SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 FORM 10-QSB/A
     |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                      FOR THE QUARTER ENDED MARCH 31, 1997
       |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                          Commission File Number 0-6580
                            PEASE OIL AND GAS COMPANY
           (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) (Zip code)

                                 (970) 245-5917
                (Issuer's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                     (None)

           Securities registered pursuant to Section 12(g) of the Act:
     Common Stock (Par Value $.10 Per Share) Series A Cumulative Convertible
                  Preferred Stock (Par Value $0.01 Per Share)
             Common Stock Purchase Warrants (Expire August 13, 1998)
                                 Title of Class

Indicate by check mark whether the issuer: (1) has filed all reports required to
be filed by  Section 13 or 15(d) of the  Exchange  Act 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,  1997 the  issuer  had  12,617,886  shares  of its $0.10 par value
Common  Stock and  122,922  shares of its  $0.01 par value  Series A  Cumulative
Convertible Preferred Stock issued and outstanding.

        Transitional Small Business Issuer Disclosure Format Yes___ No X



                                        1

<PAGE>



TABLE OF CONTENTS


                                                                      PAGE
                                                                      NUMBER


PART I - Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets                                            3-4
March 31, 1997 (unaudited)
and December 31, 1996

Consolidated Statements of Operations                                   5
For the Three Months
Ended March 31, 1997
(unaudited) and 1996 (unaudited)

Consolidated Statements of Cash Flows                                  6-7
For the Three Months Ended March 31, 1997
(unaudited) and 1996 (unaudited)

Notes to Consolidated Financial Statements                             8-9

Item 2. Management's Discussion and Analysis of                       10-19
Financial Condition and
Results of Operations

Part II - Other Information                                           19-22

Part III - Signatures                                                   22



                                        2

<PAGE>



PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                               March 31,          December 31,
                                                 1997                1996
                                             ------------        -------------
                                               (unaudited)
CURRENT ASSETS:
 Cash and equivalents                      $   2,901,908         $  1,995,860
 Trade receivables                               591,335              599,648
 Inventory                                       459,304              408,787
 Prepaid expenses and other                       88,636               56,327
                                              ------------        ------------
   Total current assets                        4,041,183            3,060,622
                                              ------------        ------------

OIL AND GAS PROPERTIES, at cost
(successful efforts method):
 Exploratory wells in progress                   527,439              181,312
 Undeveloped properties                        2,101,727              351,727
 Developed properties                         12,697,554            9,505,408
                                             -------------        ------------
   Total oil and gas properties               15,326,720           10,038,447
 Less accumulated depreciation
 and depletion                                (4,086,845)          (3,946,974)
   Net oil and gas properties                 11,239,875            6,091,473

PROPERTY, PLANT AND EQUIPMENT, at cost:
 Gas plant                                     4,099,285            4,099,285
 Service equipment and vehicles                  891,512              879,313
 Land, buildings and office equipment            459,228              459,228
                                              -------------        ------------
   Total property, plant and equipment         5,450,025            5,437,826
 Less accumulated depreciation                (1,454,796)          (1,376,154)
                                             --------------       -------------
   Net property, plant and equipment           3,995,229            4,061,672
                                              -------------        ------------

OTHER ASSETS:
 Non-compete agreements, net                     295,179              306,678
 Other                                           272,493              274,830
 Deferred debt issuance costs (Note 5)           956,465            1,093,479
                                              -------------      ------------
   Total other assets                          1,524,137            1,674,987
                                              -------------      ------------

TOTAL ASSETS                                $ 20,800,424         $ 14,888,754
                                              ============       ============


                                        3

<PAGE>



                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (continued)



                                                 March 31,        December 31,
                                                   1997               1996
                                               ------------        ---------
                                               (unaudited)
CURRENT LIABILITIES:
 Current maturities of long-term debt:
      Related parties                         $     -           $    285,895
      Other                                       32,610              45,944
 Accounts payable, trade                         605,412             267,540
 Accrued production taxes                        288,122             288,122
 Other accrued expenses                          199,869             265,427
                                              -----------        ------------
    Total current liabilities                  1,126,013           1,152,928
                                              -----------        ------------

LONG-TERM LIABILITIES:
 Long-term debt, less current maturities:
   Convertible debentures, net of discount
     of $1,515,064 and $1,732,170,
     respectively (Note 5)                     3,134,936           3,267,830
   Other                                          29,855              19,945
 Accrued production taxes                        309,284             256,088
                                              -----------        ------------
 Total long-term liabilities                   3,474,075           3,543,863
                                              -----------        ------------

STOCKHOLDERS' EQUITY:
 Preferred  Stock,  par  value $ .01 per
   share,  2,000,000  shares  authorized,
   122,922 and 179,938 shares of Series A
   Cumulative Convertible Preferred Stock
   issued and outstanding, respectfully
   (liquidation preference of $1,536,525
   at March 31, 1997)                              1,229               1,799
 Common Stock, par value $.10 per share,
   25,000,000 shares authorized, 11,510,819
   and 7,526,817 shares issued and
   outstanding, respectively                   1,151,082             752,682
 Additional paid-in capital (Note 5)          25,333,046          19,112,104
 Accumulated deficit (Note 5)                (10,285,022)         (9,674,622)
                                             ------------        ------------
   Total stockholders' equity                 16,200,336          10,191,963
                                             ------------        ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 20,800,424        $ 14,888,754
                                             ============        ============








