<PAGE>
 
                                   FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


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


For the quarterly period ended June 30, 1997


                                      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     0-17162
                       ---------------


                         KEY PRODUCTION COMPANY, INC.
-------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

Delaware                                                      84-1089744
-------------------------------------------------------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification Number)


Suite 3300
707 Seventeenth Street, Denver, Colorado                            80202-3404
------------------------------------------------------------------------------
(Address of Principal Executive Offices)                            (Zip Code)


Registrant's Telephone Number, Including Area Code  (303) 295-3995
                                                   ---------------


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


YES    X       NO______
    ------             

The number of shares of Key Production Company, Inc. common stock, $.25  par
value, outstanding as of June 30, 1997, is 11,477,497.
<PAGE>
 
                        PART I - FINANCIAL INFORMATION
                        ------------------------------

ITEM 1 - FINANCIAL STATEMENTS
-----------------------------

                         KEY PRODUCTION COMPANY, INC.
                       CONSOLIDATED STATEMENT OF INCOME
                                  (Unaudited)
<TABLE>
<CAPTION>
                                               For the Quarter                  For the Six Months
                                                Ended June 30,                    Ended June 30,
                                              ---------------------         ----------------------- 
<S>                                          <C>          <C>               <C>           <C> 
(In thousands, except per share data)          1997          1996              1997          1996
                                             --------     ---------         ---------     --------- 
REVENUES:
  Oil and gas production revenues            $  9,421     $  10,127         $  20,460     $  16,008
  Other revenues                                   95            82               166            82
                                             --------     ---------         ---------     ---------
                                                9,516        10,209            20,626        16,090
                                             --------     ---------         ---------     ---------

OPERATING EXPENSES:
  Depreciation, depletion and
    amortization                                2,884         3,633             6,038         5,959
  Operating costs                               2,529         2,634             5,282         4,217
  Administrative, selling and other               695           672             1,104         1,063
  Financing costs:
    Interest expense                              132           215               321           326
    Interest income                               (19)          (19)              (43)          (24)
                                             --------     ---------         ---------     ---------

                                                6,221         7,135            12,702        11,541
                                             --------     ---------         ---------     ---------

INCOME BEFORE INCOME TAXES                      3,295         3,074             7,924         4,549

PROVISION FOR INCOME TAXES                      1,252         1,168             3,011         1,729
                                             --------     ---------         ---------     ---------
NET INCOME                                   $  2,043     $   1,906         $   4,913     $   2,820
                                             ========     =========         =========     =========
NET INCOME PER COMMON AND COMMON
  EQUIVALENT SHARE                           $    .17     $     .16         $     .40     $     .26
                                             ========     =========         =========     =========

WEIGHTED AVERAGE COMMON AND COMMON
 EQUIVALENT SHARES OUTSTANDING                 12,138        12,265            12,159        10,858
                                             ========     =========         =========     =========
</TABLE>

              The accompanying notes to financial statements are 
                      an integral part of this statement.

                                      -2-
<PAGE>
 
                         KEY PRODUCTION COMPANY, INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                               For the Six Months
                                                                 Ended June 30,
                                                               ---------------------
(In thousands)                                                   1997        1996
                                                               ---------   ---------
<S>                                                            <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                   $   4,913   $   2,820
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation, depletion and amortization                     6,038       5,959
      Deferred income taxes                                        2,694       1,547
                                                               
  Changes in operating assets and liabilities:
    (Increase) decrease in receivables                             2,617      (1,337)
    Increase in prepaid expenses and other                          (497)       (323)
    Increase (decrease) in accounts payable and
      accrued expenses                                             2,602        (297)
    Decrease in long-term property liabilities and
      other                                                         (283)          -
                                                               ---------   ---------
      Net cash provided by operating activities                   18,084       8,369
                                                               ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Oil and gas exploration and development
    expenditures                                                 (13,430)     (7,791)
  Acquisition of oil and gas properties                           (3,827)       (429)
  Cash received in connection with acquisition,
    net of cash purchase adjustments                                   -       2,433
  Proceeds from sale of oil and gas properties                       318          23
  Other capital expenditures                                        (449)       (136)
                                                               ---------   ---------
      Net cash used by investing activities                      (17,388)     (5,900)
                                                               ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Long-term borrowings                                             6,000      10,104
  Payments on long-term debt                                      (4,500)    (11,500)
  Proceeds from issuance of common stock                              50          10
  Payments to acquire treasury stock                                (408)          -
                                                               ---------   ---------
      Net cash provided (used) by financing activities      
        activities                                                 1,142      (1,386)
                                                               ---------   ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                          1,838       1,083

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                     1,581         591
                                                               ---------   ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $   3,419   $   1,674
                                                               =========   =========
</TABLE>

              The accompanying notes to financial statements are 
                      an integral part of this statement.

