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

                                   FORM 10-K/A
            Annual Report for the Fiscal year ended December 31, 2000

                                  ISRAMCO, INC.
             (Exact name of registrant as specified in its charter)

Delaware                      0-12500                13-3145265
(State or Other Jurisdiction  Commission File        IRS Employer
of Incorporation)             Number)                Identification No.)

                      11767 Katy Freeway, Houston, TX 77079
                    (Address of Principal Executive Offices)

                                  713-621-5946
              (Registrant's Telephone Number, including Area Code)
[Mark One]

|X| Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2000

|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934

Securities registered under Section 12(b) of the Exchange Act:

      Title of each Class:          Name of each exchange on which registered
            None                                    None

         Securities registered under Section 12(g) of the Exchange Act:
                          Common Stock, par value $0.01
                                (Title of Class)

Check whether the issuer (1) has field all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
|X| Yes |_| No

Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained in this Form, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

As of March 30, 2001, the Registrant had outstanding 2,639,853 shares of $0.01
par value Common Stock. The aggregate market value of such Common Stock held by
non-affiliates of the Registrant at March 30, 2001 was approximately $7
million. Such market value was calculated by using the closing price of such
common stock as of such date reported on the NASDAQ National Market.

The registrant amends its Annual Report on Form 10-K for the year ended December
31, 2000 to amend and restate Part III in its entirety to provide the
information called for therein which the registrant originally intended to
incorporate by reference to applicable information in the Proxy Statement for
the 2001 Annual Meeting of the Stockholders.


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<PAGE>

Item 1. Business and Properties

General

      Since its formation in 1982, Isramco, Inc. ("Isramco" or the "Company")
has been active in the exploration of oil and gas in Israel. The Company, with
related and unrelated parties, were granted in 1993 five (5) licenses: Med Tel
Aviv License, Med Yavne License, Med Ashdod License, Med Hadera License, Med
Hasharon License (the "Med Licenses").

      In October 1999, an agreement was reached with BG International Limited a
member of the British Gas Group ("BG") providing for the acquisition by BG of a
50% participation interest from the license participants in the Med Licenses in
Israel and BG's replacement of the Company as operator of the Med Yavne license
and any new license issued in respect of the other Med Licenses scheduled to
expire in June 2000. See "Summary Description of the Ventures, the Petroleum
Assets, Related Work Obligations and Exploration Efforts -- Israel".

      Since the Med Licenses were granted, 2D seismic surveys covering
approximately 2,000 kilometers and 3D seismic surveys covering approximately 900
square kilometers were performed as well as drilling on six sites was undertaken
(Yam Yafo 1, Yam West 1, Yam West 2, Or 1, Or South 1 and Nir 1). With the
exception of Or 1 and Nir 1, the wells were declared dry holes and were
abandoned. In May 2000 the gas "in place" at Or 1 was placed at 107 billion
cubic feet. Drilling of the Nir 1 well (within the area covered by the "Yam
Ashdod" carveout delineated by the participants in Med Ashdod License area)
commenced in June 2000. A reserve study was completed in October 2000 and the
estimated total gas reserves (in place) in the Nir 1 well were placed at 274
billion cubic feet of natural gas. See "Summary Description of the Ventures, the
Petroleum Assets, Related Work Obligations and Exploration Efforts -- Israel".

      The Med Licenses were scheduled to expire on June 14, 2000. As a result of
the gas finds, the Med Ashdod License (where the Nir 1 well is located) was
extended through June 14, 2002 and a 30 year lease respecting a part of the area
included in the Med Yavne License (where the Or 1 well is located) was granted
in November 2000, subject to certain conditions. The Med Tel-Aviv, Med Hadera
and Med HaSharon licenses expired on June 14, 2000. See "Summary Description of
the Ventures, the Petroleum Assets, Related Work Obligations and Exploration
Efforts -- Israel".

      In June 1999, the Company was awarded a preliminary permit referred to as
"Marine North/164" covering an area 575 square kilometers offshore Israel
("Marine North"). On September 21, 1999, the Company was awarded an additional
preliminary permit, "Marine Center/168" covering an area of 194 square
kilometers offshore Israel and located adjacent to the Herzliya coastline
("Marine Center"). In December 2000, the Israeli Petroleum Commissioner issued 3
year licenses respecting Marine Center and Marine North. A 3D seismic survey
respecting Marine Center was completed in May 2000 and preliminary results
thereof indicated the presence of gas prospects. In December 2000, drilling of
Romi 1 (within Marine Center) commenced and following the analysis of the logs,
it was decided to plug and abandon the well. The Company is the operator of
these licenses and holds a 1% participation interest in each venture and the
remaining interests are held by affiliated entities. See "Summary Description of
the Ventures, the Petroleum Assets, Related Work Obligations and Exploration
Efforts -- Israel".

      In January 2000, the Company was awarded an offshore preliminary permit
known as "Marine South", covering an area of approximately 142 square kilometers
offshore Israel and an


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<PAGE>

additional permit known as "Marine South B", covering an area of approximately
40 square kilometers offshore Israel. The permits expire on July 8, 2001. The
permits include a preferential right to obtain a license. The Company serves as
operator of the permits and holds a 1% participation interest in the permit; the
remaining participation interests are held by affiliated entities.

      In 1997 the Company expanded its activities to the United States. The
Company, through its wholly-owned subsidiaries, Jay Petroleum LLC ("Jay
Petroleum") and Jay Management LLC "Jay Management"), is involved in oil and gas
production in the United States. Jat Petroleum owns varying working interests in
oil and gas wells in Louisiana, Texas, Oklahoma and Wyoming. Independent
estimates of the reserves held by Jay Petroleum as of December 31, 2000 are
approximately 128,000 net barrels of proved developed producing oil and 3,779
MMCFs of proved developed producing natural gas. See "Summary Description of the
Ventures, the Petroleum Assets, Related Work Obligations and Exploration Efforts
-- United States".

      In 1997 the Company acquired from an affiliated entity a 50% participation
in a joint venture which holds two permits offshore in the Congo; the Marine III
Exploration Permit and the Tilapia Exploitation Permit. Drilling began in
September 2000 on an onshore well, the Tilapia-Land 1, located within the
Tilapia permit. Based on the results of the production tests that were performed
on the well, the license participants decided to plug and abandon the well.
Following the abandonment of the well, the Company elected to abandon the
Tilapia Permit in the Congo. In an effort to maintain its presence in the Congo,
the Company entered into an agreement with affiliated entities to purchase their
participation interests in a limited partnership that holds a 5% working
interest in the "Marine 9" license located off-shore Congo. See "Summary
Description of the Ventures, the Petroleum Assets, Related Work Obligations and
Exploration Efforts -- Congo".

The Operator of the Israeli Licenses

      The Med License Joint Venture Agreement (the "Joint Venture Agreement")
and the Med License Joint Operating Agreement (the "JOA"), as amended were
entered into between the participants of the Med Licenses to explore, develop
and produce petroleum and/or gas in certain areas onshore and offshore in
Israel. Subject to the provisions of the Joint Venture Agreement and the JOA,
each party participates in all the costs, expenses and obligations incurred in
relation to a contract area in the same proportion as its rights and interests
in such contract area. Under the JOA, the Operator carries out all the
operations contemplated in the JOA, in the framework of approved Work Programs
and within the limitations of approved budgets (AFE's). The Operator may be
removed for cause, by notice in writing given by two or more of the other
parties representing at least 65% of the total interests in a contract area. See
"Table of Petroleum Assets and Oil and Gas Ventures.

      The Company is currently the Operator of the Med Ashdod License, the new
3-year Marine North and Marine Center licenses granted in December 2000 and the
offshore preliminary permits known as "Marine South" and "Marine South B". As
the Operator, the Company is responsible for directing the oil exploration and
drilling activities of each Venture through its Branch Office in Petach Tikva,
Israel. With six (6) full-time employees, outside consultants and
subcontractors, the Company carries out the operations of each Venture within
the framework of approved work programs and budgets and pursuant to the terms of
a Joint Operating Agreement. With respect to the Med Yavne lease, the Company
furnishes to BG consulting services of an administrative and technical nature
for which it receives a monthly fee equal to $10,000. See "Summary Description


                                      -3-
<PAGE>

of the Ventures, the Petroleum Assets, Related Work Obligations and Exploration
Efforts -- Israel".

      As operator, the Company charges each venture participant for all costs
incurred in connection with the exploration and drilling activities conducted by
each venture and is entitled to receive a fee for its administrative overhead
equal to 6% of all direct charges or minimum monthly compensation of $6,000 per
each License and Offshore Preliminary Permit. During the year ended December 31,
2000, the Company was paid a total of $1,265,000 in operator fees.

General Partner for the Isramco Negev 2 Limited Partnership

      In 1989 the Company formed in Israel the Isramco Negev 2 Limited
Partnership (the "Limited Partnership") to acquire from the Company a
substantial portion of its working interest in the Negev 2 Venture, the venture
which the Company and related parties established to hold the rights to the
properties which eventually became the subject of the Med Licenses. In exchange
for working interests, the Limited Partnership paid to the Company $700,000 and
granted to the Company certain overriding royalties. In 1992, the Company
transferred to the Limited Partnership additional rights in the Negev Ashquelon
License, the Bessor Carveout, and the Negev Med Permit with Priority Rights (now
the Med Licenses) in exchange for additional overriding royalties and
reimbursement of expenses. The Company created Isramco Oil and Gas Ltd. ("IOG"),
a wholly-owned subsidiary to act as the General Partner for the Limited
Partnership and formed Isramco Management (1988) Ltd., a wholly-owned subsidiary
to act as the nominee holder of Limited Partnership units held by public
investors in Israel. Pursuant to the Limited Partnership Agreement and the Trust
Agreement, a Supervisor was appointed on behalf of the Limited Partnership unit
holders, with sole authority to appoint the sole director for Isramco Management
(1988) Ltd. and to supervise its activities on behalf of and for the benefit of
the Limited Partnership unit holders. The control and management of the Limited
Partnership vests with the General Partner, however, matters involving the
rights of the Limited Partnership unit holders are subject to the supervision of
the Supervisor and in certain instances the approval of the Limited Partnership
unit holders. The firm of Igal Brightman & Co., Accountants and Mr. David
Valiano, Accountant has been appointed as Supervisors.

      The Company currently receives through IOG a management fee of $40,000 per
month from the Limited Partnership for office space, management and other
services. It has been significant to the Company that the Limited Partnership
(in part through the efforts of the Company and others), has been able to raise
monies from the public in Israel to fund the Limited Partnership's share of the
work programs for the Petroleum Assets in connection with the continuation of
oil and gas exploration activities in Israel and to preserve the existence of
the Company's overriding royalties. The Company currently holds 4.32% of the
issued Partnership units and a wholly-owned subsidiary of the Company, IOG,
which serves as the general partner for the Partnership (the "General Partner"),
holds an additional 0.008% of the Partnership units. On March 31, 2001, the
Limited Partnership had cash, cash equivalents, certificates of deposit and
marketable securities with a value of approximately $100 million.

      Additionally, IOG (as a general partner) is entitled to 5% overriding
royalties in certain petroleum assets held by the Limited Partnership.

Abandonment of Property / Acquisition of Assets


                                      -4-
<PAGE>

      In September 1997 the Company acquired from Equital Ltd. (an Affiliated
company formerly known as Pass-port Ltd.) a 50 % participation in a joint
venture that holds the following two permits offshore of the Congo (the "Joint
Venture"): (1) the Marine III Exploration permit which has a term of four years
with an extension right of three years; and, (2) the Tilapia Exploitation permit
to develop the Tilapia Field, which has a term of ten years with an extension
right of five years. The purchase price was $2.55 Million for the Tilapia permit
and $150,000 for the Marine III permit for an aggregate purchase price of $2.7
Million.

      Drilling on an onshore well, the Tilapia-Land 1 within the Tilapia permit
in the Congo, commenced in September 2000. Based on the results of the
production tests that were performed on the well, the license participants
decided to plug and abandon the well. Following the plugging of the well, the
Company elected to abandon the Tilapia Permit. The aggregate amount expended by
the Company to date in connection with the Tilapia Permit (including the
foregoing acquisition costs) is approximately at $4.4 million

      The Marine III Exploration Permit covers an area of approximately 236,000
acres and is located in shallow water, 0-80 Feet deep, along the coast. The area
of the two permits is covered by a dense grid of two dimensional seismic lines.

      In December 2000, the Company entered into an agreement with Naphtha
Israel Petroleum Corp. Ltd. ("Naphtha Israel") and I.O.C. Israel Oil Company
Ltd. ("IOC"), each an affiliated entity and a limited partner in Naphtha Congo
(1995) Limited Partnership, another affiliated entity (hereinafter, the "Congo
Limited Partnership"), to purchase each of Naphtha Israel's and IOC's respective
interests in the Naphtha Congo Limited Partnership. The Congo Limited
Partnership holds a 5% working interest in the "Marine 9" license located
off-shore Congo (hereinafter, the


                                      -5-
<PAGE>

"Marine 9 License"). Following the purchase, the Company became the sole limited
partner in the Congo Limited Partnership and holds 99.9% of the Congo Limited
Partnership's rights and interests in the Marine 9 License. The remaining
participants in the Marine 9 License are recognized well-known oil companies.
The general partner of the Congo Limited Partnership will remain Naphtha Congo
Ltd., an affiliated entity.

      The interests were purchased for a total consideration of $800,000 and an
undertaking to pay royalties to the sellers (and/or their designees) from net
revenues generated therefrom at the rate of 17.5% of such revenues. In
connection with this acquisition, the Company received a Fair Market Value
Letter from an independent petroleum engineer with regard to the interests being
purchased in the Congo Limited Partnership.

      The budget that the participants approved for 2001 is estimated at
approximately $19 million and includes provisions for oil exploration and
drilling.

                    OIL AND GAS VENTURES AND PETROLEUM ASSETS

          OIL AND GAS VENTURES AND PETROLEUM ASSETS LOCATED IN ISRAEL

      The table below sets forth the Working Interests and Petroleum Assets of
the Company and all affiliated and non-affiliated participants in (i) the
Ventures, (ii) the Petroleum Assets, (iii) the total acreage of each Petroleum
Asset, and (iv) the expiration dates of each of the licenses as of December 31,
2000. This information pertains only to Petroleum Assets located in Israel. The
Company also holds Overriding Royalties in the Petroleum Assets. See "Table of
Overriding Royalties".

                  TABLE OF PETROLEUM ASSETS (WORKING INTEREST)
                           OIL AND GAS VENTURES (1)(3)
                              (% Interest of 100%)
                                  Med Licenses


                                                      Yam Ashdod
                                                      Carveout        MedYavne
Name of Participant              Med Ashdod License*  Venture*(2)     Lease**
-------------------            ---------------------  ------------    --------

The Company                         0.4813             0.36245          0.4585

Affiliates

Isramco Negev 2, Limited
Partnership                        34.0188            19.13693         32.4111

I.O.C. Limited Partnership          6.7083             5.05248              --
Naphtha                             2.3958             1.84107          1.8033

Naphtha Explorations
  Limited Partnership               2.3958             1.84107          2.2826

JOEL                                    --                  --          2.8806


                                      -6-
<PAGE>

Equital                                 --                  --          2.1639

Non-affiliated entities
Delek Drilling Limited
  Partnership                       4.0000             21.7660          8.0000

BG International Ltd.              35.0000             35.0000         35.0000

Middle East Energy (MEE) LP        15.0000             15.0000         15.0000

Total                             100.0000            100.0000        100.0000

Area (acres)                       100,000              64,250          61,800

Expiration Date                  6/14/2002           6/14/2002       6/14/2030


* The license was scheduled to expire on June 14, 2000; however, due to a gas
discovery, the license was extended to June 14, 2002.

** The license expired on June 14, 2000; however, due to a gas discovery, a 30
year lease covering an area of approximately 250 square kilometers (including
the area of the gas discovery) was granted in June 2000.

(1) Subject to the fulfillment of applicable provisions of the Israel Petroleum
Law and Regulations, and the conditions and work obligations of each of the
above licenses.

(2) Under the Grant Agreement with the Government of Israel, the Government may
claim that the Company is contingently obligated to repay to the Government the
Grant monies in the amount of $110,000 and to pay a 6. 5 % Overriding Royalty on
all production from the area.

(3) All of the Petroleum Assets are subject to a 12.5% Overriding Royalty due to
the Government of Israel under the Petroleum Law.

                      Marine Licenses/ Preliminary Permits

<TABLE>
<CAPTION>
Name of Participant     Marine North A    Marine North B    Marine Center     Marine South   Marine South B
<S>                           <C>               <C>                <C>               <C>            <C>
Company                         1                 1                  1                 1              1

Isramco Negev 2
Limited Partnership            79                79                 59                59             59

Modein Energy Limited
Partnership                    20                20                 10                10             10

Naphtha Explorations
Limited Partnership            --                --                 15                15             15

I.O.C. Limited
Partnership                    --                --                 15                15             15

Total                         100               100                100               100            100
</TABLE>


                                      -7-
<PAGE>

<TABLE>
<CAPTION>
<S>                        <C>               <C>                <C>               <C>             <C>
Acres                       91,000           51,150             48,000            35,200          9,800

Expiration Date            12/3/03          12/3/03            12/3/03            7/8/01         7/8/01
</TABLE>

                    Overriding Royalties held by the Company

      The Company holds overriding royalties in certain petroleum assets.
Additionally, in connection with the BG Transaction, the Company is entitled to
receive from each member of the Isramco Group overriding royalties equal to 2%
of each such member's rights to any oil/gas produced within the existing
offshore licenses or within any new licenses or to any oil or gas rights which
may be obtained in lieu of existing offshore licenses. The Company holds the
following Overriding Royalties:

                          TABLE OF OVERRDDING ROYALTIES

From The Limited Partnership On the first 10% of the Limited Partnership's Share
of the following Petroleum Licenses

                            Before Payout             After Payout
                            -------------             ------------
Med Tel Aviv License*           1.06%                   13.83%
Med Yavne License**             1.06%                   13.83%
Med Ashdod License***           1.06%                   13.83%
Med Hadera License*             1.06%                   13.83%
Med Hasharon License*           1.06%                   13.83%
Yam Ashdod Carveout             1.06%                   13.83%
Shederot License**              5.00%                   13.00%

From JOEL
                            On 8% of JOEL's Interest

                            Before Payout             After Payout
                            -------------             ------------
Yam Ashdod Carveout              2.5%                    12.5%

From Delek Oil Exploration Ltd.
 (DOEX) (1)(2)                       On 6% of DOEX's Interest

                            Before Payout             After Payout
                            -------------             ------------
Yam Ashdod Carveout              2.5%                    12.5%

From Naphtha, Naphtha Exploration LLP, Joel, Equital, IOC Limited Partnership

And Equital On oil and/or gas produced on existing offshore licenses and new
               licenses issued in respect of expiring Med License
                                       2%

To IOG      On Certain petroleum rights held by Limited Partnership
                                       5%

* The license expired on June 14, 2000.


                                      -8-
<PAGE>

** The license was scheduled to expire on June 14, 2000; however, due to a gas
discovery, the license was extended to June 14, 2002.

