2

         UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C.  20549

                            FORM  10KSB
                                 
                            (Mark One)
      X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITY EXCHANGE ACT OF 1934   FEE REQUIRED ]
            For the fiscal year ended December 31, 1996
                                 
                                OR
 [    ]  TRANSITION  REPORT  UNDER  SECTION  13  OR  15(d)  OF THE
        SECURITY EXCHANGE ACT OF 1934  [ NO FEE REQUIRED ]
        For the transition period from ....................
                      to.....................
                                 
                    Commission File No. 1-8523
                                 
                       MSR  Exploration Ltd.
      (Exact name of Registrant as specified in its charter)

           Alberta, Canada                         None
    (State or other jurisdiction of          (I.R.S. Employer 
    incorporation or organization)           Identification No.)

        500 Main Street, Suite 210, Fort Worth, Texas 76102
         (Address of principal executive offices)(Zip Code)
                                 
Registrant's telephone number, including area code:  (817) 877-3151
                                 

    Securities registered pursuant to Section 12(g) of the Act:
                                                 Name of Each Exchange
                Title  of  Each  Class           on  Which Registered
                  Common Shares,                     United States
                  no par value                  American Stock Exchange


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


Registrant (1) has filed on time all reports required to  be  filed
by  Section 13 or 15(d) of the Exchange Act during the preceding 12
months and (2) has been subject to such filing requirement for  the
past 90 days.

The Registrant's revenues for the year ended December 31, 1996 were
$4,376,000.

The   aggregate  market  value  of  the  Common  Shares   held   by
nonaffiliates  (approximately 10,103,037 shares) of the  Registrant
as of March 17, 1997 was approximately $8,840,000.  As of March 17,
1997  there were 13,777,014 shares of the registrant's Common Stock
outstanding.

The  Registrant has not filed documents and reports required to  be
filed  by  Section  12,  13  or 15(d) of  the  Exchange  Act  after
distribution  of  securities under a  plan  confirmed  by  a  Court
because   there  was  no  distribution  of  securities  under   the
Registrant's confirmed plan.

            DOCUMENTS INCORPORATED BY REFERENCE:  NONE
                                 
 Transitional Small Business Disclosure Format:  Yes      or No  X



                             PART  I

ITEM 1.   DESCRIPTION OF THE BUSINESS

BUSINESS DEVELOPMENT

MSR  Exploration  Ltd. is an Alberta, Canada,  registered  public
company  created in 1981 under Alberta law by the merger  of  two
previous  Canadian public corporations, Mountain States Resources
Ltd.   and  Monte  Grande  Exploration  Limited.   The  Company's
corporate offices are located at 500 Main Street, Suite  210,  in
Fort  Worth,  Texas, 76102.  The telephone number is  (817)  877-
3151.   Unless  the  context requires otherwise,  all  references
herein to "MSR" or  the "Company" are to MSR Exploration Ltd. and
its subsidiaries.

The  Company's  principal line of business  is  the  exploration,
development,  production and sale of crude oil and  natural  gas.
The  Company's oil and gas operations are conducted primarily  in
Montana  and Texas.  All of the Company's United States  oil  and
gas property interests are owned and operated directly or through
its  wholly-owned  United  States subsidiaries:  Mountain  States
Resources,  Inc.; Monte Grande Exploration, Inc.; Gypsy  Highview
Gathering  System, Inc.; and MSR Exploration, Inc.   The  Company
has  operations  in Canada and participates in  those  properties
principally through other oil and gas operators.  The Company  is
also  engaged  in  the gathering, processing and transmission  of
natural  gas in Northwest Montana through its wholly-owned  Gypsy
Highview  Gathering System, Inc.  The Company gathers,  processes
and transports gas produced from northern Montana wells owned  by
the Company and by other producers.

In  September 1994, the Company completed a private placement  of
its  common  stock.   In exchange for the issuance  of  4,444,444
shares of its stock, MSR received $4,000,000.  The proceeds  from
this placement were used to retire the debt of the Company's then
secured primary lender and certain other unsecured creditors.  In
conjunction  with  this private placement,  the  Company  held  a
Special Meeting of the Shareholders on October 25, 1994, to elect
a new Board of Directors which effectively changed control of the
Company.   This  Board  of  Directors elected  Otto  J.  Buis  as
Chairman  of the Board, Chief Executive Officer and President  of
the Company.

The   Company's  primary  focus  has  been  the  development  and
enhancement  of  oil and gas properties in its present  areas  of
operations  and  acquisitions  of  additional  properties.    The
Company  believes its acquisition efforts should  be  focused  on
properties where operational efficiencies can be achieved. To the
extent  purchases  can  be made primarily  within  its  operating
areas,  efficiencies in operations, drilling, gas  marketing  and
administration should be realized.

On  March  26,1997,  the Company executed a definitive  agreement
with  Mercury  Exploration  Company, of  Fort  Worth,  Texas,  to
combine  all of their oil and gas assets in Montana with all  the
oil  and  gas  assets  of  MSR  Exploration  Ltd.  (the  Business
Combination).

The  transaction includes the addition of over 75 producing wells
with  proven reserves of more than 5 million barrels of oil.   It
also  includes the assumption of Mercury's position in a  304,000
acre area designated the "Wells Agreement" which overlies a large
portion  of  the  giant Cut Bank Field complex.  In  the  subject
area, 100% of the oil rights and 30% of the revenue pertaining to
liquids  produced  by  gas  wells will  accrue  to  the  combined
entities.  Over 50 low risk drilling locations have already  been
identified   in  the  general  area.   Monetizing  the   reserves
attendant  to  these  locations  through  an  extensive  drilling
program  is  planned.  This drilling program is  expected  to  be
initiated  later this year and will continue over  at  least  the
next three to four years.

With  this  combination,  MSR's proved  oil  reserves  and  daily
productive rates are essentially doubled.  Further economic  gain
will also be experienced by combining administrative efforts into
one  Fort  Worth office location and by operating  in  Cut  Bank,
Montana  from  a  single  site.   The  assessment  pertaining  to
personnel and facilities in these areas is presently underway.

In  consideration for the business combination, MSR will issue to
Mercury shareholders 12,000,000 shares of common stock valued  at
$0.75 per share and assume and/or pay $4,000,000 in Mercury  bank
debt.   Mercury  shareholders will receive warrants  to  purchase
5,500,000  common shares at $1.25 per share and 5,500,000  common
shares at $2.00 per share.

In  negotiating  the  number of common shares  to  be  issued  to
Mercury, consideration was given to the value of the assets,  the
proved oil and gas reserves and the market value of the Company's
common  shares (prior to the date the Agreement was executed  and
announced).

The  closing  of  this  transaction is subject  to  a  number  of
conditions  including MSR shareholder's approval  which  will  be
sought at a shareholder meeting anticipated to be held in July of
1997.   The  closing is expected immediately subsequent  to  such
approval.   Shareholders owning approximately 40% of  MSR  common
stock  have agreed to vote to approve this transaction.   Mercury
shareholders  have approved the business combination  subject  to
MSR  shareholder  approval and certain other  conditions.   As  a
result  of the effective issuance of the common shares to Mercury
by  the  Company,   Mercury  shareholders  will  effectively  own
approximately 46.6% of the Company's total issued and outstanding
common stock

In  July  1995, the Company acquired interests in three  gas  and
condensate  producing properties located in southeast  Texas  for
the approximate purchase price of $3,547,000.  The effective date
of  the  purchase  was  April 1, 1995.   The  specific  interests
acquired  are  as follows:  42% working interest in  the  Schmidt
Well #1, Brazoria County; 41% working interest in the Josey Ranch
Well  #3,  Harris County; and 53% working interest in  the  Cinco
Ltd.  Well  #1,  Fort  Bend  County.  An independent  engineering
consulting company estimated that the Company's proved  producing
reserves  were  increased by 4.6 billion cubic feet  of  gas  and
78,000 barrels of condensate by this acquisition. On May 1, 1996,
the  Company purchased an additional 21% working interest in  the
Cinco Ltd. #1 well.

During the first quarter of 1997 the Gypsy Highview Gas Plant was
reconditioned  and placed into service.  After sitting  idle  for
over  five  years, the plant began selling natural gas  in  early
March  1997.   During 1993, the Company developed a  gas  project
known as the Red River Prospect.  Additional acreage and wells in
an  area  north  of the town of Cut Bank, Montana were  acquired.
During  the  fall  of 1993, a gas plant, gathering  lines  and  a
transmission  line  connected  to a  high  pressure  system  were
completed.   In December 1993, gas sales began under a  long-term
contract  with  Montana Power Company.  The plant was  shut  down
during  the  Second  Quarter of 1995 due to a  lack  of  product.
Additional  drilling in the area in late 1995 and  1996  provided
sufficient  product to re-open the plant.  After the installation
of gathering lines to the wells, the Red River plant sold natural
gas for six months of calendar 1996.

Prior  Bankruptcy.   From September 1990 to May 1991, a  separate
group  of  Officers and Directors were in control of the  Company
and  were responsible for the Company's operations.  While  under
control   of   this   management  group,  MSR  incurred   various
significant  legal and other obligations which,  coupled  with  a
steep  reduction  in  product prices,  diminished  the  Company's
operating   cash   flow.   In  addition,  during   this   period,
Manufacturers Hanover Trust Company, the Company's then principal
secured  creditor, placed MSR's credit facility  in  default  for
infractions of nonmonetary covenants.

In  view  of  these circumstances, a new Board of  Directors  was
elected at a long-delayed Annual General Meeting held in December
1991.   On  February 7, 1992, the Company and its five subsidiary
corporations filed petitions for reorganization under Chapter  11
in  the United States Bankruptcy Court.  Later, on September  12,
1992,  the  Company  filed  a  Plan of  Reorganization  with  the
Bankruptcy  Court, which was then amended on December  11,  1992,
and  March 2, 1993, to reflect agreements between the Company and
its  creditors.  On March 2, 1993, MSR's Restated  First  Amended
Joint  Plan  of  Reorganization was confirmed by  the  Bankruptcy
Court.


BUSINESS OF THE COMPANY

General.  The business purpose of the Company is to engage in two
principal activities: (1) the acquisition, production and sale of
crude  oil,  condensate and natural gas and  (2)  the  gathering,
processing  and  transmission of natural gas.  In most instances,
the  Company  acts as operator of the oil and gas  properties  in
which it has acquired an interest.

The  Company pursues its business through the acquisition of  oil
and  gas mineral leases, gas gathering systems, and producing oil
and  gas  properties.   Based upon each  specific  mineral  lease
situation  as well as geological and engineering interpretations,
the  Company either develops its inventory of leases through  the
drilling  of  an oil and/or gas well, redrills or recompletes  an
existing  well or manages and operates existing wells located  on
such leases for the production of oil and/or gas reserves located
thereon.  The Company currently has an interest in  oil  and  gas
mineral   leases,  gas  gathering  pipeline  systems  and   wells
producing hydrocarbons that are located principally in the states
of  Montana  and Texas. The Company evaluates other opportunities
for the development of oil and gas reserves and related assets as
they  become  available  and given the right  circumstances,  may
become  involved  in these activities in other areas  other  than
those in which it is currently involved.

The  Company  currently  acts as an "operator"  of  oil  and  gas
properties,   through   its   wholly-owned   subsidiaries,    MSR
Exploration, Inc., Mountain States Resources, Inc., Monte  Grande
Exploration,  Inc.,  and Gypsy Highview Gathering  System,  Inc.,
primarily in Montana and Texas.  In this capacity, the Company is
responsible for the daily activities of producing oil and/or  gas
from  individual  wells and leases located within  those  states.
The  Company's functions are focused primarily towards management
of  the  properties to maximize profitability and supervision  of
its  field  employees.  Additionally, for some wells the  Company
contracts with individuals doing business within the proximity of
the wells, more commonly referred to as "pumpers", for performing
the various tasks that are required to maintain the production of
oil  and/or  gas  of the wells.  The Company is  not  a  user  or
refiner  of the oil and/or gas produced, except as it may  relate
to  the  operation of wells that may produce gas.  Once extracted
from the ground, the Company either connects the production to  a
pipeline  gathering  system, in the case of gas,  or  stores  the
crude  oil in storage tanks located in proximity of the producing
field,  for collection by an oil purchaser.  The properties  that
the  Company  operates are located in areas which  are  typically
serviced  by more than one crude oil purchaser and a gas pipeline
gathering  system is generally in proximity of  the  natural  gas
being produced.

