##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant To Section 13 Or 15 (d) Of The Securities Exchange Act Of 1934

For the quarterly period ended September 30, 2003.

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 0-18691

NORTH COAST ENERGY, INC.(Exact name of registrant as specified in its charter)

|                                                                          |  |                                               
|------------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction or organization of incorporation)    |  | 34-1594000(I.R.S. Employer Identification No.)
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|1993 Case Parkway
Twinsburg, Ohio(Address of principal executive offices) |  | 44087-2343(Zip Code)                          

Registrants telephone number, including area code: (330) 425-2330

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X.   No.

Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b-2 of the Exchange Act).

Yes
.   NoX.

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of
Common Stock, as of the latest practicable date.

|                             |  |                                  
|---------------------------- |  | ---------------------------------
|Class                        |  | Outstanding at September 30, 2003
|                             |  |                                  
|Common Stock, $.01 par value |  | 15,251,806                       





---

TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                               | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|SIGNATURES                    
|Index to Exhibits             
|Certification of CEO          
|Certification of CFO          
|906 Certification of CEO      
|906 Certification of CFO      



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

|                                                                                              |                                                      |                                                                 |    |          |   | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------- | --------------------------------------------------------------- | -- | -------- | - | 
|                                                                                              |                                                      |                                                                 |    | Page No.
|                                                                                              |                                                      |                                                                 |    |         
|PART I   FINANCIAL INFORMATION                                                               |                                                      |                                                                 |    |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 1. Financial Statements                                                                  |                                                      |                                                                 |    |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Balance Sheets -                        |                                                                 |    |          |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                      | September 30, 2003 (Unaudited) and December 31, 2002            |    |          | 3 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Statements of Income (Unaudited) -      |                                                                 |    |          |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                      | For the Three and Nine Months Ended September 30, 2003 and 2002 |    |          | 5 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Statements of Cash Flows (Unaudited) -  |                                                                 |    |          |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                      | For the Nine Months Ended September 30, 2003 and 2002           |    |          | 6 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Notes to Unaudited Consolidated Financial Statements |                                                                 |    | 7        |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                      |                                                                 | 14 |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                      |                                                                 | 20 |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 4. Controls and Procedures                                                               |                                                      |                                                                 | 21 |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|PART II  OTHER INFORMATION                                                                   |                                                      |                                                                 | 22 |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|SIGNATURES                                                                                    |                                                      |                                                                 | 23 |         
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|INDEX TO EXHIBITS                                                                             |                                                      |                                                                 | 24 |         

2



---



##### Table of Contents






NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2003 and December 31, 2002

|                                         |                                             |                      |             |               |            |              |             |             |            | 
|---------------------------------------- | ------------------------------------------- | -------------------- | ----------- | ------------- | ---------- | ------------ | ----------- | ----------- | ---------- | 
|                                         |                                             |                      |             | September 30, |            | December 31,
|ASSETS                                   |                                             | 2003                 |             | 2002         
|                                         |                                             |                      |             |              
|                                         |                                             |                      |             | (Unaudited)   |            |              |             |            
|CURRENT ASSETS                           |                                             |                      |             |               |            |              |             |            
|                                        
|                                        
|                                        
|                                        
|                                         | Cash and equivalents                        |                      | $           | 16,970,728    |            |              | $           | 14,711,205  |           
|                                        
|                                        
|                                        
|                                        
|                                         | Accounts receivable                         |                      |             | 8,281,944     |            |              |             | 5,796,537   |           
|                                        
|                                        
|                                        
|                                        
|                                         | Inventories                                 |                      |             | 310,713       |            |              |             | 353,722     |           
|                                        
|                                        
|                                        
|                                        
|                                         | Prepaid expenses                            |                      |             | 711,542       |            |              |             | 404,726     |           
|                                         |                                             |                      |             |               |            |              |             |            
|                                         |                                             | Total current assets |             |               | 26,274,927 |              |             |             | 21,266,190 | 
|                                        
|                                        
|                                        
|                                        
|PROPERTY AND EQUIPMENT, at cost          |                                             |                      |             |               |            |              |             |            
|                                        
|                                        
|                                        
|                                        
|                                         | Land                                        |                      |             | 222,822       |            |              |             | 222,822     |           
|                                        
|                                        
|                                        
|                                        
|                                         | Oil and gas properties (successful efforts) |                      |             | 158,612,028   |            |              |             | 143,952,276 |           
|                                        
|                                        
|                                        
|                                        
|                                         | Gathering systems                           |                      |             | 17,664,379    |            |              |             | 17,137,184  |           
|                                        
|                                        
|                                        
|                                        
|                                         | Vehicles                                    |                      |             | 3,133,369     |            |              |             | 2,288,388   |           
|                                        
|                                        
|                                        
|                                        
|                                         | Furniture and fixtures                      |                      |             | 1,092,736     |            |              |             | 991,438     |           
|                                        
|                                        
|                                        
|                                        
|                                         | Buildings and improvements                  |                      |             | 2,170,862     |            |              |             | 1,877,667   |           
|                                         |                                             |                      |             |               |            |              |             |            
|                                         |                                             |                      | 182,896,196 |               |            |              | 166,469,775 |            
|                                        
|                                        
|                                        
|                                        
|Less accumulated depreciation, depletion |                                             |                      |             |               |            |              |             |            
|                                        
|                                        
|                                        
|                                        
|                                         | and amortization                            |                      |             | 43,816,334    |            |              |             | 37,213,430  |           
|                                         |                                             |                      |             |               |            |              |             |            
|                                         |                                             |                      | 139,079,862 |               |            |              | 129,256,345 |            
|                                        
|                                        
|                                        
|                                        
|OTHER ASSETS, net                        |                                             |                      | 584,734     |               |            |              | 1,328,595   |            
|                                         |                                             |                      |             |               |            |              |             |            
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|TOTAL ASSETS                             |                                             | $                    | 165,939,523 |               |            | $            | 151,851,130 |            
|                                         |                                             |                      |             |               |            |              |             |            

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

3



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2003 and December 31, 2002

|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |            |            |            | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------- | ---------- | ------------- | ---------- | ------------ | ---------- | ---------- | ---------- | 
|                                           |                                                                                                                                                                                                         |                            |                           |            | September 30, |            | December 31,
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                                                                         | 2003                       |                           | 2002      
|                                           |                                                                                                                                                                                                         |                            |                           |           
|                                           |                                                                                                                                                                                                         |                            |                           |            | (Unaudited)   |            |              |            |           
|CURRENT LIABILITIES                        |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                                                                                                                        |                            | $                         | 4,330,519  |               |            | $            | 3,369,632  |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued expenses                                                                                                                                                                                        |                            |                           | 9,869,400  |               |            |              | 7,077,717  |           
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                           |                                                                                                                                                                                                         |                            | Total current liabilities |            |               | 14,199,919 |              |            |            | 10,447,349 | 
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|LONG-TERM DEBT                             |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|                                           | Affiliates                                                                                                                                                                                              |                            |                           |           |               |            |              | 10,000,000 |           
|                                          
|                                          
|                                          
|                                          
|                                           | Non-affiliates                                                                                                                                                                                          |                            |                           | 57,000,000 |               |            |              | 57,000,000 |           
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                           |                                                                                                                                                                                                         |                            | 57,000,000                |            |               |            | 67,000,000   |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|OTHER LONG-TERM LIABILITIES                |                                                                                                                                                                                                         |                            | 1,184,123                 |            |               |            | 208,456      |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|DEFERRED INCOME TAXES                      |                                                                                                                                                                                                         |                            | 16,514,002                |            |               |            | 9,458,421    |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|COMMITMENTS AND CONTINGENCIES              |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|STOCKHOLDERS EQUITY                       |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|                                           | Series A, 6% Noncumulative Convertible Preferred
stock par value $.01 per share; 563,270 shares
authorized; 0 and 72,336 shares issued and outstanding
(aggregate liquidation value of $0 and $723,360) |                            |                           |           |               |            |              | 723        |           
|                                          
|                                          
|                                          
|                                          
|                                           | Series B, Cumulative Convertible Preferred stock, par
value $.01 per share; 625,000 shares authorized; no
shares issued or outstanding                                                                  |                            |                           |           |               |            |              |           |           
|                                          
|                                          
|                                          
|                                          
|                                           | Undesignated Serial Preferred stock, par value $.01
per share; 811,730 shares authorized; no shares issued
or outstanding                                                                               |                            |                           |           |               |            |              |           |           
|                                          
|                                          
|                                          
|                                          
|                                           | Common Stock, par value $.01 per share; 60,000,000
shares authorized; 15,251,806 and 15,208,634 shares issued
and outstanding                                                                           |                            |                           | 152,518    |               |            |              | 152,086    |           
|                                          
|                                          
|                                          
|                                          
|Additional paid-in capital                 |                                                                                                                                                                                                         |                            | 47,264,681                |            |               |            | 47,889,111   |           
|                                          
|                                          
|                                          
|                                          
|Accumulated other comprehensive loss       |                                                                                                                                                                                                         |                            | (1,244,252                | )          |               |            | (1,430,225   | )         
|                                          
|                                          
|                                          
|                                          
|Retained earnings                          |                                                                                                                                                                                                         |                            | 30,868,532                |            |               |            | 18,125,209   |           
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                           |                                                                                                                                                                                                         | Total stockholders equity |                           |            | 77,041,479    |            |              |            | 64,736,904 |           
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           
|                                          
|                                          
|                                          
|                                          
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                                         | $                          | 165,939,523               |            |               | $          | 151,851,130  |           
|                                           |                                                                                                                                                                                                         |                            |                           |            |               |            |              |           

