<PAGE>
                    SECURITIES AND EXCHANGE COMMISSION

                          WASHINGTON, D.C. 20549

===========================================================================

                                 FORM 10-Q

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934


             For the Quarter Ended          Commission File Number
                 JUNE 30, 1998                      0-23431


                        MILLER EXPLORATION COMPANY
          (Exact Name of Registrant as Specified in Its Charter)

                   DELAWARE                        38-3379776
        (State or Other Jurisdiction of         (I.R.S. Employer
        Incorporation or Organization)        Identification No.)

            3104 LOGAN VALLEY ROAD
            TRAVERSE CITY, MICHIGAN                49685-0348
   (Address of Principal Executive Offices)        (Zip Code)

    Registrant's Telephone Number, Including Area Code:  (616) 941-0004

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                      Yes __X__              No _____

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
                                                OUTSTANDING AT
                   CLASS                        AUGUST 14, 1998
                   -----                        ---------------
<S>     <C>                                  <C>
         Common stock, $.01 par value         12,492,597 shares
</TABLE>

==========================================================================
<PAGE>
                        MILLER EXPLORATION COMPANY

                             TABLE OF CONTENTS

                                                                   PAGE NO.
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements . . . . . . . . . . . . . . . . . . . . . .3

          Consolidated Statements of Operations--
          Three Months and Six Months Ended June 30,
          1998 and 1997  . . . . . . . . . . . . . . . . . . . . . . . . .3

          Consolidated Balance Sheets--
          June 30, 1998 and December 31, 1997. . . . . . . . . . . . . . .4

          Consolidated Statement of Equity--
          Six Months Ended June 30, 1998 . . . . . . . . . . . . . . . . .5

          Consolidated Statements of Cash Flows--
          Six Months Ended June 30, 1998 and 1997. . . . . . . . . . . . .6

          Notes to Consolidated Financial Statements . . . . . . . . . . .7

          Pro Forma Statements of Operations--
          Three Months and Six Months Ended June 30, 1998 and 1997 . . . 13

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations. . . . . . . . . . . . . . . . . . . 14


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 19

Item 5.   Other Information. . . . . . . . . . . . . . . . . . . . . . . 19

Item 6.   Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 19











                                      -2-
<PAGE>
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                        MILLER EXPLORATION COMPANY

                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                                (Unaudited)
<CAPTION>
                                                        FOR THE THREE MONTHS     FOR THE SIX MONTHS
                                                           ENDED JUNE 30,          ENDED JUNE 30,
                                                         ------------------     -------------------
                                                          1998        1997        1998        1997
                                                         ------      ------     -------      ------
                                                                    (NOTE 1)                (NOTE 1)
<S>                                                     <C>         <C>        <C>          <C>
REVENUES:
    Natural gas . . . . . . . . . . . . . . . . . .      $4,895      $1,173     $ 8,484      $2,995
    Crude oil and condensate. . . . . . . . . . . .         626         236       1,079         519
    Other operating revenues. . . . . . . . . . . .         206         129         400         332
                                                         ------      ------     -------      ------
        Total operating revenues. . . . . . . . . .       5,727       1,538       9,963       3,846
                                                         ------      ------     -------      ------

OPERATING EXPENSES:
    Lease operating expenses and production taxes .         760         276       1,407         626
    Depreciation, depletion and amortization. . . .       3,117         631       5,618       1,301
    General and administrative. . . . . . . . . . .         784         516       1,833         901
                                                         ------      ------     -------      ------
        Total operating expenses. . . . . . . . . .       4,661       1,423       8,858       2,828
                                                         ------      ------     -------      ------

OPERATING INCOME. . . . . . . . . . . . . . . . . .       1,066         115       1,105       1,018
                                                         ------      ------     -------      ------

INTEREST EXPENSE. . . . . . . . . . . . . . . . . .        (326)       (208)       (562)       (390)
                                                         ------      ------     -------      ------

INCOME (LOSS) BEFORE INCOME TAXES . . . . . . . . .         740         (93)        543         628
                                                         ------      ------     -------      ------

INCOME TAX PROVISION (Note 2) . . . . . . . . . . .         139                   5,522
                                                         ------                 -------

NET INCOME (LOSS) . . . . . . . . . . . . . . . . .      $  601      $  (93)    $(4,979)     $  628
                                                         ======      ======     =======      ======

                                      -3-
<PAGE>
EARNINGS (LOSS) PER SHARE (Note 4). . . . . . . . .
    Basic . . . . . . . . . . . . . . . . . . . . .      $  .05                 $ (0.51)
                                                         ======                 =======
    Diluted . . . . . . . . . . . . . . . . . . . .      $  .05                 $ (0.51)
                                                         ======                 =======
</TABLE>

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








































                                      -4-
<PAGE>
<TABLE>
                        MILLER EXPLORATION COMPANY

                        CONSOLIDATED BALANCE SHEETS
                   (In thousands, except share amounts)
<CAPTION>
                                                                     AS OF JUNE 30,    AS OF DECEMBER 31,
                                                                          1998                1997
                                                                     --------------    ------------------
                                                                       (UNAUDITED)          (NOTE 1)
                                   ASSETS
<S>                                                                    <C>                 <C>
CURRENT ASSETS:
     Cash and cash equivalents . . . . . . . . . . . . . . . .          $     87            $    146
     Accounts receivable . . . . . . . . . . . . . . . . . . .             4,058               2,109
     Inventories, prepaids and advances to operators . . . . .               716                 994
     Other current assets. . . . . . . . . . . . . . . . . . .                --               2,936
                                                                        --------            --------
         Total current assets. . . . . . . . . . . . . . . . .             4,861               6,185
                                                                        --------            --------

OIL AND GAS PROPERTIES at cost (full cost method):
     Proved oil and gas properties . . . . . . . . . . . . . .            81,769              29,324
     Unproved oil and gas properties . . . . . . . . . . . . .            36,343               7,069
     Less-Accumulated depreciation, depletion and amortization           (17,969)            (12,425)
                                                                        --------            --------
         Net oil and gas properties. . . . . . . . . . . . . .           100,143              23,968
                                                                        --------            --------

OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . .               735                 275
                                                                        --------            --------
         Total assets. . . . . . . . . . . . . . . . . . . . .          $105,739            $ 30,428
                                                                        ========            ========

                      LIABILITIES AND EQUITY

CURRENT LIABILITIES:
     Current portion of notes payable . . . . . . . . . . . .           $    500            $  7,697
     Accounts payable . . . . . . . . . . . . . . . . . . . .              9,841               3,870
     Other accrued expenses . . . . . . . . . . . . . . . . .              1,011                 603
                                                                        --------            --------
         Total current liabilities. . . . . . . . . . . . . .             11,352              12,170
                                                                        --------            --------

NOTES PAYABLE . . . . . . . . . . . . . . . . . . . . . . . .              2,500                 481

LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . .             20,500                  --

DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . .              8,179                  --
                                      -5-
<PAGE>
DEFERRED REVENUE. . . . . . . . . . . . . . . . . . . . . . .              1,637               1,664

