FORM 10-Q

                 SECURITIES AND EXCHANGE COMMISSION

                         Washington, D.C. 20549

                              (Mark One)

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

                  For the quarterly period ended June 30, 1999

                                  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 0-20760

                           GREKA Energy Corporation
           ------------------------------------------------------
           (Exact name of registrant as specified in its charter)

           Colorado                                            84-1091986
---------------------------------                          -------------------
  (State or other jurisdiction                             (I.R.S. Employer
of incorporation of organization)                          Identification No.)

                630 Fifth Avenue, Suite 1501, New York, NY 10111
                ------------------------------------------------
                     (Address of principal executive office)

                                 (212) 218-4680
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not applicable
                   ------------------------------------------
                     (Former name, former address and former
                   fiscal year, if changed since last report)

     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

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes  X  No






                  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:

As of August 9, 1999,  GREKA Energy had 4,247,724 shares of Common Stock, no par
value per share, outstanding.
<PAGE>

                               TABLE OF CONTENTS
                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION ............................................  1

Item 1.  Financial Statements .............................................  1

   Condensed Consolidated Balance Sheets as of June 30, 1999
     (Unaudited) and December 31, 1998 ....................................  1
   Condensed Consolidated Statements of Operations for the Six and
      Three Month Periods Ended June 30, 1999 and 1998 (Unaudited)  .......  3
   Condensed Consolidated Statements of Cash Flows for the Six
      Month Periods Ended June 30, 1999 and 1998 (Unaudited) ..............  4
   Notes to Condensed Consolidated Financial Statements (Unaudited) .......  5

Item 2.  Management's Discussion and Analysis of Financial
   Condition and Results of Operations ....................................  18
Item 3.  Quantitative and Qualitative Disclosures About Market Risk........  28

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.................................................  29

Item 2.  Changes in Securities and Use of Proceeds.........................  30

Item 3.  Defaults Upon Senior Securities...................................  30

Item 4.  Submission of Matters to a Vote of Security Holders...............  30

Item 5.  Other Information.................................................  30

Item 6.  Exhibits and Reports on Form 8-K..................................  31

SIGNATURE..................................................................  32

<PAGE>





                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                    GREKA ENERGY CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS


                                                     June 30,
                                                      1999          December 31,
                                                   (Unaudited)         1998
                                                  ------------     -------------
Current Assets
     Cash and cash equivalents ...............    $  2,168,619     $    250,212
     Accounts receivable, net of
      allowance for doubtful accounts
      of $161,500(1999)and $74,000 (1998) ....       4,723,300          171,595
     Inventories .............................       6,472,288               --
     Other current assets ....................         823,033               --
                                                  ------------     -------------
            Total Current Assets .............      14,187,240          421,807
                                                  ------------     -------------
Property and Equipment
     Investment in limestone property,
      at cost ................................       3,699,304        3,500,000
     Oil and gas properties (full
      cost method) ...........................      25,673,937        3,445,816
     Land, plant and equipment ...............      42,085,814        1,561,475
                                                  ------------     -------------
                                                    71,459,055        8,507,291
     Less accumulated depletion,
      depreciation and impairment ............      (5,229,574)      (4,081,340)
                                                  ------------     -------------

            Total Property and Equipment .....      66,229,481        4,425,951
                                                  ------------     -------------
Other Assets
     Investment in Saba Petroleum Company ....            --         15,804,110
     Other ...................................       1,903,325          154,937
                                                  ------------     -------------

            Total Other Assets ...............       1,903,325       15,959,047
                                                  ------------     -------------
                                                  $ 82,320,046     $ 20,806,805
                                                  ============     =============

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

                                       1


<PAGE>

                   GREKA ENERGY CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS


                    LIABILITIES AND STOCKHOLDERS' EQUITY


                                                     June 30,
                                                      1999          December 31,
                                                   (Unaudited)         1998
                                                   ------------    -------------
Current Liabilities

     Accounts payable and accrued
      liabilities ..............................   $ 12,566,259    $    236,323
     Income taxes payable ......................        398,931            --
     Current portion of long-term debt .........     23,626,353       2,013,338
                                                   ------------    -------------
            Total Current Liabilities ..........     36,591,543       2,249,661
                                                   ------------    -------------
Long-term Debt, net of current portion .........      8,582,296          52,634

Other Liabilities ..............................        112,164              --
Minority Interest in Consolidated Subsidiary ...        585,554              --

Preferred Stock of Subsidiary ..................      7,304,356              --
                                                   ------------    -------------

                                                     16,584,370          52,634
                                                   ------------    -------------

Commitments and contingencies

Stockholders' Equity
     Common Stock, no par value, authorized
     50,000,000 shares; issued and
     outstanding 4,247,724 (1999) and
     2,910,988 (1998) shares ...................     36,305,019      25,735,019
     Accumulated comprehensive income ..........         63,982            --
     Accumulated deficit .......................     (7,224,868)     (7,230,509)
                                                   ------------    -------------
     Total Stockholders' Equity ................     29,144,133      18,504,510
                                                   ------------    -------------

                                                   $ 82,320,046    $ 20,806,805
                                                   ============    =============

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

                                       2
<PAGE>


                    GREKA ENERGY CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                         Six Months                 Three Months
                                                        Ended June 30,             Ended June 30,
                                                 1999            1998          1999            1998
                                              -----------    -----------    -----------    -----------
Revenues
<S>                                           <C>            <C>            <C>            <C>
Oil and gas sales .........................   $ 4,695,414    $    74,659    $ 4,412,526    $    39,970
Refinery product sales ....................     3,533,088             --      3,533,088             --
Other .....................................       820,056         47,000        749,842         47,000
                                              -----------    -----------    -----------    -----------
         Total Revenues ...................     9,048,558        121,659      8,695,456         86,970
                                              -----------    -----------    -----------    -----------
Expenses
Production costs ..........................     2,582,749         64,553      2,369,763         30,381
Refinery product cost of sales ............     2,065,651             --      2,065,651             --
General and administrative ................     1,587,003        720,531      1,162,267        365,984
Depletion, depreciation & amortization ....     1,719,186        109,366      1,500,811         70,498
                                              -----------    -----------    -----------    -----------
Total Expenses ............................     7,954,589        894,450      7,098,492        466,863
                                              -----------    -----------    -----------    -----------
Operating income (loss) ...................     1,093,969       (772,791)     1,596,964       (379,893)
Other Income (Expenses)
Equity in pre-acquisition loss of Saba ....      (553,483)            --             --             --
Other, net ................................       679,265         49,603        652,948         15,009
Interest expense ..........................      (646,271)            --       (542,851)            --
                                              -----------    -----------    -----------    -----------
Other Income (Expense), Net ...............      (520,489)        49,603        110,097         15,009
                                              -----------    -----------    -----------    -----------
Income (loss) before income taxes .........       573,480       (723,188)     1,707,061       (364,884)

Provision for Colombia taxes ..............       472,100             --        472,100             --
Minority interest in (Loss) of
Consolidated Subsidiary ...................       (20,617)            --        (19,579)            --
                                              -----------    -----------    -----------    -----------
Net Income (Loss) .........................       121,997       (723,188)     1,254,540       (364,884)
Other Comprehensive Income - net of tax
         Foreign currency translation
         adjustments ......................        63,982             --         63,982             --
                                              -----------    -----------    -----------    -----------

Comprehensive Income (Loss) ...............   $   185,979    $  (723,188)   $ 1,318,522    $  (364,884)
                                              ===========    ===========    ===========    ===========
New Earnings (Loss) per common share
Basic and Diluted .........................   $       -0-    $     (0.46)   $      0.27    $     (0.23)

Weighted Average Common Shares Outstanding,
Basic and Diluted .........................     3,626,639      1,570,981      4,221,018      1,570,981
</TABLE>

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

                                       3
<PAGE>


                    GREKA ENERGY CORPORATION AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>

                                                           1999            1998
                                                       ------------    ------------

 Cash Flows from Operating Activities
<S>                                                    <C>             <C>
         Net income (loss) .........................   $    121,997    $   (723,188)
         Adjustments to reconcile net income (loss)
           to net cash used in operating activities:
         Depletion, depreciation and
        amortization ...............................      1,719,186         109,366
      Equity in pre-acquisition loss of Saba .......        553,483              --
      Minority interest in (loss) of
        consolidated subsidiary ....................        (20,617)             --
      Compensation expense attributable to the
           issuance of Common Stock ................        150,000              --
         Changes in:
         Accounts receivable .......................     (3,054,506)          3,173
         Inventories ...............................     (1,267,571)             --
      Other assets .................................       (116,128)         (5,236)
      Accounts payable and accrued
        liabilities ................................      1,095,747        (831,590)
                                                       ------------    ------------
Net Cash Used In Operating
        Activities .................................       (818,409)     (1,447,475)
                                                       ------------    ------------
Cash Flows from Investing Activities
     Acquisition of inventory ......................     (1,000,000)             --
     Expenditures for property and equipment .......       (474,403)     (1,135,462)
Expenditures for
acquisition of Saba,
      net of cash acquired .........................        234,850              --
                                                       ------------    ------------
Net Cash Used In
       Investing Activities ........................     (1,239,553)     (1,135,462)
                                                       ------------    ------------
Cash Flows from Financing Activities
     Increase in deferred financing costs ..........       (330,348)             --
     Proceeds from notes payable and
      long-term debt:
      BNY Financial Corporation ....................     10,526,450              --
      15% Debenture ................................      1,000,000              --
     Principal payments on notes
      payable and long-term debt:
      Bank One, Texas ..............................     (6,000,000)             --
      BNY Financial Corporation ....................     (1,121,838)             --
         Other .....................................        (97,895)        (18,768)
         Net proceeds from issuance of Common
         Stock .....................................             --          84,446
                                                       ------------    ------------
Net Cash Provided By Financing
      Activities ...................................      3,976,369          65,678
                                                       ------------    ------------
Net Increase (Decrease) in Cash and
         Cash Equivalents ..........................      1,918,407      (2,517,259)
Cash and Cash Equivalents at Beginning
         of Period .................................        250,212       3,932,647
                                                       ------------    ------------
Cash and Cash Equivalents at End
 of Period .........................................   $  2,168,619    $  1,415,388
                                                       ============    ============
</TABLE>

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

                                       4

<PAGE>

                GREKA ENERGY CORPORATION AND SUBSIDIARIES
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES
General

The accompanying unaudited condensed consolidated financial statements have been
prepared on a basis  consistent  with the  accounting  principles  and  policies
reflected in the financial  statements for the year ended December 31, 1998, and
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto  included in the Company's 1998 Form  10-KSB/A.  In the opinion of
management,   the  accompanying   unaudited  condensed   consolidated  financial
statements contain all adjustments (which, except as otherwise disclosed herein,
consist of normal  recurring  accruals  only)  necessary  to present  fairly the
Company's  consolidated  financial  position  as  of  June  30,  1999,  and  the
consolidated  results of  operations  for the six and three month  periods ended
June 30,  1999 and  1998,  and the  consolidated  cash  flows  for the six month
periods ended June 30, 1999 and 1998.

