FORM 10-Q-SB

                       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 September 30, 1998

                                       OR

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

               For the transition period from ________ to ________

                          Commission File Number 0-9494

                          ASPEN EXPLORATION CORPORATION
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

         Delaware                                                    84-0811316
         --------                                                    ----------
(State or other jurisdiction of                                    (IRS Employer
 incorporation or organization)                                     I.D. Number)


             Suite 208, 2050 S. Oneida St., Denver, Colorado, 80224
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices)    (Zip Code)

                                 (303) 639-9860
--------------------------------------------------------------------------------

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  [   ]   No  [ X ]

Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
common stock as of the latest practicable date.

     Class                                      Outstanding at November 12, 1998
-----------------                               --------------------------------
  Common stock,
 $.005 par value                                           5,191,322


                                        1

<PAGE>



Part One.  FINANCIAL INFORMATION

     Item 1. Financial Statements

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                  September 30,      June 30,
                                                      1998             1998
                                                      ----             ----
                                                   (Unaudited)       (Audited)
Current Assets:
  Cash and cash equivalents, including .......     $   784,484      $   425,306
   $695,429 and $331,894 of invested
   cash at September 30, 1998 and June
   30, 1998 respective
  Precious metals ............................          18,823           18,823
  Accounts receivable, trade .................         187,351          115,144
  Prepaid expenses ...........................           4,332            8,762
                                                   -----------      -----------
     Total current assets ....................         994,990          568,035
                                                   -----------      -----------
Investment in oil and gas properties,
  at cost (full cost method of
  accounting) ................................       1,789,463        1,682,521
  Less accumulated depletion and
    valuation allowance ......................      (1,031,902)      (1,006,902)
                                                   -----------      -----------
                                                       757,561          675,619
                                                   -----------      -----------
Property and equipment, at cost:
  Furniture, fixtures and vehicles ...........         174,550          171,122
  Less accumulated depreciation ..............        (123,544)        (120,544)
                                                   -----------      -----------
                                                        51,006           50,578
                                                   -----------      -----------
Undeveloped mining properties, at cost .......          25,856           27,826
Cash surrender value, life insurance .........         231,314          231,314

Other ........................................            --              3,400
Deferred compensation costs ..................          28,000           28,000
                                                   ===========      ===========
     TOTAL ASSETS ............................     $ 2,088,727      $ 1,584,772
                                                   ===========      ===========


                              (Statement Continues)
                 See notes to Consolidated Financial Statements

                                        2

<PAGE>



                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                    September 30,      June 30,
                                                        1998             1998
                                                        ----             ----
                                                     (Unaudited)      (Audited)
Current liabilities:
  Accounts payable and accrued
    expenses .....................................   $   137,710    $   409,815
  Advances from joint owners .....................       270,212         87,999

  Due to related parties .........................        60,417         68,750
  Notes payable - current ........................       120,257         52,205
                                                     -----------    -----------
  Total current liabilities ......................       588,596        618,769
                                                     -----------    -----------
  Notes payable - long term ......................       406,773        280,360
                                                     -----------    -----------
Stockholders' equity:

  Common stock, $.005 par value:
    Authorized: 50,000,000 shares
    Issued: At September 30, 1998:
    5,191,322 and June 30, 1998:
    4,916,322 ....................................        25,956         24,581


  Capital in excess of par value .................     5,951,602      5,677,977
  Accumulated deficit ............................    (4,884,200)    (5,016,915)
                                                     -----------    -----------

  Total stockholders' equity .....................     1,093,358        685,643
                                                     -----------    -----------
Total liabilities and stockholders'
  equity .........................................   $ 2,088,727    $ 1,584,772
                                                     ===========    ===========

                 See Notes to Consolidated Financial Statements

                                        3

<PAGE>


                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                        Three Months Ended
                                                           September 30,
                                                    ---------------------------
                                                            (unaudited)

                                                        1998            1997
                                                        ----            ----
Revenues:
---------
  Oil and gas .................................     $   295,262     $    70,340
  Management fees .............................          19,614          31,020
  Interest and other, net .....................           6,889           5,770
                                                    -----------     -----------
Total Revenues ................................         321,765         107,130
                                                    -----------     -----------