COMMITMENTS AND CONTINGENCIES (NOTE 6). . . . . . . . . . . .             44,173

EQUITY:
     Preferred stock, $0.01 par value; 2,000,000 shares authorized;
         none outstanding . . . . . . . . . . . . . . . . . .                 --                  --
     Common stock, $0.01 par value; 20,000,000 shares
         authorized; 12,492,597 shares outstanding. . . . . .                126                  --
     Additional paid in capital . . . . . . . . . . . . . . .             67,136                  --
     Deferred compensation. . . . . . . . . . . . . . . . . .               (876)                 --
     Combined equity. . . . . . . . . . . . . . . . . . . . .                 --               8,588
     Retained earnings (deficit). . . . . . . . . . . . . . .             (4,815)              7,525
                                                                        --------            --------
         Total equity . . . . . . . . . . . . . . . . . . . .             61,571              16,113
                                                                        --------            --------
         Total liabilities and equity . . . . . . . . . . . .           $105,739            $ 30,428
                                                                        ========            ========
</TABLE>

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



























                                      -6-
<PAGE>
<TABLE>
                        MILLER EXPLORATION COMPANY

                     CONSOLIDATED STATEMENT OF EQUITY
                              (In thousands)
                                (Unaudited)
<CAPTION>
                                                              ADDITIONAL
                                    PREFERRED      COMMON      PAID IN      DEFERRED      COMBINED      RETAINED
                                      STOCK        STOCK       CAPITAL    COMPENSATION     EQUITY       EARNINGS
                                    ---------      ------     ----------  ------------    --------      --------
<S>                                 <C>           <C>         <C>           <C>           <C>          <C>
BALANCE--December 31, 1997             --            --             --          --         $ 8,588      $ 7,525
    Net loss and capital prior to
      S Corporation termination        --            --             --          --             173         (164)
    S Corporation termination          --            --        $16,122          --          (8,761)      (7,361)
    Common stock issuance              --          $ 56         39,983          --              --           --
    Combination transaction            --            69         10,156          --              --           --
    Restricted stock issuance          --             1            875       $(876)             --           --
    Net loss after S Corporation
      termination                      --            --             --          --              --       (4,815)
                                     ----          ----        -------       -----         -------      -------
BALANCE--June 30, 1998                 --          $126        $67,136       $(876)        $    --      $(4,815)
                                     ====          ====        =======       =====         =======      =======
</TABLE>

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





















                                      -7-
<PAGE>
<TABLE>
                        MILLER EXPLORATION COMPANY

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (Unaudited)
<CAPTION>
                                                                               FOR THE SIX MONTHS ENDED
                                                                                       JUNE 30,
                                                                               ------------------------
                                                                                 1998            1997
                                                                               --------         -------
                                                                                               (NOTE 1)
<S>                                                                           <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .        $ (4,979)        $   628
    Adjustments to reconcile net income (loss) to net cash from
       operating activities--
          Depreciation, depletion and amortization. . . . . . . . . . .           5,618           1,301
          Deferred revenue. . . . . . . . . . . . . . . . . . . . . . .             (27)            (27)
          Deferred income taxes . . . . . . . . . . . . . . . . . . . .             244              --
          Changes in assets and liabilities--
             Accounts receivable. . . . . . . . . . . . . . . . . . . .          (1,949)            (33)
             Other assets . . . . . . . . . . . . . . . . . . . . . . .           3,088             250
             Accounts payable . . . . . . . . . . . . . . . . . . . . .           5,971            (355)
             Other accrued expenses . . . . . . . . . . . . . . . . . .             408            (330)
                                                                               --------         -------
                Net cash flows provided by operating activities . . . .           8,374           1,434
                                                                               --------         -------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Exploration and development expenditures. . . . . . . . . . . . . .         (18,861)         (4,638)
    Acquisition of properties . . . . . . . . . . . . . . . . . . . . .         (51,011)             --
    Proceeds from sale of oil and gas properties and purchases of
       equipment, net . . . . . . . . . . . . . . . . . . . . . . . . .             515           2,971
                                                                               --------         -------
             Net cash flows used in investing activities. . . . . . . .         (69,357)         (1,667)
                                                                               --------         -------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments of principal . . . . . . . . . . . . . . . . . . . . . . .          (8,178)           (459)
    Net borrowing on notes payable. . . . . . . . . . . . . . . . . . .          23,500             282
    Contributions, return of capital and stock proceeds, net. . . . . .          45,602             249
    Payments of dividends . . . . . . . . . . . . . . . . . . . . . . .              --            (200)
                                                                               --------         -------
             Net cash flows provided by (used in) financing activities.          60,924            (128)
                                                                               --------         -------




                                      -8-
<PAGE>
NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (59)           (361)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
    PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             146             410
                                                                               --------         -------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD. . . . . . . . . . . . .        $     87         $    49
                                                                               ========         =======
SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid during the period for--
       Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $    612         $   613
                                                                               ========         =======
</TABLE>

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


































                                      -9-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


(1) ORGANIZATION AND NATURE OF OPERATIONS

     The consolidated financial statements of Miller Exploration Company
("Miller" or the "Company") and subsidiaries included herein have been
prepared by management without audit pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC").  Accordingly, they
reflect all adjustments which are, in the opinion of management, necessary
for a fair presentation of the financial results for the interim periods.
Certain information and notes normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.  However,
management believes that the disclosures are adequate to make the
information presented not misleading.  These consolidated financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.

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

     Certain reclassifications have been made to prior period financial
statements to conform with the current presentation.

  INITIAL PUBLIC OFFERING

     On February 9, 1998, the Company completed the initial public offering
(the "Offering") of its Common Stock and concurrently completed the
Combination Transaction (as defined below).  On that date, the Company sold
5,500,000 shares of its Common Stock for an aggregate purchase price of
$44.0 million.  On March 9, 1998, the Company sold an additional 62,500
shares of its Common Stock for an aggregate purchase price of $0.5 million,
pursuant to the exercise of the underwriters' over-allotment option.

     The consolidated financial statements as of and for the periods ended
March 31, 1998 include the accounts of the Company and its subsidiaries
after taking into effect the Offering and the Combination Transaction.  The
financial statements as of or for the periods ending in 1997 include the

                                      -10-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


accounts of the Company and its affiliated entities (as defined below)
before the Offering and the Combination Transaction as previously included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997.

  PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements of the Company include the
accounts of the Company and its subsidiaries after elimination of all
intercompany accounts and transactions.

  THE COMBINATION TRANSACTION

     The Company was formed as a Delaware corporation in November 1997 to
serve as the surviving company upon the completion of a series of
combination transactions (the "Combination Transaction").  The first part
of the Combination Transaction included the following activities:  Miller
acquired all of the outstanding capital stock of Miller Oil Corporation
("MOC"), the Company's predecessor, and certain oil and gas interests
(collectively, the "Combined Assets") owned by Miller & Miller, Inc.,
Double Diamond Enterprises, Inc., Frontier Investments, Inc., Oak Shores
Investments, Inc., Eagle Investments, Inc. (d/b/a Victory, Inc.) and Eagle
International, Inc. (the "affiliated entities," all Michigan corporations
owned by the Miller family members who are beneficial owners of MOC) in
exchange for an aggregate consideration of approximately 5.3 million shares
of Common Stock of Miller.  The operations of all of these entities had
been managed through the same management team, and had been owned by the
same members of the Miller family. Miller completed the Combination
Transaction concurrently with consummation of the Offering.

