deficit .............................   (33,326,616)    (33,456,590)
                                                      ------------    ------------
         Total stockholders' equity ................     4,483,773       4,353,799
                                                       ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .........  $  7,362,056    $  7,141,462
                                                       ============    ============
</TABLE>



                                       -3-

<PAGE>



                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                           For The Three Months
                                                              Ended March 31,
                                                          2000             1999

REVENUE:
<S>                                                  <C>             <C>
   Oil and gas sales .............................   $    798,998    $    411,794
                                                     ------------    ------------
OPERATING COSTS AND EXPENSES:
   Oil and gas production costs ..................        163,078          84,476
   Consulting arrangement-related party ..........           --            37,750
   General and administrative ....................        173,367         179,660
   Depreciation, depletion and amortization ......        251,757         263,375
                                                     ------------    ------------
                Total operating costs and expenses        588,202         565,261
                                                     ------------    ------------
INCOME (LOSS) FROM OPERATIONS ....................        210,796        (153,467)

OTHER INCOME (EXPENSES):
   Interest and other income .....................          9,224          11,397
   Interest expense ..............................        (90,046)        (89,930)
                                                     ------------    ------------
NET INCOME (LOSS) ................................   $    129,974    $   (232,000)
                                                     ============    ------------
NET INCOME (LOSS) AVAILABLE TO COMMON
   STOCKHOLDERS ..................................   $     63,833    $   (298,346)
                                                     ============    ============
BASIC:
   Earnings (Loss) Per Share .....................   $       0.04    $      (0.18)
   Weighted Average Shares Outstanding ...........      1,731,398       1,626,100
DILUTED:
   Earnings (Loss) Per Share .....................   $       0.01    $      (0.18)
   Weighted Average Shares Outstanding ...........     18,325,891       1,626,100
</TABLE>




                                       -4-

<PAGE>



                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                               For The Three Months
                                                                                  Ended March 31,
                                                                               2000           1999
                                                                        -------------   ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                      <C>            <C>
   Net Income (Loss) .................................................   $   129,974    $  (232,000)
   Adjustments to reconcile net loss to net cash provided by
       (used in) operating activities:
            Depreciation, depletion and amortization .................       251,757        263,375
            Amortization of debt discount and issuance costs .........        89,394         89,393
                                                                         -----------    -----------
                         Cash flows before working capital adjustments       471,125        120,768
            Changes in operating assets and liabilities:
                   (Increase) decrease in:
                        Trade receivables ............................      (134,651)       159,219
                        Prepaid expenses and other assets ............        (7,888)        (8,231)
                    Increase (decrease) in:
                        Accounts payable .............................        22,251          6,794
                        Accrued expenses .............................       (29,127)       (46,034)
                                                                         -----------    -----------
            Net cash provided by (used in) operating activities ......       321,710        232,516
                                                                         -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures for property, plant and equipment ............      (150,283)      (294,455)
   Proceeds from redemption of CD ....................................        15,000           --
   Proceeds from sale of property and equipment ......................          --           72,250
                                                                         -----------    -----------
      Net cash provided by (used in) investing activities ............      (135,283)      (222,205)
                                                                         -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of long-term debt .......................................        (1,355)        (1,469)
   Payment of Series B Preferred Stock Dividends .....................          --          (67,085)
   Purchase and retirement of Series B Preferred Stock ...............          --          (31,000)
                                                                         -----------    -----------
      Net cash provided by (used in) financing activities ............        (1,355)       (99,554)
                                                                         -----------    -----------
 INCREASE (DECREASE) IN CASH AND EQUIVALENTS .........................       185,072        (89,243)
 CASH AND EQUIVALENTS, beginning of period ...........................       724,354      1,049,582
                                                                         -----------    -----------

 CASH AND EQUIVALENTS, end of period .................................   $   909,426    $   960,339
                                                                         ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
   Cash paid for interest ............................................   $    70,787    $    70,672
                                                                         ===========    ===========
   Cash paid for income taxes ........................................   $      --      $      --
                                                                         ===========    ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
    AND FINANCING ACTIVITIES:
   Increase (Decrease) in payables for oil & gas exploration
           activities ................................................   $    44,016    $    40,359
</TABLE>


                                       -5-

<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 our Annual Report on Form 10-KSB for the year ended December 31, 1999. In our
opinion,  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 we followed  are set forth in Note 1 to our  financial
statements in Form 10-KSB for the year ended  December 31, 1999. We suggest that
these financial  statements be read in conjunction with the financial statements
and notes included in the Form 10-KSB.