Costs and expenses:
  Oil and gas production ......................          11,262           5,857
  Depreciation, depletion and
    amortization ..............................          28,000          10,573

  Selling, general and administrative .........         143,828         114,564
  Interest expense ............................           5,960            --
                                                    -----------     -----------
Total Costs and Expenses ......................         189,050         130,994
                                                    -----------     -----------

NET INCOME (LOSS) .............................     $   132,715     $   (23,864)
                                                    ===========     ===========
Basic earnings (loss) per common share ........     $       .03     $      --
                                                    ===========     ===========
Diluted earnings (loss) per common
 share ........................................     $       .03     $      --
                                                    ===========     ===========
Weighted average number of common
  shares outstanding ..........................       4,916,322       4,456,322
                                                    ===========     ===========


                     The accompanying notes are an integral
                            part of these statements.

                                        4

<PAGE>
<TABLE>
<CAPTION>



                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



                                                       Three months ended September 30,
                                                              1998         1997
                                                              ----         ----

Cash flows from operating activities:
-------------------------------------
<S>                                                        <C>          <C>       
Net gain (loss) ........................................   $ 132,715    $ (23,864)

Adjustments to reconcile net income
  (loss) to net cash provided (used)
  by operating activities:

  Depreciation, depletion & amortization ...............      28,000       10,573
  Loss on write off of investments .....................       3,400         --

Changes in assets and liabilities:

  Increase in accounts receivable ......................     (72,207)    (214,597)
  Decrease in prepaid expense ..........................       4,430        2,101
  Increase (decrease) in accounts payable and accrued
    expense ............................................     (89,892)     756,007
  Increase (decrease) in due to related parties ........      (8,333)      17,768
                                                           ---------    ---------
  Net cash provided (used) by operating activities .....      (1,887)     547,988
                                                           ---------    ---------

Cash flows from investing activities:
-------------------------------------

  Conveyance of oil & gas properties for cash ..........     477,950         --
  Development & acquisition of oil & gas properties ....    (103,642)    (183,051)
  Purchase of office equipment .........................      (3,428)        --
  Sale of mining data ..................................       1,970         --
  Additions, undeveloped mining properties .............        --            (40)
  Proceeds to prospect fees ............................        --         86,500
  Additions to cash surrender value ....................        --         (9,487)
                                                           ---------    ---------

  Net cash used in investing activities ................     372,850     (106,078)
                                                           ---------    ---------

Cash flows from financing activities:
-------------------------------------

  Note payable - proceeds ..............................       2,571       81,000
  Repayment of notes payable ...........................     (14,356)        --
                                                           ---------    ---------

                                                             (11,785)      81,000

  Net increase in cash and cash equivalents ............     359,178      522,910

  Cash and cash equivalents, beginning of year .........     425,306      238,465
                                                           ---------    ---------

  Cash and cash equivalents, end of year ...............   $ 784,484    $ 761,375
                                                           =========    =========

  Interest paid ........................................   $   5,960    $    --
                                                           =========    =========


Schedule of non cash investing and financing activities:
--------------------------------------------------------

  Notes payable issued for properties ..................   $ 206,250    $    --
  Common stock issued for properties ...................     275,000         --
                                                           ---------    ---------

                                                           $ 481,250    $    --
                                                           =========    =========


                     The accompanying notes are an integral
                            part of these statements.

                                        5
</TABLE>

                                     <PAGE>
                          ASPEN EXPLORATION CORPORATION

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

                               September 30, 1998


Note 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Aspen Exploration  Corporation ("the Company") was incorporated on February
     28,  1980 and is  engaged  in the  business  of  acquiring  and  developing
     interests in domestic oil and gas  properties and uranium and other mineral
     properties.

     Through  November  1996, the Company had oil and gas operations in Wyoming,
     Montana,  North Dakota,  Colorado and California,  and after November 1996,
     principally  in  California.  The Company's  primary  mineral  projects and
     targets of exploration (uranium) are in central Wyoming.

     The Company has two wholly  owned  subsidiaries.  None of the  subsidiaries
     have any assets, liabilities or operations.