  PRINCIPLES OF COMBINATION

     The accompanying financial statements as of and for the periods ending
in 1997 include the accounts of Miller, MOC and the other affiliated
entities described above, all of which share common ownership and
management.  The Combination Transaction was accounted for as a
reorganization of entities under common control in a manner similar to a
pooling-of-interests, as prescribed by SEC Staff Accounting Bulletin No. 47
because of the high degree of common ownership among, and the common
control of, the combined entities. Accordingly, the accompanying accounts
as of and for the periods ending in 1997 have been prepared using the


                                      -11-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


historical costs and results of operations of the affiliated entities.
There were no differences in accounting methods or their application among
the combining entities. All intercompany balances have been eliminated.

  OTHER TRANSACTIONS COMPLETED CONCURRENTLY WITH THE OFFERING

     In addition to the above combined activities of the Company, the
second part of the Combination Transaction that was consummated
concurrently with the Offering was the exchange by the Company of an
aggregate of approximately 1.6 million shares of Common Stock for interests
in certain other oil and gas properties that were owned by non-affiliated
parties. Because these interests were acquired from individuals who were
not under the common ownership and management of the Company, these
exchanges were accounted for under the purchase method of accounting. Under
that method, the properties were recorded at their estimated fair value at
the date on which the exchange was consummated (February 9, 1998).  The
financial statements as of and for the periods ending in 1997 do not
include the activities of these non-affiliated interests.

     In November 1997, the Company entered into a Purchase and Sale
Agreement (the "Agreement"), whereby the Company acquired interests in
certain crude oil and natural gas producing properties and undeveloped
properties from Amerada Hess Corporation ("AHC") for approximately $50.5
million, subject to adjustment.  This purchase was consummated concurrently
with the Offering. This acquisition was accounted for under the purchase
method of accounting and was financed with the use of proceeds from the
Offering and with new bank borrowings.  The financial statements as of and
for the periods ending in 1997 do not include the activities of these AHC
interests.

     In February 1998, MOC terminated its S corporation status which
required the Company to reclassify combined equity and retained earnings as
additional paid-in capital.

  NATURE OF OPERATIONS

     The Company is a domestic, independent energy company engaged in the
exploration, development and production of crude oil and natural gas. The
Company has established exploration efforts concentrated primarily in three
provinces: the Mississippi Salt Basin of central Mississippi; the onshore
Gulf Coast region of Texas and Louisiana; and the Michigan Basin.


                                      -12-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


(2)  INCOME TAXES

     Before consummation of the Offering, the Company and the combined
entities either elected to be treated as S corporations under the Internal
Revenue Code or were otherwise not taxed as entities for federal income tax
purposes. The taxable income or loss has therefore been allocated to the
equity owners of the Company and the affiliated entities. Accordingly, no
provision was made for income taxes in the accompanying financial
statements as of and for the periods ending in 1997.

     Due to the use of different methods for tax and financial reporting
purposes in accounting for various transactions, the Company has temporary
differences between its tax basis and financial reporting basis. Had the
Company been a taxpaying entity before consummation of the Offering, a
deferred tax liability of approximately $5.4 million at December 31, 1997,
would have been recorded for this difference, with a corresponding
reduction in retained earnings.

     Included in the deferred income tax provision for the six months ended
June 30, 1998, is a one-time non-cash accounting charge of $5.4 million to
record net deferred tax liabilities, for the differences between tax basis
and financial reporting basis, upon consummation of the Offering and the
termination of MOC's S corporation status.  The effective income tax rate
for the Company for the six months ended June 30, 1998, was different than
the statutory federal income tax rate for the following reasons (in
thousands):

<TABLE>
<CAPTION>
<S> <C>                                                                        <C>
     Income tax provision (benefit) at the federal statutory rate. . . . .      $  251
     Deferred tax liabilities recorded upon the Offering . . . . . . . . .       5,384
     All other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .        (113)
                                                                                ------
     Income tax provision. . . . . . . . . . . . . . . . . . . . . . . . .      $5,522
                                                                                ======
</TABLE>

     The principal components of the Company's net deferred tax liabilities
at June 30, 1998, are (in thousands):



                                      -13-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


<TABLE>
<CAPTION>
<S> <C>                                                                       <C>
     Net deferred tax liabilities:
        Intangible drilling costs. . . . . . . . . . . . . . . . . . . . .     $3,075
        Tax depletion and depreciation in excess of financial statement
           amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,185
        Financial statement carrying value in excess of tax basis of 
           purchased assets. . . . . . . . . . . . . . . . . . . . . . . .      2,543
        Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .        376
                                                                               ------
     Total net deferred tax liabilities. . . . . . . . . . . . . . . . . .     $8,179
                                                                               ======
</TABLE>

(3)  HEDGING ACTIVITIES

     In 1997, the Company began to periodically enter into hedging
arrangements to manage price risks related to crude oil and natural gas
sales and not for speculative purposes. The Company's hedging arrangements
apply only to a portion of its production, provide only partial price
protection against declines in natural gas prices and limit potential
gains from future increases in prices. For financial reporting purposes,
gains and losses related to hedging are recognized as income when the
hedged transaction occurs. Historically, gains and losses from hedging
activities have not been material.  For the six months ended June 30, 1998,
the Company had hedged 31% of its natural gas production.  As of June 30,
1998, the Company had 1.7 Bcf of open natural gas contracts at prices
ranging from $2.29 to $2.37 per Mcf.

     In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities."  SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value.  SFAS No. 133 requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met.  Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a
company must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
                                      -14-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


     SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 and cannot be applied retroactively.  SFAS No. 133 must be applied to
(i) derivative instruments and (ii) certain derivative instruments embedded
in hybrid contracts that were issued, acquired or substantively modified
after December 31, 1997 (and, at the company's election, before January 1,
1998).

     The Company has not yet quantified the impacts of adopting SFAS No.
133 on its financial statements and has not determined the timing of or
method of adoption of SFAS No. 133.  However, SFAS No. 133 could increase
volatility in earnings and other comprehensive income.

(4)  EARNINGS PER SHARE

     Earnings per share has been omitted from the statement of operations
for the three-month and six-month periods ended June 30, 1997, since such
information is not meaningful and the historically combined Company was not
a separate legal entity with a singular capital structure. The computation
of earnings per share for the three-month and six-month periods ended
June 30, 1998 is as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                     THREE MONTHS       SIX MONTHS
                                                                        ENDED             ENDED
                                                                     ------------       ----------
<S> <C>                                                               <C>               <C>
     Net income (loss)  attributable to
         basic and diluted EPS. . . . . . . . . . . . . . . . .        $   601           $(4,979)

     Average common shares outstanding
         applicable to basic EPS . . . . . . . . . . . . . . . .        12,493             9,791
     Add:  options treasury shares and restricted stock. . . . .           183                --
                                                                       -------           -------
     Average common shares outstanding
         applicable to diluted EPS . . . . . . . . . . . . . . .        12,676             9,791

     Earnings (loss) per share:
         Basic . . . . . . . . . . . . . . . . . . . . . . . . .       $   .05           $  (.51)
         Diluted . . . . . . . . . . . . . . . . . . . . . . . .       $   .05           $  (.51)
</TABLE>


                                      -15-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


Options and restricted stock were not included in the computation of
diluted earnings per share for the six months ended June 30, 1998 because
their effect was antidilutive.

(5)  NOTES PAYABLE AND LONG-TERM DEBT

     At December 31, 1997, the Company had a notes payable balance of
approximately $4.9 million which represented a borrowing against a $5.0
million bank line-of-credit and another $1.0 million line-of-credit.  These
notes were paid in full during February 1998 from the proceeds of the
Offering.

