<PAGE>

                                 FORM 10-Q

                    SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D. C.  20549

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

              For the Quarterly Period Ended   June 30, 1998

                                    OR

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

                        Commission File No. 0-9976




                            ARCH PETROLEUM INC.
          (Exact name of registrant as specified in its charter)

                Delaware                             83-0248900
     (State or other jurisdiction of              (I.R.S. Employer
     incorporation or organization)             Identification No.)

   777 Taylor Street, Suite II, Fort Worth, Texas      76102
   (Address of principal executive offices)          (Zip Code)

    Registrant's telephone number, including area code  (817) 332-9209

   (Former name, former address and former fiscal year, if changed since
                               last report.)

   Indicate by  check mark  whether the  registrant  (1) has  filed  all
   reports required to be filed by Section 13 or 15(d) of the Securities
   Exchange Act of  1934 during  the preceding  12 months  (or for  such
   shorter  period  that  the  registrant  was  required  to  file  such
   reports), and (2) has  been subject to  such filing requirements  for
   the past 90 days.

                 Yes   X                              No


   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 July 31, 1998     
   Common Stock, $.01 Par Value  			    17,321,804






<PAGE>

                            ARCH PETROLEUM INC.
                                   INDEX


                                                                  Page
   Part I.  FINANCIAL INFORMATION

   Item 1.

   CONSOLIDATED BALANCE SHEETS -
          June 30, 1998 and December 31, 1997 ...................   3

   CONSOLIDATED STATEMENTS OF OPERATIONS -
          Three and six months ended June 30, 1998 and 1997 .....   5

   CONSOLIDATED STATEMENTS OF CASH FLOWS -
          Six months ended June 30, 1998 and 1997 ...............   6

   CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........   7


   Item 2.

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS ...................   8


   Part II.OTHER INFORMATION

   Item 1.
        Legal Proceedings .......................................  N/A

   Item 2.
        Changes in Securities ...................................  N/A

   Item 3.
        Defaults upon Senior Securities .........................  N/A

   Item 4.
        Submission of Matters to a Vote of Security Holders .....  N/A

   Item 5.
        Other Information .......................................  N/A

   Item 6.
        Exhibits and Reports on Form 8-K

          a.  Exhibits ..........................................  N/A
          b.  Reports on Form 8-K ...............................  10


   SIGNATURES  ..................................................  11



<PAGE>
<TABLE>
                            ARCH PETROLEUM INC.
                        CONSOLIDATED BALANCE SHEETS

                                              (Unaudited)
   <S>                                      <C>            <C>
   ASSETS
                                                June 30,     December 31,
                                                  1998           1997
   Current Assets:
     Cash and cash equivalents              $    924,000   $  2,160,000
     Accounts receivable - trade               3,295,000      3,585,000
     Accounts receivable - related
      parties                                    430,000        729,000
     Prepaid expenses and other                  643,000        544,000

        Total current assets                   5,292,000      7,018,000

   Property and Equipment, at cost:
     Oil and gas properties accounted
      for by the successful efforts
      method                                 106,764,000     99,178,000
     Natural gas pipelines                     5,976,000      5,657,000
     Furniture, fixtures and other
      equipment                                1,053,000      1,033,000

                                             113,793,000    105,868,000
     Less accumulated depletion,
      depreciation and amortization           28,506,000     25,320,000

         Net property and equipment           85,287,000     80,548,000

   Accounts receivable - related parties       1,405,000      1,406,000
   Notes receivable - related parties          1,950,000      1,874,000
   Deferred income taxes                       1,808,000      1,511,000
   Other                                         881,000        814,000

                                            $ 96,623,000   $ 93,171,000


      The accompanying condensed notes are an integral part of these
                    consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                            ARCH PETROLEUM INC.
                        CONSOLIDATED BALANCE SHEETS



   <S>                                      <C>           <C>
                                              (Unaudited)
   LIABILITIES AND SHAREHOLDERS' EQUITY         June 30,    December 31,
                                                  1998          1997
   Current Liabilities:
    Accounts payable                        $  6,767,000   $  6,239,000
    Current maturities of long-term debt      36,500,000           -
    Preferred stock dividends payable            311,000        311,000