                                      -3-
<PAGE>
 
                          KEY PRODUCTION COMPANY, INC.
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                       June 30,       December 31,
     (In thousands)                                      1997            1996
                                                      ------------    -------------
                                                       (Unaudited)
     <S>                                              <C>             <C>
                                   ASSETS                
     CURRENT ASSETS:
       Cash and cash equivalents                      $      3,419    $       1,581
       Receivables                                           6,006            8,623
       Prepaid expenses and other                            1,371              874
                                                      ------------    -------------
                                                            10,796           11,078
                                                      ------------    -------------
     OIL AND GAS PROPERTIES, ON THE BASIS OF FULL
       COST ACCOUNTING:
       Proved properties                                   114,662          102,487
       Unproved properties and properties under
         development, not being amortized                   16,037           10,685
                                                      ------------    -------------
                                                           130,699          113,172
       Less - accumulated depreciation,
         depletion and amortization                        (34,881)         (28,941)
                                                      ------------    -------------
                                                            95,818           84,231
                                                      ------------    -------------
   
     OTHER ASSETS, NET                                       1,103              631
                                                      ------------    -------------
                                                      $    107,717    $      95,940
                                                      ============    =============
           LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES:
       Accounts payable                               $      6,873    $       4,405
       Accrued exploration and development                   1,440              852
       Accrued lease operating expense and other               778              761
                                                      ------------    -------------
                                                             9,091            6,018
                                                      ------------    -------------
     LONG-TERM DEBT                                         24,000           22,500
                                                      ------------    -------------
     NONCURRENT LIABILITIES
       Deferred income taxes                                12,623            9,929
       Long-term property liabilities and other              2,062            2,224
                                                      ------------    -------------
                                                            14,685           12,153
                                                      ------------    -------------
     STOCKHOLDERS' EQUITY:
       Common stock, $.25 par value, 50,000,000
         shares authorized, 11,771,690 and
         11,713,584 shares issued, respectively              2,943            2,928
       Paid-in capital                                      37,346           37,245
       Retained earnings                                    22,382           17,469 
       Treasury stock at cost, 294,193 and                  
         259,093 shares, respectively                       (2,730)          (2,373) 
                                                      ------------    -------------
                                                            59,941           55,269
                                                      ------------    -------------
                                                      $    107,717    $      95,940
                                                      ============    ============= 
</TABLE>

              The accompanying notes to financial statements are 
                      an integral part of this statement.

                                      -4-
<PAGE>
 
                         KEY PRODUCTION COMPANY, INC.
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                  (Unaudited)
<TABLE>
<CAPTION>
  
                                                                                     TOTAL
                                                                                     STOCK-
                              COMMON       PAID-IN      RETAINED      TREASURY      HOLDERS'
                               STOCK       CAPITAL      EARNINGS      STOCK         EQUITY
                             ---------     ---------    ---------     ---------     ---------
<S>                          <C>           <C>          <C>           <C>           <C>
                                          (In thousands, except per share data)
 
BALANCE, DECEMBER 31, 1996   $   2,928     $  37,245    $  17,469     $  (2,373)    $  55,269
  Net income                         -             -        4,913             -         4,913
  Common stock issued               15            94            -             -           109
  Treasury stock issued              -             7            -            51            58
  Treasury stock purchased           -             -            -          (408)         (408)
                             ---------     ---------    ---------     ----------    ---------

BALANCE, JUNE 30, 1997       $   2,943     $  37,346    $  22,382     $  (2,730)    $  59,941
                             =========     =========    =========     =========     =========
</TABLE>

              The accompanying notes to financial statements are
                      an integral part of this statement.