     In November 1997, the Chairman of the Company loaned to MOC $2.5
million, pursuant to a promissory note, for the purpose of making a down
payment in connection with the AHC acquisition.  This note was paid in full
during February 1998 from the proceeds of the Offering.

     During 1996, the Company also entered into a $1.0 million term loan
payable to a bank.  At December 31, 1997 the balance of the term-loan was
approximately $0.7 million.  The term loan was paid in full during February
1998 from the proceeds of the Offering.

     In connection with the Offering, in February 1998, the Company entered
into a credit facility (the "Credit Facility") with Bank of Montreal,
Houston Agency ("BMO").  The Credit Facility consists of a three-year
revolving line of credit converting to a three-year term loan. The amount
of credit available during the revolving period and the debt allowed during
the term period may not exceed the Company's "borrowing base," or the
amount of debt that BMO and the other lenders under the Credit Facility
agree can be supported by the cash flow generated by the Company's
producing and non-producing proved oil and gas reserves. The borrowing base
is $34 million and may not exceed $75.0 million. Amounts advanced under
the Credit Facility bear interest, payable quarterly, at either (i) BMO's
announced prime rate or (ii) the London Inter-Bank Offered Rate plus a
margin rate ranging from 0.75% to 1.625%, as selected by the Company. In
addition, the Company is assessed a commitment fee equal to 0.375% of the
unused portion of the borrowing base, payable quarterly in arrears, until
the termination of the revolving period. At the termination of the
revolving period, the revolving line of credit will convert to a three-year
term loan with principal payable in 12 equal quarterly installments. The
Credit Facility includes certain negative covenants that impose limitations
on the Company and its subsidiaries with respect to, among other things,

                                      -16-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


distributions with respect to its capital stock, the creation or incurrence
of liens, the incurrence of additional indebtedness, making loans and
investments, and mergers and consolidations. The obligations of the Company
under the Credit Facility are secured by a lien on all real and personal
property of the Company, including its oil and gas properties.  At June 30,
1998, $20.5 million was outstanding under the Credit Facility and is
classified as long-term debt on the balance sheet.

     In connection with the closing of the AHC acquisition, the Company has
a note payable to AHC of $3.0 million (at June 30, 1998) which is payable
as follows:  $0.5 million in 1999, $1.0 million in 2000 and $1.5 million in
2001.

(6)  COMMITMENTS AND CONTINGENCIES

  STOCK OPTIONS AND RESTRICTED STOCK

     During 1997, the Company adopted the Stock Option and Restricted Stock
Plan of 1997 (the "1997 Stock Option Plan"). The Board of Directors
contemplates that the 1997 Stock Option Plan primarily will be used to
grant stock options. However, the 1997 Stock Option Plan permits grants of
restricted stock and tax benefit rights if determined to be desirable to
advance the purposes of the 1997 Stock Option Plan. These stock options,
restricted stock and tax benefit rights are collectively referred to as
"Incentive Awards." Persons eligible to receive Incentive Awards under the
1997 Stock Option Plan are directors, corporate officers and other full-
time employees of the Company and its subsidiaries. A maximum of 1,200,000
shares of Common Stock (subject to certain antidilution adjustments) are
available for Incentive Awards under the 1997 Stock Option Plan.  Upon
consummation of the Offering in February 1998, a total of 577,850 stock
options were granted by the Company to directors, corporate officers and
other full-time employees of the Company.  Additionally, upon consummation
of the Offering, 109,500 shares of restricted stock were transferred to
certain employees.  At the time of the issuance of the restricted stock,
compensation expense of approximately $0.9 million was deferred.  The
restricted stock will begin to vest at cumulative increments of one-half of
the total number of restricted stock of Common Stock subject thereto,
beginning on the first anniversary of the date of grant. Because the shares
of restricted stock are subject to the risk of forfeiture during the
vesting period, compensation expense (equivalent to the Offering price per
share of $8.00) will be recognized ratably over the two-year vesting period
as the risk of forfeiture passes.

                                      -17-
<PAGE>
                        MILLER EXPLORATION COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)


     Also in February 1998, the Company made a one-time grant of an
aggregate of 272,500 stock options to certain officers pursuant to the
terms of stock option agreements entered into between the Company and the
officers.

  OTHER

     In the normal course of business, the Company may be a party to
certain lawsuits and administrative proceedings. Management cannot predict
the ultimate outcome of any pending or threatened litigation or of actual
or possible claims; however, management believes resulting liabilities, if
any, will not have a material adverse impact upon the Company's financial
position or results of operations.

(7)  NON-CASH INVESTING ACTIVITIES

     During 1998, the Company recorded a one-time non-cash charge of
approximately $5.4 million for the termination of MOC's S corporation
status, as more fully discussed in Note 2, and acquired certain oil and gas
properties owned by non-affiliated parties for approximately $12.8 million
of its Common Stock, as more fully discussed in Note 1.  These non-cash
investing activities have been excluded from the combined statement of cash
flows.

                         PRO FORMA FINANCIAL DATA

     The pro forma financial data has been prepared to give effect to the
Combination Transaction and the Offering and the application of the
estimated net proceeds therefrom.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."  The
pro forma statements of operations for the three months and six months
ended June 30, 1998 and 1997 were prepared on the basis that the
Combination Transaction and the Offering occurred on January 1, 1997.  Pro
forma data gives effect to the revenues and direct operating expenses of
the properties acquired from the non-affiliated participants in the
Combination Transaction (the "Acquired Properties").  In addition, the pro
forma data are based on assumptions and include adjustments as explained in
the notes to the pro forma data and are not necessarily indicative of the
results of future operations of the Company.  The following financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
financial statements.

                                      -18-

<PAGE>
<TABLE>
                    PRO FORMA STATEMENTS OF OPERATIONS
                   (In thousands, except per share data)
                               (Unaudited)
<CAPTION>
                                                           FOR THE THREE MONTHS        FOR THE SIX MONTHS
                                                              ENDED JUNE 30,             ENDED JUNE 30,
                                                          ---------------------      ----------------------
                                                           1998          1997         1998           1997
                                                          -------       -------      -------        -------
<S>                                                      <C>           <C>          <C>            <C>
Revenues:
    Natural gas<Fa>. . . . . . . . . . . . . . . . . .    $ 4,895       $ 4,295      $ 9,958        $10,663
    Crude oil and condensate<Fa> . . . . . . . . . . .        626           986        1,266          2,224
    Other operating revenues . . . . . . . . . . . . .        206           129          400            332
                                                          -------       -------      -------        -------
      Total operating revenues . . . . . . . . . . . .      5,727         5,410       11,624         13,219
                                                          -------       -------      -------        -------
Operating Expenses:
    Lease operating expenses and production taxes<Fa>.        760           438        1,615          1,054
    Depreciation, depletion and amortization<Fb> . . .      3,077         2,201        6,469          5,022
    General and administrative<Fc> . . . . . . . . . .        784           621        1,533          1,111
                                                          -------       -------      -------        -------
      Total operating expenses . . . . . . . . . . . .      4,621         3,260        9,617          7,187
                                                          -------       -------      -------        -------

Operating Income . . . . . . . . . . . . . . . . . . .      1,106         2,150        2,007          6,032
                                                          -------       -------      -------        -------

Interest Expense<Fd> . . . . . . . . . . . . . . . . .       (326)         (244)        (562)          (525)
                                                          -------       -------      -------        -------

