SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549

                                    Form 10-Q


(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the quarterly period ended March 31, 2002.

- 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 No. 0-17267


                       MALLON RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)


     COLORADO                                          84-1095959
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)


999 18th Street, Suite 1700
Denver, Colorado  80202
(Address of principal executive offices)


(303) 293-2333
(Registrant's telephone number, including area code)


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 such shorter period of time
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

     YES [X]               NO [  ]



As of May 10, 2002, 10,867,827 shares of the registrant's common stock, par
value $0.01 per share, were outstanding.
<PAGE>


PART I  --  FINANCIAL INFORMATION

Item 1.  Financial Statements




                       MALLON RESOURCES CORPORATION

                       CONSOLIDATED BALANCE SHEETS
                             (In thousands)



                                 ASSETS


<TABLE>
<CAPTION>
                                                                 March 31,   December 31,
                                                                 2002        2001
                                                                     (Unaudited)
<S>                                                              <C>         <C>
Current assets:
    Cash and cash equivalents                                    $  1,416    $  1,943
    Accounts receivable:
        Oil and gas sales                                             727         714
        Joint interest participants                                    54         303
    Inventories                                                       151         151
    Derivative asset                                                   --         229
    Prepaid expense and other                                         101          38
            Total current assets                                    2,449       3,378

Property and equipment:
    Oil and gas properties, full cost method                       94,464      93,933
    Natural gas processing plant                                    8,659       8,648
    Other property and equipment                                    1,087       1,085
                                                                  104,210     103,666
    Less accumulated depreciation, depletion and amortization     (71,513)    (70,414)
                                                                   32,697      33,252

Debt issuance costs, net                                              882       1,041
Other, net                                                            200         300

Total Assets                                                     $ 36,228    $ 37,971
                                                                 ========    ========
</TABLE>



(Continued on next page)








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

                       MALLON RESOURCES CORPORATION

                 CONSOLIDATED BALANCE SHEETS - Continued
                  (In thousands, except share amounts)




                  LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                 March 31,   December 31,
                                                                 2002        2001
                                                                     (Unaudited)
<S>                                                              <C>         <C>
Current liabilities:
    Trade accounts payable                                       $  1,973    $  2,153
    Undistributed revenue                                             420         612
    Accrued taxes and expenses                                         84          42
    Derivative liability                                            1,038          --
    Current portion of long-term debt                                 533         517
            Total current liabilities                               4,048       3,324

Long-term debt, net of unamortized discount of $1,790 and
    $1,899, respectively                                           29,737      28,970
Derivative liability                                                1,865       1,423
                                                                   31,602      30,393

Total liabilities                                                  35,650      33,717

Commitments and contingencies

Series B Mandatorily Redeemable Convertible Preferred Stock,
    $0.01 par value, 500,000 shares authorized, -0- shares
    issued and outstanding                                             --          --

Mandatorily Redeemable Common Stock, $0.01 par value, 490,000
    shares authorized, issued and outstanding, mandatory
    redemption of $6,125                                            5,017       4,853

Shareholders' equity:
    Common Stock, $0.01 par value, 25,000,000 shares
        authorized; 10,377,827 and 10,252,827 shares issued
        and outstanding, respectively                                 104         103
    Additional paid-in capital                                     92,652      93,012
    Accumulated deficit                                           (94,292)    (92,520)
    Accumulated other comprehensive loss                           (2,903)     (1,194)
            Total shareholders' equity                             (4,439)       (599)

Total Liabilities and Shareholders' Equity                       $ 36,228    $ 37,971
                                                                 ========    ========
</TABLE>




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

                       MALLON RESOURCES CORPORATION

                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)



<TABLE>
<CAPTION>
                                                                For the Three Months
                                                                Ended March 31,
                                                                2002         2001
                                                                  (Unaudited)
<S>                                                             <C>         <C>
Revenues:
    Oil and gas sales                                           $ 2,683     $7,093
    Interest and other                                               13        237
                                                                  2,696      7,330

Costs and expenses:
    Oil and gas production                                        1,762      2,722
    Depreciation, depletion and amortization                      1,269      1,959
    General and administrative, net                                 475      1,355
    Interest and other                                              962      1,788
                                                                  4,468      7,824

Net loss                                                         (1,772)      (494)

Dividends and accretion on preferred stock                           --        (18)

Accretion of mandatorily redeemable common stock                   (164)      (144)

Net loss attributable to common shareholders                    $(1,936)    $ (656)
                                                                ======      ======

Basic:
    Net loss per share attributable to common shareholders      $ (0.18)    $(0.06)
                                                                =======     ======

    Weighted average common shares outstanding                   10,811     10,627
                                                                =======     ======
</TABLE>
















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

                       MALLON RESOURCES CORPORATION

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In thousands)