Acquisition of Saba Petroleum Company

On October 8, 1998, the Company disclosed that it had acquired over five percent
of the outstanding  common stock of Saba Petroleum  Company  ("Saba"),  with the
intent to gain control of Saba.

In December,  1998, the Boards of Directors of both companies  approved  Greka's
proposal to acquire Saba. Under the acquisition  agreement,  Saba's stockholders
would  receive one share of the  Company's  Common  Stock for each six shares of
Saba's common stock outstanding.

In addition to the shares  owned  directly by the  Company,  568,200 Saba shares
were owned by IPH, a Company  shareholder.  Such shares  were  subject to a call
agreement by the Company at an exercise  price equal to 120% of the cost of such
shares to IPH,  payable in cash or common  shares of the Company.  IPH had a put
agreement that became  effective  April 1, 1999, and was exercised on such date.
The Company has authorized the issuance of 140,886 shares to IPH in exchange for
the shares of Saba owned directly by IPH.

During 1998, Greka acquired for cash and Greka Common Stock approximately 3.4
million common and 690 preferred shares of Saba at a total cost of approximately
$16.4  million.  The  acquisitions  resulted in Greka  owning 29.9% of the total
outstanding  common shares of Saba.  This investment was accounted for under the
equity method  through March 24, 1999.  Effective  March 24, 1999,  the Company,
through a wholly-owned subsidiary,  acquired Saba in a transaction accounted for
as a purchase with an additional cost of approximately  $10.5 million based upon
the issuance of 1,290,000 shares of GREKA Common Stock ($10.3 million) and other
expenditures ($0.2 million).  The results of operations for Saba are included in
the Company's  consolidated  results of operations as of the  acquisition  date.
During 1998 and through March 24, 1999, the Company recorded  cumulative  equity
losses from Saba of approximately $1.1 million.

                                       5

<PAGE>

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES (Continued)

Saba's  principal  assets at March 24, 1999,  consisted of an asphalt  refinery,
proved oil and gas reserves of 20,990 MBOE with  estimated  future net revenues,
discounted at 10% of $34.3 million (using prices as of April 1, 1999),  unproven
oil and gas properties and various real estate holdings in California.

The Company's net acquisition cost of $25.8 million was allocated using the fair
value of each of Saba's assets and liabilities at the date of acquisition.


                                           Acquisition
                                              cost

              Refinery                      $25,400
              Oil and Gas Properties         28,628
              Land                           16,600
              Other Assets                    8,460
              Liabilities and minority
               interest                     (46,145)
              Preferred Stock                (7,188)
                                            -------
              Total                         $25,755
                                            =======

The  Company  revised the  allocation  of the Saba  acquisition  cost during the
second quarter of 1999 based on new  information and analyses  performed  during
the quarter.  With  additional  information  which may arise in the future,  the
Company may further revise the allocation during the remainder of 1999.

Management's Plans

The Company's  financial  statements have been prepared on a going-concern basis
which  contemplates  the realization of assets and the settlement of liabilities
and commitments in the normal course of business.

During  1998,  due to  decreased  prices  for  natural  gas and crude oil in all
locations in which the Company does business,  the Company incurred  significant
losses,  due primarily to reduced production and related oil and gas sales and a
$3.2 million  non-cash  ceiling  writedown of its oil and gas assets without any
reduction for tax benefits.  As a result of these factors, the reported net loss
was $5.5 million,  or $3.42 per share. The Company had also not made payments on
two loans from one of its primary  stockholders,  but had received extensions in
the due dates for  repayments to May 31, 1999.  In addition,  the Company made a
substantial investment in, and subsequently acquired, Saba in March 1999. At the
time of the acquisition,  Saba was not in compliance with certain  requirements,
restrictions and other covenants in its 9% senior subordinated  debentures ($3.6
million),  its  revolving  ($15.6  million)  and term ($4.5  million)  bank loan
agreements,  its loan from the  operator of  properties  owned by the Company in
Colombia  ($4.2  million) and its  Preferred  Stock (with a stated value of $7.2
million).  As a  consequence,  it could not borrow under its revolving bank loan
agreement. Saba also received a notice of default from

                                       6

<PAGE>

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES (Continued)

the Colombian tax authorities for the payment of income taxes for 1997 and 1998.
Due to the Company  and Saba not being in  compliance  with the above  mentioned
requirements,  restrictions  and other  covenants,  combined  with other  normal
maturities of long term debt, approximately $2.0 and $28.8 million, of such long
term  debt  was  classified  as  currently  payable  by the  Company  and  Saba,
respectively,  and as a  result,  the  Company  and  Saba  had  working  capital
deficiencies of approximately $1.8 million and $35.4 million,  respectively,  at
December 31, 1998. The independent  public  accountants for the Company and Saba
issued modified reports at December 31, 1998, with respect to the ability of the
Company and Saba to each continue as a going  concern.  During the first quarter
of  1999,  operating  losses  continued,  and a net loss of  approximately  $1.1
million was incurred.  At March 31, 1999, the Company's  working capital deficit
was approximately $38.0 million.

The entire working capital deficit of Saba that existed on the effective date of
the acquisition, March 24, 1999, was inherited by
the Company. The Company has
entered into, and concluded, material transactions that conform to the Company's
strategy to capitalize on its asset base, including the following events:

      *  At May 1, 1999,  the  Company  assumed  full  operation  of its asphalt
         refinery in  California  which is expected  to  significantly  increase
         operating cash flows,

      *  The  Company  acquired   financing  with  a  new  bank,  BNY  Financial
         Corporation, of up to $11.0 million in May 1999,

      *  The payment of $6.0 million to Bank One, Texas to reduce  existing debt
         owed by Saba,

      *  The  Company   negotiated   terms  and  conditions   with  a  financial
         institution, providing for refinancing of the remaining Bank One, Texas
         indebtedness  (See Note 8- Subsequent  Events),  * The Company  entered
         into a term sheet providing for  restructure of Saba's  Preferred Stock
         (See Note 5 - Preferred Stock of Subsidiary),

      *  The Company  entered into a term sheet  providing  for  restructure  of
         Saba's 9% senior  subordinated  debentures  (See Note 4 - Notes Payable
         and Long- Term Debt),

      *  The  Company  closed  the  sale  of  non-core  assets  of the  Company,
         including  its oil and gas  assets  in  Colombia  (See Note 2 - Sale of
         Assets).

Management  believes  that the results of operations  for the second  quarter of
1999 and the completion of the transactions  referenced immediately above should
remove any uncertainty as to its ability to continue as a going concern. In view
of the  significant  changes  which  result  from the  events  described  above,
management believes that the results of operations and cash flows of the Company
reported herein are more indicative of the expected future results of operations
of the Company.  Comparisons of the Company's  results of operations for the six
and three month periods ended June 30, 1999 and 1998, and cash flows for the six
month periods ended June 30, 1999 and 1998, reflect  significant  improvement in
the Company's  operations  resulting  from assuming full operating and financial
responsibility  for  its  Santa  Maria  refinery  at May  1,  1999.  Results  of
operations for the six month period ended June 30, 1999,  and more  particularly
the three month  period  ended June 30,  1999,  are more  representative  of the
Company's  long-term  potential.  See  Management's  Discussion  and Analysis of
Financial  Condition  and  Results  of  Operations  and  Liquidity  and  Capital
Resources.

                                       7

<PAGE>

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES (Continued)

Inventories

Inventories  are principally  stated at the lower of cost  (first-in,  first-out
method) or market, and consist of the following at June 30, 1999:

                           Crude Oil                 $  960,463
                           Asphalt and
                             related by-products      4,548,888
                           Oilfield materials
                             and supplies               962,937
                                                     ----------
                                                     $6,472,288
                                                     ==========

Oil and Gas Property

The  Company  periodically  reviews  the  carrying  value  of its  oil  and  gas
properties  in  accordance  with   requirements  of  the  full  cost  method  of
accounting.  Under these rules,  capitalized costs of oil and gas properties may
not exceed the  present  value of  estimated  future net  revenues  from  proved
reserves,  discounted  at 10%,  plus the lower of cost or fair  market  value of
unproved  properties  ("ceiling").  Application  of this ceiling test  generally
requires  pricing  future  revenue at the prices in effect as of the end of each
reporting period and requires a writedown for accounting purposes if the ceiling
is exceeded.

New Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities." This statement
broadens the definition of a derivative  instrument and  establishes  accounting
and reporting standards  requiring that every derivative  instrument be recorded
in the balance sheet as either an asset or liability measured at its fair market
value.  Derivatives that are not hedges must be adjusted to fair value currently
in earnings.  If a derivative is a hedge,  depending on the nature of the hedge,
special  accounting  allows changes in fair value of the derivative to be either
offset  against the change in fair value of the hedged asset or liability in the
income  statement or to be  recognized as  comprehensive  income (a component of
stockholders'  equity)  until the hedged item is  recognized  in  earnings.  The
Company  must  formally  document,  designate  and assess the  effectiveness  of
transactions  that  receive  hedge  accounting.  The  ineffective  portion  of a
derivative's change in fair value will be immediately recognized in earnings.

