=======================================================================


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                                   (Mark One)

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended December31, 1999

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


                        Commission file number:000-09419
                                    ---------


                             POWER EXPLORATION, INC.
                         ------ -----------------------
        (Exact name of small business issuer as specified in its charter)




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

               Nevada                                   84-0811647
              -------                                 ----------
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
      incorporation or organization)
----------------------------------------------------------- --------------------





                5416 Birchman Avenue, Fort Worth, Texas    76107
                ----------------------------------------   -----
          (Address of principal executive office)        (Zip Code)


                                 (817) 377-4464
                              ---------------------
                           (Issuer's telephone number)


           Check whether the issuer:  (1) filed all reports required to be filed
  by Section 13 or 15(d) of the  Exchange  Act during the past 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 XX No

     The number of outstanding  shares of the issuer's  common stock,  $0.02 par
value (the only class of voting stock), as of December 31, 1999 was 9,569,260.
 ==============================================================================

<PAGE>

                                      INDEX




PART I.  FINANCIAL INFORMATION                                                 3

Item 1. Financial Statements                                                   3

      Consolidated Balance Sheet for the Two Most Recent Quarters              3

      Consolidated Statement of Operations for the Two Most Recent Quarters    4

      Consolidated Statement of Cash Flows for the First Quarter of 1999       5

      Notes to Unaudited Consolidated Financial Statements                     6

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

                General                                                       15

                Financial Results                                             15

                Liquidity And Capital Resources                               16

                Year 2000 Compliance                                          16


PART II. OTHER INFORMATION                                                    16

Item 1. Legal Proceedings                                                     16
Item 2. Changes in Securities and Use of Proceeds                             16
Item 3. Other Information                                                     17
Item 4. Exhibits and Reports                                                  18

Signature                                                                     19

EXHIBITS

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


                                       2

<PAGE>





                          PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                       POWER EXPLORATION AND SUBSIDIARIES
          CONSOLIDATED BALANCE SHEET FOR THE TWO MOST RECENT QUARTERS


                                            Dec. 31, 1999        Sept. 30, 1999
                                              Unaudited              Audited


                              ASSETS

CURRENT ASSETS
Cash                                        $  (3,700)                 1,083
Accounts Receivable                             12,769                 8,563
Accounts Receivable - Related Party              9,708                84,570
Inventory                                      378,719               323,486
Prepaid Expenses                                     -                   230
                                        --------------         -----------------
Total Current Assets                           397,496            $  417,932

OIL & GAS PROPERTIES, FULL COST METHOD
Properties being amortized                  11,134,423             7,134,910
Properties not subject to amortization           -                       -
                                        --------------         -----------------
Total Oil and Gas Properties                11,134,423             7,134,910

Less:  Accumulated depreciation,
  depletion & amortization                     (25,770)              (10,491)
                                        --------------         -----------------
Net Oil and Gas Properties                  11,108,653             7,124,419

PROPERTY AND EQUIPMENT
Property and Equipment                         222,236               370,124
Accumulated Depreciation                      (106,144)             (139,618)
                                        --------------         -----------------
Total Property and Equipment                   116,092               230,506

OTHER ASSETS                                    11,028                 6,037

TOTAL ASSETS                              $ 11,633,269           $ 7,778,894
                                        ==============         =================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable Trade                      $  256,978            $  623,441
Accounts Payable - Related Parties                   -               389,154
Payroll and Sales Tax Payable                   13,041                  -
Accrued Expenses                                24,000                  -
Accrued Interest                                62,542                  -
Accrued Wages and P/roll Taxes                 274,689               202,025
Customer Deposits                               55,000                30,000
Advances Payable                                     -                25,000
Advances Payable - Related Parties                   -               140,000
Notes Payable -- Related Parties                     -               101,313
                                        --------------         -----------------
Total Current Liabilities                  $ 1,286,250           $ 2,010,933

LONG TERM LIABILITIES

Total Liabilities                          $ 1,286,250           $ 2,010,933

STOCKHOLDERS' EQUITY

Common Stock ($.02 par value;
   50,000,000 shares authorized,
   9,569,260 shares issued & outstanding)      191,385                 3,553

Additional Paid-In Capital                  18,587,731            13,650,157
Accumulated Deficit                         (8,432,097)           (7,885,749)
Total Stockholders' Equity                $ 10,347,019           $ 5,767,961

TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                $ 11,633,269           $ 7,778,894
                                        ==============         ==============


                       See Notes to Financial Statements

                                      3
<PAGE>



                       POWER EXPLORATION AND SUBSIDIARIES
      CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWO MOST RECENT QUARTERS


                                   3 Months Ending              3 Months Ending
                                    Dec. 31, 1999                  Dec. 31, 1998
                                       Unaudited                    Unaudited

REVENUE

Oil and Gas Sales                   $     15,144                 $    2,485
Equipment Sales                            5,041                      7,635
Drilling Revenue                           6,327                          -
                                        ---------                  ----------
Total Revenue                             26,512                     10,120