<TABLE>
<CAPTION>
                                                                                 For the Three Months
                                                                                 Ended March 31,
                                                                                 2002        2001
                                                                                     (Unaudited)
<S>                                                                              <C>         <C>
Cash flows from operating activities:
    Net loss                                                                     $(1,772)    $  (494)
    Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
        Depreciation, depletion and amortization                                   1,269       1,959
        Accrued interest expense added to long-term debt                              --       1,401
        Accrued interest income added to notes receivable from shareholders           --         (45)
        Amortization of discount on long-term debt                                   296         215
        Non-cash stock compensation expense                                         (440)        579
        Changes in operating assets and liabilities:
            Decrease (increase) in:
                  Accounts receivable                                                236       1,066
                  Inventory and other assets                                          94      (1,897)
            (Decrease) increase in:
                  Trade accounts payable and undistributed revenue                  (372)       (166)
                  Accrued taxes and expenses                                          42          39
Net cash (used in) provided by operating activities                                 (647)      2,657

Cash flows from investing activities:
    Additions to property and equipment                                             (554)     (6,517)
    Other                                                                             --           7
Net cash used in investing activities                                               (554)     (6,510)

Cash flows from financing activities:
    Proceeds from long-term debt                                                     800         837
    Payments of long-term debt                                                      (126)       (110)
    Payment of preferred dividends                                                    --         (16)
Net cash provided by financing activities                                            674         711

Net decrease in cash and cash equivalents                                           (527)     (3,142)

Cash and cash equivalents, beginning of period                                     1,943      14,155

Cash and cash equivalents, end of period                                         $ 1,416     $11,013
                                                                                 =======     =======


Supplemental cash flow information:
    Cash paid for interest                                                       $   666     $   173
                                                                                 =======     =======

Non-cash transactions:
   Issuance of common stock in connection with the credit
      agreement amendment                                                        $   187     $    --
                                                                                 =======     =======

</TABLE>






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

                       MALLON RESOURCES CORPORATION

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (Unaudited)
                              ___________

NOTE 1. GENERAL

    Mallon Resources Corporation ("Mallon" or the "Company") engages in oil
and gas exploration and production through its wholly-owned subsidiary,
Mallon Oil Company ("Mallon Oil"), whose oil and gas operations are
conducted primarily in the State of New Mexico.  Mallon operates its
business and reports its operations as one business segment. All significant
inter-company balances and transactions have been eliminated from the
consolidated financial statements.

    These unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States for interim financial information and with the instructions to Form
10-Q and Article 10 of 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,
such interim statements reflect all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the financial position
and the results of operations and cash flows for the interim periods
presented. The results of operations for these interim periods are not
necessarily indicative of the results to be expected for the full year.
These interim statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 2001 Form
10-K.

    Certain prior year amounts in the consolidated financial statements have
been reclassified to conform to the presentation used in 2002.

NOTE 2. CURRENT OPERATING ISSUES

    The Company generated net losses of $1.8 million, $31.4 million,
$6.5 million and $2.8 million for the three months ended March 31, 2002 and
for the years ended December 31, 2001, 2000 and 1999, respectively.  The
Company's cash flows from operating activities were $(0.6) million,
$1.1 million, $4.0 million and $2.4 million for the respective periods.

    In September 2001, the Company completed the sale of its Delaware Basin
oil and gas properties.  Consequently, the Company's remaining operations
are located primarily in the San Juan Basin of northwest New Mexico.  In
February 2002, the Company amended its credit facility to provide, among
other things, for a $2.5 million increase in the borrowings available under
the credit facility.  In addition, the Company is currently seeking
alternative methods of financing its discretionary capital expenditures for
2002, including joint ventures with industry partners.  The Company cannot
assure that it will be able to secure financing on terms acceptable to the
Company.

    In addition, because production from the San Juan Basin is predominantly
natural gas, the Company is particularly sensitive to changes in the price
of natural gas.  Historically, natural gas prices have experienced
significant fluctuations and have been particularly volatile in recent
years.  Price fluctuations can result from variations in weather, levels of
regional or national production and demand, availability of transportation
capacity to other regions of the country and various other factors.
Increases or decreases in natural gas prices received could have a
significant impact on the Company's future results.  If natural gas prices
decline significantly from those received by the Company at March 31, 2002,
or if the Company is unable to maintain production levels at its San Juan
Basin properties, Mallon may have to implement additional cost cutting
measures in both its administrative and operating areas.

    As discussed more fully in Note 3, in conjunction with the February 2002
amendment to the Company's credit agreement, through December 31, 2002, the
Company is only required to make interest payments on the credit facility.
Management believes that cash on hand, availability under its credit
facility and cash generated from operating activities, will be sufficient to
meet the Company's cash requirements through March 31, 2003.