The  Company  operates and holds working interests  in  over  two
hundred and fifty producing oil and gas wells.  The Company  also
holds  or  has  acquired  interests in properties  which  contain
proved  undeveloped  reserves that require  additional  drilling,
workovers, water flooding or other forms of enhancement to become
productive.   In  addition  to  acquiring  such  properties,  the
Company   has   also  engaged  in  exploration  and   development
activities  by drilling new wells on such properties  during  the
past several years.

Acquisition of Additional Properties.  The Company will  continue
to  evaluate  and select  additional  prospects  and  leases  for
acquisition   and   development,   which   management   considers
appropriate for the purposes of the Company.  Such prospects  may
be  located anywhere in the United States.  The principal purpose
of  the  Company in such acquisitions will be to seek and acquire
properties which presently are producing oil and/or gas  and  are
generating  sufficient revenues from such properties  to  provide
the  Company  with the potential to significantly  increase  cash
flow.

To   the   extent   the  Company  continues  seeking   additional
acquisitions  of  producing oil and gas properties,  it  competes
with  many  other entities which seek to acquire similar  assets.
The  operations  and expenditures on behalf of  the  Company  are
minor in relation to total operations conducted and in comparison
to  amounts  expended  by  all  entities  operating  within  this
industry.   The total number and identity of producing   oil  and
gas  properties  and  proved developed  leases  acquired  by  the
Company will depend upon, among other things, on a combination of
the total amount of capital available to the Company,  the latest
geological  and geophysical data available, and the  continuation
of  a  sufficient supply of properties which may become available
for purchase.



Because   management  is  responsible  for  selecting  additional
acquisitions,  it continually engages in a process  of  reviewing
and  analyzing  prospects  submitted by  oil  and  gas  operating
companies,  investment bankers, geologists, engineers and  others
within  the  energy  industry.  In some circumstances,  prospects
may, in addition to the usual royalty paid to the landowner, have
the burden of an overriding royalty for the benefit of the entity
or person submitting prospects to the Company.

These  royalty interests do not share in any expense of drilling,
development,  completion, operating and other costs  incident  to
the  production  and sale of oil and gas. The  Company  seeks  to
acquire leasehold interests which will create the maximum revenue
interest  attributable to the working interest owners  in  leases
acquired by the Company.

The  following   information  and factors are considered  by  the
management in connection with each decision to acquire a Property
for the Company:

1.   The amount of uncommitted funds then available;
2.    The  current  production  and  expected  future  cash  flow
  therefrom;
3.   The geologic and geographic region in which the property is
located; and
4.   The nature and extent of geological  and  engineering  data
available concerning the property.

Oil  and gas production, prospects, and leases have been and will
continue  to  be  acquired by the Company from  various  industry
sources,   including,  without  limitation,   landowners,   lease
brokers,  operating  companies,  investment  bankers  and   other
persons  or  companies engaged in the business of  acquiring  and
dealing  in  oil  and gas  properties.  In that  regard,   leases
which  are   purchased by the Company may be whole or  fractional
interests in oil and gas properties, and if fractional, a portion
of  the  costs  of   development may  be  borne  by  the  parties
possessing  the remaining fractional interests. The  Company  may
also  from  time  to  time enter into joint ventures  or  farmout
arrangements to acquire or develop properties.

Drilling  Agreements  and Operation of  Wells.   In  addition  to
acquiring producing oil and gas properties, the Company  may  use
its  working  capital and available line of credit  for  drilling
and  other development on the properties in which the Company has
acquired interests, to the extent funds permit.  The Company sub-
contracts the drilling, redrilling or workover of wells for which
it is designated the operator.  When the Company is acting as the
operator, it will typically enter into a drilling agreement  with
an   independent   drilling  contractor.   The   Company   either
compensates  the  drilling contractor on i) a  footage  contract,
ii)  an  hourly  arrangement  during the  drilling,  testing  and
completion  phase of each well, or  iii) seeks a fixed  price  or
turn-key agreement.  The drilling contractor is typically allowed
to  utilize other selected independent contractors, each of which
is  experienced  in providing drilling related  services  in  the
area, to conduct certain activities on behalf of the Company.

The  Company  manages all day-to-day operations of the  Company's
wells, leases and prospects for which it is the operator.   While
the  Company  may  enter into agreements with other  parties  for
specific services, such agreements will keep management functions
within the control of the Company.  The Company utilizes its  in-
house  technical  personnel to provide  geological,  geophysical,
engineering and other services and when necessary, retains  these
services  on  a contractual basis from within the industry.   The
Company  reviews and analyzes all prospects, drilling and logging
data,  engineering information and production data, and  monitors
all expenditures made on behalf of the Company by any third party
engaged as a subcontractor.

The  Company will from time to time determine that it is  in  its
best interest to drill either exploratory or development wells on
properties  in  which  it  has acquired  an  ownership  interest.
Management will have the responsibility to determine whether  any
well  should,  at any point, be abandoned.  In the event  that  a
well is lost at any depth, either vertically or horizontally,  by
reason  of any accident or casualty, or if igneous rock or  other
impenetrable  substances are encountered, or loss of  circulation
or  other  conditions rendering further drilling  impractical  by
methods to be employed, the Company may elect to plug and abandon
a  well  and  cease operations on the prospect  or  to  plug  and
abandon  a well and commence drilling an additional well  on  the
prospect.



Timing  of  Acquisitions/Operations.  The Company is  continually
evaluating  the  acquisition of additional  proven  oil  and  gas
properties  and  other oil and gas companies.  Additionally,  the
Company  may commence drilling on existing prospects as it  deems
appropriate.  The Company believes that it has available suitable
prospects and leases for future development.

Gas  Gathering,  Processing  and  Transmission.   Gypsy  Highview
Gathering System, Inc., a wholly owned subsidiary of the Company,
owns  and  operates gas gathering pipeline systems  and  two  gas
plants  located  in  northwest Montana.  The Gypsy  Highview  Gas
Plant and the Red River Gas Plant presently compress natural  gas
from  Company  leases and from third party leases.  Approximately
12 wells are connected to the Red River Plant.  Approximately 538
Mcf  per  day  is delivered through the system to  Montana  Power
Company.  After a complete overhaul, the Gypsy Highview Plant and
system  started delivering natural gas in March 1997  from  three
wells into the Montana Power Company pipeline.

Insurance.  The Company maintains insurance coverage generally as
follows:

1.    Employer's liability insurance in certain states   covering
  injury or death to any  employee who may be outside  the scope of
  the  worker's compensation statute;
2.   Commercial general liability insurance for bodily injury and
  property  damage,  including property damage  by  blow-out  and
  cratering,  completed  operations, and broad  form  contractual
  liability with respect to any contract into which the  operator
  may enter into;
3.   Automobile liability insurance covering owned, non-owned and
  hired automotive equipment;
4.   Umbrella liability insurance; and
5.    Operator's  insurance covering the costs of  controlling  a
  blow-out,  and  seepage  and pollution liability,  when  deemed
  appropriate on certain properties.
The   Company  attempts  to  obtain  such  insurance  in  amounts
management believes to be reasonable and standard.  Such coverage
will  likely  not  fully protect the Company  from  any  specific
casualty  or  loss.  There is no assurance such   insurance  will
always  be available to the Company and on terms the Company  can
afford.

The  Company is subject to, and to the best of its knowledge  and
belief  is  currently in compliance with all bonding requirements
(such  as  those relating to plugging and abandonment)  that  are
imposed  by each of the states in which the properties for  which
the Company acts as operator are located.

Competition.   The  oil and gas industry is a highly  competitive
industry.    Competitors  include  major  oil  companies,   other
independent  oil and gas concerns, and individual  producers  and
operators,  many  of which have financing resources,  staffs  and
facilities substantially greater than those of the Company.   The
principal  means of competition are the amount and terms  of  the
consideration offered.  When possible, the Company tries to avoid
open  competitive  bidding  for acquisition  opportunities.   The
principal  means of competition with respect to the sale  of  oil
and  natural gas production are product availability  and  price.
While it is not possible for the Company to state accurately  its
position  in the oil and gas industry, the Company believes  that
it represents a minor competitive factor.

Business  Risks  and  Regulation.  The Company's  operations  are
affected  in  various degrees by political developments,  federal
and  state  laws, and regulations.  In particular,  oil  and  gas
production  operations  and  economics  are  affected  by   price
controls,  tax and other laws relating to the petroleum industry.
They  are  all affected by the changes in such laws, by  changing
administrative   regulations,  and  by  the  interpretation   and
application of such rules and regulations.

Legislation affecting the oil and gas industry is under  constant
review  for  amendment  or expansion.  Numerous  departments  and
agencies,  both federal and state, are authorized by  statute  to
issue  and have issued rules and regulations binding on  the  oil
and  gas industry and its individual members, some of which carry
substantial penalties for the failure to comply.  The  regulatory
burden  on the oil and gas industry increases the Company's  cost
of  doing  business and, consequently, affects its profitability.
Sales  of  crude oil, condensate and natural gas liquids  by  the
Company can be made at uncontrolled market prices.

Changing  Oil and  Natural Gas Prices and Markets --  The  market
for  oil  and  natural  gas produced by the  Company  depends  on
factors  beyond  its  control, including the extent  of  domestic
production and imports of oil and natural gas, the proximity  and
capacity  of  natural  gas  pipelines  and  other  transportation
facilities,  demand  for oil and natural gas,  the  marketing  of
competitive   fuels,  and  the  effects  of  state  and   federal
regulation of oil and natural gas production and sales.  The  oil
and  gas  industry as a whole also competes with other industries
in  supplying  the  energy and fuel requirements  of  industrial,
commercial and individual consumers.

The  Company's production revenues and the carrying value of  its
oil and natural gas properties are affected by changes in oil and
natural  gas prices.  Moreover, the Company's current  borrowings
under  certain credit facilities, its borrowing capacity and  its
ability  to obtain additional capital in the future are  directly
affected by oil and natural gas prices.

Environmental Regulation.  Various federal, state and local  laws
and  regulations  covering the discharge of  materials  into  the
environment,  or  otherwise relating to  the  protection  of  the
environment, may affect the Company's operations and costs  as  a
result of the effect on oil and gas exploration, development  and
production  operations.   At present, substantially  all  of  the
Company's  U.S. production of crude oil, condensate  and  natural
gas  is in states having  conservation laws and regulations.   It
is  not anticipated that the Company will be required in the near
future  to  expend amounts that are material in relation  to  its
total  capital  expenditures program by reason  of  environmental
laws  and  regulations, but inasmuch as such laws and regulations
are  frequently  changed, the Company is unable  to  predict  the
ultimate  cost  of compliance.  The Company is  able  to  control
directly the operations of only those wells for which it acts  as
operator.   Notwithstanding the Company's lack  of  control  over
wells  operated by others, the failure of the operator to  comply
with   applicable  environmental  regulations  may,  in   certain
circumstances, be attributable to the Company.

Raw  Materials.  The Company's raw materials are its oil and  gas
reserves.  Many operators are engaged in the exploration for  oil
and  gas,  and there is strong competition for desirable  leases.
(See  Item  2.  "Description  of Property"  and  Note  1  to  the
Consolidated Financial Statements Item 7, appearing elsewhere  in
this Form 10-KSB for certain information concerning the Company's
oil   and   gas  properties,  producing  activities  and   proved
reserves.)

Working   Capital  Practices.   The  Company's  working   capital
practices are common to the industry, with crude oil and  natural
gas sold to purchasers under short-term payment arrangements.