                                        4

<PAGE>



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

                                                     For The Three Months
                                                        Ended March 31,
                                                      1997            1996
                                                   ----------       --------
REVENUE:
 Oil and gas sales                                $  789,206      $  613,099
 Natural gas marketing and trading                      -          1,345,955
 Gas plant processing                                209,510         187,843
 Oil field services and supply                       198,319         201,602
 Well administration and other income                 21,805          30,749
                                                   ----------      ----------
    Total revenue                                  1,218,840       2,379,248
OPERATING COSTS AND EXPENSES:
 Oil and gas production                              327,799         293,916
 Exploration costs                                   307,280            -
 Natural gas marketing and trading                      -          1,130,663
 Gas plant processing                                104,838         125,241
 Oil field services and supply                       153,658         147,275
 General and administrative                          325,449         225,538
 Consulting agreement-related party                   83,383          15,048
 Depreciation, depletion and amortization            261,232         274,148
                                                   ----------      ----------
    Total operating costs and expenses             1,563,639       2,211,829
                                                   ----------      ----------
INCOME (LOSS) FROM OPERATIONS                       (344,799)        167,419
OTHER INCOME (EXPENSES):
 Interest income                                      18,059           1,408
 Interest expense:
   Amortization of debt issuance costs and
      discount (Note 5)                             (160,127)            -
   Interest paid or accrued                         (125,889)        (58,119)
 Gain (Loss) on sale of assets                         2,356          (1,539)
                                                   -----------     -----------
    Total other expenses, net                       (265,601)        (58,250)
                                                   -----------     -----------
INCOME (LOSS) BEFORE INCOME TAXES                   (610,400)        109,169
INCOME TAXES:
  Federal income tax refund                             -             41,509
                                                   -----------      ----------
NET INCOME (LOSS)                                   (610,400)        150,678
Preferred stock dividends:
  In arrears                                         (30,731)        (50,672)
  Converted into common stock                        (14,254)           -
                                                   -----------      ----------
NET INCOME (LOSS) APPLICABLE TO COMMON
 STOCKHOLDERS                                     $ (655,385)     $  100,006
                                                  ===========       ==========
NET INCOME (LOSS) PER COMMON SHARE
      As previously reported                      $     (.06)     $      .01
      Effect of prior period adjustment(Note 5)         (.01)          -
                                                  -----------       ----------
      As restated                                 $     (.07)     $      .01
                                                  ===========       ==========

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES OUTSTANDING                                8,923,500       7,316,500
                                                  ===========       ==========

                                        5

<PAGE>



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

                                                         For The Three Months
                                                            Ended March 31,
                                                         1997           1996
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                                    $(610,400)       $150,678
Adjustments to reconcile net loss to net cash
provided by operating activities:
provided by operating activities:
   Provision for depreciation and depletion            249,733         262,649
   Amortization of intangible assets and
      discount on convertible debt                     171,626          14,624
   Loss (Gain) on sale of property and equipment        (2,356)          1,539
   Exploration costs                                   307,280             -
   Issuance of common stock for services                 8,000             -
   Changes in operating assets and liabilities:
   (Increase) decrease in:
   Trade receivables                                     8,313        (115,625)
   Inventory                                           (50,517)         28,181
   Prepaid expenses and other assets                   (29,972)        (17,005)
   Increase (decrease) in:
   Accounts payable                                    108,769         (53,193)
   Accrued expenses                                    (12,362)          1,906
                                                   -----------         --------
         Net cash provided by (used in)
         operating activities                          148,114         273,754
                                                   -----------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property plant and         (1,184,492)       (144,575)
equipment, including dry hole costs
Acquisitions of oil and gas properties              (3,375,000)           -
Proceeds from redemption of certificate of                -             13,001
deposit
Proceeds from sale of property and equipment            56,559           8,047
                                                   -----------         --------
      Net cash provided by (used in)
      investing activities                           4,502,933        (123,527)
                                                   -----------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt                            (33,006)       (267,813)
Repayment of long-term debt to related parties        (285,895)           -
Proceeds from sale of common stock                   3,880,000          68,750
Proceeds from exercise of common stock warrants      2,264,650            -
Offering costs                                        (564,882)           -
                                                   -----------        ---------
       Net cash provided by (used in)
       financing activities                          5,260,867        (199,063)
                                                   -----------        ---------

INCREASE (DECREASE) IN CASH AND EQUIVALENTS            906,048         (48,836)
CASH AND EQUIVALENTS, beginning of period            1,995,860         677,275
                                                   -----------         --------
CASH AND EQUIVALENTS, end of period                 $2,901,908        $628,439
                                                    ==========         ========





                                        6

<PAGE>


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



                                                         For The Three
                                                        Ended March 31,
                                                        1997        1996