Income before income taxes . . . . . . . . . . . . . .        780         1,906        1,445          5,507
                                                          -------       -------      -------        -------

Provision for income taxes<Fe> . . . . . . . . . . . .        153           504          379          1,570
                                                          -------       -------      -------        -------

Net income . . . . . . . . . . . . . . . . . . . . . .    $   627       $ 1,402      $ 1,066        $ 3,937
                                                          =======       =======      =======        =======

Earnings per share<Ff>:
    Basic. . . . . . . . . . . . . . . . . . . . . . .    $  0.05       $  0.11      $  0.09        $  0.32
    Diluted. . . . . . . . . . . . . . . . . . . . . .       0.05          0.11         0.08           0.31

Average number of shares outstanding<Ff>:
    Basic. . . . . . . . . . . . . . . . . . . . . . .     12,493        12,493       12,493         12,493
    Diluted. . . . . . . . . . . . . . . . . . . . . .     12,676        12,676       12,678         12,678
<FN>
                                      -19-

<PAGE>
------------------------
Notes to pro forma financial data (unaudited):

<Fa> Includes results of operations from the Acquired Properties.
<Fb> Reflects the estimated additional depreciation, depletion and
     amortization expense resulting from the acquisition of the Acquired
     Properties using the unit-of-production method.
<Fc> Reflects estimated incremental general and administrative expenses
     expected to be incurred as a direct result of increased operations
     after the Combination Transaction.  Such expenses are primarily from
     increased salaries and additional new employees to perform
     administrative and operational activities ($0.5 million per year) and
     the elimination of the Royalty Participation Program ($0.1 million per
     year).  Excluded from this amount is $275,000 of non-recurring bonuses
     paid to certain employees of the Company in connection with
     consummation of the Offering.
<Fd> Reflects the reduction in interest expense attributable to MOC
     shareholder notes being contributed in connection with the Combination
     Transaction, resulting in the cancellation of the indebtedness, the
     cancellation of other indebtedness with the use of proceeds from the
     Offering and the increase in interest expense from the new borrowing
     under the Credit Facility.
<Fe> Gives pro forma effect to the application of federal and state income
     taxes to the Company as if it were a taxable corporation for the
     periods presented.  Upon consummation of the Combination Transaction,
     the Company was required to record a one-time non-cash charge to
     earnings of $5.4 million in connection with establishing a deferred
     tax liability on the balance sheet.  This non-recurring charge has
     been excluded from the statements.
<Ff> Reflects the issuance of Common Stock in exchange for certain of the
     Combined Assets in the Combination Transaction and the issuance of
     Common Stock in the Offering.
</FN>
</TABLE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

OVERVIEW

     Miller is an independent oil and gas company with its current
exploration efforts concentrated in the Mississippi Salt Basin, the onshore
Gulf Coast region of Texas and Louisiana and the Michigan Basin.  The
Company has an established production base in each area.

     In 1972, the Miller family began to acquire a substantial and
strategic leasehold position and apply emerging seismic technology to
discover oil and natural gas reserves in the Northern Michigan Niagaran

                                      -20-
<PAGE>
Reef Trend.  The Company also explored and had production in Texas,
Wyoming, North Dakota and Montana.  In 1988, the Miller family and their
affiliated companies sold their producing properties to Conoco, Inc.,
reserving the undeveloped acreage in the Michigan Basin.  After the Conoco,
Inc. sale, the Company shifted its focus to development of the Antrim Shale
formation in its Northern Michigan leases.  Since 1988, the Company has
participated in drilling over 600 commercially productive Antrim Shale
wells.  Since 1993, the Company has developed its base of properties and
inventory of prospects in Mississippi, Louisiana and Texas.

     The Company uses the full cost method of accounting for its oil and
natural gas properties.  Under this method, all acquisition, exploration
and development costs, including any general and administrative costs that
directly are attributable to the Company's acquisition, exploration and
development activities, are capitalized in a "full cost pool" as incurred.
The Company records depletion of its full cost pool using the unit-of-
production method.  To the extent that such capitalized costs in the full
cost pool (net of depreciation, depletion and amortization and related
deferred taxes) exceed the present value (using a 10% discount rate) of
estimated future net after-tax cash flows from proved oil and natural gas
reserves, such excess costs are charged to operations.  The Company has not
been required to make any such write-downs.  Once incurred, a write-down of
oil and natural gas properties is not reversible at a later date.

     The Company was organized as a Delaware corporation in November 1997
to serve as the surviving company in the Combination Transaction.  On
February 9, 1998, pursuant to the agreements among the Company and the
owners of the Combined Assets, the Company issued to those owners
approximately 6.9 million shares of Common Stock.  Additionally, the
Company acquired interests in certain properties from AHC for approximately
$50.5 million in cash.  The issuance of the shares and the cash payment
were completed on February 9, 1998, in connection with the Company's
initial public offering.

     For further discussion of the Offering and the Combination
Transaction, see Note 1 to the Consolidated Financial Statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997

     The following table summarizes production volumes, average sales
prices, operating revenues and average costs for the Company's oil and
natural gas operations for the periods presented (in thousands, except per
unit amounts):






                                      -21-

<PAGE>
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED JUNE 30,
                                                             1998        1997        1998        1997
                                                            ------      ------      ------      ------
                                                               (HISTORICAL)             (PRO FORMA)
                                                          (Dollars in thousands, except per unit amounts)
<S>                                                        <C>         <C>         <C>         <C>
Production volumes:
     Crude oil and condensate (Mbbls) . . . . . . . .           54          12          54          53
     Natural gas (Mmcf) . . . . . . . . . . . . . . .        2,258         558       2,258       2,150
     Natural gas equivalent (Mmcfe) . . . . . . . . .        2,582         630       2,582       2,468

Average sales prices:
     Crude oil and condensate ($ per Bbl) . . . . . .       $11.59      $19.69      $11.59      $18.60
     Natural gas ($ per Mcf). . . . . . . . . . . . .         2.17        2.10        2.17        2.00
     Natural gas equivalent ($ per Mcfe). . . . . . .         2.14        2.24        2.14        2.14

Operating revenues:
     Crude oil and condensate . . . . . . . . . . . .       $  626      $  236      $  626      $  986
     Natural gas. . . . . . . . . . . . . . . . . . .        4,895       1,173       4,895       4,295

Average Costs ($ per Mcfe):
     Lease operating expenses and production taxes .        $  .29      $  .44      $  .29      $  .18
     Depletion, depreciation and amortization . . . .         1.21        1.00        1.19         .89
     General and administrative . . . . . . . . . . .          .30         .82         .30         .25
</TABLE>

     Because of the significance of the Combination Transaction which
occurred on February 9, 1998, the results of operations have been presented
above on a pro forma and historical basis, and the results of operations
will be described below on a pro forma basis.  For additional information
regarding the Combination Transaction, see Note 1 to the Consolidated
Financial Statements and the Pro Forma Statements of Operations in this
filing.