COST OF REVENUE

Lease Operating                           69,011                     44,878
Production Taxes                             700                         32
Depreciation,
  Depletion & Amortization                12,842                        279
Exploration                                    -                          -
Cost of Equipment Sales                        -                      1,510
                                        ---------                   ----------
Total Cost of Revenue                     82,553                      46,699

GROSS PROFIT                             (56,041)                    (36,579)

EXPENSES

General and Administrative               480,093                     404,210
Interest Expense                          10,214                      17,115
                                        ---------                   ----------
Total Expenses                           490,307                     421,325

PROFIT (LOSS) BEFORE OTHER INCOME
 AND PROVISION FOR INCOME TAXES         (546,348)                   (457,904)

OTHER INCOME                               -                              -
                                     -----------                   ----------
PROFIT (LOSS) BEFORE PROVISION
FOR INCOME TAXES                       (546,348)                    (457,904)

PROVISION FOR INCOME TAXES
                                          -                                -
NET PROFIT (LOSS)                       (546,348)                    (457,904)
                                      ===========                    ==========
PROFIT (LOSS) PER SHARE              $     (0.06)                 $     (0.04)

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                     9,569,260                   12,040,382





                       See Notes to Financial Statements

                                      4
<PAGE>



                       POWER EXPLORATION AND SUBSIDIARIES
        CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FIRST QUARTER OF 1999



                                                           3 Months Ending
                                                            Dec. 31, 1999
                                                               Unaudited


Profit (Loss) After Taxes                                 $    (546,348)
Depreciation and Amortization                                    12,842


Cash Flow from Income Statement                                (533,506)

Accounts Receivable.................Decr (Incr)                  (4,206)
Inventory...........................Decr (Incr)                 (55,233)
Other Current Assets.................Decr (Incr)                 (4,991)
Prepaid & Deferred Exp..............Decr (Incr)                     230
Accounts Payable.....................Incr (Decr)               (516,359)
Other Current Liab.....................Incr (Decr)                    -
Notes Payable - Related Parties..Incr (Decr)                   (241,313)

Cash Flow from Operating Activities                            (821,872)

Fixed Assets............................Decr (Incr)             114,414
Net Oil & Gas Prop....................Decr (Incr)            (3,984,234)
Other Assets............................Decr (Incr)              (4,991)

Cash Flow from Investing Activities                          (3,874,811)

New Borrowings                                                         -
Repayments                                                             -
Short Term Debt........................Incr (Decr)              100,000
Long Term Debt.........................Incr (Decr)                    -
Common Stock.........................Incr (Decr)                187,832
Additional Paid In Capital............Incr (Decr)             4,937,574

Cash Flow from Financing Activities                           5,225,406

Net Increase (Decrease) in Cash                                  (4,783)

Beginning Cash                                                    1,083

Ending Cash                                                      (3,700)





                       See Notes to Financial Statements

                                       5

<PAGE>




                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999



NOTE 1 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Nature of Operations

          The  Company  is  engaged  primarily  in the  fields  of  acquisition,
          development,  exploration  for  and  sale  of oil  and  gas,  and  the
          construction and sale of oil and gas extraction equipment.

          Basis of Consolidation

          The consolidated  financial  statements  include the accounts of Power
          Exploration, Inc. ("Power", formerly Titan Energy Corp., Inc.) and its
          100% owned subsidiaries, Oil Retrieval Systems, Inc. ("ORS"), acquired
          May 16,  1997 and Oil Seeps,  Inc.  ("OSI")  acquired  June 17,  1997.
          Accordingly,  all references  herein to Power or the "Company" include
          the  consolidated   results  of  its  subsidiaries.   All  significant
          inter-company  accounts  and  transactions  have  been  eliminated  in
          consolidation.

          Cash and Cash Equivalents

          The Company considers all highly liquid investments purchased with the
          original maturity of three months or less to be cash equivalents.

          Inventory

          Inventory,  consisting of parts and materials used in the construction
          of oil  extraction  equipment,  are  stated  at the  lower  of cost or
          market, cost being determined by the average cost method.

          Oil and Gas Properties

          The Company follows the full cost method of accounting for oil and gas
          property acquisition, exploration, development, and production.

                  Capitalization Policies: All oil and gas property acquisition,
                  exploration,   and   development   costs  are  capitalized  as
                  incurred.  There were no internal costs directly  attributable
                  to such activities. Net capitalized costs of unproved property
                  and exploration well costs are reclassified as proven property
                  and well costs when related proven  reserves are found.  Costs
                  to operate and maintain wells and field equipment are expensed
                  as incurred.

                  Amortization  Policies:  Except  for cost of (1)  unevaluated,
                  unproved  properties  and (2) major  development  projects  in
                  progress,  all capitalized oil and gas property costs,  net of
                  prior accumulated amortization, are amortized by country using
                  the  unit-of-production  method based on proved reserves.  The
                  amortization  base includes  estimated future costs to develop
                  proved   reserves   and   estimated   future    dismantlement,
                  reclamation,  and abandonment  costs, net of equipment salvage
                  values.

