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 March 31, 1998; or

     [ ]  Transition  report  pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act of 1934 for the transition period from to .

                         Commission File Number 0-18754

                          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.

           Class                                             Outstanding at
                                                              May 15, 1998
  -----------------------                                   ----------------
  COMMON STOCK, PAR VALUE                                   3,721,087 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 - March 31, 1998
             and  December 31, 1997                                           3

             Consolidated Statements of Operations -
             Three Months Ended March 31, 1998 and
             March 31, 1997                                                   4

             Consolidated Statements of Cash Flows -
             Three Months Ended March 31, 1998 and
             March 31, 1997                                                   5

             Notes to Consolidated Financial Statements -
             Three Months Ended March 31, 1998 and
             March 31, 1997                                                   6


Item 2.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations                              7

PART II - OTHER INFORMATION

Item 2.      Changes in Securities and Use of Proceeds                        13

Item 6.      Exhibits and Reports on Form 8-K                                 15


                                        2

<PAGE>




PART I - FINACIAL INFORMATION
         ITEM 1.  FINANCIAL STATEMENTS
                  BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
                  ---------------------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                              MARCH 31          DECEMBER 31
                                                              1998              1997
                                                            (unaudited)
                           ASSETS
<S>                                                      <C>                    <C>          
Current assets:
    Cash and cash equivalents                             $    1,948,186       $     435,845
     Short-term investments                                       50,000              50,000
     Accounts receivable, less allowance for doubtful
         accounts of $146,884 and $143,559                     7,754,413           5,459,689
      Inventories                                              2,418,159             386,683
      Prepaid expenses                                           340,609             390,144
      Deferred tax asset                                          80,815              80,815
      Other receivables                                          514,946             514,946
                                                          ---------------      --------------
         Total current assets                                 13,107,128           7,318,122
Land and building                                                245,000
Property, plant, and equipment, less accumulated
    depreciation of 5,474,467 and 4,791,052                   26,713,489           9,347,685
Other assets                                                     607,862             358,521
Goodwill, less accumulated amortization of $236,498
      and $134,421                                            11,192,048           9,061,655
                                                         ---------------        -------------
         Total assets                                    $    51,865,527        $ 26,085,983
                                                         ===============        =============

                  LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:

    Accounts payable                                     $     5,405,645        $  3,619,466
    Accounts payable, related parties                              6,090               6,090
    Accrued salaries and vacation                                391,147             124,376
    Income tax payable                                           860,278             599,877
    Accrued interest payable                                     127,333              69,041
    Other accrued expenses                                     1,104,302             289,445
    Deferred revenue                                             181,000             100,000
    Current maturites of notes payable to banks                        0               7,624
    Mortgage notes payable, related party                        380,000             380,000
    Current maturities of long-term debt and capital
      lease obligations                                          860,755             793,618
                                                         ---------------        ------------
         Total current liabilities                             9,316,550           5,989,537
Deferred tax liability                                         1,132,513           1,132,513
Long-term accrued interest payable                               194,169             150,364
Notes payable to related parties                              18,070,549           8,070,549
Notes payable to banks, less current maturities                                       22,212
Long-term debt and capital lease obligations, less
    current maturities                                        14,268,233           5,123,535
                                                         ---------------        ------------
         Total liabilities                                    42,982,014          20,488,710
                                                         ---------------        ------------
Stockholder's equity:
   Preferred stock, $.0005 par value, 2,500,000
     shares authorized; none issued
     at March 31, 1998
   Common stock, $.0005 par value, 12,500,000
     shares authorized;
     3,721,087 and 2,180,596 shares issued                         1,860               1,495
Additional paid-in capital                                    11,160,154           7,744,953
Common stock to be issued in connection with
    acquisition (133,333) shares                                                     280,000
Accumulated deficit                                           (1,695,108)         (1,845,782)
Treasury stock, at cost, 4,620 shares                           (583,393)           (583,393)
                                                         ---------------        ------------
         Total stockholder's equity                            8,883,513           5,597,273
                                                         ---------------        ------------
         Total liabilities and stockholder's equity      $    51,865,527        $ 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 March 31, 1998 and March 31, 1997
<TABLE>
<CAPTION>
                                                     March 31, 1998             March 31, 1997
                                                       (unaudited)                (unaudited)
<S>                                                  <C>                        <C>           
Revenues                                             $    9,666,024             $    2,165,018


Operating costs                                           7,265,888                  1,558,366


