SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended September 30, 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 0-18754

                          BLACK WARRIOR WIRELINE CORP.
     ----------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

        DELAWARE                                        11-2904094            
 ----------------------------------------------------------------------------
(State or other jurisdiction of                      (I.R.S employer
 incorporation of organization)                       identification no.)

                  3748 HIGHWAY 45 NORTH, COLUMBUS, MISSISSIPPI
     ----------------------------------------------------------------------
            39701 (Address of principal executive offices, zip code)

                                 (601) 329-1047
     ----------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

                               YES [X]             NO

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

                                                     Outstanding at
                 Class                              November  12 , 1998      
         ------------------------                 -----------------------      
         COMMON STOCK, PAR VALUE                     3,892,831 SHARES
           $.0005 PER SHARE

                  Transitional Small Business Disclosure Format

                              YES                  NO   [X] 


<PAGE>
                          BLACK WARRIOR WIRELINE COPR.

                         QUARTERLY REPORT ON FORM 10-QSB

                                      INDEX

PART I - FINANCIAL INFORMATION

                                                                            Page
                                                                            ----
Item 1.       Financial Statements

              Consolidated Balance Sheets - September 30, 1998
              and  December 31, 1997                                          3

              Consolidated Statements of Operations -
              Three Months Ended September 30, 1998 and
              September 30, 1997                                              4

              Consolidated Statements of Operations -
              Nine Months Ended September 30, 1998 and
              September 30, 1997                                              5

              Consolidated Statements of Cash Flows -
              Nine Months Ended September 30, 1998 and
              September 30, 1997                                              6

              Notes to Consolidated Financial Statements -
              Nine Months Ended September 30, 1998 and
              September 30, 1997                                              7


Item 2.       Management's Discussion and Analysis of Financial
              Condition and Consolidated Results of Operations                6

PART II - OTHER INFORMATION

Item 3.       Defaults Upon Senior Securities                                17

Item 6.       Exhibits and Reports on Form 8-K                               17



                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
         ITEM 1.  FINANCIAL STATEMENTS

BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                        SEPTEMBER 30, 1998        DECEMBER 31, 1997
                                                        ------------------        -----------------
                           ASSETS                           (UNAUDITED)
<S>                                                       <C>                         <C>     
Current assets:
    Cash and cash equivalents                             $           0               $435,845
    Short-term investments                                       50,000                 50,000
    Accounts receivable, less allowance for doubtful
        accounts of $ 200,359 and $143,559                    5,549,349              5,459,689
    Prepaid expenses                                            283,570                390,144
    Deferred tax asset                                          730,213                 80,815
    Other receivables                                           639,083                901,629
                                                                -------                -------
                      Total current assets                    7,252,215              7,318,122
Land and building                                               245,000                      0
Property, plant, and equipment, less accumulated
    depreciation of $ 7,683,592  and $4,791,052              25,741,277              9,347,685
Inventories                                                   5,651,565                      0
Other assets                                                    518,259                358,521
Other receivables                                               500,000
Goodwill, less accumulated amortization of $477,642
  and $134,421                                               11,375,826              9,061,655 
                                                             ----------              ----------
                      Total assets                          $51,284,142            $26,085,983 
                                                            ===========            ============

                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Cash overdraft                                             $115,135                     $0
    Accounts payable                                          6,135,624              3,619,466
    Accounts payable, related parties                                 0                  6,090
    Accrued salaries and vacation                                62,380                124,376
    Income tax payable                                                                 599,877
    Accrued interest payable                                    696,244                 69,041
    Other accrued expenses                                    1,043,215                289,445
    Deferred revenue                                            182,000                100,000
    Current maturites of notes payable to banks                       0                  7,624
    Mortgage notes payable, related party                             0                380,000
    Note payable, related party                               3,000,000
    Current maturities of long-term debt and capital
         lease obligations                                    3,474,631                793,618
                                                              ---------                -------
                      Total current liabilities              14,709,229              5,989,537
Deferred tax liability                                        1,032,991              1,132,513
Long-term accrued interest payable                              437,614                150,364
Notes payable to related parties                             15,400,000              8,070,549
Notes payable to banks, less current maturities                       0                 22,212
Long-term debt and capital lease obligations, less
    current maturities                                       14,752,698              5,123,535
                                                             ----------              ---------
                      Total liabilities                      46,332,532             20,488,710 
                                                             ----------             -----------
Stockholder's equity:
     Preferred stock, $.0005 par value, 2,500,000
       shares authorized none issued at September 30,
       1998 and December 31, 1997, respectively                       0                      0
     Common stock, $.0005 par value, 12,500,000 shares
       authorized; 3,897,451 and 2,990,254 shares issued
       and outstanding at September 30, 1998 and December
       31, 1997, respectively                                     1,949                  1,495
Additional paid-in capital                                   12,065,166              7,744,953
Common stock to be issued in connection with acquisition

    (133,333 shares)                                                  0                280,000
Accumulated deficit                                          (6,532,112)            (1,845,782)
Treasury stock, at cost, 4,620 shares                          (583,393)              (583,393)
                                                              ----------              ---------
                      Total stockholders' equity              4,951,610              5,597,273
                                                              ---------              ---------
Total liabilities and stockholders' equity                  $51,284,142           $ 26,085,983
                                                            ===========           ============

</TABLE>
        See accompanying notes to the consolidated financial statements.