                                       6

<PAGE>




                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Impairment  Policies:  Costs  not  being  amortized  are  periodically
          assessed for impairment.  Any impairment is added to the  amortization
          base. Net capitalized  costs of oil and gas  properties,  less related
          deferred  income  taxes are  limited,  by  country,  to the sum of (1)
          future net  revenues  (using  prices and cost rates as of the  balance
          sheet date) from proved  reserves  and  discounted  at ten percent per
          annum, plus (2) costs not being amortized, less (3) related income tax
          effects.  Excess  costs  are  charged  to proved  property  impairment
          expense.

          Sales and Retirements  Policies:  No gain or loss is recognized on the
          sale  of  oil  and  gas  properties   unless   non-recognition   would
          significantly  alter the relationship  between  capitalized  costs and
          remaining  proved  reserves for the affected  amortization  base. When
          gain or loss is not recognized,  the  amortization  base is reduced by
          the amount of sales proceeds.

          Revenue Recognition

          Revenues from the sale of oil and gas production  are recognized  when
          title  passes,  net of  royalties.  Natural gas revenues are generally
          recognized  under  the  entitlement   method  of  accounting  for  gas
          imbalances,  i.e.,  monthly  sales  quantities  that do not  match the
          Company's entitled share of joint production.  Entitled  quantities in
          excess of sales  quantities  are recorded as a  receivable  from joint
          venture  partners.  The  receivable is carried at the lower of current
          market price or the market price at the time the  imbalance  occurred.
          Sales  quantities  in excess of entitled  quantities  are  recorded as
          deferred  revenue carried at the gas market price received at the time
          the imbalance occurred.

          Hedging

          The Company may enter into  derivative  contracts to hedge the risk of
          future oil and gas price  fluctuations.  Such contracts may either fix
          or support oil and gas prices,  limit the impact of price fluctuations
          with respect to the Company's  sales of oil and gas.  Gains and losses
          on such hedging activities are recognized in oil and gas revenues when
          the hedged  production  is sold.  Hedged  oil and gas  prices  used in
          computing the year-end  standardized  measure of discounted future net
          cash  flows  relating  to  proved  oil and gas  reserves  reflect  the
          estimated effects of hedging contracts existing at year end.


                                       7

<PAGE>




                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999



NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Use of Estimates

          The  preparation  of the financial  statements  is in conformity  with
          generally accepted accounting principles, which requires management to
          make  estimates  and  assumptions  that affect the reported  amount of
          assets  and   liabilities.   Disclosure  of   contingent   assets  and
          liabilities,  at the date of the  financial  statements  are  included
          along with the reported  amounts of revenues  and expenses  during the
          reporting date. Actual results could differ from those estimates.

          Depreciation and Amortization

          Property and  equipment are stated at cost and are  depreciated  using
          the straight-line method over their estimated useful lives.

          The costs of  maintenance  and  repairs  are  charged to expense  when
          incurred; costs of renewals and enhancements are capitalized. Upon the
          sales or  retirement of property and  equipment,  the cost and related
          accumulated  depreciation are eliminated from the respective  accounts
          and the resulting gain or loss is included in operations.

          Estimated useful lives are as follows:

          Shop Equipment                              5 years
          Furniture and Office Equipment              5 years
          Machinery                                   5 - 7 years

          Fair Value of Financial Instruments

          The  Company's   financial   instruments  consist  of  cash,  accounts
          receivable,  and accounts  payable and  short-term  debt. The carrying
          amounts of cash, accounts receivable,  accounts payable and short-term
          debt  approximate  fair value due to the relatively  short maturity of
          these instruments.

          Long-Lived Assets

          Long-lived  assets  to be held and used are  reviewed  for  impairment
          whenever events or changes in circumstances  indicate that the related
          carrying  amount may not be  recoverable.  When  required,  impairment
          losses on assets to be held and used are recognized  based on the fair
          value of the  assets  and  long-lived  assets  to be  disposed  of are
          reported  at the lower of  carrying  amount of fair value less cost to
          sell.


                                       8

<PAGE>





                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Income Taxes

                  Provisions  for  income  taxes are based on taxes  payable  or
                  refundable   for  the  current  year  and  deferred  taxes  on
                  temporary differences between the amount of taxable income and
                  pretax  financial  income and  between the tax bases of assets
                  and  liabilities  and their reported  amounts in the financial
                  statements.  Deferred tax assets and  liabilities are included
                  in the financial  statements at currently  enacted  income tax
                  rates  applicable  to the  period  in which the  deferred  tax
                  assets and  liabilities are expected to be realized or settled
                  as prescribed in FASB Statement No. 109, Accounting for Income
                  Taxes.  As changes in tax laws or rates are enacted,  deferred
                  tax assets and liabilities are adjusted  through the provision
                  for income taxes.

                  Concentration of Credit Risk

                  The  Company  places  its  cash  in  what  it  believes  to be
                  credit-worthy financial  institutions.  However, cash balances
                  may exceed FDIC  insured  levels at various  times  during the
                  year.

                  Stock-Based Compensation


                  The  Company  has  adopted  the  intrinsic   value  method  of
                  accounting for  stock-based  compensation  in accordance  with
                  Accounting   Principles   Board   Opinion   ("APB")   No.  25,
                  "Accounting   for  Stock  Issued  to  Employees"  and  related
                  interpretations.

