SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


[x]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1998 or
                                                        -----------------

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934 for the transition period from _______________
         to__________________

Commission file number 0-5704
                       ------

                               MAYNARD OIL COMPANY
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

      Delaware                                         75-1362284
---------------------------------                   -------------------
(State of other jurisdiction                         (I.R.S. Employer
of incorporation or organization)                   Identification No.)


8080 N. Central Expressway, Suite 660, Dallas, TX                    75206
-------------------------------------------------              ---------------
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code:             (214)891-8880
                                                               ---------------

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

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock - $.10 Par Value
--------------------------------------------------------------------------------
                                (Title of class)

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,  and (2) has been subject to such filing  requirements
for the past 90 days.
                                                    Yes  x    No
                                                        ----     ----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  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 ]

While it is difficult to determine the number of shares owned by  non-affiliates
(within  the  meaning  of the  term  under  the  applicable  regulations  of the
Securities and Exchange Commission), the Registrant estimates that the aggregate
market  value of its Common Stock held by  non-affiliates  on March 17, 1999 was
$16,979,000  (based  upon an  estimate  that 43.4% of the shares are so owned by
non-affiliates  and upon the closing  price for the Common  Stock as reported by
NASDAQ (NMS)).

The number of shares outstanding of the Registrant's $.10 par value common stock
as of March 17, 1999 was 4,886,118 shares.

The      following  documents are incorporated into this Form 10-K by reference:
         Proxy  Statement for Annual Meeting of  Stockholders  to be held on May
         20, 1999 Part III of Form 10K.

                                       -1-

<PAGE>



                                     PART I.

ITEM 1.  BUSINESS

THE COMPANY

         Maynard Oil Company is a Delaware  corporation  which was  organized in
1971 to continue the oil and gas operations  conducted on an individual basis by
its  founders,  including  Mr. James G.  Maynard,  its Chairman of the Board and
Chief Executive Officer.  The Company's principal executive office is located at
8080 N. Central  Expressway,  Suite 660, Dallas,  Texas 75206, and its telephone
number is (214)  891- 8880.  Unless  the  context  requires  otherwise,  as used
herein, the term "Company" refers to Maynard Oil Company and its subsidiary.

         The Company's principal line of business is the production and sale of,
and exploration and development of, crude oil and natural gas. The Company's oil
and gas operations are conducted exclusively in the United States,  primarily in
the states of Texas and Oklahoma.

OIL AND GAS OPERATIONS

         The Company is an independent oil and gas company, engaged primarily in
the  production  and  exploration  phases of the oil and gas  business.  Company
operations include acquiring, exploring, developing, and operating crude oil and
natural gas properties.

         The  Company  seeks  to  accomplish  its  overall  goal  of  increasing
hydrocarbon  reserves  and cash flow by  selectively  acquiring  and  exploiting
producing oil and gas properties.  When possible, the Company acquires producing
properties on which it can act as operator,  and thus,  supervise production and
development  activities.  Acquisition  efforts  for 1998  have  resulted  in the
purchase of interests in three  fields in West Texas for cash  consideration  of
$2,684,000.   Each  of  these  purchases  was  secured  for  additional  reserve
development with the Company taking over operations.

         Prices  realized from the sale of oil and gas from the Company's  wells
depends on numerous  factors  beyond the control of the Company,  including  the
amount of domestic  production,  the  importation  of oil, the  proximity of the
Company's  property to natural gas pipelines and the capacity of such pipelines,
the market for other  competitive  fuels,  fluctuations in seasonal demand,  and
governmental  regulations  relative to hydrocarbon  production and pricing.  The
production of oil and gas is also subject to the laws of supply and demand,  and
therefore,  is subject to purchaser cutbacks and price reductions during periods
of  oversupply.  At  December  31,  1998,  approximately  70% of  the  Company's
estimated proved reserves and 79% of the 1998 production,  were  attributable to
crude oil and condensate on a net equivalent barrel basis (net equivalent barrel
"NEB" uses a conversion ratio of six thousand cubic feet of gas (MCF) to one net
equivalent barrel of oil) and consequently, the Company is primarily impacted by
oil markets.

         During 1998,  the oil industry,  including  the Company,  experienced a
significant decline in the average price received from the sale of its

                                       -2-

<PAGE>



crude oil. The weighted average price at December 31, 1997 was $15.72 per barrel
of oil sold.  During the first quarter of 1998, the Company  received an average
of $14.39 per barrel,  which then  dropped to averages  of $12.32,  $12.07,  and
$10.66  per  barrel  for the final  three  quarters  of the year,  respectively.
Because of such volatility, the Company cannot predict expected oil pricing with
any certainty.

         Until the current year, Maynard Oil had not posted an annual loss since
1986,  a year when oil and gas  prices  also  suffered  significant  reductions,
falling to $14.64 per  barrel  and $1.83 per MCF from  prior  year  averages  of
$26.23 per barrel and $2.60 per MCF.

         During  the  year  ended  December  31,  1998,  four  customers,  Total
Petroleum,  Amoco Production Company, Koch Oil Company and EOTT Energy Operating
Limited  Partnership,  accounted  for  approximately  14%,  13%,  12%,  and  12%
respectively, of consolidated revenues. The Company does not believe it would be
adversely affected by the loss of any of its oil
or gas purchasers.

         The market price for natural gas has also fluctuated significantly from
month to month and year to year for the past several years. Like the oil market,
the Company cannot predict gas price movements with any certainty.

         Except for curtailed  exploration and production activity  occasionally
experienced  in severe  weather and normal  curtailments  of gas sales in summer
months,  the Company  does not consider its business to be seasonal and does not
carry significant amounts of inventory.

         As a reflection of weak product prices, only a total of nine wells were
drilled during 1998, two exploratory  and seven  development  wells.  One of the
seven  development  wells was  drilled as a  producer  on the  Company  operated
Fullerton waterflood field in Andrews County, Texas. The Company retained 50% of
the  working  interest  in this well.  Five  additional  development  wells were
drilled  on the  Tatums  unit in  Carter  County  Oklahoma,  a mature  secondary
recovery  project in which the Company  owns 5.8% of the working  interest.  The
seventh  development well was drilled in Stephens County,  Texas as a horizontal
producer in which the Company retained 12.5% of the working interest.

         Two Hockley County,  Texas exploratory wells were drilled in 1998, both
of which were  completed  as oil  producers.  However,  early  water  production
indicates neither well will have significant hydrocarbon reserves.

GENERAL

         The oil and gas business  involves  intense  competition  in all of its
phases and,  because of its size,  the Company is not a significant  competitive
factor in the industry.  In its efforts to acquire property rights,  the Company
competes with many companies  having access to substantially  greater  financial
resources and larger technical staffs.

         The Company's oil and gas exploration efforts often involve
exploratory drilling on unproven acreage involving high risks.  There is

                                       -3-

<PAGE>



no  assurance  that any oil or gas  production  will be  obtained,  or that such
production,  if obtained, will be profitable.  The cost of drilling,  completing
and operating wells is often uncertain.  Drilling may be curtailed or delayed as
a result of many factors, including title problems, weather conditions, delivery
delays, and shortages of pipe and equipment.

         The Company's operations are subject to potential hazards,  inherent in
the  exploration  for and  production of  hydrocarbons,  including  blowouts and
fires.  These and other  events can cause a suspension  of drilling  operations,
severe damage to equipment or surrounding property, personal injury, and perhaps
even a loss of life.  The Company may be subject to liability  for pollution and
other  damages  and  is  subject  to  statutes  and   regulations   relating  to
environmental and other matters.  While the Company maintains  insurance against
certain of these risks,  there are certain risks against which it cannot insure,
or which it may elect not to insure due to premium costs,  or for other reasons.
Substantial uninsured liabilities to third parties may be incurred.

         The oil and gas  operations of the Company are subject to local,  state
and  federal   environmental   regulations.   To  date,  compliance  with  these
regulations by the Company has had no material  effect on the Company's  capital
expenditures. The Company is unable to assess or predict at this time the impact
that  compliance  with such  environmental  regulations  may have on its  future
capital expenditures,  earnings and competitive position.  The Company presently
estimates  that  it  will  not  make  any  material  capital   expenditures  for
environmental control facilities for its fiscal year ending December 31, 1999.

         Many facets of the  Company's  operations  are subject to  governmental
regulations.  All of the Company's oil and gas  properties are located in states
in  which  oil  and  gas  production  is  regulated  by  state   production  and
conservation laws and regulations.  These laws and regulations in many instances
also require permits for the drilling of wells, the spacing of wells, prevention
of waste, conservation of oil and natural gas and various other requirements.

         The  Company's  activities  are  subject to  taxation  at all levels of
government,  including taxes on income, severance of minerals, and payroll. Laws
governing  taxation,  protection of the  environment,  crude oil and natural gas
operations  and  production,   and  other  crucial  areas  are  all  subject  to
modification at any time.

         At March 17,  1999 the  Company  employed  35  persons,  including  one
geologist and five petroleum engineers.