Major  Customers.  During the year ended December 31, 1996, three
customers:  Rio  Vista  Energy, Ltd.,  Cenex,  Inc.  and  Montana
Refining  Company, accounted for approximately 34%, 19%  and  15%
respectively  of total consolidated oil and gas sales.  For  year
ended  December  31,  1995,  three  customers:  Montana  Refining
Company, Cenex, Inc. and Hanson Production Company, accounted for
approximately 26%, 23% and 21% respectively of total consolidated
oil and gas sales.

The  Company  does not anticipate that the loss  of  any  of  its
present purchasers would have a materially adverse effect on  the
Company's consolidated business and  believes that, in the  event
of a loss of a present purchaser, other purchasers of oil and gas
operating in the Company's areas would purchase the production at
competitive prices.

Employees.   At December 31, 1996, the Company had  20  full-time
employees, including officers.

Financial  Information About Foreign and Domestic Operations  and
Export Sales.   For each of the Company's last five fiscal  years
it  has  produced and sold oil and gas in the United States.   At
December 31, 1996, five wells were on production in Canada.   For
information  regarding the Company's United States  and  Canadian
revenues,  operating  profits and assets,  see  the  Consolidated
Financial Statements.


ITEM 2.  DESCRIPTION OF PROPERTY

The   Company  operates  crude  oil  and  natural  gas  producing
properties in northwestern Montana, namely the North Central  Cut
Bank  Sand  Unit, Cut Bank Field, Graben Coulee Field in  Glacier
County, Gypsy Basin Field in Pondera County, Bills Coulee  Field,
Highview Field in Teton County, and the Red River/Midnight Coulee
Gas  Field.  Crude oil and natural gas are also produced  in  the
Winters  Capps  Field in Runnels County, Texas,  and  principally
natural  gas  from  wells  in  Brazoria,  Harris  and  Fort  Bend
Counties,  Texas.  Active areas of exploration interest  for  the
Company  are  Montana, Texas, North Dakota  and  Western  Canada.
Acreage in Western Canada is still considered in its early stages
of development.

During  1993,  the  Company built the Red  River  project,  which
consists  of an eight mile gathering and transmission  system,  a
compressor and a dehydration unit.  MSR purchases sweet gas  from
wells  in  the field, and dries and transports it to the  Montana
Power  System in the north Cut Bank area.  The Company also  owns
the  Gypsy-Highview  Gas Plant and a natural  gas  gathering  and
transmission  pipeline  system located in  northwestern  Montana.
During  January and February, 1997 this plant was overhauled  and
placed  in service.  After setting idle for over five years,  the
plant began selling natural gas in early March, 1997

Productive Wells and Acreage as of December 31, 1996

                                    Gross             Net
United  States properties      Oil       Gas     Oil         Gas
  Productive  Wells*  .        227       14      227        12.58
  Developed Acreage**. . .  16,188 Acres      15,612 Acres
  Undeveloped Acreage*** .  27,370 Acres      27,370 Acres

                                   Gross              Net
Canadian properties            Oil        Gas     Oil         Gas
  Productive  Wells*             7         9      .27         1.60
  Developed Acreage**        2,290 Acres          712 Acres
  Undeveloped Acreage***    52,070 Acres        2,100 Acres

A  "gross"  acre  or gross well is an acre or well  in  which  an
interest  is  owned.  The number of gross acres or wells  is  the
total number of acres or wells in which an interest is owned.   A
"net"  acre  or net well is deemed to exist when the sum  of  the
fractional  interests owned in gross acres or wells  equals  one.
The number of net acres or wells is the sum of fractional working
interests owned by the Company in gross acres or wells, expressed
as whole numbers and fractions thereof.

*       "Productive wells" are wells producing oil or gas.
**      "Developed  acreage" is acreage assignable to  productive
wells.
***    "Undeveloped acreage" refers to lease acres on which wells
have  not been drilled or completed to a point that would  permit
the production of commercial quantities of oil and gas regardless
of whether or not such acreage contains proved reserves.

Essentially  all  of  the Company's oil  and  gas  interests  are
working  interests or overriding royalty interests under standard
onshore oil and gas leases, rather than mineral ownership or  fee
title.   The  defensibility  of  the  Company's  title  to   such
interests in most cases is supported by written title opinions.

Title  of  Properties.  Title to the properties acquired  by  the
Company  is  subject to royalty, overriding royalty, carried  and
other  similar interests, contractual arrangements  customary  in
the oil and gas industry, liens incident to operating agreements,
liens  for  current taxes not yet due and to other  comparatively
minor  encumbrances.  Substantially all of the Company's oil  and
gas  properties  are  pledged  to a financial  institution  under
certain credit agreements.


Production   Results.   The  average  sales  price  and   average
production  (lifting) cost per equivalent unit  of  oil  for  the
three years ended December 31, 1996 were as follows:

Fiscal Year     Production              Average   Price            Average
 Ended          Oil       Gas              Oil         Gas        Production
December  31   (Bbl)*   (Mcf)**           (Bbl)*     (Mcf)**     Cost perUnit
1996        123,088      890,530         $19.21      $2.19          $5.29
1995        131,143      506,643         $15.54      $1.51          $6.26
1994        149,804      291,631         $14.03      $1.47          $6.33

*      Barrels ("Bbl")
**    Thousand cubic feet ("Mcf").

Drilling  Results.  Below is a summary of drilling  activity  for
the three years ended December 31, 1996.

 Wells Drilled (Gross):     Exploratory           Development
   Year               Productive     Dry          Productive     Dry
  1996**                 1            0              0            0
  1996                   0            0              0            1
  1995**                 2            0              4            0
  1994**                 3            0              0            0
*     Canadian
**   USA
In  general,  an "exploratory well" is a well drilled  either  in
search  of a new and yet undiscovered pool of oil or gas or  with
the expectation of greatly extending the limit of a pool which is
partly  developed.   All  other wells  are  "development  wells."
Wells completed in multiple zones are treated as a single well.

Reserves.    The  determination of  reserves  is  a  complex  and
interpretive  process which is subject to continued revisions  as
additional  information  becomes  available.   Reserve  estimates
prepared  by  different engineers from the  same  data  can  vary
widely.    Therefore,  the  reserve  data  in  the   Supplemental
Financial  Information appearing elsewhere in  this  Form  10-KSB
should  not  be construed as being exact.  Any reserve  estimate,
especially  when based upon volumetric calculations,  depends  in
part  on  the quality of available data, engineering and geologic
interpretation and judgment, and thus represents only an informed
professional  assessment.  Subsequent reservoir  performance  may
justify  upward  or  downward  revision  of  the  estimate.   The
Company's  proved reserves and proved developed reserves  of  oil
and  gas  and the standardized measure of discounted  future  net
cash  flows relating to proved oil and gas reserves for the years
ended  December  31,  1996, and 1995, were estimated  by  Citadel
Engineering  Ltd., independent petroleum consultants  located  in
Calgary  Alberta,  Canada.   Such  estimates  were  used  in  the
preparation  of the Company's financial statements.  The  Company
has  not  included estimates of total proven oil and gas reserves
comparable  to  those  disclosed in  the  Supplemental  Financial
Information  in  any  reports filed with Federal  authorities  or
agencies other than the Securities and Exchange Commission.

ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company had no matters requiring a vote of security holders
during the fourth quarter of 1996 nor any as of March 31, 1997.

                                
                                
                                
                                
                                
                            PART  II

ITEM  5.   MARKET  FOR  REGISTRANT'S COMMON  EQUITY  AND  RELATED
STOCKHOLDER MATTERS.

Market Information.  The Company's Common Shares have been listed
in  the  United  States  on  the American  Stock  Exchange  since
September 13, 1983.  "MSR" is the Company's trading symbol.   The
following  table sets forth, for the calendar periods  indicated,
the  range of high and low prices for the Company's Common Shares
as reported by the American Stock Exchange.

                       1996                    1995
                   High     Low            High      Low

First Quarter    $ 1 1/4   $ 13/16        $ 2      $ 1 3/8
Second Quarter     1 1/16     3/4           1 5/8    1 3/16
Third Quarter      1          3/4           1 3/8    1 1/8
Fourth Quarter      15/16    11/16          1 7/16    11/16

Security Holders.  As of March 17, 1997, the number of registered
holders of Common Shares was 1,432.

Dividends.   The  Company has never paid any cash  dividends  and
presently it intends to retain its earnings to finance the growth
of its business.

There  are  no  limitations under Canadian law or  the  Company's
Memorandum  or  Articles of Association  on  the  right  of  non-
Canadians  to hold or vote securities of the Company.  There  are
no  restrictions on the export or import of capital which  affect
the  remittance  of  dividends, interest  or  other  payments  to
nonresident holders of the Company's securities.

Cash dividends paid to Shareholders resident in the United States
are  generally subject to Canadian withholding tax at a  rate  of
15%.   Cash  dividends paid to other nonresidents of Canada  will
also  generally  be  subject to Canadian  withholding  tax  at  a
maximum  rate  of  25%, depending upon applicable  tax  treaties.
Stock dividends paid to nonresidents are generally not subject to
Canadian withholding tax provided that they are paid in shares of
the  same class of stock as that on which the stock dividends are
paid.


ITEM  6.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
CONDITION AND          RESULTS OF OPERATIONS

General. The following discussion and analysis should be read  in
conjunction with the Company's consolidated financial  statements
and  the  notes associated with them contained elsewhere in  this
report.

Year  ended  December 31, 1996 compared with year ended  December
31, 1995.

Revenue.    The Company's total revenue for 1996 was  $4,376,325,
an  increase  of  40%  compared to  $3,126,700  for  1995.   This
increase  was due primarily to increases in product  pricing  and
increased natural gas sales volumes.

Oil  sales for 1996 were $2,364,440, an increase of 16% over  the
$2,038,588  for  1995.  Sales volume decreased  6%  from  131,143
barrels  sold  in  1995 to 123,088 barrels  sold  in  1996.   The
average price per barrel for crude oil  in 1996 was $19.21, a 24%
increase compared to an average of $15.54 in 1995.

Gas  sales for 1996 were $1,953,092 an increase of $1,189,394  or
156%  over  the  $763,698  reported in 1995.   Natural  gas  sale
volumes for 1996 were 890,530 Mcf an increase of 383,887  Mcf  or
76%  compared to the 506,643 Mcf sold in 1995. The average  price
the Company received for its gas sales in 1996 was $2.19 per Mcf,
an  increase of 45% compared to $1.51 per Mcf for 1995.  Most  of
the increase in sales volumes was attributable to the three wells
the  Company  purchased in southeast Texas in July,  1995.   Also
contributing to the 1996 increase were sales from the  Red  River
Gas  Plant located in northwest Montana.  The plant was  on  line
for  approximately six months of calendar 1996.   During  January
and  February, 1997 the Company overhauled its Gypsy-Highview Gas
Plant  in Montana and began selling gas in March 1997.  The plant
had been idle for over five years.

Interest and other income for 1996 was $58,793 compared to  $324,
414  in  1995. In 1995 the Company reported a gain from  sale  of
assets of $177,000.

Expenses.  The Company's total expenses for 1996 were $4,876,011,
an  18  %  increase  compared to $4,126,254 in  1995.   Operating
expenses  increased 6% from $1,349,151 in 1995 to $1,435,362  for
1996.  Average  production  costs per barrel  of  oil  equivalent
decreased  from $6.26 in 1995 to $5.29 in 1996. The  decrease  in
cost per unit of production can be attributed to the increase  in
natural   gas sales volumes. Natural gas wells generally  can  be
operated  more  economically than crude  oil  wells.   Production
taxes  increased 46% from $213,793 in 1995 to $311,680  in  1996.
Depletion and depreciation expense increased $345,894 or  34%  in
1996  compared  to  the prior year. The increases  in  production
taxes  and  depletion and depreciation expense are the result  of
higher   product  sales.   General  and  administrative   expense
decreased  $40,627  or  4%  in 1996 compared  to  1995.  Interest
expense  in  1996  was  $732,910, an increase  of  55%  over  the
$472,519 for 1995.

Net  Loss.   The  1996 net loss was $329,686 ($0.02  per  share),
compared to the 1995 loss of $640,554  ($0.04 per share).