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

4



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2003 and 2002
(Unaudited)

|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |            |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------- | ---------- | -------------------------------- | ---- | ------------------------------- | ---------- | --------- | ---- | ---- | ---------- | ---------- | ---- | - | ---------- | ---------- | ---- | 
|                                                                                                                                              |                                          |         |            | Three Months Ended September 30, |      | Nine Months Ended September 30,
|                                                                                                                                              |                                          |         |            |                                  |      |                                
|                                                                                                                                              |                                          |         |            | 2003                             |      | 2002                            |            | 2003      |      | 2002
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |     
|REVENUE                                                                                                                                       |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Oil and gas production                   |         | $          | 14,445,510                       |      |                                 | $          | 9,194,196 |      |      | $          | 42,186,892 |      |   | $          | 26,245,966 |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Drilling revenues                        |         |            |                                 |      |                                 |            |          |      |      |            |           |      |   |            | 2,082,351  |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Well operating, gathering, and other     |         |            | 1,766,291                        |      |                                 |            | 1,648,632 |      |      |            | 5,018,799  |      |   |            | 5,039,990  |     
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                              |                                          |         | 16,211,801 |                                  |      |                                 | 10,842,828 |           |      |      | 47,205,691 |            |      |   | 33,368,307 |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|COSTS AND EXPENSES                                                                                                                            |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Oil and gas production expenses          |         |            | 2,565,363                        |      |                                 |            | 2,231,911 |      |      |            | 7,799,116  |      |   |            | 6,175,590  |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Drilling costs                           |         |            |                                 |      |                                 |            |          |      |      |            |           |      |   |            | 1,752,456  |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Well operating, gathering, and other     |         |            | 1,366,896                        |      |                                 |            | 921,025   |      |      |            | 4,003,930  |      |   |            | 2,523,548  |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Exploration expense                      |         |            | 1,215,721                        |      |                                 |            | 317,284   |      |      |            | 2,476,316  |      |   |            | 1,049,504  |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | General and administrative expenses      |         |            | 1,648,753                        |      |                                 |            | 947,224   |      |      |            | 4,763,290  |      |   |            | 2,921,300  |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Depreciation, depletion and amortization |         |            | 2,352,710                        |      |                                 |            | 2,257,730 |      |      |            | 6,789,965  |      |   |            | 6,463,464  |     
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                              |                                          |         | 9,149,443  |                                  |      |                                 | 6,675,174  |           |      |      | 25,832,617 |            |      |   | 20,885,862 |           
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|INCOME FROM OPERATIONS                                                                                                                        |                                          |         | 7,062,358  |                                  |      |                                 | 4,167,654  |           |      |      | 21,373,074 |            |      |   | 12,482,445 |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|INTEREST EXPENSE, NET                                                                                                                         |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Interest income                          |         |            | 118,923                          |      |                                 |            | 104,225   |      |      |            | 357,643    |      |   |            | 272,798    |     
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              | Interest expense                         |         |            | 661,009                          |      |                                 |            | 795,167   |      |      |            | 2,071,894  |      |   |            | 2,378,038  |     
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                              |                                          |         | 542,086    |                                  |      |                                 | 690,942    |           |      |      | 1,714,251  |            |      |   | 2,105,240  |           
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|INCOME BEFORE PROVISION
FOR INCOME TAXES                                                                                                      |                                          |         | 6,520,272  |                                  |      |                                 | 3,476,712  |           |      |      | 19,658,823 |            |      |   | 10,377,205 |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|PROVISION FOR INCOME TAXES                                                                                                                    |                                          |         | 2,294,000  |                                  |      |                                 | 1,175,123  |           |      |      | 6,915,500  |            |      |   | 3,506,332  |           
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|NET INCOME                                                                                                                                    |                                          | $       | 4,226,272  |                                  |      | $                               | 2,301,589  |           |      | $    | 12,743,323 |            |      | $ | 6,870,873  |           
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|NET INCOME APPLICABLE TO
COMMON STOCK (after dividends on
Cumulative Preferred
Stock of $58,167 for
the nine months ended September 30, 2002) |                                          | $       | 4,226,272  |                                  |      | $                               | 2,301,589  |           |      | $    | 12,743,323 |            |      | $ | 6,812,706  |           
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|NET INCOME PER SHARE                                                                                                                          |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                              |                                          | Basic   |            | $                                | 0.28 |                                 |            | $         | 0.15 |      |            | $          | 0.84 |   |            | $          | 0.45 | 
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           
|                                                                                                                                              |                                          | Diluted |            | $                                | 0.27 |                                 |            | $         | 0.15 |      |            | $          | 0.82 |   |            | $          | 0.45 | 
|                                                                                                                                              |                                          |         |            |                                  |      |                                 |            |           |      |      |            |            |      |   |            |           

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

5



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)

|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |               |           |           |             |  
|-------------------------------------------------- | ------------------------------------------ | --------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------------------- | --------- | ------------- | ----------- | ------------- | --------- | --------- | ----------- | -
|                                                   |                                            |                                                                                   |                                          |                                                      |           | September 30, |             | September 30,
|                                                   |                                            |                                                                                   |                                          |                                                      |           | 2003          |             | 2002         
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|CASH FLOWS FROM OPERATING ACTIVITIES               |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                 |                                                                                   | $                                        | 12,743,323                                           |           |               | $           | 6,870,873     |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            | Adjustments to reconcile net income to net cash
provided by operating activities: |                                          |                                                      |           |               |             |               |           |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   | Depreciation, depletion and amortization |                                                      |           | 6,789,965     |             |               |           | 6,463,464 |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   | Deferred income taxes                    |                                                      |           | 6,915,500     |             |               |           | 3,416,787 |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   | Gain on sale of property and equipment   |                                                      |           | (4,781        | )           |               |           |          |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   | Change in:                               |                                                      |           |               |             |               |           |           |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   |                                          | Accounts receivable                                  |           |               | (2,485,407  | )             |           |           | (291,421    | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   |                                          | Inventories and other current assets                 |           |               | (263,807    | )             |           |           | (455,585    | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   |                                          | Other assets, net                                    |           |               | 604,627     |               |           |           | 279,888     |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   |                                          | Accounts payable and accrued expenses                |           |               | 5,101,227   |               |           |           | 1,619       |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   |                                          | Billings in excess of costs on uncompleted contracts |           |               |            |               |           |           | (2,062,094  | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            |                                                                                   |                                          | Other long-term liabilities                          |           |               | (46,937     | )             |           |           | (140,598    | )
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                   |                                            |                                                                                   |                                          | Total adjustments                                    |           |               | 16,610,387  |               |           |           | 7,212,060   |  
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                   |                                            |                                                                                   |                                          | Net cash provided by operating activities            |           |               | 29,353,710  |               |           |           | 14,082,933  |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|CASH FLOWS FROM INVESTING ACTIVITIES               |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchases of property and equipment        |                                                                                   |                                          | (16,844,409                                          | )         |               |             | (19,939,244   | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds on sale of property and equipment |                                                                                   |                                          | 374,943                                              |           |               |             | 1,275         |          
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                   |                                            |                                                                                   |                                          | Net cash used by investing activities                |           |               | (16,469,466 | )             |           |           | (19,937,969 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|CASH FLOWS FROM FINANCING ACTIVITIES               |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Repayment of long-term debt  affiliates   |                                                                                   |                                          | (10,000,000                                          | )         |               |             |              |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net proceeds from issuance of common stock |                                                                                   |                                          | 154,189                                              |           |               |             |              |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Redemption of Preferred A stock            |                                                                                   |                                          | (720,610                                             | )         |               |             |              |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Redemption of Preferred B stock            |                                                                                   |                                          |                                                     |           |               |             | (2,326,640    | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Redemption of Options                      |                                                                                   |                                          | (58,300                                              | )         |               |             |              |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Dividends                                  |                                                                                   |                                          |                                                     |           |               |             | (58,167       | )        
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                   |                                            |                                                                                   |                                          | Net cash used by financing activities                |           |               | (10,624,721 | )             |           |           | (2,384,807  | )
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|INCREASE (DECREASE) IN CASH AND EQUIVALENTS        |                                            |                                                                                   | 2,259,523                                |                                                      |           |               | (8,239,843  | )            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|CASH AND EQUIVALENTS AT BEGINNING OF PERIOD        |                                            |                                                                                   | 14,711,205                               |                                                      |           |               | 22,035,924  |              
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|CASH AND EQUIVALENTS AT END OF PERIOD              |                                            | $                                                                                 | 16,970,728                               |                                                      |           | $             | 13,796,081  |              
|                                                   |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|Supplemental disclosures of cash flow information: |                                            |                                                                                   |                                          |                                                      |           |               |             |              
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid during the period for:           |                                                                                   |                                          |                                                      |           |               |             |               |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            | Interest                                                                          |                                          | $                                                    | 2,242,140 |               |             | $             | 2,548,886 |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                            | Income taxes                                                                      |                                          |                                                      |          |               |             |               | 32,545    |          