*** The license expired on June 14, 2000; however, due to a gas discovery, a 30
year lease covering an area of approximately 250 square kilometers (including
the area of the gas discovery) was granted in June 2000.

      The Company has no financial obligation with regard to the Overriding
Royalties, however, in the event the Limited Partnership, JOEL, DOEX or Delek,
fails to fund its obligation with regard to a Petroleum Asset to which an
Overriding Royalty exists, the Company could lose its interest in such
Overriding Royalty. See Glossary for definition of "Payout ".

(1) The Working Interests of Delek and DOEX have been assigned to Delek Drilling
Limited Partnership.

(2) In a prospectus of the Delek Limited Partnership dated January 26, 1994 it
is stated that the Interest which the Delek L.P, received from Delek and DOEX is
free from any encumbrances except that Isramco, Inc. may argue that the
Interests are subject to an overriding royalty. The Company has no information
available to it as to why this statement is in the Delek L.P. prospectus.

Summary Description of the Ventures, the Petroleum Assets, Related Work
Obligations and Exploration Efforts

Israel

      The Med Licenses comprise the Med Tel Aviv License, the Med Yavne License,
the Med Hadera License, the Med Ashdod License and the Med Hasharon License. In
June of 1996, the boundaries of the Med Ashdod License were modified to include
the area of the structure on which the Yam 1 and Yam 2 wells were drilled, as
well as, another additional structure. The participants in the Negev Med License
have delineated the Yam Ashdod Carveout Area within the Med Ashdod License and
this Carveout Area includes all of the areas, which were transferred from the
Negev Ashquelon License. Each participant's share in this new Carveout is the
same as it was in the Yam Carveout Venture (which was part of the Negev
Ashquelon License). The activities of the Yam Ashdod Carveout Venture, including
the accounts and expenses of the Carveout, are reported separately. No operating
fee is charged under the Joint Operating Agreement with respect to the Med
Ashdod License Area outside of the Yam Ashdod Carveout.

      By their terms, unless any gas or oil finds were discovered, each of the
Med Licenses were scheduled to expire on June 14, 2000. The Med Ashdod License
(encompassing the Nir 1 well) was extended through June 14, 2002 and a 30 year
lease was granted respecting the Or 1 and Or South 1 wells (within the Med Yavne
License area). The Med Tel Aviv, Med Hadera and Med HaSharon Licenses expired on
June 14, 2000.

Sale of Interests to British Gas

      On October 20, 1999, the Company and the other Med Licenses participants
(collectively, the "Isramco Group"), entered into an agreement with BG
International Limited, a member of the British Gas Group ("BG"), for the
acquisition by BG from the Isramco Group of a 50% participation interest in the
Med Licenses in Israel and BG's replacement of the Company as


                                      -9-
<PAGE>

operator of the Med Yavne License and any new license issued in respect of the
other Med Licenses scheduled to expire in June 2000 (the " BG Transaction").

      Under the terms of the BG Transaction, BG replaced the Company as operator
of the Med Yavne license as of January 1, 2000. The Company continued to serve
as operator of each of the remaining Med Licenses on the same terms and
conditions until each such license's expiration in June 2000. Other than for the
Med Yavne License, BG was not required to pay to the Company its share of any
administrative overhead in respect of the remaining Med Licenses which expired
in June; BG pays to the Company such amount in respect of the extended Med Asdod
license.

      Pursuant to the BG Transaction, the Company and BG are to coordinate their
respective efforts in consolidating and completing work programs in respect of
the areas included within the Med Licenses (other than for Med Yavne) for the
purpose of jointly applying for new oil licenses in replacement of the expiring
Med Licenses. However, as of June 2000, the Israeli Petroleum Commissioner
announced a freeze on the processing of all new oil and gas applications pending
further notice. The Company is unable to estimate when, if ever, such freeze
will be terminated.

      In consideration of the Company's performance of its obligations under the
BG Transaction, BG paid to the Company approximately $3.8 million Additionally,
upon the issuance of each of the three first new licenses, if any, which may be
obtained in lieu of the expiring Med Licenses, the Company is entitled to a
payment of approximately $1.7 million (or a total of approximately $5 million if
all licenses are obtained). However, given the freeze by the Petroleum
Commissioner of processing of all new applications, management is unable at the
present time to assess the likelihood of a grant of new licenses in respect of
the Med Licenses that have already expired.

      With respect to the Med Yavne license, the Joint Operating Agreement has
been revised to provide, among other things, that the Company will furnish to BG
consulting services of an administrative and technical nature. In consideration
therefor, the Company is entitled to a monthly fee equal to $10,000. The Company
is entitled to receive from each member of the Isramco Group overriding
royalties equal to 2% of each such member's rights to any oil and/or gas which
is produced within the existing offshore licenses or within any new licenses or
within other oil and gas rights which may be obtained in lieu of these offshore
licenses.

Exploration Efforts in Israel

      In the course of 1999 and 2000, the Company discovered three gas fields
offshore Israel, the "Or " and "Or South" (within the Med Yavne License) and
"Nir " (within the Med Ashdod License).

Med Yavne

      In October 1999, the "Or 1" well (within the Med Yavne license area) was
spudded to a depth of 2,000 meters (approximately 6,540 feet). The production
tests, which were completed in November 1999, reflected an initial gas
production flow rate of 21 million cubic feet a day. In February 2000, a
preliminary estimate for the gas "in place" at Or 1 placed the figure at 107
billion cubic feet. In the first quarter of 2000, a 3D seismic survey was
conducted in the Med Yavne License area. Subsequent to the drilling of "Or 1",
"Or South" was drilled in a separate structure. Gas was discovered in the Or
South field but was not tested.

      Based on the gas discovery, in June 2000, the Israel Petroleum
Commissioner advised the


                                      -10-
<PAGE>

license participants that they had been granted a 30 year lease respecting 250
square kilometers (approximately 62,000 acres) of the Med Yavne license area
(hereinafter, the "Or Lease"), subject to certain conditions, which conditions
include (i) completion of the processing and interpretation of the results of
the seismic 3D survey and the identification of gas prospects (if any), all by
May 1, 2001, (ii) the commencement of the drilling of at least one well by July
1, 2001 and the (iii) presentation of a work plan regarding the exploration
activities on the leasehold. The license with respect to the remaining area has
expired in June 2000. BG is the operator of the 30 year lease.

      In the course of 2000, the processing and interpretation of the 3D seismic
survey were performed and, based on these results, a detailed mapping of the gas
discoveries, as well as a number of additional gas prospects in the leasehold,
were drawn up.

      The Company's participation share of the Or Lease is comprised of 0.4585%.

Med Ashdod

      In April 2000, a 3D seismic survey was conducted in the southern portion
of the Med Ashdod License area and, based on the results of the survey, the
participants decided to commence drilling for gas in the Yam Ashdo Carveout
area. Drilling of the Nir 1 well (within the area covered by the "Yam Ashdod"
carveout delineated by the participants in Med Ashdod License area) commenced in
June 2000. The Nir 1 well is situated approximately 17 kilometers (approximately
10.6 miles) off the coast of Israel. Production tests were undertaken and
results indicated a daily gas flow rate of up to 15 million cubic feet. Test
results were further analyzed by an independent engineering consulting firm. A
reserves study was completed in October 2000 and the estimated total gas
reserves (in place) in the Nir 1 well were placed at 274 billion cubic feet of
natural gas.

      Based on the Nir I discovery, the Israeli Petroleum Commissioner extended
the duration of the Med Ashdod License to June 14, 2002. The extension
specifies, among other things, the following: (i) that the processing and
interpretation of the results of the 3D survey to be completed by October 1,
2001, (ii) a work program for the development of the discovered gas site to be
presented by December 1, 2001, (iv) the drilling of a well by May 1, 2002.

      In addition, the Company, as operator of the license, presented in October
2000 to the license participants, a work program covering the (i) mapping of gas
objectives based on a seismic 3-D survey previously performed with respect to
the southern part of the license and (ii) shooting of a new 3-D seismic survey
covering the Yam structure in the northern and central part of the license and
the mapping of two deep oil prospects. The participants were requested to
approve the work program and a budget of $3.1 million, which approval was
obtained in November 2000.

      A 3D survey covering an area comprised of 190 kilometers (approximately
119 miles) covering the yam structure was completed in October 2000. The results
were processed and are currently being interpreted.

Award of New Licenses

Marine North

      In June 1999, the Company was awarded a preliminary permit referred to as
the "Marine North/ 164" covering an area of 575 square kilometers off shore
Israel. The permit included a


                                      -11-
<PAGE>

preferential right to obtain a license. In April 2000, the participants approved
an AFE in the amount of $1,167,000 to perform a 3D seismic survey, its
processing and interpretation. The survey was completed in May 2000. Preliminary
results of the survey were processed.

      In response to the Company's application, the Israeli Petroleum
Commissioner issued in December 2000 two licenses in respect of the area covered
by the permit (hereinafter, collectively, the "Marine North Licenses"), "Marine
North A" and "Marine North B", which licenses continue in effect through
December 3, 2003. The Company holds a 1% interest in each of the Marine North
Licenses and the remaining interests are held by affiliated entities. The
Company serves as operator of each of the Marine North Licenses.

Marine Center

      On September 21, 1999, the Company was awarded an additional preliminary
permit, "Marine Center" covering an area of 194 square kilometers. The permit
included a preferential right to obtain a license. In April 2000, the
participants approved an AFE in the amount of $776,000 to perform a 3D seismic
survey, its processing and interpretation. The survey was completed in May 2000.
The results were processed and interpreted. Preliminary results indicate the
presence of gas prospects.

      In December 2000, Israeli Petroleum Commissioner issued a license in
respect of the area covered by the permit (hereinafter, the "Marine Center
License"), which license continues in effect through December 3, 2003. The
Company holds a 1% participation interest in the Marine Center License and the
remaining interests are held by affiliated entities. . The Company serves as
operator of the Marine Center License.

      The drilling of Romi 1 reached a depth of approximately 1,500 meters.
After the analysis of the logs, it was determined to plug and abandon Romi 1.

Offshore Preliminary Permits - Marine South & Marine South B

      In January 2000, the Company was awarded an offshore preliminary permit
known as "Marine South", covering an area of approximately 142 square kilometers
offshore Israel and an additional permit known as "Marine South B", covering an
area of approximately 40 square kilometers offshore Israel . The permits expire
on July 8, 2001. The permits include a preferential right to obtain a license.
The Company serves as operator of the permits and holds a 1% participation
interest in the permit; the remaining participation interests are held by
affiliated entities.

      A budget (AFE) of $310,000 was approved in July 2000. A 2D seismic survey
was performed and the survey results were processed and are currently being
interpreted.

Summary of Exploration Efforts in the United States

      The Company, through its wholly-owned subsidiaries, Jay Petroleum LLC
("Jay Petroleum") and Jay Management LLC "Jay Management"), is involved in oil
and gas production in the United States. Jay Petroleum owns working and operated
and non-operated varying working interests in oil and gas wells in Louisiana,
Texas, Oklahoma and Wyoming. Independent estimates of the reserves


                                      -12-
<PAGE>

held by Jay Petroleum as of December 31, 2000 are approximately 125,000 net
barrels of proved developed producing oil and 3,700 MMCFs of proved developed
producing and natural gas. Jay Mangement acts as the operator of certain of the
producing oil and gas interests owned or acquired by Jay Petroleum.

      In July 2000, Jay Management, as operator of Hoover No. 2 well, commenced
drilling for gas in Garfield County, Oklahoma. Jay Petroleum holds a 75%
participation interest in the well. The drilling budget is approximately
$300,000. Initial test flow indicated rates of 600 MCF per day. The well has
been connected to pipeline and production has commenced.

      The Company entered into a 3 year supply agreement for the sale of the gas
to unaffiliated third parties at prevailing market prices.

Summary of Exploration Efforts in the Congo

      The oil and gas properties in the Congo consisted of the Marine III
Exploration Permit and the Talipia Exploitation Permit. Drilling on an onshore
well, the Tilapia-Land 1 within the Tilapia permit, commenced in September 2000.
A budget of approximately $3.8 million (inclusive of production tests) was
approved. An offshore well, Tilapia-1, previously drilled by ELF, tested oil at
a rate of 2,000 barrels per day, from a sandstone reservoir. Based on the
results of the production tests that were performed on the well, the license
participants decided to plug and abandon the well.

      Following the plugging and abandonment of the Tilapia-1, the Company
elected to abandon the Tilapia permit in the Congo, in which the Company held a
50% participation interest; the remaining participation interest is held by an
affiliated entity. The acquisition cost to the Company of the Tilapia Permit was
reflected on the Company's at December 31, 1999 at approximately $2.55 million.
The aggregate amount expended by the Company in connection with the Tilapia
permit (including the foregoing acquisition costs) was approximately $4.4
million (which amount included the $2.55 million expended in the initial
acquisition of the permits). The Company charged approximately $1.9 million to
oil and gas exploration costs and $2.55 to impairment expenses for the year 2000
as a result of the plugging and abandoning of the Tilapia Permit.

      In December 2000, the Company entered into an agreement with Naphtha
Israel Petroleum Corp. Ltd. ("Naphtha Israel") and I.O.C. Israel Oil Company
Ltd. ("IOC"), each an affiliated entity and a limited partner in Naphtha Congo
(1995) Limited Partnership, another affiliated entity (hereinafter, the "Congo
Limited Partnership"), to purchase each of Naphtha Israel's and IOC's respective
interests in the Congo Limited Partnership. The Congo Limited Partnership holds
a 5% working interest in the "Marine 9" license located off-shore Congo
(hereinafter, the "Marine 9 License"). Following the purchase, the Company
became the sole limited partner in the Congo Limited Partnership and holds 99.9%
of the Congo Limited Partnership's rights and interests in the Marine 9 License.
The remaining participants in the Marine 9 License are recognized well-known oil
companies. The general partner of the Congo Limited Partnership will remain
Naphtha Congo Ltd., an affiliated entity.

      The interests were purchased for a total consideration payable by the
Company of $800,000 and an undertaking to pay royalties to the sellers (and/or
their designees) from net revenues generated therefrom at the rate of 17.5% of
such revenues. In connection with this acquisition, the Company received a Fair
Market Value Letter from an independent petroleum engineer with regard to the
interests being purchased in the Congo Limited Partnership.


                                      -13-
<PAGE>

      The budget for year 2001 which the participants approved is estimated at
$19 million and provides for the drilling of one well.

Accounting Treatment of Oil and Gas Properties on the Company's Financial
Statements

      The Company uses the "successful efforts" method of accounting whereby all
costs of acquiring acreage, costs of drilling successful exploration wells and
development costs are capitalized. Producing and non-producing properties are
evaluated periodically, and if conditions warrant (i.e., should a well prove to
be dry and abandoned, or not of commercial value or no development activity is
contemplated in the near future), the related costs are written off. Annual
lease rentals and exploration costs, including geologic and geophysical costs
and exploratory dry hole costs, are charged to expense as incurred.

                                    EMPLOYEES

      As of March 31, 2001, the Company had six (6) employees at its Branch
Office in Israel and three (3) employees in its offices in Houston, Texas.

Item 2. OFFICES

Israel

      The Company leases office space from Naphtha at 8 Granit St., Petach
Tikva. In 2000, the Company paid Naphtha $9,125 for rental space, office
services, secretarial services and computer services. The Company believes that
the payment for the above services are reasonable compared to other similar
locations.

United States

      The Company maintains offices in Houston, Texas. The Company has a lease
for office premises (approximately 2,015 square feet) at 11767 Katy Freeway,
Houston, TX 77079 expiring October 2003 with a monthly rental of $2,854.

Item 3. Legal Proceedings

      The Company, together with Naphtha Congo Ltd., an Israeli and related
entity ("Naphtha Congo") and Naphtah Israel Petroleum Corp., an Israeli and
related entity ("Naphtha Israel") received notice from counsel for a contractor
who provided drilling services in the Tilapia permit ("Contractor") of a claim
by Contractor against Naphtha Congo of approximately $1.2 million in respect of
drilling services rendered. The Contractor and Naphtha Congo entered into a
drilling agreement in October 2000 with respect to the Tilapia 1 well. Naphtha
Congo is authorized to represent the Company and Naphtha Israel, each of which
holds a 50% participation interest in the joint venture holding the rights in
the Tilapia permit. Drilling was commenced in the third quarter of 2000 and,
based on production tests, the license participants decided to plug and abandon
the Tilapia 1 well. Naphtha Congo represents the Company and Naphtha Israel, a
related party. See "Summary Description of the Ventures, the Petroleum Assets,
Related Work Obligations and Exploration Efforts -- Congo".

      Naphtha Congo disputes the amount claimed and has claimed offsetting
damages caused to it by the Contractor. Naphtha Congo is currently attempting to
resolve this matter, though no assurance can be provided that it will be
successful in achieving such resolution. The Contractor has threatened to


                                      -14-
<PAGE>

commence legal action unless this matter is resolved to its satisfaction and has
threatened to levy against the assets of the Company.

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

      The Company held its Annual Meeting of Shareholders on October 24, 2000
and the shareholders voted as to the following: (a) election of Haim Tsuff,
Jackob Maimon, Tina Maimon Arckens, Professor Avihu Ginzburg and Professor Linda
Canina as directors to serve for a term of one (1) year or until his/her
successor is duly elected and (b) the approval of the firm of KPMG LLP as
Company auditors for the year ended December 31, 2000. All matters were approved
at the meeting.

      Results of the vote were as follows:

                     For                Against         Abstain
                  ---------             -------         -------

1. Directors      1,371,650                 100              --
2. Auditors       1,371,650                 100              --

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

      The number of record holders of the Company's Common Stock on March 31,
2001 was approximately 827 not including an undetermined number of persons who
hold their stock in street name.

      The high and low bid prices as reported on the National Association of
Securities Dealers Automated Quotations System National Market System are shown
in the table below. These over-the-market quotations reflect prices between
dealers, without retail mark-ups, mark-downs or commissions and may not
represent actual transactions.

                                  Common Stock

Quarter Ended                                      High                  Low

2000

March 31                                           $6 1/16              $3 11/32
June 30                                            $5 3/4               $4 21/32
September 30                                       $6 5/8               $5
December 31                                        $6 7/8               $5 1/8

1999

March 31                                           2 1/8                1 21/32
June 30                                            2 11/16              2 1/8
September 30                                       3 1/2                2 5/8
December 31                                        7 3/8                3 5/32

      The Company has never paid a dividend on its Common Stock. The payment by
the Company of dividends, if any, in the future rests within the discretion of
its Board of Directors and will depend, among other things, upon the Company's
earnings, capital requirements and financial condition.