                                       3
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended September 30, 1998 and September 30, 1997



<PAGE>
<TABLE>
<CAPTION>
                                                       SEPTEMBER 30, 1998       SEPTEMBER 30, 1997
                                                       ------------------       ------------------
                                                          (UNAUDITED)                (UNAUDITED)
<S>                                                          <C>                       <C>       
Revenues                                                     $8,048,018                $4,565,840

Operating costs                                               7,607,565                 3,353,167

Selling, general and administrative expenses                  1,524,085                   740,396

Depreciation and amortization                                 1,651,343                   467,455 
                                                              ----------                  --------

     Net (loss) income from operations                       (2,734,975)                    4,822

Interest expense and amortization of debt discount              919,481                   154,476

Net gain on sale of fixed assets                                 59,817                         0

Other income                                                     14,093                    32,258 
                                                                 -------                   -------

     Net loss before benefit for
          income taxes                                       (3,580,546)                 (117,396)

Income taxes                                                          0                         0
                                                                      --                        -

     Net loss                                               $(3,580,546)                $(117,396)
                                                            ============                ==========

     Net loss per common share- basic                           $(0.92)                   $ (0.05) 
                                                                =======                   =========

     Net loss per common share- diluted                         $(0.92)                   $ (0.05)
                                                                =======                   ========


Weighted average common shares outstanding-
    basic                                                     3,892,831                 2,378,596
                                                              =========                 =========

Weighted average common shares outstanding
    with dilutive securities                                  3,892,831                 2,378,596
                                                              =========                 =========
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       4
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the nine months ended September 30, 1998 and September 30, 1997


<TABLE>
<CAPTION>
                                                      SEPTEMBER 30, 1998       SEPTEMBER 30, 1997
                                                      ------------------       ------------------
                                                         (UNAUDITED)              (UNAUDITED)
<S>                                                         <C>                        <C>       
Revenues                                                    $27,961,471                $9,218,909

Operating costs                                              23,051,611                 6,496,471

Selling, general and administrative expenses                  4,671,160                 1,538,329

Depreciation and amortization                                 3,707,192                    931,969 
                                                              ---------                   ---------

     Net (loss) income from operations                       (3,468,492)                  252,140

Interest expense and amortization of debt discount            1,978,448                   408,149

Net gain on sale of fixed assets                                 60,823                         0

Other income                                                     50,389                    82,374 
                                                                 ------                    -------

     Net loss before benefit for

          income taxes                                       (5,335,728)                  (73,635)

Benefit for income taxes                                        649,398                         0
                                                                -------                         -

     Net loss                                               $(4,686,330)                 $(73,635)
                                                            ============                 =========

     Net loss per common share - basic                          $(1.32)                     $(0.03)
                                                                =======                     =======

     Net loss per common share - diluted                       $ (1.32)                     $(0.03)
                                                               ========                     =======

Weighted average common shares outstanding-
    basic                                                     3,549,411                 2,210,968
                                                              =========                 =========

Weighted average common shares outstanding
    with dilutive securities                                  3,549,411                 2,210,968
                                                              =========                 =========
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       5
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 1998 and September 30, 1997


<TABLE>
<CAPTION>
                                                       SEPTEMBER 30, 1998        SEPTEMBER 30, 1997
                                                       ------------------        ------------------
                                                            (UNAUDITED)              (UNAUDITED)
<S>                                                           <C>                       <C>       
Cash used in  operations:                                     $(996,080)                $(242,194)

Cash flows from investing activities:
     Acquisitions of property, plant, and equipment          (4,691,698)               (1,358,015)
     Proceeds from sale of property, plant and equipment        205,781                    68,548
     Acquisition of business, net of cash acquired             (671,932)                  (98,427)
                                                              ----------                 ---------
Cash used in investing activities:                           (5,157,849)               (1,387,894)

Cash flows from financing activities:
     Debt issuance costs                                       (437,164)                 (190,000)
     Proceeds from bank and other borrowings                 23,882,426                 2,471,018
     Principal payments on long-term debt, notes payable
         and capital lease obligations                      (21,782,975)                 (361,752)
     Proceeds from issuance of common stock, net
         of offering costs                                    3,940,662                         0  
                                                                                                 --
    Increase in cash overdraft                                  115,135                         0
                                                                -------                         -
 Cash provided  by financing activities:                      5,718,084                 1,919,266

Net (decrease) increase in cash and cash equivalents           (435,845)                  289,178
Cash and cash equivalents, beginning of period                  435,845                   727,454
                                                                -------                   -------

Cash and cash equivalents, end of period                             $0                $1,016,632
                                                                      =                ==========

Supplemental disclosure of  noncash investing and financing activities:
     Notes payable incurred in connection with
           business acquisition                             $19,000,000
     Capital lease obligations incurred to acquire
           property, plant & equipment                         $111,562
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       6
<PAGE>
                  BLACK WARRIOR WIRELINE CORP. AND SUBSIDARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       GENERAL

         The  accompanying   consolidated   financial   statements  reflect  all
adjustments  that,  in the  opinion  of  management,  are  necessary  for a fair
presentation  of the financial  position of Black  Warrior  Wireline  Corp.  and
subsidiaries (the "Company"). Such adjustments are of a normal recurring nature.
The results of operations for the interim period are not necessarily  indicative
of the results to be expected for the full year. The Company's  Annual Report on
Form  10-KSB  for the fiscal  year ended  December  31,  1997  should be read in
conjuction with this document.