                                      -5-
<PAGE>
 
                         KEY PRODUCTION COMPANY, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)

     The financial statements included herein have been prepared by Key
Production Company, Inc. ("Key" or the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission, and reflect
all adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods, on a basis consistent with the
annual audited statements. All such adjustments are of a normal, recurring
nature except as disclosed herein. Certain information, accounting policies, and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
financial statements should be read in conjunction with the financial statements
and summary of significant accounting policies and notes thereto included in the
Company's latest annual report on Form 10-K.

BASIS OF PRESENTATION

    Key consummated the acquisition of Brock Exploration Corporation (Brock) on
March 28, 1996 in a tax-free reorganization pursuant to which Brock became a
wholly-owned subsidiary of Key. To effect the transaction, each Brock
shareholder received one share of Key common stock for each 1.45 Brock shares
held. The accompanying financial statements include the accounts of Key for 1997
and 1996 and the accounts of Brock for periods subsequent to the acquisition.

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

INCOME TAXES

     Income tax expense consisted of the following:

<TABLE> 
<CAPTION> 
                                        Six Months Ended June 30,
                                        -------------------------
                                            1997          1996
                                        -----------    ----------
<S>                                     <C>            <C>

     Current Taxes:
          Federal                       $         -    $        -
          State                                 317           182
 
     Deferred Taxes:                          2,694         1,547
                                        -----------    ----------
 
                                        $     3,011    $    1,729
                                        ===========    ==========
</TABLE>

                                      -6-
<PAGE>
 
NET INCOME PER SHARE

     Net income per share amounts are based on the weighted average number of
common shares outstanding for each period. When dilutive, outstanding options to
purchase common stock are included as share equivalents using the treasury stock
method. Only one per share figure is presented for each period because the fully
diluted and primary earnings per share amounts are not materially different.

     The Company will adopt Financial Accounting Standards No. 128, "Earnings
per Share," on December 15, 1997. The new standard replaces "primary earnings
per share" with "basic earnings per share" and redefines "diluted earnings per
share." On a pro forma basis, the Company would report the following per share
results.

<TABLE> 
<CAPTION> 
                         For the Three Months      For the Six Months
                            Ended June 30,           Ended June 30,

                         --------------------     --------------------  
                            1997       1996          1997      1996
                         ---------    -------     --------   ---------
<S>                      <C>          <C>         <C>        <C>   

  Basic earnings per
    common share         $     .18    $   .16     $    .43   $     .26
  Diluted earnings per
    common share         $     .17    $   .16     $    .40   $     .26
</TABLE> 

STATEMENT OF CASH FLOWS

     The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. These
investments earned 5.6 percent and 5.5 percent rates of interest at June 30,
1997 and December 31, 1996, respectively, with cost approximating market.


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE> 
<CAPTION> 

                                           For the Six Months
                                              Ended June 30,
                                           ------------------
                                             1997      1996
                                           -------    -------
(In thousands)
<S>                                        <C>        <C>    
Cash paid during the period for:
   Interest (net of amounts capitalized)   $   601    $   295 
   Income taxes (net of refunds received)  $   106    $   156
</TABLE> 

                                      -7-
<PAGE>
 
      SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

     In connection with the Brock acquisition, the Company received cash and
cash equivalents totaling $2,098,000. In addition to the cash impact, the
acquisition had the following non-cash impact on the Company's December 31,
1996 balance sheet:

<TABLE>  
<CAPTION> 
                                                            Amount
                                                            ------
                                                        (in thousands)
                    <S>                                 <C>         
                    Current assets                       $     1,383
                    Oil and gas properties                    21,346     
                                                             -------     
                                                         $    22,729 
                                                             =======
                    Current liabilities                  $     1,099     
                    Long-term debt                             7,950     
                                                                         
                    Non-current liabilities                    1,909     
                    Stockholders' equity                      13,869     
                                                             -------     
                                                         $    24,827     
                                                             =======    
 </TABLE>

 PRO FORMA FINANCIAL INFORMATION

     Key consummated the acquisition of Brock Exploration Corporation (Brock) on
March 28, 1996 in a tax-free reorganization pursuant to which Brock became a
wholly-owned subsidiary of Key. To effect the transaction, each Brock
shareholder received one share of Key common stock for each 1.45 Brock shares
held.