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

6



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Accounting Policies



| | A. |  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The accompanying unaudited consolidated financial statements included
herein, have been prepared by North Coast Energy, Inc. in accordance with
accounting principles generally accepted in the United States of America
for interim financial information and with instructions to Form 10-Q and
Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for fair presentation have been included. These financial statements
should be read in conjunction with the financial statements and notes
thereto which are in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2002.
|
| |    |  | The balance sheet at December 31, 2002, presented in this report, has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | The results of the operations for the interim periods may not necessarily
be indicative of the results to be expected for the full year. In
addition, the preparation of these financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                              
|
| |    |  | The accompanying financial statements should be read in connection with
the Notes to Consolidated Financial Statements included in Item 8.
Financial Statements and Supplemental Data in the Companys 2002 Annual
Report on Form 10-K filed with the SEC. Following is a discussion of the
Companys most critical accounting policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | B. |  | Oil and Gas Investments and Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |    |  | The Company uses the successful efforts method of accounting for its oil
and gas producing activities. Under successful efforts, costs to acquire
mineral interests in oil and gas properties, to drill and equip
exploratory wells that find proved reserves, and to drill and equip
developmental wells are capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | Costs to drill exploratory wells that do not find proved reserves, costs
of developmental wells on properties the Company has no further interest
in, geological and geophysical costs, and costs of carrying and retaining
unproved properties are expensed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | C. |  | Oil and Gas Reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |    |  | The Companys proved developed and proved undeveloped reserves are all
located within the Appalachian and Illinois Basins in the United States.
The Company cautions that there are many uncertainties inherent in
estimating proved reserve quantities and in projecting future production
rates and the timing of development expenditures. In addition, estimates
of new discoveries are more imprecise than those of properties with a
production history. Accordingly, these estimates are expected to change
as future information becomes available.                                                                                                                                                                                                                                                                                                                                                     

7



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



| |    |  | Material revisions of reserve estimates may occur in the future,
development and production of the oil and gas reserves may not occur in
the periods assumed, actual prices realized and actual costs incurred may
vary significantly from assumptions used. Proved reserves represent
estimated quantities of natural gas and oil that geological and
engineering data demonstrate with reasonable certainty, to be recoverable
in future years from known reservoirs under economic and operating
conditions existing at the time the estimates were made. Proved developed
reserves are expected to be recovered through wells and equipment in place
and under operating methods being utilized at the time the estimates were
made. The accuracy of a reserve estimate is a function of the quality and
quantity of available data, the accuracy of assumptions used and the
judgment of the persons preparing the estimate.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Companys proved reserve information is based on estimates it
prepared. Estimates prepared by others may be higher or lower than the
Companys estimates. The Companys estimates of proved reserves have been
reviewed by independent petroleum engineers at each fiscal year end, most
recently, December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | D. |  | Capitalization, Depreciation, Depletion and Impairment of
Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | When a property is determined to contain proved reserves, the capitalized
costs of such properties are transferred from unproved properties to
proved properties and are amortized on a group (pool) basis with proved
properties having similar characteristics, by the unit-of-production
method based upon estimated proved developed reserves. To the extent that
capitalized costs of each pool of proved properties exceed the estimated
future net cash flow from such pool, the excess capitalized costs are
written down to the present value of such amount. Estimated future net
cash flows are determined based primarily upon the estimated future proved
reserves related to the Companys current proved properties.                                                                                                                                                                                              
|
| |    |  | On sale or abandonment of an entire interest in an unproved property, the
gain or loss is recognized taking into consideration the amount of any
recorded impairment. If a partial interest in an unproved property is
sold, the amount received is treated as a reduction of the cost of the
interest retained. The carrying cost of unproved properties is
approximately $3,800,000 at September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |    |  | Unproved oil and gas properties that are significant are periodically
assessed for impairment of value and a loss is recognized at the time of
impairment by providing an impairment allowance. Other unproved
properties are expensed when surrendered or upon lease expiration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |    |  | Property and equipment are stated at cost and are depleted or depreciated
principally on methods and at rates designed to amortize their costs over
their estimated useful lives (proved oil and gas properties using the
unit-of-production method based upon estimated proved developed oil and
gas reserves, gathering systems using the straight-line method over 10 to
25 years, vehicles, furniture and fixtures using various methods over 3 to
15 years and building and improvements using various methods over 7  31.5
years).                                                                                                                                                                                                                                                                                                                                                                                        
|
| |    |  | The Company follows Statement of Financial Accounting Standards (SFAS)
No. 144 which requires a review for impairment whenever circumstances
indicate that the carrying amount of an asset may not be recoverable.
Impairment is recorded as impaired properties are identified.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | E. |  | Derivatives and Hedging                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |    |  | The hedging relationship between the hedging instruments and hedged item
must be highly effective. The Company measures effectiveness at least on
a monthly basis. Ineffective portions of a derivative instruments change
in fair value are immediately recognized in net income (loss). If there
is a discontinuance of a cash flow hedge because it is probable that the
original forecasted transaction would not occur, deferred gains or losses
are recognized in earnings immediately.                                                                                                                                                                                                                                                                                                                                                                                                                                   

8



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



| | F. |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                     
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | Gas production revenue is recognized as production takes place. Oil
production is recognized as oil is removed from the well site. Oil and
gas marketing revenues are recognized when title passes. Oilfield service
revenues are recognized when services have been provided.                                                                          
|
| | G. |  | Per Share Amounts                                                                                                                                                                                                                                                                                                                                       
|
| |    |  | The average number of shares used in computing basic and diluted net
income per share was 15,251,806 and 15,464,490 and 15,208,516 and
15,241,877 for the three months ended September 30, 2003 and 2002,
respectively, and 15,251,798 and 15,454,692 and 15,208,423 and 15,241,867
for the nine months ended September 30, 2003 and 2002, respectively.
|
| | H. |  | Reclassifications                                                                                                                                                                                                                                                                                                                                       
|
| |    |  | Certain reclassifications were made to prior period financial statement
presentations to conform with current period presentations.                                                                                                                                                                                                                     

Note 2. Stock Options



| |  |  | At the Annual Meeting of Stockholders held June 12, 2003, the security
holders adopted a proposal to amend the Companys 1999 Employee Stock
Option Plan to add 400,000 shares of common stock for issuance under such
plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company accounts for stock based compensation issued to its employees
and directors in accordance with Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees. Accordingly, no
compensation cost has been recognized for the stock option plans, as all
options granted under the plans have an exercise price equal to the
average of the closing price for each of the twenty trading days prior to
the date of the grant. The fair value of options granted was determined
using the Black-Scholes option pricing model, assuming no dividend yield,
and weighted average risk-free interest rates of 2.5% and 4.6% for 2003
and 2002, respectively; volatility of 67% and 52% for 2003 and 2002,
respectively; and expected life of 5 years.
|
| |  |  | The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of
FASB Statement No. 123, Accounting for Stock-based Compensation to
stock-based employee compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ------------------ | ---- | ----------------- | - | --------- | ---- | ---- | - | ---------- | ---- |  | - | --------- | ---- | 
|                                                                                                                                            |                       |   | Three Months Ended |      | Nine Months Ended
|                                                                                                                                            |                       |   | September 30,      |      | September 30,    
|                                                                                                                                            |                       |   |                    |      |                  
|                                                                                                                                            |                       |   | 2003               |      | 2002              |   | 2003      |      | 2002
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |     
|Net Income as reported                                                                                                                      |                       | $ | 4,226,272          |      |                   | $ | 2,301,589 |      |      | $ | 12,743,323 |      |  | $ | 6,870,873 |     
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                           
|Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects |                       |   |                   |      |                   |   |          |      |      |   | (504,200   | )    |  |   | (103,300  | )   
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     
|Pro forma net income                                                                                                                        |                       | $ | 4,226,272          |      |                   | $ | 2,301,589 |      |      | $ | 12,239,123 |      |  | $ | 6,767,573 |     
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     
|Earnings per share                                                                                                                          |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                            | Basic  as reported   |   | $                  | 0.28 |                   |   | $         | 0.15 |      |   | $          | 0.84 |  |   | $         | 0.45 | 
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     
|                                                                                                                                            | Diluted  as reported |   | $                  | 0.27 |                   |   | $         | 0.15 |      |   | $          | 0.82 |  |   | $         | 0.45 | 
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     
|                                                                                                                                            | Basic  pro forma     |   | $                  | 0.27 |                   |   | $         | 0.15 |      |   | $          | 0.80 |  |   | $         | 0.44 | 
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     
|                                                                                                                                            | Diluted  pro forma   |   | $                  | 0.28 |                   |   | $         | 0.15 |      |   | $          | 0.79 |  |   | $         | 0.44 | 
|                                                                                                                                            |                       |   |                    |      |                   |   |           |      |      |   |            |      |  |   |           |     