The  Company  adopted  SFAS 133 in fiscal  year 1999,  but since it does not use
derivatives currently, there was no impact resulting from such adoption.


                                       8
<PAGE>

NOTE 2 - SALE OF ASSETS

In June 1999,  the Company  closed the  agreement  entered into in April 1999 to
sell  substantially  all  of  the  assets  of  Sabacol,  Inc.   ("Sabacol"),   a
wholly-owned  subsidiary  of the Company,  in exchange for  consideration  of at
least $10.0  million  consisting  of cash,  interests  in oil and gas  producing
properties in California,  and full release of the related debts.  The agreement
provides  for  the  payment  of  additional  consideration  to  Sabacol  if  the
difference between the January 1, 2000 reserve value (using the average wellhead
prices received for production during fourth quarter 1999) for Sabacol's oil and
gas properties and the California properties acquired by Sabacol is greater than
the  difference  between  the  January  1,  1999  reserve  value  for  the  same
properties.  If the differential is $5 million or less, by March 31, 2000 Omimex
will pay such  amount to  Sabacol  in cash or,  upon  non-payment,  reassign  to
Sabacol the 50%  interest in the  Velasquez-Galan  pipeline in Colombia  sold by
Sabacol to Omimex . If the differential is greater than $5 million, Sabacol will
have the option  through  May 31, 2000 of  repurchasing  for  approximately  $12
million  the assets  sold to Omimex  and  reassigning  to Omimex the  California
assets  purchased from Omimex.  If this option is not exercised,  Omimex will be
obligated  to pay  Sabacol $5 million in cash or, upon  non-payment  reassign to
Sabacol the Velasquez-Galan pipeline. On April 26, 1999, following the Company's
motion,  it was announced that Sabacol had successfully  obtained the Bankruptcy
Court's  approval of the sales  transaction and the authorized  dismissal of its
bankruptcy case, upon consummation of the sale. In July 1999, Sabacol filed with
the  bankruptcy  court a request to enter the order  dismissing  the  bankruptcy
case.

In connection with the closing of this transaction, the Company removed from its
accounts  approximately  $9.0  million  of  indebtedness,  consisting  of  trade
payables,  a promissory  note,  accrued  interest and Colombia  income taxes. In
addition, the Company recorded the acquisition of interests in two producing oil
and gas properties in California at a cost of approximately $790,000.

In April 1999,  the Company and IPH closed an agreement  with  Pembrooke  Calox,
Inc. for the sale of the Company's and IPH's  interests in a 355-acre  limestone
property  located in Indiana in exchange  for a  non-recourse  promissory  note,
secured by the limestone property.  The buyer had the option to pay either $3.85
million by July 31,  1999  followed by four  annual  payments  of $200,000  each
beginning in 2001,  or $5.7 million by November 1, 1999.  The buyer had not paid
any funds to the  Company  or IPH on or before  July 31,  1999.  As part of this
transaction,  the Company paid  Pembrooke  $50,000 and issued  16,736  shares of
Common  Stock  following  the  filing  of a  registration  statement  on May 17,
1999.The Company has not recorded the sales  transaction due to the terms of the
sale and pending realization of the note receivable on November 1, 1999.

                                       9

<PAGE>

NOTE 3 - STATEMENT OF CASH FLOWS

Following is certain supplemental  information  regarding cash flows for the six
month periods ended June 30, 1999 and 1998:

                                            1999               1998
          Interest paid                   $521,325          $    -
          Income taxes paid               $ 43,296          $    -


NOTE 3 - STATEMENT OF CASH FLOWS (continued)

Non-cash investing and financing transactions are as follows:

Dividend obligations on Saba's Preferred Stock for the periods March 24 to
31, 1999,  and April 1 to June 30, 1999,  that were due and payable on March 31,
1999, and June 30, 1999, of $9,000 and $107,400,  respectively,  were accrued by
increasing that issue's reported carrying amount.

In March 1999, the Company issued  1,290,000 shares of Common Stock at a cost of
$10.3  million to acquire 7.7 million  shares of common  stock of Saba (See Note
1-Acquisition of Saba Petroleum Company).

In May 1999,  the  Company  issued  16,736  shares of Common  Stock at a cost of
$100,000 in connection with the sale of the limestone property.

In May 1999, the Company  acquired  $2,627,493 of crude oil, asphalt and related
products by assuming credits against outstanding  receivables and the assumption
of accounts payable.

In June 1999, the Company realized  credits against a promissory note,  accounts
payable  and  Colombia  income  taxes  in the  total  amount  of $9  million  as
consideration for the sale of oil and gas property, and settlement of additional
accounts  payable and accounts  receivable were utilized to fund the acquisition
of producing oil and gas property at a recorded cost of $789,500.

NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consist of the following at June 30, 1999:

     Saba 9% senior subordinated Debentures
      due 2005 (a)                          $ 3,299,660
     Loan agreement-Bank One (b)             14,101,769
     Demand loan agreement with a bank (c)    1,223,513
     Capital lease obligations (d)              418,047
     Promissory note (e)                        345,290
     Term loan with a bank (f)                  360,218
     Notes payable (g)                        2,000,000
     15% convertible senior subordinated
      Debenture due 2001 (h)                  1,000,000
     Loan agreement-BNY Financial
      Corporation (i)                         9,404,612
     Other                                       55,540
                                            -----------
                                             32,208,649
     Less current portion                    23,626,353
                                            -----------
                                            $ 8,582,296
                                            ===========

As discussed in Note 1, the Company  completed the  acquisition of Saba on March
24, 1999.  The following  notes discuss the debt  obligations  outstanding as of
June 30, 1999. With respect to certain of these  instruments,  the Company is in
the process of  renegotiating  the terms and conditions of the obligations  (See
Note  8  -  Subsequent   Events).

                                       10

<PAGE>

NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT (continued)

(a) In December 1995,  and February 1996,  Saba issued a total of $12.65 million
of 9% convertible senior subordinated debentures ("Debentures") due December 15,
2005. The Debentures were  convertible  into common stock of Saba, at the option
of the holders of the Debentures,  at any time prior to maturity at a conversion
price of $4.38 per share, subject to adjustment in certain events.

Debentures in the amount of $9,075,000  were converted into 2,074,213  shares of
Saba's common stock prior to the  acquisition of Saba by the Company on March24,
1999.

The Company is currently in discussions with the majority holder of the
outstanding  Debentures  to amend  the  terms of the  obligation  (See  Note 8 -
Subsequent Events).

Saba is not in  compliance  with  certain of the  Debentures'  restrictions  and
covenants, and accordingly, such debt is classified as currently payable at June
30, 1999.

(b) Amounts  outstanding under the loan agreement with Bank One, Texas aggregate
$14.1 million at June 30, 1999. A portion of the indebtedness was advanced under
a reducing,  revolving  borrowing  base loan.  The  balance of the  indebtedness
consists  of term loans that  matured  on July 31,  1998,  and were not paid nor
extended.

In February  1999,  Bank One, Texas notified Saba that as a result of continuing
defaults  under  Saba's  principal  credit  facilities  with Bank One the entire
amount of $20.1 million then outstanding under the facilities was accelerated
and declared immediately due and payable. In May 1999, the Company borrowed $6.0
million under the terms of a new credit facility with BNY Financial  Corporation
and applied  such  proceeds to the Bank One,  Texas  indebtedness,  reducing the
outstanding balance to $14.1 million.

In July  1999,  the  Company,  Saba and Bank One  entered  into an  Amended  and
Restated  Forbearance  Agreement,  under  which  Bank One  agreed  that it would
forbear  from  exercising  its  remedies  under the  credit  facilities  through
September  15,  1999,  provided  that  Saba  maintain  compliance  with  certain
conditions  regarding  Events of Default,  making timely  interest  payments and
securing alternative financing to retire the Bank One, Texas indebtedness.

In July 1999,  the Company  entered  into a  commitment  letter with a financial
institution  to lend the  Company a minimum  of $14.0  million,  secured  by the
Company's interest in certain oil and gas properties and certain California real
estate.  Proceeds  from  this  financing  will be used to pay off the  Company's
indebtedness to Bank One, Texas in the amount of $14.1 million that is reflected
as a current liability in the accompanying balance sheet.

                                       11


<PAGE>


NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT(continued)

(c) The Company's Canadian  subsidiary has a demand revolving reducing loan with
a borrowing  base of $1.2 million.  Interest is payable at a variable rate equal
to the  Canadian  prime rate plus 0.75% per annum (7.0% at June 30,  1999).  The
loan is collateralized by the subsidiary's oil and gas producing  properties and
a first and fixed  floating  charge  debenture in the  principal  amount of $3.6
million over all assets of the  subsidiary.  The  borrowing  base reduces at the
rate of $34,175 per month.  In accordance  with the terms of the loan agreement,
$410,100 of the total loan  balance of $1.2 million is  classified  as currently
payable at June 30, 1999.  Although  the bank can demand  payment in full of the
loan at any time,  it has provided a written  commitment  not to do so except in
the event of default.  Management  believes  that there has not been an event of
default under this agreement.

(d) A subsidiary of the Company leases certain  equipment under  agreements that
are classified as capital leases.  Lease payments vary from three to five years.
The effective  interest rate on the total amount of  capitalized  leases at June
30, 1999, was 8.21%.

(e)  The  promissory  note  ($345,290)  is due to the  seller  of an oil and gas
property,  which was acquired by Saba in December  1997. The note bears interest
at the rate of 13.5%, and is classified as a current liability.

(f) The term loan with a bank  ($360,218) is due to the seller of a fee interest
in property in which the Company owns mineral interests. The note bears interest
at the prime rate plus 1% (8.75% at June 30,  1999),  is scheduled for repayment
in  monthly   installments   to  a  maturity  date  of  February  2001,  and  is
collateralized by the fee interest acquired by the Company.