Item 6. Selected Consolidated Financial Data

      The data presented below with respect to the Company should be read in
conjunction with the Consolidated Financial Statements and related Notes thereto
of the Company included elsewhere in


                                      -15-
<PAGE>

this Report and Item 7-- "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                            2000             1999             1998           1997           1996
<S>                                                     <C>              <C>              <C>             <C>            <C>
Operator's fees                                         $     1,265      $     1,744      $       720     $      461     $      468
Oil and Gas Sales                                       $     2,080      $     1,107      $     1,410     $    2,001     $       --
Interest income                                         $     1,277      $     1,011      $       557     $    1,085     $    1,175
Office services to related parties and other            $     1,018      $       881      $       613     $      483     $      464
Equity in earnings of investees                         $        64      $      (107)     $        16     $       39     $       --
Reinbursement of exploration cost                       $        --      $        --      $       255     $       --     $       --
Gain from sale of oil and gas properties
     and equipment                                      $         6      $        17      $       931     $       --     $       --
Gain (Loss) on marketable securities                    $        (9)     $     1,264      $      (973)    $     (272)    $      706
Other                                                   $        --      $        13      $        --     $       --     $       --
Realized gain on investment in affiliate                $        --      $       100      $        --     $       --     $       --
Gain on BG Transaction                                  $     3,626      $        --      $        --     $       --     $       --
Impairment of oil & gas properties                      $     2,550      $        --      $       571     $       12     $       --
Impairment of Investment                                $       400      $        --      $        --     $       --     $       --
Exploration costs                                       $     2,956      $       154      $        81     $       11     $       34
Lease operating expenses and severance taxes            $       630      $       469      $       883     $      972     $       --
Depreciation, depletion and amortization                $       443      $       609      $       815     $      684     $       37
Operator expense                                        $       634      $       514      $       487     $      507     $      656
General and administrative expenses                     $     1,740      $     1,061      $     1,196     $    1,289     $    1,254
Interest Expense                                        $        55      $       157      $       326     $      341     $        2
Income tax expense (benefit)                            $      (383)     $       221      $        38     $       --     $       --
Net Income (loss)                                               302            2,845             (851)           (14)           830
                                                        ===========      ===========      ===========     ==========     ==========
Earnings (loss) per common share - basic                $      0.11      $      1.08      $     (0.32)    $    (0.01)    $    (0.31)
                                                        ===========      ===========      ===========     ==========     ==========
Earnings (loss) per common share - diluted              $      0.11      $      1.08      $     (0.32)    $    (0.01)    $    (0.31)
                                                        ===========      ===========      ===========     ==========     ==========
Weighted average number of common outstanding - basic     2,639,853        2,639,853        2,639,853      2,634,853      2,649,475
                                                        ===========      ===========      ===========     ==========     ==========
Weighted average number of common outstanding - diluted   2,706,731        2,639,853        2,639,853      2,639,853      2,649,475
                                                        ===========      ===========      ===========     ==========     ==========

<CAPTION>
                                                                                         December 31,
                                                        ---------------------------------------------------------------------------
                                                            2000             1999             1998           1997           1996
Balance Sheet Data
<S>                                                     <C>              <C>              <C>             <C>            <C>
Total assets                                            $    27,843      $    30,764      $    24,486     $   26,783     $   23,263
Total liabilities                                       $     1,378      $     4,467      $     2,422     $    3,868     $      335
Shareholders' equity                                    $    26,465      $    26,297      $    22,064     $   22,915     $   22,928
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      Statements contained in this Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's expectations,
hopes, intentions or strategies regarding the future. Such forward-looking
statements involve known and unknown factors that could cause actual results of
the Company to be materially different from the historical results or from any
future results expressed or implied by such forward looking statements.

Liquidity and Capital Resources

      Working capital (current assets minus current liabilities) was $16,265,000
and $15,142,000 at December 31, 2000 and 1999, respectively.

      Net cash flow provided by operating activities was $1,511,000 and
$1,789,000 in 2000 and


                                      -16-
<PAGE>

1999, respectively.

      Net cash used in investing activities in 2000 was $2,715,000 compared to
$341,000 in 1999. The cash used in 2000 was primarily attributable to purchases
of marketable securities, investments in affiliates and oil and gas property
costs in the Congo and in the United States, offset by proceeds from sale of
marketable securities and from BG transaction. The cash used in investing
activities in 1999 was primarily attributable to purchases of marketable
securities and investment in affiliates, offset by sales of such investments and
proceeds from BG transaction.

      Capital expenditures for property and equipment were $2,337,000 and
$177,000 in 2000 and 1999, respectively.

      In May 2000, an indebtedness of Jay in the amount of $1,404,000 under a
bank loan facility of $10 million from Comerica Bank-Texas was repaid in full.

      In June 2000, the Company established IsramTec, Inc., a Delaware
corporation and wholly-owned subsidiary (hereinafter, "IsramTec") for purposes
primarily of identifying and investing in promising high-tech ventures. The
Company intends to remit to IsramTec, in the Company's sole discretion and as
needed from time to time, up to $2.5 million to enable such investments by
IsramTec. In July 2000, IsramTec invested approximately $400,000 in a high tech
venture by way of the purchase of 5% convertible promissory notes issued by such
venture, convertible at the discretion of IsramTec, under certain conditions,
into equity capital of such venture. During December 2000, the Company
determined the investment to be impaired and, accordingly, charged $400,000 to
impairment expenses.

      The Company believes that existing cash balances and cash flows from
activities will be sufficient to meet its financing needs. The Company intends
to finance its ongoing oil and gas exploration activities from working capital.

Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

      The Company reported net income of $302,000 ($0.11 per share) in 2000
compared to a net income of $2,845,000 ($1.08 per share) in 1999. The decrease
in net income in 2000 compared to 1999 is primarily attributable to the
abandonment of the Tilapia Permit in the Congo and related exploration and
impairment expenses.

      Set forth below is a break-down of these results.

United States

Oil and Gas Volume and Revenues (in thousands)

                                                           2000             1999
                                                           ----             ----
Oil Volume Sold (Bbl)                                        23               23

Gas Volume Sold (MCF)                                       431              410

Oil Sales ($)                                               618              310

Gas Sales ($)                                             1,462              797

Average Unit Price


                                      -17-
<PAGE>

Oil ($/Bbl) *                                             26.87            13.48
Gas ($/MCF) **                                             3.39             1.90

*  Bbl - Stock Market Barrel Equivalent to 42 U.S. Gallons

** MCF - 1,000 Cubic Feet

Israel

The Offshore Licenses

      During 2000, approximately $139,000 was expended by the Company in respect
of the Offshore Licenses compared to $173,000 in 1999.

Operator's Fees

      In 2000 the Company earned $1,265,000 in operator fees, compared to
$1,744,000 in 1999. In 2000, the operator fees were primarily attributable to
the drilling of the Nir 1 and Romi 1 wells. In 1999, the operator fees were
primarily attributable to the drilling of the Yam West 2, Or 1 and Or South
wells.

Oil and Gas Revenues

      In 2000 and 1999 the Company had oil and gas revenues of $2,080,000 and
$1,107,000, respectively. The increase is due mainly to the increase in gas and
oil prices.

Lease Operating Expenses and Severance Taxes

      Lease operating expenses and severance taxes were incurred primarily in
connection with oil and gas fields in the United States. Oil and gas lease
operating expenses and severance taxes were $630,000 and $469,000 for 2000 and
1999, respectively. The increase in lease operating expenses and severance taxes
is primarily due to the workovers performed in connection with producing wells.

Interest and dividend Income

      Interest income during the year ended December 31, 2000 was $1,277,000
compared to $1,011,000 for the year ended December 31, 1999.

Gain on Marketable Securities

      In 2000, the Company recognized net realized and unrealized losses on
marketable securities of $9,000 compared to net realized and unrealized gains of
$1,264,000 in 1999.

      Increases or decreases in the gains and losses from marketable securities
are dependent on the market prices in general and the composition of the
portfolio of the Company.

Gain on BG Transaction

      During 2000, the Company completed its transaction with BG International
Limited, a member of British Gas Group ("BG") which included the sale of
participation interests in certain licenses offshore Israel to BG and BG's
replacement of the Company as operator on Med Yavne license. As a result of the
transaction, the Company recognized a gain of approximately $3,626,000.

Operator Expenses


                                      -18-
<PAGE>

      There was no material change in operator costs in 2000 compared to 1999.

Exploration and Impairment of Oil & Gas Assets.

      In 2000, the Company expended approximately $1,900,000 in connection with
the drilling in the Tilapia Permit in the Congo. Subsequently, upon the
Company's abandonment of the Tilapia Permit, the Company recorded an impairment
of oil and gas assets in the amount of $2.55 million, which represents the
acquisition cost to the Company of the Tilapia Permit. In connection with the
purchase by the Company of certain affiliates' interest in Naphtha Congo L.P.
(which holds a 5% working interest in the Congo), the Company recorded $800,000,
representing the cash purchase price paid for such interest, to exploration
costs, as such payment represents a reimbursement of exploration costs
previously expensed by the Company affiliates.

General and Administrative Expenses

      In 2000, the Company charged $1,740,000 to general and administrative
expenses compared to $1,061,000 charged for 1999. The increase is primarily
attributable to the compensation of senior personnel and bonuses awarded to
senior officers.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

      The Company reported net income of $2,845,000 ($1.08 per share) in 1999
compared to a net loss of $851,000 ($0.32 per share) in 1998. The net income in
1999 compared to the loss in 1998 is primarily attributable to increased
operator fees resulting from the offshore drilling with the Med Yavne license,
gains attributable to marketable securities and decreases in operating expenses.

      Set forth below is a break-down of these results.

United States

Oil and Gas Volume and Revenues   (in thousands)

                                                           1999             1998
                                                           ----             ----
Oil Volume Sold (Bbl)                                        23               31

Gas Volume Sold (MCF)                                       410              523

Oil Sales ($)                                               310              395

Gas Sales ($)                                               797            1,015

Average Unit Price

Oil ($/Bbl) *                                             13.48            12.74
Gas ($/MCF) **                                             1.90             1.94

*   Bbl - Stock Market Barrel Equivalent to 42 U.S. Gallons

**  MCF - 1,000 Cubic Feet

Israel

The Licenses

      During 1999, approximately $173,000 were expended by the Company in
respect of the Med Licenses compared to $3,500 in 1998. The increased amount is
primarily for the purposes of the offshore drilling on the Yam West 2, Or 1 and
Or 1 South wells.

Operator's Fees


                                      -19-
<PAGE>

      In 1999 the Company earned $1,744,000 in operator fees, compared to
$720,000 in 1998. The increase in the operator fees is due primarily to the
offshore drilling activities in Yam West 2, Or 1 and Or South 1.

Oil and Gas Revenues

      In 1999 and 1998 the Company had oil and gas revenues of $1,107,000 and
$1,410,000, respectively. The decrease is due mainly to the sale of producing
wells during 1998.

Lease Operating Expenses and Severance Taxes

      Lease operating expenses and severance taxes were incurred primarily in
connection with oil and gas fields in the United States. Oil and gas lease
operating expenses and severance taxes were $469,000 and $883,000 for 1999 and
1998, respectively. The decrease in lease operating expenses and severance taxes
is due to the sale of gas and oil wells with relatively high operating costs.

Interest Income

      Interest income during the year ended December 31, 1999 was $1,011,000
compared to $557,000 for the year ended December 31, 1998. The increase is
primarily attributable to Interest earned on marketable securities.

Gain on Marketable Securities

      In 1999, the Company recognized net realized and unrealized gains on
marketable securities of $1,264,000 compared to net realized and unrealized
losses of $973,000 in 1998.

      Increases or decreases in the gains and losses from marketable securities
are dependent on the market prices in general and the composition of the
portfolio of the Company.

Impairment of Oil and Gas Properties

      The Company recorded provisions for impairment of oil and gas properties
in 1999 and 1998 of $0 and $571,000 respectively, as the result of capitalized
costs being in excess of future net revenues.

Operator Costs

      There was no material change in operator costs in 1999 compared to 1998.

General and Administrative Expenses

      There was no material change in general and administrative expenses for
the year ended December 31, 1999 compared to the year ended December 31, 1998.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

      The Company is exposed to market risk, including adverse changes in
commodity prices.


                                      -20-
<PAGE>

      The Company produces and sells natural gas and crude oil. As a result, the
Company's financial results can be significantly affected if these commodity
prices fluctuate widely in response to changing market forces.

Item 8. Financial Statements and Supplementary Data

      The information called for by this Item 8 is included following the "Index
to Financial Statements" contained in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.

Not Applicable

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

      As of April 30, 2001, the executive officers and directors of the Company
are as follows:

Name                   Age    Position

Haim Tsuff              43    Chairman of the Board and Chief Executive Officer
                              of the Company

Jackob Maimon           45    President of the Company, Director

Daniel Avner            38    Vice President

Yossi Levy              49    Branch Manager, Israel Branch

Pinchas Pinchas         46    Chief Controller, Israel Branch

Tina Maimon Arckens     46    Director and Secretary

Prof. Linda Canina      46    Director

Prof. Avihu Ginzburg    74    Director

Eyal Gibor              43    Director

Max Pridgeon            34    Director

      Haim Tsuff has been a director of the Company since January 1996 and the
Chairman of the Board of Directors and Chief Executive Officer since May 1996.
Mr. Tsuff is the sole director and owner of United Kingsway Ltd. and Chairman of
YHK General Manager Ltd. (which entity effectively controls Equital Ltd., JOEL
Ltd., Naphtha, Naphtha Holdings Ltd., public companies in Israel) and may be
deemed to control the Company.

      Jackob Maimon has been President and a director of the Company since
November 1999. Mr. Maimon is the Chairman of the Board of Directors of Naphtha
Israel Petroleum Corporation Ltd. ("Naphtha") an Israeli entity, which holds
indirectly through Naphtha Holdings, Ltd. Another Israeli entity, over 50% of
the issued and outstanding stock of the Company. Mr. Maimon has held the
position at Naphtha since August 1996. Mr. Maimon is the brother of Tina Maimon
Arckens, a director of the Company.

      Daniel Avner was President of the Company from July 1997 through October
1999, whereupon he resigned. Upon his resignation from the position of
president, Mr. Avner was elected in October 1999 as Vice President. On July 9,
1998, Mr. Avner resigned as director and as Secretary of the Company, positions
which he has held since May 1996. Since 1992, Mr. Avner has been the General
Manager of E.D.R. GMBH Co., a company that engages in investment, development
and management of residential property in Germany. From 1991 to 1992 Mr. Avner
was a Financial Analyst with Proctor & Gamble Company in Germany. Mr. Avner
holds a BA Degree in Accounting and Economics from the University of Tel Aviv
and a Masters of Business Administration from Duke University.


                                      -21-
<PAGE>

      Yossi Levy has been Branch Manager of the Company's Branch Office in
Israel since August 1996. Since 1988 Mr. Levy has held the position of General
Manager of Naphtha - Israel Petroleum Corp. Ltd. (Naphtha), a public company in
the oil and gas business in Israel. Since 1995, Mr. Levy has been General
Manager of N.I.R. (Naphtha International Resources) Ltd. Naphtha through its
subsidiary (Naphtha Holdings Ltd.) may be deemed to be a controlling shareholder
of the Company.

      Pinchas Pinchas has been the Chief Controller of the Company's Israel
Branch since December 31, 1997. Mr. Pinchas serves as the Controller of Naphtha
(which holds 100% of Naphtha Holdings Ltd., which company holds 50.2% of the
outstanding common stock of the Company and also as controller of J.O.E.L.
(which holds approximately 87% of Naphtha).

      Tina Maimon Arckens has been a director of the Company since March 1997
and Secretary of the Company since July 14, 1998. Mrs. Arckens is a director of
YHK General Manager Ltd. Mrs. Arckens is the sister of Jackob Maimon, the
President and a director of the Company and the Chairman of the Board of
Directors of Naphtha Israel Petroleum Corp. Ltd. Mrs. Maimon Arckens is a
housewife.

      Linda Canina has been a director of the Company since December 1997. From
1993 to the present Dr. Canina has held the position of Professor of Finance at
Cornell University, Ithaca, New York. From August 1996 through July 1998 Dr.
Canina also held the position of Visiting Assistant Professor of Finance at the
Recanati School of Business in Tel Aviv, Israel. From July 1992 - January 1993
Dr. Canina was a Research Fellow, Johnson Graduate School of Management, Cornell
University.

      Avihu Ginzburg has been a director of the Company since July 1997. Dr.
Ginzburg is currently Emeritus Professor in Geophysics at Tel Aviv University.
In 1996 he was Visiting Professor in Exploration Geophysics at Curtin
University, Perth, Western Australia; and, Research Fellow at the Department of
Geological Sciences, University College, London. From 1992 - 1995 Dr. Ginzburg
held the position of Chairman of Geophysics and Planetary Science at Tel Aviv.

      Max Pridgeon has been a director of the Company since April 2001. From
March 1995 through the present time, Mr. Pridgeon has served as director of
MAXIM Wholesale and Marketing Co., a company which he founded. Concurrently,
from February 1999 through the present time, Mr. Pridgeon has also served as a
manager of sales for Europe and the Middle East for Blenfin XI, Netherlands, a
company that engages in the distribution of wooden picture frames. From April
1996 through January 1999, Mr. Pridgeon has also served as a property
acquisitions consultant to M.A. Realistic Estate, Netherlands, a company engaged
in the ownership and management of hotels in the Netherlands. From September
1989 through March 1995, he served as account manager and then export manager at
VERNO Holland, a company engaged in the marketing and distribution of oil
paintings.

      Eyal Gibor has been a director of the Company since April 2001. From
January 1992 through the present time, Mr. Gibor has headed his own private
management consulting and advisory services company in Israel, engaging mainly
in the provision of consulting advice relating to real-estate investments and
tax planning. From June 1997 through August 1999, he also served as the general
manager of Israel Credit Line Complimentary Services, Ltd., a company engaged in
the provision of financial services. From June 1986 to January 1992, Mr. Gibor
was affiliated with the Israel based accounting firm of, Singer, Nir & Partners.
He holds a B.A. in economics and accounting from Tel Aviv University and, since
December 1993, has been qualified as a C.P.A. in Israel. Mr. Gibor presently
serves as a director of Binar Building and Investments Ltd., a company whose
securities are traded on the Tel-Aviv stock exchange.

      Except as noted above, there are no family relationships between any of
the above executive officers, and there is no arrangement or understanding
between any of the above executive officers and any other person pursuant to
which he was selected as an officer. Each of the above executive officers was
elected by the Board of Directors to hold office until the next annual election
of officers and until his successor is elected and qualified or until his
earlier resignation or removal.


                                      -22-
<PAGE>

                               SECTION 16 FILINGS

      No person who, during the fiscal year ended December 31, 2000, was a
director, officer or beneficial owner of more than ten percent of the Company's
Common Stock, or a 'Reporting Person', failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year. The
foregoing is based solely upon a review by the Company of Forms 3 and 4 during
the most recent fiscal year as furnished to the Company under Rule 16a-3(d)
under the Act, and Forms 5 and amendments thereto furnished to the Company with
respect to its most recent fiscal year.

Item 11. Executive Compensation

      The following table sets forth the compensation paid for 2000 and for the
previous two years to the Chief Executive Officer and the five (5) other highly
paid officers and/or key employees of the Company (the "Named Executive
Officers").