NOTE 3. LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                    March 31,   December 31,
                                                    2002        2001
<S>                                                 <C>         <C>
Note payable to Aquila Energy Capital
    Corporation, due 2003                           $ 27,511    $ 26,711
Less unamortized discount                             (1,790)     (1,899)
                                                      25,721      24,812
Lease obligation to Universal Compression, Inc.        4,446       4,567
8.0% unsecured note payable to Bank One,
    Colorado, N.A., due 2006                             103         108
                                                      30,270      29,487
Less current portion                                    (533)       (517)

         Total                                      $ 29,737    $ 28,970
                                                    ========    ========
</TABLE>

    In September 1999, the Company established a credit agreement (the
"Aquila Credit Agreement") with Aquila Energy Capital Corporation
("Aquila").  In February 2002, the Company notified Aquila that it would not
be in compliance as of December 31, 2001 with one of the covenants under the
Aquila Credit Agreement.  That covenant requires the Company to maintain
projected net revenue attributable to its proved reserves in sufficient
amount to fully amortize the balance under the Aquila Credit Agreement by
the maturity date of September 9, 2003.  As a result, in February 2002, the
Aquila Credit Agreement was amended for a second time.  The second amendment
contains the following provisions:

(i)   As long as no new event of default occurs subsequent to the date
of the second amendment, Aquila has agreed that through December 31, 2002,
it will not exercise any of the remedies available to Aquila due to any
event of default that occurs and is continuing regarding the amount of
projected net revenue required to amortize the amounts outstanding by
September 9, 2003.

(ii)   Interest on amounts outstanding accrues at prime plus 3% starting
January 1, 2002, through September 30, 2002, and increases to prime plus 4%
after October 1, 2002.  The Company is required to pay interest only on the
outstanding balance through December 31, 2002.

(iii)   The amount available under the agreement was increased by $2.5
million, making the total available $55.9 million.  Aquila may, at its
discretion, advance additional loans up to $2.5 million to be used for
development operations and/or working capital needs of the Company.

(iv)   A "change of control" provision was added, which calls for the
prepayment of the entire outstanding balance, together with any accrued and
unpaid interest, at the occurrence of a change of control of the Company.

(v)   The Company has the option to purchase from Aquila 490,000 shares
of the Company's common stock previously issued to Aquila for a price of
$2.6 million if a sale of the Company is consummated prior to September 30,
2002.

(vi)   Aquila's one-time right to require the Company to purchase shares
of the Company's common stock previously issued to Aquila (the "Put Option")
was amended to provide that Aquila has the option to sell to the Company up
to 490,000 shares of the Company's common stock at $10.00 per share if a
sale of the Company is consummated at any time after September 30, 2002 and
prior to September 9, 2003, or at $12.50 per share if the outstanding
balance under the Aquila Credit Agreement is paid on the earlier of
September 9, 2003 or the date on which Aquila notifies the Company of the
acceleration of payment of the outstanding balance because of the occurrence
of an event of default.

(vii)   The Company issued to Aquila 125,000 shares of the Company's common
stock as a part of the amendment.  If a sale of the Company is not
consummated before October 1, 2002, the Company will issue Aquila an
additional 150,000 shares.

(viii)   Upon a change of control of the Company occurring on or before
September 30, 2002, the Company will pay Aquila $500,000 and recorded
$187,000 as an increase to unamortized discount.  If a change of control of
the Company occurs after September 30, 2002, the Company will pay Aquila
$1,250,000.

    Through March 31, 2002, the Company had drawn $800,000 under provision
(iii) above, and had $1.7 million available for future draws.

    Principal payment under the Aquila Credit Agreement are based on the
Company's cash flow from operations, as defined (the "Defined Cash Flow"),
less advances for the Company's development drilling program.  Principal
payments have been delayed by the second amendment and are to resume in
January 2003.  The Company estimates that the Defined Cash Flow available
for principal payments in first quarter 2003 could range between $0 and
$300,000, therefore, at March 31, 2002, no amount has been classified as
current.

NOTE 4.  PER SHARE DATA

    Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if the Company's outstanding stock
options and warrants were exercised (calculated using the treasury stock
method) or if the Company's Series B Mandatorily Redeemable Convertible
Preferred Stock were converted to common stock.  The consolidated statements
of operations for the three months ended March 31, 2002 and 2001 reflect
only basic earnings per share because the Company was in a loss position for
all periods presented and all common stock equivalents are anti-dilutive.

NOTE 5. HEDGING ACTIVITY

    Under the Aquila Credit Agreement, the Company may be required to
maintain price hedging arrangements in place with respect to up to 65% of
its oil and gas production.  Accordingly, at March 31, 2002, the Company had
price swaps covering 2,949,000 MMBtu of gas related to production for 2002-
2004 at fixed prices ranging between $2.55-$3.38 per MMBtu.  In addition,
the Company had outstanding at March 31, 2002 basis swaps to fix the
differential between the NYMEX (Henry Hub) price and the index price at
which the hedged gas is to be sold for 2,949,000 MMBtu for 2002-2004.