     During fiscal year 1997 and the first two quarters of fiscal year 1998, the
     Company experienced cash flow and liquidity problems; however, subsequently
     cash flow has substantially increased, due to the production from three gas
     wells and four oil wells,  which has allowed  the Company to pay  creditors
     and resume normal operations.

     A summary of the Company's significant accounting policies follows:

     Consolidated financial statements
     ---------------------------------

     The  consolidated   financial   statements  include  the  Company  and  its
     wholly-owned subsidiaries,  Aspen Gold Mining Company and Aspen Recursos de
     Mexico.  Significant  intercompany accounts and transactions,  if any, have
     been eliminated.

     Statement of cash flows
     -----------------------

     For  statement  of cash flow  purposes,  the Company  considers  short-term
     investments  with  original  maturities  of three months or less to be cash
     equivalents.  Cash restricted from use in operations beyond three months is
     not considered a cash equivalent.


                                        6

<PAGE>



Note 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Management's Use of Estimates
     -----------------------------

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted   accounting   principles  requires  management  to  make  certain
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and the disclosure of contingent liabilities at the date of the
     financial statements and reported amounts of revenues and expenses.  Actual
     results could differ from those estimates.

     The mining and oil and gas  industries  are subject,  by their  nature,  to
     environmental  hazards  and  cleanup  costs for which the  Company  carries
     catastrophe  insurance.  At this time,  management  knows of no substantial
     costs from environmental  accidents or events for which it may be currently
     liable. In addition, the Company's oil and gas business makes it vulnerable
     to changes in  wellhead  prices of crude oil and natural  gas.  Such prices
     have been  volatile  in the past and can be  expected to be volatile in the
     future.  By  definition,  proved  reserves are based on current oil and gas
     prices and estimated reserves. Price declines reduce the estimated quantity
     of proved reserves and increase annual amortization expense (which is based
     on proved reserves).

     Impairment of Long-lived Assets
     -------------------------------

     The Company  evaluates the carrying  value of assets other than oil and gas
     assets for potential  impairment on an ongoing basis. The Company evaluates
     the  carrying  value of  long-lived  assets  and  long-lived  assets  to be
     disposed of for potential  impairment  periodically.  The Company considers
     projected  future  operating   results,   cash  flows,   trends  and  other
     circumstances in making such estimates and evaluations.

     Financial Instruments
     ---------------------

     The  carrying   value  of  current   assets  and   liabilities   reasonably
     approximates  their fair value due to their  short  maturity  periods.  The
     carrying value of the Company's debt  obligations  reasonably  approximates
     their fair value as the stated  interest rate  approximates  current market
     interest rates of debt with similar terms.

     New Accounting Pronouncements
     -----------------------------

     Earnings Per Share
     ------------------

     In February 1997, the Financial Accounting Standards Board issued Financial
     Accounting  Standard  No. 128 ("SFAS No.  128"),  addressing  earnings  per
     share.  SFAS No. 128 changed the  methodology of  calculating  earnings per
     

                                        7

<PAGE>



Note 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     share and renamed the two calculations basic earnings per share and diluted
     earnings per share. The calculations differ by eliminating any common stock
     equivalents  (such as stock options,  warrants,  and convertible  preferred
     stock) from basic earnings per share and changes certain  calculations when
     computing  diluted  earnings per share. The Company adopted SFAS No. 128 in
     fiscal year 1998.

     The following is a reconciliation  of the numerators and denominators  used
     in the  calculations of basic and diluted earnings (loss) per share for the
     three months ended September 30, 1998 and 1997:

<TABLE>
<CAPTION>

                                             September 30,                    September 30,
                                                 1998                              1997
                                                            Per                               Per
                                      Net                   Share       Net                   Share
                                      Income      Shares    Amount      Loss       Shares     Amount
                                      ------      ------    ------      ----       ------     ------
  
Basic earnings per share:
<S>                                    <C>       <C>          <C>      <C>        <C>          <C>         
  Net income (loss)
  and share amounts                    132,715   4,916,322    .03      (23,864)   4,456,322      --

  Dilutive securities
   stock options                                   460,000

  Repurchased shares                              (181,700)
                                     ---------------------------------------------------------------

Diluted earnings per share:

  Net income and assumed
  share conversion                     132,715   5,194,562    .03      (23,864)   4,456,322      --
                                     =========   =========    ===    =========    =========    =====

</TABLE>


     Precious metals and revenues
     ----------------------------

     Precious  metals  inventories  are  valued at the  lower of cost  (specific
     identification  method) or market.  There was no allowance  for  unrealized
     losses against inventories due to market decline at September 30, 1998.