Selling, general, and  administrative expenses              840,679                    370,577


Depreciation and amortization                               809,690                    196,027
                                                     --------------             --------------


         Income from operations                             749,767                     40,048


Interest expense and amortization of debt discount         (434,760)                   (39,759)


Net gain on sale of fixed assets                              1,944                     12,059


Other income                                                 17,345                     21,593
                                                     --------------             --------------


         Income before provision for
             income taxes                                   334,296                     33,941


Provision for income taxes                                  183,619                          0
                                                     --------------             --------------


         Net income                                  $      150,677            $        33,941
                                                     ==============             ==============


         Net income per common share - basic         $         0.05            $          0.02
                                                     ==============             ==============


         Net income per common share - diluted       $         0.03           $          0.01
                                                     ==============             ==============


Weighted average common shares outstanding-
    basic                                                 3,211,678                  2,180,596
                                                     ==============             ==============

Weighted average common shares outstanding
    with dilutive securities                              5,169,182                  2,369,358
                                                     ==============             ==============
</TABLE>

        See accompanying notes to the consolidated financial statements.


                                       4

<PAGE>


BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended:
<TABLE>
<CAPTION>
                                                           March 31,                  March 31,
                                                             1998                       1997
                                                         (unaudited)                 (unaudited)
<S>                                                  <C>                        <C>              
Cash provided by operations          :               $           766,649        $         325,969
                                                      -------------------------------------------
Cash flows from investing activities:
         Acquisitions of property, plant, and equipment       (1,634,485)               (252,573)
         Proceeds from sale of fixed assets                       28,970                  29,448
         Acquisition of business, net of cash acquired          (397,485)
                           Cash used in investing
                               activities:                    (2,003,000)               (223,125)
                                                     --------------------------------------------

Cash flows from financing activities:
         Proceeds from bank and other borrowings                  520,373
         Debt issuance costs                                     (135,000)
         Principal payments on long-term debt, notes payable
             and capital lease obligations                       (449,936)              (104,954)
         Proceeds from issuance of common stock, net
             of offering costs                                  2,813,255
                                                     --------------------------------------------

                           Cash provided by (used in)
                               financing activities:            2,748,692               (104,954)
                                                     --------------------------------------------

                           Net increase (decrease) in cash and
                               cash equivalents                 1,512,341                 (2,110)
Cash and cash equivalents, beginning of period                    435,845                727,454
                                                     ---------------------------------------------

Cash and cash equivalents, end of period             $          1,948,186       $        725,344
                                                     =============================================

Supplemental disclosure of cash flow information:
                  Interest paid                      $            972,667       $         37,759
                  Income taxes paid                  $                  0       $              0

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, and
                    equipment                        $            111,562
</TABLE>

        See accompanying notes to the consolidated financial statements.


                                       5


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

1.       GENERAL

         The  accompanying   consolidated   financial   statements  reflect  all
adjustments  which,  in the  opinion of  management,  are  necessary  for a fair
presentation of the  consolidated  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 inconjuction 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 Black Warrior
and Mississippi Salt Dome Basins in Alabama and  Mississippi,  the Permian Basin
in West Texas and New  Mexico,  the East Texas and Austin  Chalk  Basins in East
Texas,  the Anadarko Basin in Oklahoma,  the Powder River and Green River Basins
in Wyoming and Montana,  and the Williston Basin in North Dakota.  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 five  acquisitions  completed since November 1996. On November 19,
1996, the Company  acquired the outstanding  stock of DynaJet,  Inc.,  which has
been engaged in the  wireline  business in the  Gillette,  Wyoming area for more
than  eighteen  years.  Its service area  includes the states of Wyoming,  South
Dakota,  Montana and New Mexico.  On June 6, 1997,  the  Company  completed  the
acquisition  of Production  Well  Services,  Inc.  which has been engaged in the
wireline business in southern Alabama and southern Mississippi. On June 9, 1997,
the Company completed the acquisition of Petro-Log,  Inc. which has been engaged
in the wireline  business in Wyoming,  Montana and South  Dakota.  On October 9,
1997, the Company  completed the  acquisition,  effective  September 1, 1997, of
Diamondback  Directional,   Inc.  ("Diamondback")  which  has  been  engaged  in
providing  directional  drilling and other oil and gas well drilling services in
the Texas and Louisiana  areas. On December 15, 1997, the Company  completed the
acquisition  of the  assets  of Cam  Wireline  Services,  Inc.,  which  provides
wireline  services in the Permian Basin. On March 16, 1998, the Company acquired
from Phoenix Drilling Services,  Inc.  ("Phoenix") its domestic oil and gas well
directional  drilling and downhole survey service business including the related
operating  assets  (such  acquisition  is  herein  referred  to as the  "Phoenix
Acquisition") for approximately 19 million with majority of purchase price being
allocated to property, plant and equipment.