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                  Annual Compensation                                       Long-Term Compensation

                                                                               Other         Securities         All
Name and                                     Salary/                           Annual        Underlying   other Principal
Position                          Year   Consulting Fee ($)    Bonus       Compensation (6)    Option       Compensation
------------------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>              <C>               <C>             <C>                 <C>
Haim Tsuff                        2000       240,000          100,000           --              69,995              --
Chairman of the Board             1999       240,000           60,000           --                  --              --
And Chief Executive               1998       240,000               --           --                  --              --
Officer
Officer (1)

Jackob Maimon                     2000       240,000          100,000           --              69,995              --
President(2)                      1999        40,000               --           --                  --              --
                                  1998            --               --           --                  --              --

Daniel Avner                      2000       180,000           50,000           --                  --              --
Vice President (3)                1999       172,500           45,000           --                  --              --
                                  1998        90,000               --           --                  --              --

Yossi Levy                        2000       100,000               --           --                  --              --
Branch Manager (4)                1999       109,000           23,700           --                  --              --
                                  1998        88,000               --           --                  --              --

Pinchas Pinchas                   2000        48,000               --           --                  --              --
Controller Branch                 1999        48,000               --           --                  --              --
Office(5)                         1998        48,000               --           --                  --              --

Joshua Folkman                    2000       102,000            2,000           --                  --              --
Exploration Manager               1999       101,000            9,400           --                  --              --
Branch Office                     1998        95,600               --           --                  --              --
</TABLE>

Notes

(1) In May of 1996 the Company entered into a Consulting Agreement with a
company owned and controlled by Haim Tsuff, the Chairman of the Board and Chief
Executive Officer of the Corporation. Pursuant to this Consulting Agreement as
amended April 1997, the Company pays to consultant the sum of $240,000 per annum
in installments of $20,000 per month in addition to reimbursing all reasonable
business expenses incurred in connection with the services rendered on behalf of
the Company.

(2) Mr. Maimon was elected to the position of President in November of 1999. In
November of 1999, the Company entered into a Consulting Agreement with a company
of which Jackob Maimon is a director. Pursuant to this Consulting Agreement, the
Company pays to consultant


                                      -23-
<PAGE>

the sum of $240,000 per annum in installments of $20,000 per month in addition
to reimbursing all reasonable business expenses incurred in connection with the
services rendered on behalf of the Company.

(3) In August of 1997 the Company entered into a Consulting Agreement with
Romulas Investment Ltd. (which Agreement has been assigned to Remarkable
Holdings Ltd.), a company which is wholly owned and controlled by Daniel Avner,
the President of the Company. Pursuant to this Agreement, the Company has agreed
to pay the Consultant the sum of $7,500 per month plus expenses. In February
1999, the agreement was amended to increase the amount payable per month to
$15,000. Pursuant to the amendment in February 1999, expenses are no longer
reimbursable. The Company has also agreed to provide a company car and company
furnished apartment to Consultant, if available. The agreement is in force
through July 2,000. Mr. Avner resigned from his position as President of the
Company in October 1999, whereupon he was elected as a Vice-President.

(4) In November of 1996 the Company entered into an Employment Agreement with
Yossi Levy, the Managing Director of Naphtha Israel Petroleum Company Ltd. to
employ Mr. Levy as the General Manager of the Israel Branch of the Company.

(5) Mr. Pinchas is employed as Controller of Naphtha and J.O.E.L., affiliates of
the Company. As of January 1, 1998, the Company participates in the payment by
J.O.E.L. of Mr. Pinchas' salary in an aggregate monthly amount of $4,000.

(6) Does not include personal benefits, which do not exceed 10% of the cash
compensation of all officers as a group.

Director Compensation

Each of the Directors receives cash compensation of $750 per Board meeting
attended. In addition, each of the outside Directors, except for Mr. Pridgeon
and Mr. Gibor, were awarded a bonus of $3,000 in respect of their service on the
Board.

Option Grants in 2000

      The following table sets forth certain information concerning the
individual option grants during the year ended December 31, 2000, to each of the
following Named Executive Officers:

<TABLE>
<CAPTION>
                                                                        Market                          Potential Realizable Value
Name                 Number of          % of Total        Exercise      Price of       Expiration       at Assumed Annual Rates
----                 Securities         Options           Price         Common            Date          of Stock Price for Option
                     Underlying         Granted to        ($/sh)        Stock on       ----------       Term (2) ($)
                     Options Granted    Employees         ------        Date of
                       (#) (1)          in 2000 (%                      Grant ($/sh)                   5%        10%       0%
                      --------          ----------                      -----------                    --        ---       --
<S>                  <C>                 <C>              <C>           <C>               <C>       <C>       <C>        <C>
Haim Tsuff           69,995              50%               4.28         5.125             2005      158,255   278,151    59,146

Jackob Maimon        69,995              50%               4.28         5.125             2005      158,255   278,151    59,146
</TABLE>

      (1)   The Options are currently exercisable

      (2)   Potential realizable values are based on fair market value per share
            on the date of grant and represent hypothetical gains that could be
            achieved for the respective options if exercised at the end of the
            option term. The dollar amounts set forth in these columns are the
            result of calculations at the five percent and ten percent rates set
            by the Securities and Exchange Commission, and are not intended to
            forecast possible future appreciation, if any, of the Company's
            Common Stock Price. The column labeled 0 percent is intended to
            reflect the value of the options on the date of grant for those
            options with an exercise price per share below market price on the
            date of grant, representing the cash value of such grant on such
            date and not any actual cash proceeds. There can be no assurance
            that such potential realizable values will not be more or less that
            that indicated in the table above.

Aggregate Options Exercised in 2000 and 2000 Year End Option Values

<TABLE>
<CAPTION>
                                                              Number of Securities                 Value of Unexercised
                         Shares                               Underlying                           In the Money
                         Acquired         Value               Unexercised                          Options at Year
Name                     on Exercise      Realized ($)        Options at fiscal                    End ($) (1)
                                                              Year End (#)                         Exercisable/Unexercisable
                                                              Exercisable/Unexercisable
<S>                     <C>                  <C>                 <C>                                   <C>
Haim T. Suff            --                   --                 69,995/0                               $151,014/0

Jackob Maimon           --                   --                 69,995/0                               $151,014/0

Joshua Folkman          --                   --                  2,000                                 $0/0

</TABLE>

Notes

(1) The value reported is based on the closing price of the common stock of the
Company as reported on NASDAQ on the date of the exercise less the exercise
price.

      The Company during 2000 did not amend or adjust the exercise price of
outstanding stock options previously awarded to any of the named executive
officers or directors or employees. The only incentive plan, which the Company
has, is its 1993 Stock Option Plan (the "Stock Option Plan").

Stock Option Plan


                                      -24-
<PAGE>

      Directors, officers, employees and consultants of the Company and its
subsidiaries adopted the Company's Stock Option Plan with the intention of
encouraging stock ownership. The plan provides for stock options of up to 50,000
shares of common stock of the Company (after giving effect to the reverse stock
split). Options may either be options intended to qualify as "incentive stock
options" or "non-statutory stock options", as those terms are defined in the
Internal Revenue Code.

      Employees (including officers) of the Company are eligible to receive
incentive stock options, however, non-statutory stock options may be granted to
officers, directors, employees and consultants of the Company and its
subsidiaries. Options are granted for a period of up to ten (10) years from the
grant date for an exercise price of not less than 100% of the fair market value
of the securities of the Company's common stock on the date of grant. As of this
date no persons have been appointed to fill the current vacancies on the
committee which administers this plan.

Item 12. Security Ownership of Directors, Officers and Key Employees

      The following table sets forth certain information, as of April 30, 2001,
concerning the ownership of the Common Stock by (a) each person who, to the best
of the Company's knowledge, beneficially owned on that date more than 5% of the
outstanding Common Stock (b) each of the Company's directors (c) all current
directors, officers and significant employees of the Company as a group. Except
as otherwise indicated, the stockholders listed in the table have the sole
voting and investment power with respect to the shares indicated.

                                                        Number of        Percent
                                                        Shares Owned     of
Name                     Position                       Beneficially     Class
----                     --------                       ------------     -----

Haim Tsuff               Chairman of the
                         Board, Chief Executive
                         Officer and Director           1,395,217(1)     51.49%

Jackob Maimon            President and Director            69,995(2)      2.58%

Daniel Avner             Vice-President                         0            *

Yossi Levy               Manager of the Company's
                         Israel Branch                          0            *

Pinchas Pinchas          Controller of the Company's
                         Israel Branch                          0            *

Tina Maimon Arckens      Director and Secretary                 0            *

Prof. Avihu Ginzburg     Director                               0            *

Prof. Linda Canina       Director                               0            *

Max Pridgeon             Director                               0            *

Eyal Gibor               Director                               0            *

All directors and


                                      -25-
<PAGE>

Officers as a group                                     1,465,212        52.71%

Notes

*     less than 1%.

(1)   Haim Tsuff owns 100% of United Kingsway Ltd., which through YHK General
      Manager Ltd. controls various entities, which may be deemed to control the
      Company. In March 2000, Mr. Tsuff was granted five year options to
      purchase up to 69,995 shares of the Company's stock at an exercise price
      per share of $4.28, all of which are currently exercisable. For more
      information see Security Ownership of Certain Beneficial Owners.

(2)   In March 2000, Mr. Maimon was granted five year options to purchase up to
      69,995 shares of the Company's stock at an exercise price per share of
      $4.28, all of which are currently exercisable.

                 Security Ownership of Certain Beneficial Owners

      Set forth below is certain information with respect to ownership of the
Company's securities as of April 30, 2001 by persons or entities who are known
by the Company to own beneficially more than 5% of the outstanding shares of the
common stock, as determined in accordance with Rule 13d-3 under the Act.

            Name of                          No. of
        Beneficial Owner                  Common Shares           Percentage
        ----------------                  -------------           ----------

Naphtha Holdings Ltd. *                    1,325,222                50.20%

Haim Tsuff *                                  69,995                 2.58%

United Kingsway Ltd. *

YHK Investment Limited Partnership *

Notes

*     Haim Tsuff owns and controls 100% of United Kingsway Ltd. (Kingsway) which
      holds a 74% interest in YHK Investment Limited Partnership (YHK). Avraham
      Livnat Ltd. through its subsidiary Carmen Management and Assets (1997)
      Ltd. owns 26% of YHK. The General Partner of YHK is YHK General Manager
      Ltd. and Haim Tsuff, Joseph Tsuff (the father of Haim Tsuff) and Tina
      Maimon-Arckens (the sister of the Chairman of the Board of Naphtha are the
      directors of YHK General Manager Ltd. YHK owns of record 42.4% of Equital
      Ltd. (formerly known as Pass-port Ltd.), Equital Ltd. owns 42.4% of
      J.O.E.L. - Jerusalem Oil Exploration Ltd. (JOEL), JOEL owns 86.6% of
      Naphtha, which holds 100% of Naphtha Holdings Ltd. JOEL also owns 8.2% of
      the shares of Equital Ltd.. Naphtha Holdings Ltd. owns of record
      approximately 50.18% of the issued and outstanding common stock of the
      Company. Does not include currently exercisable options held by Mr. Haim
      Tsuff to purchase up to 69,995 shares of the Company's common stock, which
      option, if exercised in full, would reduce the percentage set forth above
      to 48.90%.

            Information regarding these relationships is set forth on the Chart
      of Ownership and in Schedule 13d filings and amendments made thereto made
      on behalf of the above entities, which are on file with the Securities and
      Exchange Commission.

            As a result of the foregoing, Haim Tsuff, Kingsway, YHK, Equital
      Ltd., JOEL, Naphtha and Naphtha Holdings Ltd. may be deemed to control the
      Company.


                                      -26-
<PAGE>

Item 13. Certain Relationships and Related Transactions

      In December 2000, the Board of Directors approved a bonus to each of Mr.
Tsuff, the Company's Chairman and Chief Executive Officer, and Mr. Maimon, the
Company's President and a director, of $100,000.

      In March 2000, each of Mr. Tsuff, the Company's Chairman and Chief
Executive Officer, and Mr. Maimon, the Company's President and a director, were
each awarded five year options to purchase up to 69,995 shares of the Company's
common stock at a per share exercise price of $4.28.

      In May 1996 the Company entered into a Consulting Agreement with Goodrich
Global L.T.D. B.V.I., a company owned and controlled by Haim Tsuff, the Chairman
of the Board of Directors and Chief Executive Officer of the Corporation.
Pursuant to this Consulting Agreement which had a term of two (2) years, the
Company agreed to pay the sum of $144,000 per annum in installments of $12,000
per month, in addition to reimbursing all reasonable business expenses incurred
during the term in connection with the performance of services on behalf of the
Company. In April 1997 the consulting compensation was increased to $240,000 per
annum and in December 1997 the term of the Agreement was extended to May 31,
2001. The Consulting Agreement provides that the term shall be automatically
extended for an additional term of three (3) years, commencing June 1, 2001,
unless the Company has given notice at least ninety (90) days prior to June 1,
2001, that it does not intend that the term be renewed. The Company has not
given notice of its intention that it does not intend to renew the arrangement.

      In November 1999 the Company entered into a Consulting Agreement with
Worldtech Inc., a Mauritus company of which Jackob Maimon, the President of the
Company, is a director. Pursuant to this Consulting Agreement which is in effect
through May 31, 2001, the Company agreed to pay the sum of $240,000 per annum in
installments of $20,000 per month, in addition to reimbursing all reasonable
business expenses incurred during the term in connection with the performance of
services on behalf of the Company. The Consulting Agreement as amended, provides
that the term shall be automatically extended for an additional term of three
(3) years, unless the Company has given notice at least ninety (90) days prior
to the scheduled expiration, that it does not intend that the term be renewed.
The Company has not given notice of its intention that it does not intend to
renew the arrangement.

      In August 1997 the Company entered into a Consulting Agreement with
Romulas Investment Ltd. (which Agreement has been assigned to Remarkable
Holdings Ltd.), a company which is wholly owned and controlled by Daniel Avner,
the Vice-President of the Company. Pursuant to this Agreement which has a term
of one (1) year through July 31, 1998, the Company has agreed to pay the
Consultant the sum of $7,500 per month plus expenses. In February 1999, the
Consulting Agreement was amended to increase the monthly compensation payable
thereunder to $15,000 and pursuant to the amendment, the reimbursement of
expenses was disallowed. The Company has also agreed to make provide a company
car and company furnished apartment to Consultant, if available. The Consulting
Agreement has been extended through July 2001.

      Pursuant to the agreement terminating the employment of Mr. Toledano as
the Company's President and Chief Operating Officer in October 1995, Mr.
Toledano executed, in June 1996, a Covenant Not to Compete Agreement with the
Company. Pursuant to the terms of the Covenant Not to Compete, Mr. Toledano
agreed that for a period of five (5) years he would not directly or indirectly
compete with the Company in connection with the exploration for oil and gas in
the State of Israel, the territorial waters off Israel or the territories
currently under control of the State of Israel. In consideration for the
Covenant Not To Compete, the Company paid to Mr. Toledano the sum of $200,000.
The Company also entered into a Consulting Agreement with Natural Resources
Exploration Services B.V., a


                                      -27-
<PAGE>

Netherlands corporation controlled by Mr. Toledano. Pursuant to the Consulting
Agreement between the Company and Natural Resources Exploration Services B.V.,
the Company paid a lump sum payment of $72,000 to Natural Resources Exploration
Services B.V. to provide the services of Mr. Toledano to the Company through
June 23, 1997.


                                      -28-
<PAGE>

                                    GLOSSARY

      "Authorization for Expenditure (AFE)" shall mean a proposal for financial
expenditure within the framework of petroleum explorations, which the Operator
proposes from time to time to the partners in the Petroleum Assets which it
manages, for the purpose of the approval of the participants. When approved by
them, it constitutes the budget for the execution of the petroleum exploration
and the remainder of the operations of the Petroleum Assets.

      "Carveout" shall mean an area in a Petroleum License or Lease in which the
ownership is different from the ownership in the License or Lease.

      "Grant Agreement" shall mean the agreement between the Company and the
Government of Israel pursuant to which the Government of Israel has provided
assistance to the Company in connection with its investment in the Negev 2
Venture by providing a grant of 44.34(cent) for each U.S. dollar ($1.00)
invested and expended by the Company in oil and gas activities in Israel within
the framework of the Negev 2 Venture. The Government financing provided for
under the Grant is repayable only from funds emanating from commercial
production in any payout area and then, only to the extent of 30% of the
recipient's share of the net revenue from said payout area, as and when
received. The Grant Agreement entitles the Government of Israel, to receive a
12.5% royalty on oil sales, as well as an overriding royalty of 6.5% of the
Company's share in the petroleum produced and saved after payout. If there is no
commercial discovery of oil, the Company will not be required to repay the grant
monies. A grant agreement was also entered into between the Government of Israel
and HEI, Donesco, L.P.S. and Mazal Oil.

      "Joint Operating Agreement" shall mean the Joint Operating Agreement of
the Negev 2 Venture which was signed as of the 30th day of June, 1988, between
the participants in the Negev 2 Venture, as amended or as shall be amended from
time to time.

      "Joint Venture Agreement" shall mean the Joint Venture Agreement of the
Negev 2 Venture which was signed as of the 30th of June, 1988 between the
participants in the Negev 2 Venture, as amended from time to time.

      "Limited Partnership" shall mean Isramco-Negev 2 Limited Partnership, a
Limited Partnership founded pursuant to a Limited Partnership Agreement made on
the 2nd and 3rd days of March, 1989 (as amended on September 7, 1989, July 28,
1991,March 5, 1992 and June 11, 1992) between the Trustee on part as Limited
Partner and Isramco Oil and Gas Ltd., as General Partner on the other part.

      "Limited Partnership Agreement" shall mean the Limited Partnership
Agreement made the 2nd and 3rd days of March, 1989 (as amended September 7,
1989, July 28, 1991, March 5, 1992 and June 11, 1992), between Isramco Oil and
Gas Ltd., as General Partner, and Isramco Management (1988) Ltd. as the Limited
Partner.

      "Negev 2 Venture Agreements" shall mean the Joint Venture Agreement, the
Joint Operating Agreement, the Voting Agreement and every agreement into which
the parties to said agreements have entered, in connection with the Negev 2
Venture.

      "Overriding Royalty Interest" shall mean a percentage interest over and
above the base royalty and is free of all costs of exploration and production,
which costs are borne by the Grantor


                                      -29-
<PAGE>

of the Overriding Royalty Interest and which is related to a particular
Petroleum License.

      "Payout" shall mean the defined point at which one party has recovered its
prior costs.

      "Petroleum" shall mean any petroleum fluid, whether liquid or gaseous, and
includes oil, natural gas, natural gasoline, condensates and related fluid
hydrocarbons, and also asphalt and other solid petroleum hydrocarbons when
dissolved in and producible with fluid petroleum.

      "Petroleum Exploration" shall mean test drilling; any other operation or
search for petroleum, including geological, geophysical, geochemical and similar
investigations and tests; and, drilling solely for obtaining geological
information.

      "Petroleum Law" shall mean the Israel Petroleum Law, 5712-1952.

      "Petroleum Production" shall mean the production of petroleum from a
petroleum field and all operations incidental thereto, including handling and
treatment thereof and conveyance thereof to tankers, a pipe line or a refinery
in or in the vicinity of the field.