    The following table indicates the Company's outstanding energy swaps at
March 31, 2002:

<TABLE>
<CAPTION>
             Annual                                    Market Price
Product      Production   Fixed Price    Duration      Reference
<S>          <C>          <C>            <C>           <C>
Gas (MMBtu)  1,101,000    $2.55-$3.38    4/02-12/02    NYMEX (Henry Hub)
Gas (MMBtu)    996,000    $2.55          1/03-12/03    NYMEX (Henry Hub)
Gas (MMBtu)    852,000    $2.55          1/04-12/04    NYMEX (Henry Hub)
</TABLE>

    At March 31, 2002, the Company had recorded a current derivative
liability of $1.0 million, a long-term derivative liability of $1.9 million
and an unrealized loss of $2.9 million in accumulated other comprehensive
loss.  No related income tax effects were recorded because of the Company's
net operating loss carryforward.

    During the three months ended March 31, 2002, gains of $0.3 million were
transferred from accumulated other comprehensive loss to oil and gas
revenues related to settled positions and an unrealized loss of $1.4 million
was recorded to other comprehensive income to adjust the fair value of the
open positions.  The Company expects to reclassify as decreases to earnings
during the next twelve months approximately $1.0 million of unrealized
hedging losses in accumulated other comprehensive loss at March 31, 2002.

    For the three months ended March 31, 2002 and 2001, the Company's gains
(losses) under its swap agreements were $0.3 million and $(2.9) million,
respectively, and are included in oil and gas sales in the Company's
consolidated statements of operations.  At March 31, 2002, the estimated net
amount the Company would have paid to terminate its outstanding energy swaps
and basis swaps, described above, was approximately $2.9 million.

NOTE 6. COMPREHENSIVE INCOME

    The Company follows SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting comprehensive income. In addition
to net income, comprehensive income includes all changes in equity during a
period, except those resulting from investments and distributions to the
owners of the Company.  The following table illustrates the changes in
accumulated other comprehensive loss for the periods presented (in
thousands):

<TABLE>
<CAPTION>
                                                        For the Three Months
                                                        Ended March 31,
                                                        2002       2001
<S>                                                     <C>        <C>
Accumulated other comprehensive loss - beginning
    of period                                           $(1,194)   $     --

Other comprehensive loss:
   Cumulative effect of change in accounting principle       --     (15,171)
   Reclassification adjustment for settled hedging
       contracts                                           (263)      2,914
   Changes in fair value of outstanding hedging
       positions                                         (1,446)      1,159

Other comprehensive loss                                 (1,709)    (11,098)

Accumulated other comprehensive loss - end of period    $(2,903)   $(11,098)
                                                        =======    ========
</TABLE>

NOTE 7. CONTINGENCIES

    As of December 31, 2001, the Revenue and Taxation Department of the
Jicarilla Apache Nation (the "Nation") issued to the Company Possessory
Interest Tax assessments for 1998, 1999, 2000 and 2001 totaling $3.3
million, as adjusted, including related penalties and interest.  The Company
paid the assessments, but filed protests with the Nation taking the position
that, among other things, certain rules and regulations promulgated in
December 2000 by the Nation do not apply to the determination of Possessory
Interest Tax for years prior to 2001.  The protests were denied.   The
Company has filed an appeal, which is pending.    In March 2002, the Company
was assessed an additional $1.5 million for 2002, of which $358,000 has been
accrued and expensed at March 31, 2002.  The Company has: 1) requested that
the Legislative Council of the Nation grant the Company relief, and 2)
engaged New Mexico counsel to represent it.  The final outcome of this
matter cannot yet be predicted.

    By letter dated October 9, 2001, the Company was advised that the
Minerals Management Service will audit the royalties payable on production
from certain oil and gas properties in which the Company owns an interest.
The audit began in mid-November 2001.  The final outcome of this matter
cannot yet be predicted.

    In June 2001, in connection with staff cuts that were part of general
corporate reductions, the Company terminated an employee.  The employee
filed a complaint, in which he claims he was wrongfully terminated.  The
Company believes the allegations of the suit are wholly without merit, and
intends to defend itself vigorously, but cannot predict the outcome of the
case.

    In 1992, the Minerals Management Service commenced an audit of royalties
payable on production from certain oil and gas properties in which the
Company owns an interest.  The audit was initiated against the predecessor
operator of the properties, but the Company has since undertaken primary
responsibility for resolving matters that arise out of the audit.  The
Company's liability with respect to the predecessor operator's liability is
limited to $100,000.  However, the Company may have an additional liability
with respect to transactions that have occurred subsequent to its purchase
of the oil and gas properties in question.  The audit focused on several
matters, the most significant of which were the manner in which production
is measured and the manner in which royalties are calculated and accounted
for.  Certain alleged deficiencies preliminarily suggested by the audit were
contested.  Determinations contrary to several of the Company's positions
were rendered in June 1999, which the Company has determined not to appeal.
Certain key items relating to the calculation of royalties have yet to be
determined.  A determination contrary to the Company's position concerning
so-called "major portion" issues was recently rendered by the Department of
the Interior.  The Company's interests in this controversy are represented
by outside legal counsel who is appealing the Department of the Interior's
rulings.  In addition, the Company has recently determined to attempt to
negotiate a private protocol addressing the manner in which royalties are
calculated and accounted for.  The final outcome of these matters cannot yet
be predicted.
<PAGE>

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

    The following discussion is intended to assist in understanding our
consolidated financial position at March 31, 2002 and December 31, 2001, and
results of operations and cash flows for the three months ended March 31,
2002 and 2001. Our consolidated financial statements and notes thereto
should be referred to in conjunction with the following discussion.