         The  Company  is an oil and gas  service  company  currently  providing
various  services to oil and gas well  operators  primarily  in the  continental
United  States  and in the Gulf of  Mexico.  The  Company's  principal  lines of
business  include  (a)  wireline  services,  (b)  directional  oil and gas  well
drilling activities,  and (c) workover services. The Company's recent growth and
increased  revenues  has been  principally  the  result  of  seven  acquisitions
completed since November 1996, including two acquisitions in 1998.

         On March 16, 1998, the Company acquired from Phoenix Drilling Services,
Inc.,  ("Phoenix")  the  assets  of its  domestic  oil and gas well  directional
drilling and downhole survey service business  ("Phoenix  Acquisition")  for $19
million. For financial statement purposes, the Phoenix Acquisition was accounted
for as a purchase  and,  accordingly,  Phoenix's  results  are  included  in the
consolidated  financial statements since the date of acquisition.  The excess of
the purchase price of Phoenix over net assets acquired,  goodwill,  approximated
$2.5 million and is being amortized over twenty-five years. On June 1, 1998, the
Company acquired Petro Wireline ("Petro  Acquisition") which has been engaged in
the wireline business in the four corners region of New Mexico,  Colorado,  Utah
and Arizona for $875  thousand.  For  financial  statement  purposes,  the Petro
Acquisition was accounted for as a purchase and,  accordingly,  Petro Wireline's
results are included in the consolidated  financial statements since the date of
acquisition.  The excess of the purchase price of Petro Wireline over net assets
acquired,  goodwill,  approximated  $65  thousand  and is being  amortized  over
twenty-five years.

         The following table presents unaudited pro forma  consolidated  results
of  operations  for the nine months ended  September 30, 1998 and 1997 as if the
acquisitions  above had occurred at the beginning of the period  presented.  The
pro forma  summary  information  does not  necessarily  reflect  the  results of
operations as they actually would have been if the  acquisitions had occurred at
the beginning of the periods presented.

                                       7
<PAGE>
<TABLE>
<CAPTION>
                                          NINE MONTHS ENDED      NINE MONTHS ENDED
                                          SEPTEMBER 30, 1998     SEPTEMBER 30, 1997
                                          ------------------     ------------------
                                              (UNAUDITED)            (UNAUDITED)

<S>                                         <C>                    <C>        
Revenues                                    $31,972,607            $42,522,509
Loss  before benefit for income tax         $(5,530,446)           $ (2,851,108)
Net loss                                    $(4,953,183)           $ (1,844,846)

Net loss per common share - basic           $     (1.40)           $      (0.83)

Net loss per common share - diluted         $     (1.40)           $      (0.83) 

</TABLE>

         The  unaudited  pro  forma  consolidated   results  include  historical
accounts of the Company and historical accounts of the acquired business and pro
forma adjustments,  including the amortization of the excess purchase price over
fair value of net assets  acquired,  applicable  tax  effects,  an  increase  in
interest  expense,  and the  increase  in  depreciation  expense  as a result of
purchase price adjustments.

2.       EARNINGS PER SHARE

The calculation of basic and diluted earning per share ("EPS") is as follows:

<TABLE>
<CAPTION>
                                              FOR THE THREE MONTHS                        FOR THE THREE MONTHS
                                            ENDED SEPTEMBER 30, 1998                    ENDED SEPTEMBER 30, 1997      
                                --------------------------------------------     -------------------------------------
                                     LOSS            SHARES         PER SHARE      LOSS          SHARES        PER SHARE
                                   NUMERATOR       DENOMINATOR       AMOUNT      NUMERATOR     DENOMINATOR      AMOUNT
                                   ---------       -----------       ------      ---------     -----------      ------
<S>                              <C>                 <C>             <C>       <C>               <C>            <C>    
Net income (loss)                $(3,580,546)                                  $(117,396)
BASIC EPS
Income (loss) available
    to common                   --------------------------------------------------------------------------------------
    shareholders                 $(3,580,546)        3,892,831       $(0.92)   $(117,396)        2,378,596      $(0.05)
EFFECT OF DILUTIVE SECURITIES
Stock warrants
Stock options
Convertible debt securities
DILUTED EPS
Income (loss) available
    to common                   --------------------------------------------------------------------------------------
    shareholders                 $(3,580,546)        3,892,831       $(0.92)   $(117,396)        2,378,596      $(0.05)

</TABLE>






                                       8
<PAGE>

<TABLE>
<CAPTION>
                                               FOR THE NINE MONTHS                         FOR THE NINE MONTHS
                                            ENDED SEPTEMBER 30, 1998                    ENDED SEPTEMBER 30, 1997      
                                --------------------------------------------     -------------------------------------
                                     LOSS            SHARES         PER SHARE      LOSS          SHARES        PER SHARE
                                   NUMERATOR       DENOMINATOR       AMOUNT      NUMERATOR     DENOMINATOR      AMOUNT
                                   ---------       -----------       ------      ---------     -----------      ------
<S>                              <C>                 <C>             <C>        <C>              <C>            <C>    
Net income (loss)                $(4,686,330)                                   $(73,635)
BASIC EPS
Income (loss) available
    to common                  ---------------------------------------------------------------------------------------
    shareholders                 $(4,686,330)        3,549,411       $(1.32)    $(73,635)        2,210,968      $(0.03)
EFFECT OF DILUTIVE SECURITIES
Stock warrants
Stock options
Convertible debt securities
DILUTED EPS
Income (loss) available
    to common                  ---------------------------------------------------------------------------------------
    shareholders                 $(4,686,330)        3,549,411       $(1.32)    $(73,635)        2,210,968      $(0.03)
</TABLE>


         Options and  warrants to purchase  4,918,000  and  1,674,500  shares of
common stock at prices ranging from $1.50 to $8.01 were  outstanding  during the
three and nine months ended  September 30, 1998 and 1997  respectively  but were
not  included in the  computation  of diluted  EPS  because the effect  would be
anti-dilutive.