      "Preliminary Permit", "Preferential Right to Obtain a License", "License"
shall have the meaning(s) set forth in the Petroleum Law of Israel.

      "Sole Risk operation" is an operation in which fewer than all of the
participants in a venture participate, and the non-consenting participant has no
financial obligation but also loses his right to participate in the results of
the operation.

      "Trust Agreement" shall mean the Trust Agreement made on the 3rd day of
March, 1989 (as amended September 7, 1989, July 28, 1991, March 5, 1992 and June
11, 1992) for the Trust Company of Kesselman and Kesselman.

      "Voting Agreement" shall mean the Voting Agreement made the 30th day of
June, 1988 between the Negev 2 Venture participants, excluding HEI.

      "Working Interest" shall mean an interest in a Petroleum Asset granting
the holder thereof the right to participate pro rata in exploiting the Petroleum
Asset for petroleum exploration, development and petroleum production, subject
to its pro rata participation in the expenses involved therein after acquiring
the Working Interest.

      Israel Petroleum Law

      The Company's business in Israel is subject to regulation by the State of
Israel pursuant to the Petroleum Law, 1952. The administration and
implementation of the Petroleum Law is vested in the Minister of National
Infrastructure (the "Minister") and an Advisory Council.

      The following includes brief statements of certain provisions of the
Petroleum Law in effect at the date of this Prospectus. Reference is made to the
copy of the Petroleum Law filed as an exhibit to the Registration Statement
referred to under "Additional Information" and the description which follows is
qualified in its entirety by such reference.

      The holder of a preliminary permit is entitled to carry out petroleum
exploration, but not test


                                      -30-
<PAGE>

drilling or petroleum production, within the permit areas. The Commissioner
determines the term of a preliminary permit and it may not exceed eighteen (18)
months. The Minister may grant the holder a priority right to receive licenses
in the permit areas, and for the duration of such priority right no other party
will be granted a license or lease in such areas.

Drilling for petroleum is permitted pursuant to a license issued by the
Commissioner. The term of a license is for three (3) years, subject to extension
under certain circumstances for an additional period up to four (4) years. A
license holder is required to commence test drilling within two (2) years from
the grant of a license (or earlier if required by the terms of the license) and
not to interrupt operations between test drillings for more than four (4)
months.

      If any well drilled by the Company is determined to be a commercial
discovery prior to expiration of the license, the Company will be entitled to
receive a Petroleum Lease granting it the exclusive right to explore for and
produce petroleum in the lease area. The term of a lease is for thirty (30)
years, subject to renewal for an additional term of twenty (20) years.

      The Company, as a lessee, will be required to pay the State of Israel the
royalty prescribed by the Petroleum Law which is presently, and at all times
since 1952 has been, 12.5% of the petroleum produced from the leased area and
saved, excluding the quantity of petroleum used in operating the leased area.

      The Minister may require a lessee to supply at the market price such
quantity of petroleum as, in the Minister's opinion, is required for domestic
consumption, subject to certain limitations.

      As a lessee, the Company will also be required to commence drilling of a
development well within six (6) months from the date on which the lease is
granted and, thereafter, with due diligence to define the petroleum field,
develop the leased area, produce petroleum therefrom and seek markets for and
market such petroleum.

Item 13. Exhibits and Reports on Form 8-K and Financial Statements

      (a) Exhibits

3.1   Articles of Incorporation of Registrant with all amendments filed as an
      Exhibit to the S-l Registration Statement, File No. 2-83574.

3.2   Amendment to Certificate of Incorporation filed March 17, 1993, filed as
      an Exhibit with the S-l Registration Statement, File No. 33-57482.

3.4   By-laws of Registrant with all amendments, filed as an Exhibit to the S-l
      Registration Statement, File No. 2-83570.

4.1   Form of Deposit Agreement, filed as an Exhibit with the S-l Registration
      Statement, File No. 33-57482.


                                      -31-
<PAGE>

10.1  Oil Marketing Agreement, filed as Exhibit with the S-l Registration
      Statement, File No. 2-83574.

10.2  License Agreement dated February 29, 1984 between the Company and
      Petronav, Inc., filed as an Exhibit to Form 10-K Fiscal 1984, and
      incorporated herein by reference.

10.3  Consulting Agreement dated April 1, 1985 between the Company and Elmco
      Holdings Limited (subsequently assigned by Elmco Holdings Ltd. to H.G.
      Finance Ltd.), filed as an Exhibit to Form 10-K Fiscal 1985, and
      incorporated herein by reference.

10.4  Employment Agreement and Stock Option Agreement dated March 1, 1985
      between the Company and William W. Houck, filed as an Exhibit to Form 10-K
      Fiscal 1985, and incorporated herein by reference (now expired).

10.5  Farmout Agreement dated March 30, 1986 between the Company and Naphtha
      Israel Petroleum Corp. Ltd., filed as an Exhibit to Form 10-K Fiscal 1986,
      and incorporated herein by reference.

10.6  Exchange Agreement dated May 22, 1986 between the Company and SSE (UK),
      filed as an Exhibit to Form 8-K for the month of May 1986 and incorporated
      herein by reference.

10.7  Assignment Agreement dated as of May 5, 1988 between the Company and SSE
      (UK), filed as an Exhibit to Form 8-K for the month of June 1988 and
      incorporated herein by reference.

10.8  Joint Venture Agreement and Joint Operating Agreement dated June 30, 1988
      by and among HEI Oil and Gas Limited Partnership, JOEL - Jerusalem Oil
      Exploration Ltd., Delek Oil Exploration Ltd., Delek, The Israel Fuel
      Corporation Ltd., the Company, Southern Shipping and Energy (U.K.),
      Naphtha, Israel Petroleum Company Ltd., Oil Exploration of Pat Ltd., LPS
      Israel Oil Inc., Donesco Venture Fund One, a Limited Partnership and
      Mazaloil Inc. filed as an Exhibit to Form 8-K for the month of September
      1988.

10.9  Agreement(re: Negev Joint Venture No. 2 - Assignment of Interest) dated
      December 9, 1988 between the Company and Southern Shipping and Energy
      (U.K.), filed as an Exhibit to Form 8-K for the month of November 1988 and
      incorporated herein by reference.

10.10 Amendment No. 1 to Agreement (re: Negev Joint Venture No. 2 - Assignment
      of Interest) with Southern Shipping and Energy (U.K.) dated January 12,
      1989 between the Company and Southern Shipping and Energy (U.K.), filed as
      an Exhibit to Form 8-K for the month of January 1989 and incorporated
      herein by reference.

10.11 Management Services Agreement dated November, 1988 and effective as of
      July 1, 1988 between the Company and H.G. Finance Ltd., filed as an
      Exhibit to Form 10-Q for the Company for the quarter ending September 30,
      1988 and incorporated herein by reference.

10.12 Grant Agreement with the Government of Israel, undared, between the
      Company and the Government of Israel on behalf of the State of Israel,
      filed as an Exhibit to Form 10-Q for the Company for the period ending
      September 30, 1988 and incorporated herein by reference.


                                      -32-
<PAGE>

10.13 Translated from Hebrew, Transfer of Rights Agreement between the Company
      and Isramco-Negev 2 dated March 5, 1989, filed as an Exhibit to Form 8-K
      for the month of March 1989 and incorporated herein by reference.

10.14 Translated from Hebrew, Limited Partnership Agreement between Isramco Oil
      and Gas Ltd. and Isramco Management (1988) Ltd. dated March 2, 1989, filed
      as an Exhibit to Form 8-K for the month of March 1989 and incorporated
      herein by reference.

10.15 Translated from Hebrew, Trust Agreement between Isramco Management (1988)
      Ltd. and Kesselman and Kesselman dated March 3, 1989, filed as an Exhibit
      to Form 8-K for the month of March 1989 and incorporated herein by
      reference.

10.16 Translated from Hebrew, Indemnity Agreement between the Company and
      Isramco Management (1988) Ltd. dated March _, 1989, filed as an Exhibit to
      Form 8-K for the month of March 1989 and incorporated herein by reference.

10.17 Consulting and Option Agreement dated March 17 1989 between the Company
      and M.H. Meyerson & Co., Inc., filed as an Exhibit to Form 8-K dated March
      20, 1989 and incorporated herein by reference.

10.18 Agreement dated as of March 30, 1989 between the Company and SSE (U.K.)
      and filed as an Exhibit to Form 8-K for the month of June 1989 and
      incorporated herein by reference.

10.19 Consulting and Option Agreement dated December 4, 1989 between the Company
      and Ladenburg, Thalmann & Co., Inc., filed as an Exhibit to Form 8-K for
      the month of December 1989.

10.20 Amendment No. 1 to the Negev 2 Venture Agreement made as of August 1, 1989
      and Amendment No. 2 to the Negev 2 Venture Agreement made as of September
      22, 1989 by and between the Negev 2 Venture Participants, filed as an
      Exhibit to the Post-effective Amendment No. 8 to Form S-l Registration
      Statement. File No. 2-83574.

10.21 Amendment Agreement to Grant Agreement between the Company and the
      Government of Israel, filed as an Exhibit to this Post-effective Amendment
      No. 8 to Form S-l Registration Statement. File No. 2- 83574.

10.22 Amendment to Agreement between the Company and M.H. Meyerson & Co., Inc.
      made as of February 28, 1991, as filed as an Exhibit to Form 8-K for the
      month of February 1991 and incorporated herein by reference.

10.23 Stock Option Agreement dated as of May 25, 1990 between the Company and J.
      Jerome Williams, filed as an Exhibit to Form 8-K for the month of May,
      1990 and incorporated herein by reference.

10.24 Supplement to Transfer of Rights Agreement dated July 22, 1991 between the
      Company and Isramco-Negev 2, Limited Partnership filed as an Exhibit to
      Form 8-K of the Company, dated August 27, 1991, and incorporated herein by
      reference.

10.25 Clarification Agreement dated March 3, 1992 between the Company and JOEL -


                                      -33-
<PAGE>

      Jerusalem Oil Exploration Ltd., filed as an Exhibit to Form 10-K for
      Calendar Year ended December 31, 1991 dated March 26, 1992, and
      incorporated herein by reference.

10.26 Underwriting Agreement dated March 11, 1992 between Isramco-Negev 2
      Limited Partnership, Isramco Oil and Gas Ltd., Pat Oil Exploration
      Limited, JOEL -Jerusalem Oil Exploration Ltd., Isramco Management (1988)
      Limited, East Mediterranean Oil and Gas Limited and the Company (executed
      in Hebrew with an English translation attached), filed as an Exhibit to
      Form 10-K for Calendar Year ended December 31, 1991 dated March 26, 1992,
      and incorporated herein by reference.

10.27 Assignment of Rights Agreement dated March 8, 1992 between JOEL Jerusalem
      Oil Exploration Ltd., Pat Oil Exploration Limited, the Company and
      Isramco-Negev 2 Limited Partnership (executed in Hebrew with an English
      translation attached), filed as an Exhibit to Form 10-K for Calendar Year
      ended December 31, 1991 dated March 26, 1992, and incorporated herein by
      reference.

10.28 Supplement to Assignment of Rights Agreement dated March 8, 1992 between
      JOEL -Jerusalem Oil Exploration Ltd., Pat Oil Exploration Limited, the
      Company and Isramco-Negev 2 Limited Partnership (executed in Hebrew with
      an English translation attached), filed as an Exhibit to Form 10-K for
      Calendar Year ended December 31, 1991 dated March 26, 1992, and
      incorporated herein by reference.

10.29 Cancellation of Forfeiture and Ratification Agreement and Amendment No. 1
      to Cancellation of Forfeiture and Ratification Agreement filed as an
      Exhibit to Form 8-K for the month of January 1993 dated January 21, 1993
      and incorporated herein by reference.

10.30 Option Agreement between Isramco Resources Inc. and Naphtha Petroleum
      Corporation Ltd. filed as an Exhibit to Form 8-K for the month of January
      1993 dated January 21, 1993 and incorporated herein by reference.

10.31 Option Agreement between Isramco Resources Inc. and J.O.E.L. - Jerusalem
      Oil Exploration Ltd., Oil Exploration of Pat Ltd., Isramco- Negev 2
      Limited Partnership and the Company filed as an Exhibit to Form 8-K for
      the month of January 1993 dated January 21, 1993 and incorporated herein
      by reference.

10.32 Equalization of Rights Agreement between Isramco-Negev 2 Limited
      Partnership and Delek Oil Exploration Ltd. and Delek - The Israel Fuel
      Corporation Ltd, filed as an Exhibit to Form 8-K for the month of January
      1993 dated January 21, 1993 and incorporated herein by reference.

10.33 Option Agreement between Isramco Resources Inc. and Delek Oil Exploration
      Ltd. and Delek - The Israel Fuel Corporation Ltd. filed as an Exhibit to
      Form 8-K for the month of January 1993 dated January 21, 1993 and
      incorporated herein by reference.

10.34 Investment Banking Agreement filed as an Exhibit with the S-l Registration
      Statement, Filed No. 33-574482.

10.35 Consulting Agreement with Dr. Joseph Elmaleh dated June 20, 1995, filed as
      an Exhibit to Form 8-K for the month of July, 1995 and incorporated herein
      by reference.


                                      -34-
<PAGE>

10.36 Consulting Agreement with Zenith Holdings Ltd., a company which employs
      Haim Tsuff made May _, 1996, filed as an Exhibit to Form 8-K for the month
      of June, 1996 and incorporated herein by reference.

10.37 Termination Agreement between the Company and Danny Toledano made as of
      the 23rd day of June 1996, filed as an Exhibit to Form 8-K for the month
      of June, 1996 and incorporated herein by reference.

10.38 Non-Compete Agreement between the Company and Danny Toledano made as of
      the 23rd day of June 1996, filed as an Exhibit to Form 8-K for the month
      of June, 1996 and incorporated herein by reference.

10.39 Consulting Agreement between the Company and Danny Toledano made as of the
      23rd day of June 1996, filed as an Exhibit to Form 8-K for the month of
      June, 1996 and incorporated herein by reference.

10.40 Termination Agreement between the Company and Dr. Joseph Elmaleh dated
      April 16, 1996, filed as an Exhibit to Form 10-Q for the three month
      period ending March 31, 1996 and incorporated herein by reference.

10.41 Agreement by and among Naphtha Congo Ltd., Equital Ltd. and the Company
      dated September 4, 1997, filed as an Exhibit to Form 8-K for the month of
      September, 1997 and incorporated herein by reference.

10.42 Amendment to Consulting Agreement between Goodrich Global L.T.D. B.V.I.
      and the Company dated December _, 1997, filed as an Exhibit to Form 8-K
      for the month of December, 1997 and incorporated herein by reference.

10.43 Consulting Agreement between Romulas Investment Ltd. and the Company dated
      August _, 1997, filed as an Exhibit to Form 8-K for the month of
      September, 1997 and incorporated herein by reference, assigned by Romulas
      Investment Ltd. on December 31, 1997 to Remarkable Holdings Ltd.

10.44 Settlement Agreement and Release dated March _, 1998 between Reuven Hello,
      Jay Resources Corporation, Jay Natural Resources Inc., Jay Petroleum LLC
      and Jay Management Company LLC, as Claimants and the Company, NIR
      Resources Inc., Jay Petroleum LLC and Jay Management Company LLC, as
      Respondents, filed as an Exhibit to Form 8-K for the month of March, 1998
      and incorporated herein by reference.

10.45 Inventory Services Management Agreement dated December _, 1997 between the
      Company and Equital Ltd. filed herewith as Exhibit 10.70.

10.46 Consulting Agreement dated August 20, 1997 between the Company and JFC
      Enterprises, LLC filed herewith as Exhibit 10.71.

10.47 Formout Agreement dated October 29, 1999 between the Company and Isramco
      Negen 2 Limited Partnership, J.O.E.L - Jerusalem Oil Exploration Ltd.,
      Equital Ltd, Naphtha Exploration Limited Partnership, Naphtha Israel
      Petroleum Corp. Ltd., INOC - Dead Sea Limited Partnership and BG.
      International Ltd., filed as an Exhibit to the Annual Report on Form 10-K
      for the year ended December 31, 1999.

10.50 Consulting Agreement dated as of November 1, 1999 between the Company and
      Worldtech, Inc.

      (b)   Reports on Form 8-K

            (i) Report on Form 8-K dated December 11, 2000.

            (ii) Report on Form 8-K dated June 23, 2000.

      (c)   Financial Statements


                                      -35-
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) 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.

                            ISRAMCO,  INC.
                            Registrant


                            By: /s/ HAIM TSUFF
                                    Haim Tsuff,
                            Chairman of the Board and
                              Chief Executive Officer

Date: April 30, 2001

      In accordance with 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, in the capacities and on the dates indicated.

Signature                     Capacity                     Date

Jackob Maimon                 Director, President          April 30, 2001
/s/ Jackob Maimon

Tina Maimon Arckens           Director and Secretary       April 30, 2001
/s/ Tina Maimon Arckens

Prof. Avihu Ginzburg          Director                     April 30, 2001
/s/ Prof. Avihu Ginzburg

Prof. Linda Canina            Director                     April 30, 2001
/s/ Prof. Linda Canina

Eyal Gibor                    Director                     April 30, 2001
/s/ Eyal Gibor

Max Pridgeon                  Director                     April 30, 2001
/s/ Max Pridgeon


                                      -36-
<PAGE>

                         Index to Financial Statements

                                                                            Page
                                                                            ----

Independent Auditors' Report .............................................   F-1

Consolidated Balance Sheets at December 31, 2000 and 1999 ................   F-2

Consolidated Statements of Operations for the years ended December 31,
2000, 1999 and 1998 ......................................................   F-3

Consolidated Statements of changes in Shareholders' Equity and
Comprehensive Income for the years ended December 31, 2000, 1999 and 1998    F-4

Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998 ......................................................   F-5

Notes to Consolidated Financial Statements ...............................   F-6


                                      (i)
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Isramco, Inc.:

      We have audited the accompanying consolidated balance sheets of Isramco,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, changes in shareholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Isramco,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.