     Total current liabilities                43,578,000      6,550,000

   Long-term debt, less current
    maturities                                      -        30,000,000
   Non-recourse production payment
    obligation                                15,824,000     13,317,000
   Deferred revenue                              310,000      2,123,000
   Convertible subordinated notes              5,000,000      5,000,000
   Deferred federal income taxes               4,870,000      5,770,000
   Other liabilities                             312,000        273,000

   Exchangeable convertible preferred
    stock, $.01 par value, 727,273 shares
    authorized, issued and outstanding        20,000,000     20,000,000

   Shareholders' Equity:
    Preferred stock, $.01 par value,
     1,000,000 shares authorized, 727,273
     issued as exchangeable convertible
     preferred stock                                -              -

    Common stock, $.01 par value,
     50,000,000 shares authorized,
     17,321,804 issued and outstanding           173,000        173,000

    Additional paid-in capital                 6,137,000      6,137,000

    Employee notes for stock purchases        (1,091,000)    (1,047,000)

    Treasury stock, 100,000 shares              (206,000)      (206,000)

    Cumulative translation adjustment           (357,000)      (219,000)

    Retained earnings                          2,073,000      5,300,000
                                               6,729,000     10,138,000

                                            $ 96,623,000   $ 93,171,000


      The accompanying condensed notes are an integral part of these
                    consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
                            ARCH PETROLEUM INC.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)

                           Three Months Ended           Six Months Ended
                                June 30,                    June 30,
                           1998         1997            1998         1997
   <S>                 <C>          <C>             <C>          <C>
   Revenues:
    Oil and gas sales  $ 4,841,000  $ 5,403,000     $ 9,379,000  $ 11,921,000
    Pipeline sales       1,351,000   21,705,000       2,578,000    48,147,000
    Interest and other     143,000      199,000         269,000       382,000
                         6,335,000   27,307,000      12,226,000    60,450,000
   Costs and Expenses:
    Oil and gas lease
     operations          2,786,000    1,887,000       5,116,000     3,989,000
    Natural gas
     purchases and
     pipeline
     operations          1,189,000   20,883,000       2,349,000    46,207,000
    Exploration             55,000      127,000         144,000       202,000
    Depletion,
     depreciation and
     amortization        1,799,000    1,766,000       3,380,000     3,434,000
    General and
     administrative      1,663,000    1,430,000       2,677,000     2,667,000
    Interest             1,191,000    1,052,000       2,279,000     2,040,000
    Foreign currency
     transaction (gain)
     loss                   63,000      (66,000)        (49,000)       41,000
    Minority interest
     in income of
     consolidated
     subsidiaries             -         141,000            -          448,000
                         8,746,000   27,220,000      15,896,000    59,028,000
   Income (loss)
    before income
    taxes and
    dividends           (2,411,000)      87,000      (3,670,000)    1,422,000

   Income tax expense
    (benefit)             (788,000)      32,000      (1,243,000)      466,000

   Net income (loss)
    before dividends    (1,623,000)      55,000      (2,427,000)      956,000

   Dividends on
    preferred stock        400,000      400,000         800,000       800,000

   Net income (loss)
    available to common
    shareholders       $(2,023,000) $  (345,000)    $(3,227,000) $    156,000

   Net income (loss)
    per common share -
    basic and diluted  $     (0.12) $     (0.02)    $     (0.19) $       0.01

   Weighted average
    common shares
    outstanding -
    basic               17,322,000   17,285,000      17,322,000    17,287,000

      The accompanying condensed notes are an integral part of these
                    consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
                            ARCH PETROLEUM INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                                                 Six Months Ended
                                                     June 30,
                                               1998            1997
   <S>                                     <C>             <C>
   Cash flows from operating
    activities:
    Net income (loss)                      $(2,427,000)    $    956,000
    Adjustments to reconcile
     to net cash from operations:
     Depletion, depreciation and
      amortization                           3,380,000        3,434,000
     Deferred revenue                         (746,000)      (1,196,000)
     Deferred income taxes                  (1,243,000)         357,000
     Dry hole costs and other                   66,000             -
     Interest on production payment
      obligation                               712,000          457,000
     Interest on notes receivable
      and other                               (184,000)         (90,000)
     Minority interest in net income
      of consolidated subsidiaries                -             448,000
     Foreign currency transaction
      (gain) loss                              (49,000)          41,000
                                              (491,000)       4,407,000