     The following unaudited pro forma information was prepared as if the Brock
acquisition occurred on January 1, 1996. The pro forma data presented is based
on numerous assumptions and is not necessarily indicative of future operations.

<TABLE>
<CAPTION>
                                                    Six Months Ended         
                                                      June 30, 1996           
                                                     ----------------          
                                                   (In thousands, except     
                                                       per share data)      
               <S>                                 <C>                      
               Revenues                                   $18,595           
               Net income                                 $ 3,361           
               Net income per share                       $   .28            
</TABLE>

                                      -8-
<PAGE>
 
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FINANCIAL RESULTS

     Key is reporting second quarter 1997 net income of $2.0 million. This
represents a 7 percent increase over the $1.9 million reported for the same
quarter of 1996. Net income per share of $.17 per share is up 6 percent from the
$.16 per share reported a year ago. Second quarter results for 1997 and 1996 are
based on revenues of $9.5 million and $10.2 million, respectively.

     On a year to date basis, Key is reporting a 74 percent increase in net
income, and a 54 percent increase in net income per share. Net income for the
six month periods was $4.9 million and $2.8 million for 1997 and 1996,
respectively.

RESULTS OF OPERATIONS

<TABLE> 
<CAPTION> 
                                          For the Quarter              For the Six Months
                                            Ended June 30,               Ended  June 30,   
                                         -------------------           -------------------
                                          1997         1996              1997        1996
                                         ------       ------           -------     -------
Selected Oil and Gas
Operating Statistics
--------------------
<S>                                      <C>           <C>             <C>         <C>
Gas Volume - Mcf per day                  29,550        30,152          28,962      23,596
Gas Price - Per Mcf                      $  2.00       $  1.91         $  2.32     $  1.97
Oil Volume - Barrels per day               2,366         2,651           2,298       2,143
Oil Price - Per barrel                   $ 17.65       $ 19.81         $ 18.98     $ 18.85
Full Cost Amortization Rate                 30.0%         35.5%           29.0%       36.7%
</TABLE> 

     Oil and gas revenues for the second quarter of 1997 were down 7 percent
from the previous year.The slight decline is the result of lower oil sales. Oil
and gas revenues for the six month periods increased by 28 percent between 1997
and 1996. The year to date increase is due to the acquisition of Brock at the
end of the first quarter in 1996 as well as production from new drilling.

     Oil sales for the current quarter of $3.8 million reflect a 20 percent
decrease from the $4.8 million reported for the same quarter a year ago.
Decreases to oil production and price declines both contributed to the drop in
oil revenues. Daily oil production went from 2,651 barrels per day in 1996 to
2,366 per day in 1997. Key's average daily price slipped from $19.81 per barrel
in 1996 to $17.65 per barrel in 1997.
 
     Oil sales for the first six months of 1997 are 7 percent ahead of 1996 six
month results. Most of the increase, $.5 million, is due to an increase in oil
production. Daily production increased from 2,143 barrels per day in 1996 to
2,298 barrels per day in 1997. Average oil prices for the six month periods
increased slightly from $18.85 per barrel in 1996 to $18.98 per barrel in 1997.

     Gas sales for the second quarter of 1997 increased to $5.4 million. A 5
percent increase to Key's average gas price more than offset a 2 percent
decrease in gas production. Key's average price for the second quarter climbed
from $1.91 per Mcf in 1996 to $2.00 per Mcf in 1997. Average daily production
fell from 30,152 Mcf per day in 1996 to 29,550 Mcf per day in 1997.

                                      -9-
<PAGE>
 
     Gas sales for the six month period increased by 44 percent between 1996 and
1997. Daily production increased from 23,596 Mcf per day in 1996 to 28,962 Mcf
per day in 1997. Production increases contributed approximately $1.9 million to
gas sales. Key's average price increased from $1.97 per Mcf in 1996 to $2.32 per
Mcf in 1997, for an additional $1.8 million in sales.
 
     Product sales from gas processing plants for the second quarter and first
six months increased 110 percent and 87 percent, respectively, but did not
contribute a significant amount to oil and gas revenues. Key's second quarter
oil and gas revenues are derived from the following product mix: 40 percent oil,
57 percent gas and 3 percent plant products. This compares to the following mix
for 1996: 47 percent oil, 52 percent gas and 1 percent plant products.