Note 2 - Dividends and Earnings (Loss) Per Common Share:

We have adopted SFAS No. 128 titled "Earnings Per Share".  Accordingly,  "Basic"
earnings  (loss)  per share  ("EPS")  is  computed  by  dividing  income  (loss)
available  to common  stockholders  (the  "numerator")  by the  weighted-average
number of common  shares  outstanding  (the  "denominator")  during the  periods
presented.

The net  income  (loss)  available  to  common  stockholders  is  determined  by
including any dividends accruing to the benefit of the preferred stockholders to
the net income (loss). The dividends included for this calculation  include:  1)
paid  dividends;  2)  accrued  but unpaid  dividends;  and 3) any  dividends  in
arrears. Accordingly, the net loss available to common stockholders includes the
following charges associated with the Series B preferred stock.

                                         For the Three Months Ended March 31,
                                           2000                     1999
                                         -----------           ----------------
         Dividends declared and paid     $  -                  $   66,346
         Dividends in arrears              66,141                     -
                                         -----------           ----------------
                  Total                  $ 66,141              $   66,346
                                         ===========          =================

In  connection  with an  agreement  signed  by the  Preferred  Stockholders  and
associated with the contemplated  merger with Carpatsky,  we have not accrued or
paid  any  dividends  to the  Series  B  Preferred  Stockholders  subsequent  to
September 1, 1999.  However,  should the merger be abandoned  the amount that we
would be obligated  to pay for the periods  presented  has been  included in the
calculation of net income per share as "Dividends in arrears".

Computing the "Diluted" EPS for the three months ended March 31, 2000 is similar
to the Basic EPS except  for:  a.) the  numerator  is  adjusted  to add back the
$66,141  of  convertible  preferred  stock  dividends  in  arrears;  and b.) the
denominator is increased to include the number of additional  common shares that
would have been outstanding assuming the preferred stock had been converted into
16,594,493  shares of common stock on January 1, 2000. This assumption  presumes
the preferred  stock would have been  converted  into common stock in accordance
with its original terms of a 25% discount to the reported  closing market price.
The market price used for purposes of this calculation was as of March 31, 2000.
Our Articles of  Incorporation  only authorize the issuance of up to 4.0 million
shares,  of which 1,731,398 are currently issued and  outstanding.  Accordingly,
the "Diluted" EPS is only a hypothetical  computation since we would be required
to obtain  shareholder  approval for any shares to be issued beyond 4.0 million.
Pursuant to the terms of our proposed merger with Carpatsky Petroleum, Inc.

                                       -6-

<PAGE>



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

("Carpatsky")  which is more  thoroughly  discussed in our Annual Report on Form
10-KSB,  our Preferred  Stockholders have agreed to exchange all the outstanding
Preferred  Shares for 8,865,665 shares of Common stock when and if the merger is
ultimately consummated.

"Diluted"  EPS for the three  months  ended March 31, 1999 is  identical  to the
"Basic" EPS for the same period  since the affects of  including  any  potential
common shares would have been antidilutive.

Note 3 - Comprehensive Income:

There are no  components of  comprehensive  income which have been excluded from
net income and,  therefore,  no separate  statement of comprehensive  income has
been presented.



                                       -7-

<PAGE>



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS

Liquidity, Capital Expenditures and Capital Resources
At March 31, 2000, our cash balance was $909,426 with a positive working capital
position of  $1,201,662,  compared to a cash  balance of $724,354 and a positive
working  capital  position of $922,105 at December 31,  1999.  The change in our
cash balance is summarized as follows:

         Cash balance at December 31, 1999                          $   724,354
         Sources of Cash:
               Cash provided by operating activities                    321,710
           Proceeds from the redemption of certificate of deposit        15,000
                  Total sources of cash                                 336,710
         Uses of Cash:
           Capital expenditures for exploration activities             (150,283)
           Repayment of long term debt                                   (1,355)
                  Total uses of cash                                   (151,638)
                                                                    -----------
         Cash balance at March 31, 2000                             $   909,426
                                                                    ============

As a result of oil prices  averaging  almost  $28.00 per barrel during the first
quarter of 2000, we were able to generate  positive cash flow from operations of
$321,710.  This enabled us to improve both our cash and overall  working capital
position.  As far as our uses of cash, the following table illustrates the costs
incurred for our exploration  activities (the difference  between the total cash
paid for  exploration  activities in the above table and the amount  illustrated
below,  relates to the net  increase  in accounts  payable for those  activities
between December 31, 1999 and March 31, 2000):