    Change in accounts receivable              524,000        4,097,000
    Change in other current assets            (102,000)         388,000

    Change in accounts receivable -
     related parties                           364,000          (92,000)
    Change in accounts payable and
     other current liabilities                 620,000       (3,135,000)
    Production payment remedy adjustment      (177,000)        (245,000)

      Net operating cash flows                 738,000        5,420,000

   Cash flows from investing activities:
    Capital expenditures                    (7,482,000)      (7,865,000)
    Notes receivable and other assets         (192,000)        (216,000)

      Net investing cash flows              (7,674,000)      (8,081,000)

   Cash flows from financing activities:
    Proceeds from bank borrowing             7,500,000        6,000,000
    Payments of bank debt                   (1,000,000)      (3,064,000)
    Payment of preferred stock dividends      (800,000)        (800,000)
    Proceeds from note payable - minority
     interest holder                              -              73,000

      Net financing cash flows               5,700,000        2,209,000

   Change in cash and cash equivalents      (1,236,000)        (452,000)

   Cash and cash equivalents at beginning
    of period                                2,160,000        3,192,000

   Cash and cash equivalents at end of
    period                                 $   924,000     $  2,740,000

       The accompanying condensed notes are an integral part of these
                    consolidated financial statements.
</TABLE>
<PAGE>
                            ARCH PETROLEUM INC.
           CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)

        In the  opinion  of Arch  Petroleum  Inc. (the  "Company"),  the
   accompanying consolidated financial statements,  which have not  been
   audited by independent  public accountants,  contain all  adjustments
   necessary to  present  fairly the  Company's  consolidated  financial
   position, the results of  its operations and its  cash flows for  the
   periods reported.  The consolidated financial statements include  the
   accounts of  the  Company  and its  subsidiaries.    All  significant
   intercompany balances  and  transactions  are  eliminated.    Certain
   information and footnote disclosures  normally included in  financial
   statements prepared in accordance with generally accepted  accounting
   principles have been  condensed or  omitted.   Certain prior  amounts
   have been  reclassified  to conform  to  1998 presentation.    It  is
   suggested that  these consolidated  financial statements  be read  in
   conjunction with the consolidated financial statements and  footnotes
   thereto included in the  Company's Annual Report on  Form 10-K as  of
   December 31, 1997. The results of operations for the three months and
   six  months  ended  June  30,  1998  and  1997  are  not  necessarily
   indicative   of   the  results  to  be  expected  for  a  full  year.

        Effective January  1, 1998,  the  Company adopted  Statement  of
   Financial  Accounting   Standards   ("SFAS")  No.   130,   "Reporting
   Comprehensive Income".  Comprehensive income  as defined by SFAS  No.
   130 is net  income plus direct  adjustments to shareholders'  equity.
   The cumulative  translation  adjustment  of  the  Company's  Canadian
   subsidiary, Arch  Petroleum Ltd.  ("APL"), is  the only  such  direct
   adjustment recorded by the Company.

<TABLE>
                               Three Months Ended          Six Months Ended
                                    June 30,                   June 30,

                               1998          1997          1998         1997
  <S>                      <C>           <C>           <C>          <C>

  Comprehensive income:
    Net income (loss)      $(1,623,000)  $    55,000   $(2,427,000) $ 956,000
    Cumulative translation
     adjustment, net of
     tax                      (186,000)       17,000      (138,000)   (55,000)

    Total comprehensive
     income (loss)         $(1,809,000)  $    72,000   $(2,565,000) $ 901,000
</TABLE>
<PAGE>