                  Comprehensive Income

                  In June 1997, SFAS No. 130, "Reporting  Comprehensive Income",
                  was  issued.  This  statement  establishes  standards  for the
                  reporting  and  display  of   comprehensive   income  and  its
                  components  in the financial  statements.  As of September 30,
                  1999 and 1998, the Company had no items that  represent  other
                  comprehensive  income  and,  therefore,  has  not  included  a
                  schedule of comprehensive income in the financial statements.

                  Per Share of Common Stock

                  Per share  amounts  have been  computed  based on the  average
                  number of common  shares  outstanding  during the  period.  In
                  February 1997, the Financial Accounting Standards Board issued
                  a new  statement  titled  "Earnings Per Share" (SFAS No. 128).
                  This  statement  is  effective  for both  interim  and  annual
                  periods  ending  after  December  15, 1997 and  specifies  the
                  computation,  presentation,  and disclosure  requirements  for
                  earnings  per share for  entities  with  publicly  held common
                  stock or potential  common stock.  All  prior-period  EPS data
                  presented has been restated to conform with the provisions for
                  SFAS No. 128.

                  Potential  common stock has been excluded from the computation
                  of  earnings  per share  since the  inclusion  of options  and
                  warrants would be anti-dilutive.


                                       9

<PAGE>




                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999


NOTE 1 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


                  All  share  and  per  share   data  have  been   adjusted   to
                  retroactively  reflect  the  1 for  100  reverse  stock  split
                  effected on October 19, 1999.

                  Impact of Recently Issued Accounting Standards

                  During  1998,  the FASB  issued  No.  131,  "Disclosure  About
                  Segments  of an  Enterprise  and Related  Information",  which
                  changes  the way public  companies  report  information  about
                  segments. SFAS No. 131, which is based on the selected segment
                  information   quarterly  and  entity-wide   disclosures  about
                  products  and  services,  major  customers  and  the  material
                  countries  in  which  the  entity  holds  assets  and  reports
                  revenue.  This statement is effective for the Company's fiscal
                  year.  The  Company  is  in  the  process  of  evaluating  the
                  disclosure requirements under this standard.

                  Additionally,  during 1998, the America Institute of Certified
                  Accountants'  Executive Committee issued Statement of Position
                  Number 98-1 (SOP 98-1),  "Accounting  for the Cost of Computer
                  Software  Developed or Obtained for Internal Use". SOP 98-1 is
                  effective for fiscal years  beginning after December 15, 1998.
                  Management  believes  that the  Company  is  substantially  in
                  compliance    with   this    pronouncement    and   that   its
                  complementation  will  not  have  a  material  effect  on  the
                  Company's  financial  position,  results of operations or cash
                  flows.

NOTE 2 -      INVENTORY

                  Inventory at 9-30-99 & 12-31-99 consist of the following:

                                                   9-30-99           12-31-99
                                                    -------           --------
                  Raw Material                   $  220,069         $  251,861
                  Work in Process                   103,417            126,858
                                                -----------        -----------
                                                 $  323,486         $  378,719
                                                  ==========         ==========


NOTE 3 -      PROPERTY AND EQUIPMENT

                  Property and  equipment  at 9-30-99 & 12-31-99  consist of the
                  following:

                                                           9-30-99      12-31-99
                                                          -------       --------
                  Shop Equipment                        $   30,852    $   30,852
                  Furniture and Office Equipment            24,068        22,887
                  Machinery                                269,167       123,072
                                                         ----------    ---------
                                                           324,087       176,811
                  Less Accumulated Depreciation             93,581        60,719
                                                       -----------   -----------
                  Property and Equipment - Net           $ 230,506     $ 116,092
                                                         =========     =========

                  Depreciation Expense Recorded in
                   the Statement of Operations          $   47,544    $   12,842
                                                        ==========    ==========



                                       10

<PAGE>



                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999



NOTE 4 -      OIL AND GAS PROPERTIES NOT SUBJECT TO AMORTIZATION

                The Company's oil and gas  properties  are located in the United
                States and Australia.  Amortization  expense was $2.41 and $1.07
                per Bbl production during the years ended September 30, 1999 and
                1998, respectively.

                Costs excluded from amortization are as follows at September 30:

                                                1999                 1998
                                        ---------------       --------------
                Acquisition Costs     $               -         $ 1,200,000
                Exploration Costs                     -             112,505
                                     ------------------       -------------
                                      $               -         $ 1,312,505
                                      =================       ==============

                All  excluded  costs  at  September  30,  1998  are  located  in
                Australia.

At              September 30, 1998, a determination  could not be made about the
                extent  of oil  reserves  that  should be  classified  as proven
                reserves  for  this  prospect.   Consequently,   the  associated
                property  costs and  exploration  costs  have been  excluded  in
                computing  amortization  of the full cost pool.  Amortization of
                these costs began during fiscal 1999.