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
   Cash paid for interest:
         Related parties                             $  42,417    $    -
     Other                                             118,597      50,700
                                                      --------     ---------
       Total                                         $ 161,014    $  50,700
                                                     =========      ========
   Cash paid for income taxes                        $   -        $    -
                                                      ========      ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES:
Long-term debt incurred for purchase of
    vehicles                                         $  29,582    $    -
                                                      ========      ========
Conversion of debenture into common stock            $ 350,000    $    -
                                                      ========      ========
Acquisition of oil and gas property
    for common stock                                 $ 875,000    $    -
                                                      ========      ========
Estimated fair value of warrants granted for
    debt issuance costs                              $    -       $ 200,000
                                                      =========     =========




                                        7

<PAGE>


                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (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,  1996.  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,
1996. 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 - Income Taxes:

The total  income tax expense or benefit  differs  from the amount that would be
provided by applying the  statutory  U.S.  Federal  income tax rate to income or
loss before taxes  primarily due to the  utilization of net operating loss carry
forwards, tax credit carry forwards, and percentage depletion carry forwards.

The income tax refund of $41,509  recorded  during the first  quarter of 1996 is
related to a net  operating  loss  carry  back that was filed with the  Internal
Revenue Service in March 1996.

Note 3 - Net Income (Loss) Per Common Share:

The net income per common  share for the first  quarter of 1996 was  computed by
dividing net income applicable to common  stockholders (which includes preferred
stock dividends in arrears during the period  presented) by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the period. All the outstanding  options and warrants that had an exercise price
below  the  market  value  at  March  31,  1996  were  considered  common  stock
equivalents  and were included in the earnings per share  computation  using the
treasury stock method.

                                        8

<PAGE>



                   PEASE OIL AND GAS COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The net loss per  common  share for the first  quarter of 1997 was  computed  by
dividing  the  net  loss  applicable  to  common  stockholders  (which  includes
preferred  stock  dividends  in  arrears  during the  period  presented)  by the
weighted  average  number of common shares  outstanding  during the period.  All
common stock  equivalents  were  excluded  from the  computations  because their
effect would be anti-dilutive.

Note 4 - Reclassifications:

Certain  reclassifications  have been made to the 1996  financial  statements to
conform to the presentation in 1997. The  reclassifications had no effect on the
1996 net income.

Note 5 - Prior Period Adjustments:

The carrying amount of the convertible debentures, deferred debt issuance costs,
additional  paid-in capital,  the accumulated  deficit and interest expense have
been restated to change the valuation  assigned to the warrants  attached to the
convertible  debentures  issued in 1996.  The effect of the  adjustments  on the
March 31, 1997 financial statements is summarized as follows:

<TABLE>
<CAPTION>

                                 Deferred                                        Net Loss       Net Loss for
                                 Debt          Additional                        Applicable     the Three
                  Convertible    Issuance      Paid-in         Accumulated       to Common      Months Ended
                  Debentures     Costs         Capital         Deficit          Stockholders      3/31/97
As previously
<S>              <C>           <C>             <C>            <C>             <C>              <C>
reported ......  $ 4,650,000   $   1,042,074   $ 23,807,265   $(10,188,695)   $    (559,058)   $   (559,058)

Prior period
adjustments ...   (1,515,064)        (85,609)     1,525,781        (96,327)         (96.327)        (96,327)
                 -----------   -------------   ------------   ------------    -------------    ------------
As restated ...  $ 3,134,936   $     956,465   $ 25,333,046   $(10,285,022)   $    (655,385)   $   (655,385)
                 ===========   =============   ============   ============    =============    ============
</TABLE>


The prior  period  adjustments  had no effect  on the March 31,  1996  financial
statements as previously reported.

                                                              9

<PAGE>



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS

Liquidity and Capital Resources
At March 31, 1997,  the Company's  cash balance was  $2,901,908  with a positive
working capital position of $2,915,170, compared to a cash balance of $1,995,860
and a positive  working capital position of $1,907,694 at December 31, 1996. The
change in the Company's cash balance is summarized as follows:

 Cash Balance at December 31, 1996                                  $ 1,995,860
 Sources of Cash:
      Proceeds from the sale of common stock                          3,880,000
      Proceeds from the exercise of common stock warrants             2,264,650
      Cash provided by operating activities                             148,114
      Proceeds from the sale of property and equipment                   56,559
                                                                     ----------
             Total Sources of Cash                                    6,349,323
 Uses of Cash:
      Acquisition of oil and gas interest in
         East Bayou Sorrel                                           (3,375,000)
   Other Capital Expenditures                                        (1,184,492)
      Costs associated with the sale of common stock and
         exercise of common stock warrants                             (564,882)
      Payments on long term debt                                       (318,901)
             Total uses of cash                                      (5,443,275)
 Cash balance at March 31, 1997                                     $ 2,901,908

Although most of the Company's  sources of cash during the first quarter of 1997
were derived from equity transactions (which are discussed more thoroughly later
in this report under Item 2(c) in Part II below), it is important to note that a
portion  of the funds were used to acquire a  significant  interest  in the East
Bayou Sorrel Field, located in Iberville Parish,  Louisiana. This field includes
a discovery well, the Schwing #1 that accounted for 20% of the Company's oil and
gas production (on a BOE basis),  23% of the Company's oil and gas revenue,  and
34% of the Company's  operating  income from oil and gas  activities  during the
first quarter of 1997. The operating  statistics  for this well,  along with all
the other  oil and gas  properties,  are more  fully  illustrated  later in this
report under the Results of Operations  section under the caption "Oil and Gas".
The exploratory offset to the C.E. Schwing #1, known as the C.E. Schwing #2, was
drilled to a total depth of 13,600 feet during the second  quarter of this year.
The Company  anticipates  it will be completed by the end of May and is awaiting
the test  results.  Should the Schwing #2 ultimately  produce  similar or higher
rates as those currently being produced by the Schwing #1, the Company's  future
production and cash flow could be enhanced considerably.