     Oil and gas properties
     ----------------------

     The Company  follows the  "full-cost"  method of accounting for oil and gas
     properties.   Under  this  method,   all  costs  associated  with  property
     acquisition,  exploration and development  activities,  including  internal
     costs  that  can  be  directly   identified  with  those  activities,   are
     capitalized  within one cost center.  No gains or losses are  recognized on
     the receipt of prospect fees or on the sale or  abandonment  of oil and gas
     properties, unless the disposition of significant reserves is involved.


                                        8

<PAGE>



Note 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Depletion  and  amortization  of the full-cost  pool is computed  using the
     units-of-production  method based on proved reserves as determined annually
     by the Company and independent engineers. An additional depletion provision
     in the form of a valuation  allowance is made if the costs  incurred on oil
     and gas  properties,  or  revisions in reserve  estimates,  cause the total
     capitalized  costs of oil and gas  properties  in the cost center to exceed
     the capitalization  ceiling.  The capitalization  ceiling is the sum of (1)
     the present  value of future net  revenues  from  estimated  production  of
     proved oil and gas  reserves  applicable  to the cost  center  plus (2) the
     lower  of cost or  estimated  fair  value  of the  cost  center's  unproved
     properties less (3) applicable income tax effects.  The valuation allowance
     was $281,719 at September 30, 1998 and September 30, 1997.

     Property and equipment
     ----------------------

     Depreciation  and  amortization  of property and  equipment are expensed in
     amounts  sufficient to relate the expiring costs of  depreciable  assets to
     operations   over   estimated   service   lives,   principally   using  the
     straight-line  method.  Estimated  service  lives range from three to eight
     years.  When  assets  are  sold or  otherwise  disposed  of,  the  cost and
     accumulated  depreciation  are removed from the accounts and any  resulting
     gain or loss is reflected in operations in the period realized.

     Undeveloped mining properties
     -----------------------------

     The Company capitalizes all costs associated with acquiring,  exploring and
     developing  mineral  properties,  including  certain  internal  costs which
     specifically   relate  to  each  mining  property  area  ("cost   center").
     Capitalized  costs are  deferred  until the area of  interest to which they
     relate is put into operation,  sold,  abandoned or impaired.  The Company's
     pro rata  share of  advance  mineral  royalties,  bonuses  and  other  cash
     payments  received by the Company from joint  venture or other  exploration
     participants  reduce  the  amount  of  a  cost  center  as  a  recovery  of
     capitalized  costs.  The excess of the  Company's pro rata share of advance
     mineral royalties,  bonuses and other cash payments received by the Company
     from joint venture or other exploration participants over capitalized costs
     in a specific cost center are recognized as revenue in the period received.
     Gains or losses on the sale or abandonment of mining properties are charged
     to current operations.



                                        9

<PAGE>



Note 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


     Deferred compensation Costs
     ---------------------------

     The  Company  records  stock  bonuses to  employees  as an  expense  and an
     increase  to paid-in  capital in the year of grant  unless the bonus  vests
     over future years. Bonuses that vest are deferred and expensed ratably over
     the vesting period.


Note 2   MINING PROPERTIES

     KAYCEE AND SHAMROCK URANIUM PROSPECTS
     -------------------------------------

     The Company has recently begun  exploration for in situ uranium deposits in
     Wyoming.  During  the  years  ended  June 30,  1998 and 1997,  the  Company
     expended  $4,472 and  $63,352,  respectively,  on the  Kaycee and  Shamrock
     prospects.  In addition  during 1998,  the Company  issued to the president
     100,000  shares  of the  Company's  common  stock,  valued at  $14,000,  in
     exchange for the  president's 25% interest in geological data and potential
     uranium prospects.