2.       EARNINGS PER SHARE

THE CALCULATION OF BASIC AND DILUTED EPS IS AS FOLLOWS:
<TABLE>
<CAPTION>
                                    FOR THE THREE                            FOR THE THREE
                                    MONTHS ENDED 1998                        MONTHS ENDED 1997
                                    ---------------------------------------- ----------------------------------------
                                    INCOME       SHARES         PER SHARE    INCOME       SHARES         PER SHARE
                                    (NUMERATOR)  (DENOMINATOR)  AMOUNT       (NUMERATOR)  (DENOMINATOR)  AMOUNT
                                    ---------------------------------------- ------------ ---------------------------
<S>                                 <C>           <C>           <C>          <C>           <C>           <C>  
NET INCOME                          $150677                                  $33941
                                    =============                            ============

BASIC EPS

INCOME AVAILABLE TO COMMON
   STOCKHOLDERS                     $150677       3211678       $0.05        $33941        2180596       $0.02

EFFECT OF DILUTIVE SECURITIES

STOCK WARRANTS                                    836291                                   140925
STOCK OPTIONS                                     393940                                   47837
CONVERTIBLE DEBT DEBENTURE           27945        727273
                                    ---------------------------------------- ------------ ---------------------------

DILUTED EPS

INCOME AVAILABLE TO COMMON
   STOCKHOLDERS PLUS ASSUMED

   CONVERSIONS                      $178622       5169182       $0.03        $33941        2369358       $0.01
                                    ======================================== ============ ===========================
</TABLE>

OPTIONS  TO  PURCHASE  12,500  SHARES  OF COMMON  STOCK AT $8.01 PER SHARE  WERE
OUTSTANDING  DURING THE THREE MONTHS  ENDING MARCH 31, 1998 BUT ARE NOT INCLUDED
IN THE  COMPUTATION  OF DILUTED  EPS  BECAUSE THE  OPTIONS'  EXERCISE  PRICE WAS
GREATER THAN THE AVERAGE MARKET PRICE OF THE COMMON SHARES.  THE OPTIONS,  WHICH
EXPIRE DECEMBER 2002, WERE STILL OUTSTANDING AT MARCH 31, 1998.

CONVERTIBLE  DEBT  INTRUMENTS  WHICH WOULD RESULT IN THE ISSUANCE OF 625,985 AND
1,428,571 SHARES OF COMMON STOCK, IF THE CONVERSION FEATURE WAS EXERCISED,  WERE
OUTSTANDING  DURING THE THREE MONTHS ENDING MARCH 31, 1998 BUT WERE NOT INCLUDED
IN THE COMPUTATION OF DILUTED EPS BECAUSE THE AFFECT WOULD BE ANTI-DILUTIVE. THE
INSTRUMENTS  CAN BE  CONVERTED  AT $4.63 AND $7.00 PER SHARE,  RESPECTIVELY  AND
REMAINED OUTSTANDING AT MARCH 31, 1998.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

                                       6
<PAGE>

         The Company  intends to seek to expand its  wireline  and other oil and
gas  service  areas by  completing  strategic  acquisitions  of other  companies
engaged  in such  activities.  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 wireline  companies.  There can be no assurance that the Company will
acquire any additional  wireline companies or that any such acquisitions will be
beneficial to the Company.  The process of integrating  acquired properties 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 any future  acquisitions.  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. 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 of  Operations - General," "-
Liquidity and Capital Resources." 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  and 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, and the


                                       7

<PAGE>

ability of the Company to raise additional  capital to meet its requirements and
to obtain  additional  financing,  its  ability to  successfully  implement  its
business strategy,  and its ability to maintain compliance with the covenants of
its various loan  documents and other  agreements  pursuant to which  securities
have been issued.  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.

CONSOLIDATED  RESULTS OF OPERATIONS,  THREE MONTHS ENDED MARCH 31, 1998 COMPARED
TO THREE MONTHS ENDED MARCH 31, 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 both through the  acquisition of
other oil and natural gas well service companies and by intensified marketing of
its services.  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 general  upgrading in technology  used on the
Company's equipment.