/s/ KPMG

Houston, Texas
March 31, 2001


                                      F-1
<PAGE>

                          ISRAMCO INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                   (in thousands except for share information)

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                        ------------
                                                                       2000        1999
                                                                   --------    --------
<S>                                                                <C>         <C>
                                     ASSETS
Current assets:
    Cash and cash equivalents                                      $ 12,706    $ 15,314
    Marketable securities, at market                                  3,526       2,692
    Accounts receivable                                                 831         381
    Prepaid expenses and other current assets                           580       1,222
                                                                   --------    --------
          Total current assets                                       17,643      19,609

Property and equipment, net (successful efforts
    method for oil and gas properties)                                2,447       4,965
Marketable securities, at market                                      3,474       3,113
Investment in affiliate                                               4,053       2,925
Covenants not to compete, less accumulated
    amortization of $450 and $410 at December 31,
    2000 and 1999, respectively                                          20          60
Deferred tax asset                                                      201          85
Other                                                                     5           7
                                                                   --------    --------
          Total assets                                             $ 27,843    $ 30,764
                                                                   ========    ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
   Current portion of long-term debt                                     --    $  1,404
   Accounts payable and accrued expenses                              1,378       1,362
   Advance payments received                                             --       1,701
                                                                   --------    --------
          Total current liabilities                                   1,378       4,467
                                                                   --------    --------
Commitments, contingencies and other matters

Shareholders' equity:
     Common stock $.0l par value; authorized
     7,500,000 shares; issued 2,669,120
     shares; outstanding 2,639,853
     at December 31, 2000 and 1999                                       27          27
     Additional paid-in capital                                      26,286      26,168
     Accumulated deficit                                               (820)     (1,122)
     Accumulated other comprehensive income -
        unrealized gain on marketable securities,
        net of taxes                                                  1,136       1,388
     Treasury stock, 29,267 shares at December 31, 2000 and 1999       (164)       (164)
                                                                   --------    --------
          Total shareholders' equity                                 26,465      26,297
                                                                   --------    --------
          Total liabilities and shareholders' equity               $ 27,843    $ 30,764
                                                                   ========    ========
</TABLE>

See notes to the consolidated financial statements


                                       F-2
<PAGE>

                         ISRAMCO INC. AND SUBSIDIARRIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands except for share information)

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                              ----------------------------------------
                                                                  2000           1999          1998
                                                              -----------    -----------   -----------
<S>                                                           <C>            <C>           <C>
Revenues:
    Operator fees from related parties                        $     1,265    $     1,744   $       720
    Oil and gas sales                                               2,080          1,107         1,410
    Interest and dividend income                                    1,277          1,011           557
    Office services to related parties                              1,018            881           613
    Gain from sale of oil and gas properties and equipment              6             17           931
    Gain on marketable securities                                      --          1,264            --
    Gain on BG transaction                                          3,626             --            --
    Gain on sale of investments in affiliates                          --            100            --
    Reimbursement  of exploration costs                                --             --           255
    Equity in net income of investees                                  64             --            16
    Other                                                              --             13            --
                                                              -----------    -----------   -----------
          Total revenues                                            9,336          6,137         4,502

Expenses:

    Interest expense                                                   55            157           326
    Depreciation, depletion and amortization                          443            609           815
    Lease operation expense and severance taxes                       630            469           883
    Exploration costs                                               2,956            154            81
    Operator expense                                                  634            514           487
    General and administrative                                      1,740          1,061         1,196
    Loss on marketable securities                                       9             --           973
    Equity in net loss of investees                                    --            107            --
    Impairment of oil and gas assets                                2,550             --           571
    Impairment of investment in convertible promissory note           400             --            --
                                                              -----------    -----------   -----------
          Total expenses                                            9,417          3,071         5,332
                                                              -----------    -----------   -----------

Income (loss) before income taxes and minority interest               (81)         3,066          (830)
Income tax expense (benefit)                                         (383)           221            38
Minority interest                                                      --             --            17
                                                              -----------    -----------   -----------

NET  INCOME (LOSS)                                            $       302    $     2,845   $      (851)
                                                              ===========    ===========   ===========
Earnings (loss) per common share - basic                      $      0.11    $      1.08   $     (0.32)
                                                              ===========    ===========   ===========
Earnings (loss) per common share - diluted                    $      0.11    $      1.08   $     (0.32)
                                                              ===========    ===========   ===========
Weighted average number of common outstanding - basic           2,639,853      2,639,853     2,639,853
                                                              ===========    ===========   ===========
Weighted average number of common outstanding -diluted          2,706,731      2,639,853     2,639,853
                                                              ===========    ===========   ===========
</TABLE>

               See notes to the consolidated financial statements


                                       F-3
<PAGE>

<TABLE>
<CAPTION>
                                                   ISRAMCO INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                      AND COMPREHENSIVE INCOME
                                        FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
                                             (in thousands except for share information)

                                                                  Additional                Accumulated
                                              Common Stock         Paid-in                     Other
                                       ------------------------   ----------   Accumulated  Comprehensive   Treasury   Shareholders'
                                         Shares         Amount     Capital       Deficit       Income        Stock         Equity
                                       ----------    ----------   ----------   ----------    ----------    ----------    ----------
<S>                                     <C>          <C>          <C>          <C>           <C>           <C>           <C>
Balances-December 31, 1997              2,669,120    $       27   $   26,168   $   (3,116)           --    $     (164)   $   22,915
Comprehensive loss:
    Net loss                                   --            --           --         (851)           --            --          (851)
                                                                                                                         ----------
    Total comprehensive loss                                                                                                   (851)
                                        ---------    ----------   ----------   ----------    ----------    ----------    ----------
Balances-December 31, 1998              2,669,120    $       27   $   26,168   $   (3,967)           --    $     (164)   $   22,064
Comprehensive income:
   Net Income                                  --            --           --        2,845            --            --         2,845
   Unrealized gain on
      marketable securities, net
      of taxes                                 --            --           --           --         1,388            --         1,388
                                                                                                                         ----------
Total comprehensive income                                                                                                    4,233
                                        ---------    ----------   ----------   ----------    ----------    ----------    ----------
Balances-December 31, 1999              2,669,120    $       27   $   26,168   $   (1,122)   $    1,388    $     (164)   $   26,297
Options issued as directors'
    compensation                               --            --          118           --            --            --           118
Comprehensive income:
   Net Income                                  --            --           --          302            --            --           302
   Unrealized loss on
      marketable securities,
      net of taxes
                                               --            --           --           --          (252)           --          (252)
                                                                                                                         ----------
Total comprehensive income                                                                                                       50
                                        ---------    ----------   ----------   ----------    ----------    ----------    ----------
Balances-December 31, 2000              2,669,120    $       27   $   26,286   $     (820)   $    1,136    $     (164)   $   26,465
                                        =========    ==========   ==========   ==========    ==========    ==========    ==========
</TABLE>

               See notes to the consolidated financial statements


                                       F-4
<PAGE>

                          ISRAMCO INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                    --------------------------------
                                                                      2000        1999        1998
                                                                    --------    --------    --------
<S>                                                                 <C>         <C>         <C>
Cash Flows From Operating Activities:
Net income (loss)                                                   $    302    $  2,845    $   (851)
     Adjustment to reconcile net income (loss)
      to net cash provided by operating activities:
          Depreciation, depletion, amortization and
             provision for impairment                                  2,993         609       1,386
          Dry hole costs                                               1,902          --          --
          Loss (gain) on marketable securities                             9      (1,264)      1,259
          Realized gain on investment in affiliate                        --        (100)         --
          Minority interest                                               --          --         (17)
          Gain on BG transaction                                      (3,626)         --          --
          Gain on sale of oil and gas properties and equipment            (6)        (17)       (931)
          Equity in net (income) loss of investees                       (64)        107         (16)
          Directors stock awards                                         118          --          --
          Impairment of investment in convertible promissory note        400          --          --
          Deferred taxes                                                (727)        (85)         --
          Changes in assets and liabilities:
               Accounts receivable                                      (450)       (113)        505
               Prepaid expenses and other current assets                 642      (1,015)         96
               Other                                                       2          11          15
               Accounts payable and accrued liabilities                   16         811        (364)
                                                                    --------    --------    --------
          Net cash provided by operating activities                    1,511       1,789       1,082
                                                                    --------    --------    --------
Cash Flows From Investing Activities:
     Additions to property and equipment                              (2,337)       (117)       (149)
     Purchase of Jay Petroleum, L.L.C and of Jay Management
          L.L.C, net of cash acquired                                     --         (60)        (63)
     Proceeds from sale of oil and gas properties and equipment            6          89       1,437
     Purchase of marketable securities                                (3,389)     (3,642)     (1,966)
     Proceeds from BG transaction                                      1,925       1,701          --
     Proceeds from sale of marketable securities                       2,546       4,335       3,990
     Purchase of convertible promissory note                            (400)         --          --
     Proceeds from sale of investments in affiliates                      --       1,018          --
     Proceeds from certificate of deposit                                 --          --       1,900
     Purchase of investment in affiliates                             (1,066)     (3,665)       (285)
                                                                    --------    --------    --------
          Net cash provided by (used in) investing activities         (2,715)       (341)      4,864
                                                                    --------    --------    --------
Cash Flows From Financing Activities:
     Proceeds from long-term debt                                         --          --         137
     Principal payments on long-term debt                             (1,404)       (374)     (1,584)
                                                                    --------    --------    --------
          Net cash used in financing activities                       (1,404)       (374)     (1,447)
                                                                    --------    --------    --------

NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                                 (2,608)      1,074       4,499
Cash and cash equivalents - beginning of year                         15,314      14,240       9,741
                                                                    --------    --------    --------
Cash and cash equivalents - end of year                             $ 12,706    $ 15,314    $ 14,240
                                                                    ========    ========    ========

Supplemental disclosure of cash flow information:
Cash paid during the period for interest                            $     55    $    157    $    326
                                                                    ========    ========    ========
Cash paid during the period for taxes                               $    695    $     --    $     --
                                                                    ========    ========    ========
</TABLE>

               See notes to the consolidated financial statements


                                       F-5
<PAGE>

                          ISRAMCO INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(NOTE A) -- General and Summary of Significant Accounting Policies:

      [1] The Company

      Isramco Inc. and subsidiaries (the Company) is primarily engaged in the
acquisition, exploration, operation and development of oil and gas properties.
As of December 31, 2000, the Company owns properties in Texas, Louisiana,
Oklahoma, Wyoming, New Mexico, the Republic of Congo, Africa, and approximately
a 0.5% working interest in various properties located in Israel.

      [2] Consolidation

      The consolidated financial statements include the accounts of the Company,
its direct and indirect wholly-owned subsidiaries Isramco Oil and Gas Ltd. (Oil
and Gas) and Isramco Resources Inc., a British Virgin Islands company, its
wholly owned subsidiary, Jay Petroleum, L.L.C., (Jay), Jay Management L.L.C
(Jay Management), IsramTec Inc. (IsramTec) and a wholly-owned foreign
subsidiary. Intercompany balances and transactions have been eliminated in
consolidation.

      [3] Method of Accounting for Oil and Gas Operations

      The Company follows the "successful efforts" method of accounting for its
oil and gas properties. Under this method of accounting, all property
acquisition costs and costs of exploratory and development wells are capitalized
when incurred, pending determination of whether the well has found proved
reserves. If an exploratory well has not found proved reserves, the costs of the
well are charged to expense. The costs of development wells are capitalized
whether successful or unsuccessful. Geological and geophysical costs and the
costs of carrying and retaining undeveloped properties are expensed as incurred.
Management estimates that the salvage value of lease and well equipment will
approximately offset the future liability for plugging and abandonment of the
related wells. Accordingly, no accrual for such costs has been recorded.

      Depletion and depreciation of capitalized costs for producing oil and gas
properties is provided using the units-of-production method based upon proved
reserves. Depreciation, depletion, amortization and provision for impairment
expense for the Company's oil and gas properties amounted to approximately
$2,917,000 , $450,000 and $1,255,000 for 2000, 1999 and 1998, respectively.

      [4] Marketable Securities

      Statement of Financial Accounting Standard No. 115 (SFAS No. 115),
Accounting for Certain Investments in Debt and Equity Securities, requires the
Company to classify its debt and equity securities in one of three categories:
trading, available-for-sale or held-to-maturity. Trading securities are bought
and held principally for the purposes of selling them in the near term.
Held-to-maturity securities are those securities in which the Company has both
the ability and intent to hold the security until maturity. All other securities
not included in trading or held-to-maturity are classified as
available-for-sale.

      At December 31, 1998, the Company considered all of its marketable
securities to be held for trading purposes. During the first quarter of 1999,
the Company transferred certain investments in marketable securities, with a
historical cost of $2,750,000, to available-for-sale at fair market value. The
Company holds


                                       F-6
<PAGE>

no held-to-maturity securities. Trading and available-for-sale securities are
recorded at fair market value. Unrealized holding gains and losses on trading
securities are included in earnings. Unrealized holding gains or losses, net of
the related tax effects, on available-for-sale securities are excluded from
earnings and are reported as accumulated other comprehensive income, a separate
component of shareholders' equity, until realized.

[5] Investment in Affiliate

The Company accounts for its investment in an affiliated entity in which it has
the ability to exercise significant influence over operating and financial
policies using the equity method.

[6] Equipment

Equipment, consisting of motor vehicles, office furniture and equipment, is
carried at cost less accumulated depreciation, computed on the straight-line
method over the estimated useful lives of the assets.

[7] Translation of Foreign Currencies

Foreign currency is translated in accordance with Statement of Financial
Accounting Standards No. 52, which provides the criteria for determining the
functional currency for entities operating in foreign countries. The Company has
determined its functional currency is the United States (U.S.) dollar since all
of its contracts are in U.S. dollars. The financial statements of Oil and Gas
have been remeasured into U.S. dollars as follows: at rates prevailing during
the year for revenue and expense items (except depreciation); at year-end rates
for assets and liabilities except for fixed assets and prepaid expenses which
are translated at the rate in effect at the time of their acquisition.
Depreciation is remeasured based on the historical dollar cost of the underlying
assets. The net effects of currency translations were not material in any
period.

[8] Earnings Per Share (EPS)

The Company follows SFAS No. 128, Earnings per Share, for computing and
presenting earnings per share, which requires, among other things, dual
presentation of basic and diluted loss per share on the face of the statement of
operations. Basic EPS is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common shares were exercised or converted
into common shares or resulted in the issuance of common shares that then shared
in the earnings of the entity. For the year ended December 31, 2000, the
Company's potential dilutive securities included dilutive stock options.

[9] Cash Equivalents

Cash equivalents include short-term investments with original maturities of
ninety days or less and are not limited in their use.

[10] Noncompete Agreements

Noncompete agreements are amortized over the period to be benefited, generally
from three to five years.

[11] New Pronouncements


                                       F-7
<PAGE>

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement, as amended by SFAS No. 137
and SFAS No. 138, establishes standards of accounting for and disclosures of
derivative instruments and hedging activities. This statement requires all
derivative instruments to be carried on the balance sheet at fair value and is
effective for the Company beginning January 1, 2001. The Company's January 1,
2001 adoption of SFAS No. 133 had no material impact on its financial
statements.

[12] Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and related notes.
Actual results could differ from those estimates.

Oil and gas reserve quantities are the basis for the calculation of
depreciation, depletion and impairment of oil and gas properties. An independent
petroleum-engineering firm determines the Company's reserve estimates. However,
management emphasizes that reserve estimates are inherently imprecise and that
estimates of more recent discoveries and non-producing reserves are more
imprecise than those for properties with long production histories. At December
31, 2000, approximately 32% of the Company's oil and gas reserves were
attributable to non-producing reserves. Accordingly, the Company's estimates are
expected to change, as future information becomes available.

As mandated under SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, the Company is required
under certain circumstances to evaluate the possible impairment of the carrying
value of its long-lived assets. For proved oil and gas properties, this involves
a comparison to the estimated future undiscounted cash flows, as described in
the paragraph below. In addition to the uncertainties inherent in the reserve
estimation process, these amounts are affected by management's estimates for
projected prices for oil and natural gas, which have typically been volatile. It
is reasonably possible that the Company's oil and gas reserve estimates will
materially change in the forthcoming year.

[13] Impairment of Long-Lived Assets

The provisions of SFAS No. 121 require the Company to assess impairment whenever
events or changes in circumstances indicate that the carrying amount of a
long-lived asset may not be recoverable. When an assessment for impairment of
proved oil and gas properties is performed, the Company is required to compare
the net carrying value of proved oil and gas properties on a field-by-field
basis (the lowest level at which cash flows can be determined on a consistent
basis) to the related estimates of undiscounted future net cash flows for such
properties. If the net carrying value exceeds the net cash flows, then an
impairment is recognized to reduce the carrying value to the estimated fair
value. The Company recorded an impairment provision of $571,000 during 1998 for
the excess of the carrying value of the Company's proved oil and gas properties
over the estimated future discounted cash flows from such properties. There were
no such impairments recognized during 2000 or 1999.

Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized to the
extent, if any, that the cost of the property had been impaired. During 2000,
the company recorded an impairment of $2,550,000 relating to its unproved
properties. There were no such impairments recognized during 1999 or 1998.

[14] Income Taxes

The Company accounts for income taxes using the asset and liability method as
prescribed by SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities, and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The measurement of deferred tax


                                       F-8
<PAGE>

assets is reduced, if necessary, by a valuation allowance for any tax benefits
which, are not expected to be realized. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that such tax
rate changes are enacted.

[15] Oil and Gas Revenues

The Company records oil and gas revenues following the entitlements method of
accounting for production, in which any excess amounts received above the
Company's share is treated as a liability. If less than the Company's share is
received, the underproduction is recorded as an asset. The Company's imbalance
position was not significant in terms of volumes or value at December 31, 2000
and 1999.

[16] Environmental

The Company is subject to extensive Federal, state, local and foreign
environmental laws and regulations. These laws, which are constantly changing,
regulate the discharge of materials into the environment and may require the
Company to remove or mitigate the environmental effects of the disposal or
release of petroleum or chemical substances at various sites. Liabilities for
expenditures of noncapital nature are recorded when environmental assessment
and/or remediation is probable, and the costs can be reasonably estimated. No
significant amounts for environmental liabilities are recorded at December 31,
2000 or 1999.

[17] Reclassifications

Certain amounts in prior financial statements have been reclassified to conform
to the 2000 financial statements presentation.

(NOTE B) - Transactions with Affiliates and Related Parties

The Company acts as Operator for joint ventures with related parties in Israel
engaged in the exploration for oil and gas for which it receives operating fees
equal to the larger of 6% of the actual direct costs or minimum monthly fees of
$6,000 per license.

Operator fees earned and related operator expenses are as follows:

                                                       Year Ended December 31,
                                                  ------------------------------
                                                   2000        1999        1998
                                                  ------      ------      ------
                                                         (in thousands)
Operator fees:
             Negev Med Venture .............      $   85      $  252      $  288
             Shederot Venture ..............           1          18         360
             Yam Ashdod Carveout ...........          87          65          72
             Yam West 2 ....................          --         575          --
             OR-1 ..........................          16         283          --
             OR South-1 ....................          --         509          --
             Marine North ..................          72          42          --
             Marine Center .................         396          --          --
             Marine South ..................          39          --          --
             Nir-1 .........................         569          --          --
                                                  ------      ------      ------
                                                  $1,265      $1,744      $  720
                                                  ======      ======      ======
Operator expenses ..........................      $  634      $  514      $  487
                                                  ======      ======      ======


                                       F-9
<PAGE>

In August of 1997 the Company entered into a Consulting Agreement with Romulas
Investment Ltd. (which Agreement has been assigned to Remarkable Holdings Ltd.),
a company which is wholly owned and controlled by Daniel Avner, the President of
the Company. Pursuant to this Agreement, the Company agreed to pay the
Consultant the sum of $7,500 per month plus expenses. In February 1999, the
Consulting Agreement was amended to increase the monthly compensation payable
thereunder to $15,000 and pursuant to the amendment, the reimbursement of
expenses was disallowed. The Consulting Agreement is in effect through July
2001.