NOTE 5 -      NOTES PAYABLE

                    Notes   payable  at  December  31,  1999   consists  of  the
                    following:

                                                         9-30-99        12-31-99

                a)  Note Payable - Trident III, LLC    $   250,000      250,000
                b)  Note Payable - BEI, Inc                250,000      250,000
                c)  Note Payable - Related Party           101,313           -
                d)  Note Payable - Landmark Bank              -         100,000
                                                              -         -------
                                                         $ 601,313  $   600,000
                                                        =========   ===========

     a) The  Company  was  indebted  to Trident  III,  L.L.C.  under  terms of a
     promissory note dated October 21, 1998 in the amount of $250,000.  Terms of
     the note provide for interest at a rate of 10% per annum,  with an original
     maturity  date of April 20,  1999.  The Company  issued 1,000 shares of its
     common stock to Trident III,  L.L.C. in connection with this loan. The loan
     has been extended at various times with a current  maturity date of October
     30, 1999. The Company issued a total of 2,600 shares of its common stock in
     consideration of these extensions.  When the note was extended to September
     30,  1999,  the  Company  agreed that if the note was not paid on or before
     September 30, 1999,  then it would issue 50,000 shares per day for each day
     that the note is outstanding  subsequent to September 30, 1999.  Concurrent
     with the  extension  to October  30, 1999 the  provision  was added that if
     payment of  outstanding  principal and interest were made by that date, the
     lender  would not seek to receive  the 50,000  shares per day due under the
     previous extension. The lender has waived this provision of the contract.

             A  settlement  has been reached  with the lender that  requires the
                company  issuing  279,861  common  stock  shares to Trident III,
                L.L.C.  in  exchange  for a  full  release  from  the  debt  and
                indemnity  against any and all current  and future  claims.  The
                issuance of the  Company's  common  stock  shares on February 9,
                2000, eliminated the debt and satisfied the agreement in full.


                                       11

<PAGE>


                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999

NOTE 5 -        NOTES PAYABLE (continued)

          b) The Company is indebted to Business Exchange Investment, Inc. under
          terms of a promissory note dated September 15, 1998. Terms of the note
          provide for  interest at a rate of 10% per annum with a maturity  date
          of June 30, 2000. The note is  collateralized by 100% of the shares of
          OSI. The Company  hopes to satisfy this debt by issuing  shares of its
          common stock. No agreement has been reached at this date, however, the
          Company is active in its attempt to resolve this debt.

          c)The Company was indebted to the M.O. Rife III, Trust A under terms
          of a  promissory  note date March 31, 1999 in the amount of  $101,313.
          This note was  eliminated  according  to the terms of the  December 7,
          1999  Acquisition  Agreement of certain assets of Rife Oil Properties,
          Inc. and the extinguishment of this debt.

          d)The  Company  is  indebted  to  Landmark  Bank  under  terms  of a
          promissory note dated October 13. 1999.  Terms of the note provide for
          interest  at a rate of 10% per annum with a maturity  date of February
          9,  2000.  The note is  collateralized  by 100% of the  assets  of Oil
          Retrieval Systems, Inc. The funds were used as working capital for Oil
          Retrieval Systems, Inc.

NOTE 6 -      RELATED PARTY TRANSACTIONS

                During the quarter ending December 31, 1999:

          a)   The Company  issued a  promissory  note to M.O.  Rife III Trust A
               (the "Rife Trust"), who is a principal  stockholder in the amount
               of  $101,313.  The proceeds of the note were used to repay a loan
               to the Company from the Bank of Commerce,  which the  stockholder
               had   guaranteed.   This  note  was  forgiven   pursuant  to  the
               acquisition  dated  December 7, 1999 whereby this  promissory was
               forgiven in exchange  for the  consideration  enumerated  in said
               agreement. This consideration consisted, in part, of the issuance
               of one million shares of the issuer's common stock.

          b)   The  Company  was   advanced  a  net  of  $140,000  by  Rife  Oil
               Properties,  Inc., a company owned by the beneficiary to the Rife
               Trust. This amount was forgiven pursuant to the acquisition dated
               December 7, 1999 whereby this promissory was forgiven in exchange
               for  the  consideration   enumerated  in  said  agreement.   This
               consideration  consisted, in part, of the issuance of one million
               shares of the issuer's common stock.

          c)   The  Company   incurred  a  net  accounts  payable  to  Rife  Oil
               Properties,  Inc. of $389,154.  This amount was forgiven pursuant
               to the acquisition dated December 7, 1999 whereby this promissory
               was forgiven in exchange for the consideration enumerated in said
               agreement. This consideration consisted, in part, of the issuance
               of one million shares of the issuer's common stock.

          d)   The Company occupies space in facilities leased by M.O. Rife III.
               The Company pays rent to the  stockholder in the amount of $2,000
               per month. The space is rented on a monthly basis.

          e)   The Company is indebted  to  officers  for wages  accrued in year
               1999 in the  amount  of  $254,820,  which  incurred  payroll  tax
               accrual  of  $19,869.  A  settlement  has been  reached  with the
               officers  consisting of the Company issuing 100,000 shares common
               stock to extinguish  debt.  As of the date of this filing,  these
               shares have not been issued.