         The following  table sets forth the  Company's  revenues from its three
principal  lines of business and other revenues for the three months ended March
31, 1998 and March 31, 1997:


                                       8


<PAGE>

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED MARCH 31
                                      1998                       1997
-----------------------------------------------------------------------------------------------
                                    -----------------------------------------------------------
<S>                                   <C>                      <C>         
Wireline Services                     $  2,873,831             $  1,675,522

Directional Drilling                     6,320,599                     -0-

Workover and Completion                    428,230                  395,876

Other                                       43,364                   93,620

                                    -----------------------------------------------------------

                                      $  9,666,024             $  2,165,018

                                    ===========================================================
</TABLE>

         The Company had income  before  provision  for income taxes of $334,266
for the three months ended March 31, 1998,  as compared to income  before before
provision  for income  taxes of $33,941 in 1997.  The  Company  experienced  net
income of  $150,677  for the three  months  ended  March  31,1998 as compared to
$33,941 for the three months ended March 31,1997, after reflecting the provision
for income taxes in 1998.

         Revenues  increased by $7,501,006  to  $9,666,024  for the three months
ended March 31, 1998 as compared to revenues of $2,165,018  for the three months
ended  March  31,  1997.  Of  such  increase,   $6,750,905  was  the  result  of
acquisitions  completed  during 1997 and the first  quarter of 1998 and $750,101
was the result of the improved market and pricing for the Company's services. Of
the  increase  in  wireline  services  revenue,  $647,087  was the result of the
acquisition  of Petro-Log,  Inc.,  Production  Well  Services,  and CAM Wireline
Services,  Inc., and $551,222 was the result of increases in the Company's other
operations. The remaining increase of $6,320,599 was attributable to directional
drilling  revenues   resulting   primarily  from  the  Diamondback  and  Phoenix
acquisitions.  Revenues from  workover and  completion  activities  increased 8%
during the three  months  ended March 31, 1998 as compared to the same period in
1997. This is a result of increased activity in workover services in the Alabama
and Mississippi area.

         Operating  costs  increased  by  $5,707,522  for the three months ended
March 31, 1998, as compared to 1997. Operating costs were approximately 75.2% of
revenues in 1998 as compared  with 71.9% of revenues in 1997.  This increase was
due primarily to


                                        9


<PAGE>

the  increase  in the level of  activities  primarily  as a  consequence  of the
acquisitions  completed  in 1997 and the first  quarter  in 1998.  Salaries  and
benefits  increased by $146,439  for the three  months ended March 31, 1998,  as
compared to 1997,  while the total  number of  employees  increased  from 112 at
March 31,  1997 to 317 at March  31,  1998.  This was due to  salary  increases,
hiring of additional personnel, and the number of employees hired in conjunction
with the Phoenix Acquisition .

         Selling, general and administrative expenses increased by approximately
$470,102  from  $370,577 in the three months ended March 31, 1997 to $840,679 in
the three  months ended March 31, 1998.  As a percentage  of revenues,  selling,
general and  administrative  expenses  declined  from 17.1% in the three  months
ended  March  31,  1997 to 8.6% in  1998,  primarily  as a result  of  increased
revenues  due to  acquisitions  completed  without  a  significant  increase  in
executive and administrative personnel.

         Depreciation  and  amortization  increased  from  $196,027 in the three
months ended March 31, 1997, 9.0% of revenues, to $809,690 million in 1998, 8.3%
of  revenues,  primarily  because  of  the  higher  asset  base  of  depreciable
properties  in the three  months  ended  March 31,  1998 over the same period in
1997.

         Interest  expense  and  amortization  of  debt  discount  increased  by
$395,001  for the three  months  ended  March 31,  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.

         Income tax expense totaled approximately  $183,619 for the period ended
March 31,  1998.  These  totals  contain  Federal and State  deferred as well as
current amounts.