        On May 28, 1998, the Company and Pogo Producing Company ("Pogo")
   entered into a definitive Agreement and  Plan of Merger (the  "Merger
   Agreement") that  will  provide  for  a  tax-free,  stock  for  stock
   transaction through  which the  Company will  become a  wholly  owned
   subsidiary of  Pogo.   The  Merger  Agreement provides  for  a  fixed
   exchange ratio of one share of  Pogo common stock for 10.4 shares  of
   the Company's common stock.   In addition,  holders of the  Company's
   preferred stock will receive one share of Pogo common stock for  each
   1.04 shares of  preferred stock  they hold.   Former  holders of  the
   Company's stock will  hold approximately six  percent of Pogo  common
   stock after the merger.  The total number of outstanding Pogo  shares
   after the merger will be approximately  40,100,000 shares.  Based  on
   the Company's  closing  price of  $2.47  on  May 28,  1998,  and  the
   assumption of approximately $48.5 million  of the Company's debt  and
   production payment obligations, the transaction has a total value  of
   approximately $115 million.

        The Boards of Directors of both Pogo and the Company unanimously
   approved the merger; however, the merger is also subject to  approval
   by the Company's shareholders and to customary regulatory  approvals.
   Executive  officers   and  directors   of  the   Company,   Threshold
   Development Corporation  and  all of  the  holders of  the  Company's
   preferred stock, representing approximately 47% of Arch's outstanding
   stock entitled to  vote on the  merger at  the shareholders  meeting,
   have entered into agreements with Pogo  agreeing to vote in favor  of
   the merger.  A  special meeting of shareholders  of the Company  will
   take place on August 14, 1998, wherein the shareholders will be asked
   to approve and adopt the Merger  Agreement.  If approved, the  Merger
   Agreement will be closed on or about August 17, 1998.  The merger  is
   expected to be accounted for as a pooling of interests and qualify as
   a tax-free reorganization.


                            ARCH PETROLEUM INC.
                   MANAGEMENT'S DISCUSSION AND ANALYSIS
             OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        With  the  exception  of  historical  information,  the  matters
   discussed herein are  forward-looking statements  that involve  risks
   and uncertainties including, but  not limited to,  oil and gas  price
   fluctuations, economic conditions,  reserve estimates, interest  rate
   fluctuations, the  regulatory and  political environments,  estimated
   volumes of gas to be delivered pursuant to the volumetric  production
   payment and other risks indicated in filings with the Securities  and
   Exchange Commission.

        The Company operates in an industry that is subject to  volatile
   prices for its products.  Cash flows from operations may be  affected
   to a significant degree by fluctuations in prices that are brought on
   by factors beyond the Company's control.

<PAGE>

 Liquidity and Capital Resources

        In 1998 the Company's chief sources  of funds were $6.5  million
   (net)  from  its  bank  credit  facilities  and  $0.7  million   from
   operations.     Cash  flows   from  operations   were  decreased   by
   approximately $4.7 million in 1998 as compared to 1997 as a result of
   lower than normal  oil and gas  prices.  These  funds were  primarily
   used to  fund $3.5  million of  domestic drilling,  primarily in  New
   Mexico and West Texas, $4.0 million for the drilling of new wells  in
   Canada,  including   construction   of  supporting   facilities   and
   pipelines, and $0.8 million for preferred stock dividends.

        The Company participates  in two  bank credit  facilities:   the
   Third Restated Revolving Credit Loan Agreement among the Company  and
   Bank One, Texas, NA,  the Agent bank and  other banks (the  "Domestic
   Revolver"), and the Credit Agreement among APL and Bank of  Montreal,
   the Canadian Agent bank  (the "Canadian Revolver").   The Agent  bank
   and the Canadian Agent  bank together are (the  "Lenders").  The  two
   credit facilities are separate bank revolvers.

        The Company's Revolvers are in place  for use by the Company  at
   its discretion for certain activities including drilling, development
   and acquisition of oil and gas properties.  The Company has  borrowed
   $22.5 million and  $14.0 million  against the  Domestic and  Canadian
   Revolvers at June 30, 1998,  respectively.  The Revolvers'  borrowing
   base is the  amount that the  Lenders commit to  loan to the  Company
   based on  the designated  loan value  established by  the Lenders  at
   their sole discretion and  assigned to certain  of the Company's  oil
   and gas properties which serve as  collateral for any loan which  may
   be outstanding under  the Revolvers. The  Revolver facility is  $50.0
   million and the borrowing base  is currently allocated $23.0  million
   Domestic and $14.0 million Canadian. The Revolvers' borrowing base is
   reviewed   semiannually   by  the  Lenders  at  their  discretion.  A
   commitment fee of  one half of  one percent of  the unused  borrowing
   base accrues and is payable quarterly.   The Revolvers mature on  May
   1, 1999.   Borrowings  under the  Revolvers  will, at  the  Company's
   option, bear interest  either at  the Lenders'  Base Rate  or a  rate
   based on the London  Interbank Offered Rate  (LIBOR).  The  effective
   interest rate realized was 8.19% at June 30, 1998.