Year  ended  December 31, 1995 compared with year ended  December
31, 1994.

Revenue.  The Company's total revenue 1995 was $3,126,700, an
increase of 23% compared to $2,543,990 for 1994. This increase
was due primarily to increased natural gas sales.

Oil  sales  for  1995  were  $2,038,588,  up  slightly  over  the
$2,033,916  in  1994. Sales volumes decreased 12%,  from  149,804
barrels sold in 1994 to 131,143 barrels sold in 1995. The average
price per barrel sold increased 11% from sold increased 11%  from
14.03  in  1994 to $15.54 in 1995 which helped to offset  reduced
sales volumes.

Gas sales of $763,698 for 1995 increased 97% compared to $388,183
for  1994.  The increase in sales is attributable  to  three  gas
wells  purchased  in Southeast Texas.  Since the  acquisition  on
July  28,  1995,  these three wells contributed $507,600  of  gas
sales  during the last five months of 1995. Gas sales volumes  in
1995 were 506,643 Mcf, a 73% increase compared to the 291,631 Mcf
for  1994.  The average price for gas sold in 1995 was $1.51  per
Mcf, an increase of 3% compared to $1.47 per Mcf for 1994.

Interest  and  other  income was $324,414 in   1995,  a  $200,523
increase  compared  to  1994.  Most  of  the  1995  increase  was
attributable to the $177,000 of gain recognized on  the  sale  of
the GeoResources, Inc. common stock.

Expenses.  The Company's total expenses for 1995 were $4,126,254,
a 21% increase compared to $3,418,939 in 1994. Operating expenses
increased  7%  to  $1,349,151  in  1995.   However,  the  average
production cost per unit decreased from $6.33 in 1994 to $6.26 in
1995. Production taxes decreased 12% in 1995 to $213,793 compared
to  $241,780 in 1994, principally due to reduced crude oil  sales
volumes and reduced tax rates. Depletion and depreciation are  up
13%  in 1995 compared to 1994 primarily due to the increased  gas
sales  volumes from the new gas wells in Southeast Texas. General
administrative  expenses  increased 55%  in  1995  to  $1,058,768
compared  to  $683,552  in 1995. Most  of  the  increase  was  in
administrative salaries and office expenses related to relocating
the corporate headquarters to Fort Worth, Texas. Interest expense
has increased from $324,981 in 1994 to $472,519 in 1995 due to an
increase in long-term borrowing.

Net  Loss.  The  1995 net loss was $640,554 ($0.04), compared  to
the  1994  loss  of  $460,455 ($0.04 per share),  which  included
extraordinary income from the extinguishment of debt of  $278,494
($0.03 per share).

Liquidity  and  Financial  Resources.   The  Company's  liquidity
position  at December 31, 1996 improved as the balance  of  cash,
cash  equivalents  and  time deposits increased  to  $313,185  as
compared to $279,519 at December 31, 1995.  The current ratio was
0.91  to 1, with current liabilities exceeding current assets  by
$136,700  as of December 31, 1996.  This compares to a  ratio  of
1.2   to  1, and current assets exceeding current liabilities  by
$211,060 at December 31, 1995.  Cash flow forcasts indicate  cash
will  be  available  for  working capital requirements,  to  fund
capital expenditures and to make debt service payments.

Cash  flow  from  operating activities  for  1996  was  $708,880,
compared  to  $522,415 of negative cash flow used  for  operating
activities  for 1995.   This significant increase  of  $1,231,000
was primarily the result of increases in product sales. Cash used
for  investing was $1,074,068 for 1996 as compared to  $4,773,724
for 1995.  The 1996 expenditures were for purchasing reserves  in
place  and  for  drilling, completing  oil  and  gas  wells,  and
additions  to the Red River Gas Plant, with most of  the  funding
coming from working capital.  The 1995 expenditures consisted  of
reserve  acquisitions and reworking, drilling and completing  oil
and gas wells.

Cash  provided  from financing activities for 1996  was  $394,744
compared  to  $5,037,944  of funds from financing  activities  in
1995.   During  1996 and 1995 the Company borrowed  $400,000  and
$6,000,000 respectively, under its revolving credit agreement.

In January 1995, the Company entered into a $15,000,000 revolving
credit  agreement.   The  proceeds from the  facility  were  used
primarily  to fund the Company's oil and gas reserve  acquisition
program  and  for  development drilling in the Company's  present
producing  areas.  The loan agreement is for seven  years.   Only
interest  on  principal amounts outstanding was required  in  the
first  two  years, with the balance of the loan at  December  31,
1996 to be amortized in quarterly installments over the remaining
five years.  The interest rate on the loan is prime rate plus 1%.
On  August 15, 1996 the loan limit was set at $6,500,000  and  on
January  1,  1997  the  commitment shall be  reduced  by  monthly
payments at a rate of $60,000 for 1997, $65,000 for 1998, $75,000
for  1999,  $70,000 for 2000 and $60,000 for 2001.   The  Company
began  making  such  payments on the principal  of  the  note  in
February 1997.

GeoResources, Inc.   In November, 1995 the Company completed  the
sale  of  its  holdings in 687,600 shares of GeoResources  Common
Stock  and  44,000  shares of Big Sky Airlines  Common  Stock  to
Joseph  V.  Montalban,  a  former director  of  the  Company,  in
exchange  for 700,000 shares of the Company's Common Stock.   The
sale  or  exchange was approved by Shareholders at the  Company's
Annual  General Meeting held on September 22, 1995.  The  Company
recognized a $177,000 gain from the sale of the stock in 1995.

Inflation.  The Company's sales and operating expenses  have  not
been  significantly  affected by inflation during  the  two  year
period ending December 31, 1996.


ITEM 7.  FINANCIAL STATEMENTS

Financial   Statements.    The  audited  consolidated   financial
statements  for the years ended December 31, 1996  and  1995  are
submitted herewith as part of this Form 10-KSB.

Information    About   Oil   and   Gas   Producing    Activities.
Supplementary  disclosures regarding the Company's  oil  and  gas
producing  activities are set forth in the unaudited Supplemental
Financial Information appearing elsewhere in this Form 10-KSB.

ITEM  8.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON
ACCOUNTING AND FINANCIAL DISCLOSURES

None.

                            PART  III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  names,  ages  and positions of the Company's  Directors  and
Executive Officers are as follows:

  Name                      Age                 Position

 Otto J. Buis                65               Chairman of the Board,
                                              President, Chief Executive,
                                              Officer and Director

 Patrick M. Montalban        39               Executive Vice President,
                                              Chief Operating Officer
                                              and Director

 James M. Richardson         67               Vice President - Operations
                                              and Special Projects

 Bruce D. Hirsche            48               Secretary - General Counsel

 Howard  N.  Boals           53               Vice President - Finance and
                                              Administration

 C. Al Buis                  37               Director

 Robert McClinton            46               Director

 Steven M. Morris            44               Director

The   Company's  Board  of  Directors  has  an  Audit   Committee
consisting  of Otto J. Buis, C. Al Buis and Steven M. Morris  and
its  Compensation Committee includes C. Al Buis, Steven M. Morris
and Patrick M. Montalban.  The Company does not have a nominating
committee.

Otto  J. Buis is a petroleum geologist and for some 35 years  has
held   executive   positions  with  domestic  and   international
companies  such as OKC Limited Partnership, OKC Corp., Shenandoah
Oil Corporation and Texaco, Inc.  Mr. Buis has been President and
Chief Executive Officer of Pozo Resources, Inc. since 1992.   Mr.
Buis  was  a director of the Company from September 1989  through
July  1990  and  he  was  a court appointed  Director  and  Chief
Executive  Officer  from June 1991 through March  1992.   At  the
Special  Stockholders meeting on October 25, 1994, Mr.  Buis  was
elected Director and subsequently elected Chairman of the  Board,
President and Chief Executive Officer.
Patrick M. Montalban is a petroleum geologist who graduated  from
the  University of Montana in 1981.  He joined the Company  as  a
Staff  Geologist in 1983 and became Vice President of Exploration
and  Production in October 1986.  In December 1990 he  was  named
Executive Vice President and at the December 1991 Annual  General
Meeting for the Company was elected Director and he has continued
in these offices to the present.

James M. Richardson is a petroleum engineer and has over 25 years
of  management  and  executive experience in many  areas  of  the
petroleum  industry.   Corporate affiliations  include  The  Gruy
Companies, Inc., Howell Petroleum Corporation, OKC Corp., General
Crude  Oil  Company  and Texaco, Inc.  Mr.  Richardson  has  also
worked  as a petroleum consultant.  He is Vice President of  Pozo
Resources,  Inc. having joined that company in 1992 as  Operating
Manager.   In  October, 1994, Mr. Richardson joined MSR  as  Vice
President, Operations and Special Projects.

  Bruce D. Hirsche is a barrister and solicitor, who was admitted
to  the  Alberta  Bar  in  1975 and has practiced  corporate  and
securities  law  in Edmonton, Alberta since his admittance.   Mr.
Hirsche was appointed Director and Chairman of the Interim  Board
effective June 27, 1991 by the Court of Queen's Bench of Alberta,
and  subsequently elected Director, Secretary and General Counsel
at  the  Company's December 1991 Annual General Meeting.  At  the
Annual General Meeting, held on June 25, 1993, Mr. Hirsche was re-
elected   Director  of  the  Company  and  subsequently   elected
Secretary  and General Counsel.  Mr. Hirsche continued  in  these
offices  until the Special Stockholders Meeting held  on  October
25,  1994,  at  which time he was elected Secretary  and  General
Counsel.

Howard  N. Boals is a certified public accountant with  over  ten
years experience as a controller for publicly and privately  held
oil  and  gas  exploration and production companies.   From  1992
through 1994,  Mr. Boals was the accounting manager for  PG  &  E
Resources  Inc. of Dallas and the prior five years was controller
for  Sinclair  Resources, Inc.  Mr. Boals joined the  Company  as
controller in January 1995.  In September 1995 he was named  Vice
President of Finance and Administration.

C.  Al  Buis  has  been the President of Buis &  Co.,  a  private
investment  banking firm and its predecessor company  from  March
1990  to  the present.  Mr. Buis was an officer in the  Corporate
Finance Department of Rauscher Pierce Refsnes, Inc. from 1985  to
1990.   From  1982  to  1985 Mr. Buis  held  a  position  in  the
Investment  Banking Division of Schneider, Bernet  &  Hickman,  a
division  of Thompson McKinnon Securities.  Mr. Buis was  elected
Director of the Company at the Special Stockholders Meeting  held
on October 25, 1994.

Robert McClinton is a chartered accountant in Canada and for  the
past  four  years  has  served as Director, President  and  Chief
Operating  Officer of BMP Energy Systems Ltd. (BMP).   BMP  is  a
Canadian company specializing in the provision of gas measurement
and  production accounting services and products.  From  1981  to
1991,  Mr.  McClinton  was Vice President of  Finance  and  Chief
Financial  Officer  of Canadian Turbo, Inc. a  Canadian  publicly
held  company.  From 1969 to 1981 he was with Deloitte  &  Touche
Chartered  Accountants.  Mr. McClinton was elected as a  Director
of  the Company's Board in July, 1996.

Steven  M.  Morris is a certified public accountant and President
of  Morris  &  Co., a private investment firm in Houston,  Texas.
From  1988  to  1991 he was Vice-President of  Finance  for  ITEX
Enterprises, Inc.  From 1981 to 1988 Mr. Morris was the Financial
Vice-President  of Hanson Minerals Company, a Houston  based  oil
and gas exploration company.  From 1978 to 1981 Mr. Morris was  a
Partner  in  the  Certified Public Accounting  Firm  of  Haley  &
Morris.   He served as Senior Accountant with the Houston  office
of  Arthur  Young and Company from 1974 to 1977.  Mr. Morris  was
elected  Director  of  the  Company at the  Special  Stockholders
Meeting held on October 25, 1994.