The  acquisition  of the  interest  in East Bayou  Sorrel is  indicative  of the
Company's  commitment to maintain its charted  course of action to cultivate its
existing asset base in the Rocky Mountain  region and expand into the Gulf Coast
region of Alabama, Southern Louisiana and Texas. However, this

                                       10

<PAGE>



course of action  will  require  the  Company  to seek a  significant  amount of
additional capital to fully fund and continue to implement this plan.

On February 4, 1997,  the Company  signed a definitive  agreement  with National
Energy Group, Inc. ("NEGX"),  a publicly held Company,  headquartered in Dallas,
Texas.  The  agreement   provides  the  Company  the  right  and  obligation  to
participate  with NEGX in  various  oil and gas  exploration  projects  over the
course of next two years.  Essentially,  the  agreement  consists  of three main
elements.  First,  the Company has the right and  obligation to participate as a
12.5% working  interest  owner in NEGX's  outlined  program which consists of 10
identified projects in Alabama,  Southern Louisiana,  and Texas. Second, subject
to certain  conditions  defined in the agreement,  the Company has the right and
obligation  to  participate  in  any  future  projects  generated  under  NEGX's
exclusive  arrangement  with  Sandefer Oil and Gas Company,  Inc.  ("Sandefer").
Sandefer is a private  corporation  owned and operated by a group of  geologists
and geophysicists who generate Gulf Coast,  Southern Louisiana and other wildcat
prospects.  Third,  the Company is entitled  to  participate  in any other third
party  generated   prospects  that  NEGX  participates  in  subject  to  certain
conditions as defined in the agreement.

Pursuant  to the  terms  of the  agreement  with  NEGX,  the  Company's  minimum
obligation  is at least $5.0 million per year in dry hole,  or drilling,  costs.
Additional  costs will be incurred for completion and  development of successful
projects.  Accordingly,  the Company  anticipates the actual  obligation will be
higher  assuming  that a  reasonable  amount of  success  is  achieved  with the
underlying  prospects.  If all the prospects  prove to be productive  (which the
Company  believes is unlikely as the drilling  program is a wildcat  exploration
program),  the total  obligation  to the  Company for 1997 could be in excess of
$20.0 million.

If all the contemplated  exploratory prospects are successful and the properties
are eventually fully developed,  the net reserves  attributable to the Company's
interest would be several times the Company's  present  reserves.  The Company's
current  reserves are  approximately 2 million  barrels of oil (or  equivalent).
Accordingly,  the agreement  with NEGX provides the Company with an  exploration
program that has the potential to significantly  increase its existing  reserves
and future cash flow.

The Company's  current cash position should cover the Company's  working capital
needs,  including the anticipated  exploration  costs associated with the letter
agreement  with NEGX, at least through the second  quarter of 1997.  After that,
the Company will need to seek additional  financing.  Anticipating  the need for
additional  financing,  in February 1997 the Company signed a non-binding letter
of intent with a brokerage  firm setting  forth the terms and  conditions  under
which the  broker  will  attempt  to assist the  Company  with a future  private
placement.  The letter  agreement with the brokerage firm  contemplates a future
placement  of at least $6.0  million  dollars  in common  stock in the second or
third  quarter of 1997.  The  agreement  is  subject  to  several  contingencies
including, but

                                       11

<PAGE>



not limited to, due diligence and the execution of formal agreement.

If the  Company is  unsuccessful  in  completing  the private  placement,  or if
additional funds are necessary either before or after such a transaction,  it is
uncertain at this time what actions the Company will take. Possibilities include
other debt or equity financings or the sale of certain existing assets.

In March 1996 the  Company  retained  Beta  Capital  Group,  Inc.  ("Beta") as a
consultant  to the Company.  Beta is located in Newport  Beach,  California  and
specializes in emerging oil and gas companies that have capital  resources needs
and market  support  requirements.  Beta has worked  closely with the Company to
structure  its  financings  and meet the  Company's  expected  cash and  capital
resources requirements.  Beta's President, Steve Antry, was an officer of Benton
Oil and Gas  Company  between  1989 and 1992.  During that time,  Mr.  Antry was
instrumental  in  obtaining  various  sources of capital that Benton Oil and Gas
required  during  a  very  significant  growth  period.  Based  on  Mr.  Antry's
background,  the  Company  believes  that  Beta adds a  tremendous  value to the
Company because of their network of financial resources.  Therefore, the Company
will attempt to utilize Beta's syndication of financial resources to fund future
capital requirements.