     During fiscal 1998, the Company sold the geological  data of the Kaycee and
     Shamrock  prospects to a privately-held  Canadian company and, in exchange,
     received a $125,000  cash payment and a commitment to receive an additional
     $125,000 prior to December 31, 1998. Under the terms of the sales agreement
     reached in March,  1998,  the  Company  also  received 2 million  shares or
     approximately 25% of the common stock of the privately-held company. To the
     knowledge  of the  Company,  at the time of this  filing,  the stock had no
     market value.

Note 3   NOTES PAYABLE

     The Company owes the following debt:

                                                      September 30,    June 30,
                                                          1998           1998
                                                          ----           ----

     Borrowings  from life  insurance  company  on
     cash   surrender   value  of   officer   life
     insurance,  interest  at  6%  per  annum,  no
     specific  due  date,  however,   the  Company
     intends  to repay  this  obligation  in equal
     installments  during  fiscal years  6/30/2000
     and   6/30/2001,   collateralized   by   cash
     surrender value of policy

                                                       $  210,437    $  210,437


                                       10

<PAGE>



Note 3   NOTES PAYABLE (CONTINUED)

     Note  payable  to  related   party,   monthly
     principal  and  interest  payments of $4,269,
     due  September,   2000,   collateralized   by
     working interests in the Emigh lease                  91,398       101,456

     Note  payable  to  auto  dealership,  monthly
     principal and interest  payments of $879, due
     July, 2000, collateralized by new vehicle             18,945        20,672

     Note payable to an  unaffiliated  third party
     for  the   acquisition   of   producing   gas
     properties  in  Tehama  and  Glenn  Counties,
     California,    interest    at   5.475%    and
     collateralized  by working  interests  in the
     Johnson and Gay Gas Units                            206,250          --

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

                                                          527,030       332,565

     Less current portion                                 120,257        52,205
                                                       ----------    ----------

                                                       $  406,773    $  280,360
                                                       ==========    ==========


Note 4   COMMITMENTS AND CONTINGENCIES

     At September 30, 1998 the Company was  committed to the following  drilling
     and development projects in California:

              1.  Drill, complete and equip the Emigh 35-2.
              2.  Drill, complete and equip the Cilker 4-1 well.
              3.  Drill, complete and equip the Brandt 46X-27 well.


     Additional  perforations  were added in the Emigh 34-1 and Emigh 35-1 wells
     during the first  quarter of the  current  fiscal  year.  These  additional
     producing intervals, in addition to the production from the Emigh 2-1, have
     increased the gross  production from these three wells to its current level
     of approximately 8,000 MMBTU per day.

     During the second quarter of the fiscal year, the Company drilled the Emigh
     35-2 and set producing  casing to a depth of  approximately  10,640'.  This
     well  will be  deepened  to a depth of  approximately  11,200'  in the near
     future.


                                       11

<PAGE>



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


Liquidity and Capital Resources
-------------------------------

September 30, 1998 as compared to September 30, 1997
----------------------------------------------------

Registrant  has  sustained   operating  losses  in  prior  years.  In  addition,
Registrant has used  substantial  amounts of working  capital in its operations.
However,  at September 30, 1998 current assets exceeded  current  liabilities by
$406,394,  and cash used for  operations  during the  quarter  amounted  to only
$1,887. At June 30, 1998 current liabilities  exceeded current assets by $50,734
and Registrant had a working capital deficit to that extent.  The improvement of
$457,128 in working  capital from a negative  $50,734 to a positive  $406,394 is
primarily due to the issuance of common stock and the increase in long term debt
by  Registrant  in  conjunction  with  the  acquisition  of  two  producing  gas
properties in California.