9



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Note 3. Preferred Stock



| |  |  | The Company paid a dividend of $58,167 on the Cumulative Convertible
Series B Preferred stock during the nine months ended September 30, 2002.
All shares of Series B Preferred stock were redeemed March 31, 2002. In
June 2003, the Company redeemed all of its outstanding Series A Preferred
stock for $720,610.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 4. Related Party Transactions



| |  |  | Prior to January 2002, a large portion of the Companys revenues, other
than oil and gas production revenue, was generated from, or was a result
of, the organization and management of oil and gas drilling partnerships
sponsored by the Company. The Company ceased offering these partnerships
in 2002. The Company believes that the terms of any remaining related
party transactions involving the remaining partnerships are consistent
with terms that could have been obtained from unaffiliated third parties.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Accounts receivable from affiliates amounted to $97,095 and $72,385 at
September 30, 2003, and December 31, 2002, respectively, consisting
primarily of receivables from the partnerships managed by the Company and
are for administrative fees charged to the partnerships and to reimburse
the Company for amounts paid on behalf of the partnerships.                                                                                                                                                                

Note 5. Financial Instruments



| |  |  | Derivative Financial Instruments:The Company uses financial derivatives
solely for hedging purposes. The following is a summary of the Companys
risk management strategies and the effect of these strategies on the
Companys consolidated financial statements.                                                                                                                                                                                                                                                                                    
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Cash Flow Hedging Strategy:The Company is exposed to commodity price
risks related to the sale of its natural gas and oil. As a result, the
Companys financial results can be significantly impacted by changes in
commodity prices. Costless collars are financial derivatives that
consist of a sold call option and a purchased put option such that the
combined revenue and cost of these individual transactions is equal to or
near zero. As of September 30, 2003, the Company had entered into the
following costless collar arrangements:

|                                     |  |         |         |           |  |           |      |  |  |   |      | 
|------------------------------------ |  | ------- | ------- | --------- |  | --------- | ---- |  |  | - | ---- | 
|                                     |  | Monthly |         | Price Per |  | Price Per
|                                     |  | Volume  |         | MMBtu     |  | MMBtu    
|Term                                 |  | MMBtu   |         | Floor     |  | Ceiling  
|                                     |  |         |         |           |  |          
|January 1, 2003 to December 31, 2003 |  |         | 100,000 |           |  | $         | 3.25 |  |  | $ | 4.35 | 
|                                    
|                                    
|                                    
|                                    
|January 1, 2003 to December 31, 2003 |  |         | 150,000 |           |  |           | 3.00 |  |  |   | 4.45 | 
|                                    
|                                    
|                                    
|                                    
|April 1, 2003 to December 31, 2003   |  |         | 153,000 |           |  |           | 3.60 |  |  |   | 4.68 | 
|                                    
|                                    
|                                    
|                                    
|April 1, 2003 to December 31, 2003   |  |         | 153,000 |           |  |           | 3.65 |  |  |   | 4.40 | 
|                                    
|                                    
|                                    
|                                    
|January 1, 2004 to December 31, 2004 |  |         | 153,000 |           |  |           | 3.35 |  |  |   | 4.61 | 
|                                    
|                                    
|                                    
|                                    
|January 1, 2004 to December 31, 2004 |  |         | 153,000 |           |  |           | 3.50 |  |  |   | 5.30 | 
|                                    
|                                    
|                                    
|                                    
|January 1, 2004 to December 31, 2004 |  |         | 305,000 |           |  |           | 4.25 |  |  |   | 7.06 | 



| |  |  | Gains or losses on the hedges relative to the market are recognized
monthly as additions to or subtractions from oil and gas sales. To lessen
its exposure to commodity price risk, the Company expects to continue to
sell natural gas under fixed price contracts, on the spot market and to
use financial hedging instruments to realize a defined price on a portion
of its production. As a result of the costless collars, revenues were
decreased by $820,340 and increased by $15,000 for the three months ended
September 30, 2003 and 2002, respectively, and revenues were decreased by
$5,383,000 and increased by $789,170 for the nine months ended September
30, 2003 and 2002, respectively. The mark-to-market liability associated
with the costless collars at September 30, 2003, was $1,038,000.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



| |  |  | The following table reflects the natural gas volumes and the weighted
average prices under financial hedges and fixed price contracts at
September 30, 2003. One MMBtu is approximately equal to one Mcf.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         |  |                            |                                      |                       |  |                       |      |       |  |            |      |           |  |  |           |       |  |   |      |  |  |   |      | 
|------------------------ |  | -------------------------- | ------------------------------------ | --------------------- |  | --------------------- | ---- | ----- |  | ---------- | ---- | --------- |  |  | --------- | ----- |  | - | ---- |  |  | - | ---- | 
|                         |  | Financial Hedges (Collars) |                                      | Fixed Price Contracts |  |                       |      |      
|                         |  |                            |                                      |                       |  |                       |      |      
|                         |  |                            |                                      |                       |  | Est. Realizable Price |      |       |  |            |      |           |  |  |           |       |  |  
|                         |  |                            |                                      |                       |  |                       |      |       |  |            |      |           |  |  |           | NYMEX
|Quarter Ending           |  | MMBtu                      |                                      | Floor                 |  | Cap                   |      | MMBtu |  | Est. Price |      | @ 9/30/03
|                         |  |                            |                                      |                       |  |                       |      |       |  |            |      |          
|December 31, 2003        |  |                            | 1,670,000                            |                       |  | $                     | 3.39 |       |  | $          | 4.48 |           |  |  | 873,000   |       |  | $ | 5.30 |  |  | $ | 4.78 | 
|                        
|                        
|                        
|                        
|March 31, 2004           |  |                            | 1,815,000                            |                       |  |                       | 3.84 |       |  |            | 6.01 |           |  |  | 1,111,000 |       |  |   | 5.43 |  |  |   | 5.19 | 
|                        
|                        
|                        
|                        
|June 30, 2004            |  |                            | 1,820,000                            |                       |  |                       | 3.84 |       |  |            | 6.01 |           |  |  | 619,000   |       |  |   | 5.32 |  |  |   | 4.75 | 
|                        
|                        
|                        
|                        
|September 30, 2004       |  |                            | 1,840,000                            |                       |  |                       | 3.84 |       |  |            | 6.01 |           |  |  | 403,000   |       |  |   | 5.45 |  |  |   | 4.72 | 
|                        
|                        
|                        
|                        
|December 31, 2004        |  |                            | 1,840,000                            |                       |  |                       | 3.84 |       |  |            | 6.01 |           |  |  | 280,000   |       |  |   | 5.39 |  |  |   | 4.86 | 
|                        
|                        
|                        
|                        
|March 31, 2005           |  |                            | 0                                    |                       |  |                       | 0.00 |       |  |            | 0.00 |           |  |  | 87,717    |       |  |   | 5.23 |  |  |   | 5.00 | 
|                        
|                        
|                        
|                        
|June 30, 2005            |  |                            | 0                                    |                       |  |                       | 0.00 |       |  |            | 0.00 |           |  |  | 60,208    |       |  |   | 5.05 |  |  |   | 4.49 | 
|                        
|                        
|                        
|                        
|September 30, 2005       |  |                            | 0                                    |                       |  |                       | 0.00 |       |  |            | 0.00 |           |  |  | 45,291    |       |  |   | 4.88 |  |  |   | 4.46 | 
|                        
|                        
|                        
|                        
|December 31, 2005        |  |                            | 0                                    |                       |  |                       | 0.00 |       |  |            | 0.00 |           |  |  | 28,483    |       |  |   | 4.67 |  |  |   | 4.67 | 
|                        
|Mcf: thousand cubic feet |  |                            | MMBtu: million british thermal units