                                  Overview

    Our revenues, profitability and future growth rates will be
substantially dependent upon our drilling success in the San Juan Basin, and
prevailing prices for oil and gas, which are in turn dependent upon numerous
factors that are beyond our control, such as economic, political and
regulatory developments and competition from other sources of energy. The
energy markets have historically been volatile, and oil and gas prices can
be expected to continue to be subject to wide fluctuations in the future. A
substantial or extended decline in oil or gas prices could have a material
adverse effect on our financial position, results of operations and access
to capital, as well as the quantities of gas reserves that we may produce
economically.

                        Liquidity and Capital Resources

    We have generated net losses of $1.8 million, $31.4 million,
$6.5 million and $2.8 million for the three months ended March 31, 2002 and
for the years ended December 31, 2001, 2000 and 1999, respectively.  Our
cash flows from operating activities for the respective periods were $(0.6)
million, $1.1 million, $4.0 million and $2.4 million.

    In September 2001, we completed the sale of our Delaware Basin oil and
gas properties.  Consequently, our remaining operations are located
primarily in the San Juan Basin of northwest New Mexico.  We have limited
access to the capital necessary to continue to develop our properties.  In
February 2002, we were able to amend our credit facility to provide, among
other things, for a $2.5 million increase in the borrowings available under
the credit facility.  In addition, we are currently pursuing alternative
methods of financing our discretionary capital expenditures for 2002,
including joint ventures with industry partners.  There is no assurance that
we will be able to secure financing on terms acceptable to us.

    In addition, because production from the San Juan Basin is predominantly
natural gas, we are particularly sensitive to changes in the price of
natural gas.  Historically, natural gas prices have experienced significant
fluctuations and have been particularly volatile in recent years.  Price
fluctuations can result from variations in weather, levels of regional or
national production and demand, availability of transportation capacity to
other regions of the country and various other factors.  Increases or
decreases in natural gas prices received could have a significant impact on
our future results.  If natural gas prices received decline significantly
from those received at March 31, 2002, or if we are unable to maintain
production levels at our San Juan Basin properties, we may have to implement
additional cost cutting measures in both our administrative and operating
areas.

    As discussed more fully below, in conjunction with the February 2002
amendment to the Aquila Credit Agreement, through December 31, 2002, we are
only required to make interest payments. We believe that cash on hand,
available borrowings under the Aquila Credit Agreement and cash generated
from operating activities will be sufficient to meet our cash requirements
through March 31, 2003.

    Our operations are capital intensive. Historically, our principal
sources of capital have been cash flow from operations, borrowings and
proceeds from sales of stock. Our principal uses of capital have been for
the acquisition, exploration and development of oil and gas properties and
related facilities.

    During the three months ended March 31, 2002, our capitalized costs
incurred in oil and gas producing activities were $0.6 million, principally
relating to the installation of artificial lift equipment.  We are currently
evaluating the number of wells we will drill during 2002.  We plan to fund
our capital requirements for the next 12 months with additional financing or
joint venture arrangements.  In April 2002, Mallon entered into a letter of
intent with Smart Exploration, Inc., for the formation of a joint venture to
explore and develop Fruitland Formation coal seams that underlie our East
Blanco Gas Project in the San Juan Basin of New Mexico.  We cannot be sure
that any additional financing or joint ventures will be available to us on
acceptable terms.

    In September 1999, we established a credit agreement (the "Aquila Credit
Agreement") with Aquila.  In February 2002, we notified Aquila that as of
December 31, 2001, we would not be in compliance with one of the covenants
under the Aquila Credit Agreement.  That covenant requires us to maintain
projected net revenue attributable to our proved reserves in an amount
sufficient to fully amortize the balance under the Aquila Credit Agreement
by the maturity date of September 9, 2003.  As a result, in February 2002,
the Aquila Credit Agreement was amended for a second time, as follows:

(i)   As long as no new event of default occurs subsequent to the date of
the second amendment, Aquila has agreed that through December 31, 2002, it
will not exercise any of the remedies available to Aquila due to any event
of default that occurs and is continuing regarding the amount of projected
net revenue required to amortize the amounts outstanding by September 9,
2003.