<TABLE>
<CAPTION>
                                              PROGRAM OPERATOR         Internal
                                      NEG       Parallel     AHC        Costs       Total           %

Category:
<S>                                <C>         <C>         <C>         <C>         <C>               <C>
 Productive Efforts ............   $   --      $  1,170    $ 61,040    $   --      $ 62,210          32%
                                                           --------    --------    --------    --------
  Exploratory Dry Holes ........       --        32,192        --          --        32,192          17%
                                                           --------    --------    --------    --------
  Land, G&G Costs on Seismic
     Programs ..................      5,690      19,612        --          --        25,302          13%
                                                           --------    --------    --------    --------
  Capitalized Interest .........       --        69,182        --          --        69,182          36%
                                                           --------    --------    --------    --------
  Other Exploration Costs ......       --          --          --         5,413       5,413           2%
                                                                       --------    --------    --------
         Total Exploration Costs   $  5,690    $122,156    $ 61,040    $  5,413    $194,299         100%
                                   ========    ========    ========    ========    ========    ========
         Percent ...............          3%         63%         31%          3%        100%
</TABLE>

A  description  of the  areas  we  have  an oil and  gas  interest  in are  more
thoroughly  discussed in our 1999 Annual Report on Form 10-KSB.  There have been
no significant changes in our areas of operation since the date of that report.

Since we are a non-operator  in all of the areas in which we hold an oil and gas
interest,  we do not  necessarily  control  the  timing  of any  development  or
exploration  activities and therefore have little control over the corresponding
required cash outlays.  However,  we currently expect the expenditures that will
be  proposed  by the  respective  operators  of our core  areas to be within the
following ranges through the first quarter of 2001:



                                       -8-

<PAGE>



<TABLE>
<CAPTION>
                                                                         Estimated Investment
      Area                                 Operator                     Minimum          Maximum

<S>                                                                    <C>             <C>
East Bayou Sorrel                   National Energy Group, Inc.        $    -          $ 400,000
                                    ("NEG")
Formosa, Texana, and Ganado         Parallel Petroleum Corporation       150,000         300,000
                                    ("Parallel")
Maurice Prospect                    Amerada Hess Corporation              50,000         500,000
                                    ("AHC")                           ----------       ------------

      Total                                                            $ 200,000      $  1,200,000
                                                                      =========         ===========
</TABLE>

In addition to the potential capital  necessary for our exploration  activities,
in April 2001 our convertible  debentures with a current  outstanding balance of
$2,782,500  will  become  due and  payable.  Accordingly,  given  the  range  of
potential capital  requirements  through the first part of next year (2001), our
current and anticipated  cash position may not be sufficient to cover the future
working capital and exploration obligations. We have 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), we have been unable to attract  additional equity
capital. For example, using our recent common stock price of $0.43, and applying
the applicable discount of 25%, should all the holders of the Series B Preferred
Stock  elect to  convert  into  common  stock,  we would  be  required  to issue
approximately  16.6  million  shares in the  conversion.  This  would  represent
approximately 90% of the then outstanding common shares. Presently, we have only
4.0 million shares of common stock  authorized and are obligated under the terms
of the  Preferred  Stock  Agreement to seek  approval of  additional  authorized
shares at our 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,  we  engaged  San  Jacinto  Securities,  Inc.  ("SJS"),  an
investment  banking  firm  located in Dallas,  Texas,  to assist us in  pursuing
various strategic alternatives.  Their efforts have focused primarily on seeking
a potential  merger  candidate for us. In exchange for their  services,  SJS was
paid a  $150,000  non-refundable  cash  fee in  1999  (which  was  expensed  for
financial statement reporting purposes) and will receive an additional 3% of the
merger value in excess of $5.0 million should it close.  On September 1, 1999 we
entered into a Merger Agreement with Carpatsky Petroleum, Inc. ("Carpatsky"),  a
company whose primary oil and gas assets are located in the Republic of Ukraine.
The potential merger with Carpatsky and a description of Carpatsky's assets, are
more thoroughly  discussed in our 1999 Annual Report on Form 10-KSB.  We entered
into the merger  agreement  with  Carpatsky  in order to,  among  other  things,
increase  and  diversify  our asset base and improve  the  chances of  financing
future opportunities.