        The Revolvers contain  normal and  standard covenants  generally
   found in lending  agreements.   Among other  things, these  covenants
   prohibit the  declaration  and  payment  of  cash  dividends  on  the
   Company's common stock.   In  addition, the  covenants stipulate  the
   maintenance of financial criteria including:  a minimum level of  net
   worth, a certain current ratio, a certain debt to net worth ratio and
   a defined net income  in excess of  scheduled interest and  principal
   payments.

        The entire  $36.5  million  due under  the  Revolvers  has  been
   classified as  current  on the  June  30, 1998  Consolidated  Balance
   Sheets because the Revolvers  mature within one year.   As a  result,
   the Company is  in technical default  with certain  covenants in  the
   loan agreements.   If the Merger  Agreement is  not consummated,  the
   Company will begin discussions  with its Lenders  to extend its  bank
   credit facilities.   The Company has no other unused lines of credit.

<PAGE>

   Results of Operations

                Six months ended June 30, 1998 compared to
                      six months ended June 30, 1997

        The Company recorded a net  loss before dividends of  $2,427,000
   in 1998 as  compared to net  income of $956,000  before dividends  in
   1997.    Total  revenues  and  expenses  decreased  as  a  result  of
   diminished natural gas pipeline segment operations after the sale  of
   a pipeline  subsidiary  effective June  30,  1997.   Net  income  was
   decreased primarily as a  result of lower oil  and gas prices  during
   1998.

        Revenues from oil and gas sales decreased $2,542,000 in 1998  as
   compared to 1997.   Oil production  increased to  336,000 barrels  in
   1998 as compared to 307,000 barrels in 1997, resulting in a  $590,000
   sales increase.  The Company has begun realizing production from  the
   new wells drilled during late 1997 and early 1998.  The average price
   received for oil was  $14.12 in 1998 as  compared to $20.58 in  1997,
   resulting in a  $2,168,000 sales decrease.   Gas  production in  1998
   increased to  2,813,000 Mcf  as compared  to 2,684,000  Mcf in  1997,
   resulting in  a  $270,000  sales  increase.    The  increase  in  gas
   production is attributable primarily to  new wells drilled in  Canada
   in late 1997.  The average price received for gas decreased to  $1.65
   in 1998 as compared to $2.09 in 1997, resulting in a $1,233,000 sales
   decrease.   The  average price  received  for gas  excluding  certain
   production payment volumes was $1.83 in 1998 as compared to $2.94  in
   1997.

        Lease  operating  expenses  ("LOE")  related  to  oil  and   gas
   properties increased $1,127,000 as a result of the new wells  drilled
   during 1998  and general  increases in  the cost  of field  services.
   Lifting costs per equivalent barrel increased  in 1998 to $6.36  from
   $5.29 in  1997 primarily  as a  result of  increases in  the cost  of
   services.

        Interest expense  increased $239,000  in  1998 due  entirely  to
   interest  associated  with   the  accounting   treatment  of   volume
   deficiencies related to the production payment obligation.   Interest
   related to the production payment obligation of $712,000 and $457,000
   in 1998 and 1997, respectively, is a non-cash item that is added back
   to cash flows in the Consolidated Statements of Cash Flows.

<PAGE>


               Three months ended June 30, 1998 compared to
                     three months ended June 30, 1997

        The Company recorded a net  loss before dividends of  $1,623,000
   in 1998 as  compared to  net income  of $55,000  before dividends  in
   1997. Total revenues and expenses decreased as a result of diminished
   natural gas pipeline segment operations after the sale of a  pipeline
   subsidiary effective  June  30,  1997.    Net  income  was  decreased
   primarily as a result of lower oil and gas prices during 1998.