| |  |  | Interest Rate Swaps:During 2001, the Company entered into interest rate
swap agreements that effectively converted a portion of its variable rate,
long-term debt to fixed rate debt for periods of up to two years, thus
reducing the impact of interest rate changes on future income. As a
result of the swap agreements, interest expense was increased by
approximately $203,400 and $132,100 for the three months ended September
30, 2003 and 2002 respectively, and $604,000 and $363,400 for the nine
months ended September 30, 2003 and 2002 respectively.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     |  |          |            |            |  |               |     |   |  |  |     |  
|------------------------------------ |  | -------- | ---------- | ---------- |  | ------------- | --- | - |  |  | --- | -
|                                     |  | Notional |            | LIBOR      |  | NCE Effective
|Term                                 |  | Amount   |            | Rate Fixed |  | Fixed Rate   
|                                     |  |          |            |            |  |              
|January 1, 2003 to December 31, 2004 |  | $        | 20,000,000 |            |  |               | 3.2 | % |  |  | 4.9 | %
|                                    
|                                    
|                                    
|                                    
|January 1, 2003 to December 31, 2004 |  | $        | 20,000,000 |            |  |               | 3.0 | % |  |  | 4.6 | %



| |  |  | The mark-to-market liability associated with the two interest rate swap
contracts was approximately $907,000 at September 30, 2003. In February
2003 the Company extended the term of both swaps to December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company qualifies for special hedge accounting treatment under SFAS
133, whereby the fair value of the hedge is recorded in the balance sheet
as either an asset or liability and changes in fair value are recognized
in other comprehensive income (loss) until settled, when the resulting
gains and losses are recorded in earnings. The effect on earnings and
other comprehensive income as a result of SFAS 133 will vary from period
to period and will be dependent upon prevailing natural gas prices and
interest rates, the volatility of forward prices for such commodities, the
amount and terms of the Companys hedges and the time periods covered by
such hedges.

11



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



| |  |  | The following table summarizes other comprehensive income of the Company
for the three and nine months ended September 30, 2003 and 2002.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------

|                                                                  |                     |   |                    |           |                   |   |           |          |      |   |            |         |  |   |           |          |  
|----------------------------------------------------------------- | ------------------- | - | ------------------ | --------- | ----------------- | - | --------- | -------- | ---- | - | ---------- | ------- |  | - | --------- | -------- | -
|                                                                  |                     |   | Three Months Ended |           | Nine Months Ended
|                                                                  |                     |   | September 30,      |           | September 30,    
|                                                                  |                     |   |                    |           |                  
|                                                                  |                     |   | 2003               |           | 2002              |   | 2003      |          | 2002
|                                                                  |                     |   |                    |           |                   |   |           |          |     
|Net Income                                                        |                     | $ | 4,226,272          |           |                   | $ | 2,301,589 |          |      | $ | 12,743,323 |         |  | $ | 6,870,873 |         
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Change in mark-to-market asset (liability)
net of deferred taxes: |                     |   |                    |           |                   |   |           |          |      |   |            |         |  |   |           |         
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Natural gas hedge   |   |                    | 2,368,199 |                   |   |           | (270,798 | )    |   |            | 152,474 |  |   |           | (990,478 | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Interest rate swaps |   |                    | 119,584   |                   |   |           | (375,887 | )    |   |            | 33,499  |  |   |           | (627,915 | )
|                                                                  |                     |   |                    |           |                   |   |           |          |      |   |            |         |  |   |           |         
|Comprehensive Income                                              |                     | $ | 6,714,055          |           |                   | $ | 1,654,904 |          |      | $ | 12,929,296 |         |  | $ | 5,252,480 |         
|                                                                  |                     |   |                    |           |                   |   |           |          |      |   |            |         |  |   |           |         

Note 6. Accounting Standards



| |  |  | In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations which was effective the first quarter of fiscal year 2003.
SFAS 143 addresses financial accounting and reporting for obligations
associated with the retirement of long-lived assets and the associated
asset retirement cost. The adoption of this standard has not had a
material effect on the Companys financial position, results of operations
or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS 146 is effective for the Company
for disposal activities initiated after December 31, 2002. The adoption
of this standard has not had a material effect on the Companys financial
position, results of operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure (SFAS 148) that amends
SFAS No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition to Statement 123s fair value method of
accounting for stock-based employee compensation. SFAS 148 also amends
the disclosure provisions of SFAS 123 and APB Opinion No. 28, Interim
Financial Reporting, to require disclosure of the effects of an entitys
accounting policy with respect to stock-based employee compensation on
reported net income and earnings per share in annual and interim financial
statements. The Statement does not amend SFAS 123 to require companies to
account for employee stock options using the fair value method. The
Statement is effective for fiscal years beginning after December 15, 2002.
The adoption of SFAS 148 has not had a material effect on the Companys
results of operations.
|
| |  |  | In April 2003, the FASB issued SFAS No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities. This statement
amends and clarifies financial reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and
for hedging activities under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The Company does not expect
the application of the provisions of SFAS No. 149 to have a material
impact on its financial position, results of operations or cash flows.                                                                                                                                                                                                                                                       
|
| |  |  | In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. This statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics
of both liabilities and equity. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after
June 15, 2003. The Company does not expect the application of the
provisions of SFAS No. 150 to have a material impact on its financial
position, results of operations or cash flows.                                                                                                                                                                                                                                                                                        

12



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Note 7. Commitments and Contingencies



| |  |  | The Company leases certain equipment used in its field operations under
non-cancellable operating leases. Rents under existing leases are
approximately $33,400 per month and continue in decreasing amounts until
2005.                                                                                                                                                                                                                
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company has unlimited liability to third parties with respect to the
operations of the partnerships it has sponsored and may be liable to
limited partners for losses attributable to breach of fiduciary
obligations. In certain partnerships, certain investors have participated
as co-general partners. All such general partner investors have
subsequently been converted to limited partners in all outstanding
partnerships.
|
| |  |  | From time to time and in the ordinary course of business, the Company may
be subject to various claims, charges, and litigation. In the opinion of
management, final judgments from such pending claims, charges, and
litigation against the Company, if any, would not have a material adverse
effect on its consolidated financial position, results of operations or
cash flows.                                                     

Note 8. Industry Segment Information



| |  |  | The Company operates in one reportable industry segment as an independent
energy company engaged in exploring for, developing and producing natural
gas and oil reserves, acquiring and enhancing existing reserves and
gathering and marketing natural gas and oil. The Companys operations are
entirely within the United States.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13



---



##### Table of Contents






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



| |  |  | Forward Looking Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The information in this document includes forward-looking statements
that are made pursuant to Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on
current expectations and projections about future events. Forward-looking
statements and the business prospects of the Company are subject to a
number of risks and uncertainties, which may cause the Companys actual
results in future periods to differ from the forward-looking statements
contained herein. These risks and uncertainties include, but are not
limited to, the Companys access to capital, the market demand for and
prices of oil and natural gas, the Companys oil and gas production and
costs of operation, the results of the Companys future drilling
activities, the uncertainties of reserve estimates, general economic
conditions, new legislation or regulation changes, changes in accounting
principles, policies or guidelines and environmental risks. These and
other risks are described in the Companys Annual Report on Form 10-K
reports and other filings with the SEC.

14



---



##### Table of Contents



General

North Coast Energy, Inc., (NCE or the Company), is a Delaware
corporation. NCE and its subsidiaries, are engaged in the acquisition and
enhancement of developed producing natural gas and oil properties and the
exploration, development and production of undeveloped natural gas and oil
properties. NCE derives its revenues from its own oil and gas production, and
well operations, gas gathering and gas marketing services it provides for third
parties.

In April 2003, the Company announced that it had retained an investment
banking firm to assist it in examining and evaluating its strategic
alternatives. Subsequently, in connection with its evaluation, the Company
received several third party proposals for the acquisition of the Company. As
announced on October 6, 2003, the prices reflected in these proposals are below
the recent market trading prices of the Companys stock and the level of recent
trading activity in the Companys stock has been substantially above historical
levels at certain times recently.

There can be no assurance that a definitive transaction will be
consummated.