On July 16, 1998,  Registrant  acquired a net 21% working  interest  (16.17% net
revenue  interest)  in two  natural gas units,  the  Johnson  and Gay Units,  in
addition  to a 5.00%  royalty  interest  in the Gay Unit,  located in Tehama and
Glenn Counties,  California.  Registrant acquired a 100% working interest in the
two properties from D. E. Craggs, Inc., an unaffiliated third party for $275,000
in cash and 275,000  shares of  Registrant's  restricted  common stock valued at
$1.00 per  share.  Simultaneously  with the  acquisition  Registrant  sold a 79%
working  interest  in the  two  prospects  to  certain  unaffiliated  and  three
affiliated purchasers for a total price of $477,950.

The  effective  date of the  acquisition  and  disposition  was June  30,  1998.
Pursuant to the agreement  with Craggs,  Registrant  paid Craggs 25% of the cash
and stock at the closing  ($68,750 and 68,750 shares) and is obligated to pay an
additional  25% (plus interest on the cash from the date of closing at the daily
rate of 0.015%) in January 1999, 2000, and 2001.

Registrant  believes that actions  presently being taken to revise  Registrant's
operations and financial  requirements provide the opportunity for Registrant to
continue as a going concern.  In light of recent successful  drilling operations
and the acquisition of producing properties, increased revenues will continue to
have  a  positive  effect  on   Registrant's   working  capital  and  contribute
significantly to its cash flow in the coming months.

Registrant  is now focusing most of its efforts on drilling for or acquiring oil
and gas production in the state of California.

Registrant  shares certain oil and gas drilling  opportunities  with third party
investors  (including  some affiliated  investors) and takes a reduced  interest
until after payout to the third party investors.  Payout in several of the wells
has occurred,  and consequently  Registrant is now receiving  increased revenues
from its oil and gas operations. This commenced in the first quarter of calendar
year 1997 when Emigh 2-1 paid out, and will continue for the foreseeable future.

                                       12

<PAGE>

                              Results of Operations
                              ---------------------


September 30, 1998 Compared to September 30, 1997
-------------------------------------------------

For the three months ended September 30, 1998 Registrant's  operations continued
to be  focused  on the  production  of oil and gas,  and the  investigation  for
possible acquisition of producing oil and gas properties.

Oil and gas revenues for the three months  ended  September  30, 1998  increased
$224,922,  from $70,340 to $295,262,  a 220%  increase.  This increase  reflects
Registrant's  continued successful efforts in drilling exploratory and extension
wells in California  as well as bringing  recent  acquisitions  into the revenue
stream.

Oil and gas production  expenses  increased $5,405 or 92% from $5,857 to $11,262
for the period ended  September  30, 1998.  This increase was due to a number of
new wells  coming  into  production  during the past year.  These new wells also
reflect positively on increased oil and gas revenue.

Depletion,  depreciation and amortization increased significantly,  from $10,573
to $28,000,  a $17,427 or 165%  increase.  This increase  reflects added volumes
produced from the new wells and the under estimate of actual  depletion  expense
for the first quarter of 1997 by approximately $16,000.

Selling,  general and administrative expenses increased by $29,264 or 25.5% from
$114,564 to  $143,828.  The bulk of this  increase  was caused by an increase in
audit  and  accounting  fees of  $21,824  due to the  fact  that the  audit  was
performed for fiscal 1997 during the second and third quarters of 1998 resulting
in no expenditure  for accounting  fees during the three months ended  September
30,  1997.   Membership  dues,  temporary  secretarial  fees,  and  unclassified
miscellaneous  expense  increased  by a  further  $12,000  and was  offset  by a
reduction  of salary  expense of  approximately  $8,000  during the three months
ended September 30, 1998.

As a result of Registrant's  operations for the three months ended September 30,
1998, Registrant ended the quarter with net income of $132,715 compared to a net
loss of  ($23,864)  a year  earlier.  This  increase of  approximately  $156,600
reflected  an increase in total  revenues of  $225,000  due  primarily  to newly
discovered oil and gas  production  coming on line and was offset by an increase
in operating costs,  depletion,  depreciation and amortization,  and general and
administrative expenses of approximately $58,000.


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<PAGE>


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


                                           ASPEN EXPLORATION CORPORATION
                                                    (Registrant)




                                           /s/ R. V. Bailey
                                           -------------------------------------
                                           By:  R. V. Bailey,
November 12, 1998                               Chief Executive Officer,
                                                Principal Financial Officer



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