ITEM 2.  PROPERTIES

         The  Company's  executive  offices  are  presently  located  at 8080 N.
Central  Expressway,  Suite 660, Dallas,  Texas occupying  approximately  11,300
square feet of space under a lease agreement which expires in
April, 2000.

         The  Company's   principal   property  holdings  consist  of  leasehold
interests in oil and gas properties located in the United States,

                                       -4-

<PAGE>



primarily in Oklahoma and Texas.  The  leaseholds are continued in force so long
as production from lands under lease is maintained. The Company believes that it
has  satisfactory  title  to its oil and gas  properties.  Such  properties  are
subject to customary royalty interests,  liens incident to operating agreements,
liens for current taxes,  and other burdens and minor  encumbrances,  easements,
and  restrictions.  The Company believes such burdens do not materially  detract
from the value of the  properties or materially  interfere with their use in the
operation of the Company's business.  The Company has pledged certain of its oil
and gas properties to secure its term loan.

ESTIMATED PROVED RESERVES,
FUTURE NET REVENUES AND PRESENT VALUE

         Reflected  below are the estimated  quantities of proved  developed and
undeveloped  reserves  of crude oil and  natural  gas owned by the Company as of
December 31, 1998, 1997, and 1996. Such reserve information has been prepared by
the  Company's  staff of  petroleum  engineers  and  audited by the  independent
petroleum consulting firm of Netherland, Sewell, and Associates, Inc. No reserve
reports with respect to the Company's  proved net oil or gas reserves were filed
with any federal  authority or agency during the fiscal year ended  December 31,
1998.

<TABLE>
<CAPTION>

                                                                 December 31
                           ---------------------------------------------------------------------------------------
                                        1998                            1997                       1996
                           --------------------------          ------------------------      ---------------------

                              Oil(MB)       Gas(MMCF)           Oil(MB)       Gas(MMCF)      Oil(MB)      Gas(MMCF)

<S>                           <C>           <C>                 <C>           <C>            <C>          <C>     
Proved Developed              4,947.1       12,262.1            6,761.9       12,001.6       8,650.0      13,442.2
Proved Undeveloped               72.4          642.0              386.5          733.3         324.4       1,143.0
                              -------       --------            -------       --------        ------      --------

Total Proved Reserves         5,019.5       12,904.1            7,148.4       12,734.9       8,974.4      14,585.2
                              =======       ========            =======       ========       =======      ========

</TABLE>

                                       -5-

<PAGE>



       The following  table  summarizes  the future net revenues,  using current
prices  and  costs as of the  dates  indicated,  as well as the  present  value,
discounted  at 10%, of such future net revenues  from  estimated  production  of
proved reserves of crude oil and natural gas as of December 31, 1998,  1997, and
1996.  Oil and gas prices used in the  tabulation of the amounts below are based
on the price  received for each lease at December 31, of the  appropriate  year.
The weighted average prices at December 31, 1998,  1997, and 1996  respectively,
used in the  estimates  were  $10.02,  $15.72,  and $24.66 per barrel of oil and
$1.86,  $2.05,  and $3.59 per mcf of natural gas. Lease and well operating costs
are based upon actual operating expense records.

<TABLE>
<CAPTION>

                                                            December 31
                          ---------------------------------------------------------------------------------
                                    1998                          1997                     1996
                          ------------------------       -----------------------    -----------------------
                            Future         Present        Future         Present     Future         Present
                              Net           Value           Net           Value        Net           Value
Expressed in 000's          Revenue         @ 10%         Revenue         @ 10%      Revenue         @ 10%
                            -------        -------        -------        -------     -------        ------

<S>                         <C>             <C>            <C>           <C>          <C>           <C>     
Proved Developed            $34,048         $23,374        $59,789       $41,357      $152,508      $ 98,184
Proved Undeveloped            1,302             783          2,848         1,203         8,101         4,026
                             ------          ------         ------        ------       -------       -------

Total Proved Reserves       $35,350         $24,157        $62,637       $42,560      $160,609      $102,210
                             ======          ======         ======        ======       =======       =======

</TABLE>

Amounts presented in the tables above are before the effects of taxes.

PRODUCTION, SALES PRICES AND COSTS

     The following  table sets forth the  Company's net oil and gas  production,
average sales prices and production costs for the three years ended December 31,
1998.

<TABLE>
<CAPTION>

                                                                                    December 31
                                                                         -----------------------------------
                                                                           1998           1997          1996
                                                                           ----           ----          ----
<S>                                                                      <C>            <C>           <C>    
Production:
  Oil (MB)                                                               1,025.5        1,106.0       1,212.4
  Gas (MMCF)                                                             1,637.3        1,957.1       2,890.1

Average Sales Prices:
  Oil (per BBL)                                                           $12.38         $19.38        $20.39
  Gas (per MCF)                                                           $ 2.12         $ 2.58        $ 2.03

Average Production Costs:
  Per net equivalent barrel of oil (1)(2)                                 $ 6.72        $ 7.07         $ 5.95

(1)      Six MCF of gas equals one net equivalent barrel ("NEB").
(2)      Production costs are comprised of severance and advalorem taxes, if
         applicable, and lease operating expenses, which include workover
         costs.

</TABLE>

PRODUCTIVE WELLS AND ACREAGE

         As of December 31, 1998, the Company owned an interest in approximately
1,095 gross  (295.6 net) wells,  of which 1,061 gross  (284.7 net) are oil wells
and 34 gross (10.9 net) are gas wells,  located on  approximately  48,153  gross
(20,257 net) producing acres.

                                       -6-

<PAGE>



UNDEVELOPED ACREAGE

         The following  table sets forth the Company's gross and net undeveloped
acreage as of December 31, 1998.
                                                             Undeveloped Acreage
                                                             -------------------
                                                             Gross         Net
                                                             -----         ---

Colorado.....................................................  80             10
Louisiana....................................................  80             40
North Dakota.................................................  62              4
Oklahoma..................................................... 135             70
Texas....................................................  10,284          3,083
Wyoming..................................................   2,376            809
                                                           ------         ------

Total                                                      13,017          4,016
                                                           ======         ======

DRILLING ACTIVITY

     The  following  table sets  forth the  results  of the  Company's  drilling
activity during the three years ended December 31, 1998.

<TABLE>
<CAPTION>

                                         Exploratory                   Development                     Total
                                         -----------                   -----------                     -----
                                  Gross            Net          Gross           Net          Gross           Net
                                  -----            ---          -----           ---          -----           ---
<S>                                   <C>         <C>               <C>        <C>               <C>       <C>  
December 31, 1998
     Productive                       2           .438              7          .916              9         1.354
     Dry                              0           .000              0          .000              0          .000
                                    ---          -----            ---        ------            ---         -----

  Total                               2           .438              7          .916              9         1.354
                                    ===          =====            ===        ======            ===        ======

December 31, 1997
     Productive                       0           .000              8         3.469              8         3.469
     Dry                              4           .663              1         1.000              5         1.663
                                    ---          -----            ---        ------            ---        ------

  Total                               4           .663              9         4.469             13         5.132
                                    ===          =====            ===        ======            ===        ======

December 31, 1996
     Productive                       1           .063              9         3.856             10         3.919
     Dry                              1           .333              0          .000              1          .333
                                    ---          -----            ---        ------            ---        ------

  Total                               2           .396              9         3.856             11         4.252
                                    ===          =====            ===        ======            ===        ======

</TABLE>

     At March 17, 1999,  and December 31, 1998,  the Company had no wells in the
process of being drilled.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is a defendant  in minor  lawsuits  that have arisen in the
ordinary  course of business.  The Company does not expect any of these lawsuits
or other items to have a material  adverse effect on the Company's  consolidated
financial position or results of operations.





                                       -7-

<PAGE>



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

         None.

EXECUTIVE OFFICERS OF THE REGISTRANT

         Information  with  respect to the  Company's  executive  officers as of
March 17, 1999, is set forth in the table below.

     Name                        Position                       Age        Since
     ----                        --------                       ---        -----

James G. Maynard           Chairman of the Board,                72         1971
                              Chief Executive Officer
                              and Treasurer

Glenn R. Moore             President and Chief                   61         1982
                              Operating Officer

L. Brent Carruth           Vice President of                     65         1984
                              Operations

Kenneth W. Hatcher         Vice President of                     55         1983
                              Finance

Linda K. Burgess           Corporate Secretary                   50         1984
                              and Controller


         Mr. Maynard has been a director since 1971 and engaged in oil and
gas exploration as an independent operator and private investor for the
past 40 years.

         Mr. Moore has over 30 years experience in domestic and foreign oil
and gas exploration and production.  Prior to joining the Company in
November, 1982, Mr. Moore served as President of Shannon Oil and Gas,
Inc. and Hanover Petroleum Corporation.

         Mr.  Carruth  has over 30 years of  petroleum  engineering  experience.
Prior to joining the Company in  January,  1984,  he served for one year as Vice
President of Operations of Cordova Resources.  Preceding that, Mr. Carruth was a
petroleum  consultant  for three years and served as Manager of  Engineering  of
Texas Pacific Oil Company for eight years.