The following table is a review of the results of operations of the
Company for the three and nine months ended September 30, 2003 and 2002.

|             |                                   |                                          |   |                    |       |                   |   |      |       |      |   |      |       |  |   |      |       | 
|------------ | --------------------------------- | ---------------------------------------- | - | ------------------ | ----- | ----------------- | - | ---- | ----- | ---- | - | ---- | ----- |  | - | ---- | ----- | 
|             |                                   |                                          |   | Three Months Ended |       | Nine Months Ended
|             |                                   |                                          |   | September 30,      |       | September 30,    
|             |                                   |                                          |   |                    |       |                  
|             |                                   |                                          |   | 2003               |       | 2002              |   | 2003 |       | 2002
|PRODUCTION   |                                   |                                          |   |                    |       |                   |   |      |       |      |   |      |       |  |   |     
|            
|            
|            
|            
|             |                                   | Oil production (MBbls)                   |   |                    | 29    |                   |   |      | 27    |      |   |      | 84    |  |   |      | 76    | 
|            
|            
|            
|            
|             |                                   | Gas production (MMcf)                    |   |                    | 2,733 |                   |   |      | 2,425 |      |   |      | 7,943 |  |   |      | 6,935 | 
|            
|            
|            
|            
|             |                                   | Total production (MMcfe)                 |   |                    | 2,909 |                   |   |      | 2,585 |      |   |      | 8,447 |  |   |      | 7,393 | 
|            
|            
|            
|            
|             | AVERAGE PRICES                    |                                          |   |                    |       |                   |   |      |       |      |   |      |       |  |   |      |      
|            
|            
|            
|            
|             |                                   | Oil (per Bbl)                            |   | $                  | 26.44 |                   |   | $    | 25.80 |      |   | $    | 27.27 |  |   | $    | 21.90 | 
|            
|            
|            
|            
|             |                                   | Gas (per Mcf)                            |   |                    | 5.00  |                   |   |      | 3.51  |      |   |      | 5.02  |  |   |      | 3.54  | 
|            
|            
|            
|            
|             |                                   | Average price per Mcfe                   |   |                    | 4.97  |                   |   |      | 3.56  |      |   |      | 4.99  |  |   |      | 3.55  | 
|            
|            
|            
|            
|             | AVERAGE COSTS (per Mcfe)          |                                          |   |                    |       |                   |   |      |       |      |   |      |       |  |   |      |      
|            
|            
|            
|            
|             |                                   | Production expense                       |   | $                  | 0.65  |                   |   | $    | 0.65  |      |   | $    | 0.67  |  |   | $    | 0.63  | 
|            
|            
|            
|            
|             |                                   | Production taxes                         |   |                    | 0.24  |                   |   |      | 0.22  |      |   |      | 0.25  |  |   |      | 0.21  | 
|            
|            
|            
|            
|             |                                   | Depreciation, depletion and amortization |   |                    | 0.81  |                   |   |      | 0.87  |      |   |      | 0.80  |  |   |      | 0.87  | 
|            
|            
|            
|            
|             |                                   | General and administrative expenses      |   |                    | 0.57  |                   |   |      | 0.37  |      |   |      | 0.56  |  |   |      | 0.40  | 
|            
|            
|            
|            
|             | GROSS OPERATING MARGIN (per Mcfe) |                                          | $ | 4.08               |       |                   | $ | 2.69 |       |      | $ | 4.07 |       |  | $ | 2.71 |      
|            
|            
|Definitions: |                                   |                                          |   |                    |       |                   |   |      |       |      |   |      |       |  |   |     

|                                                                                                      |  |                           |  |                            |  |                           |  | 
|----------------------------------------------------------------------------------------------------- |  | ------------------------- |  | -------------------------- |  | ------------------------- |  | 
|MBbls: thousand barrels                                                                               |  | MMcf:  million cubic feet |  | MMcfe:  million cubic feet
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      |  |                           |  |                            |  | of natural gas equivalent
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Bbl: barrel                                                                                           |  | Mcf:  thousand cubic feet |  | Mcfe:  thousand cubic feet
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      |  |                           |  |                            |  | natural gas equivalent   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Gross Operating Margin (per Mcfe): Average Price less Production Expense (including production taxes)
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Average Price (per Mcf and Mcfe): Includes the effect of the Companys natural gas hedging activities

15



---



##### Table of Contents



All items in the table are calculated as a percentage of total revenues.

|                   |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |    |  
|------------------ | ---------------------------------------- |  | ------------------ | -- | ----------------- |  | ---- | -- | ---- |  | --- | -- | - |  | --- | -- | -
|                   |                                          |  | Three Months Ended |    | Nine Months Ended
|                   |                                          |  | September 30,      |    | September 30,    
|                   |                                          |  |                    |    |                  
|                   |                                          |  | 2003               |    | 2002              |  | 2003 |    | 2002
|                   |                                          |  |                    |    |                   |  |      |    |     
|REVENUE            |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |   
|                  
|                  
|                  
|                  
|                   | Oil and gas production                   |  |                    | 89 | %                 |  |      | 85 | %    |  |     | 89 | % |  |     | 79 | %
|                  
|                  
|                  
|                  
|                   | Drilling revenues                        |  |                    | 0  | %                 |  |      | 0  | %    |  |     | 0  | % |  |     | 6  | %
|                  
|                  
|                  
|                  
|                   | Well operating, gathering and other      |  |                    | 11 | %                 |  |      | 15 | %    |  |     | 11 | % |  |     | 15 | %
|                   |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |   
|                  
|                  
|                  
|                  
|                   |                                          |  | 100                | %  |                   |  | 100  | %  |      |  | 100 | %  |   |  | 100 | % 
|                  
|                  
|                  
|                  
|COSTS AND EXPENSES |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |   
|                  
|                  
|                  
|                  
|                   | Oil and gas production expenses          |  |                    | 16 | %                 |  |      | 21 | %    |  |     | 17 | % |  |     | 19 | %
|                  
|                  
|                  
|                  
|                   | Drilling costs                           |  |                    | 0  | %                 |  |      | 0  | %    |  |     | 0  | % |  |     | 5  | %
|                  
|                  
|                  
|                  
|                   | Well operating, gathering and other      |  |                    | 8  | %                 |  |      | 8  | %    |  |     | 8  | % |  |     | 7  | %
|                  
|                  
|                  
|                  
|                   | Exploration expense                      |  |                    | 7  | %                 |  |      | 3  | %    |  |     | 5  | % |  |     | 3  | %
|                  
|                  
|                  
|                  
|                   | General and administrative expenses      |  |                    | 10 | %                 |  |      | 9  | %    |  |     | 10 | % |  |     | 9  | %
|                  
|                  
|                  
|                  
|                   | Depreciation, depletion and amortization |  |                    | 15 | %                 |  |      | 21 | %    |  |     | 14 | % |  |     | 19 | %
|                  
|                  
|                  
|                  
|                   | Interest (net)                           |  |                    | 3  | %                 |  |      | 6  | %    |  |     | 4  | % |  |     | 6  | %
|                  
|                  
|                  
|                  
|                   | Income taxes                             |  |                    | 14 | %                 |  |      | 11 | %    |  |     | 15 | % |  |     | 11 | %
|                   |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |   
|Total Expense      |                                          |  | 73                 | %  |                   |  | 79   | %  |      |  | 73  | %  |   |  | 79  | % 
|                   |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |   
|NET INCOME         |                                          |  | 27                 | %  |                   |  | 21   | %  |      |  | 27  | %  |   |  | 21  | % 
|                   |                                          |  |                    |    |                   |  |      |    |      |  |     |    |   |  |     |   

The following discussion and analysis reviews the results of operations
and the financial condition of the Company for the three and nine months ended
September 30, 2003 and 2002. The review should be read in conjunction with the
financial information presented elsewhere herein.

16



---



##### Table of Contents



Comparison of Three Months Ended September 30, 2003 to September 30, 2002

Revenues

Oil and gas revenues increased $5,251,314 (57%) to $14,445,510 for the
three months ended September 30th. Of this amount, $4,098,969 reflects higher
prices received for natural gas and oil and $1,152,345 reflects higher
production volumes. The Companys production volumes for the three months ended
September 30, 2003, were 2,909,031 Mcfe (Mcf equivalents) of natural gas
compared to 2,585,038 Mcfe for the three months ended September 30, 2002. The
Company recognizes a portion of the wellhead price it receives as gas gathering
and other revenues to offset a portion of its cost related to its gathering
systems and compression facilities. Excluding the portion attributable to gas
gathering and compression revenues, the Company received an average price of
$4.97 and $3.56 per Mcfe for oil and natural gas sold for the three months
ended September 30, 2003, and 2002, respectively.

Well operating, gathering and other revenue increased $117,659 (7%) to
$1,766,291 for the three months ended September 30, 2003, compared to
$1,648,632 for the three months ended September 30, 2002. This increase
results from the higher price received for natural gas bought for resale,
partially offset by the loss of administrative fee revenue resulting from the
Companys purchase of interests in 14 drilling programs in 2002.

Expenses

Oil and gas production expenses increased $333,452 (15%) to $2,565,363 for
the three months ended September 30, 2003, from $2,231,911 for the three months
ended September 30, 2002. This increase in production expense is due to higher
production volumes and production taxes.

Well operating, gathering, and other expenses increased $445,871 (48%) for
the three months ended September 30, 2003, to $1,366,896 from $921,025 at
September 30, 2002, primarily as a result of increased spot prices on the open
market for natural gas which has driven up the cost of the Companys purchased
gas for resale.

Exploration expense increased $898,437 (283%) for the three months ended
September 30, 2003, to $1,215,721 from $317,284 for the corresponding three
months ended September 30, 2002, which reflects an increase in the Companys
exploration activities (seismic and dry hole costs) and the
addition of technical personnel. The Company recognized dry hole cost of
approximately $574,000 for the three months ending September 30, 2003.