If the  contemplated  merger  with  Carpatsky  cannot  be  consummated  within a
reasonable  period of time, or is otherwise  abandoned  then we may have to seek
additional  financing.  However,  our 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 our  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,   we  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.





                                       -9-

<PAGE>



RESULTS OF OPERATIONS

Overview
Our  largest  source of  operating  revenue  is from the sale of  produced  oil,
natural gas, and natural gas liquids.  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 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.

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

                                           For the Three Months
                                              Ended March 31,
                                           2000          1999
                                         ---------   -----------
Production:
    Oil (Bbls) ......................      23,072        18,171
    Gas (Mcf) .......................      52,397       107,356
    BOE (6:1) .......................      31,805        36,064
Average Collected Price:
    Oil (per Bbl) ...................   $   27.93     $   10.87
    Gas (per Mcf) ...................        2.95          2.00
    Per BOE (6:1) ...................       25.12         11.42
 Operating Margins:
        Revenue -
                 Oil ................   $ 644,497     $ 197,534
                 Gas ................     154,501       214,260
                                        ---------     ---------
                        Total Revenue     798,998       411,794

        Costs
                  Lifting Costs .....     (73,799)      (44,087)
                  Production taxes ..     (89,279)      (40,389)
                                        ---------     ---------
                        Total Costs .    (163,078)      (84,476)
                                        ---------     ---------
        Operating Margin ............   $ 635,920     $ 327,318
                                        =========     =========
        Operating Margin Percent ....          80%           79%

Production Costs per BOE before DD&A    $    5.13     $    2.34
                                        =========     =========
Change in Revenue Attributable to:
        Production ..................   $ (56,409)
        Price .......................     443,613
                                        ---------
Total Increase in Revenue ...........   $ 387,204
                                        =========

The  decrease  in gas  production  between the periods  presented  is  primarily
attributed to the Maurice Field operations  (operated by AHC) where: a.) we have
experienced  the  natural  decline  of  production   inherent  in  oil  and  gas
operations;  and b.) the loss of one  well in  September  1999 due to  down-hole
mechanical problems.  Absent any unforeseen negative circumstances or additional
discoveries,  we  expect  gas  production  for  the  remainder  of  2000  to  be
approximately 50% of what it was in 1999.




                                      -10-

<PAGE>



Production costs per BOE have increased during the periods presented due to: 1.)
a  substantial  portion of the  production  taxes is based on revenue  (vs.  the
volume  produced),  and 2.) increased water  production at the East Bayou Sorrel
facility  has  significantly  increased  the  lifting  costs for the three wells
currently  producing  there.  We  expect  the  production  costs  to  remain  at
approximately $5.00 per BOE for the remainder of 2000.

Substantially,  all of our current oil and gas  production is now generated from
four of the ten  wells in which we hold a  working  interest.  Of the four  main
producing  wells,  three are  operated by NEG,  and the other one is operated by
AHC. All these wells are deep, high pressure,  water driven  reservoirs that are
inherently   laden  with  geologic,   geophysical,   and  mechanical  risks  and
uncertainties.  The  unexpected  loss of any one of  these  wells  would  have a
material negative impact on our estimated reserves, future production and future
cash flows.

Consulting Arrangement - Related Party
In March  1996 we  entered  into a  three-year  consulting  agreement  with Beta
Capital  Group,  Inc.  ("Beta")  located in Newport  Beach,  California.  Beta's
chairman,  Steve  Antry,  has been a director of Pease since  August  1996.  The
consulting agreement, which ended in February 1999, provided for minimum monthly
cash payments of $17,500 plus reimbursement for out-of-pocket expenses.  Stephen
Fischer,  an  independent  contractor for Beta, is also a member of our Board of
Directors.  Messrs.  Antry and  Fischer are also  principals  of Beta Oil & Gas,
Inc., a publicly held oil and gas company.

General and Administrative
General and  administrative  ("G&A")  expenses  decreased only $6,293 during the
first  quarter of 2000 when  compared to the same period in 1999.  However,  the
costs in 2000  include  $47,088  incurred in  connection  with the  contemplated
merger with Carpatsky.

We have taken  steps to  significantly  reduce  future G&A costs,  and we expect
"core" G&A costs in 2000 to be between $40,000 to $50,000 per month. However, we
expect additional amounts  (aggregating  $50,000 to $75,000) will be incurred in
connection with the efforts to consummate the merger transaction with Carpatsky.