         Convertible  debt  instruments  which would  result in the  issuance of
3,059,552  shares of common stock,  if the conversion  features were  exercised,
were  outstanding  during the three months and nine months ended  September  30,
1998 but were not  included  in the  computation  of the diluted EPS because the
effect would be anti-dilutive.  The conversion price of these instruments ranges
from $3.25 to $7.00 per share and remained outstanding at September 30, 1998.

3.       INVENTORY

         Inventory  consists of tool components,  subassemblies,  and expendable
parts. Tools  manufactured and assembled are transferred to property,  plant and
equipment  as  completed  at the total cost of  components,  subassemblies,  and
expendable parts of each tool. Components,  subassemblies,  and expendable parts
are  capitalized as inventory and expensed as tools are repaired and maintained.
At September 30, 1998  inventories  were  classified as a long-term asset rather
than a current asset.

4.       CONTINGENCIES

         The Company and certain of its officers and directors  are  respondents
in an arbitration  proceeding commenced by Monetary Advancements  International,
Inc.  before the American  Arbitration  Association  in New York,  New York. The
claimant seeks to recompense against the Company and other named respondents for
the alleged  failure to pay  compensation  in the form of shares of stock of the
Company for services  allegedly  rendered.  The  respondents  have  submitted an
answer and counterclaims  and have initiated a Court proceeding  seeking partial
stay of the  arbitration  proceeding.  The Company deems the  allegations of the
claimant  to be  without  merit and  intends  to  vigorously  contest  the case.
Management  does not believe the ultimate  outcome of these  actions will have a
materially  adverse effect on the consolidated  financial  position,  results of
operations or cash flows of the Company.

                                       9
<PAGE>
         On July 9, 1998, Southwick Investments Inc.  ("Southwick")  commenced a
lawsuit  against the Company in the Superior  Court of Fulton  County,  Georgia,
based on a Professional  Services  Agreement dated March 26, 1997,  entered into
between Southwick and the Company pursuant to which Southwick was to develop and
implement a plan for raising  additional  capital and provide certain  financial
advisory services.  Southwick is seeking to be awarded damages in an unspecified
amount for breach of contract and the loss in value to Southwick of an option to
purchase  50,000 shares of the common stock of the Company at an exercise  price
of $4.00 per share,  together with court costs and attorney's  fees. The Company
intends to defend  this  action  vigorously  and  believes  that it has good and
meritorious defenses.  Management does not believe the ultimate outcome of these
actions  will have a materially  adverse  effect on the  consolidated  financial
position, results of operations or cash flows of the Company.

         The  Company  is also a  defendant  in  various  legal  actions  in the
ordinary course of business. Management does not believe the ultimate outcome of
these  actions  will  have a  materially  adverse  effect  on  the  consolidated
financial position, results of operations or cash flows of the Company.

         At September 30, 1998,  the Company was not in compliance  with certain
financial covenants of its Loan and Security Agreement dated March 16, 1998 with
Fleet Capital  Corporation  ("Fleet").  On October 30, 1998, the Company entered
into an Amended and Restated Loan and Security  Agreement  ("the Amended  Credit
Facility") with Fleet which amended and restated the Loan and Security Agreement
entered into with Fleet on March 16, 1998. Under the terms of the Amended Credit
Facility,  any and all defaults or events of default  occurring at September 30,
1998 or earlier  under the prior Loan and Security  Agreement  were  permanently
waived.

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The Company  intends to continue  to expand its  wireline,  directional
drilling  and other  oil and gas  service  business  through  further  strategic
acquisitions of other companies  engaged in such activities and through internal
growth. Currently the Company is primarily seeking to consolidate its management
of the operations acquired throughout 1997 and early 1998; however, it continues
to  explore  and  evaluate  additional  acquisitions  and  may  seek  to  pursue
additional acquisition opportunities if it believes the terms are favorable. The
Company currently has no definitive agreements to acquire any additional oil and
gas services companies.  There can be no assurance that the Company will acquire
any additional oil and gas services companies or that any such acquisitions will
be beneficial to the Company. The process of integrating acquired companies into
the Company's  operations can create  unforeseen  difficulties and may require a
disproportionate  amount of management's  attention and the Company's resources.
In connection with acquisitions, the Company could become subject to significant
contingent  liabilities arising from the activities of the acquired companies to
the extent the  Company  assumes,  or an  acquired  entity  becomes  liable for,
unknown or  contingent  liabilities  or in the event that such  liabilities  are
imposed on the Company under theories of successor liability.