         Mr. Hatcher has over 25 years of finance and accounting experience
in the oil and gas industry and is a Certified Public Accountant.  Prior
to joining the Company in February, 1983, Mr. Hatcher served as
Controller and Vice President of Finance of Shannon Oil and Gas, Inc.
for three years and as Controller and Vice President of Hanover
Petroleum Corporation for four years.






                                       -8-

<PAGE>



         Ms. Burgess has in excess of 20 years of oil and gas accounting
experience.  Prior to joining the Company in May, 1984, Ms. Burgess
served as Controller for Trans-Western Exploration Inc. for four years
and as Controller for Energy Resources Oil and Gas for three years.

         Each  officer's  term of office  expires on the date of the next annual
meeting of the Board of Directors,  or until his earlier resignation or removal.
There are no family relationships among the executive officers listed, and there
are no arrangements or understandings pursuant to which any of them were elected
or appointed as officers.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
         HOLDER MATTERS.

         The Company's  Common Stock is traded in the  over-the-counter  market,
NASDAQ trading  symbol "MOIL".  The high and low sales prices for each quarterly
period during the two years ended December 31, 1998, were as follows:

         1998      High        Low          1997            High          Low
         ----      ----        ---          ----            ----          ---

First Quarter     $11        $ 9 3/4    First Quarter      $21 1/2       $12 1/2
Second Quarter     11          9 3/4    Second Quarter      16 1/2        10
Third Quarter      10 5/8      7        Third Quarter       16            10
Fourth Quarter     10 1/2      7        Fourth Quarter      14 1/2        10 1/4

         As of March 17, 1999, the Company had approximately 874 shareholders of
record.

         The Company has not paid any dividends on its Common Stock in the past,
nor does it plan to pay  dividends  in the  foreseeable  future.  The  Company's
ability to pay dividends is currently  restricted  under its Loan Agreement with
Bank One, Texas.

                                       -9-

<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA.

         The following  table  summarizes  certain  selected  financial  data to
highlight  significant trends in the Company's financial condition and operating
results for the periods indicated.  The selected financial information presented
should be read in conjunction  with the  consolidated  financial  statements and
related notes appearing elsewhere in this Report and the Management's Discussion
and Analysis of Financial  Condition and Results of  Operations  set forth under
Item 7  below.  All  amounts  are  expressed  in  thousands,  except  per  share
information.

                                            December 31
                             -------------------------------------------------
                             1998        1997       1996      1995        1994
                             ----        ----       ----      ----        ----
Total revenue from
  oil and gas             $ 16,166    $ 26,477   $ 30,583   $ 20,540    $ 13,265
Income (loss) before
  income taxes             (11,897)      6,613     15,758      4,354       1,196
Net income (loss)           (7,816)      4,455      9,954      3,023         943
Per share income
 (loss) (1)                  (1.60)        .91       2.04        .62         .19
Total assets                60,363      78,286     81,257     72,838      48,071
Long-term debt               6,250      11,250     16,250     21,250       5,250
Shareholders' equity        45,647      53,509     49,054     39,104      36,137
Net working capital         16,448      17,503     12,942       (370)      4,079
Net cash provided by
  operating activities       5,025      11,250     13,921     11,558       5,696

(1)      Basic and diluted earnings (loss) per share were the same for the years
         presented.

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997
OVERVIEW

              1998 was a  challenging  year for Maynard Oil Company,  as well as
all others  involved  in the energy  sector,  attempting  to deal with a virtual
price collapse for its hydrocarbon  products.  For 1998, the Company  recorded a
net loss of $7,815,509, primarily related to oil and gas price reductions, which
resulted in lower oil and gas revenues,  as well as a non cash impairment charge
of $8,754,846.  Without this non cash write off, the Company would have reported
a loss of approximately $2,075,000 (net of tax).

LIQUIDITY AND CAPITAL RESOURCES

              During 1998, the Company  purchased three fields in West Texas for
cash  consideration  of  approximately  $2,684,000.  The  Company  also made its
scheduled  bank loan payments and continued  maintenance  activities on existing
properties, all of which reduced the cash balance by approximately $3,700,000 in
1998.  However,  almost 35% of the Company's  total assets,  as reflected on its
1998 balance sheet,  is represented by cash,  which would be utilized along with
additional bank debt to finance future property acquisitions.

                                      -10-

<PAGE>



RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997

              The net loss for 1998 was  $7,815,509  compared  to net  income of
$4,455,355  for 1997 an adverse  change in  financial  results over the two year
period of $12,270,864.

              Oil and gas revenues declined  $10,311,196,  or almost 39% between
the two years,  primarily due to product price reductions.  Oil prices plummeted
seven dollars per barrel during the period and gas prices fell  forty-six  cents
per MCF, accounting for approximately  $8,600,000 of the revenue reduction.  Oil
and gas revenues were also negatively  impacted by oil and gas volume reductions
of 7% and 16%, respectively.

              Lease operating  expenses  decreased 14%, from $10,124,212 in 1997
to $8,722,565 in 1998,  primarily due to lower  production  taxes resulting from
the significant decline in oil and gas prices. On a net equivalent barrel basis,
this decrease was thirty-five cents per NEB, from $7.07 per NEB in 1997 to $6.72
per NEB during the current year.

              Exploration  costs  decreased  from  $838,580  in 1997 to $391,718
currently, a 53% decline,  essentially due to a reduction in seismic costs which
were partially offset by higher impairments of undeveloped acreage.  Because the
Company  follows the  successful  efforts  method of  accounting,  the Company's
results of operations may be adversely  affected during any accounting period in
which  seismic  costs,   exploratory  dry  hole  costs,  and  unproved  property
impairments are expensed.

              General and administrative expenses increased approximately 20% in
1998, due primarily to decreased amounts accrued under an employee benefit plan,
which is based  upon  stock  price  (see  Note 6 to the  Company's  Consolidated
Financial  Statements).  Last  year,  general  and  administrative  expense  was
credited $518,563 as the Company's stock price fell from $18.75 per share at the
end of 1996 to $10.25 per share at the end of 1997.  During the current calendar
year, the Company's general and administrative  expense was credited $262,625 to
reflect a further stock price reduction from $10.25 per share to $7.50 per share
at the end of 1998.  Thus,  the Company  ended 1998 with a liability of $234,750
representing  future cash  payments to which various  employees  covered by this
plan are entitled whenever their employment by the Company is ended.

              Depreciation  and  amortization  expense  increased  22% due to an
increase in the Company's average  depletion rate. Under the successful  efforts
method  of  accounting,  costs  of oil and gas  properties  are  amortized  on a
unit-of-production  method based on estimated proved  reserves.  The increase in
the Company's  average  depletion rate was  attributable to the effects of lower
oil and gas prices on estimated  quantities of proved reserves.  These estimates
relate to end-of-year  product  prices,  which were $15.72 per barrel of oil and
$2.05 per MCF of natural gas at the end of 1997 compared to $10.02 per barrel of
oil and $1.86 per MCF of  natural  gas at the end of 1998.  On a net  equivalent
barrel basis, the current depreciation and amortization expense rate was

                                      -11-

<PAGE>



$7.58 per NEB  compared  with $5.63 per NEB for the prior twelve  months,  a 35%
increase.

              During  1998,  the Company also  recognized a non-cash  impairment
charge  to oil and gas  properties  in the  amount  of  $8,754,846  compared  to
$227,879 in the prior year. Under generally accepted accounting principles,  the
Company must compare the carrying value of its oil and gas  properties  with the
undiscounted  value of its future net revenues from the properties.  Should this
comparison indicate  non-recoverability  of the carrying costs, an impairment is
recognized based upon estimates of discounted  value. The significant  reduction
in  product  pricing  impacted  this  comparison  and caused  the  current  year
writedown.

              Interest expense decreased  approximately  $438,000, or 30% due to
scheduled bank note payments for 1998 and the resulting lower principal  amounts
outstanding.

              The Company  recognized  a tax benefit of  $4,081,856  during 1998
compared with tax expense of $2,157,500 during the prior year. This current year
tax benefit relates to the tax effects of the revenue  reductions,  expenses and
impairments discussed above.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996
LIQUIDITY AND CAPITAL RESOURCES

              The Company acquired one minor group of oil properties during 1997
for  approximately  $700,000.  The Company  made its  scheduled  debt  payments,
continued  its  exploitation   work  and  maintenance   activities  on  existing
properties  and ended the year with an  additional  $2.7 million in cash.  Thus,
31.4% of the  Company's  total assets as reflected on its current  balance sheet
was  represented  by  cash,  and net  working  capital  at  year  end  1997  was
$17,503,000.

RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996

              Net income for 1997 was  $4,455,355  compared  to  $9,953,783  for
1996.  The current year included a gain from the sale of oil and gas  properties
amounting  to $191,873  compared to a gain of  $6,202,473  in 1996.  Oil and gas
revenues declined 13% between the two years due primarily to the loss of volumes
resulting   from  property   dispositions   in  1996.   Oil  volumes   decreased
approximately  9% and gas volumes  almost 32%.  Oil and gas  revenues  were also
negatively  affected by a $1.01 per barrel  reduction  in oil prices,  which was
partially offset by a fifty-five cent per mcf increase in gas prices.

              Lease  operating  expenses  increased  $44,264  over 1996  levels.
However,  on a net  equivalent  barrel (NEB) basis,  this  relatively low amount
equates to a rise in lifting costs of $1.12 per NEB. During 1997,  approximately
$835,000,  or fifty-eight cents per NEB, was spent on maintenance costs compared
with $486,000, or twenty-nine cents per NEB, a year ago. Additionally, advalorem
taxes in the state of Texas grew from  $582,000  (thirty-four  cents per NEB) to
$673,000  in 1997  (forty-seven  cents per NEB).  The  balance of the  operating
expense increase

                                      -12-

<PAGE>



related to higher lifting costs for recurring activities on certain
identifiable properties.

              Exploration  costs  totaled  $838,580 in 1997  versus  $201,509 in
1996.  Seismic work in 1997 totaled $315,000 compared to only $11,000 in 1996 as
the Company initiated two new seismic  projects.  Dry hole and abandonment costs
were  approximately  $512,000 for four wells in 1997  compared  with $180,000 in
1996 relating to one well and the  cancellation of leaseholds  acquired in prior
years.

              General and  administrative  expenses were $1,337,484 less in 1997
as  compared to 1996,  and the  reduction  represents  the effect of an employee
benefit  plan whose  impact on  earnings is  directly  related to the  Company's
common  stock  price.  In 1996,  earnings  were charged in excess of $888,000 to
reflect a closing stock price of $18.75 per share.  However, by the end of 1997,
Maynard's  stock price had  retreated  to $10.25 per share.  Generally  accepted
accounting  principles  dictate  the  treatment  of this item of  administrative
expense and require current year credits to the account. Thus, the Company ended
1997 with a  liability  of  $497,375  which  represents  cash  payments to which
various employees covered by this plan are entitled whenever their employment by
the Company is ended.

              Depreciation and amortization  expense increased on a dollar basis
from $7,837,332 in 1996 to $8,063,249 in 1997.  This increase  resulted from oil
and gas reserve revisions attributable to current pricing trends.

              Interest  expense  decreased  $227,880 due to the  scheduled  note
payments for 1997 and the resulting lower principal balance outstanding.

              Income tax  expense  was  $3,646,870  less than in 1996 due to the
non-recurring  nature of property sales and the decreased  effective tax rate in
1997 compared to 1996.

YEAR 2000 ISSUES

              The "Year 2000 Issue" is the result of computer  programs  written
using two digits  rather than four to define the  applicable  year.  Any systems
developed with this methodology could fail to operate or fail to produce correct
results if "00" is interpreted to mean 1900, rather than 2000.

              In response to the potential  impact of the Year 2000 issue on the
Company's  business  and  operations,   certain  Company  executives  have  been
appointed to serve on its Year 2000 Readiness Team. This group is in the process
of inventorying and assessing the readiness for Year 2000 by the Company and its
vendors, suppliers, customers and other significant business relationships.

              In 1990, as part of a business  modernization  program intended to
reduce  cycle  time and  improve  profitability,  the  Company  purchased  a new
accounting  package  which runs on PC and LAN  platforms,  which the Company has
upgraded  in all years  since  acquisition.  The  software  vendor has  provided
written assurance that dating changes have been throughly

                                      -13-

<PAGE>



tested and were found to be  functioning  correctly.  The Company  will  conduct
further testing of this system,  along with other ancillary  financial  systems,
during the second  quarter of 1999 and  anticipates  completion by September 30,
1999.  The costs of these  efforts,  which  have  been  funded by cash flow from
operations, were not material.

              The  Company  is in  the  data  gathering  phase  with  regard  to
non-financial  software and embedded chip  technology.  Further activity in this
area involves implementing software upgrades to selected equipment and verifying
Year 2000 compliance.  The Company anticipates completion of these activities by
the end of the third quarter of 1999.

              Additionally,  the Company is in the process of surveying critical
suppliers, vendors, and customers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remedy their
own Year 2000 issues.  It is expected that the survey  process will be completed
by June 30, 1999. To the extent that responses regarding Year 2000 readiness are
unsatisfactory, the Company intends to change external business relationships to
those who have demonstrated Year 2000 readiness.

              Given  the  complexity  of the Year  2000  issue,  there can be no
assurance that the Company will be able to address these problems  without costs
and  uncertainties  that might affect future financial results or cause reported
financial  information  not to  necessarily  be indicative  of future  operating
results or future financial condition.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

              The information required by Item 8 is included on pages 18 through
34 of this Report.

ITEM 9.       CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
              DISCLOSURE.

              None
                                    PART III

              The information  required by Part III (Items 10 through 13) is set
forth in the Company's Proxy Statement for the annual meeting of stockholders to
be held on May 20, 1999, and is  incorporated  herein by reference.  Information
with respect to the  Company's  executive  officers as of March 17, 1999, is set
forth commencing on pages 8 and 9 hereof under the caption  "Executive  Officers
of the Registrant".












                                      -14-

<PAGE>



                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K

FINANCIAL STATEMENTS AND SCHEDULES

              See Index to  Consolidated  Financial  Statements  and Schedule on
page 18 of this Report.

REPORTS ON FORM 8-K

              No reports on Form 8-K were filed by the  Company  during the last
quarter of 1998.

EXHIBITS

         3.1(a)   Certificate of Incorporation, as amended, filed as Exhibit 3.1
                  to the  Company's  Annual  Report on Form 10-K for its  fiscal
                  year ended  December  31,  1980 (the "1980  Form  10-K"),  and
                  incorporated herein by reference.

            (b)   Certificate of Amendment of Certificate of Incorporation dated
                  May 19, 1981,  filed as Exhibit 3.1(b) to the Company's Annual
                  Report on Form 10-K for its  fiscal  year ended  December  31,
                  1981  (the  "1981  form  10-K"),  and  incorporated  herein by
                  reference.

            (c)   Certificate of Amendment of Certificate of Incorporation dated
                  May 22, 1987, filed as Exhibit 3.1 to the Company's  Quarterly
                  Report on Form 10-Q for the period  ended June 30,  1987,  and
                  incorporated herein by reference.

            (d)   Certificate of Amendment of Certificate of Incorporation dated
                  June 3, 1993, filed as Exhibit 3.1 to the Company's  Quarterly
                  Report on Form 10-Q for the period  ended June 30,  1993,  and
                  incorporated herein by reference.

         3.2(a)   By-Laws, as amended,  filed as Exhibit 3.2(b) to the 1981 Form
                  10-K and incorporated herein by reference.

            (b)   Amendment to the By-Laws,  filed as Exhibit 3.2(b) to the 1981
                  Form 10-K and incorporated herein by reference.

            (c)   Amendment  to the  By-Laws,  filed as  Exhibit  3.2(c)  to the
                  Company's Annual Report on Form 10-K for its fiscal year ended
                  December 31, 1984, and incorporated herein by reference.

            (d)   Amendment  to  the  By-Laws,  filed  as  Exhibit  3.2  to  the
                  Company's  Quarterly  Report on Form 10-Q for the period ended
                  June 30, 1987, and incorporated herein by reference.



                                      -15-

<PAGE>



            (e)   Amendment  to  the  By-Laws,  filed  as  Exhibit  3.2  to  the
                  Company's Annual Report on Form 10-K for its fiscal year ended
                  December 31, 1993 and incorporated herein by reference.

          4.1     Restated  Loan  Agreement,  dated  December  20, 1995  between
                  Maynard  Oil  Company  and Bank  One,  Texas,  N.A.,  filed as
                  Exhibit 4.6 to the  Company's  Annual  Report on Form 10-K for
                  its fiscal year ended  December  31,  1995,  and  incorporated
                  herein by reference.

         10.1     1989 Stock  Participation  Plan,  filed as Exhibit 10.1 to the
                  Company's Annual Report on Form 10-K for its fiscal year ended
                  December 31, 1995 and incorporated herein by reference.

         21.1     List of  subsidiaries  of the Company as of December 31, 1998,
                  filed herewith.



                                      -16-

<PAGE>



                                   SIGNATURES


         Pursuant to the  requirements  of 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.

                                                       MAYNARD OIL COMPANY


                                                       By \s\   James G. Maynard
                                                          ----------------------
                                                          James G. Maynard
                                                          Chairman of the Board


Date:  March 31, 1999

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the date indicated in multiple counterparts with the same force and effect as
if each person  executing a separate  counterpart has joined in execution of the
same counterpart.