  PRO FORMA THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO PRO FORMA THREE
  MONTHS ENDED JUNE 30, 1997

     Oil and natural gas revenues for the three months ended June 30, 1998
increased 5% to $5.5 million from $5.3 million for the same period in 1997.
Production volumes for natural gas during the three months ended June 30,
1998 increased 5% to 2,258 MMcf from 2,150 MMcf for the same period in
1997.  Average natural gas prices increased 8% to $2.17 per Mcf for the
three months ended June 30, 1998 from $2.00 per Mcf in the same period in
1997.  Production volumes for oil during the three months ended June 30,
1998 increased 2% to 54 MBbls from 53 MBbls for the same period in
1997.  Average oil prices decreased 38% to $11.59 per barrel during the

                                      -22-
<PAGE>
three months ended June 30, 1998 from $18.60 per barrel in the same period
in 1997.  The changes in commodity prices were experienced by the industry
as a whole during the first six months of 1998.

     Lease operating expenses and production taxes for the three months
ended June 30, 1998 increased 74% to $0.8 million from $0.4 million for the
same period in 1997.  Lease operating expenses and production taxes
increased primarily due to increased production as described above and an
increase in operating expenses per equivalent unit to $.29 per Mcfe for
the three months ended June 30, 1998 from $.18 per Mcfe in the same period
in 1997.

     Depreciation, depletion and amortization ("DD&A") expense for the
three months ended June 30, 1998 increased 40% to $3.1 million from $2.2
million for the same period in 1997.  This increase was due to a 34%
increase in the 1998 depletion rate to $1.19 per Mcfe from $.89 per Mcfe
for the three months ended June 30, 1997.  The higher depletion rate was
the combined result of increased production and an increase in costs
subject to DD&A.

     General and administrative expense for the three months ended June 30,
1998 increased 26% to $0.8 million from $0.6 million for the same period in
1997, as a result of increases in the number of employees and related
salaries and benefits.

     Interest expense for the three months ended June 30, 1998 increased
34% to $0.3 million from $0.2 million in the same period in 1997, as a
result of increased debt levels in 1998 for substantial exploration and
development activities in the Mississippi Salt Basin area.

     Net income for the three months ended June 30, 1998 decreased to $0.6
million from $1.4 million for the same period in 1997, as a result of the
factors described above.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997

     The following table summarizes production volumes, average sales
prices, operating revenues and average costs for the Company's oil and
natural gas operations for the periods presented (in thousands, except per
unit amounts):









                                      -23-
<PAGE>
<TABLE>
<CAPTION>
                                                                    SIX MONTHS ENDED JUNE 30,
                                                             1998        1997        1998        1997
                                                            ------      ------      ------      ------
                                                               (HISTORICAL)             (PRO FORMA)
                                                          (Dollars in thousands, except per unit amounts)
<S>                                                        <C>         <C>         <C>         <C>
Production volumes:
     Crude oil and condensate (Mbbls) . . . . . . . .           89          24         103          108
     Natural gas (Mmcf) . . . . . . . . . . . . . . .        4,093       1,160       4,786        4,490
     Natural gas equivalent (Mmcfe) . . . . . . . . .        4,627       1,304       5,404        5,138

Average sales prices:
     Crude oil and condensate ($ per Bbl) . . . . . .       $12.12      $21.62      $12.29      $ 20.59
     Natural gas ($ per Mcf). . . . . . . . . . . . .         2.07        2.58        2.08         2.37
     Natural gas equivalent ($ per Mcfe). . . . . . .         2.15        2.69        2.15         2.51

Operating revenues:
     Crude oil and condensate . . . . . . . . . . . .       $1,079      $  519      $1,266      $ 2,224
     Natural gas. . . . . . . . . . . . . . . . . . .        8,484       2,995       9,958       10,663

Average Costs ($ per Mcfe):
     Lease operating expenses and production taxes .        $  .30      $  .48      $  .30      $   .21
     Depletion, depreciation and amortization . . . .         1.21        1.00        1.20          .98
     General and administrative . . . . . . . . . . .          .40         .69         .28          .22
</TABLE>

     Because of the significance of the Combination Transaction which
occurred on February 9, 1998, the results of operations have been presented
above on a pro forma and historical basis, and the results of operations
will be described below on a pro forma basis.  For additional information
regarding the Combination Transaction, see Note 1 to the Consolidated
Financial Statements and the Pro Forma Statements of Operations in this
filing.

  PRO FORMA SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO PRO FORMA SIX
  MONTHS ENDED JUNE 30, 1997

     Oil and natural gas revenues for the six months ended June 30, 1998
decreased 13% to $11.2 million from $12.9 million for the same period in
1997.  Production volumes for natural gas during the six months ended
June 30, 1998 increased 7% to 4,786 MMcf from 4,490 MMcf for the same
period in 1997.  Average natural gas prices decreased 12% to $2.08 per
Mcf for the six months ended June 30, 1998 from $2.37 per Mcf in the same
period in 1997.  Production volumes for oil during the six months ended
June 30, 1998 decreased 5% to 103 MBbls from 108 MBbls for the same
period in 1997.  Average oil prices decreased 40% to $12.29 per barrel

                                      -24-
<PAGE>
during the six months ended June 30, 1998 from $20.59 per barrel in the
same period in 1997.  This decrease in commodity prices was experienced by
the industry as a whole during the first six months of 1998.

     Lease operating expenses and production taxes for the six months ended
June 30, 1998 increased 53% to $1.6 million from $1.1 million for the same
period in 1997.  Lease operating expenses and production taxes increased
primarily due to increased production as described above and an increase in
operating expenses per equivalent unit to $.30 per Mcfe for the six months
ended June 30, 1998 from $.21 per Mcfe in the same period in 1997.

     Depreciation, depletion and amortization ("DD&A") expense for the six
months ended June 30, 1998 increased 29% to $6.5 million from $5.0 million
for the same period in 1997.  This increase was due to a 22% increase in
the 1998 depletion rate to $1.20 per Mcfe from $.98 per Mcfe for the six
months ended June 30, 1997.  The higher depletion rate was the combined
result of increased production and an increase in costs subject to DD&A.

     General and administrative expense for the six months ended June 30,
1998 increased 38% to $1.5 million from $1.1 million for the same period in
1997, as a result of increases in the number of employees and related
salaries and benefits.

     Interest expense for the six months ended June 30, 1998 increased 7%
to $0.6 million from $0.5 million in the same period in 1997, as a result of
increased debt levels in 1998 for substantial exploration and development
activities in the Mississippi Salt Basin area.

     Net income for the six months ended June 30, 1998 decreased to $1.1
million from $3.9 million for the same period in 1997, as a result of the
factors described above.

LIQUIDITY AND CAPITAL RESOURCES

     Historically, the Company's primary sources of capital have been funds
generated by operations, capital contributions and borrowings, primarily
from MOC's shareholders and under bank credit facilities.  The Company had
working capital deficits of $6.0 million (excluding current maturities of
notes payable) at June 30, 1998 and $6.0 million at December 31, 1997.

     The Company has entered into the Credit Facility with BOM.  The Credit
Facility consists of a three-year revolving line of credit converting to a
three-year term loan.  The amount of credit available during the revolving
period and the debt allowed during the term period may not exceed the
Company's "borrowing base," or the amount of debt that BOM and the other
lenders under the Credit Facility agree can be supported by the cash flow
generated by the Company's producing and non-producing proved oil and
natural gas reserves.  Under the Credit Facility the borrowing base is

                                      -25-
<PAGE>
$34 million and may not exceed $75.0 million.  Amounts advanced under the
Credit Facility bear interest, payable quarterly, at either (i) BOM's
announced prime rate or (ii) the London Inter-Bank Offered Rate plus a
margin rate ranging from 0.75% to 1.625%, as selected by the Company.  In
addition, the Company is assessed a commitment fee equal to 0.375% of the
unused portion of the borrowing base, payable quarterly in arrears, until
the termination of the revolving period.  At the termination of the
revolving period, the revolving line of credit will convert to a three-year
term loan with principal payable in 12 equal quarterly installments.  The
Credit Facility includes certain negative covenants that impose limitations
on the Company and its subsidiaries with respect to, among other things,
distributions with respect to its capital stock, the creation or incurrence
of liens, the incurrence of additional indebtedness, making loans and
investments and mergers and consolidations.  The obligations of the Company
under the Credit Facility are secured by a lien on all real and personal
property of the Company, including its oil and natural gas properties.  At
June 30, 1998, $20.5 million was outstanding under the Credit Facility.