(ii)   Interest on amounts outstanding accrues at prime plus 3% starting
January 1, 2002, through September 30, 2002, and increases to prime plus 4%
after October 1, 2002.  We are required to pay interest only on the
outstanding balance through December 31, 2002.

(iii)   The amount available under the agreement was increased by $2.5
million, making the total available $55.9 million.  Aquila may, at its
discretion, advance additional loans up to $2.5 million to be used for our
development operations and/or working capital needs.

(iv)   A "change of control" provision was added, which calls for the
prepayment of the entire outstanding balance, together with any accrued and
unpaid interest, at the occurrence of a change of control of the Company.

(v)   We have the option to purchase from Aquila 490,000 shares of our
common stock previously issued to Aquila for a price of $2.6 million if a
sale of the Company is consummated prior to September 30, 2002.

(vi)   Aquila's one-time right to require us to purchase shares of our
common stock previously issued to Aquila (the "Put Option") was amended to
provide that Aquila has the option to sell to us up to 490,000 shares of our
common stock at $10.00 per share if a sale of the Company is consummated at
any time after September 30, 2002 and prior to September 9, 2003, or at
$12.50 per share if the outstanding balance under the Aquila Credit
Agreement is paid on the earlier of September 9, 2003 or the date on which
Aquila notifies us of the acceleration of payment of the outstanding balance
because of the occurrence of an event of default.

(vii)   We issued to Aquila 125,000 shares of the Company's common stock as
a part of the amendment and recorded $187,000 as an increase to unamortized
discount.  If a sale of the Company is not consummated before October 1,
2002, we will issue Aquila an additional 150,000 shares.

(viii)   Upon a change of control of the Company occurring on or before
September 30, 2002, we will pay Aquila $500,000.  If a change of control of
the Company occurs after September 30, 2002, we will pay Aquila $1,250,000.
Through May 10, 2002, we had drawn $1,700,000 under provision (iii) above,
and had $800,000 available for future draws.

    The Aquila Credit Agreement is secured by substantially all of our oil
and gas properties and contains various covenants and restrictions,
including ones that could limit our ability to incur other debt, dispose of
assets, or change management.  The weighted average interest rate for
borrowings outstanding under the Aquila Credit Agreement at March 31, 2002
was 7.75%. The outstanding loan balance is due in full on September 9, 2003.
As part of the transaction, we also entered into an Agency Agreement with
Aquila under which we pay Aquila a marketing fee equal to 1% of the net
proceeds (as defined) from the sale of our oil and gas production to market
our gas and to negotiate our gas purchase contracts.

    In April 2000, the Government of Costa Rica awarded us a concession to
explore for oil and natural gas on approximately 2.3 million acres in the
northeast quadrant of Costa Rica. We have completed an environmental
assessment of our proposed operations, and are currently in the process of
negotiating final concession contracts.  Once we sign final contracts, the
work program is expected to require the expenditure of $8.8 million
(including the drilling of six wells) over a three-year period, with a
possible extension of three more years. We will need to secure joint venture
or other additional financing in order to complete the work program.

                            Results of Operations

<TABLE>
<CAPTION>
                                                Three Months Ended March 31,
                                                2002            2001
                                       (In thousands, except per unit data)
<S>                                             <C>             <C>
Operating Results from Oil and Gas Operations:
    Oil and gas sales                           $2,683          $7,093
    Production tax and marketing expenses          474           1,506
    Lease operating expenses                     1,288           1,216
    Depletion                                    1,017           1,734
    Depreciation                                    92              75

Net Production:
    Oil (MBbl)                                       1              45
    Natural gas (MMcf)                           1,394           1,449
    Mmcfe                                        1,400           1,719

Average Sales Price Realized (1):
    Oil (per Bbl)                               $16.88          $25.27
    Natural gas (per Mcf)                        $1.91           $4.11
    Per Mcfe                                     $1.92           $4.13

Average Cost Data (per Mcfe):
    Production tax and marketing expenses        $0.34           $0.88
    Lease operating expenses                     $0.92           $0.70
    Depletion                                    $0.73           $1.01
    Depreciation                                 $0.06           $0.04
</TABLE>_________________
(1)   Includes effects of hedging.

     Three Months Ended March 31, 2002 Compared to March 31, 2001

    Revenue.  Revenue for first quarter 2002 decreased 63% to $2,696,000
from $7,330,000 for first quarter 2001.  Oil and gas sales for first quarter
2002 decreased 62% to $2,683,000 from $7,093,000 for first quarter 2001 due
to lower oil production as a result of the sale of the Delaware Basin
properties in September 2001 and lower gas prices realized.  Average oil
prices per barrel for first quarter 2002 decreased 33% to $16.88 from $25.27
for first quarter 2001. Average gas prices per Mcf for first quarter 2002
decreased 54% to $1.91 from $4.11 for first quarter 2001.  Oil production
for first quarter 2002 decreased 98% to 1,000 barrels from 45,000 barrels
for first quarter 2001 as a result of the Delaware Basin sale and gas
production for first quarter 2002 decreased 4% to 1,394,000 Mcf from
1,449,000 Mcf for first quarter 2001.