Capital Expenditures

During the first quarter of 1997, the Company capitalized or invested $4,559,492
in property and equipment as follows:

 Acquisition of oil and gas interest in East Bayou Sorrel           $ 3,375,000
 Drilling Costs -
     Exploratory wells in progress                                      346,127
     Exploratory Dry Hole                                               307,280
          Total Drilling Costs                                          653,407
 Workovers or Recompletions of existing properties                      525,974
       Total Oil and Gas properties                                   4,554,381
 Service Equipment and Rolling Stock                                      4,620
 Office Equipment                                                           491
                                                                     ----------
                                                                    $ 4,559,492

The  acquisition  of the oil and gas  interest in East Bayou Sorrel is discussed
above. It is anticipated this field will ultimately be one of the Company's core
properties. NEGX, the operator of the property, has planned a 33-square mile 3-D
seismic program covering the East Bayou Sorrel field and surrounding areas later
this  year.  The 3-D data will  complement  an  already  extensive  database  of
reprocessed 2-D seismic and a number of existing well logs.

At March 31, 1997, the well in progress and corresponding costs incurred through
the first quarter were as follows:


                                       12

<PAGE>



                                     Costs
                                    Incurred        12/31/96      Total WIP
                                  1st Qtr 1997      Balance      at 3/31/97
C.E. Schwing #2 (Bayou Sorrel)     $ 302,391       $   -         $ 302,391
E. Winn #1 (South Lake Arthur)        43,736         181,312       225,048
                                    --------      ---------        --------
      Totals                       $ 346,127       $ 181,312     $ 527,439
                                    ========       ========        ========

As previously  discussed,  the C.E.  Schwing #2 is a exploratory well located in
East Bayou Sorrel  Field,  Iberville  Parish,  Louisiana,  and is expected to be
completed  by the end of May 1997.  The E. Winn #1, an  exploratory  well in the
South Lake Arthur Prospect,  located in Jefferson Devis Parish,  Louisiana,  was
drilled  to a total  depth of  17,800  feet in  April  1997.  Although  the deep
objective of a Miogyp Sand test was dry, a  potentially  productive  zone uphole
was found.  The Company  expects this upper zone to be  completed  and tested by
June  1997.  All the costs  incurred  to  acquire  and drill this well have been
capitalized  and will remain that way,  along with the future  completion  costs
expected to be  incurred,  until the outcome of the  completion  procedures  are
known.

Brazos Block 480, an offshore prospect in Texas, was drilled to a total depth of
13,500 feet in May 1997 and found to be dry. The  Company's  portion of the cost
of this exploratory dry hole was $307,280.

In the  first  quarter  of 1997,  the  Company  spent  $525,974  for  workovers,
recompletions and equipment acquisitions related to maintaining or enhancing the
current production of its producing oil and gas properties in the Rocky Mountain
region.

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. As a result,  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.



                                       13

<PAGE>



Total Revenue
Total Revenue from all operations was as follows:

                                            For the Three Months Ended March 31,
                                               1997                    1996
                                             -------------          ----------
                                             Amount    %           Amount     %
Oil and gas sales                        $  789,206  65%       $  613,099   26%
Natural gas marketing and trading                -              1,345,955   56%
Gas plant processing                        209,510  17%          187,843    8%
Oil field services and supply               198,319  16%          201,602    9%
Well administration and other                21,805   2%           32,157    1%
                                           --------- ----        ---------  ----
   Total revenue                         $1,218,840 100%       $2,380,656  100%
                                          ========= ====        =========  ====

The  decrease in total  revenue is primarily a result of the  expiration  of the
Company's natural gas marketing and trading contract with Public Service Company
of Colorado effective July 1, 1996. The Company has not been able to conduct any
natural gas trading  activities  subsequent to June 30, 1996. As illustrated for
the first three  months of 1996,  revenues  generated  from that  contract  were
$1,345,955,  or 56% of the total  revenue.  The loss of this  contract has had a
material  negative  effect  on  the  Company's   results  of  operations.   This
circumstance,  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.

Oil and Gas
Operating statistics for oil and gas production for the periods presented are as
follows:
                                                    For the Three Months
                                                        Ended March 31,
                                                  1997               1996
                                               ----------          -----------
Production:
      Oil (Bbls)
             Rocky Mtns ............             19,969               26,608
             East Bayou Sorrel .....              7,829                 -
                                                --------             --------
                    Combined Total .             27,798               26,608
                                                ========             ========
      Gas (Mcf)
             Rocky Mtns ............             95,443              111,925
             East Bayou Sorrel .....              6,864                 -
                                                --------             --------
                    Combined Total .            102,307              111,925
                                                ========             ========
      BOE (6:1)
             Rocky Mtns ............             35,876               45,262
             East Bayou Sorrel .....              8,973                 -
                                                --------             --------
                    Combined Total .             44,849               45,262
                                                ========             ========

Average Collected Price:
      Oil (per Bbl)
             Rocky Mtns ............           $  21.35             $  17.74
             East Bayou Sorrel .....           $  20.87             $   -
                                               --------              --------
                    Combined Average           $  21.22             $  17.74
                                               ========             ========


