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   March 31, 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 April 30, 1998

      Common Stock, $.01 Par Value                     17,321,804


<PAGE>

                               ARCH PETROLEUM INC.

                                      INDEX

                                                                       Page
   Part I. FINANCIAL INFORMATION                                      Number

   Item 1.

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

           CONSOLIDATED STATEMENTS OF OPERATIONS -
             Three months ended March 31, 1998 and 1997.............    5

           CONSOLIDATED STATEMENTS OF CASH FLOWS -
             Three months ended March 31, 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 .............................   N/A

         SIGNATURES ................................................    10
<PAGE>
<TABLE>

                               ARCH PETROLEUM INC.
                           CONSOLIDATED BALANCE SHEETS


                                               (Unaudited)
   ASSETS                                       March 31,
                                                December 31,
                                                   1998              1997
   <S>                                          <C>              <C>
   Current Assets:
     Cash and cash equivalents                  $1,382,000        $2,160,000
     Accounts receivable - trade                 2,881,000         3,585,000
     Accounts receivable - related parties         613,000           729,000
     Prepaid expenses and other                    399,000           544,000

        Total current assets                     5,275,000         7,018,000

   Property and Equipment, at cost:
   Oil and gas properties accounted for
    by the successful efforts method           102,464,000        99,178,000
     Natural gas pipelines                       5,940,000         5,657,000
     Furniture, fixtures and other equipment     1,043,000         1,033,000

                                               109,447,000       105,868,000
     Less accumulated depletion, depreciation
      and amortization                          26,870,000        25,320,000

        Net property and equipment              82,577,000        80,548,000

   Accounts receivable - related parties         1,458,000         1,406,000
   Notes receivable - related parties            1,905,000         1,874,000
   Deferred income taxes                         1,640,000         1,511,000
   Other                                           882,000           814,000

                                               $93,737,000       $93,171,000
</TABLE>

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


                                                (Unaudited)
   LIABILITIES AND SHAREHOLDERS' EQUITY          March 31,       December 31,
                                                   1998              1997
   <S>                                          <C>               <C>
   Current Liabilities:
     Accounts payable                           $5,563,000        $6,239,000
     Preferred stock dividends payable             711,000           311,000

        Total current liabilities                6,274,000         6,550,000

   Long-term debt                               32,000,000        30,000,000
   Non-recourse production payment
    obligation                                  14,545,000        13,317,000
   Deferred revenue                              1,222,000         2,123,000
   Convertible subordinated notes                5,000,000         5,000,000
   Deferred federal income taxes                 5,431,000         5,770,000
   Other liabilities                               299,000           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 shares issued and
      outstanding                                  173,000           173,000

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

     Employee notes for stock purchases         (1,064,000)       (1,047,000)
     
     Treasury stock, 100,000 shares               (206,000)         (206,000)

     Cumulative translation adjustment            (171,000)         (219,000)

     Retained earnings                           4,097,000         5,300,000

                                                 8,966,000        10,138,000

                                               $93,737,000       $93,171,000
</TABLE>

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

<PAGE>
<TABLE>

                               ARCH PETROLEUM INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                      Three Months Ended
                                                           March 31,
                                                   1998              1997
   <S>                                      <C>               <C>
   Revenues:
     Oil and gas sales                      $    4,538,000    $    6,520,000
     Pipeline sales                              1,227,000        26,441,000
     Interest and other                            126,000           181,000

                                                 5,891,000        33,142,000

   Costs and Expenses:
     Oil and gas lease operations                2,330,000         2,102,000
     Natural gas purchases and
      pipeline operations                        1,160,000        25,323,000
     Exploration                                    88,000            75,000
     Depletion, depreciation and
      amortization                               1,582,000         1,667,000
     General and administrative                  1,014,000         1,238,000
     Interest _ banks and other                    748,000           766,000
     Interest _ production payment
      obligation                                   339,000           224,000
     Foreign currency transaction
      (gain) loss                                 (112,000)          107,000
     Minority interest in net income of
      consolidated subsidiaries                       -              306,000

                                                 7,149,000        31,808,000

   Income (loss) before income taxes
    and dividends                               (1,258,000)        1,334,000

   Income tax expense (benefit)                   (455,000)          434,000

   Net income (loss) before dividends             (803,000)          900,000

   Dividends on preferred stock                    400,000           400,000

   Net income (loss) available to
    common shareholders                     $   (1,203,000)   $      500,000

   Net income (loss) available
    per common share -
    basic and diluted                       $        (0.07)   $         0.03

   Weighted average common
    shares outstanding - basic                  17,322,000        17,289,000