All  Directors of the Company hold office until the  next  annual
meeting of Shareholders or until their successors are elected and
shall  qualify.  Executive officers are elected annually by,  and
serve at the discretion of the Board of Directors.  There are  no
arrangements  or understandings between any of the  directors  or
officers  or  any  other  person  (other  than  arrangements   or
understandings  with  directors  or  officers  acting  as   such)
pursuant to which any person was elected as a director or officer
of  the Company.  Otto J. Buis and C. Al Buis are father and son.
There  are  no  other  family relationships among  the  executive
officers of the Company.


ITEM 10.  EXECUTIVE COMPENSATION

Compensation.  The following table lists compensation paid to all
the Company's chief executive officers and other officers paid in
excess of $100,000 for the three years ended December 31, 1996.

                     Summary of Compensation
                                
                                   Annual Compensation
Name and Principal Position        Year       Salary        All Other
Otto J.  Buis                      1996      $116,667        -
Chairman of the Board,             1995      $101,000        -
President, Chief Executive
Officer and Director

Patrick M. Montalban               1996      $88,200         -
Executive  Vice  President         1995      $80,700         $28,000
(1)
Chief Operating Officer
and Director

(1)  The additional amounts paid to Patrick M. Montalban were for
four years of  scheduled raises that had not been paid.
Directors who are not employees of the Company receive  $200  per
day  per  meeting plus traveling and out-of-pocket  expenses  for
each Directors meeting attended.

ITEM  11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS  AND
MANAGEMENT

The following table provides information concerning persons known
to the Company to be the beneficial owners of more than 5% of the
Company's outstanding Common Shares as of March 15, 1997.  Unless
otherwise  indicated, the Shareholders listed in the  table  have
sole voting and sole investment powers with respect to the shares
indicated.  On March 17, 1997 there were 13,777,014 Common Shares
issued and outstanding.  On March 17, 1997, the Company had 1,432
Registered  Shareholders.  Each Common Share is entitled  to  one
vote on each matter presented to Shareholders for a vote.




                                 Number of Common Shares
Name and Address                 Beneficially Owned         Percentage of
of Beneficial Owner              Controlled or Directed     Common Shares

Pozo Resources, Inc.               1,931,444                    14.0%
500 Main Street, Suite 201
Fort Worth, Texas   76102

Joseph V. Montalban                1,809,855                    13.1%
East Lakeshore Drive
Whitefish, Montana  59937

Steven M. Morris                   1,111,111                     8.1%
Morris & Co.
952 Echo Lane, Suite 335
Houston, Texas   77024

The following table sets forth the number of Common Shares
beneficially owned by each Director and nominee for Director of
the Company and by all Directors and  Officers as a group, as of
the same date:

                                      Number of Common Shares
Name and address        Position      Beneficially Owned,     Percentage of
Beneficial Owner        With Company  Controlled or Directed  Common Shares

Pozo Resources, Inc.                             1,931,444 (1)     14.0%

Steven M. Morris           Director              1,111,111 (2)      8.1%
952 Echo Lane, Suite 335
Houston, Texas  77024

Patrick M. Montalban       Executive               279,100          2.0%
317 1st Avenue, S. E.      Vice-President,
Cut Bank, Montana  59427   Chief Operating
                           Officer and Director

Otto J. Buis               Chairman of the Board,  194,544 (3)      1.4%
500 Main Street, Ste 210   President, Chief Executive
Fort Worth, Texas  76102   Officer and Director

Bruce D. Hirsche           Secretary               100,000          0.7%
1201 Esso Tower
10060 Jasper Avenue
Edmonton, Alberta

James M. Richardson        Vice President           30,000          0.2%
5930 Theall
Houston, Texas  77066

C. Al Buis                 Director                 27,778 (4)      0.2%
500 Main Street, Suite 201
Fort Worth, Texas  76102

All Directors and
Officers as a Group                              3,673,977         26.6%

(1)  Pozo Resources, Inc., ("POZO") is owned by Otto J. Buis,  C.
Al  Buis and Steven M. Morris, each of whom is also a Director of
MSR.  Otto J. Buis, C. Al Buis and Steven M. Morris may be deemed
to  share  voting  and  investment  power  with  respect  to  the
1,931,444  shares  of  Common Stock beneficially  owned  by  Pozo
Resources, Inc.   Otto J. Buis, C. Al Buis and Steven  M.  Morris
each disclaim beneficial ownership of such shares.

(2)  Excludes 1,931,444 shares owned by Pozo Resources, Inc.

(3)  Excludes 27,778 shares owned by Otto J. Buis' adult son,  C.
Al  Buis (who is a Director of MSR) and 1,931,444 shares owned by
Pozo  Resources, Inc. Mr. Buis disclaims beneficial ownership  of
such shares.
(4)   Excludes 194,544  shares owned by C. Al Buis' father,  Otto
J. Buis (who is Chairman of the Board, President, Chief Executive
Officer and a Director of MSR) and 1,931,444 shares owned by Pozo
Resources, Inc.  Mr. Buis disclaims beneficial ownership of  such
shares.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lucas,  Bowker  &  White, barristers & solicitors,  of  Edmonton,
Alberta are Corporate Counsel for MSR Exploration Ltd.  Mr. Bruce
Hirsche  is  a  Partner of the firm.  He served as  Chairman  and
Director of the Interim Board from June 1991 until December 1991.
Mr. Hirsche served as Director, Secretary and General Counsel  to
the  Company  through  October 25, 1994, at  which  time  he  was
elected  Secretary and General Counsel.  Legal fees  and  out-of-
pocket  costs  totaling  approximately $2,523  and  $25,777  were
billed  to  the  Company by the law firm during the  years  ended
December 31, 1996 and 1995, respectively.

In  1994,  the  Company retained the services of Buis  &  Co.,  a
private  investment banking firm, to assist  in arranging  credit
facilities.   The  firm  is partially owned  by  C.  Al  Buis,  a
Director of the Company.  In January 1995, the Company paid  Buis
& Co. $150,000 for the performance of such services in connection
with  the  Company's $15,000,000 revolving credit/term  agreement
with a bank.

The   Company   subleases  office  space  for  its   Fort   Worth
headquarters from Buis & Co.  As previously noted, Buis & Co.  is
partially owned by C. Al Buis, a current Director of the Company.
The  Company  reimbursed $35,160 and $22,300  for  annual  rental
payments  for 1996 and 1995 respectively and $14,644 and  $12,428
for  property taxes, telephone and utilities for 1996  and  1995.
The  rent  paid for the Company's space was at the same rate  per
square  foot as that paid by Buis & Co. and is commensurate  with
rental rates in the area.

In  November, 1995 the Company completed the sale of its holdings
in  687,600 shares of GeoResources Common Stock and 44,000 shares
of Big Sky Airlines Common Stock to Joseph V. Montalban, a former
director, in exchange for 700,000 shares of the Company's  Common
Stock.  The sale or exchange was approved by Shareholders at  the
Company's  Annual  General Meeting held on  September  22,  1995.
There was a $177,000 gain recognized on the sale of the stock.

Compliance with Section 16(a) of the Exchange Act.

Section 16(a) of the Exchange Act requires directors and officers
of  the  Company, and persons who own more than 10% of the Common
Stock,  to  file  with the SEC initial reports of  ownership  and
reports  of changes in ownership of the Common Stock.  Directors,
officers and more than 10% stockholders are required by  the  SEC
regulations  to  furnish the Company with copies of  all  Section
16(a) forms they file.

To  the  Company's knowledge, based solely on  a  review  of  the
copies  of  such  reports furnished to the  Company  and  written
representations that no other reports were required,  during  the
year   ended   December  31,  1996,  all  Section  16(a)   filing
requirements applicable to its directors, officers and more  than
10% beneficial owners were complied with.


















ITEM 13.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K.

(a)  Documents filed as a part of this report.
                                                            Page in
                                                              this
                                                           Form 10-KSB
(1)  Financial Statements:

Independent Auditors' Report                                       F-1
Consolidated Balance Sheets
  at December 31, 1996 and 1995                                    F-2
Consolidated Statements of Operations
  Years ended December 31, 1996 and 1995                           F-3
Consolidated Statements of Stockholders' Equity
  Years ended December 31, 1996 and 1995                           F-4
Consolidated Statements of Cash Flows
  Years ended December 31, 1996 and 1995                           F-5
Notes to Consolidated Financial Statements
  Years ended December 31, 1996 and 1995                    F-6 / F-14


(2)  Supplemental Financial Information (Unaudited):

Disclosures about Oil and Gas Producing Activities         F-15 / F-17
Selected Quarterly Financial Data                                 F-18

(3) List of Exhibits Required by Item 601 of Regulation S-B

Exhibit
Number           Description of Exhibit

   2.1    Amalgamation  Agreement of  Monte  Grande  Exploration
          Limited  and  Mountain States Resources  Ltd.
          predecessors of the Registrant (filed as  Exhibit  2.1  of  the
          Registrant's Registration Statement on Form 10
          dated May 5, 198 and incorporated herein by reference.

   2.2    Purchase and Sale Agreement by and  between  MSR
          Exploration, Inc. and Hanson Production Company
          dated July 28, 1995 (filed as Exhibit 2-1 to the  Registrant's
          Form 8-K/A dated October 11, 1995 and incorporated
          herein by reference.

   3.1    Articles of Continuance of the Registrant, which
          constitute the Registrant's corporate charter
          (filed as Exhibit 3.1 to the Registrant's Form 10-K for the
          fiscal year ended December 31, 1994 and
          incorporated herein by reference.

   3.2    By-Law No. 1 of the Registrant, relating generally
          to the conduct of its affairs (filed as
          Exhibit 3.2 to the Registrant's Form 10-K for the fiscal year
          ended December 31, 1994 and incorporated herein
          by reference.

   4.1    Form   of   stock   certificate   representing
          Registrant's Common Shares (filed as Exhibit 4.2
          to the Registrant's Form 10-K for the fiscal year ended December
          31, 1989 and incorporated herein by reference.

  10.1    Agreements  of subsidiaries dated  December  17,
          1982,  October 15, 1977 and May 26,  1977 with
          Montana Power Company (filed as Exhibit 10.1 to the Registrant's
          Registration statement on Form 10 dated  May  5,
          1983 and incorporated herein by reference.

  10.2    Purchase and Sale Agreement between Registrant and
          Omni Petroleum dated March 9, 1991 (filed  as
          Exhibit 10.6 to the Registrant's Form 10-K for the fiscal year
          ended December 31, 1990 and incorporated herein by
          reference.


(b)  Reports on Form 8-K.

There have been no Form 8-K reports filed during the last quarter
of the year ended December 31, 1996.

All  schedules have been omitted because they are not applicable,
are  not  required, or because the required information has  been
provided  in  the  Consolidated  Financial  Statements  or  notes
thereto.
                                
                                
                                
                                
                                
                                
                                
                           SIGNATURES

Pursuant  to  the  requirements of Section 13 of  the  Securities
Exchange Act of 1934, the Registrant has duly caused this  report
to  be  signed  on its behalf by the undersigned, thereunto  duly
authorized.
                                                  MSR Exploration
Ltd.
                                                  (the "Registrant")

Dated:   March 27, 1997         by:    /s/ Otto J. Buis
                                     Otto J. Buis
                                     Chairman of the Board
                                     President and Chief Executive Officer

Pursuant  to the requirements of the Securities Exchange  Act  of
1934,  this report has been signed below by the following persons
on  behalf  of the Registrant and in the capacities  and  on  the
dates indicated.

Signature                        Title                         Date

 /s/  Otto J. Buis         Chairman of the Board,           March 27, 1997
Otto J. Buis               President and Chief Executive
                           Officer and Director


 /s/ Patrick M. Montalban  Executive Vice-President,        March 27, 1997
Patrick M. Montalban       Chief Operating Officer
                           and Director


 /s/  C. Al Buis           Director                         March 27, 1997
C. Al Buis


                           Director                         March 27, 1997
Robert McClinton


 /s/ Steven M.Morris       Director                         March 27, 1997
Steven M. Morris


 /s/ Howard N. Boals       Vice President - Finance         March 27, 1997
Howard N. Boals            Chief Accounting Officer






INDEPENDENT AUDITORS' REPORT
 
 
To the Board of Directors and Stockholders of
MSR Exploration Ltd. and Subsidiaries
Fort Worth, Texas


We have audited the accompanying consolidated balance sheets of MSR
Exploration Ltd. and subsidiaries (the Company) as of December 31,
1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then
ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.