/s/  James G. Maynard              Chairman of the Board,         March 31, 1999
------------------------
         James G. Maynard          Chief Executive Officer
                                     & Treasurer

/s/  Glenn R. Moore                President and Chief            March 31, 1999
------------------------
         Glenn R. Moore              Operating Officer

/s/  Kenneth W. Hatcher            Vice President of Finance      March 31, 1999
------------------------
         Kenneth W. Hatcher          (Principal Financial
                                     and Accounting Officer)

/s/  Robert B. McDermott           Director                       March 31, 1999
------------------------
         Robert B. McDermott


/s/  Ralph E. Graham               Director                       March 31, 1999
------------------------
         Ralph E. Graham





                                      -17-

<PAGE>



                       MAYNARD OIL COMPANY AND SUBSIDIARY

             Index to Consolidated Financial Statements and Schedule


                                                                           Page


Financial Statements:

         Report of Independent Accountants                                  19

         Consolidated Balance Sheets - December 31, 1998 and 1997           20

         Consolidated Statements of Operations - Three years ended
            December 31, 1998                                               21

         Consolidated Statements of Shareholders' Equity - Three
            years ended December 31, 1998                                   22

         Consolidated Statements of Cash Flows - Three years
            ended December 31, 1998                                         23

         Notes to Consolidated Financial Statements                         24

         Financial Statement Schedule for the Three years
             ended December 31, 1998

                    II - Valuation and Qualifying Accounts                  34

         All  other  schedules  are  omitted  as  the  required  information  is
inapplicable  or the  information  is  presented in the  Consolidated  Financial
Statements or Notes thereto.


                                      -18-

<PAGE>





                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholders of
 Maynard Oil Company

In our opinion, the consolidated financial statements listed in the accompanying
index  present  fairly,  in all material  respects,  the  financial  position of
Maynard Oil Company and its  subsidiary  at December 31, 1998 and 1997,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1998,  in  conformity  with  generally  accepted
accounting principles.  These financial statements are the responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.






PricewaterhouseCoopers LLP
Dallas, Texas
March 23, 1999



                                      -19-

<PAGE>


<TABLE>

                       MAYNARD OIL COMPANY AND SUBSIDIARY
                           Consolidated Balance Sheets

<CAPTION>

                                                                        December 31,
                                                                   -----------------
                                                          1998                       1997
                                                          ----                       ----
<S>                                                   <C>                       <C>         
ASSETS
Current assets:
   Cash and cash equivalents                          $ 20,889,742              $ 24,584,288
   Accounts receivable, trade                            2,568,807                 3,174,635
     Income taxes receivable                               977,587                    92,620
     Other current assets                                  478,680                   546,238
                                                       -----------               -----------
         Total current assets                           24,914,816                28,397,781
                                                       -----------               -----------

Property and equipment, at cost:
   Oil and gas properties, successful
     efforts method                                    107,292,314               104,031,352
   Other property and equipment                            460,475                   548,668
                                                       -----------               -----------
                                                       107,752,789               104,580,020
   Less accumulated depreciation and
    amortization                                       (72,985,138)              (54,692,225)
                                                        -----------               -----------
      Net property and equipment                        34,767,651                49,887,795
                                                       -----------               -----------

Deferred income taxes                                      681,000                     --
                                                       -----------               --------

                                                      $ 60,363,467              $ 78,285,576
                                                       ===========               ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current installments of long-term debt             $  5,000,000              $  5,000,000
   Accounts payable                                      2,583,357                 4,271,662
   Accrued expenses                                        842,368                 1,402,021
   Income taxes payable                                     40,799                   220,798
                                                       -----------               -----------
              Total current liabilities                  8,466,524                10,894,481
                                                       -----------               -----------

Deferred income taxes                                        --                    2,632,000

Long-term debt                                           6,250,000                11,250,000

Shareholders' equity:
   Preferred stock of $.50 par value.
     Authorized 1,000,000 shares; none
        issued                                                 --                        --
   Common stock of $.10 par value.
     Authorized 20,000,000 shares;
     4,884,597 and 4,889,450 shares
     issued and outstanding                                488,460                   488,945
   Additional paid-in capital                           18,831,138                18,831,138
   Retained earnings                                    26,327,345                34,189,012
                                                       -----------               -----------
              Total shareholders' equity                45,646,943                53,509,095
                                                       -----------               -----------

Contingencies and commitments (note 10)
                                                      $ 60,363,467              $ 78,285,576
                                                       ===========               ===========


See accompanying Notes to Consolidated Financial Statements.

</TABLE>

                                      -20-

<PAGE>


<TABLE>
<CAPTION>




                       MAYNARD OIL COMPANY AND SUBSIDIARY
                      Consolidated Statements of Operations

                                                                      Years ended December 31,
                                                             ---------------------------------------------
                                                             1998                1997                 1996
                                                             ----                ----                 ----
<S>                                                     <C>                 <C>                  <C>        
Revenues:
   Oil and gas sales and royalties                      $16,166,042         $26,477,238          $30,583,133
   Interest and other                                     1,329,606           1,229,556              732,660
   Gain on disposition of assets                              6,275             191,873            6,202,473
                                                         ----------          ----------           ----------
                                                         17,501,923          27,898,667           37,518,266
                                                         ----------          ----------           ----------

Costs and expenses:
   Operating expenses                                     8,722,565          10,124,212           10,079,948
   Exploration, dry holes and
         abandonments                                       391,718             838,580              201,509
   General and administrative                               673,935             562,924            1,900,408
   Depreciation and amortization                          9,845,105           8,063,249            7,837,332
   Impairment of oil and gas properties                   8,754,846             227,879               57,056
   Interest and other                                     1,011,119           1,468,968            1,683,860
                                                         ----------          ----------           ----------
                                                         29,399,288          21,285,812           21,760,113
                                                         ----------          ----------           ----------

   Income (loss) before income taxes                     (11,897,365)         6,612,855           15,758,153

Income tax expense (benefit)                              (4,081,856)         2,157,500            5,804,370
                                                          ----------         ----------           ----------

     Net income (loss)                                   $(7,815,509)       $ 4,455,355          $ 9,953,783
                                                          ==========         ==========           ==========

Weighted average number of common
   shares outstanding                                     4,887,882           4,889,450            4,889,690
                                                         ==========          ==========           ==========

Net income (loss) per common share
   (basic and diluted)                                      $(1.60)             $ .91               $2.04
                                                              ====               ====                ====

See accompanying Notes to Consolidated Financial Statements.

</TABLE>

                                      -21-

<PAGE>


<TABLE>



                       MAYNARD OIL COMPANY AND SUBSIDIARY
                 Consolidated Statements of Shareholders' Equity

<CAPTION>


                                                    Common Stock            Additional
                                                    ------------             Paid-in              Retained
                                            Shares          Amount           Capital              Earnings            Total
                                            ------          ------           -------              --------            -----

<S>                                      <C>              <C>              <C>                 <C>                <C>        
Balance at December 31, 1995             4,889,970        $488,997         $18,831,138         $19,784,073        $39,104,208
     Net income                                --              --                 --             9,953,783          9,953,783
     Purchase and retirement
       of common stock                        (520)            (52)              --                 (4,199)            (4,251)
                                          ---------         -------         ----------           ----------         ----------

Balance at December 31, 1996             4,889,450        $488,945         $18,831,138         $29,733,657        $49,053,740
     Net income                                --              --                 --             4,455,355          4,455,355
                                         ---------         -------          ----------          ----------         ----------

Balance at December 31, 1997             4,889,450        $488,945         $18,831,138         $34,189,012        $53,509,095
     Net (loss)                               --              --                 --             (7,815,509)        (7,815,509)
     Purchase and retirement
       of common stock                      (4,853)           (485)              --                (46,158)           (46,643)
                                          ---------         -------         ----------           ----------         ----------

Balance at December 31, 1998             4,884,597        $488,460         $18,831,138         $26,327,345        $45,646,943
                                         =========         =======          ==========          ==========         ==========


See accompanying Notes to Consolidated Financial Statements.