    Other revenue for the second quarters and first six months of 1997 and 1996
is primarily income derived from a pipeline acquired in the 1996 Brock
acquisition.

     Depreciation, depletion and amortization (DD&A) expense decreased 21
percent between the second quarters of 1997 and 1996. Most of the decrease is
based on a reduction in the DD&A rate, and to a smaller extent a decrease in oil
and gas sales. The quarterly depletion rate as a percentage of oil and gas sales
went from 35.5 percent in 1996 to 30.0 percent in 1997 .

     DD&A expense for the six months increased by 1 percent between 1997 and
1996. The expense increase is the result of a 28 percent increase to oil and gas
sales which was offset by a decrease in the DD&A rate. The six month depletion
rate as a percentage of oil and gas sales dropped from 36.7 percent in 1996 to
29.0 percent in 1997. Improved product prices and increased reserves were the
catalyst for improved DD&A rates in 1997. Also included in DD&A expense is a
relatively immaterial amount of depreciation on fixed assets and amortization of
financing costs associated with the Company's credit facility.

     Quarterly operating expenses decreased by 4 percent between 1997 and 1996.
On a unit of production basis, second quarter expenses increased from $.63 per
EMcf in 1996 to $.64 per EMcf in 1997. Consistent with oil and gas revenue
increases, year to date operating expenses increased by 25 percent between 1996
and 1997. Expenses compared on a unit of production basis increased by 7
percent, or $.05 per EMcf. Operating expenses for the first six months of 1997
are $.68 per EMcf. (Oil is compared to natural gas in terms of equivalent
thousand cubic feet, "EMcf." One barrel of oil is the energy equivalent of six
Mcf of natural gas.)

     General, administrative and other costs increased 3 percent between the
second quarters of 1996 and 1997, and increased 4 percent between the first six
months of 1997 and 1996. Due to certain economies of scale and full cost
accounting rules which provide for the capitalization of direct overhead related
to exploration and development activities, the Company was able to maintain
levels of administrative expense while managing a larger asset base. General,
administrative and other costs declined on a units of production basis from $.16
per EMcf for the first six months of 1996 to $.14 per EMcf for the first six
months of 1997.

                                      -10-
<PAGE>
 
     Interest expense before capitalization for the first six months of 1997 and
1996 was $734,000 and $646,000, respectively. Key capitalizes interest on
borrowings associated with undeveloped leasehold. The amounts capitalized for
the same periods were $413,000 and $320,000, respectively.

CASH FLOW AND LIQUIDITY
 
     Liquidity refers to the ability of an enterprise to generate adequate
amounts of cash to satisfy its financial commitments. Key's primary needs for
cash are for payment of existing financing obligations and trade commitments
related to oil and gas operations. The Company's primary sources of liquidity
are cash flows from operating activities and debt financing. Management believes
that the overall sources of funds available to Key, including cash on hand, will
continue to be more than sufficient to satisfy the Company's financial
obligations.
 
     Cash from operating activities reached $18.1 million for the first six
months of 1997, more than twice the $8.4 million reported for the same period
1996. Increases to net income, deferred taxes and DD&A added $3.3 million. The
remaining $6.4 million increase stems primarily from a decrease in revenue
receivables and an increase in accounts payable balances.

     Cash expenditures for exploration and development reached $13.4 million for
the first six months of 1997. This is a 72 percent increase over the $7.8
million expended in the first six months of 1996. For the six months of 1997,
exploration and development expenditures amounted to 74 percent of cash from
operating activities.

     Cash expended for the acquisition of oil and gas properties includes the 
acquisition of non-producing acreage over 11 salt domes in west central 
Mississippi.
 
     Since year end 1996, long-term debt increased from $22.5 million to $24.0
million The Company borrowed a net $1.5 million against its credit facility to
finance the acquisition of undeveloped acreage in excess of cash generated by
operating activities. In the first six months of 1996, long-term debt increased
from $14.6 million to $21.2 million. Key drew on its own credit facility to
retire Brock debt and obtain more favorable financing terms.
 
     The Company's ratio of current assets to current liabilities was 1.2 to 1
at June 30, 1997, a decrease from the 1.8 to 1 ratio calculated at December 31,
1996.
 