    Production Tax and Marketing Expenses.  Production tax and marketing
expenses decreased 69% to $474,000 in first quarter 2002 from $1,506,000 in
first quarter 2001, primarily due to lower oil production and lower gas
prices.  Production taxes are calculated and paid on prices before hedging
gains or losses.  As a percentage of sales before hedging losses, production
tax and marketing expenses were 16% in first quarter 2002 and 15% in first
quarter 2001.  Production tax and marketing expenses per Mcfe decreased 61%
to $0.34 from $0.88.

    Lease Operating Expenses.  Lease operating expenses increased 6% to
$1,288,000 in first quarter 2002 from $1,216,000 in first quarter 2001.
Lease operating expenses per Mcfe increased 31% to $0.92 in first quarter
2002 from $0.70 per Mcfe in the 2001 quarter due to the accrual of $358,000
for the possessory interest tax in 2002.

    Depreciation, Depletion and Amortization. First quarter 2002
depreciation, depletion and amortization decreased 36% to $1,244,000 from
$1,959,000 in first quarter 2001.  Depletion per Mcfe decreased 28% to $0.73
from $1.01, due to the lower capitalized costs subsequent to the September
2001 sale of Delaware Basin properties and provision for impairment.

    General and Administrative Expenses. Net general and administrative
expenses for first quarter 2002 decreased 65% to $475,000 from $1,355,000 in
first quarter 2001, primarily due to stock compensation expense.  As a
result of fluctuations in the market price of the Company's common stock,
and employee stock options with a below-market strike price, which require
mark-to-market accounting, and issuance of restricted stock, the Company
recognized a reduction to general and administrative expense of $440,000 in
the first quarter of 2002, whereas the Company recognized $579,000 of
expense in the 2001 quarter.

    Interest and Other Expenses. Interest and other expenses for first
quarter 2002 decreased 46% to $962,000 from $1,788,000 for first quarter
2001.  The decrease was primarily due to a lower outstanding debt balance in
the 2002 quarter as proceeds from the September 2001 Delaware Basin sale
were used to pay down debt.

    Income Taxes. We incurred net operating losses for U.S. Federal income
tax purposes in 2002 and 2001, which can be carried forward to offset future
taxable income. Statement of Financial Accounting Standards No. 109 requires
that a valuation allowance be provided if it is more likely than not that
some portion or all of a deferred tax asset will not be realized. Our
ability to realize the benefit of our deferred tax asset will depend on the
generation of future taxable income through profitable operations and the
expansion of our oil and gas producing activities. The market and capital
risks associated with achieving the above requirement are considerable,
resulting in our decision to provide a valuation allowance equal to the net
deferred tax asset. Accordingly, we did not recognize any tax expense or
benefit in the consolidated statements of operations for the first quarters
of 2002 and 2001.

    Net Loss. We had a net loss of $1,772,000 for first quarter 2002
compared to net loss of $494,000 for first quarter 2001 as a result of the
factors discussed above.  We paid the 8% dividend of $16,000 on our $800,000
face amount Series B Mandatorily Redeemable Convertible Preferred Stock in
the quarter ended March 31, 2001, and realized accretion of $2,000.  In
addition, during first quarter 2002 and 2001 we realized accretion of
$164,000 and $144,000, respectively, on the Mandatorily Redeemable Common
Stock.  Net loss attributable to common shareholders for the quarter ended
March 31, 2002 was $1,936,000 compared to $656,000 for the quarter ended
March 31, 2001.

                            Hedging Activities

    We use hedging instruments to manage commodity price risks. We have used
energy swaps and other financial arrangements to hedge against the effects
of fluctuations in the sales prices for oil and natural gas. Gains and
losses on such transactions are matched to product sales and charged or
credited to oil and gas sales when that product is sold. Management believes
that the use of various hedging arrangements can be a prudent means of
protecting our financial interests from the volatility of oil and gas
prices. Under our Aquila Credit Agreement, we may be required to maintain
price hedging arrangements in place with respect to up to 65% of our oil and
gas production upon terms satisfactory to us and Aquila.  We recognized a
hedging gain (loss) of $263,000 and $(2,914,000) in first quarter 2002 and
2001, respectively. These amounts are included in oil and gas sales in our
consolidated statements of operations.

                              Miscellaneous

    Our oil and gas operations are significantly affected by certain
provisions of the Internal Revenue Code applicable to the oil and gas
industry. Current law permits our intangible drilling and development costs
to be deducted currently, or capitalized and amortized over a five-year
period. We, as an independent producer, are also entitled to a deduction for
percentage depletion with respect to the first 1,000 barrels per day of
domestic crude oil (and/or equivalent units of domestic natural gas)
produced (if such percentage depletion exceeds cost depletion). Generally,
this deduction is 15% of gross income from an oil and gas property, without
reference to the taxpayer's basis in the property. The percentage depletion
deduction may not exceed 100% of the taxable income from a given property.
Further, percentage depletion is limited in the aggregate to 65% of our
taxable income. Any depletion disallowed under the 65% limitation, however,
may be carried over indefinitely.