(g) In October  1998 and  November  1998,  the  Company  borrowed  $500,000  and
$1,500,000,  respectively,  from  International  Publishing  Holding,  S.  A., a
significant  shareholder  of the Company.  The initial  borrowing  does not bear
interest;   the  second  note  bears   interest  at  the  rate  of  6%,  and  is
collateralized  by all of the issued and outstanding  shares of capital stock of
Greka SMV Inc., a wholly owned  subsidiary of the Company.  Both loans have been
amended and mature for payment on September 30, 1999.

(h) In February,  1999, the Company issued $1,000,000 of 15% convertible  senior
subordinated  debentures due February 1, 2001. The debentures are secured by the
Company's limestone deposits to the extent of the outstanding debenture balance.
The debentures are convertible  into Common Stock of the Company,  at the option
of the holders of the  debentures,  at any time from August 1, 1999,  to January
31,  2000,  at a  conversion  price of $15.00  per  share,  and at any time from
February 1, 2000,  until  January 31,  2001,  at a  conversion  price of $20.00.
Interest  will accrue on the  debentures to the maturity  date.  The Company may
call the entire amount outstanding, or a portion thereof, at any time during the
term of the  debenture  by paying the  principal  amount  owing plus any accrued
interest.  The principal use of proceeds from the sale of the  debentures was to
provide working capital.

                                       12
<PAGE>


NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT(continued)

(i) In May 1999,  the Company  entered into a loan  agreement with BNY Financial
Corporation that provides for financing of up to $11.0 million,  consisting of a
term note in the amount of $6.0 million and a revolving  credit  facility in the
face amount of $5.0 million. The term loan was fully advanced at closing and the
proceeds were used to reduce  indebtedness with Bank One, Texas.  Advances under
the revolving loan are based upon eligible accounts  receivable and inventory of
the Company's asphalt refinery  operation.  Amounts outstanding under the credit
facility bear interest at the rate of prime plus 1% (8.75% at June 30, 1999) and
are collateralized by real estate interests located in Santa Maria,  California,
all  assets  owned  by  Santa  Maria  Refining  Company,  and the  common  stock
certificates of Santa Maria Refining Company and Saba Realty, Inc., wholly-owned
subsidiaries of the Company. Amortization of the term loan is scheduled to begin
in August 1999, and  accordingly,  $3.2 million of the loan amount is classified
as currently payable at June 30, 1999.

NOTE 5 -  PREFERRED STOCK OF SUBSIDIARY

In December 1997,  Saba sold 10,000 shares of Series A 6% Convertible  Preferred
Stock for $10.0 million to RGC International  Investor LDC. ("RGC").  Since that
date,  a portion of the issued  shares had either been  redeemed  or  converted,
including 150 shares of Preferred  Stock  converted  into 305,868 shares of Saba
common stock in January 1999,  such that at June 30, 1999,  there remained 7,160
shares of preferred  stock  outstanding.  On March 15, 1999, the Company and RGC
entered into a term sheet that  provided  for the  conversion  of the  preferred
stock to a subordinated convertible note obligation of the Company. Negotiations
relating to the final documentation of the agreement are ongoing.

NOTE 6 - BUSINESS SEGMENTS

Effective  January 1, 1998, the Company  adopted the provisions of SFAS No. 131,
"Disclosures  about  Segments of an  Enterprise  and Related  Information."  The
Company  considers  that  its  operations  are  principally  in  three  industry
segments:   Central  Coast  of  California   production  and  asphalt   refining
("Integrated  Operations"),  exploration  and  production ("E & P") domestic and
exploration and production ("E & P") international.

Earnings of industry  segments exclude interest expense on corporate  borrowings
and unallocated corporate expenses.

Foreign  income and other taxes and certain  state taxes are included in segment
earnings on the basis of operating results.

Identifiable  assets are those assets used in the  operations  of the  segments.
Corporate  assets consist of cash,  short-term  investments,  certain  corporate
receivables, and other assets.

                                       13
<PAGE>


NOTE 6 - BUSINESS SEGMENTS (continued)

Summaries of the  Company's  operations  by segments for the six and three month
periods ended June 30, 1999 and 1998, are as follows (dollars in thousands):

<TABLE>
<CAPTION>

Six months ended           Integrated    E & P     E & P       Corporate
June 30, 1999:             Operations  domestic international  and other   Total
------------------------   --------   --------    --------    --------    --------
<S>                        <C>        <C>         <C>         <C>         <C>
Total revenues .........   $  5,470   $  1,564    $  2,015    $   --      $  9,049
Production costs .......      2,787        751       1,111        --         4,649
Other expenses .........        181        423         127         856       1,587
Depreciation,
 depletion and
 amortization ..........        921        442         299          57       1,719
                           --------   --------    --------    --------    --------
Results of operations
 from segment
 activities ............      1,581        (52)        478        (913)      1,094

Interest expense, income
taxes and other (income)         72         62         (76)        914         972
                           --------   --------    --------    --------    --------
Net Income (Loss) ......   $  1,509   $   (114)   $    554    $ (1,827)   $    122
                           ========   ========    ========    ========    ========
Identifiable assets at
June 30, 1999 ..........   $ 48,002   $ 12,332    $  2,216    $ 19,770    $ 82,320
                           ========   ========    ========    ========    ========
</TABLE>


Six months ended           Integrated    E & P     E & P       Corporate
June 30, 1998:             Operations  domestic international  and other   Total
------------------------   --------   --------    --------    --------    ------
Total revenues .........   $ 122                                          $ 122
Production costs .......      65                                             65
Other operating expenses   $ 721                                 $721
Depreciation, depletion
 and amortization ......     109                                            109
Results of operations
 from segment activities     (52)
Interest expense and
other (income) (net) ...      --                                  (50)      (50)

Net loss ...............   $ (52)                               $(671)    $(723)


                                       14
<PAGE>

NOTE 6 - BUSINESS SEGMENTS (continued)

Three months ended       Integrated    E & P     E & P       Corporate
June 30, 1999:           Operations  domestic international  and other   Total
------------------         -------   -------    -------      ---------  -------
Total revenues .........   $ 5,314   $ 1,510    $ 1,872      $      --  $ 8,696
Production costs .......     2,698       715      1,023             --    4,436
Other expenses .........       163       416        100            483    1,162
Depreciation,
 depletion and
 amortization ..........       800       401        267             33    1,501
                           -------   -------    -------      ---------  -------
Results of operations
 from segment
 activities ............     1,653       (22)       482           (516)   1,597

Interest expense, income
tax and other (income) .        72        62        (76)           284      342
                           -------   -------    -------      ---------  -------
Net Income (Loss) ......   $ 1,581   $   (84)   $   558      $    (800) $ 1,255
                           =======   =======    =======      =========  =======

Three months ended       Integrated    E & P     E & P       Corporate
June 30, 1998:           Operations  domestic international  and other   Total
------------------         -------   -------    -------      ---------    -----

Total revenues ...........   $  87                                           87
Production costs .........      31                                           31
Other operating expenses .     366                                 366
Depreciation, depletion
 and amortization ........      70                                           70
                           -------
Results of operations
 from segment activities       (14)

Interest expense and
other (income) (net) .....      --                                 (15)     (15)
                           -------                           ---------    -----
Net loss .................   $ (14)                              $(351)   $(365)
                           =======                           =========    =====

Total  assets at June 30,  1999,  increased  by $61.5  million  from the  amount
reported at December 31, 1998, due principally to the acquisition of Saba by the
Company on March 24, 1999.

Revenues and expenses reflect Saba's operations on a consolidated basis from the
effective date of the acquisition, March 24, 1999.

In  view  of the  significant  changes  to  the  Company  during  1998  and  the
acquisition of Saba completed in March 1999, and the changes  resulting from the
sale of certain  assets  (See Note 2 - Sale of  Assets),  the change in refinery
operations,  and debt  restructuring  (See Note 4 - Notes  Payable and Long-Term
Debt and Note 8 - Subsequent  Events),  management  believes that the results of
operations  for the three months ended June 30,  1999,  of the Company  reported
herein are more  indicative of the expected  future results of operations of the
Company.

                                       15

<PAGE>

NOTE 7 - CONTINGENCIES

In 1993, Saba acquired a producing  mineral  interest in California from a major
oil company. At the time of acquisition,  Saba's  investigation  revealed that a
discharge of diluent, a light, oil-based fluid which is often mixed with heavier
grades of crude had occurred on the acquired  property.  The purchase  agreement
required  the seller to  remediate  the area of the  diluent  spill.  After Saba
assumed  operation  of the  property,  it  became  aware of  additional  diluent
contamination  and  believes the major oil company is  responsible  to remediate
these  areas  as  well.  Saba has  notified  the  seller  of its  obligation  to
remediate. The Company expects ongoing discussions with the seller in order that
the seller comply with the required remediation.

In 1995, Saba agreed to acquire an oil and gas interest in California on which a
number of out of  production  oil  wells had been  drilled  by the  seller.  The
acquisition  agreement  required that Saba assume the  obligation to abandon any
wells that Saba did not return to production,  irrespective  of whether  certain
consents  of third  parties  necessary  to  transfer  the  property to Saba were
obtained.

Management believes Saba has no obligation to remediate this property because it
believes  the  seller  did not give  Saba any  consideration  to enter  into the
contract for the property.  The Company anticipates ongoing discussions with the
seller in order that the seller  comply  with the  required  obligations  of the
property.

The Company  owns an asphalt  refinery in Santa  Maria,  California,  with which
significant environmental remediation obligations are associated.  The party who
sold the asphalt  refinery to Saba performs all  environmental  obligations that
arose  during and as a result of its  operations  of the  refinery  prior to the
acquisition by Saba. The extent of such remediation is ongoing.

The Company,  as is customary in the  industry,  is required to plug and abandon
wells and remediate facility sites on its properties after production operations
are completed.  The cost of such  operation will be significant  and will occur,
from time to time, as properties are abandoned.

There  can  be no  assurance  that  material  costs  for  remediation  or  other
environmental  compliance will not be incurred in the future.  The occurrence of
such environmental  compliance costs could be materially adverse to the Company.
No  assurance  can be given that the costs of  closure  of any of the  Company's
other oil and gas  properties  would not have a material  adverse  effect on the
Company.