FUTURE TRENDS
 
     The Company expects that cash on hand, net cash generated by operating
activities and amounts available under the credit facility will be adequate to
meet future liquidity needs under current corporate policies. Management
believes that the overall sources of funds available to Key will continue to be
sufficient to provide resources to meet the Company's exploration, development
and acquisition objectives.
 
     Exploration expenditures for the first half of 1997 exceeded $17 million,
more than double the amount spent in the first half of 1996. The Mid-Continent
region continues to be the region with the most activity in terms of the number
of wells drilled. Also, the number of company-operated drilling wells in the

                                      -11-
<PAGE>
 
Mid-Continent region increased significantly during the first half of the year.
Exploration activity in this region is expected to continue to increase. 
 
     Activities in the California region during the first half of 1997 have
focused on getting several projects to the drilling stage. As a result, drilling
activity in California is expected to increase significantly during the balance
of 1997. Due to the timing of this drilling, any wells that are successfully
completed probably would not significantly impact California gas production
before the fourth quarter of 1997.
 
     Gulf Coast exploration efforts have been focused in the Mississippi Salt
Basin and in Vermillion Parish, Louisiana. The Company is conducting 3-D seismic
shoots in both of these areas. The 3-D seismic data is expected to yield several
prospects, although drilling in these areas is not expected to commence until
late 1997 or early 1998.

     As discussed previously, compared to the first half of 1996, oil prices
were somewhat better and gas prices were significantly better in the first half
of this year. Although the price of both products is relatively strong at the
current time, it is impossible to predict future prices.

     The Company continues to review merger and acquisition opportunities when
they become known. Potential acquisitions or mergers with the economic and
strategic attributes necessary to facilitate the profitable growth of the
Company will be actively pursued.

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

     This report contains "forward-looking statements" within the meaning of the
federal securities laws. These forward-looking statements include, among others,
statements concerning the Company's outlook for the remainder of 1997 with
regard to production levels, price realizations, expenditures for exploration
and development, plans for funding operations and capital expenditures, and
other statements of expectations, beliefs, future plans and strategies,
anticipated events or trends and similar expressions concerning matters that are
not historical facts. The forward-looking statements in this report are subject
to risks and uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements.

     These risks and uncertainties include, but are not limited to, fluctuations
in the price the Company receives for its oil and gas production, reductions in
the quantity of oil and gas sold due to decreased industry-wide demand and/or
curtailments in production from specific properties due to mechanical, marketing
or other problems, operating and capital expenditures that are either
significantly higher or lower than anticipated because the

                                      -12-
<PAGE>
 
actual cost of identified projects varied from original estimates and/or from
the number of exploration and development opportunities being greater or fewer
than currently anticipated and increased financing costs due to a significant
increase in interest rates. These and other risks and uncertainties affecting
the Company are discussed in greater detail in this report and in other filings
by the Company with the Securities and Exchange Commission.

                                      -13-
<PAGE>
 
                          PART II. - OTHER INFORMATION
                          ----------------------------

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

     On May 8, 1997 Company held its annual meeting of stockholders at which
Francis H. Merelli, Cortlandt S. Dietler and L. Paul Teague were elected as
directors.



     The following are the number of votes cast on the election of directors.

<TABLE>
<CAPTION>  
Directors:                                           For                                         Withhold Authority
----------                                           ---                                         ------------------
<S>                                               <C>                                            <C> 
Francis H. Merelli                                9,108,650                                             458,142    
Cortlandt S. Dietler                              9,107,510                                             459,282    
L. Paul Teague                                    9,109,536                                             457,256    
</TABLE> 

ITEM 5.  OTHER INFORMATION
--------------------------


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

     (a)  Exhibits:

          27.1  Financial Data Schedule for Commercial and Industrial Companies
                per Article 5 of the Regulation S-X for the quarter ended June
                30, 1997.

     (b)  Reports on Form 8-K:

          None.

                                      -14-
<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements 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.

Dated: August 8, 1997


                                        KEY PRODUCTION COMPANY, INC.


                                                                                
                                        /s/ Monroe W. Robertson
                                        ------------------------------
                                        Monroe W. Robertson
                                        Senior Vice President and Secretary
                                        (Principal Financial Officer)


                                        /s/ Cathy L. Anderson
                                        ------------------------------
                                        Cathy L. Anderson
                                        Controller
                                        (Principal Accounting Officer)

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