        Revenues from oil and  gas sales decreased  $562,000 in 1998  as
   compared to 1997.   Oil production  increased to  175,000 barrels  in
   1998 as compared to 165,000 barrels in 1997, resulting in a  $192,000
   sales increase.  The Company has begun realizing production from  the
   new wells drilled during late 1997 and early 1998.  The average price
   received for oil was  $13.77 in 1998 as  compared to $19.34 in  1997,
   resulting in  a $975,000  sales decrease.    Gas production  in  1998
   increased to  1,437,000 Mcf  as compared  to 1,171,000  Mcf in  1997,
   resulting in  a  $502,000  sales  increase.    The  increase  in  gas
   production is attributable primarily to  new wells drilled in  Canada
   in late 1997.  The average price received for gas decreased to  $1.69
   in 1998 as compared to $1.89  in 1997, resulting in a $281,000  sales
   decrease.   The  average price  received  for gas  excluding  certain
   production payment volumes was $1.88 in 1998 as compared to $2.46  in
   1997.

        Lease  operating  expenses  ("LOE")  related  to  oil  and   gas
   properties increased $899,000 as  a result of  the new wells  drilled
   during 1998  and general  increases in  the cost  of field  services.
   Lifting costs per equivalent barrel increased  in 1998 to $6.72  from
   $5.24 in 1997 as  a result of  increases in the  cost of services  as
   well as decreased gas production from Keystone.

        Interest expense  increased $139,000  in  1998 due  entirely  to
   interest  associated  with   the  accounting   treatment  of   volume
   deficiencies related to the production payment obligation.   Interest
   related to the production payment obligation of $373,000 and $233,000
   in 1998 and 1997, respectively, is a non-cash item that is added back
   to cash flows in the Consolidated Statements of Cash Flows.

<PAGE>
                                 Part II.

   Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

        Form 8-K current report dated May 28, 1998, was filed on June 4,
   1998.   This  report was  filed  pursuant  to the  Company  and  Pogo
   entering into the Merger Agreement that will provide for a  tax-free,
   stock for stock transaction through which  the Company will become  a
   wholly owned subsidiary of Pogo.  The Merger Agreement provides for a
   fixed exchange  ratio of  one share  of Pogo  common stock  for  10.4
   shares of the Company's  common stock.  In  addition, holders of  the
   Company's preferred stock will receive one share of Pogo common stock
   for each 1.04 shares of preferred stock they hold.  Former holders of
   the Company's  stock  will hold  approximately  six percent  of  Pogo
   common stock after the merger.  The total number of outstanding  Pogo
   shares after  the merger  will  be approximately  40,100,000  shares.
   Based on the Company's  closing price of $2.47  on May 28, 1998,  and
   the assumption of approximately $48.5  million of the Company's  debt
   and production payment obligations, the transaction has a total value
   of approximately $115 million.

        The Boards of Directors of both Pogo and the Company unanimously
   approved the merger; however, the merger is also subject to  approval
   by the Company's shareholders and to customary regulatory  approvals.
   Executive  officers   and  directors   of  the   Company,   Threshold
   Development Corporation  and  all of  the  holders of  the  Company's
   preferred stock,  representing  approximately 47%  of  the  Company's
   outstanding stock entitled to vote on the merger at the  shareholders
   meeting, have entered into agreements with  Pogo agreeing to vote  in
   favor of  the merger.    A special  meeting  of shareholders  of  the
   Company will take place on August 14, 1998, wherein the  shareholders
   will be  asked  to  approve  and adopt  the  Merger  Agreement.    If
   approved, the Merger Agreement will be closed on or about August  17,
   1998.  The merger  is expected to  be accounted for  as a pooling  of
   interests and qualify as a tax-free reorganization.

<PAGE>

                                SIGNATURES



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





                                                ARCH PETROLEUM INC.

   (Registrant)


   Date:  August 12, 1998                         /s/ Fred Cantu
                                                  Fred Cantu
                                                  Treasurer and
                                                  Chief Financial Officer
















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