LIQUIDITY AND CAPITAL RESOURCES

         Cash  provided by Company  operating  activities  was  $766,649 for the
three months  ended March 31, 1998 as compared to cash  provided of $325,969 for
the sames period in 1997.  Investing  activities used cash of $2,003,000  during
the three months ended March 31, 1998, net of cash acquired, for the acquisition
of property,  plant and equipment and other  businesses  offset by proceeds from
the sale of fixed  assets of $28,970.  During the three  months  ended March 31,
1997, acquisitions of property, plant and equipment used cash of $252,573 offset
by  proceeds  of $29,448  from the sale of fixed  assets.  Financing  activities
provided  cash of  $2,748,692  from the net proceeds from the issuance of common
stock and $520,373 from the proceeds from bank and




                                       10

<PAGE>



other  borrowings  during  the  three  months  ended  March 31,  1998  offset by
principal payments on long-term notes and capital lease obligations of $449,936.
During the three  months  ended March 31, 1997  principal  payments on long-term
debt and capital lease obligations totaled $104,954.  For the three months ended
March 31, 1998, the Company incurred debt issuance costs of $135,000.

         Cash and cash  equivalents at March 31, 1998 was $1,948,186 as compared
with cash at December 31, 1997 of $435,845.

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

         On March 16, 1998, the Company completed the 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 million was borrowed  under the  Company's  Loan and
Security  Agreement with Fleet Capital  Corp.,  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  Report  filed  March  16,  1998  for a
description  of the  Company's  Loan and Security  Agreement  with Fleet Capital
Corp.

         Currently,  the Company  has no  definitive  agreements  to acquire any
additional  wireline  companies.  However,  there can be no  assurance  that the
Company will not acquire  additional  wireline  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.

         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.  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.



                                       11



<PAGE>

         Under the terms of its  agreement to acquire  Diamondback,  the Company
agreed to commit to make approximately $4.0 million available to the Diamondback
business for capital improvements during the years 1998 and 1999.

         The Company  believes that cash flow generated from  operations will be
sufficient to fund its normal working capital needs and capital expenditures for
at least the next 12 months.

YEAR 2000 COMPUTER ISSUES

         The Company has reviewed  its  computer  systems and hardware to locate
potential  operational  problems associated with the year 2000. Such review will
continue  until all  potential  problems are located and  resolved.  The Company
believes that all year 2000  problems in its computer  systems have been or will
be resolved in a timely manner and have not caused and will not cause disruption
of its operations or have a material  adverse effect on its financial  condition
or results of operations.  However, it is possible that the Company's cash flows
could  be  disrupted  by  year  2000  problems  experienced  by the  oil and gas
production companies that utilize its services,  financial institutions or other
persons.  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. Inflation did not have a
significant  effect on the Company's  operations in the three months ended March
31, 1998.

RECENTLY ISSUED ACCOUNTING STANDARDS

         The Board has issued SFAS No.  131,  Disclosures  About  Segments of an
Enterprise and Related Information which establishes  standards for the way that
public business  enterprises  report  information  about  operating  segments in
annual financial  statements and requires  selected  information about operating
segments in interim financial reports.

         This  Statement  requires  that a  public  business  enterprise  report
financial and descriptive  information about its reportable  operating segments.
Operating  segments  are  components  of  an  enterprise  about  which  separate
financial  information  is available  that is  evaluated  regularly by the chief
operating  decision maker in deciding how to allocate resources and in assessing
performance.  Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.



                                       12


<PAGE>


         The financial information required includes a measure of segment profit
or loss,  certain  specific  revenue and  expense  items,  segment  assets and a
reconciliation  of  each  category  to the  general  financial  statements.  The
descriptive  information  required includes the way that the operating  segments
were determined,  the products and services provided by the operating  segments,
differences  between the measurements used in reporting segment  information and
those used in the  general  purpose  financial  statements,  and  changes in the
measurement of segment amounts from period to period.

         This  Statement  is  effective  for  financial  statements  for periods
beginning after December 15, 1997 with  restatement of earlier periods  required
in the  initial  year of  application.  This  Statement  need not be  applied to
interim  financial  statements  in the  initial  year  of its  application,  but
comparative  information  for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of  application.  The  Company  is  currently  determining  if these  disclosure
requirements will be applicable and, therefore, required in future periods.

PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         In March 1998,  the Company  sold  596,000  shares of Common Stock at a
purchase  price of $5.50 per share.  The  securities  were sold in a transaction
exempt from the  registration  requirements  of the  Securities  Act of 1933, as
amended,  in reliance on Regulation D,  thereunder.  All of the purchasers  were
accredited  investors as defined under  Regulation D. Harris,  Webb, & Garrison,
Inc., a registered broker dealer,  acted as agent for the Company and received a
commission  of  $229,460.  The net  proceeds of  $3,048,540  were used to fund a
portion of the purchase price and related fees of the Phoenix Acquisition.