                                       14

<PAGE>



                                                     For the Three Months
                                                        Ended March 31,
                                                      1997            1996
                                                   ----------        --------
      Gas (per Mcf)
             Rocky Mtns.                           $   1.86          $ 1.26
             East Bayou Sorrel                     $   3.17          $   -
                                                   ----------        --------
                    Combined Average               $   1.95          $ 1.26
                                                   ==========        =========
      Per BOE (6:1)
             Rocky Mtns.                           $  16.84          $13.55
             East Bayou Sorrel                     $  20.63          $   -
                                                   ----------        ---------
                    Combined Average               $  17.60          $13.55
                                                   ==========        =========
Operating Margins:
      Rocky Mtns:
             Revenue                               $ 604,056         $ 613,099
             Costs                                 $(299,336)        $(293,916)
                                                   -----------       ----------
                    Operating Margin               $ 304,720         $ 319,183
                                                   ==========        =========
                    Operating Margin Percent              50%               52%
      East Bayou Sorrel:
             Revenue                               $ 185,150         $   -
             Costs                                 $ (28,463)        $   -
                                                  -----------        ---------
                    Operating Margin               $ 156,687         $   -
                                                   ==========        =========
                    Operating Margin Percent              85%            -
      Combined Totals:
             Revenue                               $ 789,206         $ 613,099
             Costs                                 $(327,799)        $(293,916)
                                                  -----------       ----------
                    Operating Margin               $ 461,407         $ 319,183
                                                   ==========        =========
                    Operating Margin Percent             58%                52%
Production Costs per BOE before DD&A:
      Rocky Mtn Region                             $    8.37         $    6.49
      Gulf Coast Region                            $    3.17         $     -
                                                   ----------        ----------
      Combined Average                             $    7.33         $    6.49
                                                   ==========        =========
Change in Revenue Attributable to:
      Production                                   $    8,972
      Price                                        $  167,135
                                                   ----------
      Total Increase in Revenue                    $  176,107
                                                   ==========

Most  of the  decrease  in oil  and  gas  production  can be  attributed  to the
following: 1) the sale of several marginal,  uneconomic, or nonstrategic oil and
gas  properties in the second quarter 1996 that accounted for 3,900 bbls. of oil
and 4,500 Mcf of gas during the first  quarter of 1996;  and 2) to a much lesser
extent the natural  decline in production that is inherent in oil and gas wells.
Both these  circumstances were largely offset by an increase in commodity prices
and new production from the East Bayou Sorrel Field in Louisiana.

Natural Gas Marketing and Trading
Operating  statistics for the Company's Marketing and Trading Activities for the
periods presented are as follows:



                                       15

<PAGE>



                                                   For the Three Months Ended
                                                             March 31,
                                                    1997             1996
                                                 ----------        --------
Total Volume Sold (Mcf)                               -            725,479
Average Price                                   $     -         $     1.86
                                                 ----------       ----------
      Total Revenue                             $     -         $1,345,955
Costs                                                 -         (1,130,663)
                                                 ----------      -----------
      Gross Margin                              $     -         $  215,292
                                                 ==========       ==========

The Company had a "take-or-pay" contract with Public Service Company of Colorado
("PSCo")  which  called for PSCo to purchase  from the Company a minimum of 2.92
billion cubic feet ("BCF") of natural gas  annually.  The price paid the Company
by PSCo was based on the Colorado Interstate Gas Commission's "spot" price, plus
a fixed price bonus. The natural gas marketing and trading activities  represent
natural  gas that was  purchased  from third  parties and sold to PSCo under the
terms of the contract.

The contract with PSCo expired on June 30, 1996. Historically, the price paid by
PSCo under that contract was at a premium above the market and therefore allowed
for the  marketing  and  trading  activities.  Although  the  Company  has  been
negotiating  with  PSCo to renew the  contract,  no  formal  agreement  has been
reached as of the date of this report.  Consequently,  no marketing  and trading
revenues have been  generated  subsequent to June 30, 1996.  With the increasing
competition  fostering  within all phases of the  natural  gas  industry,  it is
unlikely  that the contract  will be renewed at an above market  premium,  if at
all,  and the Company is unlikely to resume  marketing  and trading  activities.
Since the gross margin  represents  the net cash flow and income  generated from
this  activity,  the loss of this  premium  contract  price  has and will have a
material and negative impact on the Company's current and future operations.

Gas Plant Processing Revenues
This category accounts for the natural gas processed and the natural gas liquids
extracted  and sold by the Gas  Plant  facility.  Operating  statistics  for the
periods presented are as follows:

                                            For the Three Months Ended March 31,
                                              1997                     1996
                                            -------                   ------
      Production:
        Natural Gas Processed (Mcf)          78,930                   91,590
        Liquids Produced -
               B-G Mix (gallons)            192,100                  226,300
               Propane (gallons)            159,100                  173,700
                                            -------                  -------
                    Total                   351,200                  400,000
                                            =======                  =======
   Average Sales Price of Liquids
       (per gallon)                         $  0.48                  $  0.42
                                            =======                  =======
      Gross Margin:                          Amount                   Amount
                                          ------------              ---------
               Revenue                  $   209,510              $   187,843
               Costs                       (104,838)                (125,241)
                                          ------------           ------------
                    Gross Margin        $   104,672              $    62,602
                                          ============            ===========
                    Gross Margin Percent        50%                      33%


                                       16

<PAGE>



The decrease in processing  volumes during 1997 when compared to the same period
in 1996,  can be  substantially  attributed to the normal  decline in production
from the two fields  owned and operated by the Company that supply the gas plant
with the natural gas. The increase in revenue and gross margin generated in 1997
when  compared  to the same period in 1996 is a direct  result of higher  liquid
prices in 1997.