On January 21, 1998, the Company entered into an Inventory Management Agreement
with Equital Ltd. pursuant to which the Company is obligated to pay to Equital
Ltd. $1,650 plus VAT payable December, March, June and September of each year
during the term of the Agreement. In the case of the drilling of a well if the
total monthly hours of services provided to the Company by Equital Ltd. exceed
30 hours per month, then the Company shall pay an additional $40.00 per hour
plus VAT for services rendered. The Agreement may be terminated on three (3)
month's written notice.

The Company paid Naphtha $6,500 per month for rent, office, secretarial and
computer services from July 1998 through April 30, 2000 and $ 9,125 per month
from May 1, 2000 for such services.

A subsidiary of the Company is the general partner of Isramco-Negev 2 Limited
Partnership from which it received management fees and expense reimbursements of
$530,000, $580,000 and $480,000 for the year ended December 31, 2000, 1999 and
1998, respectively.

During the years ended December 31, 2000, 1999 and 1998 the Company incurred
$283,000, $273,000 and $214,000, respectively, for consulting services rendered
by officers/directors of the Company.

In June 1996, the Company paid its former President $200,000 in consideration
for a five-year covenant not to compete and entered into a consulting agreement
with a company owned by the former President.

In May of 1996, the Company entered into a Consulting Agreement with Goodrich
Global L.T.D. B.V.I., a company owned and controlled by Haim Tsuff, the Chairman
of the Board of Directors and Chief Executive Officer of the Corporation.
Pursuant to this Consulting Agreement which had a term of two years, the Company
agreed to pay the sum of $144,000 per annum in installments of $12,000 per
month, in addition to reimbursing all reasonable business expenses incurred
during the term in connection with the performance of services on behalf of the
Company. In April 1997 the consulting compensation was increased to $240,000 per
annum in installments of $20,000 per month and in December 1997 the term was
extended to May 31, 2001. The Consulting Agreement, as amended, provides that
the term shall be automatically extended for an additional term of three years,
commencing June 1, 2001, unless the Company has given notice at least 90 days
prior to June 1, 2001 that it does not intend that the term be renewed. In the
event that the Company terminates Mr. Tsuff, he shall be entitled to receive a
lump sum severance payment equal to the balance of the unpaid consulting fee due
for the remaining term of the agreement.

      In November of 1999 the Company entered into a Consulting Agreement with
Worldtech Inc., a Mauritus company of which Jackob Maimon, the President of the
Company, is a director. Pursuant to this Consulting Agreement which is in effect
through May 31, 2001, the Company agreed to pay the sum of $240,000 per annum in
installments of $20,000 per month, in addition to reimbursing all reasonable
business expenses incurred during the term in connection with the performance of
services on behalf of the Company. The Consulting Agreement provides that the
term shall be automatically extended for an additional term of three (3) years,
unless the Company has given notice at least ninety (90) days prior to the
scheduled expiration, that it does not intend that the term be renewed. In the
event that the Company terminates Mr. Maimon, he shall be entitled to receive a
lump sum severance payment equal to the balance of the unpaid consulting fee due
for the remaining term of the agreement.

On December 26, 2000, the Company awarded bonuses of $100,000 to the chairman of
the board, $100,000 to the president and $50,000 to the vice president.

In December 2000, the Company assumed from Naphtha Israel Petroleum Corp., I.O.C
Israel Petroleum Company and affiliated entities (all commonly controlled
companies) their respective interest in Naphtha Congo L.P in (which holds a 5%
working interest in the Congo). In connection with this transaction, the Company
paid $800,000 to these commonly controlled entities and also agreed to pay
royalties of 17.5% of its net revenues associated with the working interest. The
Company recorded the $800,000 paid as


                                      F-10
<PAGE>

exploration costs because the payment represents a reimbursement of exploration
costs previously expensed by the commonly controlled companies.

(NOTE C) - Investment in Affiliate

A wholly-owned subsidiary of the Company is the General Partner in the Isramco
Negev 2 Limited Partnership. The daily management of the Limited Partnership
vests with the General Partner, however, matters involving the rights of the
Limited Partnership unit holders, are subject to supervision of the Supervisor,
appointed to supervise the Limited Partnership activities, and in some instances
the approval of the Limited Partnership unit holders. The Company's General
Partnership interest in the Limited Partnership is 0.01% which is accounted for
by the equity method of accounting

At December 31, 2000, the Company also owned 184,184,615 units (4.33%) of the
Isramco Negev 2 Limited Partnership with a cost and market value of $3,989,000
and $3,145,000, respectively. At December 31, 1999, the Company owned
122,742,565 units of the Isramco Negev 2 Limited Partnership, with a cost and
market value of $3,031,000 and $3,665,000, respectively. These investments are
also accounted for under the equity method of accounting. During 1999, the
Company sold approximately 43,100,000 units, realizing a gain of $100,000 in
earnings.

Summarized financial information of Isramco Negev 2 Limited Partnership is as
follows (amounts in thousands) (unaudited):

                                       Year Ended December 31,
                                       ----------------------
Balance Sheet ......................      2000         1999
                                       ---------    ---------
   Current assets ..................   $ 105,000    $  81,000
   Other assets ....................      15,000        2,000
                                       ---------    ---------
        Total assets ...............   $ 120,000    $  83,000
                                       =========    =========

   Current liabilities .............   $   3,000    $   3,000
   Equity ..........................     117,000       80,000
                                       ---------    ---------
        Total liabilities and equity   $ 120,000    $  83,000
                                       =========    =========

                                              Year Ended December 31,
                                       -----------------------------------
Statement of Operations ............        2000         1999         1998
                                       ---------    ---------    ---------
   Income...........................   $   3,000    $  10,000    $   6,000
   Expenses.........................       6,000       13,000        5,000
                                       ---------    ---------    ---------
        Net income (loss) ..........   $  (3,000)   $  (3,000)   $   1,000
                                       =========    =========    =========

The Company's equity in net income (loss) is adjusted for the amortization of
the difference between the carrying amount of the investment and its underlying
equity in the net assets of the investee.

(NOTE D) - Marketable Securities

At December 31, 2000 and 1999, the Company had net unrealized gains on
marketable securities of (9,000) and $8,000, respectively.

Trading securities, which are primarily traded on the Tel-Aviv Stock Exchange,
consists of the following:


                                       F-11
<PAGE>

                                 December 31, 2000           December 31, 1999
                                 -----------------           -----------------
                               Cost       Market Value     Cost     Market Value
                               ----       ------------     ----     ------------
Debentures and
Convertible
Debentures                  $2,981,000    $3,015,000    $2,012,000    $1,968,000

Equity securities              529,000       511,000       517,000       569,000

Investment Trust
Fund                                --            --       155,000       155,000
                            ----------    ----------    ----------    ----------
                            $3,510,000    $3,526,000    $2,684,000    $2,692,000
                            ==========    ==========    ==========    ==========

Available-for-sale securities, which are primarily traded on the Tel-Aviv Stock
Exchange, consist of equity securities with amortized cost of $1,727,000, gross
unrealized holding gains of $1,747,000 and a fair market value of $3,474,000.

Sales of marketable securities resulted in realized gains (losses) of $(18,000),
$1,256,000 and $(83,000) for the years ended December 31, 2000, 1999 and 1998,
respectively.

(NOTE E) - Investment in Convertible Promissory Note

In July 2000, the Company invested approximately $400,000 in a high-tech venture
through the purchase of a 5% convertible promissory note issued by such venture,
convertible at the discretion of the Company, under certain conditions, into
equity capital of the venture. On December 31, 2000, the Company determined the
investment to be impaired and recorded an impairment charge for the full amount
of the note.

(NOTE F) - Oil and Gas Properties

                                                                       Total
                                                                    Capitalized
                                       Unproved        Proved          Costs
                                      -----------    -----------    -----------
Balance--December 31, 1998            $ 2,700,000    $ 4,347,000    $ 7,047,000
Acquisition costs                              --         57,000         57,000
Sale of oil and gas properties                 --       (402,000)      (402,000)
                                      -----------    -----------    -----------
Balance--December 31, 1999            $ 2,700,000    $ 4,002,000    $ 6,702,000
Acquisition costs                         127,000             --        127,000
Development costs                              --        262,000        262,000
Exploration costs                       1,902,000             --      1,902,000
Sale of oil and gas properties                 --       (252,000)      (252,000)
Dry hole costs                         (1,902,000)            --     (1,902,000)
Impairment                             (2,550,000)            --     (2,550,000)
                                      -----------    -----------    -----------
Balance--December 31, 2000            $   277,000    $ 4,012,000    $ 4,289,000
                                      ===========    ===========    ===========

In September 2000 the company drilled an exploration well within the Tilapia
permit in the Congo. Based on the results of the production tests that were
performed on the well, the license participants decided to plug and abandon the
well. The costs of the dry hole of $1,902,000 were recorded to exploration
expense during the year ended December 31, 2000. The Board of Directors of the
Company decided to abandon the Tilapia permit. Accordingly, the Company
recognized an impairment of unproved property costs of $2,550,000.

(NOTE G) -- Equipment


                                      F-12
<PAGE>

      Cost:
      Balance--December 31, 1998 ............................   $ 266,000
      Purchases .............................................      28,000
      Sales .................................................          --
                                                                ---------
      Balance--December 31, 1999 ............................     294,000
      Purchases .............................................      46,000
      Sales .................................................      (7,000)
                                                                ---------
      Balance--December 31, 2000 ............................     333,000

      Accumulated Depreciation:
      Balance at December 31, 1998 ..........................     144,000
      Depreciation expense ..................................      48,000
      Depreciation of equipment that was sold or retired ....          --
                                                                ---------
      Balance--December 31, 1999 ............................     192,000
      Depreciation expense ..................................      37,000
      Depreciation of equipment that was sold or retired ....      (7,000)
                                                                ---------
      Balance--December  31, 2000 ...........................     222,000

      Cost less accumulated depreciation--December 31, 2000 .   $ 111,000
                                                                =========
      Cost less accumulated depreciation--December 31, 1999 .   $ 102,000
                                                                =========

      Annual rates of depreciation are as follows:
         Office equipment and furniture .....................     7%--20%
         Motor vehicles .....................................    15%--30%

      A summary of property and equipment is as follows:

                                                         December, 31
                                                    -----------------------
                                                       2000         1999
                                                    ----------   ----------
      Unproved properties .......................   $  277,000   $2,700,000
      Oil and gas properties ....................    4,012,000    4,002,000
      Transportation equipment ..................      179,000      149,000
      Office equipment ..........................      154,000      145,000
                                                    ----------   ----------
                                                     4,622,000    6,996,000
                                                    ----------   ----------
      Less accumulated depletion, depreciation,
        amortization and provision for impairment    2,175,000    2,031,000
                                                    ----------   ----------
                                                    $2,447,000   $4,965,000
                                                    ==========   ==========

(NOTE H) - Shareholders' Equity

The Company declared a one-for-ten reverse stock split during 1998. The effect
of the reverse stock split has been reflected in all share and per share amounts
in the accompanying consolidated financial statements.

EPS Computation

SFAS No. 128, "Earnings per share", requires a reconciliation of the numerator
(income) and denominator (shares) of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. The Company's reconciliation is
as follows:

<TABLE>
<CAPTION>
                                                          For the year ended December 31,
                                    ----------------------------------------------------------------------------
                                              2000                     1999                       1998
                                    ----------------------------------------------------------------------------
                                      Income        shares      Income       shares       Income        shares
                                    ----------    ---------   ----------    ---------   ----------     ---------
<S>                                 <C>           <C>         <C>           <C>         <C>            <C>
Earnings per common share-basic     $  302,000    2,639,853   $2,845,000    2,639,853   $ (851,000)    2,639,853
Effect of dilutive securities:
Stock options                               --       66,878           --           --           --            --
Earnings per common share-Diluted   $  302,000    2,706,731   $2,845,000    2,639,853   $ (851,000)    2,639,853
                                    ==========   ==========   ==========   ==========   ==========    ==========
</TABLE>


                                      F-13
<PAGE>

The 1993 stock option plan (the 1993 Plan) was approved at the Annual General
Meeting of Shareholders held on August 13, 1993. At December 31, 2000, 1999 and
1998 50,000 shares of common stock are reserved under the 1993 Plan. Options
granted under the 1993 Plan might be either incentive stock options under the
Internal Revenue Code or options which do not qualify as incentive stock
options. Options are granted for a period of up to ten years from the grant
date. The exercise price for an incentive stock option may not be less than 100%
of the fair market value of the Company's common stock on the date of grant. The
options granted under this plan were fully vested at grant date. The
administrator may set the exercise price for a nonqualified stock option.

Summary of the status of the Company's stock options is presented below:

                                                                Weighted-Average
1993 Plan:                                         Options       Exercise Price
                                                   -------      ----------------
Outstanding at December 31, 1997 .................  29,750            $21.00
Granted ..........................................      --                --
Expired ..........................................      --                --
                                                    ------
Outstanding at December 31, 1998 .................  29,750            $21.00
Granted ..........................................      --                --
Expired ..........................................      --                --
                                                    ------
Outstanding at December 31, 1999 .................  29,750            $21.00
                                                    ======
Granted ..........................................      --                --
Expired ..........................................      --                --
                                                    ------
Outstanding at December 31, 2000 .................  29,750            $21.00
                                                    ======            ======

 As of December 31, 2000, 29,750 options were outstanding and exercisable with a
 price of $21.00 and a weighted-average remaining contractual life of 3.3 years.

                                                                Weighted-Average
Consultants and others:                            Options       Exercise Price
                                                   -------      ----------------
Outstanding at December 31, 1997                     2,000            $23.00
Granted                                                 --                --
Expired                                                 --                --
                                                    ------
Outstanding at December 31, 1998                     2,000            $23.00
Granted                                                 --                --
Expired                                                 --                --
                                                    ------
Outstanding at December 31, 1999                     2,000            $23.00
Granted                                                 --                --
Expired                                                 --                --
-Outstanding at December 31, 2000                    2,000            $23.00
                                                    ======            ======

As of December 31, 2000 - 2000 options were outstanding and exercisable with a
price of $23.00 and a weighted-average remaining contractual life of 2.7 years.

On March 24, 2000, Haim Tsuff, the Chairman of the Board of Director and Chief
Executive officer of the Corporation and Jacob Maimon, the president of the
Corporation were each granted five year options to purchase up to 69,995 shares
of the company's common stock at an exercise price of $4.28.

Shares of common stock reserved for future issuance are:


                                      F-14
<PAGE>

            Options granted under the 1993 Plan                29,750
            Options available for grant under the 1993 Plan    20,250
            Options granted to directors                      139,990
                      Other                                     2,000
                                                              -------
            Total                                             191,990
                                                              =======

The Company applies Accounting Principles Bulletin Opinion No. 25 and related
interpretations in accounting for its options. Accordingly, compensation expense
of $118,000 has been recognized for its stock option grants to its directors
during 2000. Had compensation cost for the Company's stock option grants been
determined based on the fair value at the grant dates for awards consistent with
the method of SFAS No. 123, Accounting for Stock-based Compensation, the
Company's net income and income per share would have been reduced to the pro
forma amounts indicated below.


<TABLE>
<CAPTION>
                                                                         2000              1999              1998
                                                                      ----------        ----------        ----------
<S>                                                                   <C>               <C>               <C>
          Net income (loss)  - as reported                            $  302,000        $2,861,000        $ (851,000)
                                                                      ==========        ==========        ==========
                             - proforma                               $   56,000        $2,861,000        $ (851,000)
                                                                      ==========        ==========        ==========


          Earnings (loss) per share
                             Basic and diluted
                             - as reported                            $     0.11        $     1.08        $    (0.32)
                                                                      ==========        ==========        ==========
                             - pro forma (basic and diluted)          $     0.02        $     1.08        $    (0.32)
                                                                      ==========        ==========        ==========
</TABLE>

(NOTE I) -- Income Taxes

Income (loss) before income taxes and minority interest from U.S. and foreign
results of operations is as follows:

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                -----------------------------------------
                                                    2000           1999           1998
                                                -----------    -----------    -----------
<S>                                             <C>            <C>            <C>
U.S.                                            $  (455,000)   $  (640,000)   $  (938,400)
Foreign                                         $   374,000    $ 3,706,000        108,400
                                                -----------    -----------    -----------
Total                                           $   (81,000)   $ 3,066,000    $  (830,000)
                                                ===========    ===========    ===========
</TABLE>

Total income tax expense (benefit) for each of the years ended December 31,
2000, 1999 and 1998 were allocated as follows:

<TABLE>
<CAPTION>
                                                    2000           1999           1998
                                                -----------    -----------    -----------
<S>                                             <C>            <C>            <C>
Income (loss) from continuing operations        $  (383,000)   $   221,000    $    38,000
Shareholders' equity for unrealized holding
               gains of marketable securities       611,000             --             --
                                                -----------    -----------    -----------
        Total                                   $   228,000    $   221,000    $    38,000
                                                ===========    ===========    ===========
</TABLE>

Income tax expense (benefit) attributable to income (loss) from continuing
operations consists of :


                                      F-15
<PAGE>

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                -----------------------------------------
                                                    2000           1999           1998
                                                -----------    -----------    -----------
<S>                                             <C>            <C>            <C>
Current:
     State                                      $    40,000    $        --    $    38,000
     Federal                                        376,000        234,000             --
     Foreign                                        (72,000)        72,000             --
Deferred                                           (727,000)       (85,000)            --
                                                -----------    -----------    -----------
Total                                           $  (383,000)   $   221,000    $    38,000
                                                ===========    ===========    ===========
</TABLE>

The deferred tax assets (liabilities) as of December 31, 2000 and 1999 are as
follows:

<TABLE>
<CAPTION>
                                                                        As of  December 31,
                                                                      ----------------------
                                                                         2000         1999
                                                                      ---------    ---------
<S>                                                                   <C>          <C>
Net unrealized depreciation (appreciation) of marketable securities   $(270,000)   $ 403,000
Basis differences in property and equipment                             426,000      177,000
U.S. state taxes                                                        (49,000)     (46,000)
Other timing differences                                                 94,000      (46,000)
                                                                      ---------    ---------
                                                                        201,000      488,000
     Valuation allowance                                                     --     (403,000)
                                                                      ---------    ---------
                                                                        201,000       85,000
                                                                      =========    =========
</TABLE>

The change in the valuation allowance from December 31, 1999 to December 31,
2000 amounted to $403,000 and was primarily caused by the change in the
depreciation (appreciation) of marketable securities.

The Company has determined that it is more likely than not that the deferred tax
assets will be realized and a valuation allowance for such assets is not
required at December 31, 2000. This determination considered, among other
things, estimated future cash flows from proved reserves and the market value of
securities and expected resulting taxable income.

Reconciliation between the actual income tax expense and income taxes computed
by applying the U.S. Federal income tax rate to income before income taxes and
minority interest is as follows:

                                                 Year Ended December 31,
                                             ----------------------------
                                               2000       1999       1998
                                             ------     ------     ------
Computed at U.S. statutory rates              (35.0)%     35.0%     (35.0)%
State income taxes, net of federal benefit     49.8        2.9       (2.9)
Adjustment to valuation allowance            (497.5)     (31.2)      42.5
Other                                           9.9         .5         --
                                             ------     ------     ------
                                             (472.8)%      7.2%       4.6%
                                             ======     ======     ======

(NOTE J) -- Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of
credit risk, consist primarily of trade accounts receivable. The Company's
customer base includes several of the major United States oil and gas operating
and production companies. Although the Company is directly affected by the


                                      F-16
<PAGE>

well-being of the oil and gas production industry, management does not believe a
significant credit risk exists at December 31, 2000.