         On March 16,1998,  the Company sold to St. James pursuant to a Purchase
Agreement dated January 23, 1998 (the  "Agreement")  the Company's $10.0 million
8%  Convertible  Promissory  Note (the "Note") and warrants (the  "Warrants") to
purchase 2,000,000 shares of Common Stock exercisable at $6.75 per share through
January 23, 2003. The securities were sold to St. James in a transaction  exempt
from the  registration  requirements  of the  Securities Act of 1933 in reliance
upon Section 4(2) thereof.  See Item 12 of the  Company's  Annual Report on Form
10-KSB for a description of this and other transactions with St. James.  Payment
of principal and interest on the Note is collateralized by substantially all the
assets of the Company,  subordinated,  as of March 16,1998, to borrowings by the
Company  from Fleet  Capital  Corp.  in the  maximum  aggregate  amount of $19.0
million.  The Note is convertible  into shares of the Company's  Common Stock at
the conversion price of $7.00 per share,  subject to  anti-dilution  adjustments
for certain issuances of securities by the Company at prices per share of Common
Stock less than the conversion price then in effect. St. James agreed to



                                       13


<PAGE>

subordinate its security  interests and rights to the  indebtedness and security
interests of the lenders  providing  up to $4.5 million  pursuant to a term loan
and $3.0 million pursuant to a revolving credit facility.  The exercise price of
the Warrants is subject to  anti-dilution  adjustment  for certain  issuances of
securities  by the  Company  at prices  per share of Common  Stock less than the
exercise price then in effect. The shares issuable on conversion of the Note and
exercise of the Warrants have demand and  piggy-back  registration  rights under
the Securities Act of 1933. The Company agreed that one person designated by St.
James will be nominated  for election to the Company's  Board of Directors.  Mr.
John L. Thompson,  currently a Director of the Company, serves in this capacity.
The Agreement  grants St. James certain  preferential  rights to provide  future
financings to the Company, subject to certain exceptions. The Note also contains
various affirmative and negative covenants,  including a prohibition against the
Company  consolidating,  merging or entering into a share  exchange with another
person,  with certain  exceptions,  without the consent of St. James.  Events of
default under the Note include, among other events, (i) a default in the payment
of principal or interest;  (ii) a default under the Note and the failure to cure
such default for five days,  which will constitute a cross default under each of
the other notes held by St. James;  (iii) a breach of the  Company's  covenants,
representations  and warranties under the Agreement;  (iv) a breach under any of
the other  agreements  between  the Company  and St.  James,  subject to certain
exceptions;  (v) any  person or group of  persons  acquiring  40% or more of the
voting power of the Company's  outstanding  shares who was not the owner thereof
as of January  23,  1998,  a merger of the  Company  with  another  person,  its
dissolution or liquidation or a sale of all or substantially all its assets; and
(vi) certain  events of  bankruptcy.  In the event of a default  under the Note,
subject to the terms of an agreement  between St. James and Fleet Capital Corp.,
St. James could seek to foreclose against the collateral for the Note.

         St. James has agreed to convert its $2.0 million convertible note dated
June 5, 1997 and its $2.9 million  convertible  note dated October 10, 1997 into
shares of the  Company's  Common  Stock at such time as the  Company has filed a
registration  statement  under the Securities Act of 1933 relating to the shares
issuable on conversion  of such notes and on exercise of the warrants  issued to
St. James and such  registration  statement  has been  declared  effective.  The
Company  intends to file a  registration  statement  under the Securities Act of
1933 during the second quarter of 1998 to register these shares.

         In March 1998, St. James agreed to certain amendments to its agreements
with the Company in connection with the Company's  borrowings from Fleet Capital
Corp. to finance the Phoenix Acquisition. St. James has advised the Company that
it is seeking to be  compensated  for agreeing to the amendments to the terms of
its agreements with the Company. The Company and St. James are currently engaged
in negotiations  regarding the terms of such  compensation and the terms of such
amendment have not been finalized.



                                       14


<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)       Exhibits

                          27.   Financial Data Schedule

         (b)       Reports on Form 8-K

                          The  Company  filed  Current  Reports  on Form  8-K on
                          February  6, 1998 in  response to Items 5 and 7 and on
                          March 31, 1998 in response to Items 2, 5, and 7.









                                       15


<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.

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

Date:  May  15,  1998                   ----------------------------------------
                                               William L. Jenkins
                                        President and Chief Operating Officer
                                        (Principal Executive, Financial and
                                        Accounting Officer)