</TABLE>
   The accompanying condensed notes are an integral part of these consolidated
                             financial statements.
<PAGE>
<TABLE>
                               ARCH PETROLEUM INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                     Three Months Ended
                                                         March 31,
                                                   1998              1997
   <S>                                          <C>               <C>
   Cash flows from operating activities:
     Net income (loss)                          $ (803,000)       $  900,000
     Adjustments to reconcile to net cash
      provided (used) by operations:
        Depletion, depreciation and
         amortization                            1,582,000         1,667,000
        Deferred revenue                          (386,000)         (684,000)
        Income taxes                              (455,000)          434,000
        Dryhole costs and other                     33,000              -    
        Interest on production payment
         obligation                                339,000           224,000
        Interest on notes receivable and
         other                                     (78,000)          (44,000)
        Foreign currency transaction (gain)
         loss                                     (112,000)          107,000
        Minority interest in income of
         consolidated subsidiaries                    -              306,000

                                                   120,000         2,910,000

     Change in accounts receivable                 781,000         7,176,000
     Change in other current assets                145,000          (155,000)
     Change in accounts payable and
      other current liabilities                   (695,000)       (7,049,000)
     Change in accounts receivable -
      related parties                               94,000           (72,000)
     Production payment remedy adjustment          (55,000)          (59,000)

        Net operating cash flows                   390,000         2,751,000

   Cash flows from investing activities:
     Capital expenditures                       (3,038,000)       (2,525,000)
     Notes receivable and other assets            (130,000)         (153,000)

        Net investing cash flows                (3,168,000)       (2,678,000)

   Cash flows from financing activities:
     Proceeds from bank borrowing                3,000,000         2,000,000
     Payments of bank debt                      (1,000,000)       (2,279,000)
     Proceeds from note payable -
      minority interestholder                         -               82,000

        Net financing cash flows                 2,000,000          (197,000)

   Change in cash and cash equivalents            (778,000)         (124,000)

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

   Cash and cash equivalents at end of
    period                                      $1,382,000        $3,068,000
<PAGE>
</TABLE>
   The accompanying condensed notes are an integral part of these consolidated
                             financial statements.



                               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
   ended March 31, 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 March 31,

                                                1998            1997
         <S>                                 <C>             <C>
         Comprehensive income:
            Net income (loss)                $(803,000)      $ 900,000
            Cumulative translation
             adjustment, net of tax             48,000         (72,000)

         Total comprehensive income
          (loss)                             $(755,000)      $ 828,000


</TABLE>
<PAGE>
                               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.

   Liquidity and Capital Resources

        In 1998 the Company's chief sources  of funds were $2.0  million
   (net)  from  its  bank  credit  facilities  and  $0.4  million   from
   operations.     Cash  flows   from  operations   were  decreased   by
   approximately $2.1 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 $2.5  million of  domestic drilling,  primarily in  New
   Mexico and North Texas and $0.6 million for the drilling of new wells
   in  Canada,  including  construction  of  supporting  facilities  and
   pipelines.

        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
   $18.0 million and  $14.0 million  against the  Domestic and  Canadian
   Revolvers at March 31, 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 8.30% at March 31, 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 Company is currently not in default with the covenants
   in the loan  agreements. The  Company has  no other  unused lines  of
   credit.

        The Company  believes  that it  has  sufficient cash  flows  and
   available borrowing base  in the  Revolvers to  fund its  anticipated
   drilling, development and  acquisition programs for  1998 as well  as
   its  debt  service   and  preferred   stock  dividend   requirements.
   Additionally, the Company expects to meet its current operating  cash
   requirements  from  cash  flows   provided  by  current   operations.
   Management believes that  the Company  can continue  to generate,  or
   obtain through other alternatives, resources sufficient to meet  cash
   requirements for future acquisition opportunities.

<PAGE>

   Results of Operations

               Three months ended March 31, 1998 compared to
                     three months ended March 31, 1997

        The Company recorded a net loss before dividends of $803,000  in
   1998 as compared to net income of $900,000 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 $1,982,000 in 1998  as
   compared to 1997.   Oil production  increased to  161,000 barrels  in
   1998 as compared to 142,000 barrels in 1997, resulting in a  $414,000
   sales increase.  The Company has begun realizing production from  the
   new wells drilled during  1997.  The average  price received for  oil
   was $14.50 in  1998 as  compared to $22.03  in 1997,  resulting in  a
   $1,210,000 sales  decrease.   Gas  production  in 1998  decreased  to
   1,376,000 Mcf as compared  to 1,513,000 Mcf in  1997, resulting in  a
   $307,000  sales  decrease.    The  decrease  in  gas  production   is
   attributable primarily to the  reduced allowable production from  the
   Keystone Ellenburger field ("Keystone").  The average price  received
   for gas decreased  to $1.60  in 1998 as  compared to  $2.24 in  1997,
   resulting in a $879,000 sales decrease.   The average price  received
   for gas excluding  certain production  payment volumes  was $1.82  in
   1998 as compared to $3.12 in 1997.

        Lease  operating  expenses  ("LOE")  related  to  oil  and   gas
   properties increased $228,000 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 $5.97  from
   $5.33 in 1997 as  a result of  increases in the  cost of services  as
   well as decreased gas production from Keystone.

        Interest expense  increased  $97,000  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 $339,000 and $224,000
   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>

                                   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: May 14, 1998                      /s/ Fred Cantu
                                                Fred Cantu
                                              Treasurer and
                                           Chief Financial Officer

<PAGE>