                                       16



<PAGE>

NOTE 8 - SUBSEQUENT EVENTS

Bank One Indebtedness

In July 1999, the Company,  Saba and Bank One, Texas entered into an amended and
restated  forbearance  agreement under which Bank One has agreed to forbear from
exercising  its  remedies  to  collect  the  indebtedness  owed by Saba  through
September 15, 1999 on the condition  that the Company shall have entered into on
or before July 15, 1999 a term sheet with a reputable  financial  institution or
other lender acceptable to Bank One pursuant to which such lender has stated its
willingness to fund a loan to Saba on or before  September 15, 1999, all or part
of the  proceeds  of  which  would  be used to pay off in full  the  outstanding
principal balance and accrued, unpaid interest owed by Saba to Bank One.

Additional Financing

In July 1999,  the Company  entered  into a  commitment  letter with a financial
institution  to lend the  Company a minimum  of $14.0  million,  secured  by the
Company's interest in certain oil and gas properties and certain California real
estate.  Proceeds  from  this  financing  will be used to pay off the  Company's
indebtedness to Bank One, Texas in the amount of $14.1 million that is reflected
as a current  liability in the accompanying  balance sheet.

Beaver Lake Resources Corporation

In July 1999,  the Company  acquired the  remaining  common stock of Beaver Lake
Resources  Corporation  ("BLRC")  that it did not hold  effective  July 31, 1999
whereby the Company will issue a total of approximately  68,000 shares resulting
in each BLRC  shareholder  receiving 1 share of the  Company's  common  stock in
exchange  for  74.4  shares  of  BLRC's  common  stock.  Beaver  Lake  Resources
Corporation is now a wholly-owned subsidiary of the Company.

Saba Debentures

In July 1999, the Company  entered into a term sheet with the majority holder of
the  outstanding  Saba  debentures  to exchange the  debentures  of Saba for new
debentures of the Company with interest at the rate of 9%,  maturing on December
31, 2005 with a right of the  Company to redeem at any time for an amount  equal
to 102% of the principal amount plus any accrued but unpaid interest, subject to
the right of holders  to first  convert.  The  conversion  price  offered by the
Company is 95% of the average  closing bid price of the  Company's  common stock
for the 30 consecutive trading days of the Company's common stock ending one day
prior to the date notice of  conversion  is received by the  Company,  but in no
event less than $8.50 nor greater than $12.50 per share. The terms further offer
that,  commencing  April 1, 2000, each holder of the Company's  debentures shall
have the right upon written  notice to the Company to require that it redeem its
debentures  at an amount  equal to the  principal  amount  plus any  accrued but
unpaid  interest.  The Company  expects  most of the Saba  debenture  holders to
accept the term sheet and  further  expects the Saba  debentures  to be delisted
from the American Stock Exchange.

                                       17


<PAGE>

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

Overview

     GREKA  Energy is an  independent  integrated  energy  company  committed to
create shareholder value by capitalizing on consistent cash flow hedged from oil
price fluctuations  within integrated  operations,  exploiting E&P opportunities
and  penetrating  new niche markets  utilizing  proprietary  technology  with an
emphasis on low cost short radius horizontal  drilling technology patented by BP
Amoco and licensed to GREKA  Energy.  GREKA  Energy has oil and gas  production,
exploration and  development  activities in North America and the Far East, with
primary areas of activity in Alberta, California,  Louisiana, Texas, New Mexico,
Indonesia  and China.  In  addition,  GREKA  Energy owns and operates an asphalt
refinery in California.

         GREKA Energy has a three-prong  strategy that  capitalizes on its asset
base to enhance shareholder value as follows:

         Integrated Hedged Operations

Hedged  operations of GREKA Energy focus on the  integration  of its Santa Maria
(California)  assets,  including an asphalt  refinery and interests in heavy oil
fields.  To date,  GREKA  Energy  has only been  able to  supply to the  asphalt
refinery  20-35%  of its heavy  oil  requirements.  The  hedged  operations  are
targeted to capitalize on the stable  asphalt  market in California by providing
the feedstock (heavy oil) into the refinery at cost. The planned  integration of
the refinery  (100% owned) with the interests in the heavy oil producing  fields
(100% working  interest)  should  provide a stable hedge to GREKA Energy on each
equity barrel. GREKA Energy's strategy in these integrated assets is two-fold:

     1.  GREKA Energy  intends to  proceed  with  acquisitions  that enhance the
         long-term feedstock supply to the refinery.

     2.  GREKA Energy  intends to implement  the  proprietary  Amoco  Horizontal
         Drilling Technology to cost-efficiently boost production rates from the
         the Company's 150 potential drilling locations  identified in the Santa
         Maria Valley area of central California.

The two actions are targeted to increase  throughput  into the refinery from the
rate at June 30, 1999 of  approximately  3,500 barrels per day to 10,000 barrels
per day by yearend 2001. It is  anticipated  that the  profitability  from these
integrated  operations  will not be affected by volatile oil prices.  It is also
anticipated  that,  by using  equity  barrels  to supply the  refinery,  working
capital  requirements  should  be lower and cash flow  should be  enhanced.  The
continued  stability of the price of asphalt,  coupled  with  reduced  costs for
processing  and lifting,  should create a substantial  value for GREKA  Energy's
shareholders.

                                       18
<PAGE>

         Exploitation & Production

The Company is currently  focusing on return to production ("RTP") work that had
been ignored by Saba for over eighteen  months.  Such RTP is expected to enhance
the current production levels and capitalize on current oil prices. GREKA Energy
plans to  capitalize  on its existing  portfolio  of domestic and  international
exploration  projects that are synergistic  with GREKA Energy's Amoco Horizontal
Drilling  Technology.  The Company plans to  specifically  focus on its existing
concessions  in locations  such as China where the Company  believes  there is a
significant demand for energy.

         Amoco Horizontal Drilling Technology

GREKA Energy plans to continuously  pursue new,  emerging  opportunities  in the
energy  business to identify  and  evaluate  niche  markets for its  proprietary
knowledge.  Two  specific  niche  targets are coal bed methane  projects and gas
storage.  These opportunities  should provide significant upside from the use of
short horizontal laterals.

Recent History

     During  the  first  part  of  1998,  management  of  GREKA  Energy  focused
substantially  all of its efforts on corporate  restructuring,  recapitalization
and acquisition efforts and an investment in a horizontal drilling pilot program
in the Cat Canyon  field in  California  that all were part of its  strategy  to
capitalize on its experience with  horizontal  drilling  technology.  During the
latter  part of 1998 and early 1999,  management  was  primarily  focused on the
acquisition of Saba,  which had  substantial  reserves suited to exploitation by
GREKA Energy's horizontal drilling  technology,  and considerable  expenses were
incurred in connection with the Saba  transactions in the first quarter of 1999.
Due to the  significance  to GREKA  Energy  of the Saba  acquisition,  which was
completed  effective March 24, 1999, GREKA Energy's management and staff devoted
a  substantial  amount of time and effort to the  acquisition.  Greka Energy has
already  executed,  and continues to execute,  an aggressive  rework  program to
return to production  existing  wells on all  properties  that had wells shut-in
over eighteen months. Subsequent to the reworks, Greka Energy intends during the
third quarter of 1999 to implement  its  horizontal  drilling  program using its
proprietary technology on the Santa Maria Valley area assets.

Acquisition of Saba

     During the  fourth  quarter  of 1998 and the first  quarter of 1999,  GREKA
Energy entered into the following transactions culminating in the acquisition of
Saba effective March 24, 1999:

                                       19
<PAGE>

     On  October  6, 1998,  GREKA  Energy  entered  into an  agreement  with RGC
International Investors, LDC, by which GREKA Energy acquired on October 6, 1998,
690 shares of the 8,000 shares of issued and outstanding Preferred Stock of Saba
held by RGC in exchange  for cash in the amount of $750,000,  of which  $500,000
was borrowed from  International  Publishing Holding s.a. ("IPH"), a shareholder
of GREKA Energy.  GREKA Energy  executed a promissory note to repay the $500,000
to IPH without interest, which note is now due September 30, 1999.

         Under this  Agreement,  GREKA  Energy was granted the  exclusive  right
until  November  6,1998 to acquire from RGC up to an additional  6,310 shares of
Saba Preferred
Stock  held  by  RGC  in  exchange  for  cash  in the  amount  of  approximately
$6,859,000,  with such exclusive right subject to an extension for an additional
thirty days by GREKA Energy's payment of $500,000. GREKA Energy paid $500,000 to
RGC on November 6, 1998 to extend the term of the exclusive  right,  but did not
exercise the right.

     On October 8, 1998 GREKA Energy and Saba  entered  into an agreement  under
which on  November 6, 1998 Saba issued to GREKA  Energy  333,333  shares of Saba
common stock in exchange for cash of $1,000,000.

     The  November  6,  1998  payments  to RGC and Saba were  financed  by GREKA
Energy's issuance to IPH on November 4, 1998 of a promissory note payable in
the amount of $1,500,000,  bearing 6% interest,  which note is now due September
30, 1999. The promissory  note is secured by GREKA Energy's pledge of all of the
issued and  outstanding  shares of capital  stock of Greka SMV,  Inc.,  a wholly
owned subsidiary of GREKA Energy.

         IPH in  conjunction  with GREKA  Energy made open market  purchases  of
approximately  5% of the issued and  outstanding  shares of Saba  common  stock.
Under an option  agreement  between  GREKA Energy and IPH,  GREKA Energy had the
right to purchase the approximate  568,200 shares of Saba common stock purchased
by IPH at an exercise  price equal to the cost to IPH of  acquiring  such shares
plus twenty percent. IPH had a put agreement that became effective April 1, 1999
and was exercised on such date.  The Company will issue 140,886 shares to IPH in
exchange  for  the  shares  of  Saba  owned  directly  by  IPH,   following  the
effectiveness  of a registration  statement.  Subsequently,  GREKA Energy during
October and early November 1998 directly  acquired  80,000 shares of Saba common
stock in open market purchases at an aggregate cost of approximately $70,130.