General and administrative expenses increased $701,529 (74%) to $1,648,753
for the three months ended September 30, 2003, from $947,224 for the three
months ended September 30, 2002. This increase is largely the result of costs
associated with the Companys decision to explore its strategic alternatives to
increase stockholder value.

The increase in depreciation, depletion and amortization (DD&A) of $94,980
(4%) to $2,352,710 for the three months ended September 30, 2003, from
$2,257,730 for the three months ended September 30, 2002, is primarily the
result of higher production volumes for the three months ended September 30,
2003, compared to the comparable period of 2002.

For the three months ended September 30, 2003, net interest expense
decreased $148,856 to $542,086 compared to $690,942 for the three months ended
September 30, 2002. The decrease reflects lower interest rates on the
Companys long-term debt, higher interest income earned on higher amounts
invested in 2003 compared to 2002 and the repayment of $10,000,000 of long-term
debt to Nuon International Renewables Projects, B.V.

Net Income

Net income for the three months ended September 30, 2003, increased
$1,924,683 (84%) to $4,226,272 from $2,301,589 for the three months ended
September 30, 2002, due to increased production volumes coupled with a $1.41
increase in the average price per Mcfe. The Companys net income attributable
to common stock was $4,226,272 ($.28/share basic and $.27/share diluted) for
the three months ended September 30, 2003, compared to $2,301,589 ($.15/share
basic and diluted) for the three months ended September 30, 2002.

17



---



##### Table of Contents



Comparison of Nine Months Ended September 30, 2003 to September 30, 2002

Revenues

Oil and gas revenues increased $15,940,926 (61%) to $42,186,892 for the
nine months ended September 30th. Of this amount, $12,220,312 reflects higher
prices received for natural gas and oil and $3,740,614 reflects higher
production volumes. The Companys production volumes for the nine months ended
September 30, 2003, were 8,446,860 Mcfe (Mcf equivalents) of natural gas
compared to 7,393,174 Mcfe for the nine months ended September 30, 2002, an
increase of 1,053,686 Mcfe or 14%. The Company recognizes a portion of the
wellhead price it receives as gas gathering and other revenues to offset a
portion of its cost related to its gathering systems and compression
facilities. Excluding the portion attributable to gas gathering and
compression revenues, the Company received an average price of $4.99 and $3.55
per Mcfe for oil and natural gas sold for the nine months ended September 30,
2003, and 2002, respectively.

Drilling revenues decreased $2,082,351 (100%) to $0 for the nine months
ended September 30, 2003, compared to $2,082,351 for the nine months ended
September 30, 2002. This decrease reflects the Companys decision to exit the
drilling fund business to focus on its core business of exploration and
production.

Well operating, gathering and other revenue decreased $21,191 to
$5,018,799 for the nine months ended September 30, 2003, compared to $5,039,990
for the nine months ended September 30, 2002. The decrease resulted from the
Companys purchase of the interests in 14 of its drilling programs that were a
source of administrative fee revenue to the Company. The overall decrease was
partially offset by an increase in gas marketing revenue as a result of higher
gas prices.

Expenses

Oil and gas production expenses increased $1,623,526 (26%) to $7,799,116
for the nine months ended September 30, 2003, from $6,175,590 for the nine
months ended September 30, 2002. This increase is partly due to increased
production taxes caused by higher oil and gas prices combined with increased
production volumes. Also, the Company incurred unexpected clean-up costs due
to late winter ice storms in March of 2003.

Drilling costs decreased $1,752,456 (100%) to $0 for the nine months ended
September 30, 2003, compared to $1,752,456 at September 30, 2002, reflecting
the Companys transition to its core business of exploration and development.

Well operating, gathering, and other expenses increased $1,480,382 (59%)
for the nine months ended September 30, 2003 to $4,003,930 from $2,523,548 at
September 30, 2002. This increase is a result of increased spot prices on the
open market for natural gas which has driven up the cost of the Companys gas
purchased for resale.

Exploration expense increased $1,426,812 (136%) for the nine months ended
September 30, 2003, to $2,476,316 from $1,049,504 for the corresponding nine
months ended September 30, 2002. This change reflects an increase in the
Companys exploration activities, specifically, dry hole expense, seismic costs and technical personnel.

General and administrative expenses increased $1,841,990 (63%) to
$4,763,290 for the nine months ended September 30, 2003, from $2,921,300 for
the nine months ended September 30, 2002. A significant portion of this
increase is due to the retention of various professional services firms engaged
to assist the Company in completing corporate projects and to evaluate the
Companys strategic options, as well as the addition of several key technical
employees.

The increase in depreciation, depletion and amortization (DD&A) of
$326,501 (5%) to $6,789,965 for the nine months ended September 30, 2003, from
$6,463,464 for the nine months ended September 30, 2002, is primarily the
result of higher production volumes for the nine months ended September 30,
2003, compared to the comparable period of 2002.

18



---



##### Table of Contents



For the nine months ended September 30, 2003, net interest expense
decreased $390,989 (19%) to $1,714,251 compared to $2,105,240 for the nine
months ended September 30, 2002. The decrease reflects lower interest rates on
the Companys long-term debt and higher interest income resulting from amounts
invested in 2003 compared to 2002.

Net Income

Net income for the nine months ended September 30, 2003, increased
$5,872,450 (85%) to $12,743,323 from $6,870,873 for the nine months ended
September 30, 2002, due to increased production volumes coupled with a $1.44
increase in the average price per Mcfe. The Companys net income attributable
to common stock was $12,743,323 ($.84/share basic and $.82/share diluted) for
the nine months ended September 30, 2003, compared to $6,812,706 ($.45/share
basic and diluted) for the nine months ended September 30, 2002. Dividends of
$58,167 were declared and paid on the Companys Series B Cumulative Preferred
Stock for the three months ended March 31, 2002. All outstanding shares of the
Companys Series B Cumulative Preferred stock were redeemed on March 31, 2002.

Inflation and Changes in Prices

Inflation affects the Companys operating expenses as well as interest
rates, both of which may have an effect on the Companys profitability. Oil
and gas prices have exhibited substantial volatility in recent years as a
result of forces such as OPEC production quotas, economic conditions, demand
for and supply of natural gas in the United States and within the Companys
regional area of operation. Oil prices have increased as a result of political
and labor unrest in Venezuela along with the conflict in Iraq. Natural gas
prices have increased substantially for the three and nine months ended
September 30, 2003, compared to natural gas prices for the corresponding
periods in 2002. The increase in natural gas prices has been driven by a
relatively cold winter causing greater demand for natural gas coupled with high
volatility in the future markets. As a result of these market forces, the
Company received an average price of $27.27 per barrel of oil for the nine
months ended September 30, 2003, compared to $21.90 for the nine months ended
September 30, 2002. The Company received an average price after recognition of
a portion of the wellhead price as gas gathering revenues of $5.02 per MCF for
its natural gas for the nine months ended September 30, 2003, compared to $3.54
for the nine months ended September 30, 2002. The Company cannot predict the
duration of the current strength of oil and gas markets and prices, since the
forces noted above as well as other variables are subject to change.

Liquidity and Capital Resources

The Companys working capital was $12,075,008 at September 30, 2003,
compared to $10,818,841 at December 31, 2002. The increase of $1,256,167 in
working capital at September 30, 2003, reflects an increase in cash flow from
operations offset by cash used for repayment of debt as well as capital
expenditures during the period. The following table summarizes the Companys
financial position at September 30, 2003, and December 31, 2002:

|                                            |       |   |                    |                               |                   |  |        |     |   |   |         |         |  |  |    |     | 
|------------------------------------------- | ----- | - | ------------------ | ----------------------------- | ----------------- |  | ------ | --- | - | - | ------- | ------- |  |  | -- | --- | 
|                                            |       |   | September 30, 2003 |                               | December 31, 2002
|                                            |       |   |                    |                               |                  
|                                            |       |   | Amount             |                               | %                 |  | Amount |     | %
|                                            |       |   |                    |                               |                   |  |        |     |  
|                                            |       |   |                    | (Dollar amounts in Thousands)
|                                           
|                                           
|                                           
|                                           
|Working capital                             |       | $ | 12,075             |                               |                   |  | 7      |     |   | $ | 10,819  |         |  |  | 8  |    
|                                           
|                                           
|                                           
|                                           
|Property and equipment (net)                |       |   | 139,080            |                               |                   |  | 92     |     |   |   | 129,256 |         |  |  | 91 |    
|                                           
|                                           
|                                           
|                                           
|Other                                       |       |   | 585                |                               |                   |  | 1      |     |   |   | 1,329   |         |  |  | 1  |    
|                                            |       |   |                    |                               |                   |  |        |     |   |   |         |         |  |  |    |    
|                                           
|                                           
|                                           
|                                           
|                                            | Total |   | $                  | 151,740                       |                   |  |        | 100 |   |   | $       | 141,404 |  |  |    | 100 | 
|                                            |       |   |                    |                               |                   |  |        |     |   |   |         |         |  |  |    |    
|                                           
|                                           
|                                           
|                                           
|Long-term debt                              |       | $ | 57,000             |                               |                   |  | 38     |     |   | $ | 67,000  |         |  |  | 47 |    
|                                           
|                                           
|                                           
|                                           
|Deferred income taxes and other liabilities |       |   | 17,698             |                               |                   |  | 12     |     |   |   | 9,667   |         |  |  | 7  |    
|                                           
|                                           
|                                           
|                                           
|Stockholders equity                        |       |   | 77,042             |                               |                   |  | 50     |     |   |   | 64,737  |         |  |  | 46 |    
|                                            |       |   |                    |                               |                   |  |        |     |   |   |         |         |  |  |    |    
|                                           
|                                           
|                                           
|                                           
|                                            | Total |   | $                  | 151,740                       |                   |  |        | 100 |   |   | $       | 141,404 |  |  |    | 100 | 
|                                            |       |   |                    |                               |                   |  |        |     |   |   |         |         |  |  |    |    