     In connection with the closing of the AHC acquisition, the Company has
a note payable to AHC of $3.0 million (at June 30, 1998) which is payable
during 1999-2001.

     Pursuant to a promissory note dated November 26, 1997, the C.E. Miller
Trust loaned on an unsecured basis $2.5 million to MOC, which MOC used to
fund a down payment made in connection with the Combination Transaction.
This note was paid in full during February 1998 from the proceeds of the
Offering.

     At December 31, 1997, the Company had an approximate notes payable
balance of $5.0 million which represented a borrowing against a $5.0
million bank line-of-credit and another $1.0 million line-of-credit. These
notes were paid in full during February 1998 from the proceeds of the
Offering.

     During 1996, the Company also entered into a $1.0 million term loan
payable to a bank.  At December 31, 1997, the balance of the term loan was
$0.7 million.  The term loan was paid in full during February 1998 from the
proceeds of the Offering.

     The Company has budgeted capital expenditures of approximately $44.3
million for 1998.  Substantially all of the capital expenditures will be
used to fund 3-D seismic surveys, drilling and development activities and
leasehold acquisitions in the Company's project areas.  The actual amounts
of capital expenditures and number of wells drilled may differ
significantly from such estimates.  Actual capital expenditures for the six
months ended June 30, 1998 were approximately $18.9 million.



                                      -26-
<PAGE>
     The Company intends to fund its budgeted capital expenditures through
the end of 1998 from cash flow from operations and borrowings under the
credit facility.

     The Company's revenues, profitability, future growth and ability to
borrow funds or obtain additional capital, and the carrying value of its
properties, substantially are dependent on prevailing prices of oil and
natural gas.  The Company cannot predict future oil and natural gas price
movements with certainty.  Declines in prices received for oil and natural
gas may have an adverse effect on the Company's financial condition,
liquidity, ability to finance capital expenditures and results of
operations.  Lower prices also may impact the amount of reserves that can
be produced economically by the Company.

     The Company has experienced and expects to continue to experience
substantial working capital requirements primarily due to the Company's
active exploration and development programs and its increased participation
percentages and technology enhancement programs.  While the Company
believes that cash flow from operations and borrowings under the Credit
Facility should allow the Company to implement its present business
strategy through 1998, additional financing may be required in the future
to fund the Company's growth, development and exploration program and
continued technological enhancement.  In the event such capital resources
are not available to the Company, its exploration and other activities may
be curtailed.

HEDGING

     In 1997, the Company began using certain hedging instruments (e.g.,
NYMEX futures contracts) for a portion of its natural gas production to
achieve a more predictable cash flow, as well as to reduce the exposure to
price fluctuations.  The Company's hedging arrangements apply to only a
portion of its production, provide only partial price protection against
declines in oil and natural gas prices and limit potential gains from
future increases in prices.  Such hedging arrangements may expose the
Company to risk of financial loss in certain circumstances, including
instances where production is less than expected, the Company's customers
fail to purchase contracted quantities of oil or natural gas or a sudden
unexpected event materially impacts oil or natural gas prices.  For
financial reporting purposes, gains and losses related to hedging are
recognized as oil and natural gas revenues during the period the hedged
transactions occur.  The Company expects that the amount of hedges that it
has in place will vary from time to time but at no time does it expect that
hedging activities will be of material significance.

     The Company's hedging strategy is to maximize its return on investment
through hedging a portion of its activities relating to natural gas price
volatility.  While this strategy should help the Company reduce its

                                      -27-
<PAGE>
exposure to price risks, it also limits the Company's potential gains from
increases in market prices for natural gas.  The Company intends to
continue to hedge up to 50% of its natural gas production to retain a
portion of the potential for greater upside from increases in natural gas
prices, while limiting to some extent the Company's exposure to declines in
natural gas prices.  For the six months ended June 30, 1998, the Company
had hedged 31% of its natural gas production.  As of June 30, 1998, the
Company had 1.7 Bcf of open natural gas contracts at prices ranging from
$2.29 to $2.37 per Mcf.

     For additional information regarding recently issued accounting
standards impacting the accounting for hedging activities, see Note 3 to
the Consolidated Financial Statements in this filing.

EFFECTS OF INFLATION AND CHANGES IN PRICE

     The Company's results of operations and cash flows are affected by
changing oil and natural gas prices.  If the price of oil and natural gas
increases (decreases), there could be a corresponding increase (decrease)
in the operating cost that the Company is required to bear for operations,
as well as an increase (decrease) in revenues.  Recent rates of inflation
have had a minimal effect on the Company.

ENVIRONMENTAL AND OTHER REGULATORY MATTERS

     The Company's business is subject to certain federal, state and local
laws and regulations relating to the exploration for, and the development,
production and transportation of, oil and natural gas, as well as
environmental and safety matters.  Many of these laws and regulations have
become more stringent in recent years, often imposing greater liability on
a larger number of potentially responsible parties.  Although the Company
believes it is in substantial compliance with all applicable laws and
regulations, the requirements imposed by laws and regulations frequently
are changed and subject to interpretation, and the Company is unable to
predict the ultimate cost of compliance with these requirements or their
effect on its operations.  Any suspensions, terminations or inability to
meet applicable bonding requirements could materially adversely affect the
Company's business, financial condition and results of operations.
Although significant expenditures may be required to comply with
governmental laws and regulations applicable to the Company, compliance has
not had a material adverse effect on the earnings or competitive position
of the Company.  Future regulations may add to the cost of, or
significantly limit, drilling activity.

COMPUTER MODIFICATIONS FOR YEAR 2000

     The Year 2000 issue exists because many computer systems and
applications abbreviate dates by eliminating the first two digits of the

                                      -28-
<PAGE>
year, assuming that these two digits would always be "19."  Unless
corrected, this shortcut is expected to cause problems when the century
date occurs.  On that date, some computer programs may recognize the date
as January 1, 1900 instead of January 1, 2000.  This may cause the
Company's systems to incorrectly process critical financial and operational
information, or stop processing altogether.  Additionally, computer
applications may be affected before January 1, 2000, if calculations into
the year 2000 are involved.

     The Company has a plan to address the Year 2000 issue and will
continue to assess the impact of the Year 2000 issue on the remainder of
its computer-based systems and applications throughout 1998.  If the
Company's plans are not successful, there could be a significant disruption
of the Company's ability to bill customers and pay suppliers, as well as a
possible slowdown of certain computer-dependent processes.  Based on
currently available information, management presently does not anticipate
that the costs to address the Year 2000 issues or potential operating
disruptions will have an adverse impact on the Company's financial
conditions, results of operations or liquidity.