     On December 18, 1998 GREKA Energy  entered into an agreement to acquire the
2,976,765  shares of Saba common stock held by Saba  Acquisub,  Inc. in exchange
for the  issuance by GREKA Energy of  1,340,000  shares of GREKA  Energy  common
stock to the shareholder of Saba Acquisub.

     Also  on  December  18,  1998,  GREKA  Energy  and  Saba  entered  into  an
acquisition  agreement  whereby  GREKA Energy would acquire all of the remaining
shares of Saba common stock and the shareholders of Saba other than GREKA Energy
would  receive  shares of GREKA  Energy  common  stock  based on a  contemplated
exchange  ratio of one share of GREKA Energy common stock for each six shares of
Saba common stock.  The acquisition  was completed  effective March 24, 1999 and
GREKA Energy issued approximately  1,290,000 shares of its common stock and Saba
became a wholly owned subsidiary of GREKA Energy.

                                       20
<PAGE>

Sale of Non-Core Assets

         Colombia Assets

     In June 1999, the Company  closed the agreement  entered into in April 1999
to  sell  substantially  all of the  assets  of  Sabacol,  Inc.  ("Sabacol"),  a
wholly-owned  subsidiary  of the Company,  in exchange for  consideration  of at
least $10.0  million  consisting  of cash,  interests  in oil and gas  producing
properties in California,  and full release of the related debts.  The agreement
provides  for  the  payment  of  additional  consideration  to  Sabacol  if  the
difference between the January 1, 2000 reserve value (using the average wellhead
prices received for production during fourth quarter 1999) for Sabacol's oil and
gas properties and the California properties acquired by Sabacol is greater than
the  difference  between  the  January  1,  1999  reserve  value  for  the  same
properties.  If the differential is $5 million or less, by March 31, 2000 Omimex
will pay such  amount to  Sabacol  in cash or,  upon  non-payment,  reassign  to
Sabacol the 50%  interest in the  Velasquez-Galan  pipeline in Colombia  sold by
Sabacol to Omimex . If the differential is greater than $5 million, Sabacol will
have the option  through  May 31, 2000 of  repurchasing  for  approximately  $12
million  the assets  sold to Omimex  and  reassigning  to Omimex the  California
assets  purchased from Omimex.  If this option is not exercised,  Omimex will be
obligated  to pay  Sabacol $5 million in cash or, upon  non-payment  reassign to
Sabacol the Velasquez-Galan pipeline. On April 26, 1999, following the Company's
motion,  it was announced that Sabacol had successfully  obtained the Bankruptcy
Court's  approval of the sales  transaction and the authorized  dismissal of its
bankruptcy case, upon consummation of the sale. In July 1999, Sabacol filed with
the  bankruptcy  court a request to enter the order  dismissing  the  bankruptcy
case.

         Limestone Property

     In April  1999,  the  Company and IPH closed an  agreement  with  Pembrooke
Calox,  Inc.  for the sale of the  Company's  and IPH's  interests in a 355-acre
limestone property located in Indiana in exchange for a non-recourse  promissory
note, secured by the limestone property.  The buyer had the option to pay either
$3.85 million by July 31, 1999 followed by four annual payments of $200,000 each
beginning in 2001,  or $5.7 million by November 1, 1999.  The buyer had not paid
any funds to the  Company  or IPH on or before  July 31,  1999.  As part of this
transaction,  the Company paid  Pembrooke  $50,000 and issued  16,736  shares of
Common Stock following the filing of a registration statement on May 17, 1999.

Refinery Operations

     In May 1999, GREKA Energy assumed all marketing and distribution operations
at its refinery in Santa Maria,  California  that were  previously  performed by
Crown Asphalt  Distribution LLC under a processing agreement terminated by GREKA
Energy.  Under  the  terms of this  agreement,  each  party  had been  receiving
approximately  fifty percent of the net income from the  refinery.  During 1998,
the  refinery  processed  on average  3,850  barrels per day of  throughput  and
generated   revenues  of  approximately   $22  million  with  a  net  income  of
approximately  $4.7 million.  During the term of the  processing  agreement with
Crown,  Saba had only  recognized  and reported its fifty  percent  share of the
profits from the refinery  operations.  GREKA  Energy  expects to recognize  and
report refinery revenues at a similar level, as well as increased operating cash
flows, as a result of assuming such operations.

                                       21
<PAGE>

Cautionary Information About Forward-Looking Statements

     This  report  contains  forward-looking  statements  within the  meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934 that include, among others, statements concerning:

        *  the benefits expected to result from GREKA Energy's recent
           acquisition of Saba discussed below, including
        *  synergies in the form of increased revenues,
        *  decreased  expenses and avoided  expenses and  expenditures  that are
           expected to be  realized by GREKA  Energy and Saba as a result of the
           transaction, and
        *  the complementary nature of GREKA Energy's horizontal drilling
           technology and certain Saba oil reserves, and
        *  other statements of:
        *  expectations,
        *  anticipations,
        *  beliefs,
        *  estimations,
        *  projections, and
        *  other similar matters that are not historical  facts,  including such
           matters as:
        *  future capital,
        *  development and exploration expenditures (including the amount
           and nature thereof),
        *  drilling of wells,  reserve  estimates(including  estimates of future
           net revenues  associated  with such reserves and the present value of
           such future net revenues),
        *  future production of oil and gas,
        *  repayment of debt,
        *  the  state  of  GREKA  Energy's  Year  2000  readiness,
        *  business strategies, and
        * expansion and growth of business operations.


     These statements are based on certain  assumptions and analyses made by the
management of GREKA Energy in light of:

     *  past experience and perception of:
        *  historical trends,
        *  current conditions,
        *  expected future developments, and

     *  other  factors  that  the  management  of  GREKA  Energy   believes  are
        appropriate under the circumstances.

     GREKA Energy cautions the reader that these forward-looking  statements are
subject to risks and uncertainties, including those associated with:

     *  the financial environment,
     *  the regulatory environment, and
     *  trend projections,
that  could  cause  actual  events or results  to differ  materially  from those
expressed or implied by the  statements.  Such risks and  uncertainties  include
those risks and uncertainties identified below.


                                       22

<PAGE>

Cautionary Information About Forward-Looking Statements (continued)

     Significant  factors that could  prevent  GREKA Energy from  achieving  its
stated goals include:

     *  the failure by GREKA Energy to integrate  the  respective  operations of
        GREKA  Energy and Saba or to achieve  the  synergies  expected  from the
        acquisition of Saba,
     *  the failure by GREKA Energy to obtain refinancing agreements or
        arrange for the payment of Saba obligations,
     *  declines in the market prices for oil and gas,
     *  the failure of GREKA Energy's technology systems or the technology
        systems of third parties with whom GREKA Energy has material
        relationships to be Year 2000 compliant, and
     *  adverse changes in the regulatory environment affecting GREKA Energy.

The  cautionary  statements  contained  or referred to in this report  should be
considered in connection  with any  subsequent  written or oral  forward-looking
statements  that may be issued by GREKA Energy or persons acting on its or their
behalf.  GREKA Energy undertakes no obligation to release publicly any revisions
to any  forward-looking  statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

Long-Term Potential

     Management  believes that the results of operations and cash flows of GREKA
Energy  reported  herein are more  indicative of the expected  future results of
operations  and cash flows of GREKA Energy,  most  particularly,  the results of
operations  achieved  during  the  three  month  period  ended  June  30,  1999.
Management  further  believes  that the results of  operations  of GREKA  Energy
reported  herein are  representative  of the  Company's  long term  potential in
consideration  that the Statement of Operations for the three month period ended
June 30, 1999  reflects  only two, not three,  complete  months of the Company's
refinery  operations  since  taking over the sales and  marketing of its refined
products at May 1, 1999.

Results of Operations

Comparison of Three Month Periods Ended June 30, 1999 and 1998

     Revenues increased from $86,970 for the second quarter of 1998 to$8,695,456
for the second quarter of 1999. This increase was primarily  attributable to the
acquisition of Saba,  followed by the  cancellation of the processing  agreement
with Crown Asphalt Distribution on April 30, 1999 and the subsequent recognition
of refinery revenues bythe Company.

     Other  revenues of $749,842  in the second  quarter of 1999 were  primarily
attributable  to  pipeline  tariff  income  and  processing  fees from the Crown
agreement.

     Production  costs  increased from $30,381 for the second quarter of 1998 to
$4,435,414  for  the  second  quarter  of  1999.  This  increase  was  primarily
attributable  to the  cancellation  of  the  Crown  agreement  and  the  related
recognition of refinery expenses by the Company and lease operating  expenses on
properties included in the Saba acquisition.

     General and administrative  expenses increased from $365,984 for the second
quarter of 1998 to $1,162,267  for the second  quarter of 1999. The increase was
primarily attributable to expenses related to the acquisition of Saba.

                                       23

<PAGE>

Results of Operations (continued)

     Depletion,  depreciation  and  amortization  increased from $70,498 for the
second  quarter  of 1998 to  $1,500,811  for the  second  quarter  of 1999.  The
increase was primarily attributable to the acquisition of Saba.

     Interest expense of $542,851 was attributable to borrowings by the Company
from IPH and BNY  Financial  Corporation,  the  issuance of 15%  debentures  and
assumption of debt related to the acquisition of Saba.

Comparison of Six Month Periods Ended June 30, 1999 and 1998

         Revenues  increased  from  $121,659  in  the  first  half  of  1998  to
$9,048,558 in the first half of 1999. The substantial increase in revenue is due
to acquisition of Saba and  cancellation  of the marketing  agreement with Crown
Asphalt Distribution.

         Production  costs  increased  from $64,553 in the first half of 1998 to
$4,648,400  in the first half of 1999.  This  increase  is  consistent  with the
increase in revenues  related to the  cancellation  of the Crown  agreement  and
lease operating expenses on properties included in the Saba acquisition.

     General and  administrative  expenses  increased from $720,531 in the first
half of 1998 to $1,587,003 in the first half of 1999. General and administrative
expenses have increased due to the acquisition of Saba.