DELOITTE & TOUCHE LLP

Fort Worth, Texas
March 26, 1997















                               F - 1


MSR Exploration Ltd. and  Subsidiaries
(Incorporated Under the Laws of Alberta)
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
U.S. DOLLARS
<CAPTION>
ASSETS                                                1996          1995
<S>                                             <C>            <C>

CURRENT ASSETS
   Cash and cash equivalents                        $262,150       $232,594
   Time deposits                                      51,035         46,975
   Accounts receivable                               936,639        700,069
   Inventories                                       194,873        184,421
   Prepaid expenses                                   15,184         11,478
       Total current assets                        1,459,881      1,175,537

PROPERTIES, PLANT AND EQUIPMENT - NET
   ("full cost") (Note 4)                         28,786,443     29,040,594

OTHER ASSETS (Note 5)                                470,103        538,025

                                                 $30,716,427    $30,754,156

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Current portion of long-term debt (Note 6)       $706,931        $90,707
   Accounts payable                                  277,141        368,630
   Accrued liabilities                               612,509        503,140
       Total current liabilities                   1,596,581        962,477
LONG-TERM DEBT (Note 6)                            5,930,532      6,252,012
DEFERRED INCOME TAXES (Note 7)                     3,832,635      4,003,000

STOCKHOLDERS' EQUITY
   Common stock, without par value
      Authorized 20,000,000 shares, issued and
      outstanding 13,777,014 in 1996 and
      13,712,014 in 1995                          17,861,264     17,796,264
   Less notes receivable arising from
      the issuance of common stock (Note 8)          (95,000)      (190,000)
   Foreign currency translation adjustment          (108,986)       (98,684)
   Retained earnings                               1,699,401      2,029,087

                                                  19,356,679     19,536,667

                                                 $30,716,427    $30,754,156

</TABLE>



The accompanying notes are an integral part
  of these consolidated financial statements.
F - 2

MSR Exploration Ltd. and  Subsidiaries
(Incorporated Under the Laws of Alberta)

CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1996 and 1995
U.S. DOLLARS
<TABLE>
<CAPTION>
                                  1996            1995 
<S>                            <C>             <C>

REVENUE
 Oil sales                      $2,364,440      $2,038,588
 Gas sales                       1,953,092         763,698
 Interest and other income          58,793         324,414
    Total revenues               4,376,325       3,126,700


EXPENSES
 Operating expenses              1,435,362       1,349,151
 Production taxes                  311,680         213,793
 Depletion and depreciation      1,377,917       1,032,023
 General and administrative      1,018,141       1,058,768
 Interest                          732,911         472,519
    Total expenses               4,876,011       4,126,254

Loss before income taxes          (499,686)       (999,554)
Income tax benefit (Note 7)        170,000         359,000

NET LOSS                         ($329,686)      ($640,554)

PER SHARE NET LOSS                  ($0.02)         ($0.04)

Weighted average number
 of shares outstanding          13,773,110      14,262,973


</TABLE>

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

F- 3





MSR Exploration Ltd. and  Subsidiaries
(Incorporated Under the Laws of Alberta)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
U.S. DOLLARS


<TABLE>
<CAPTION>

                                                                                 Foreign                    Total
                                                                       Stock     Currency                    Stock-
                                        Common Stock                  Option    Translation   Retained      holders'
                                           Shares        Amount        Loans    Adjustment    Earnings       Equity

<S>                                      <C>          <C>            <C>        <C>          <C>          <C>                      

Balance at December 31, 1994              14,312,014   $18,621,264    ($300,000)    $0        $2,669,641   $20,990,905

 Net loss                                    0             0            0           0           (640,554)     (640,554)

 Purchase of 700,000 shares (Note 8)        (700,000)  (875,000)        0           0            0            (875,000)

 Issuance of 100,000 shares
   of common stock as
   payment for services (Note 8)             100,000        50,000      0           0            0              50,000

 Translation adjustments                     0             0            0        (98,684)        0             (98,684)

 Proceeds from stock option loans            0             0            110,000     0            0             110,000

Balance at December 31, 1995              13,712,014    17,796,264     (190,000)   (98,684)    2,029,087    19,536,667

 Net loss                                          0             0            0          0      (329,686)     (329,686)

 Issuance of 100,000 shares
   of common stock for
   property acquisition (Note 8)             100,000       100,000            0          0             0       100,000

 Translation adjustments                           0             0            0    (10,302)                    (10,302)

 Repurchase of stock option
   shares (Note 8)                           (35,000)      (35,000)           0          0             0       (35,000)

 Proceeds from stock option loans                  0             0       95,000          0             0        95,000

Balance at December 31, 1996              13,777,014   $17,861,264     ($95,000) ($108,986)   $1,699,401   $19,356,679


</TABLE>

The accompanying notes are an integral part
  of these consolidated financial statements.
F - 4



MSR Exploration Ltd. and  Subsidiaries
(Incorporated Under the Laws of Alberta)

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
U.S. DOLLARS
<TABLE>

<S>                                                     <C>         <C>
                                                            1996        1995
OPERATING ACTIVITIES
   Net loss                                               ($329,686)  ($640,554)
   Charges and credits to net loss not affecting cash
      Depletion and depreciation                          1,377,917   1,032,023
      Amortization of deferred financing costs               67,922           0
      Common stock issued for payment of general
          and administrative expenses                             0      50,000
      Gain on property and securities available for sale          0    (175,223)
      Deferred income taxes                                (170,365)   (359,000)
   Changes in assets and liabilities
      Proceeds from sale of  (invested in) time deposits     (4,060)     29,097
      Receivables                                          (236,570)   (430,655)
      Inventories and prepaid expenses                      (14,158)     11,316
      Accounts payable and accrued liabilities               17,880     (39,419)
NET CASH FROM (USED FOR) OPERATING ACTIVITIES               708,880    (522,415)

INVESTING ACTIVITIES
   Property, plant and equipment expenditures              (773,766) (1,086,635)
   Acquisition of producing properties                     (250,000) (3,621,984)
   Proceeds from sale of property and equipment                   0      56,570
   Proceeds on notes receivable arising
      from the issuance of common stock                      60,000     110,000
   Change in cumulative foreign currency translation        (10,302)
   Restricted cash                                                0    (191,675)
NET CASH FROM (USED FOR) INVESTING  ACTIVITIES             (974,068) (4,733,724)

FINANCING ACTIVITIES
   Principal payments on long-term debt                    (105,256)   (615,706)
   Proceeds from debt borrowings                            400,000   6,000,000
   Payment of financing costs                                     0    (346,350)
NET CASH FROM (USED FOR) FINANCING ACTIVITIES               294,744   5,037,944

NET INCREASE (DECREASE) IN CASH                              29,556    (218,195)

CASH AT BEGINNING OF PERIOD                                 232,594     450,789

CASH AT END OF PERIOD                                      $262,150    $232,594

</TABLE>




The accompanying notes are an integral part
  of these consolidated financial statements.
F - 5

              MSR Exploration Ltd. and Subsidiaries
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 AND 1995
                                

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
                                
The  accompanying consolidated financial statements  include  the
accounts  of  MSR  Exploration Ltd. (the  Company)  (incorporated
under   the  laws  of  Alberta,  Canada),  and  its  wholly-owned
subsidiaries.   All  significant inter-company  transactions  and
balances have been eliminated in consolidation.

Principal Business Activity and Reorganization

The  Company  and its subsidiaries are involved in  oil  and  gas
exploration, development and production activities in the  United
States  and  Canada.  On February 7, 1992, the  Company  and  its
subsidiaries filed for protection under Chapter 11  of  the  U.S.
Bankruptcy Code.  On March 2, 1993, the Company's Restated  First
Amended  Joint  Plan  of  Reorganization  was  confirmed  by  the
Bankruptcy Court.  See Note 2.

U.S. Dollar Reporting

The  majority  of  the Company's business is transacted  in  U.S.
dollars  and, accordingly, the consolidated financial  statements
are expressed in that currency.

Securities Available for Sale
                                
The  Company  had  investments in marketable  equity  securities.
These  consisted of common stocks that were listed and traded  on
national stock exchanges.

The  Company adopted Statement of Accounting Standards  No.  115,
"Accounting   for   Certain  Investments  in  Debt   and   Equity
Securities," at January 1, 1994.  Statement No. 115 requires that
management  classify  securities at the  date  of  adoption,  and
thereafter  at  the  date of acquisition,  as  trading,  held-to-
maturity,  or available-for-sale.  The investments in  marketable
equity securities had been classified as available-for-sale,  and
were   stated  at  fair  value  each  balance  sheet  date,  with
unrealized gains and losses reported separately as a component of
stockholders'  equity.  During the fourth quarter  of  1995,  all
marketable securities held by the Company were sold.

Accounts Receivable
                                
The Company's customers are large oil and natural gas purchasers.
The  Company  does  not require collateral  and  receivables  are
generally  due in 30-60 days.  Management considers all  accounts
receivable current and collectible; accordingly, no allowance for
doubtful accounts has been established.


              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                
                                
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Major Customers

For  the  years ended December 31, 1996 and 1995 three purchasers
accounted  for  approximately 66% and 70%,  respectively  of  the
Company's total consolidated oil and gas sales.  The Company does
not  anticipate  that the loss of any of its  present  purchasers
would adversely effect the Company's consolidated business.   The
Company  also believes that, in the event of a loss of a  present
purchaser, other oil and gas purchasers located in the  Company's
areas  of  production  would offer competitive  prices  for  such
production.

Inventories
                                
Inventories are valued at the lower of cost (first-in, first-out
method) or market.


Properties, Plant and Equipment
                                
The  Company follows the "full cost" method of accounting for oil
and  gas  properties whereby all costs associated with acquiring,
exploring   for,  and  developing  oil  and  gas   reserves   are
capitalized  and  accumulated in cost centers  established  on  a
country-by-country  basis.  Such costs include  land  acquisition
costs,  geological and geophysical expenses, carrying charges  on
non-producing  properties, costs of drilling both productive  and
non-productive  wells, and overhead charges directly  related  to
acquisition, exploration and development activities.

The  capitalized costs related to each cost center, including the
estimated  future costs to develop proved reserves and the  costs
of   production  equipment,  are  amortized  using  the  unit-of-
production  method based on the estimated net proved reserves  of
each  country  as determined by independent petroleum  engineers.
Investments in unproved properties are not amortized until proved
reserves  associated  with  them  can  be  determined  or   until
impairment  occurs.  Oil and natural gas reserves and  production
are converted into equivalent units based upon estimated relative
energy content.

The capitalized costs less accumulated depletion and depreciation
in  each  cost  center  are limited to an  amount  equal  to  the
estimated future net revenue from proved reserves discounted at a
ten  percent  interest rate (based on prices  and  costs  at  the
balance  sheet date) plus the lower of cost (net of  impairments)
or fair market value of unproved properties.

Proceeds  from  the  sale of oil and gas properties  are  applied
against  capitalized  costs, with no  gain  or  loss  recognized,
unless  such  a  sale would significantly alter the  relationship
between capitalized costs and proved reserves of oil and gas,  in
which case the gain or loss is recognized in income.
              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                
                                
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Other  plant  and equipment are depreciated on the  straight-line
basis as follows:

     Gas  processing  plants and gathering  systems  -  over
     eight years
     Other equipment - over three to five years

Potential  impairment  of  producing properties  and  significant
unproved properties is assessed annually (unless economic  events
warrant   more  frequent  reviews).   In  addition,  a  quarterly
impairment analysis of aggregated properties is performed by  the
Company using discounted future net cash flows determined based
upon current prices and costs.

Environmental Compliance and Remediation

Environmental  compliance costs, including  on-going  maintenance
and   monitoring,   are  expensed  as  incurred.    Environmental
remediation costs, which improve the condition of a property, are
capitalized.