</TABLE>

                                      -22-

<PAGE>


<TABLE>


                       MAYNARD OIL COMPANY AND SUBSIDIARY
                      Consolidated Statements of Cash Flows

<CAPTION>

                                                                              Years ended December 31,
                                                                     ---------------------------------------------
                                                                     1998                 1997                1996
                                                                     ----                 ----                ----
<S>                                                               <C>                   <C>                <C>       
Cash flows from operating activities:
     Net income (loss)                                            $(7,815,509)          $4,455,355         $9,953,783
     Adjustments to reconcile net income (loss)to
       net cash provided by operating activities:

       Depreciation and amortization                                9,845,105            8,063,249          7,837,332
       Impairment of oil and gas properties                         8,754,846              227,879             57,056
       Deferred income tax expense (benefit)                       (3,313,000)             413,000              6,490
       Exploration, dry holes and
         abandonments                                                 345,284              512,317            180,230
       Current year costs of dry holes and
         abandonments                                                (145,868)            (436,058)           (90,521)
       Gain on disposition of assets                                   (6,275)            (191,873)        (6,202,473)
     (Increase) decrease in current assets:
       Accounts receivable                                            605,828            1,099,804           (976,506)
       Income taxes receivable                                       (884,967)             (92,620)              --
       Other current assets                                            67,558               38,783           (119,595)
     Increase (decrease) in current liabilities:
     Accounts payable                                              (1,688,305)             679,258           (533,609)
     Accrued expenses                                                (559,653)            (308,660)           790,028
       Income taxes payable                                          (179,999)          (3,210,678)         3,018,781
                                                                   ----------           ----------         ----------

       Net cash provided by operating
         activities                                                 5,025,045           11,249,756         13,920,996
                                                                   ----------           ----------         ----------

Cash flows from investing activities:
     Proceeds from disposition of assets                               38,880              263,613          8,884,691
     Purchase price adjustment                                          --                   --               874,245
     Additions to property and equipment                           (3,711,828)          (3,746,528)        (3,184,637)
                                                                   ----------           ----------         ----------

       Net cash provided (used) by
         investing activities                                      (3,672,948)          (3,482,915)        6,574,299
                                                                   ----------           ----------       -----------

Cash flows from financing activities:
     Principal payments on long-term debt                          (5,000,000)          (5,000,000)        (4,812,500)
     Purchase of common stock                                         (46,643)              --                 (4,251)
                                                                   ----------           ---------          ----------

       Net cash provided (used) by
         financing activities                                      (5,046,643)          (5,000,000)        (4,816,751)
                                                                   ----------           ----------         ----------

Net increase (decrease) in cash
 and cash equivalents                                              (3,694,546)           2,766,841         15,678,544
Cash and cash equivalents at beginning
  of year                                                          24,584,288           21,817,447          6,138,903
                                                                   ----------           ----------         ----------
Cash and cash equivalents at end of year                          $20,889,742          $24,584,288        $21,817,447
                                                                   ==========           ==========         ==========


See accompanying Notes to Consolidated Financial Statements.


</TABLE>

                                      -23-

<PAGE>



                       MAYNARD OIL COMPANY AND SUBSIDIARY
                   Notes to Consolidated Financial Statements


(1)       Summary of Significant Accounting Policies
          ------------------------------------------

          Business Activity
          -----------------

          Maynard  Oil  Company  (the  Company)  is engaged in the  acquisition,
          exploration, development, production and sale of crude oil and natural
          gas in the Continental United States, primarily in the states of Texas
          and Oklahoma.

          Principles of Consolidation
          ---------------------------

          The consolidated  financial statements include the accounts of Maynard
          Oil  Company  and  its   wholly-owned   subsidiary.   All  significant
          intercompany   balances  and  transactions  have  been  eliminated  in
          consolidation.

          Property and Equipment
          ----------------------

          The Company follows the "successful  efforts" method of accounting for
          its costs of  acquisition,  exploration and development of oil and gas
          properties.  Intangible  drilling  and  development  costs  related to
          development  wells and successful  exploratory  wells are capitalized,
          whereas  the  costs of  exploratory  wells  which  do not find  proved
          reserves  are  expensed.  All  geological  and  geophysical  costs not
          reimbursed  are  expensed as  incurred.  Costs of  acquiring  unproved
          leases are evaluated for impairment  until such time as the leases are
          proved or abandoned.  In addition,  unamortized costs at a field level
          are reduced to fair value if the sum of expected  undiscounted  future
          cash flows are less than net book value.

          Depreciation  and  amortization  of producing  properties  is computed
          using  the  unit-of-production  method  based  upon  estimated  proved
          recoverable reserves.  Depreciation of other property and equipment is
          calculated by the  straight-line  method based upon  estimated  useful
          lives ranging from two to ten years.

          Maintenance  and repairs are charged to expense as incurred.  Renewals
          and  betterments  are  capitalized.  When assets are sold,  retired or
          otherwise   disposed  of,  the   applicable   costs  and   accumulated
          depreciation and  amortization are removed from the accounts,  and the
          resulting gain or loss is recognized.

          Overhead Reimbursement Fees
          ---------------------------

          Overhead  charges  billed to working  interest  owners  including  the
          Company of $2,018,870, $1,796,113, and $1,870,752, for the three years
          ended  December  31, 1998,  respectively,  have been  classified  as a
          reduction of general and  administrative  expenses in the accompanying
          Consolidated Statements of Operations.  The Company's working interest
          portion of the amounts billed are included in operating expenses.


                                      -24-

<PAGE>



          Deferred Income Taxes
          ---------------------

          The Company  recognizes  deferred tax  liabilities  and assets for the
          expected future tax consequences of temporary  differences between the
          tax  and  financial  reporting  bases  of  the  Company's  assets  and
          liabilities by applying  enacted tax rates.  A valuation  allowance is
          established  to reduce  deferred  tax assets if it is more likely than
          not that the related tax benefits will not be realized.

          Income per Common Share
          -----------------------

          In February 1997, the Financial  Accounting  Standards  Board ("FASB")
          issued Statement of Financial  Accounting  Standards ("SFAS") No. 128,
          "Earnings per Share",  which  requires  disclosure of two earnings per
          share ("EPS") measures,  basic EPS and diluted EPS, on the face of its
          Consolidated  Statements  of  Operations  if the Company has a complex
          capital  structure.  Net income per common share is computed using the
          weighted average number of common shares outstanding during each year.
          During  1995,  all  outstanding  stock  options  were  exercised,  and
          consequently,  basic and diluted  earnings per share were the same for
          1998, 1997 and 1996.

          Financial Instruments
          ---------------------

          The  carrying   amounts  of  cash  and  cash   equivalents,   accounts
          receivable, and accounts payable approximate fair value because of the
          short maturity of these instruments.  The carrying amount of long-term
          debt,  including the current portion,  approximates fair value because
          the interest  rate on this  instrument  changes  with market  interest
          rates.

          Financial  instruments,  which  potentially  subject  the  Company  to
          concentrations  of credit risk,  consist  principally of cash and cash
          equivalents and accounts  receivable.  The Company places its cash and
          cash equivalents with high credit quality  institutions.  With respect
          to accounts receivable,  these financial instruments primarily pertain
          to oil and gas sales  and  joint  interest  billings.  These  accounts
          receivable   are  due  from  small  to  mid-size   companies   engaged
          principally in oil and gas activities.  The Company  performs  ongoing
          credit  evaluations  of  its  customers'   financial   condition  and,
          generally,  requires no collateral  from its customers.  Payment terms
          are on a short-term basis and in accordance with industry standards.

          The Use of Estimates in Preparing Financial Statements
          ------------------------------------------------------

          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,
          liabilities, disclosures of gain and loss contingencies at the date of
          the financial statements and reported amounts of revenues and expenses
          during the  reporting  period.  Since  estimates are made based on all
          information  available at the time, it is  reasonably  possible in the
          near term a change in an  estimate  may  occur or actual  amounts  may
          differ from estimated amounts.



                                      -25-

<PAGE>



          Reclassifications
          -----------------

          Certain reclassifications of prior period statements have been made to
          conform with the 1998 presentation.

(2)       Impairment of Long-Lived Assets
          -------------------------------

          Oil and gas prices fell from an average of $15.72 per barrel and $2.05
          per mcf at the end of 1997 to  averages of $10.02 per barrel and $1.86
          per mcf, at the end of 1998.  Consequently,  the Company  performed an
          impairment  evaluation of its oil and gas  properties and recognized a
          non-cash  write-down  of  $8,754,846  in December  1998 to account for
          those properties  whose investment would not be recoverable  under the
          Company's  current  pricing  assumptions,  as defined by  Statement of
          Financial  Accounting Standards No. 121, Accounting for the Impairment
          of  Long-Lived  Assets and for  Long-Lived  Assets to Be  Disposed  of
          ("SFAS 121").

          For 1997 and 1996,  when oil prices  ranged from averages of $15.72 to
          $24.66 per barrel and gas prices  averaged $2.05 to $3.59 per mcf, the
          Company recognized  impairments of oil and gas properties amounting to
          $227,879 and $57,056, respectively.

(3)       Dispositions (Reserve information is unaudited)
          -----------------------------------------------

          During  1996,  the  Company  sold its  interest in  approximately  130
          producing  wells in Texas and Oklahoma for cash  totaling  $8,865,731.
          The Company  considered these  properties to be non strategic  assets.
          Proved  reserves  sold  were  estimated  to be  approximately  269,000
          barrels of oil and 4.9 billion cubic feet of gas (BCF).

          The following table presents  unaudited pro forma operating results as
          if the dispositions had occurred on January 1, 1996.

                                                            Year ended
                                                            December 31,
                                                              1996
                                                            ------------
          Amounts in thousands, except per
           share amounts
            Revenues                                        $28,706
            Net income                                        5,234
            Net income per common share                       1.07

(4)       Cash Flow Data
          --------------

          Cash in  excess  of  daily  requirements  is  invested  in  marketable
          securities,  consisting  of  repurchase  agreements,  certificates  of
          deposit,  money market funds, and commercial paper, with maturities of
          three months or less. At December 31, 1998 and 1997, such  investments
          totaled $21,050,000 and $24,700,000,  respectively, and are considered
          to be cash equivalents, which approximate their fair value.