         To date, the Company has funded its  acquisition  activities  using the
proceeds from secured lending from banks and other  institutional  lenders,  the
private or public sale of debt and equity  securities and the cash flow from its
current  operations.  Financing obtained to date has included borrowings secured
by substantially all of the Company's assets. The Company intends to continue to
use these  sources to finance  future  acquisitions.  Any such  capital  that is
raised will be on terms 


                                       10
<PAGE>
yet to be  negotiated  and may be on terms that dilute the  interests of current
stockholders  of the Company.  There can be no  assurance  that the Company will
raise  additional   capital  when  it  is  required  to  complete  any  proposed
acquisitions  or that  the  Company  will  have or be able to  raise  sufficient
capital to fund its acquisition strategy.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

         With the exception of historical matters, the matters discussed in this
Report are "forward-looking statements" as defined under the Securities Exchange
Act of 1934, as amended,  that involve risks and uncertainties.  Forward-looking
statements  include,  but are not  limited  to, the  matters  described  herein,
including  Management's  Discussion  and  Analysis or Plan of  Operations.  Such
forward-looking  statements  relate  to the  Company's  ability  to  attain  and
maintain profitability and cash flow, the stability of and future prices for oil
and gas,  pricing  in the oil and gas  services  industry,  the  ability  of the
Company to compete in the premium services market, the ability of the Company to
expand  through  acquisitions  and to  redeploy  its  equipment  among  regional
operations,  the  ability of the Company to  upgrade,  modernize  and expand its
equipment,  including its wireline  fleet,  the ability of the Company to expand
its tubing conveyed perforating services,  the ability of the Company to provide
services using the newly  acquired state of the art tooling,  the ability of the
Company  to raise  additional  capital  to meet its  requirements  and to obtain
additional financing,  the ability of the Company to successfully  implement its
business  strategy,  the ability of the Company to maintain  compliance with the
covenants of its various loan documents and other  agreements  pursuant to which
securities  have been  issued  and the  ability of the  Company to  successfully
address Year 2000 issues.  The inability of the Company to meet these objectives
or the consequences on the Company from adverse developments in general economic
conditions,  adverse developments in the oil and gas industry, and other factors
could  have a material  adverse  effect on the  Company.  The  Company  cautions
readers that various risk factors  described in the  Company's  Annual Report on
Form  10-KSB for the year ended  December  31,  1997 could  cause the  Company's
operating   results  to  differ   materially   from  those   expressed   in  any
forward-looking  statements made by the Company and could  adversely  affect the
Company's  financial  condition and its ability to pursue its business strategy.
Readers  should  refer to the Annual  Report on Form 10-KSB and the risk factors
discussed therein.

RESULTS OF CONSOLIDATED OPERATIONS. THREE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997 AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997

         The Company's consolidated results of operations are affected primarily
by the extent of  utilization  and rates paid for its  services  and  equipment.
Revenues are also affected by the success of the  Company's  efforts to increase
its penetration of the market for its services  through the acquisition of other
oil and natural gas well  service  companies,  by  intensified  marketing of its
services  and through  internal  growth.  Incremental  demand for the  Company's
services is affected by the level of oil and natural gas well drilling  activity
and efforts by oil and gas  producers to improve well  production  and operating
efficiencies. Both short-term and long-term trends in oil and natural gas prices
affect the utilization of the Company's services. This effect has been offset in
recent years by a number of industry  trends,  including  advances in technology
that have  increased  drilling  success  rates  and  efficiency  and an  general
upgrading in technology used on the Company's equipment.

                                       11
<PAGE>
         Demand and prices for the Company's  services  depend upon the level of
activity in the oil and gas exploration  and production  industry in those areas
of the United  States  where the  Company  offers its  services.  This  activity
depends upon numerous  factors over which the Company has no control,  including
the level of oil and gas prices,  expectations  about future oil and gas prices,
the ability of the Organization of Petroleum Exporting Countries ("OPEC") to set
and maintain  production levels and prices, the cost of exploring for, producing
and delivering oil and gas, the price of foreign imports of oil and natural gas,
the discovery rate of new oil and gas reserves, available pipeline and other oil
and gas transportation  capacity,  worldwide weather  conditions,  international
political,  military,  regulatory and economic conditions and the ability of oil
and gas companies to raise capital.  Recently, oil and gas prices have decreased
primarily as a result of decreased international demand and economic uncertainty
in Asia.  These lower oil and gas prices have negatively  impacted the Company's
revenues for the nine months  ended  September  30, 1998.  The level of drilling
activity in the onshore oil and gas exploration  and production  industry in the
United  States has been  volatile  and no  assurance  can be given that  current
levels of oil and gas  exploration  activities  in the areas  where the  Company
offers its services will continue or that demand for the Company's services will
correspond  to the level of  activity in the  industry.  Further,  any  material
changes in the demand for or supply of natural gas could  materially  impact the
demand  for the  Company's  services.  Prices  for oil and gas are  expected  to
continue  to be  volatile  and to  affect  the  demand  for and  pricing  of the
Company's services. A material decline in oil or gas prices or industry activity
in the  United  States  could have a material  adverse  effect on the  Company's
results of operations, financial condition and cash flows.

         The oil and gas well service  industry has been recently  characterized
by a decreased level of demand for wireline, directional drilling,  recompletion
and other oil and gas well  services.  The  industry has been  characterized  by
substantial  fluctuations  in the  demand  for such  services  and the supply of
equipment. Recent declines in prices for oil and gas can be expected to continue
to impact the Company's revenues.  The Company's revenues in the future also can
be  expected  to be  impacted  to a  material  extent  not  only  by the  demand
throughout  the industry  but the supply of oil and gas well  service  equipment
available to perform these services.  The Company's  revenues could be adversely
affected by a shortage in the equipment  available to the Company to perform its
services.