                                       12

<PAGE>



                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999

NOTE 7 -         ADVISORY & CONSULTING AGREEMENTS

                For the period ending December 31,1999, the Company entered into
                various  cancelable  advisory  agreements  with  third  parties.
                Compensation  for services  provided under these agreements will
                be paid in either Common Shares or Common Share Purchase options
                of the Company.  During the quarter ended December 31, 1999, the
                Company  issued  90,000  shares  of  common  stock  under  these
                advisory agreements, valued at $236,250.

NOTE 8 -     COMMITMENTS AND CONTINGENCIES

         a)The Company has entered into various  non-cancelable  operating lease
agreements for office and warehouse space and equipment.

             1) Warehouse  facilities  located in Fort Worth,  Texas.  The lease
term expires on September 30, 2001.

             2) Various office equipment leases expiring through March 2004.

                Future  minimum lease  payments  under the lease  agreements for
each of the years ended September 30 are as follows:

                2000                                   $  109,319
                2001                                       77,790
                2002                                       11,639
                2003                                        8,731
                2004                                        2,368
                                                     -------------
                Total minimum lease payments           $  209,847
                                                        ==========

                Rent  expense  included  in the  financial  statements  for  the
quarter ended December 31, 1998 totaled $39,700.

          b)   The Company has pledged 100% of the shares of Oil Seeps,  Inc., a
               wholly owned subsidiary,  as collateral for a $250,000 promissory
               note due on June 30, 2000.

          c)   A former employee had filed a claim against ORS. The employee had
               demanded  $75,000 in exchange for a full and final  release.  The
               claim has been settled for $20,000 through  mediation in December
               1998.  The  settlement  amount  has not  been  paid  and has been
               accrued in the financial statements.

          d)   A suit has been filed  against  the  Company  alleging  breach of
               contract  and seeking  damages of  approximately  $120,000.  This
               relates  to  an  alleged   agreement  to   repurchase   equipment
               previously sold by the Company. This amount has not been recorded
               in the financial statements as of December 31, 1999.


                                       13

<PAGE>




                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999

NOTE 9 -      SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES

                  During the quarter ended December 31, 1999:

         a)     The Company  issued 90,000  shares under an advisory  agreement.
                The shares of the Issuer's  common stock were issued to Allen Z.
                Wolfson,  under an agreement dated December 14, 1999 whereby the
                recipient is entitled to receive 750,000 for consulting services
                provided to the Issuer.  This  transaction is valued at $236,250
                and charged to G & A for the quarter ending December 31, 1999.

         b)     The Company issued  9,000,000  shares to Rife Oil Properties for
                certain oil leases and the  relinquishment  of certain debt owed
                by the issuer to Rife Oil Properties, Inc.

         c)     The Company  issued  300,000 shares of its common stock in order
                to  secure a loan by Global  Universal,  Inc.  in the  amount of
                $25,000. The loan was subsequently  forgiven and the shares were
                returned to the Company's  treasury during the second quarter of
                its fiscal year.

NOTE 10 -    SUBSEQUENT EVENTS

                  Subsequent to December 31, 1999, the Company

         a)     The Company is indebted  to officers  for wages  accrued in year
                1999 in the  amount of  $254,820,  which  incurred  payroll  tax
                accrual of  $19,869.  A  settlement  has been  reached  with the
                officers consisting of the Company issuing 100,000 shares common
                stock to extinguish debt,  thereby  eliminating  accrued payroll
                taxes.  The  issuance of the  Company's  common stock shares for
                this matter will occur in the 2nd of this fiscal year.

         b)     A settlement  has been reached  with  Trident III,  L.L.C.  that
                consists of the company  issuing  279,188 common stock shares to
                Trident III, L.L.C. in exchange for a full release from the debt
                and indemnity against any and all current and future claims. The
                issuance of the  Company's  common  stock shares for this matter
                will occur in the 2nd of this fiscal year.

         c)     The Company is seeking to resolve debt payable  burdens with the
                issuance of shares in its common stock. Under this scenario, the
                Company is seeking  to  negotiate  a  settlement  with  Business
                Exchange,  Inc.  for its debt of  $250,000.  The Company is also
                seeking to eliminate the claim made by a former  employee of Oil
                Retrieval Systems, Inc.

         d)     The  Company  entered  into  two  advisory  agreements  covering
                financial and investment  services to be provided to the Company
                on a best efforts basis. The agreements  provide for the Company
                to issue an aggregate of 1,500,000  shares of post reverse split
                common  stock plus options to purchase an aggregate of 1,500,000
                shares of post reverse  split common stock at an exercise  price
                of $0.66667 per share for a period of one year,  the term of the
                agreements. As of the end of the fiscal quarter ending 12-31-99,
                the Company has issued  90,000  shares of its common stock under
                the aforementioned agreements.

NOTE 11 -       Additional footnotes included by reference

                Except as  indicated  in Notes  above,  there have been no other
                material  changes in the  information  disclosed in the notes to
                the financial statements included in the Company's Annual Report
                on Form 10-KSB for the year ended September 30, 1999. Therefore,
                those footnotes are included herein by reference.