                                      -26-

<PAGE>




          Supplemental  cash flow information for the three years ended December
          31, 1998 is summarized as follows:

                                       1998            1997            1996
                                       ----            ----            ----
          Cash paid:
            Interest expense          $982,258      $1,462,269      $1,735,416
                                       =======       =========       =========

            Income taxes              $330,000      $5,047,847      $2,779,099
                                       =======       =========       =========

(5)       Long-term Debt
          --------------

          Long-term debt at December 31, 1998 and 1997 is summarized as follows:

<TABLE>
<CAPTION>


                                                                 1998            1997
                                                                 ----            ----
          <S>                                               <C>                <C>        
          Term note due in 20 equal quarterly
            installments of $1,250,000 commencing 
            April 1, 1996 plus one payment of 
            $1,062,500 made January 1, 1996.
            Interest paid quarterly at varying 
            rates.  Secured by certain oil and
            gas properties.                                $11,250,000        $16,250,000
          Less current installments                          5,000,000          5,000,000
                                                            ----------         ----------

            Long-term debt                                 $ 6,250,000        $11,250,000
                                                            ==========         ==========

</TABLE>

          The term note  permits the Company to choose  between  three  interest
          rate  options and to specify  what portion of the loan is covered by a
          specific  interest rate option and the  applicable  funding  period to
          which the interest rate option is to apply.  The interest rate options
          are as follows:

                  (1)      Bank's prime lending rate
                  (2)      Bank's certificate of deposit rate
                  (3)      London interbank eurodollar rate (Eurodollar)

          At December 31, 1998,  interest on the bank term loan was at a rate of
          approximately 6.64%.

          The credit agreement  contains various financial  covenants related to
          working  capital,  net worth,  and cash flow.  Additionally,  the debt
          agreement  places certain  limitations on the incurrence of additional
          debt and prohibits the payment of dividends.

(6)       Employee Incentive Plans
          ------------------------

          In August 1989, an employee incentive plan was adopted,  whereby stock
          participation  units might be granted to officers  and key  employees.
          Such stock participation units entitle a participant to a cash payment
          following  termination of employment in an amount equal to the excess,
          if any, of the fair market value of one share of the Company's  common
          stock over a share price specified on the date of grant, multiplied by
          the number of vested  units.  The units  vest over a five year  period
          with 25%  vesting  after two years and the  remainder  in three  equal
          annual  installments.  For the year ended  December 31,  1989,  73,000
          units were

                                      -27-

<PAGE>



          awarded  to certain  employees  at a price of $4.50 per share of which
          49,500 units remain outstanding at December 31, 1998, all of which are
          100% vested.  During August 1993, 52,000 additional units were awarded
          at $5.625 per share of which 46,000 units remain  outstanding  and are
          also 100% vested.  Earnings are charged and credited  over the life of
          the units for  fluctuations  in stock  prices from $4.50 per share and
          $5.625 per share.  During the current year,  operations  were credited
          $136,125  and  $126,500  in regard to the  stock  participation  units
          granted in 1989 and 1993,  respectively.  These  credits  reflect  the
          reduction  in closing  stock  prices from $10.25 per share at December
          31,  1997 to $7.50  per  share at  December  31,  1998.  During  1997,
          operations  were  credited  $518,563  for the two sets of awards which
          followed a 1996 charge to operations in the amount of $888,887.

(7)       Income Taxes
          ------------

          Income tax expense (benefit) consists of the following:

                                             Years ended December 31,
                                      ----------------------------------------
                                      1998              1997              1996
                                      ----              ----              ----
            Federal
              Current             $  (734,967)      $1,212,500       $5,397,880
              Deferred             (3,313,000)         413,000            6,490
            State                     (33,889)         532,000          400,000
                                   ----------        ---------        ---------

                                  $(4,081,856)      $2,157,500       $5,804,370
                                   ==========        =========        =========

          Income tax  expense(benefit)  for the three years ended  December  31,
          1998 differs from the amount  computed by applying the applicable U.S.
          corporate  income  tax rate  (34% in 1998 and 1997 and 35% in 1996) to
          income (loss) before income taxes. The reasons for this difference are
          as follows:
<TABLE>
<CAPTION>


                                                              Years ended December 31,
                                                    -----------------------------------------
                                                    1998             1997                1996
                                                    ----             ----                ----
          <S>                                   <C>              <C>                <C>       
          Income tax expense (benefit)
            at U.S. statutory rate              $(4,045,104)     $2,248,371         $5,515,354
          State income taxes (benefit),
            net of Federal income
            tax effects                             (22,366)        351,120            260,000
          Allowable depletion in
            excess of cost depletion                 --            (223,261)          (223,197)
          Items not related to current
            year earnings                            --            (136,000)             --
          All other items                           (14,386)        (82,730)           252,213
                                                  ---------        ---------         ---------

            Income tax expense
                  (benefit)                     $(4,081,856)     $2,157,500         $5,804,370
                                                  =========       =========          =========

</TABLE>







                                      -28-

<PAGE>




          The  components of the net deferred tax (asset) and liability  were as
          follows:
                                                           December 31,
                                                     -----------------------
                                                     1998               1997
                                                     ----               ----

          Depreciable assets                      $ (387,000)      $   86,500
          Depletable assets                       (2,094,000)          36,500
          Intangible drilling
            and development costs                  1,860,000        2,678,000
          Employee benefit
            obligations                              (60,000)        (169,000)
                                                   ---------         ---------

          Net deferred tax (asset)
            liability                             $ (681,000)      $2,632,000
                                                   =========        =========

          For 1998, the net deferred tax calculation resulted in the recognition
          of a deferred tax asset. After review by management, it was determined
          no valuation allowance was deemed necessary.  In addition, the Company
          has statutory depletion carryovers of approximately $431,000 available
          for Federal income tax purposes.

(8)       Employee Benefit Plans
          ----------------------

          The Company adopted a noncontributory  defined contribution retirement
          plan for all full-time  employees  age 21 or older who have  completed
          one  year  of  service.   The  plan  provides  for  a  minimum  annual
          contribution  by the Company equal to 3% of an employee's  base salary
          plus overtime  compensation.  At its discretion,  the Company may also
          make  supplemental  contributions  to the plan.  For calendar 1997 and
          1998, the Company  elected to contribute 5% for each employee  covered
          by this plan.  Under  this  plan,  amounts  equal to  retirement  plan
          expense are funded annually, which amounted to $103,458,  $99,313, and
          $53,965, respectively, for the years ended December 31, 1998, 1997 and
          1996.

          The Company also has a profit  sharing plan pursuant to Section 401 of
          the Internal  Revenue  Code,  whereby  participants  may  contribute a
          percentage  of   compensation.   The  Plan  provides  for  a  matching
          contribution  by the  Company  equal  to  one-half  of the  employee's
          percentage  contribution up to the first 10% of compensation for 1998,
          1997,  and 1996.  During this same three year  period,  the  Company's
          matching   portion   amounted  to  $91,911,   $91,302,   and  $79,879,
          respectively.

(9)       Major Customers
          ---------------

          For the  year  ended  December  31,  1998,  oil and gas  sales to four
          customers,   amounting  to   approximately   $2,449,000,   $2,277,000,
          $2,183,000, and $2,144,000, respectively, each accounted for more than
          10% of total consolidated revenues.

          During the year ended  December 31,  1997,  oil and gas sales to three
          customers,  amounting  to  approximately  $5,698,000,  $5,067,000  and
          $3,783,000,  respectively,  each  accounted for more than 10% of total
          consolidated  revenues.  During the year ended  December 31, 1996, oil
          and

                                      -29-

<PAGE>



          gas sales to two customers,  amounting to approximately $6,059,000 and
          $3,898,000  each  accounted  for more  than 10% of total  consolidated
          revenues.

(10)      Contingencies and Commitments
          -----------------------------

          The Company is a  defendant  in certain  non-environmental  litigation
          arising from operations in the normal course of business.  While it is
          not  feasible to  determine  the outcome of these  actions,  it is the
          Company's opinion that the ultimate outcome of the litigation will not
          have a material adverse effect on the financial position or results of
          operations of the Company.

          All of the  Company's  operations  are  generally  subject to Federal,
          state and local environmental regulations. To the best of management's
          knowledge, the Company is in substantial compliance with such laws and
          regulations.

          The Company  leases office space and certain  equipment  under various
          operating  leases  which  expire over the next five years.  All leases
          require  the  payment of taxes and  insurance,  and the  office  lease
          requires  the  Company  to pay its pro  rata  share  of  increases  in
          maintenance  expense above that  prevailing in base years.  Management
          expects that in the normal course of business,  leases will be renewed
          or replaced by other  leases.  Rent  expense for the three years ended
          December 31, 1998 was $341,443, $321,001, and $314,743, respectively.