         The following  table sets forth the  Company's  revenues from its three
principal  lines of business  and other  revenues  for the nine months and three
months ended September 30, 1998 and 1997 respectively:

<TABLE>
<CAPTION>
                                    NINE MONTHS ENDED                THREE MONTHS ENDED        
                               ---------------------------     ---------------------------        
                                09/30/98          09/30/97        09/30/98       09/30/97
                                --------          --------        --------       --------
<S>                            <C>             <C>             <C>             <C>       
Wireline Services              $8,215,653      $6,548,856      $2,831,291      $2,815,176
Directional Drilling           18,457,240       1,282,086       4,774,019       1,282,086
Workover and Completion         1,149,323       1,180,922         367,354         406,164
Other                             139,255         207,045          75,354          62,414
                            -------------------------------------------------------------
                              $27,961,471      $9,218,909      $8,048,018      $4,565,840
                              ===========      ==========      ==========      ==========
</TABLE>


         The Company had a net loss of $3.6  million for the three  months ended
September  30, 1998,  as compared to net loss of $.1 million for the same period
in 1997.  The Company had a net loss of $4.7  million for the nine months  ended
September  30,  1998,  as compared to loss of $.1 million for the same period in
1997.

                                       12
<PAGE>
         Revenues increased by $3.5 million to $8.1 million for the three months
ended  September  30, 1998 as compared to revenues of $4.6 million for the three
months ended  September 30, 1997.  This increase was the result of  acquisitions
completed  during 1997 and 1998.  Revenues from  operations  have declined by an
estimated  $6.9 million on a pro forma basis  during the same  period,  due to a
reduced  demand for the  Company's  services  that  primarily  resulted from the
recent decline in oil and gas prices.

         Revenues  increased by $18.8 million to $28 million for the nine months
ended  September  30, 1998 as compared to revenues of $9.2  million for the nine
months  ended  September  30,  1997.  Revenues  from  operations  declined by an
estimated  $10.5  million on a pro forma basis during the same period as seen in
Note 1 to the Consolidated Financial Statements, due to a reduced demand for the
Company's  services that  primarily  resulted from the recent decline in oil and
gas prices.

         Operating  costs  increased  by $4.3 million for the three months ended
September 30, 1998, as compared to the same period of 1997. Operating costs were
95% of revenues for the three months ended  September  30, 1998 as compared with
73.4% of revenues in the same period in 1997. Operating costs increased by $16.6
million for the nine months ended  September  30, 1998,  as compared to the same
period in 1997. Operating costs were 82.6% of revenues for the nine months ended
September  30,  1998 as  compared  with 70.5% of  revenues in the same period in
1997. This increase was due primarily to the increase in the level of activities
primarily as a consequence of the  acquisitions  completed in 1997 and 1998. The
increase  in  operating  costs  as a  percentage  of  revenues  is a  result  of
competitive  pressures  on the prices the Company  charges for its  services and
costs  associated  with  integrating  its  various  acquisitions.  Salaries  and
benefits  increased by $3.3 million for the three  months  ended  September  30,
1998,  as  compared  to the same  period  in 1997,  while  the  total  number of
employees increased from 176 at September 30, 1997 to 357 at September 30, 1998.
Salaries  and  benefits  increased  by $9.5  million for the nine  months  ended
September  30,  1998,  as compared  to the same period in 1997.  This was due to
salary  increases,  hiring  of  additional  personnel,  and  employees  hired in
conjunction  with  acquisitions,  partially  offset by layoffs and cost controls
that the Company  initiated in response to the reduced  demand for the Company's
services that primarily resulted from the recent decline in oil and gas prices.

         Selling,  general and administrative  expenses increased by $.8 million
from $.7 million in the three months ended September 30, 1997 to $1.5 million in
the three months ended September 30, 1998. As a percentage of revenues, selling,
general and  administrative  expenses  increased  from 16.2% in the three months
ended  September 30, 1997 to 18.9% in 1998,  primarily as a result of lower than
anticipated revenues due to adverse market conditions with an increased level of
executive and administrative activities associated with the recent acquisitions.
Selling, general and administrative expenses increased by $3.2 million from $1.5
million,  or 16.7% of revenues in the nine months ended  September  30, 1997, to
$4.7 million,  or 16.7% of revenues in the nine months ended September 30, 1998,
primarily  as a result of  increased  levels  of  executive  and  administrative
activities associated acquisitions.

         Depreciation and  amortization  increased from $.5 million in the three
months ended September 30, 1997, or 10% of revenues, to $1.7 million in 1998, or
20% of  revenues  and from $.9 million in the nine months  ended  September  30,
1997,  or 10.1% of  revenues,  to $3.7  million  in  1998,  or 13% of  revenues,
primarily  because of the higher  asset base of  depreciable  properties  in the
three  month and nine  month  periods  ended  September  30,  1998 over the same
periods in 1997 and higher goodwill amortization.


                                       13

<PAGE>
         Interest  expense and  amortization  of debt discount  increased by $.8
million for the three  months ended  September  30, 1998 as compared to the same
period in 1997 and increased by $1.6 million for the nine months ended September
30, 1998 as compared to the same period in 1997.  This was  directly  related to
the increased  amounts of  indebtedness  outstanding in 1998 incurred to finance
acquisitions.  See "Note 6 of Notes to Consolidated Financial Statements" in the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
1997.

         Net gain on sale of fixed  assets was $60 thousand for the three months
ended  September  30,  1998 as compared to no gain or loss in the same period in
1997. Other income decreased by $18 thousand in three months ended September 30,
1998 as compared to the same period in 1997.

         Income tax  benefit  totaled  $.7  million  for the nine  months  ended
September  30, 1998 as compared to no income tax benefit or expense for the nine
months ended September 30, 1997. These totals contain Federal and State deferred
taxes as well as current amounts.