                                       14

<PAGE>


                    POWER EXPLORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1999

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Forward Looking Statements


The information  herein contains certain forward looking  statements  within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the  Securities  Exchange Act of 1934,  as amended,  which are intended to be
covered by the safe harbors  created  thereby.  Investors are cautioned that all
forward looking  statements  involve risks and uncertainty,  including,  without
limitation,  the ability of Power  Exploration,  Inc.  ("Power") to continue its
expansion  strategy,  changes in the real  estate  markets,  labor and  employee
benefits,  as well as  general  market  conditions,  competition,  and  pricing.
Although Power  believes that the  assumptions  underlying  the forward  looking
statements  contained  herein are reasonable,  any of the  assumptions  could be
inaccurate,  and therefore,  there can be no assurance that the forward  looking
statements included in the Form 10QSB will prove to be accurate.  In view of the
significant  uncertainties  inherent in the forward looking statements  included
herein,  the  inclusion  of  such  information  should  not  be  regarded  as  a
representation  by Power or any other  person that the  objectives  and plans of
Power will be achieved.

General

During the first quarter of 2000,Power  Exploration,  Inc. and its  subsidiaries
(hereinafter the "Company" unless the context indicates  otherwise) continued to
improve  its  financial  condition.  Power  decreased  its net  losses  over the
comparable  quarter in 1999. As a direct result of slightly  increased  revenues
for the three months ended December 31, 1999,  Power's overall  financial health
has somewhat improved.

The following discussion of the consolidated  financial condition and results of
operations  of  Power  should  be  read in  conjunction  with  the  consolidated
financial statements of Power and the notes thereto included in Item 1 of Part I
of this Report.

Financial Results

Revenues

Oil and gas sales  increased  $12,659,  or 509%, to $15,144 for the three months
ended  December  31, 1999 from $2,485 for the three  months  ended  December 31,
1998.  Equipment sales decreased  $2,594, or 34%, to $5,041 for the three months
ended  December  31, 1999 from $7,635 for the three  months  ended  December 31,
1998.  To date,  Power has been  putting the  necessary  components  in place to
create ongoing income,  and these efforts should begin to be realized during the
second half of the 2000 fiscal year.

Costs and Expenses

Power's  general  and  administrative  expenses  increased  $75,883,  or 19%, to
$480,093  for the three months  ended  December  31, 1999 from  $404,210 for the
three months ended December 31, 1998. The change in the dollar amount of general
and  administrative  expenses  was due  primarily  to an increase in  consulting
expenses. Other major components of general and administrative expenses included
officer's salaries at 14%, non-officer salaries at 14%, and legal fees at 4%.


                                       15

<PAGE>



Net Loss

Net loss for the three months ended December 31, 1999 was $546,348,  or $.06 per
share,  compared to a loss of $457,904,  or $.04 per share, for the three months
ended December 31, 1998. Net cash used in operating  activities was $821,872 for
the three  months ended  December  31,  1999,  and $384,034 for the three months
ended  September  30,  1999,  representing  a increase of more than 100% in cash
usage.  All cash  activities of the business  produced a $4,783 decrease in cash
for the three months ended December 31, 1999.

Liquidity and Capital Resources

Power's working capital deficit on December 31, 1999 was $888,754  compared to a
deficit of $986,680 on  September  30, 1999, a ratio of 0.4 for the three months
ended December 31, 1999 as well as for the fiscal year ended September 30, 1999.
A comparison  of other ratios that measure  financial  performance  show a quick
ratio of 0.2, a change in the net worth to assets  ratio of 0.9, and debt to net
worth of (8.4). This data all highlights Power's need to raise additional equity
capital.

Cash and cash  equivalents  totaled  $18,777 at  December  31,  1999,  a $75,439
increase  from  September 30, 1999.  This change  represents  the  conversion of
related  party  receivables  against  existing  debt of the same. An increase in
short-term  debt funded  Power's  capital  expenditures.  Power's  debt  totaled
$1,286,250 at December 31, 1999,  down 40% from September 30, 1999. The decrease
was due to the conversion of short-term debt to common stock.

Long Term Debt

On December  31,  1999,  Power had no  long-term  debt.  Although 89% of Power's
assets are comprised of oil and gas properties that are not a current asset, all
of  Power's  borrowings  have been short  term in  nature.  This has  aggravated
Power's cash position and produced lower measures of financial  performance than
would otherwise be possible.

Year 2000 Compliance

As of  February  18,  2000,  Power  has  experienced  no  significant  year 2000
problems.

Power  currently uses Year 2000 compliant  engineering  evaluation  software for
acquisition  analysis,  as well as internal  engineering  applications.  Power's
spreadsheet and word processing software is also Year 2000 compliant.

Power  currently has limited  information  concerning  the Year 2000  compliance
status of its clients and associates.  However,  even if Power's clients are not
Year 2000 complaint Power does not anticipate that such  noncompliance will have
a material adverse effect on Power's business,  financial condition,  results of
operations or cash flows.

PART II.OTHER INFORMATION

ITEM 1.  Legal Proceedings

During the first  quarter  ending  December 31, 1999,  no material  developments
occurred  regarding Power's legal  proceedings.  For more information please see
Power's Form 10KSB for the year ended  September 30, 1999 which is  incorporated
herein by reference.