The Company maintains deposits in banks, which may exceed the amount of federal
deposit insurance available. Management periodically assesses the financial
condition of the institutions and believes that any possible deposit loss is
minimal.

A significant portion of the Company's cash and cash equivalents is invested in
money-market funds.

Substantially all marketable securities owned by the Company are held by banks
in Israel.

(NOTE K) -- Commitments and Contingencies

Commitments:

The Company leases corporate office facilities under a three-year operating
lease expiring October 2003 at a monthly rental of $ 2,854. The Company shares
office space with Jay Petroleum, L.L.C. and Jay Management L.L.C., affiliates,
under an informal sublease agreement.

At December 31, 2000, future minimum lease payments under noncancellable
operating leases are approximately $34,248 through the year ending December 31,
2001.

Contingencies:

The Company is currently involved in a dispute with a contractor relating to
drilling costs of the Tilapia well in the Congo. The Company believes that it
has adequately accrued for all amounts due to this contractor as of December 31,
2000.

The Company is also involved in various legal proceedings arising in the normal
course of business. In the opinion of management, the Company's ultimate
liability, if any, in these pending actions would not have a material adverse
effect on the financial position, operating results or liquidity of the Company.

(NOTE L) - Sale of Interests

On October 20, 1999, the Company and the other participants (collectively, the
"Isramco Group"), entered into an agreement with BG International Limited, a
member of the British Gas Group ("BG"), for the acquisition by BG from the
Isramco Group of a 50% participation interest in the Med Licenses in Israel and
BG's replacement of the Company as operator of the Med Yavne License and any new
license issued in respect of the other Med Licenses scheduled to expire in June
2000 (the " BG Transaction"). Following the consummation of the BG Transaction,
the Company's participation in the Med Licenses was reduced to approximately
0.5% (reduced from 1.0043%).

In consideration of the Company's performance of its obligations under the BG
Transaction, BG paid to the Company approximately $3.8 million, of which $1.9
million was paid in October 1999 and the remainder in January 2000. Included in
advance payments received on the balance sheet at December 31, 1999 is $1.7
million relating to the cash received in 1999 from BG of $1.9 million, less
costs incurred of approximately $200,000. This amount was deferred until the
completion of the agreement and the Company's performance of its obligations
under the BG Transaction in January 2000, and it was recognized as a gain during
2000. Additionally, upon the issuance of each of the three first new licenses,
if any, which may be obtained in lieu of the expiring Med Licenses, the Company
is entitled to a payment of approximately $1.7 million (or a total of
approximately $5 million if all licenses are obtained).


                                      F-17
<PAGE>

Under the terms of the BG Transaction, BG replaced the Company as operator of
the Med Yavne license as of January 1, 2000. The Company will continue to serve
as operator of each of the remaining Med Licenses on the same terms and
conditions currently existing among the Company and the other license
participants until each such license's expiration.

(NOTE M) - Long - term debt

In May 2000, Jay Petroleum repaid in full the principal of approximately
$1,404,000 and accrued interest on its loan from Comerica Bank - Texas.

(NOTE N) - Geographical Segment Information

The Company's operations involve a single industry segment--the exploration,
development, production and transportation of oil and natural gas. Its current
oil and gas activities are concentrated in the United States, Israel, and the
Republic of Congo, Africa. Operating in foreign countries subjects the Company
to inherent risks such as a loss of revenues, property and equipment from such
hazards as exploration, nationalization, war and other political risks, risks of
increases of taxes and governmental royalties, renegotiation of contracts with
government entities and changes in laws and policies governing operations of
foreign-based companies.

The Company's oil and gas business is subject to operating risks associated with
the exploration, and production of oil and gas, including blowouts, pollution
and acts of nature that could result in damage to oil and gas wells, production
facilities or formations. In addition, oil and gas prices have fluctuated
substantially in recent years as a result of events, which were outside of the
Company's control. Financial information, summarized by geographic area, is as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                               Geographic Segment
                                                         -------------------------------------------------------------
                                                           United                                          Consolidated
                                                           States           Israel           Congo            Total
                                                         ----------       ----------       ----------       ----------
                    2000
                    ----
<S>                                                      <C>              <C>              <C>              <C>
Sales and other operating revenue ................       $    2,165       $    2,198       $       --       $    4,363
Gain on sale of right to BG ......................               --            3,626               --            3,626
Costs and operating expenses .....................           (1,215)            (746)          (5,252)          (7,213)
                                                         ----------       ----------       ----------       ----------
Operating profit (loss) ..........................       $      950       $    5,078       $   (5,252)      $      776
                                                         ==========       ==========       ==========       ==========

Interest and dividend income
     and other corporate revenues ................                                                               1,347
General corporate expenses .......................                                                              (1,740)
Interest expense and loss on marketable securities                                                                 (64)
Impairment of investment .........................                                                                (400)
Income tax benefit ...............................                                                                 383
                                                                                                            ----------
Net income .......................................                                                          $      302
                                                                                                            ==========

Identifiable assets at December 31, 2000
Net property and equipment .......................       $    2,166       $      131       $      150       $    2,447
Cash and corporate assets ........................                                                          $   25,396
                                                                                                            ----------
Total assets at December 31, 2000 ................                                                          $   27,843
                                                                                                            ==========
</TABLE>

                                      F-18
<PAGE>

<TABLE>
<CAPTION>
                                                                               Geographic Segment
                                                         -------------------------------------------------------------
                                                           United                                          Consolidated
                                                           States           Israel           Congo            Total
                                                         ----------       ----------       ----------       ----------
                    1999
                    ----
<S>                                                      <C>              <C>              <C>              <C>
Sales and other operating revenue ................       $    1,174       $    2,558       $       --       $    3,732
Costs and operating expenses .....................           (1,058)            (688)              --           (1,746)
                                                         ----------       ----------       ----------       ----------
Operating profit (loss) ..........................       $      116       $    1,870       $       --       $    1,986
                                                         ==========       ==========       ==========       ==========

Interest and dividend income, gain on marketable
  securities and other corporate revenues ........                                                               2,298
General corporate expenses .......................                                                              (1,061)
Interest expense .................................                                                                (157)
Income taxes .....................................                                                                (221)
                                                                                                            ----------
Net income .......................................                                                          $    2,845
                                                                                                            ==========

Identifiable assets at
  December 31, 1999 ..............................       $    2,175       $       90       $    2,700       $    4,965
Cash and corporate assets ........................                                                              25,799
                                                                                                            ----------
Total assets at December 31, 1999 ................                                                          $   30,764
                                                                                                            ==========

<CAPTION>
                                                                               Geographic Segment
                                                         -------------------------------------------------------------
                                                           United                                          Consolidated
                                                           States           Israel           Congo            Total
                                                         ----------       ----------       ----------       ----------
                    1998
                    ----
<S>                                                      <C>              <C>              <C>              <C>
Sales and other operating revenue ................       $    1,543       $    1,455       $       --       $    2,998
Costs and operating expenses .....................           (2,244)            (512)              --           (2,756)
                                                         ----------       ----------       ----------       ----------
Operating profit (loss) ..........................       $     (701)      $      943       $       --       $      242
                                                         ==========       ==========       ==========       ==========

Interest and dividend income
  and other corporate revenues ...................                                                               1,504
General corporate expenses .......................                                                              (1,277)
Interest expense, loss on marketable
  securities and other corporate revenues ........                                                              (1,299)
Minority interest ................................                                                                  17
Income taxes .....................................                                                                 (38)
                                                                                                            ----------
Net income .......................................                                                          $     (851)
                                                                                                            ==========

Identifiable assets at
  December 31, 1998 ..............................       $    2,686       $       64       $    2,700       $    5,450
Cash and corporate assets ........................                                                              19,036
                                                                                                            ----------
  Total assets at December 31, 1998 ..............                                                          $   24,486
                                                                                                            ==========
</TABLE>


                                      F-19
<PAGE>

                      SUPPLEMENTARY OIL AND GAS INFORMATION
        FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998 (unaudited)

      The following supplemental information regarding the oil and gas
activities of the Company is presented pursuant to the disclosure requirements
promulgated by the Securities and Exchange Commission and SFAS No. 69,
Disclosures About Oil and Gas Producing Activities. Capitalized costs relating
to oil and gas activities and costs incurred in oil and gas property
acquisition, exploration and development activities for each year are shown
below.

Capitalized Cost of Oil and Gas Producing Activities (in thousands)

<TABLE>
<CAPTION>
                                                 2000                   1999                 1998
                                           ----------------     -------------------   -----------------
                                           United               United                United
                                           States     Congo     States        Congo   States      Congo
                                           ------     -----     ------        -----   ------      -----
<S>                                       <C>       <C>        <C>        <C>        <C>        <C>
Unproved properties not being amortized   $    79   $   150    $    --    $   2,700  $    --    $ 2,700
Proved property being amortized             4,012        --      4,002           --    4,347         --
Accumulated depreciation, depletion
     amortization and impairment           (1,953)       --     (1,840)          --   (1,719)        --
                                          -------   -------    -------    ---------  -------    -------

Net capitalized costs                     $ 2,138   $   150    $ 2,162    $   2,700  $ 2,628    $ 2,700
                                          =======   =======    =======    =========  =======    =======

Costs Incurred in Oil and Gas Property Acquisition, Exploration, and Development Activities  (in thousands)
</TABLE>

<TABLE>
<CAPTION>
                                                                         2000                   1999                 1998
                                                                   ----------------     -------------------   -----------------
                                                                   United                United                United
                                                                   States      Congo     States        Congo   States      Congo
                                                                   ------      -----     ------        -----   ------      -----
<S>                                                                <C>        <C>       <C>               <C> <C>          <C>
Property acquisition costs--proved and
unproved properties ........................................       $  79      $   --     $   57           --  $   260      $  --
Exploration costs ..........................................         164       2,702         --           --       --         --
Development costs ..........................................         262          --         --           --       --         --
(Israel exploration costs in 2000 -$90 ; 1999 - $154;
1998 - $81;)
</TABLE>

<TABLE>
<CAPTION>

              Results of Operations for Oil and Gas Producing Activities (in thousands)

                                                      2000                  1999                  1998
                                             ---------------------- -------------------- --------------------
                                               United                  United                United
                                               States        Congo     States      Congo     States    Congo
                                               -------       -----     ------      -----     ------    -----
<S>                                            <C>        <C>         <C>        <C>          <C>        <C>
Oil and gas sales .........................    $ 2,080    $     --    $ 1,107         --      1,410      --
Lease operating expense and severance taxes        630          --        469         --        883      --
Depreciation, depletion, amortization and
provision for impairment ..................        367       2,550        609         --      1,386      --
Exploration costs .........................        164       2,702         --         --         --      --
                                               -------    --------    -------     ------    -------    ----
Income (Loss) before tax provision ........        919      (5,252)        29         --       (859)     --
Provision for income taxes ................       (348)      1,838        (221)       --        (38)     --
                                               -------    --------    -------     ------    -------    ----
Results of operations .....................    $   571     $(3,414)   $  (192)        --    $  (897)     --
                                               =======    ========    =======     ======    =======    ====
</TABLE>


                                      F-20
<PAGE>

Oil and Gas Reserves

     Oil and gas proved reserves can not be measured exactly. The engineers
interpreting the available data, as well as price and other economic factor base
reserve estimates on many factors related to reservoir performance, which
require evaluation. The reliability of these estimates at any point in time
depends on both the quality and quantity of the technical and economic data, the
production performance of the reservoirs as well as extensive engineering
judgment. Consequently, reserve estimates are subject to revision, as additional
data become available during the producing life of a reservoir. When a
commercial reservoir is discovered, proven reserves are initially determined
based on limited data from the first well or wells. Subsequent data may better
define the extent of the reservoir and additional production performance, well
tests and engineering studies will likely improve the reliability of the reserve
estimate. The evolution of technology may also result in the application of
improved recovery techniques such as supplemental or enhanced recovery projects,
or both, which have the potential to increase reserves beyond those envisioned
during the early years of a reservoir's producing life.

The following table represents the Company's net interest in estimated
quantities of proved developed and undeveloped reserves of crude oil, condense,
natural gas liquids and natural gas and changes in such quantities at December
31, 2000,1999 and 1998, and for the years then ended. Net proved reserves are
the estimated quantities of crude oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are proved reserve volumes that can be
expected to be recovered through existing wells with existing equipment and
operating methods. Proved undeveloped reserves are proved reserve volumes that
are expected to be recovered from new wells on undrilled acreage or from
existing wells where a significant expenditure is required for recompletion. All
of the Company's proved reserves are in the United States. The Company's oil and
gas reserves are priced at $25.82 per barrel and $9.51 per Mcf, respectively, at
December 31, 2000. Gas prices have declined significantly subsequent to December
31, 2000 and, therefore, it is not likely the Company will ultimately realize
the value of the reserves as determined at December 31, 2000.


                                                       Oil BBls      Gas Mcf
                                                    -----------    ----------

    December 31, 1997                                   115,396     4,788,548
    Revisions of previous estimates                      67,584       945,551
    Acquisition of minerals in place                         --        56,961
    Sales of minerals in place                               --      (984,600)
    Production                                         (31,000)      (523,000)
                                                    -----------    ----------

    December 31, 1998                                   151,980     4,283,460
    Revisions of previous estimates                      57,843       245,207
    Acquisition of minerals in place                         --            --
    Sales of minerals in place                           (4,200)     (195,500)
    Production                                          (23,200)     (409,668)
                                                    -----------    ----------

    December 31, 1999                                   182,423     3,923,499


                                      F-21
<PAGE>

    Revisions of previous estimates                      21,098       831,779
    Acquisition of minerals in place                         --            --
    Sales of minerals in place                               --            --
    Net discoveries and extensions                        1,102     1,234,713
    Production                                          (22,587)     (430,625)
                                                    -----------    ----------
    December 31, 2000                                   182,036     5,559,366
                                                    ===========    ==========

             The Company's proved developed reserves are as follows:

                                     Oil BBls           Gas Mcf
                                     --------           -------

    December 31, 2000                 181,333         4,609,431
    December 31, 1999                 182,423         3,040,710
    December 31, 1998                 151,435         3,384,986

Standardized Measure of Discounted Future Net Cash Flow

The standardized measure of discounted future net cash flows relating to the
Company's proved oil and gas reserves is calculated and presented in accordance
with Statement of Financial Accounting Standards No. 69. Accordingly, future
cash inflows were determined by applying year-end oil and gas prices to the
Company's estimated share of the future production from proved oil and gas
reserves. Future production and development costs were computed by applying
year-end costs to future years. Applying year-end statutory tax rates to the
estimated net future cash flows derived future income taxes. A prescribed 10%
discount factor was applied to the future net cash flows.

In the Company's opinion, this standardized measure is not a representative
measure of fair market value. The standardized measure is intended only to
assist financial statement users in making comparisons among companies.

<TABLE>
<CAPTION>
                                              2000             1999             1998
                                              ----             ----             ----

<S>                                      <C>             <C>             <C>
Future cash inflows ..................   $ 55,556,404    $ 15,512,720    $  8,247,017
Future development costs .............       (426,525)       (286,187)       (289,517)
Future production costs ..............    (11,207,839)     (4,931,404)     (3,081,781)
                                         ------------    ------------    ------------
Future net cash flows ................     43,922,040      10,295,129       4,875,719
Future income tax expenses ...........    (14,492,448)             --              --
Annual 10% discount rate .............    (14,554,720)     (5,012,695)     (2,125,207)
                                         ------------    ------------    ------------

Standardized measure discounted future
net cash flows .......................   $ 14,874,872    $  5,282,434    $  2,750,512
                                         ============    ============    ============
</TABLE>

Changes in Standardized Measure of Discounted Future Net Cash Flows

The principal sources of change in the standardized measure of discounted future
net cash flows for the years ended December 31, 2000, 1999 and 1998 were as
follows:


                                      F-22
<PAGE>

<TABLE>
<CAPTION>
                                                           2000           1999             1998
                                                      ------------    ------------    ------------

<S>                                                   <C>             <C>             <C>
Beginning of the year .............................   $  5,282,434    $  2,750,512    $  5,336,990
Sales and transfers of oil and gas produced, net of
   production costs ...............................     (1,423,372)       (637,849)       (527,500)
Sales of reserves in place ........................             --         (81,100)     (1,609,800)
Net changes in prices and production costs ........     10,541,051       2,258,520      (1,510,631)
Net changes in income taxes .......................     (7,325,052)             --              --
Changes in estimated future development costs,
   net of current development costs ...............       (197,414)             --              --
Acquisition of minerals in place ..................             --              --          67,500
Revision of previous estimates ....................      3,239,923         717,351         459,953
Changes in production rate and other ..............      4,229,059              --              --
Accretion of discount .............................        528,243         275,000         534,000
                                                      ------------    ------------    ------------
End of year .......................................   $ 14,874,872    $  5,282,434    $  2,750,512
                                                      ============    ============    ============
</TABLE>

Selected Quarterly Financial Data (amounts in thousands, except per share data)
(Unaudited):

<TABLE>
<CAPTION>
                                                                 Quarter Ended
                                            ------------------------------------------------------------
                                             March 31,  June 30,  September 30,   December 31,
                                               2000(2)    2000        2000            2000(1)   Total
                                               ----       ----        ----            ----      -----
<S>                                           <C>        <C>         <C>           <C>          <C>
Total Revenues                                $  4,804   $   1,973   $ 1,611       $    948     $9,336
Income before taxes and minority interest     $  4,049   $     586   $   846       $ (5,562)    $  (81)
Net Income                                    $  1,749   $     247   $   371       $ (2,065)    $  302
Earnings(loss) per Common Share-Basic         $   0.66   $    0.09   $  0.14       $  (0.78)    $ 0.11
Earnings(loss) per Common Share-Diluted       $   0.66   $    0.09   $  0.14       $  (0.78)    $ 0.11
<CAPTION>
                                                                 Quarter Ended
                                              ----------------------------------------------------------
                                               March 31,  June 30,  September 30,  December 31,
                                                 1999       1999        1999          1999        Total
                                                 -----      ----        ----          ----        -----
<S>                                           <C>        <C>         <C>            <C>          <C>
Total Revenues                                $   988    $   941     $ 1,344        $ 2,864      $ 6,137
Income before taxes and minority interest     $   349    $   301     $   520        $ 1,896      $ 3,066
Net Income                                    $   304    $   251     $   390        $ 1,900      $ 2,845
Earnings(loss) per Common Share-Basic         $  0.12    $  0.10     $  0.15        $  0.71      $  1.08
Earnings(loss) per Common Share-Diluted       $  0.12    $  0.10     $  0.15        $  0.71      $  1.08
</TABLE>

(1)   Includes impairment and dry hole costs of $4,852.
(2)   Includes gain on the BG transaction of $3,626.



                                      F-23