          Minimum payments for operating leases having initial or noncancellable
          terms in excess of one year are as follows:

                                            1999                 $  271,316
                                            2000                    120,914
                                            2001                     35,388
                                            2002                     20,520
                                                                  ---------

                  Total minimum payments                          $ 448,138
                                                                   ========

(11)      Supplemental Oil and Gas Disclosures (Unaudited)
          ------------------------------------------------

          Capitalized Costs
          -----------------

          A  summary  of  the  Company's  aggregate   capitalized  property  and
          equipment  costs relating to oil and gas  exploration  and development
          activities follows:
                                                            December 31,
                                                      ----------------------
                                                      1998              1997
                                                      ----              ----
              Undeveloped leaseholds and
                royalties                         $       --        $    199,416
              Producing properties                 107,292,314       103,831,936
                                                   -----------       -----------
                                                   107,292,314       104,031,352
              Accumulated depreciation and
                amortization                        72,687,281        54,351,135
                                                   -----------       -----------

              Net capitalized costs               $ 34,605,033      $ 49,680,217
                                                   ===========       ===========


                                      -30-

<PAGE>




(11)      Supplemental Oil and Gas Disclosures (Unaudited) continued
          ----------------------------------------------------------

          Costs Incurred
          --------------

              A  summary  of  costs   incurred  in  oil  and  gas   acquisition,
              exploration and development activities follows:

<TABLE>
<CAPTION>

                                                            Years ended December 31,
                                                      ---------------------------------
                                                      1998          1997           1996
                                                      ----          ----           ----
               <S>                               <C>            <C>            <C>       
               Acquisition of properties
                 Undeveloped                     $    2,946     $  195,434     $  104,846
                 Proved                           2,683,526        700,055          --
               Exploration costs                    472,001      1,006,253        125,963
               Development costs                    693,363      2,539,005      2,980,849
                                                  ---------      ---------      ---------

                                                 $3,851,836     $4,440,747     $3,211,658
                                                  =========      =========      =========

</TABLE>

         Results of Operations
         ---------------------

               The results of operations  from oil and gas producing  activities
               are as follows:

<TABLE>
<CAPTION>

                                                             Years ended December 31,
                                                      ---------------------------------------
                                                      1998              1997           1996
                                                      ----              ----           ----

               <S>                               <C>              <C>               <C>        
               Sales                             $16,166,042      $26,477,238       $30,583,133
               Production costs (a)               (8,722,565)     (10,124,212)      (10,079,948)
               Exploration expenses                 (421,977)      (1,060,616)         (340,913)
               Depreciation and
                 amortization                     (9,776,334)      (7,950,659)       (7,759,618)
               Impairment of oil and
               gas properties                     (8,754,846)        (227,879)          (57,056)
                                                  ----------       ----------        ----------
                                                 (11,509,680)       7,113,872        12,345,598
               Income tax (expense)
                 benefit                           3,897,501       (2,267,708)       (4,408,531)
                                                  ----------        ----------        ----------

               Results of operations
                 from oil and gas
                 producing activities            $(7,612,179)     $ 4,846,164       $ 7,937,067
                                                  ==========       ==========        ==========

               (a) Includes lifting costs, severance taxes and advalorem taxes.


</TABLE>













                                      -31-

<PAGE>




(11)     Supplemental Oil and Gas Disclosures (Unaudited) continued
         ----------------------------------------------------------

         Oil and Gas Reserve Quantities
         ------------------------------

         The following unaudited tables represent the Company's estimates of its
         proved  oil and gas  reserves.  The  Company  emphasizes  that  reserve
         estimates  are   inherently   imprecise  and  that   estimates  of  new
         discoveries  are more  imprecise  than those of  producing  oil and gas
         properties. Accordingly, the estimates are expected to change as future
         information  becomes  available.  The estimates  were  evaluated by the
         Company's  staff of  petroleum  engineers  and  audited by  independent
         petroleum engineers. It is their opinions that the reserve quantity and
         present value  information  in the following  tables  complies with the
         applicable  rules  and  regulations  of the SEC.  All of the  Company's
         reserves are located within the United States.

Proved Developed and                                Oil               Gas
Undeveloped Reserves                             (Barrels)            (MCF)
--------------------                             ---------           -----
Total as of December 31, 1995                    8,872,515        18,864,020
         Revisions of previous estimates         1,150,114         3,100,882
         Purchases of reserves                       --                --
         Extensions and discoveries                432,789           463,296
         Production                             (1,212,369)       (2,890,061)
         Sales of reserves in place               (268,663)       (4,952,957)
                                                 ---------        ----------

Total as of December 31, 1996                    8,974,386        14,585,180
         Revisions of previous estimates          (733,337)         (763,172)
         Purchases of reserves                      55,867            98,228
         Extensions and discoveries                 10,402           782,797
         Production                             (1,106,042)       (1,957,147)
         Sales of reserves in place                (52,809)          (10,966)
                                                 ---------        ----------

Total as of December 31, 1997                    7,148,467        12,734,920
         Revisions of previous estimates        (1,372,452)         (252,807)
         Purchases of reserves                     244,810         1,971,319
         Extensions and discoveries                 24,624            94,318
         Production                             (1,025,524)       (1,637,254)
         Sales of reserves in place                   (473)           (6,396)
                                                ----------        ----------

Total as of December 31, 1998                    5,019,452        12,904,100
                                                ==========        ==========

Proved Developed Reserves
December 31, 1996                                8,649,996        13,442,204
December 31, 1997                                6,761,920        12,001,602
December 31, 1998                                4,947,039        12,262,069










                                      -32-

<PAGE>




(11)     Supplemental Oil and Gas Disclosures (Unaudited) continued
         ----------------------------------------------------------

Standardized Measure
--------------------

     The  standardized  measure of discounted  future cash flows from proved oil
and gas reserves determined in accordance with rules prescribed by the Financial
Accounting Standards Board is summarized as follows:

                                                     Years ended December 31,
                                             ----------------------------------
                                              1998          1997          1996
                                             (000's)       (000's)       (000's)
                                             -------       -------       -------

Future cash inflows                         $  74,282    $ 138,471    $ 273,644
Future production costs                       (38,158)     (73,641)    (110,123)
Future development costs                         (773)      (2,193)      (2,912)
                                            ---------    ---------    ---------
                                               35,351       62,637      160,609
Future income tax (expenses)
  benefits                                        487       (6,891)     (38,610)
                                            ---------    ---------    ---------
Future net cash flows                          35,838       55,746      121,999
10% annual discount for estimated
  timing of cash flows                        (11,348)     (17,867)     (44,361)
                                            ---------    ---------    ---------
Standardized measure of discounted
  future net cash flows                     $  24,490    $  37,879    $  77,638
                                            =========    =========    =========


The average  prices for oil and gas used to  calculate  future  cash  inflows at
December 31, 1998 were $10.02 per barrel and $1.86 per mcf, respectively.

The following are the principal  sources of changes in the standardized  measure
of discounted future net cash flows.

                                                    Years ended December 31,
                                                --------------------------------
                                                 1998        1997         1996
                                                (000's)     (000's)      (000's)
                                                -------     -------      -------

Standardized measure - beginning of year       $ 37,879    $ 77,638    $ 56,601
Sales of oil and gas produced,
  net of production costs                        (7,443)    (16,353)    (20,503)
Net changes in prices and production costs      (10,714)    (46,696)     36,421
Extensions, discoveries, and improved
  recovery, less related costs                      277       1,593       3,876
Changes in future development costs               1,094         128        (617)
Development costs incurred                          193         994         182
Revisions of previous quantity estimates         (7,361)     (3,741)     14,503
Accretion of discount                             3,788       4,256       6,631
Purchase of proved reserves                       1,800         348        --
Sale of proved reserves                              (2)       (255)     (4,669)
Net change in income taxes                        5,015      19,889     (14,861)
Other                                               (36)         78          74
                                               --------    --------    --------

Standardized measure - end of year             $ 24,490    $ 37,879    $ 77,638
                                               ========    ========    ========



                                      -33-

<PAGE>





                                                                     Schedule II
<TABLE>


                       MAYNARD OIL COMPANY AND SUBSIDIARY
                        Valuation and Qualifying Accounts
                       Three Years Ended December 31, 1998

<CAPTION>



                                                                  Charged to
                                                Beginning          Cost and                                   Ending
Description                                      Balance           Expenses            Deductions            Balance
-----------                                      -------           --------            ----------            -------

Allowance for Doubtful Accounts - (a)
-------------------------------------


<S>                                              <C>                 <C>                                      <C>    
December 31, 1996                                $ 43,000            $ 7,000               --                 $50,000
                                                 ========            =======            ========              =======

December 31, 1997                                $ 50,000            $20,000               --                 $70,000
                                                 ========            =======            ========              =======

December 31, 1998                                $ 70,000            $ 3,600             $(20,600)            $53,000
                                                 ========            =======             ========             =======

(a)  Valuation  account  deducted  in the  balance  sheet  from  trade  accounts receivable.



</TABLE>




                                      -34-