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
                                              2000                 1999
                                         ------------          -------------
         Oil and Gas Properties          $ 246,828              $   257,091
         Furniture and Fixtures              4,929                    6,284
                                          -----------         --------------
           Total                         $ 251,757              $   263,375
                                          =========              ===========

DD&A for the oil and gas properties,
per BOE:                                 $    7.76              $      7.13
                                        ============           ==============

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".



                                      -11-

<PAGE>



Interest Expense
Total interest  incurred,  and its allocation,  for the periods  presented is as
follows:

                                            For the Three Months Ended March 31
                                                     2000         1999
                                                ------------  -------------
Interest paid or accrued ......................   $  69,832   $  69,147
Amortization of debt discount .................      54,834      54,834
Amortization of debt issuance costs ...........      34,562      34,559
                                                  ---------   ---------
         Total interest incurred ..............     159,228     158,540
Interest capitalized for exploration activities     (69,182)    (68,610)
              Interest expense ................   $  90,046   $  89,930
                                                  =========    =========

Impairment - Oil and Gas Properties
We use the full cost method of accounting  for our 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 Pease's  proved  reserves.  Establishing  a direct
cause-and-effect  relationship  between  costs  incurred and  specific  reserves
discovered, which is the premise under the successful efforts accounting method,
is not relevant to the full cost concept.  However, the costs accumulated in our
full cost pool are  subject to a  "ceiling,"  as defined by  Regulation  SX Rule
4-10(e)(4).  No charge for  impairment  has been  recognized  during the periods
presented  because our ceiling is in excess of the costs accumulated in our full
cost pool.

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
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" regarding Pease's contemplated merger,  financial position,  reserve
quantities, plans and objectives of Pease's management for future operations and
capital   expenditures,   and   statements   regarding  the  planned   Carpatsky
transactions  and the Carpatsky  assets are  forward-looking  statements and the
assumptions upon which such forward-looking statements are based are believed to
be reasonable.  We 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 our control.
Such risks and uncertainties 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  contemplated  merger not be
consummated,  our ability to generate additional capital to complete our 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;  U.S. and
foreign government regulation;  environmental matters; implications to Carpatsky
from conducting its operations in Ukraine and related political and geographical
risks;  financial  condition  of  the  other  companies   participating  in  the
exploration,  development  and  production  of oil and gas  programs;  and other
matters beyond our control. In addition,  since all of the prospects in the Gulf
Coast are currently  operated by another  party,  we 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 Pease or persons
acting  on our  behalf  subsequent  to the  date of this  report  are  expressly
qualified in their entirety by this disclosure.

                                      -12-

<PAGE>



PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

We 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.  At March 31, 2000 and as
of the date of this  report,  we were not  involved in any  litigation  which we
believe could have a materially  adverse  effect on our  financial  condition or
results of operations.

Recent  Sales  of  Unregistered  Securities  - We have  not  issued  or sold any
unregistered  securities during the three months ended March 31, 2000 or through
the date of this report.

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.  However,  on March
31, 2000 there were 105,828  outstanding shares of Series B Preferred Stock held
by 10 holders.  The Series B Preferred Stock is convertible into common stock at
a 25% discount from the reported closing market price at the time of conversion.
Based on such price on March 31, 2000, the outstanding  Series B Preferred Stock
would have been convertible into  approximately  16.6 million common shares. Our
Articles of Incorporation  authorize a total of up to 4,000,000 shares of common
stock, of which 1,731,398 are currently issued and outstanding. We are obligated
to take appropriate action and seek stockholder  approval to increase the number
of authorized  common stock at the next meeting of  stockholders  to provide for
this contingency. In connection with the contemplated merger with Carpatsky, all
of the  preferred  stockholders  have agreed that as long as the merger is being
pursued that they will:  a.) not convert any preferred  shares into common;  b.)
not receive any dividends subsequent to September 1, 1999; and c.) will exchange
all the outstanding preferred stock for 8,865,665 shares of common if the merger
is ultimately consummated.

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

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

Item 5. Other Information

There is no  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, 2000.

(b)      Reports on Form 8-K: Pease filed the following  reports on Form 8-K for
         the period January 1, 2000 through the date of this report:

           Item Reported            Date                 Financial Statements
           -------------      ------------------        ----------------------
    (1)          5,7          January 13, 2000           None - Not Applicable




                                      -13-

<PAGE>


                                   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 15, 2000                  By: /s/ Patrick J. Duncan
                                    Patrick J. Duncan
                                    President, Chief Financial Officer
                                    and Principal Accounting Officer




                                      -14-