Costs  associated with the Gas Plant  operations  consist of both semi-fixed and
variable  costs.  The  semi-fixed  costs consist of direct  payroll,  utilities,
operating supplies,  general and administrative costs, and other items necessary
in the day-to-day  operations.  The semi-fixed  costs are not expected to change
significantly  regardless of the volume processed by the Gas Plant. The variable
costs consist  primarily of purchased  gas,  plant fuel and shrink,  lubricants,
repair and maintenance,  and costs of gas marketing and buying.  These costs are
generally  a direct  function of the volume  processed  by the Gas Plant and are
expected to either increase or decrease  proportionately  with the corresponding
plant production. When compared to 1997, the costs in 1996 were higher in amount
and as a percentage of revenue as a result of processing  higher  volumes of gas
in 1996.

Oil Field Services and Oil Field Supply
Operating  statistics for the Company's oil field service and supply  operations
for the periods presented are as follows:

                                                       Service Operations
                                                      For the Three Months
                                                        Ended March 31,
                                                       1997         1996
Revenue                                             $  198,319   $ 201,602
Costs                                                 (153,658)   (147,275)
                                                      -----------  ----------
Net Operating Income                                $   44,661   $  54,327
                                                      ===========  =========

As expected,  there has been no material change in the results of operations for
the periods presented and the Company does not expect any significant changes in
the future.

Well Administration and Other Income
This  revenue  primarily  represents  the revenue  generated  by the Company for
operating oil and gas  properties.  There has been no significant  change in the
average  monthly  revenue  between 1997 and 1996 and the Company does not expect
any significant change in the future.

General and Administrative
General and administrative  expenses increased approximately $100,000 during the
first  quarter  of 1997  when  compared  to the  same  period  in 1996  which is
summarized as follows:




                                       17

<PAGE>



  $ 25,000  -      For consulting services (legal, land and other) associated
                   with the Company's expansion into the Gulf Coast.
    17,000  -      Travel costs associated with the Company's expansion into
                   the Gulf Coast.
    17,000  -      Payroll costs associated with an increase in base pay and
                   insurance benefits for virtually all the Company's
                   officers and employees.
    13,000  -      A Directors and Officers Liability Insurance Policy
                   purchased on July 1, 1996.
    28,000  -      All other, net.
  --------
  $100,000

Consulting Arrangement - Related Party
In March 1996 the Company  entered into a three-year  consulting  agreement with
Beta Capital Group, Inc.  ("Beta").  Beta's  president,  Steve Antry, has been a
director of the Company since August 1996.  The  consulting  agreement with Beta
provides for minimum  monthly cash  payments of $17,500 plus  reimbursement  for
out-of-pocket expenses.

Depreciation, Depletion and Amortization
Depreciation,  Depletion and  Amortization  ("DD&A") for the periods  presented,
excluding the amortization of debt issuance costs, consisted of the following:

                                                    For the Three Months Ended
                                                              March 31,
                                                         1997         1996
      Oil and Gas Properties                       $   139,872    $   157,901
      Gas Plant and Other Buildings                     60,929         62,072
      Rolling Stock                                     27,104         23,048
      Other Field Equipment                              9,458          7,945
      Furniture and Fixtures                            12,370         11,682
      Non-Compete Agreement                             11,499         11,500
                                                   -----------    -----------
             Total                                 $   261,232    $   274,148
                                                   ===========    ===========

DD&A per BOE for oil and gas  properties  decreased in the first quarter of 1997
when compared to the same period in 1996  primarily as a result of a decrease in
production from the Rocky Mountain region.  However, DD&A per BOE was relatively
constant  at $3.11  for the first  quarter  of 1997  compared  to $3.48 for same
period in 1996.

Interest Expense
The higher  interest  expense  incurred in 1996 is reflective of the increase in
the average  long-term debt  outstanding,  the amortization of the corresponding
debt issuance costs and the discount  associated with the convertible  debt. All
of these  circumstances are directly related to the convertible  debentures sold
by the Company pursuant to the private placement completed in November 1996.



                                       18

<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, 1997 and through the date of this Report.

1.  Effective  January 10, 1997 the Company  issued 315,000 shares of its common
stock to three unrelated  entities,  Atocha  Exploration,  Inc., Potosky Oil and
Gas, Inc., and Browning Oil Company, Inc., in exchange for an undivided interest
in a producing oil and gas prospect designated as the East Bayou Sorrel Prospect
in Iberville Parish, Louisiana.