FORWARD-LOOKING STATEMENTS

     This discussion and analysis of financial condition and results of
operations, and other sections of this Form 10-Q, contain forward-looking
statements that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the oil and gas industry, the
economy and about the Company itself.  Words such as "anticipates,"
"believes," "estimates," "expects," "forecasts," "intends," "is likely,"
"plans," "predicts," "projects," variations of such words and similar
expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions ("Future Factors") that are
difficult to predict with regard to timing, extent, likelihood and degree
of occurrence. Therefore, actual results and outcomes may differ materially
from what may be expressed or forecasted in such forward-looking
statements.  Furthermore, the Company undertakes no obligation to update,
amend or clarify forward-looking statements, whether as a result of new
information, future events or otherwise.

     Future Factors include, but are not limited to the results of the
Company's exploratory drilling activities, volatility of oil and natural
gas prices, uncertainty of estimates of oil and natural gas reserves,
implementation of the Company's growth strategy and its management of
future growth, substantial capital requirements associated with the
Company's operations, risks related to replacement of oil and natural gas
reserves, operating hazards and uninsured risks, competition, government
regulation and environmental matters, the Company's hedging policies and
transactions, marketability of production, dependence on key personnel,

                                      -29-
<PAGE>
technological changes and shortages of drilling rigs, equipment, supplies
and personnel.  These are representative of the Future Factors that could
cause a difference between an ultimate actual outcome and a preceding
forward-looking statement.

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company is not currently named as a defendant in any lawsuits
and/or administrative proceedings arising in the ordinary course of
business.

ITEM 5.  OTHER INFORMATION

     The Company's Bylaws contain provisions regarding the procedure and
permissibility of stockholder proposals.  Under the Bylaws no matter may be
presented for stockholder action at an annual or special meeting of
stockholders unless such matter is: (i) specified in the notice of the
meeting (or any supplement to the notice) given by or at the direction of
the Board of Directors; (ii) otherwise presented at the meeting by or at
the direction of the Board of Directors; (iii) properly presented for
action at the meeting by a stockholder in accordance with the notice
provisions set forth in the Bylaws and any other applicable requirements;
or (iv) a procedural matter presented, or accepted for presentation, by the
Chairperson of the meeting in his or her sole discretion.

     For a matter to be properly presented by a stockholder, the
stockholder must have given timely notice of the matter in writing to the
Secretary of the Company.  To be timely, the notice must be delivered to or
mailed to and received at the principal executive offices of the Company
not less than 120 calendar days prior to the date corresponding to the date
of the Company's proxy statement or notice of meeting released to
stockholders in connection with the last preceding annual meeting of
stockholders in the case of an annual meeting (unless the Company did not
hold an annual meeting within the last year, or if the date of the upcoming
annual meeting changed by more than 30 days from the date of the last
preceding meeting, then the notice must be delivered or mailed and received
not more than seven days after the earlier of the date of the notice of the
meeting or public disclosure of the date of the meeting), and not more than
seven days after the earlier of the date of the notice of the meeting or
public disclosure of the date of the meeting in the case of a special
meeting.  The notice by the stockholder must set forth: (i) a brief
description of the matter the stockholder desires to present for
stockholder action; (ii) the name and record address of the stockholder
proposing the matter for stockholder action; (iii) the class and number of
shares of capital stock of the Company that are beneficially owned by the
stockholder; and (iv) any material interest of the stockholder in the
matter proposed for stockholder action.
                                      -30-
<PAGE>
     The stockholder proposal, together with any accompanying supporting
statement, may not in the aggregate exceed 500 words.  Except to the extent
that a stockholder proposal submitted pursuant to the Bylaws is not made
available at the time of mailing, the notice of the purposes of the meeting
shall include the name and address of and the number of shares of the
voting security held by the proponent of each stockholder proposal.

     A stockholder may submit matters and proposals for stockholder action
at any annual or special stockholder meeting if the matters and proposals
are of general concern to, and are proper subjects for action by, the
stockholders.  A submitted proposal or matter may not be presented for
stockholder action if it:  (i) relates to the enforcement of a personal
claim or the redress of a personal grievance against the Company, its
management or any other person; (ii) consists of a recommendation, request
or mandate that action be taken with respect to a matter, including a
general economic, political, racial, religious, social or similar cause,
that is not significantly related to the Company's business or is not
within the Company's power to effectuate; (iii) has, at the stockholder's
request, previously been submitted in either of the last two annual
stockholder meetings and the stockholder has failed to present the
proposal, in person or by proxy, for action at the meeting; (iv) is
substantially similar to a matter or proposal presented within the
preceding five calendar years: (x) if it was submitted once during the past
five annual meetings and it received less than 3% of the total votes cast,
or (y) if it was submitted twice during the past five annual meetings and
it received less than 6% of the total votes cast at the time of its second
submission, or (z) if it was submitted three times during such period and
it received less than 10% of the votes cast at the time of its third
submission (if any of (x), (y) or (z) apply, the proposal may be omitted
for three years after the latest previous submission); or (v) consists of a
recommendation or request that the management take action with respect to a
matter relating to the conduct of the Company's ordinary business
operations.

     Notwithstanding the above, if the stockholder desires to require the
Company to include the stockholder's proposal in the Company's proxy
materials, matters and proposals submitted for inclusion on the agenda
shall be governed by the rules and regulations under the Securities
Exchange Act of 1934, as amended.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  EXHIBITS.  The following documents are filed as exhibits to this
report on Form 10-Q:





                                      -31-
<PAGE>
     EXHIBIT NO.                        DOCUMENT

         3.1       Certificate of Incorporation of the Registrant.
                   Previously filed as an exhibit to the Company's
                   Registration Statement on Form S-1 (333-40383), and
                   incorporated herein by reference.

         3.2       Bylaws of the Registrant.

         4.1       Certificate of Incorporation.  See Exhibit 3.1.

         4.2       Bylaws.  See Exhibit 3.2.

         4.3       Form of Specimen Stock Certificate.  Previously filed
                   as an exhibit to the Company's Registration Statement
                   on Form S-1 (333-40383), and incorporated herein by
                   reference.

         11.1      Computation of Earnings Per Share.

         27        Financial Data Schedule.

     (b)  REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during
the fiscal quarter ended June 30, 1998.

























                                      -32-
<PAGE>
                                SIGNATURES


     Pursuant to the requirement 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.


                                   MILLER EXPLORATION COMPANY



Date:  August 13, 1998             By: /S/ WILLIAM J. BAUMGARTNER
                                       William J. Baumgartner
                                       Vice President-Finance, Chief
                                         Financial Officer and Secretary
                                       (Principal Accounting and Financial
                                         Officer)































                                      -33-
<PAGE>
                               EXHIBIT INDEX


     EXHIBIT NO.                        DOCUMENT

         3.1       Certificate of Incorporation of the Registrant.
                   Previously filed as an exhibit to the Company's
                   Registration Statement on Form S-1 (333-40383), and
                   incorporated herein by reference.

         3.2       Bylaws of the Registrant.

         4.1       Certificate of Incorporation.  See Exhibit 3.1.

         4.2       Bylaws.  See Exhibit 3.2.

         4.3       Form of Specimen Stock Certificate.  Previously filed
                   as an exhibit to the Company's Registration Statement
                   on Form S-1 (333-40383), and incorporated herein by
                   reference.

         11.1      Computation of Earnings Per Share.

         27        Financial Data Schedule.