     Depreciation,  depletion and  amortization  increased  from $109,366 in the
first half of 1998 to  $1,719,186  in the first half of 1999.  The  increase was
attributable to the acquisition of Saba.

     Interest  expense of $646,271 was attributable to borrowings by the Company
from IPH and BNY  Financial  Corporation,  the  issuance of 15%  debentures  and
assumption of debt included in the acquisition of Saba.

Liquidity and Capital Resources

     Working  capital  increased  $15,572,588  from a deficit of  $37,976,891 at
March 31, 1999 to a deficit of  $22,404,303  at June 30, 1999.  Working  capital
deficit at June 30, 1999 of $22,404,303 increased from a working capital deficit
of $1,827,854 at December 31, 1998.  Current assets  increased  $13,765,433 from
$421,807 at December 31, 1998 to $14,187,240 at June 30, 1999 as a result of the
acquisition  of Saba and the Company  assuming the operations of its Santa Maria
refinery.  Approximately  $7.7  million of refinery  raw  material  and finished
product  inventory  and  refinery  accounts   receivable  result  from  refinery
operations.  Current liabilities  increased from $2,249,661 at December 31, 1998
to $36,591,543 at June 30, 1999, an increase of  $34,341,882.  Accounts  payable
increased  as a  result  of the  acquisition  of  Saba  and  the  assumption  of
operations of the Santa Maria  refinery.  The current  portion of long term debt
increased $21,613,015 during the period.

         Cash  and  cash  equivalents  increased  $1,918,407  from  $250,212  at
December 31, 1998 to $2,168,619 at June 30, 1999. Of this increase, $444,800 was
due to the cash and cash  equivalents of Saba; the remainder of the increase was
due to $1.0 million of debentures issued by the Company during the first quarter
reduced by  expenditures  for  quarterly  operations.  The Santa Maria  refinery
operations produced substantial cash flow during the second quarter of 1999.

                                       24
<PAGE>
         Cash Flows

     The  Company's  net cash used in  operating  activities  decreased  from an
outflow of $1,447,475 for the six month period ended June 30, 1998 to an outflow
of $818,409  for the six month  period  ended June  30,1999.  Net income for the
period,  adjusted  for non-cash  charges,  provided  $2,524,049  of cash inflow.
Changes in other assets and  liabilities  were  responsible for cash outflows of
$3,342,458.

     The Company's net cash flows from investing activities decreased from a net
outflow of  $1,135,462  from the six month  period  ended June 30, 1998 to a net
outflow of $1,239,553 for the six month period ended June 30, 1999.  This change
was  primarily  attributable  to a $1 million  investment  in inventory  for the
asphalt refinery.

     The Company's net cash provided by financing  activities  increased from an
inflow of $65,678 for the six month  period  ended June 30, 1998 to an inflow of
$3,976,369 in the six months ended June 30, 1999.  Cash was provided  during the
six months ended June 30, 1999 from proceeds of the Company's financing facility
with BNY Financial  Corporation in the amount of  $10,526,450  and proceeds from
the Company's  15%  Debenture in the amount of $1 million.  Cash was used during
the six month period ended June 30, 1999 to reduce its  obligation  to Bank One,
Texas by $6 million and make  payments  on its BNY  Financial  Corporation  note
payable in the amount of $1,121,838.

         Liquidity

     Under the direction of GREKA Energy's management and strategy, GREKA Energy
has  significantly  improved  its  liquidity  and  expects  to have low  capital
requirements.  Specifically,  GREKA Energy expects to have an annual capex of $5
million  funded by its cash flow.  The  Company  is current on all its  interest
payments,  and has  sufficient  cash  flow for all its  operating  and  foreseen
capital requirements. Further, GREKA Energy intends to achieve the following:

     *    Obtain financing of at least $14 million to pay currently due Bank One
          debt,  reducing current liabilities from $36,591,543 to $22,591,543 as
          of June 30, 1999.

     *    Utilize  the  in-house   proprietary  and  cost  effective  horizontal
          drilling  technology  to enhance  production in the Santa Maria Valley
          area.

     *    Continue  integration of GREKA  Energy-operated oil and gas properties
          and the wholly-owned  and operated asphalt refinery that  collectively
          provide for low cost operating expenses and high cash flow.


         GREKA  Energy's  management  also believes that the  disposition of the
Colombia  properties brings  opportunities for cost savings,  economies of scale
and other synergies, resulting in improved cash flow potential for the long-term
growth of GREKA Energy and of shareholder value. Further, these dispositions and
acquisition give GREKA Energy a stronger  consolidated  asset base upon which it
can rely in securing future financings,  both equity and debt. However, there is
no assurance that any specific level of cost savings or other  synergies will be
achieved or that such cost savings or other  synergies  will be achieved  within
the time  periods  contemplated,  or that  GREKA  Energy  will be able to secure
future financings.

                                       25


<PAGE>

         Capital Expenditures

      The Company's growth is focused on acquisitions  that are synergistic with
its  technology.  It  is  intended  that  such  acquisitions  will  be  achieved
concurrent with the closing of adequate financing.  Operationally on the current
asset base, the Company  expects to fund its annual capex of $5.0 million by its
cash flow.

Debt Financing and Restructuring

     Outstanding debt and the Company's plans for payment or restructuring:

     *     The Bank One  debt  that was  reduced  from  $20.1  million  to $14.1
           million following the payment of $6.0 million in May 1999 is expected
           to be eliminated  in August 1999 as a result of additional  financing
           that the Company plans to acquire.

     *    The  Company  entered  into a term sheet with the  majority  holder of
          Saba's 9% senior  subordinated  debentures  ($3.6 million) to exchange
          the debentures of Saba for new debentures of the Company.

     *    The  Company  entered  into a term  sheet in March  1999 with the Saba
          Preferred  Stockholder  holding Saba's  Preferred Stock (with a stated
          value of $7.3  million)  that  provided for the  conversion  of Saba's
          Preferred Stock to a subordinated  convertible  note obligation of the
          Company.

     In April 1999, GREKA Energy's wholly-owned subsidiaries,  Greka Integrated,
Inc., Santa Maria Refining Company,  and Saba Realty, Inc., procured a loan from
BNY Financial  Corporation  that  provides  funds of up to $11 million under two
credit  facilities.  A term loan in the amount of  $6,000,000  was  funded  upon
closing, the proceeds of which were used to reduce the indebtedness owed by Saba
to Bank One. In addition,  a revolving  credit  facility  provides  advances for
working capital of up to $5,000,000  against eligible  receivables and inventory
of the Santa  Maria  asphalt  refinery.  It is  intended  that a portion of this
working  capital  will be applied  to  expenditures  incurred  in  assuming  the
marketing  and sale of refined  products at the asphalt  refinery  following the
termination of the  processing  agreement  with Crown Asphalt  Distribution  LLC
effective April 30, 1999. The loans are secured by real estate interests located
in Santa Maria,  California,  all assets owned by Santa Maria Refining  Company,
and the common  stock  certificates  of Santa  Maria  Refining  Company and Saba
Realty, Inc.

     In July 1999, the Company, Saba and Bank One, Texas entered into an amended
and restated  forbearance  agreement  under which Bank One has agreed to forbear
from  exercising its remedies to collect the  indebtedness  owed by Saba through
September 15, 1999 on the condition  that the Company shall have entered into on
or before July 15, 1999 a term sheet with a reputable  financial  institution or
other lender acceptable to Bank One pursuant to which such lender has stated its
willingness to fund a loan to Saba on or before  September 15, 1999, all or part
of the  proceeds  of  which  would  be used to pay off in full  the  outstanding
principal balance and accrued, unpaid interest owed by Saba to Bank One.

     In July 1999, the Company  negotiated terms and conditions with a financial
institution  to fund  during  August  1999 at least $14  million  secured by the
Company's interest in certain oil and gas properties and certain California real
estate.

                                       26

<PAGE>

Debt Financing and Restructuring (continued)

     In July 1999,  the  Company  entered  into a term  sheet with the  majority
holder of the outstanding Saba debentures to exchange the debentures of Saba for
new  debentures  of the Company  with  interest  at the rate of 9%,  maturing on
December  31,  2005  with a right of the  Company  to  redeem at any time for an
amount  equal to 102% of the  principal  amount  plus  any  accrued  but  unpaid
interest, subject to the right of holders to first convert. The conversion price
offered by the Company is 95% of the average  closing bid price of the Company's
common stock for the 30 consecutive  trading days of the Company's  common stock
ending  one day  prior to the date  notice  of  conversion  is  received  by the
Company,  but in no event less than $8.50 nor greater than $12.50 per share. The
terms further offer that, commencing April 1, 2000, each holder of the Company's
debentures  shall have the right upon  written  notice to the Company to require
that it redeem its  debentures at an amount equal to the  principal  amount plus
any accrued but unpaid interest.  The Company expects most of the Saba debenture
holders to accept the term sheet and further  expects the Saba  debentures to be
delisted from the American Stock Exchange.

Year 2000 Readiness Disclosure

     Computer programs or other embedded technology that have been written using
two  digits  (rather  than  four) to define  the  applicable  year and that have
time-sensitive  logic may  recognize  a date using "00" as the Year 1900  rather
than the Year 2000, which could result in widespread  miscalculations  or system
failures.  Both information  technology systems and  non-information  technology
systems using embedded technology may be affected by the Year 2000. GREKA Energy
has not completed an assessment of Year 2000 compliance  issues,  but management
currently  believes that since GREKA Energy's  drilling  equipment does not make
use of embedded computer chips and its other operating  equipment is not heavily
automated with technology systems, the costs of becoming ready for the Year 2000
will not have a material adverse effect on GREKA Energy's  financial  condition,
results of operations or cash flows.

     GREKA Energy currently  believes that its existing  technology  systems and
software will not need to be upgraded to become Year 2000 compliant, except that
GREKA Energy must replace its current integrated accounting software in order to
accurately  process  Year 2000 data.  Should it not do so, GREKA Energy would be
unable to properly  process and report upon its own  operating  data, as well as
information  provided  to it by outside  sources  that are Year 2000  compliant.
GREKA Energy's  third-party  accounting software vendor has modified the current
operating  system  utilized by GREKA Energy and provided the modified  system to
GREKA Energy in the first  quarter of 1999.  The cost of this  modification  was
included  in the  vendor's  system  support  contract  and did not  result  in a
significant additional expense for GREKA Energy.