LIQUIDITY AND CAPITAL RESOURCES

         Cash used by Company  operating  activities was $1 million for the nine
months ended  September 30, 1998 as compared to cash used of $.2 million for the
same period in 1997.  Investing  activities used cash of $5.2 million during the
nine months ended September 30, 1998 for the acquisition of property,  plant and
equipment and businesses, net of cash acquired, offset by proceeds from the sale
of fixed assets of $.2 million. During the nine months ended September 30, 1997,
investing  activities used cash of $1.5 million for the acquisition of property,
plant and equipment and businesses,  net of cash acquired, offset by proceeds of
approximately  $.1 million from the sale of fixed assets.  Financing  activities
provided  cash of $5.7 million from the net proceeds from the issuance of common
stock of $3.9 million and $23.9  million  from the proceeds  from bank and other
borrowings  during the nine months ended  September 30, 1998 offset by principal
payments on bank and other  borrowings  and capital lease  obligations  of $21.8
million and $.4 million of costs related to debt issuances.

         Cash at September  30, 1998 was zero as compared with cash at September
30, 1997 of $1.0 million.

         The Company's recent growth and increased revenues has been principally
the result of the completion of seven acquisitions since November 1996. See Note
1 to the Consolidated Financial Statements.

         Under the terms of its  agreement to acquire  Diamondback,  the Company
has satisfied its capital  expenditures  obligations by expending $4 million for
capital  improvements  during the last quarter of 1997 and the nine months ended
September 30, 1998.

         During the  twelve  months  ending  September  30,  1999 and the twelve
months ending September 30, 2000, the Company is obligated to make repayments of
principal  on  outstanding  indebtedness  of $4.3  million  and  $14.1  million,
respectively.  The  foregoing  does not  include  repayment  of the  outstanding
indebtedness of $2.1 million at September 30, 1998 under the Company's revolving
loan facility with Fleet Capital Corp.  ("Fleet").  The Company  intends to make
these  payments  of  principal  and  interest  and to satisfy  the excess of its
current  liabilities  over current assets out of its cash flow from  operations,
the  proceeds  from  the  possible  private  or  public  sale of debt or  equity
securities, other borrowings or refinancings of borrowings. On October 30, 1998,
the Company  entered  into an Amended and Restated  Loan and Security  Agreement
with

                                       14
<PAGE>
Fleet which  amended and restated the loan and security  agreement  entered into
with Fleet on March 16, 1998. Under the terms of the agreement, Fleet has agreed
to advance an  additional  $1.2  million and reduce  principal  payments.  Fleet
funded $600 thousand upon closing and will fund the remaining $600 thousand once
certain  conditions  are  met.  Additionally,  Black  Warrior  has  received  an
additional  $2.0 million from St. James  Merchant  Bankers L.P. in the form of a
convertible  promissiory note that has warrants  attached.  St. James has funded
$1.25  million,  of which $500  thousand had been  received by the Company as of
September 30, 1998 and will fund the remaining $750 thousand  concurrently  with
Fleet's second  funding of $600  thousand.  On March 15, 2001 the revolving loan
expires  and  the  outstanding  principal  is  due.  The  Company  has  made  no
arrangements  to raise  additional  capital  for the  purpose  of  making  these
payments of  principal  and  interest  and is unable to state the terms on which
such  capital  could be raised.  However,  there can be no  assurance  that such
capital may be raised on terms that do not dilute the interests of the Company's
present stockholders.

         On June 1, 1998,  the Company  completed  the Petro  Wireline  Services
Acquisition.  The purchase price for the Petro Wireline Services Acquisition was
approximately  $943,632.  Financing  for  the  transaction,  in  the  amount  of
$525,000,  was obtained  under the Company's  Loan and Security  Agreement  with
Fleet.  The  balance  of the  purchase  price  was  paid  by the  issuance  of a
three-year  promissory note, in the amount of $350,000,  with interest at a rate
of one and  one/half  percent  above the prime  rate of Fleet,  payable in three
equal annual installments with all accrued interest thereon. The Note is secured
by a second lien on all the assets acquired,  other than the inventory and other
expendables.  The Note and  security for the note shall be  subordinated  to the
first lien of Fleet.  The Company has also agreed to pay the sellers  $68,632 to
be  paid  in six  equal  installments  of  $11,438.68  bearing  interest  on the
outstanding  balance at a rate of 9% per annum. Petro Wireline Services provides
wireline and other  services to oil and gas operators in the four corners region
of New Mexico, Colorado, Utah and Arizona.

         On March 16, 1998, the Company acquired from Phoenix Drilling Services,
Inc.  ("Phoenix")  the  assets  of its  domestic  oil and gas  well  directional
drilling and domestic  survey  business  ("Phoenix  Acquisition").  The purchase
price for the Phoenix Acquisition was approximately $19.0 million. Financing for
the transaction was obtained through the sale of convertible  notes and warrants
to St.  James  Capital  Partners,  L.P.  ("St.  James")  for $10.0  million.  An
additional  $9.0  million was  borrowed  under the  Company's  Loan and Security
Agreement  with  Fleet,  and $3.3  million  raised  from  the sale in a  private
placement of 596,000  shares of common stock at a price of $5.50 per share.  See
"Item 11. Security  Ownership of Certain  Beneficial  Owners and Management" and
"Item 12.  Certain  Relationships  and Related  Transactions"  in the  Company's
Annual  Report of Form 10-KSB for the fiscal year ended  December 31, 1997.  See
the Company's  Current Reports on Form 8-K filed March 16, 1998 and November 16,
1998 for a description of the Company's Loan and Security Agreement with Fleet.