    Inflation has not historically had a material impact on our financial
statements, and management does not believe that we will be materially more
or less sensitive to the effects of inflation than other companies in the
oil and gas industry.

    The preceding information contains forward-looking statements, the
realization of which cannot be assured. Actual results may differ
significantly from those forecast. When evaluating us, our operations, or
our expectations, the reader should bear in mind that we and our operations
are subject to numerous risks and uncertainties. Among these are risks
related to the oil and gas business generally (including operating risks and
hazards and the regulations imposed thereon), risks and uncertainties
related to the volatility of the prices of oil and gas, uncertainties
related to the estimation of reserves of oil and gas and the value of such
reserves, uncertainties relating to geologic models and evaluations, the
effects of competition and extensive environmental regulation, and other
factors, many of which are necessarily beyond our control. These and other
risk factors that affect our business are discussed in our 2001 Form 10-K.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

    We use commodity derivative financial instruments, including swaps, to
reduce the effect of natural gas price volatility on a portion of our
natural gas production. Commodity swap agreements are generally used to fix
a price at the natural gas market location or to fix a price differential
between a benchmark price of natural gas and the price of gas at its market
location. Settlements are based on the difference between a fixed and a
variable price as specified in the agreement. The following table summarizes
our derivative financial instrument position on our natural gas production
as of March 31, 2002.  The fair value of these instruments reflected below
is the estimated amount that we would receive (or pay) to settle the
contracts as of March 31, 2002.  Actual settlement of these instruments when
they mature will differ from these estimates reflected in the table. Gains
or losses realized from these instruments hedging our production are
expected to be offset by changes in the actual sales price received by us
for our natural gas production. See "Hedging Activities" above.

<TABLE>
<CAPTION>
                         Fixed Price
    Year    MMBtu        per MMBtu      Fair Value
    <S>     <C>          <C>            <C>
    2002    1,101,000    $2.55-$3.38    $  (810,000)
    2003      996,000    $2.55           (1,118,000)
    2004      852,000    $2.55             (955,000)
</TABLE>

    In addition, we entered into a basis swap to fix the differential
between the NYMEX price and the index price at which the hedged gas is to be
sold for 2,949,000 MMBtu for 2001 - 2004 with a fair value of $(20,000).

    The table below provides information about our financial instruments
sensitive to changes in interest rates, including debt obligations. The
table presents principal cash flows and related weighted average interest
rates by expected maturity dates.


<TABLE>
<CAPTION>
                              Expected Maturity
                               (In thousands)

                          2002      2003       2004      2005     2006    Thereafter   Fair Value
<S>                       <C>       <C>        <C>       <C>      <C>     <C>          <C>
Long-term debt:
  Fixed rate              $391      $   586    $3,514    $17      $ 41    $  --        $ 4,549
  Average interest rate   12.7%        12.7%     12.8%    8.0%     8.0%      --
  Variable rate           $ --      $27,511    $   --    $ --     $ --    $  --        $27,511
  Average interest rate     --         8.75%       --      --       --       --
</TABLE>

<PAGE>

                     PART II  --  OTHER INFORMATION

Item 1.  Legal Proceedings

    The information contained in Note 7 to the consolidated financial
statements set forth in Part I is hereby incorporated by reference.

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits:

     None.

(b)  Reports on Form 8-K:

     During the quarter for which this report is filed, the Company filed a
Current Report on Form 8-K dated February 8, 2002 under "Item 5. Other
Events", relating to the Second Amendment to Credit Agreement dated
September 9, 1999, by and between Mallon Resources Corporation, Mallon Oil
Company and Aquila Energy Capital Corporation.  The Amendment was attached
under Item 7, as Exhibit 10.25.

     Subsequent to March 31, 2002, the Company also filed Current Reports on
Form 8-K, under "Item 5. Other Events", dated April 4, 2002 and May 2, 2002.
The April 4, 2002 report related to the execution of a letter of intent to
explore and develop the Fruitland Formation coal seam that underlie Mallon's
East Blanco Gas Project in the San Juan Basin of New Mexico with Smart
Exploration, Inc.  The May 2, 2002 report related to the retirement of Frank
Douglass from, and the appointment of Christopher H.B. Mills to, the
Company's Board of Directors.

<PAGE>

                                    SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    MALLON RESOURCES CORPORATION
                                    Registrant


Date:  May 15, 2002                 By:  /s/ Roy K. Ross
                                          Roy K. Ross
                                          Executive Vice President


Date:  May 15, 2002                 By:  /s/ Alfonso R. Lopez
                                          Alfonso R. Lopez
                                          Vice President, Finance/Treasurer