The oil and gas exploration and development activities of NCE historically
have been financed through internally generated funds and from bank and equity
financing.

19



---



##### Table of Contents



The following table summarizes the Companys Statements of Cash Flows for
the nine months ended September 30, 2003 and 2002:

|                                            |  |                               |         |               |  |   |         |  
|------------------------------------------- |  | ----------------------------- | ------- | ------------- |  | - | ------- | -
|                                            |  | September 30,                 |         | September 30,
|                                            |  | 2003                          |         | 2002         
|                                            |  |                               |         |              
|                                            |  | (Dollar amounts in Thousands)
|Net cash provided by operating activities   |  | $                             | 29,354  |               |  | $ | 14,083  |  
|                                           
|                                           
|                                           
|                                           
|Net cash used by investing activities       |  |                               | (16,469 | )             |  |   | (19,938 | )
|                                           
|                                           
|                                           
|                                           
|Net cash used by financing activities       |  |                               | (10,625 | )             |  |   | (2,385  | )
|                                            |  |                               |         |               |  |   |         |  
|Increase (decrease) in cash and equivalents |  | $                             | 2,260   |               |  | $ | (8,240  | )
|                                            |  |                               |         |               |  |   |         |  

As the above table indicates, the Companys cash provided by operating
activities was $29,353,710 and $14,082,933 for the nine months ended September
30, 2003, and 2002, respectively. The increase in cash provided by operating
activities was favorably impacted by an increase in net income, an increase in
its year to date deferred tax provision and an increase in drilling liabilities
partially offset by an increase in accounts receivable.

Net cash used for investing activities was $16,469,466 for the nine months
ended September 30, 2003, compared to $19,937,969 for the nine months ended
September 30, 2002. This decrease in cash used by investing activities
reflects a decrease in the Companys acquisitions in the 2003 period and the
timing of its drilling expenditures.

Net cash used by financing activities was $10,624,721 for the nine months
ended September 30, 2003, compared to $2,384,807 for the nine months ended
September 30, 2002. The increase is primarily due to the repayment of
$10,000,000 of long-term debt to affiliates and the redemption of the Companys
Series A Preferred Stock. The prior years activity is the result of the
redemption of the Companys Series B Preferred Stock.

At September 30, 2003, the Company had $23,000,000 available on its
revolving line of credit and cash balances of $16,970,728. The Company
believes that its cash balances, cash flow from operations and available
borrowing capacity are adequate to fund its planned capital expenditures and
operations.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to commodity price, interest rate and credit risks.
The Companys primary interest rate risk exposure results from floating rate
debt, including debt under the Companys revolving Credit Facility. The
Company is exposed to commodity price risks related to its production of
natural gas and oil. The Company has entered into contracts to reduce its
exposure to these risks, as discussed in the Companys financial statements
filed herein. In addition, quantitative and qualitative disclosures about
market risk were included in the Companys Form 10-K (Item 7A) and the
financial statements included therein for the fiscal year ended December 31,
2002.

The Company is exposed to credit risk from its customer and other parties
with which it does business. The Company has a credit approval policy that
establishes credit limits for its customers. These limits are closely
monitored, as are collections of accounts receivable. The Company generally
does not require collateral from its customers and counterparties.
Historically, losses from bad debt have been within managements expectations.

The Companys ability to collect for sales of natural gas and oil to its
customers is dependent on the payment ability of the customer. The Company
monitors the creditworthiness of its customers and, from time to time, will
demand adequate assurances of performance if the creditworthiness of a
particular customer is in question. If such assurances are not given to the
Company, an alternative purchaser may be sought. In recent months, a number of
energy marketing and trading companies have discontinued their marketing and
trading operations, which has significantly reduced the number of potential
purchasers for the Companys natural gas production. This reduction in
potential customers has reduced market liquidity and, in some cases, made it
difficult for the Company to identify creditworthy customers. The Company will
continue to monitor its customer base and to pursue alternative customers.

The Company sells approximately $1,000,000 per month of natural gas to a
major customer. Performance by this customer is guaranteed by an affiliate of
the customer deemed by the Company to have acceptable creditworthiness.

20



---



##### Table of Contents






Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.The Companys Chief
Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the Companys disclosure controls and procedures (as defined
in Exchange Act Rule 13a-14) as of September 30, 2003 (the Evaluation Date)
have concluded that as of the Evaluation Date, the Companys disclosure
controls and procedures were effective in ensuring that information required to
be disclosed by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commissions rules and forms.

Changes in internal controls.There were no significant changes in the
Companys internal controls that occurred during the fiscal quarter ended
September 30, 2003 that have materially affected, or are reasonably likely to
materially affect, the Companys internal controls.

21



---



##### Table of Contents



NORTH COAST ENERGY, INC. AND SUBSIDIARIES




PART II
OTHER INFORMATION


|        |  |                                                     |  |                                                                                                                                
|------- |  | --------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Item 1. |  | Legal Proceedings                                  
|       
|       
|       
|       
|        |  | Not applicable                                     
|       
|       
|       
|       
|Item 2. |  | Changes in Securities and Use of Proceeds          
|       
|       
|       
|       
|        |  | Not applicable                                     
|       
|       
|       
|       
|Item 3. |  | Defaults Upon Senior Securities                    
|       
|       
|       
|       
|        |  | Not applicable                                     
|       
|       
|       
|       
|Item 4. |  | Submission of Matters to a Vote of Security Holders
|       
|       
|       
|       
|        |  | Not applicable                                     
|       
|       
|       
|       
|Item 5. |  | Other Information                                  
|       
|       
|       
|       
|        |  | Not applicable                                     
|       
|       
|       
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                   
|       
|       
|       
|       
|        |  | a.)                                                 |  | Exhibits                                                                                                                       
|       
|       
|       
|       
|        |  |                                                     |  | See Attached Index to Exhibits                                                                                                 
|       
|       
|       
|       
|        |  | b.)                                                 |  | Report on Form 8-K filed August 6, 2003, regarding the Companys second quarter earnings.                                      
|       
|       
|       
|       
|        |  |                                                     |  | Report on Form 8-K filed September 3, 2003, regarding the repayment
of a loan from Nuon International Renewables Projects. B.V.
|       
|       
|       
|       
|        |  |                                                     |  | No other reports on Form 8-K have been filed during the quarter for
which this report was filed.                               

22



---



##### Table of Contents






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.

|                          |  |                                                                                        
|------------------------- |  | ---------------------------------------------------------------------------------------
|                          |  | NORTH COAST ENERGY, INC.                                                               
|                         
|Date:    November 6, 2003 |  | /s/ Gordon O. YonelGordon O. Yonel
President, Chief Executive Officer and Director     
|                         
|                          |  | NORTH COAST ENERGY, INC.                                                               
|                         
|Date:    November 6, 2003 |  | /s/ Dale E. StittDale E. Stitt
Chief Financial Officer and
Principal Accounting Officer

23



---



##### Table of Contents






Index to Exhibits

|        |  |                                                                                                                                |  |          |    | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | -------- | -- | 
|Exhibit |  |                                                                                                                                |  |          |    | 
|Number  |  | Description of Documents                                                                                                       |  | Page No.
|        |  |                                                                                                                                |  |         
|31.1    |  | Certification of Chief Executive
Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002                             |  |          | 25 | 
|       
|       
|       
|       
|31.2    |  | Certification of Chief Financial
Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002                             |  |          | 26 | 
|       
|       
|       
|       
|32.1    |  | Certification of Principal Executive
Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350 |  |          | 27 | 
|       
|       
|       
|       
|32.2    |  | Certification of Principal Financial
Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350 |  |          | 28 | 

24