ITEM 2. Changes in Securities and Use of Proceeds

Common Stock

On October 12, 1999,  Power's board of directors agreed to effect a 1 for 100 on
October 19, 1999.  Power by board  resolution  approved the  effectuation of the


                                       16

<PAGE>



reverse  split in an effort  to  assist  Power in  raising  additional  capital.
Power's  current  financial  condition  and  low  stock  price  has  facilitated
management's decision to effect the reverse split.

On October 25, 1999,  Power adopted a Stock Benefit Plan which  provides for the
issuance  of up to four  million  (4,000,000)  shares of  common  stock of Power
according to the terms of the plan.

Recent sales of Unregistered Securities

The  following  is a list of all  securities  sold by Power  within  the  period
covered by this report, including,  where applicable, the identity of the person
who purchased the securities, title of the securities, and the date sold.

In November,  1999,  Power issued 100 shares of common stock at $68.75 per share
to Company  employees,  in  exchange  for  services  performed  for  Power.  The
transaction  was carried out pursuant to section 4(2) of the  Securities  Act of
1933 in an isolated  private  transaction by the Company which did not involve a
public offering.

On November 23, 1999, Power entered into an agreement to borrow $25,000 from A-Z
Professional  Consultants,  a Utah  Corporation  and Global  Universal,  Inc., a
Nevada  Corporation.  As consideration for making the loan, Power issued 150,000
post-reverse-split  shares  of  common  stock  to each  of the two  corporations
pursuant to section 4(2) of the  Securities  Act of 1933 in an isolated  private
transaction by the Company which did not involve a public offering.

On  December  9,  1999  Power  acquired  approximately  32 sets  of oil  leases,
representing  mineral rights to approximately  Two Hundred Forty (240) producing
oil wells, as well as approximately 39 injection wells, in the Corsicana Shallow
Field,  Navarro  County,  Texas.  Power  acquired  the Oil Leases  from Rife Oil
Properties,  Inc.,  a Nevada  corporation  in exchange for  8,000,000  shares of
Power's  common voting stock issued  pursuant to section 4(2) of the  Securities
Act of 1933 in an isolated  private  transaction  by the  Company  which did not
involve a public offering (for more information see Form 8-K filed 12/13/99).

ITEM 3.  Other Information

On October 5, 1999,  Guy Pyron,  Jack  Gallagher,  and Thom Schleim  resigned as
directors  of Power.  Mark  Zouvas was elected as a Director to serve on a three
man Board of  Directors  with M. O. Rife III and Joe Bill Bennett On October 27,
1999  Power  entered  into  two  advisory   agreements  covering  financial  and
investment  services to be provided to Power on a best efforts basis by Allen Z.
Wolfson and Ronald  Welborn.  The agreements  provide for Power to issue 750,000
shares of  post-reverse-split  common  stock plus an option to purchase  750,000
shares  of  post-reverse-split  common  stock of Power at an  exercise  price of
$0.66667 per share for a period of one year, the term of the agreement, to Allen
Z. Wolfson, and the same number of shares and options to Ronald Welborn.


                                       17

<PAGE>



On December  20,1999  Power  entered into two  settlement  agreements  to settle
Company debts.

         1. Power agreed to issue 279,861  restricted  shares of Power's  common
stock to Trident III,  L.L.C.,  a Cayman Islands,  West Indies exempted  Company
("Trident") in exchange for cancellation of a note in the amount of$250,000 plus
accrued interest owed to Trident by Power.

         2. Power agreed to issue 500,000  restricted  shares of Power's  common
stock to Benchmark Equity Group, Inc., a Delaware  Corporation  ("Benchmark") in
exchange  for  cancellation  of a note in the amount of  $500,000  plus  accrued
interest  owed to  Benchmark  by Power and the  agreement  of Jeffrey W. Tomz to
cancellation of certain  warrants to purchase stock of Power which were owned by
Mr. Tomz.


         These two  agreements  have been  finalized  and signed by the  parties
thereto.  However the shares of stock have not yet been  issued.  The parties to
the agreements  have agreed to issuance of the shares during Power's next fiscal
quarter.  Power intends to issue the said shares pursuant to section 4(2) of the
Securities Act of 1933 in an isolated  private  transaction by the Company which
will not involve a public offering

ITEM 4.  Exhibits and Reports on Form 8-K

(a)  Exhibits Exhibits required to be attached by Item 601 of Regulation S-B are
     listed in the Index to  Exhibits  on page _ of this  Form  10-QSB,  and are
     incorporated herein by this reference.

(b)  Reports on Form 8-K. Power filed a Form 8-K on December 13, 1999,  which is
     incorporated herein by this reference.


                                       18

<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.

                                                  POWER EXPLORATION, INC.
                                            ------------------------------
                                                      (Registrant)



Date      February 19, 2000                        /s/ Joe B. Bennett
      -------------------------             ------------------------------
                                  Joe B. Bennett, Chief Executive Officer

                                                (Duly Authorized Officer)


                                       19