The  Accounting  Standards Executive Committee  of  the  American
Institute  of Certified Public Accountants has adopted  Statement
of  Position 96-1, "Environmental Remediation Liabilities," which
provides  guidance on the recognition, measurement,  display  and
disclosure  of  environmental  liabilities.   The  statement   is
effective  for  the Company's 1997 fiscal year.   Management  has
evaluated  such statement and believes that it will  not  have  a
material  effect  on  the  financial  condition, results   of
operation or cash flows of the Company.


Deferred Charges

Financing charges related to the acquisition of debt are deferred
and  amortized  over  the term of that debt using  the  effective
interest method.

Foreign Currency Translation

The  functional currency for the Company's foreign operations  is
the   applicable   local  currency;  therefore,  translation   is
performed for balance sheet accounts using current exchange rates
in  effect at the balance sheet date, and for revenue and expense
accounts using a weighted average exchange rate for the year.

Joint Venture Operations

Certain  of  the Company's exploration and development activities
relating  to oil and gas are conducted jointly with others.   The
accompanying  financial  statements reflect  only  the  Company's
proportionate interest in such activities.

              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

Income taxes provide for the tax effects of transactions reported
in  the  financial statements and consist of taxes currently  due
plus deferred taxes related primarily to differences between  the
basis of properties, plant and equipment for financial and income
tax reporting.  The deferred tax assets and liabilities represent
the  future  tax return consequences of those differences,  which
will  either  be  taxable  or  deductible  when  the  assets  and
liabilities are recovered or settled.

Net Income (Loss) Per Share

Net  income  (loss) per share has been calculated  based  on  the
weighted  average number of common shares outstanding during  the
year.

Cash Equivalents and Time Deposits

The  Company  considers  all highly liquid investments  purchased
with  a  maturity of three months or less to be cash equivalents.
Investments  with an original maturity in excess of three  months
are considered to be time deposits.

Stock-Based Compensation

Compensation  expense is recorded with respect  to  stock  option
grants  to  employees using the intrinsic value method prescribed
by  Accounting Principles Board Opinion No. 25.  The Company  has
not  elected  the fair value method of accounting for stock-based
compensation  encouraged,  but  not  required,  by  Statement  of
Financial  Accounting Standards No. 123, "Accounting  for  Stock-
Based Compensation."

Disclosure of Fair Value of Financial Instruments

The Company's financial instruments under Statement of  Financial
Accounting  Standards No. 107, "Disclosure about  Fair  Value  of
Financial Instruments," include cash, accounts receivable,  notes
payable,  accounts  payable  and  long-term  debt.   The  Company
believes  that the carrying amount of these items is a reasonable
estimate of their fair value.

Accounting Estimates

The  preparation  of  financial  statements  in  conformity  with
generally  accepted accounting principles requires management  to
make  estimates and assumptions that affect the reported  amounts
of assets and liabilities and the disclosure of contingent assets
and  liabilities at the date of the financial statements, as well
as  the  reported  amounts of revenues and  expenses  during  the
reporting  period.   Actual  results  could  differ  from   those
estimates.


              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

2.  BANKRUPTCY

Due  to a series of events, which included a substantial net loss
and the inability to negotiate a mutually agreeable restructuring
of  indebtedness  with  the Company's then  primary  lender,  the
Company and its subsidiaries elected on February 7, 1992 to  file
voluntary petitions for protection under Chapter 11 of  the  U.S.
Bankruptcy Code.

On September 12, 1992, the Company filed a plan of reorganization
with  the  Bankruptcy  Court which was  subsequently  amended  on
December  11,  1992  and  March 2, 1993,  to  reflect  agreements
between the Company and its creditors.

On March 2, 1993, the Company's Restated First Amended Joint Plan
of  Reorganization  was confirmed by the Bankruptcy  Court.   The
significant   changes  resulting  from  the  Plan   include   the
following:

     A  net  reduction of $2,429,829 in recorded liabilities  to
  secured and unsecured creditors through settlement, disallowance
  or rejection of claims.

     An  increase  of $5,143,170 in non-current, long-term  debt
  through  establishment of installment payment terms for certain
  claims.

As of December 31, 1996, the remaining amount due to pre-petition
creditors totaled $237,463 (see Note 6).


3.  SECURITIES AVAILABLE FOR SALE

As  discussed  in  Note  1, the Company  elected  to  adopt  FASB
Statement No. 115 as of January 1, 1994.  The December  31,  1994
balance   of  stockholder's  equity  increased  by  $171,900   to
recognize  appreciation in the fair value of securities available
for sale.  There was no deferred tax effect of that appreciation.
All  marketable  securities held by  the  Company  were  sold  in
November, 1995, at a gain of $177,000.







              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

4.  PROPERTY, PLANT AND EQUIPMENT
                                           1996          1995
U.S. proved oil and gas properties:                   
  Rocky Mountain Region                $28,245,283   $27,896,712
  Texas Region                          13,275,806    12,887,117
Accumulated depletion and depreciation (15,989,893)  (14,740,907)
                                                                
Net U.S. oil and gas properties         25,531,196    26,042,922
                                                                
Canadian oil and gas properties          2,221,085     2,158,803
Accumulated depletion and depreciation   (195,915)     (150,572)
                                                                
Net Canadian oil and gas properties      2,025,170     2,008,231
                                                                
Gas processing plants and gathering      3,623,687     3,388,459
systems
Other equipment                          1,146,343     1,061,984
Accumulated depletion and depreciation (3,539,953)   (3,461,022)
                                                                
                                         1,230,077       989,421
                                                                
Properties, plant and equipment-Net    $28,786,443   $29,040,574

5.  OTHER ASSETS

Other assets included deferred charges related to the acquisition
of long-term debt (amortized over the life of that debt using the
effective interest method) and restricted cash (held in a  letter
of  credit in lieu of a plugging and abandonment bond required by
the US Environmental Protection Agency).
                                         1996         1995
Deferred loan cost                       $385,215     $397,440
Less accumulated amortizatioin           (106,737)     (51,040)
Net deferred loan cost                    278,478      346,400
                                                              
Restricted cash                           191,625      191,625

Total other assets                       $470,103     $538,025




              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


6.  NOTE PAYABLE AND LONG-TERM DEBT
                                   1996          1995
Long-term debt consists of:                            
Prime rate plus 1.0% note                              
payable to Banque Paribas                                    
  (9.25% at December 31, 1996)  $6,400,000    $6,000,000
                                                       
Various pre-petition claims at                         
  interest rates ranging from                          
  6% to 10% due in monthly,                            
  quarterly and annual             
  installments
  including interest               237,463      342,719
                                                       
                                 6,637,463    6,342,719
 Less current maturities          (706,931)     (90,707)
                                $5,930,532    $6,252,012

Long-term debt maturities are as follows:
   Years Ending                       Amount
   December 31,
                                             
       1997                          $706,931
       1998                           868,294
       1999                           928,892
       2000                           848,649
       2001                           744,697
    Thereafter                      2,540,000
                                             
                                   $6,637,463


During  the  first quarter of 1995, the Company  entered  into  a
revolving  credit/term loan agreement with a bank.  The agreement
allowed the Company to borrow up to $15,000,000 under a revolving
credit arrangement for a two year period.  On August 15, 1996 the
loan  limit  was  set at $6,500,000 and on January  1,  1997  the
commitment  shall be reduced by monthly payments  at  a  rate  of
$60,000 for 1997, $65,000 for 1998, $75,000 for 1999, $70,000 for
2000  and  $60,000  for  2001.  The  Company  can  designate  the
interest  rate  on  amounts  outstanding  as  either  the  London
Interbank Offered Rate (LIBOR) + 2.5% or bank prime plus 1%.  The
collateral for this loan agreement consists of substantially  all
of  the  existing  assets of the Company and any future  reserves
acquired.    The  loan  agreement  contain  certain   restrictive
covenants which, among other things, require the maintenance of a
minimum current ratio, net worth and debt service ratio.   As  of
December  31,  1996 the Company was in compliance with  all  such
requirements.

              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                
                                
7.  INCOME TAXES

Deferred  income taxes reflect the net tax effects  of  temporary
differences   between  the  carrying  amounts   of   assets   and
liabilities for financial reporting purposes and the amounts used
for income tax purposes.  Significant components of the Company's
deferred  tax assets and liabilities as of December 31, 1996  and
1995 are as follows:
                                   1996         1995
Deferred tax assets:                                   
Operating loss carryforwards     $3,565,000  $3,473,503
Investment tax credits              428,000     428,765
Total deferred tax assets         3,993,000   3,902,268
Less valuation allowance         (2,002,635) (2,165,768)
                                             
                                1,990,365     1,736,500
Deferred tax liabilities:                    
Properties, plant and                        
equipment                       5,823,000     5,739,500
  Total deferred tax                         
   liabilities                   5,823,000    5,739,500
 Net deferred tax               $3,832,635   $4,003,000
  liabilities
The income tax benefit for each of the years ended December 31,
1996 and 1995 consists of the following:
                                   1996         1995
Deferred tax benefit             ($170,365)  ($359,000)

The  income  tax provision differs from the amount of income  tax
determined by applying the U.S. federal income tax rate  to  pre-
tax income for the years ended December 31, 1996 and 1995 due  to
the following:

                                   1996         1995
Computed expected tax                                   
expense (benefit)                ($170,365)   ($340,500)
Increase (decrease) in                                  
income resulting from:                                  
State income taxes, net                                 
  of federal tax benefit           (20,000)     (40,000)
Other                               20,365       21,500
                                 ($170,000)   ($359,000)

The  Company  has  U.S.  net  operating  loss  carry-forwards  of
approximately $10,500,000 available to reduce future U.S. taxable
income.   These U.S. net operating loss carry-forwards  begin  to
expire  in  2001.  The Company also has Canadian  expense  carry-
forwards  totaling approximately $2,200,000 available  to  reduce
future  Canadian taxable income.  These Canadian  expense  carry-
forwards have no expiration date.  Use of these U.S. and Canadian
carry-forwards is dependent on future taxable income.

              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                
                                
8.  COMMON STOCK TRANSACTIONS

In  May, 1996 the Company issued 100,000 shares of common  stock,
valued  at  $1.00  per  share,  with  $250,000  to  purchase   an
additional 21% working interest in the Cinco Ltd No.  1  well  in
Southeast, Texas.

During 1994, the Company granted stock options for 600,000 shares
of  common stock to the Board of Directors and employees.   These
options  were  exercisable at a price of $0.50  per  share.   The
options were later exercised and initially funded by the Company.
The  Company  accepted  notes receivable totaling  $300,000  from
certain members of the Board of Directors and employees, and  are
collateralized  by  the common stock issued.   During  1996,  the
Company  offered each individual the opportunity  to  cancel  the
notes  in  exchange for Company stock valued at $1.00 per  share.
35,000  shares  of  common stock were presented  to  reduce  such
notes.   At  December 31,1996 notes receivable arising  from  the
issuance of common stock was $95,000.

On  November  8,  1995  the Company completed  the  sale  of  its
holdings  in  687,600  shares of GeoResources  Common  Stock  and
44,000  shares  of  Big Sky Airlines Common Stock  to  Joseph  V.
Montalban, then a director of the Company, in exchange for 700,000
shares  of the Company's Common Stock.  The sale or exchange  was
approved by Shareholders at the Company's Annual General  Meeting
held on September 22, 1995.

During 1995, the Company issued 100,000 shares of common stock to
Joseph V. Montalban for services performed in 1994.  These shares
were issued at a value of $0.50 per share.


9.  RELATED PARTY TRANSACTIONS

The law firm in which the corporate secretary of the Company is a
senior  partner acted as Corporate Counsel during 1996 and  1995.
Legal  fees and out-of-pocket costs totaling approximately $2,523
and $25,777 were billed to the Company by the law firm during the
years ended December 31, 1996 and 1995, respectively.