         The  Company has no  definitive  agreements  to acquire any  additional
companies.  However, there can be no assurance that the Company will not acquire
additional companies in the future, or that any such acquisitions, if made, will
be beneficial to the Company.  The process of  integrating  acquired  properties
into the  Company's  operations  may result in unforeseen  difficulties  and may
require a  disproportionate  amount of management's  attention and the Company's
resources. In connection with acquisitions,  the Company could become subject to
significant  contingent  liabilities arising from the activities of the acquired
companies  to the extent the  Company  assumes,  or an acquired  entity  becomes
liable  for,  unknown  or  contingent  liabilities  or in the  event  that  such
liabilities are imposed on the Company under theories of successor liability.

                                       15
<PAGE>
         The Company intends to fund its  acquisitions  using cash flow from its
current  operations as well as the possible  proceeds from secured  lending from
banks or other institutional  lenders and the private or public sale of debt and
equity  securities.  Any such  capital that is raised will be on terms yet to be
negotiated and may be on terms that dilute the interests of current stockholders
of the Company.  Subject to the restrictions contained in the Company's existing
loan agreement with Fleet,  loans may be  collateralized by all or a substantial
portion of the Company's assets. There can be no assurance that the Company will
raise additional capital when it is required or that the Company will have or be
able to raise sufficient capital to fund its acquisition strategy.

YEAR 2000 COMPUTER ISSUES

         Computer  hardware and software  often denote the year using two digits
rather than four;  for example,  the year 1998 is often denoted by such hardware
and software as "98." It is probable  that such  hardware  and/or  sofrware will
interpret  "00" as  representing  the year 1900 rather than the year 2000.  This
"Year 2000" issue potentially affects all individuals and companies. The Company
has and continues to evaluate its information  technology systems,  hardware and
non-information  technology systems to assess  modifications needed for the Year
2000.  These systems  include those  utilized for  financial  recordkeeping  and
certain  oil and gas  service  equipment.  A member  of  senior  management  was
selected to oversee the Year 2000  project.  The project work plan  involves the
following phases:  inventory of critical and non-critical  systems and hardware,
assessment and  certification of third party systems.  The Company has completed
its  inventory of systems and  hardware.  All critical  systems are supported by
third party vendors. The Company is currently in the process of certifying these
systems with the vendors.  With respect to other third party relationships,  the
Company is inquiring of certain vendors, customers, and other third parties that
supply critical services to determine their preparedness and ability to continue
normal operations.

         To date,  the Company has incurred  minimal  costs  related to the Year
2000 project and does not  anticipate any  significant  additional  costs.  Such
costs are expensed as incurred.

         Management  expects  that  Year  2000  issues  will be  addressed  on a
schedule  and in a manner that will  prevent  such issues from having a material
effect on the Company's results of operations, liquidity or financial condition.
While the Company has and will  continue to pursue Year 2000  compliance,  there
can be no assurance that the Company and its vendors,  customers and other third
parties which supply  critical  services will be successful in  identifying  and
addressing  all material  Year 2000 issues.  It is possible  that the  Company's
financial position,  results of operations,  or cash flows could be disrupted by
Year 2000 problems  experienced by its vendors and  customers,  that utilize its
services,  financial  institutions  or other  parties.  The Company is unable to
quantify  the  effect,  if any,  of Year  2000  computer  problems  that  may be
experienced by these third parties.

INFLATION

         The  Company's  revenues  have been and are  expected to continue to be
affected by fluctuations in the prices for oil and gas.  Inflationary  pressures
did not have a  significant  effect  on the  Company's  operations  in the three
months and nine months ended September 30, 1998.

RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1997, the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 specifies guidelines for
determining an entity's  operating 

                                       16
<PAGE>
segments  and the  type  and  level  of  financial  information  required  to be
disclosed.  In February 1998, the FASB issued Statement of Financial  Accounting
Standards No.132,  "Employers Disclosure about Pension and Other Post Retirement
Benefits".  SFAS No. 132 provided for new disclosure  requirements about pension
and  other  postretirement   benefit   obligations.   These  standards  will  be
implemented in fiscal year 1998. The  implementation  of these  standards is not
anticipated to have a material  impact on the Company's  consolidated  financial
position, results of operations or cash flows.

PART II - OTHER INFORMATION

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         At September 30, 1998,  the Company was not in compliance  with certain
financial covenants of its Loan and Security Agreement dated March 16, 1998 with
Fleet Capital  Corporation  ("Fleet").  On October 30, 1998, the Company entered
into an Amended and Restated Loan and Security  Agreement  ("the Amended  Credit
Facility") with Fleet which amended and restated the Loan and Security Agreement
entered into with Fleet on March 16, 1998. Under the terms of the Amended Credit
Facility,  any and all defaults or events of default  occurring at September 30,
1998 or earlier  under the prior Loan and Security  Agreement  were  permanently
waived.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

          27.      Financial Data Schedule

(b)      Reports on Form 8-K

          None

                                   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.


                                           BLACK WARRIOR WIRELINE CORP.
                                           ----------------------------
                                                  (Registrant)

Date:  November 19,  1998                  /S/  William L. Jenkins            
                                         -------------------------------------
                                                  William L. Jenkins
                                           President and Chief Operating Officer
                                           (Principal Executive, Financial and
                                           Accounting Officer)