                                       27



<PAGE>

    GREKA Energy is in the process of verifying  whether vendors,  suppliers and
significant  customers  with which GREKA Energy has material  relationships  are
Year 2000 compliant. GREKA Energy believes that some of these third parties will
not be  materially  affected  by the Year 2000 since  those  third  parties  are
relatively  small entities  which do not rely heavily on technology  systems for
their  operations.  GREKA Energy does not know  whether the other third  parties
will be Year 2000 complaint.  Under a worst-case  scenario,  if GREKA Energy and
such third parties are not Year 2000 compliant on a timely basis, there could be
financial risk to GREKA Energy,  including  supplier and service customer delays
resulting in short-term  delay of revenue and substantial  unanticipated  costs.
Accordingly,  GREKA  Energy plans to devote all  resources  necessary to resolve
significant  Year 2000 issues in a timely manner.  GREKA  Energy's  current Year
2000  contingency  plan is  essentially  to have all necessary  tasks  performed
manually in the event of material  Year 2000  problems  affecting  GREKA Energy.
Management of GREKA Energy believes that GREKA Energy has adequate  personnel to
perform  those  functions  manually  until any Year 2000  problems are resolved.
Inflation

     GREKA Energy does not believe that inflation will have a material impact on
GREKA Energy's future operations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

     As discussed in the  explanatory  note  preceding the table of contents for
this report, GREKA Energy filed its SEC reports for periods through December 31,
1998 under SEC  Regulation  S-B.  Regulation S-B does not contain the disclosure
requirements  under this item. In addition,  the information  under this item is
not required for interim period reports until after the first fiscal year end in
which  this  item is  applicable.  Therefore,  GREKA  Energy  expects  to  begin
presenting  the  information  required by this item in its Annual Report on Form
10-K for the fiscal year ending December 31, 1999.


                                       28

<PAGE>

                    PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

     The following material  developments occurred during the quarter ended June
30, 1999 with  respect to the legal  proceedings  reported  in the GREKA  Energy
Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 1998:

     As reported in the GREKA  Energy 1998 Annual  Report on Form  10-KSB/A,  on
December 11, 1998,  Sabacol filed a voluntary  petition  under Chapter 11 of the
U.S.  Bankruptcy  Code in U.S.  Bankruptcy  Court for the  Central  District  of
California  (BK Case  No.  ND98-15858-RR).  On April  26,  1999,  following  the
Company's  motion,  it was announced that Sabacol had successfully  obtained the
Bankruptcy  Court's approval of the sale of substantially all its assets and the
authorized  dismissal of its bankruptcy case, upon  consummation of the sale. In
July 1999,  Sabacol filed with the bankruptcy court a request to enter the order
dismissing the bankruptcy case.

     In July 1999 in  Gitte-Ten,  Inc. v. Saba  Petroleum  Company  (Case No. CV
980202 Superior and Municipal  Courts of the State of California,  County of San
Luis Obispo,  March 1998),  the court  vacated its summary  judgment  previously
granted to Gitte-Ten, Inc. The matter is scheduled for trial in October 1999.

     In July  1999 the  matter  of Chase  v.  Saba  Petroleum,  Inc.  (Case  no.
SM108977,   Superior  Court  of  the  State  of  California,   County  of  Santa
Barbara-Cook Division, July 1998) was settled by Saba's insurance carrier, which
included a release of all claims and dismissal with prejudice as to Saba.

     Wellspring  Partners,  LLC v. Saba Energy of Texas,  Inc., et al. (Case No.
1999-24729,  125th Judicial  District Court of Harris County,  Texas,  May 1999)
Wellspring  brought suit for damages  alleging breach of contract and conspiracy
for Saba's non-payment of fees claimed pursuant to a brokerage agreement between
Wellspring  and Saba.  Wellspring  moved for a Temporary  Restraining  Order and
Temporary  Injunction  to restrain Saba from  allegedly  breaching the brokerage
agreement  and from  closing the pending sale of Saba's  properties  to Enervest
Energy LP without first providing Wellspring with certain information  regarding
the sale and depositing  with the court the alleged  broker fee due  Wellspring.
The court denied Wellspring's motion, and in June 1999 Saba filed a counterclaim
against  Wellspring for damages  incurred as a result of  Wellspring's  tortious
interference with Saba's contractual and prospective business relationships with
Enervest Energy LP.  Enervest Energy LP v. Saba Energy of Texas,  Inc. (Case No.
1999-30673,  152nd Judicial  District Court of Harris County,  Texas, June 1999)
Enervest filed an action  claiming that Saba breached the agreement  between the
parties for failing to close the sale of Saba's interests in certain oil and gas
properties  for  $12.5  million.  In  accordance  with the  agreement,  Enervest
deposited  earnest money in the amount of $1.25 million to a jointly  controlled
account to assure  Enervest's  performance  of the agreement.  Enervest  further
seeks the court's  declaration that it is entitled to the deposit. In July 1999,
Saba filed a counterclaim  against  Enervest for damages incurred as a result of
Enervest's breach of the agreement by failing to close the sale.

     Crown Asphalt  Distribution LLC, et al. v. Santa Maria Refining Company, et
al. (Case No. CV99-895 DOC (Anx), United States District Court, Central District
of  California,  Southern  Division,  July 1999) Crown  brought suit for damages
alleging breach of contract,  breach of covenant of good faith and fair dealing,
conversion, fraud, claim and delivery, unjust enrichment and constructive trust,
unfair  competition,  declaratory relief, and specific  performance  pursuant to
Santa Maria's  termination of the processing  agreement with Crown.  Crown moved
for a  Preliminary  Injunction  or Writ of  Possession  to compel  Santa  Maria,
amongst  other  things,  to  continue  doing  business  with  Crown  beyond  the
termination date of the processing agreement. The court denied Crown's motion.

     From time to time,  GREKA  Energy and its  subsidiaries  are named in legal
proceedings  arising  in the  normal  course  of  business.  In the  opinion  of
management,  such legal  proceedings are not expected to have a material adverse
effect on GREKA  Energy's  financial  condition,  results of  operations or cash
flows.

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<PAGE>

Item 2.  Changes in Securities and Use of Proceeds.

     During the three  months  ended June 30, 1999,  the Company  issued  30,000
shares  of its  Common  Stock  to  Randeep  S.  Grewal  under  the  terms of his
employment  agreement and 16,736 shares of its Common Stock to Pembrooke  Calox,
Inc. in connection with the sales transaction of the Company's  interests in the
Indiana property (see Overview-Sale of Non-Core Assets).

Item 3.  Defaults Upon Senior Securities.

     The information  required by this Item is incorporated  herein by reference
to the  discussion  in Part I Item 2 of this  report  under  the  caption  "Debt
Financing and Restructuring."

Item 4.  Submission of Matters to a Vote of Security Holders.

         None.

Item 5.  Other Information.

     In June 1999, the Company issued a warrant to Internet Associates,  Inc. to
purchase  50,000 shares of the Company's  common stock that vests monthly at the
rate of 10,000  shares  per month for five  months and at an  exercise  price of
$8.25 per share which may be  exercised  in  increments  of not less than 10,000
shares. The warrant expires on June 1, 2000. Vesting is contingent upon holder's
performance  under an agreement  between the Company and holder for investor and
public relation services.

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<PAGE>

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

     (a) Exhibits. The following exhibits are furnished as part of this report:

     Exhibit No.    Description

        10.1        Arrangement Agreement dated June 16, 1999 among GREKA Energy
                    Corporation and Beaver Lake Resources Corporation*

        10.2        Forbearance  Agreement dated April 19, 1999, First Amendment
                    To Forbearance  Agreement  dated April 30, 1999, and Amended
                    And Restated Forbearance Agreement dated July 15, 1999 among
                    Bank One,  Texas,  Saba  Petroleum  Company and Greka Energy
                    Corporation*

        10.3        Agreement  For  Purchase and Sale of Real Estate dated April
                    28,  1999  among  Pembrooke  Calox,  Inc.  and Greka  Energy
                    Corporation  (filed  as  Exhibit  10.4 to the  GREKA  Energy
                    Report on Form 10-Q for the quarter ended March 31, 1999 SEC
                    file #0-207670 and incorporated by reference herein)

        10.4        Loan and Security  Agreement  dated April 30, 1999 among BNY
                    Financial Corporation,  Greka Integrated, Inc., Saba Realty,
                    Inc. and Santa Maria Refining Company (filed as Exhibit 10.1
                    to the GREKA  Energy  Report  on Form  10-Q for the  quarter
                    ended March 31, 1999 SEC file #0-207670 and  incorporated by
                    reference herein)

        10.5        Closing  Agreement  dated June 30, 1999 among Sabacol,  Inc.
                    and Omimex  Resources,  Inc. et al. (filed as Exhibit 4.2 to
                    the GREKA Energy  Report on Form 8-K filed July 14, 1999 SEC
                    File #0-20760 and incorporated by reference herein)

        11.1        Computation of Earnings per Common Share*

        27.1        Financial Data Schedule*

* Filed herewith

     (b) During the quarter for which this report is filed,  GREKA  Energy filed
the following Reports on Form 8-K:

Current Report on Form 8-K dated April 6, 1999 which reported  events under Item
2, Acquisition or Disposition of Assets.

Current  Reports on Form 8-K/A dated June 8, 1999 which  reported  events  under
Item 2, Acquisition or Disposition of Assets,  and Item 7, Financial  Statements
and Exhibits.

Current Report on Form 8-K dated July 14, 1999 which reported  events under Item
2, Acquisition or Disposition of Assets.


                                       31
<PAGE>

                                    SIGNATURE

     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.

                              GREKA ENERGY CORPORATION


Date August 9, 1999         By:/s/ Randeep S. Grewal
                               -------------------------------
                               Randeep S. Grewal, Chairman and
                               Chief Executive Officer
















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