The   Company  sub-leases  office  space  for  its   Fort   Worth
headquarters from Buis & Co.  Buis & Co. is partially owned by C.
Al  Buis,  a  current  Director  of  the  Company.   The  Company
reimbursed  Buis  &  Co. $35,160 and $22,300  for  annual  rental
payments for 1996 and 1995, respectively, and $14,644 and $12,428
for  property taxes, telephone and utilities for 1996  and  1995.
The  rent  paid for the Company's space was at the same rate  per
square  foot  paid by Buis & Co. and is commensurate with  rental
rates in the area.

On November 8, 1995 the Company completed the sale of its
holdings in 687,600 shares of GeoResources Common Stock and
44,000 shares of Big Sky Airlines Common Stock to Joseph V.
Montalban, then a director of the Company, in
                                
                Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                
  exchange for 700,000 shares of the Company's Common Stock.  The
                                                      sale or MSR
exchange  was  approved by Shareholders at the  Company's  Annual
General Meeting held on September 22, 1995.

In  1994,  the  Company retained the services of Buis  &  Co.,  a
private investment banking firm, to assist it in arranging credit
facilities.   The  firm  is partially owned  by  C.  Al  Buis,  a
Director of the Company.  In January 1995, the Company paid  Buis
& Co. $150,000 for the performance of such services in connection
with the Company's $15,000,000 revolving credit/term agreement.


10.  CASH FLOW INFORMATION
                                            1996      1995
Cash paid during the year:                                  
Interest                                  $677,863  $430,156
Income taxes                                    $0        $0
                                                            
Non-cash investing activity:                     
Common stock received in payment                            
  of note receivable from                                   
  insuance of common stock                ($35,000)       $0
                                                            
Non-cash financing activity:
Acquisition of producing property from                      
  from issuance of common stock           $100,000        $0






              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                

11.  SEGMENT INFORMATION

All of the Company's activities are in one business segment:  oil
and  gas  exploration, development and production.   The  Company
operates in the United States and Canada as follows:

Year Ended December 31,     United        Canada        Total
1996                        States
                                                               
Revenues                   $4,192,960     $183,365   $4,376,325
Operating income (loss)     ($514,896)     $15,210    ($499,686)
Total assets              $28,512,065   $2,204,362  $30,716,427
Depletion per equivalent                                       
unit of production              $4.89        $2.59        $4.74
                                                               
                                                               
                                                       
Year Ended December 31,     United        Canada        Total
1995                        States
                                                               
Revenues                   $2,962,031     $162,669   $3,124,700
Operating income (loss)     ($994,718)     ($4,836)   ($999,554)
Total assets              $28,486,026   $2,268,130  $30,754,156
Depletion per equivalent                                       
unit of production              $5.01        $2.36        $4.79

12.  SUBSEQUENT EVENT.

On  March 26,1997, the Company signed a definitive agreement with
Mercury  Exploration  Company, a Fort Worth,  Texas  company,  to
combine  all of their oil and gas assets in Montana with all  the
oil and gas assets of MSR Exploration Ltd. ( the Business Combination).

The transaction includes the addition of over 75 producing  wells
with  proven reserves of more than 5 million barrels of oil.   It
also includes the assumption of  Mercury's joint venture position
in  304,000 acres of undeveloped oil and gas properties,  located
in  the Cut Bank Field complex in Montana.  Mercury holds, in the
subject  area,  100%  of the oil rights and 30%  of  the  revenue
pertaining to liquids produced by gas wells.

As  consideration for the business combination, MSR will issue to
Mercury shareholders 12,000,000 shares of common stock valued  at
$0.75 per share and assume and/or pay  $4,000,000 in Mercury bank
debt.   Mercury  shareholders will receive warrants  to  purchase
5,500,000  common shares at $1.25 per share and 5,500,000  common
shares at $2.00 per share.

              MSR Exploration Ltd. and Subsidiaries
                                
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


As  a  result of the issuance of the common shares to Mercury  by
the   Company,   Mercury   shareholders  will   effectively   own
approximately 46.6% of the Company's total issued and outstanding
common stock.  After approval of the Business Combination at  the
Company's  shareholder  meeting anticipated  in  July  1997,  the
common shares will be distributed to the respective shareholders.
Shareholders  owning approximately 40% of MSR common  stock  have
agreed  to  vote  to approve this transaction.  Closing  the
transaction  is  expected immediately subsequent  to  shareholder
approval.

       DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES
                           (Unaudited)
                                
The  following  information  about  the  Company's  oil  and  gas
producing  activities  has  been  prepared  in  accordance   with
Statement  of Financial Standards No. 69, Disclosures  about  Oil
and Gas Producing Activities.

The  Company  believes  that the valuation method  prescribed  by
Statement of Financial Standards No. 69 does not provide the best
estimate of current economic value of its oil and gas reserves as
unproved reserves are not attributed any economic value  and  the
use  of  year-end price assumptions and a 10% discount  rate  are
arbitrary.

Proved Oil and Gas Quantities

The  following information summarizes the Company's estimated net
quantities  of proved and proved-developed oil and gas  reserves.
The  December 31, 1996 reserves are based on estimates of Citadel
Engineering  Ltd., petroleum consultants, contained in  a  report
dated March 1, 1997.

Year Ended December 31, 1996          
                              Oil (000,s bbls)          Gas (mmcf)
                             United                 United               
Proved reserves              States Canada  Total   States Canada     Total
Beginning of year            4,448      22  4,470   17,220   5,840    23,060
Revisions of previous         (466)     15   (451)    (861)    857        (4)
estimates
Purchase of reserves in          1       0      1      181       0       181
place
Extensions, discoveries,                                                 
reworks
  and other additions           42       0     42    1,955        0    1,955
Production                    (123)      0  (123)     (784)    (106)    (890)
                                                                         
End of year                  3,902      37  3,939    17,711    6,591  24,302
                                                                         
Proved developed reserves                                                
Beginning of year            2,621      19  2,640    11,593    5,767  17,360
                                                                         
End of year                  2,496      34  2,530    12,120    1,831  13,951
                                                                         
                                                                         
Year Ended December 31, 1995       
                               Oil (000's bbls)          Gas (mmcf)
                             United                 United               
Proved reserves              States Canada  Total   States Canada     Total
Beginning of year            4,382      21  4,403   14,076   5,736    19,812
Revisions of previous           54       1     55   (1,081)    213      (868)
estimates                                               
Purchase of reserves in         78       0     78    4,623       0     4,623
place
Extensions, discoveries,                                                 
reworks
  and other additions           65       0     65        0       0         0
Production                    (131)      0   (131)    (398)   (109)     (507)
                                                                         
End of year                  4,448      22  4,470   17,220    5,840   23,060
                                                                         
Proved developed reserves                                                
Beginning of year            2,563      18  2,581    8,502    5,664   14,166
                                                                         
End of year                  2,621      19  2,640   11,593    5,767   17,360
                                
DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES - (continued)
                           (Unaudited)

The  following standardized measure of discounted future net cash
flows  relating to proved oil and gas reserves has been  computed
using  year-end prices, except where contractual arrangements  in
place at year-end provide for future price changes and costs.

Year Ended December 31, 1996            United        Canada       Total
                                       States
                                                                              
Future cash flows                      $116,139,00   $10,701,000  $126,840,000
                                                  
Future production and development costs(31,135,000)  (5,309,000)  (36,444,000)
                                                  
Future income tax expense              (19,510,000)    (900,000)  (20,410,000)
                                                  
                                        65,494,000    4,492,000    69,986,000
10% annual discount for timing of cash (31,989,000)  (2,648,000)  (34,637,000)
flows                                             
                                                                              
Standardized measure of discounted                                            
cash flows                              $33,505,000   $1,844,000   $35,349,000
                                                                              
                                                                              
                                                                              
Year Ended December 31, 1995               United      Canada        Total
                                           States
                                                                              
Future cash flows                      $100,768,000   $9,301,000  $110,069,000
                                                  
Future production and development costs (26,641,000)  (5,481,000)  (32,122,000)
                                                  
Future income tax expense               (16,651,000)    (149,000)  (16,800,000)
                                                  
                                         57,476,000    3,671,000    61,147,000
10% annual discount for timing of cash  (27,806,000)  (1,974,000)  (29,780,000)
flows                                             
                                                                              
Standardized measure of discounted                                            
                                        $29,670,000   $1,697,000   $31,367,000

The  standardized  measure  of discounted  cash  flows  does  not
include any value relating to the Company's gathering, processing
and transmission of gas reserves owned by other companies.

The following table sets out in aggregate the principle source of
change in the standardized measure of discounted future net  cash
flows for each of the two years ended December 31, 1995 and 1994,
respectively.
                                         1996         1995
Sales of oil and gas produced, net of                         
production costs                     ($2,570,000)  ($1,239,000)
                                              
Net changes in price and production    7,740,000     6,176,000
Purchase of reserves in place            350,000     4,453,000
Extensions, discoveries and improved                          
recovery, less related costs              36,000       148,000
Revisions of previous quantity          (637,000)      (71,000)
estimates
Development costs incurred during the    367,000       877,000
year
Accretion of discount                  3,137,000     2,294,000
Net change in income taxes            (3,610,000)   (2,960,000)
                                               
Other                                   (831,000)   (1,248,000)
Net increase                           3,982,000     8,430,000
Balance at beginning of year          31,367,000    22,937,000
                                                              
Balance at end of year               $35,349,000   $31,367,000
                                               
                                
DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES - (continued)
                           (Unaudited)
                                
Costs incurred in oil and gas property acquisition, exploration
and development activities:

Year Ended December 31,                  
                            1996       1995
Property acquisition                           
costs
United States             $406,824   $3,621,984
Canada                           0            0
                          $406,824   $3,621,984
                                               
Exploration costs                              
United States                   $0     $116,973
Canada                      36,352       13,926
                           $36,352     $130,899
                                               
Development costs                              
United States             $331,235     $259,360
Canada                      35,336      617,726
                          $366,571     $877,086

Results of operations from producing activities:

Year Ended December 31, 1996    United      Canada       Total
                                States
                                                                
Oil and gas sales              $4,134,515   $183,017   $4,317,532
Operating expenses             (1,369,326)   (66,036)  (1,435,362)
                                                             
Production taxes                 (310,679)    (1,001)    (311,680)
Depletion and depreciation     (1,331,917)   (46,000)  (1,377,917)
                                                              
                                1,122,593     69,980    1,192,573
Income taxes                    (381,682)    (23,793)    (405,475)
                                                                
Results of operations from                                   
 producing activities(excluding
 corporate overhead and
 interest costs)                 $740,911     $46,187    $787,098
                                                                
                                                                
Year Ended December 31, 1995    United      Canada       Total
                                States
                                                                
Oil and gas sales              $2,651,281   $151,005    $2,802,286
Operating expenses             (1,294,364)   (54,787)   (1,349,151)
                                                              
Production taxes                 (213,677)      (116)     (213,793)
Depletion and depreciation       (989,223)   (42,800)   (1,032,023)
                                                               
                                  154,017     53,302       207,319
Income taxes                     (52,366)   (18,123)       (70,488)
                                                                
Results of operations from                                   
 producing activities (excluding 
 corporate overhead and                                   
 interest costs)                 $101,651    $35,179       $136,831

                SELECTED QUARTERLY FINANCIAL DATA
                           (Unaudited)
                                
The  following table summarizes selected quarterly financial data
for  each  of  the two years ended December 31,  1996  and  1995,
respectively.
                                                                 
                   March 31    June 30  September 30 December 31  
                                              
                                                                 
1996                                                             
Revenue             $989,000   $1,056,000  $1,082,000  $1,249,000  
                                                                 
Net income (loss)   ($76,000)    ($62,000)   ($99,000)   ($93,000)  
                                                                 
Net income (loss)                                                
  per share           ($0.01)         Nil      ($0.01)         Nil  
                                                                 
                                                                 
                                                                 
1995                                                             
Revenue             $575,000     $576,000     $827,000   $1,147,000 *
                                                                 
Net income (loss)  ($272,000)   ($286,000)   ($188,000)    $105,000  
                                                                 
Net income (loss)                                                
  per share          ($0.02)       ($0.02)      ($0.01)         Nil  
                                                                 
                                                                 
                                                                 
* Included gain of $177,000 recognized on the sale of stock.