2. Between  February 1, 1997 and March 10, 1997,  the Company  issued  1,500,000
shares of its common stock for  $3,750,000 to a group of private  investors each
of whom  qualified  as an  accredited  investor  as  such  term  is  defined  in
Regulation D adopted by the Securities and Exchange Commission. The Company paid
a selling  commission of $300,000.  The Company  relied upon Section 4(2) of the
Securities  Act and Rule 506 of  Regulation  D in  claiming  exemption  from the
registration requirements of the Securities Act for the securities sold.

3. Between March 14, 1997 and April 15, 1997,  the Company sold 52,000 shares of
its  common  stock for  $130,000  to a group of private  investors  each of whom
qualified  as an  accredited  investor as such term is defined in  Regulation  D
adopted by the  Securities and Exchange  Commission.  The Company paid a selling
commission of $10,400.  The Company  relied upon Section 4(2) of the  Securities
Act and Rule 506 of  Regulation D in claiming  exemption  from the  registration
requirements of the Securities Act for the securities sold.

4.  Through  May 12,  1997  holders of  $420,000  of the  Company's  outstanding
collateralized   convertible  10%  debentures  ("Debentures")  surrendered  such
Debentures to the Company for  conversion  into 139,999  shares of the Company's
common stock ($350,000 in Debentures were converted through March 31,

                                       19

<PAGE>




1997) in accordance  with  conversion  provisions of the  Debentures.  Shares of
common  stock  issued upon  conversion  have been  registered  for resale by the
holders on  Registration  No.  333- 19589.  The Company  relied upon Rule 506 of
Regulation D in claiming  exemption  for the  registration  requirements  of the
Securities Act for issuance of the securities upon exercise of the warrants.

5. On March 31, 1997, the Company issued 4,000 shares of its common stock to two
consultants of the Company in lieu of cash for consulting  services  rendered to
the Company valued at $8,000 for financial reporting purposes.

6. Between March 1, 1997 and April 15, 1997 the Company issued  2,482,500 shares
of its common stock upon  exercise of a like number of warrants upon exercise of
such warrants at $1.25 per warrant for a total proceeds of  $3,103,125.  Holders
of such warrants  acquired the warrants in the Company's 1996 private  placement
of Debentures  and warrants.  The warrants  would have expired if not previously
exercised  on April 15,  1997.  Shares  issued upon  exercise  of warrants  were
registered  by the Company for resale by the  holders in  Registration  No. 333-
19589.  The Company  relied upon Rule 506 of Regulation D in claiming  exemption
for the  registration  requirements  of the  Securities  Act for issuance of the
securities upon exercise of the warrants.

7. Between March 1, 1997 and May 12, 1997,  the Company issued 110,000 shares of
its common stock upon exercise of outstanding  stock purchase  warrants at $0.75
per share for total  proceeds  of  $82,500  to the  Company.  The  holder of the
warrants is an affiliate of Beta Capital Group, Inc. with whom the Company has a
consulting  agreement  and to whom the  warrants  were issued in February  1996.
Shares of common stock issued upon exercise of the warrants were  registered for
resale by the holder in Registration No. 333-19589.

8. Between  January 1997 and May 12, 1997,  the Company issued 275,625 shares of
its common stock upon exercise of outstanding  stock purchase warrants issued by
the Company between 1994 and 1996 to certain  broker/dealers  in connection with
private  placements of Company securities during such time. The Company received
$363,350  of proceeds  upon  exercise of the  warrants.  Shares of common  stock
issued upon  exercise  were  registered by the Company for resale by the holders
under Registration Nos. 333-19589 and 33-94536.

As to each issuance of securities  identified in paragraphs 1, 5, 7 and 8 above,
the Company relied upon Section 4(2) of the Securities Act in claiming exemption
for the registration requirement of the Securities Act.

                                       20

<PAGE>



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.

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)          In December 1994, the Board of Directors elected to forego the
             declaration of the regular quarterly dividend for the Company's
             Series A Cumulative Convertible Preferred Stock for the fourth
             quarter of 1994.  In March 1995, the Board of Directors elected to
             suspend the Preferred Stock dividend indefinitely.  However, the
             dividends continue to accrue on a quarterly basis and are
             cumulative.  Accordingly, as of March 31, 1997, dividends in
             arrears aggregate $307,305 or $2.50 per share.

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

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".

(b)          The  following  reports on Form 8-K were filed  during the  quarter
             ended March 31, 1997:

                    Item Reported          Date             Financial Statement
                    -------------          ----             -------------------
             (1)    Item 2, 7        January 10, 1997           None
             (2)    Item 5,7         February 4, 1997           None
             (3)    Item 2,7         March 13, 1997             None

There were no financial statements filed during the quarter ended March 31, 1997
other  than the  Company's  Annual  Report  on Form  10-KSB  for the year  ended
December 31, 1996.


                                       21

<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:  March 27, 1998           By:/s/ Willard H. Pease, Jr.
                                ----------------------------
                                Willard H. Pease, Jr.
                                President and Chief Executive Officer

Date:  March 27, 1998           By: /s/ Patrick J. Duncan
                                -------------------------
                                Patrick J. Duncan
                                Chief Financial Officer, Treasurer,
                                and Principal Accounting Officer



                                       22