UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended      August 31, 2000
                               -----------------------
                                       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:               001-9872
                        ----------------------



                              COLUMBUS ENERGY CORP.
                   ------------------------------------------
             (Exact name of registrant as specified in its charter)

           Colorado                                 84-0891713
--------------------------------------------------------------------------------
(State or other jurisdiction of                  (I.R.S. Employer
 incorporation or organization)                Identification No.)

     1660 Lincoln St., Denver, CO                         80264
--------------------------------------------------------------------------------
(Address of principal executive offices)                (Zip Code)

                                 (303) 861-5252
               ---------------------------------------------------
              (Registrant's telephone number, including area code)

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

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.      Yes _X_     No ____

  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 October 6, 2000
----------------------------                ------------------------------
Common stock, $.20 par value                            3,760,743




<PAGE>



                              COLUMBUS ENERGY CORP.

                                      INDEX

                                                                          PAGE

PART I.  FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Consolidated Balance Sheets -
                August 31, 2000 and
                November 30, 1999                                          3

              Consolidated Statements of Operations -
                Three Months and Nine Months Ended
                August 31, 2000 and 1999                                   5

              Consolidated Statement of
                Stockholders' Equity -
                Nine Months Ended August 31, 2000                          6

              Consolidated Statements of Cash Flows -
                Nine Months Ended August 31, 2000
                and 1999                                                   7

              Notes to the Consolidated Financial
                Statements                                                 9

     Item 2.  Management's Discussion and Analysis
                of Financial Condition and
                Results of Operations                                     15

PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings                                           27

     Item 2.  Not Applicable

     Item 3.  Quantitative and Qualitative Disclosure
                About Market Risk                                         27

     Items 4 and 5.  Not Applicable

     Item 6.  Exhibits and Reports
                on Form 8-K                                               27

     Signatures                                                           28







                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                              COLUMBUS ENERGY CORP.

                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                                                   August 31,             November 30,
                                                                     2000                    1999
                                                                  -----------              --------
                                                                  (unaudited)
                                                                             (in thousands)
<S>                                                                  <C>                    <C>
Current assets:
  Cash and cash equivalents                                          $  2,455               $  1,850
  Accounts receivable:
    Joint interest partners                                             1,058                  1,780
    Oil and gas sales                                                   2,195                  1,501
    Allowance for doubtful accounts                                      (101)                  (116)
  Deferred income taxes (Note 3)                                           60                    200
  Inventory of oil field equipment,
    at lower of average cost or market                                     81                    106
  Other                                                                    50                     80
                                                                      -------                -------

        Total current assets                                            5,798                  5,401
                                                                      -------                -------

Deferred income taxes (Note 3)                                            570                    937

Property and equipment:
  Oil and gas assets, successful efforts
    method (Note 2)                                                    38,166                 36,862
  Other property and equipment                                          1,884                  1,836
                                                                      -------                -------

                                                                       40,050                 38,698
  Less:  Accumulated depreciation,
     depletion and amortization
     and valuation allowance                                          (24,895)               (22,506)
                                                                      -------                -------

        Net property and equipment                                     15,155                 16,192
                                                                      -------                -------

                                                                     $ 21,523               $ 22,530
                                                                      =======                =======
</TABLE>
                                   (continued)



                                       3
<PAGE>


                              COLUMBUS ENERGY CORP.

                    CONSOLIDATED BALANCE SHEETS - (continued)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

<TABLE>
<CAPTION>
                                                                   August 31,             November 30,
                                                                     2000                    1999
                                                                  -----------              --------
                                                                  (unaudited)
                                                                             (in thousands)
<S>                                                                  <C>                    <C>
Current liabilities:
  Accounts payable                                                   $   1,933              $   2,352
  Undistributed oil and gas
   production receipts                                                     547                    386
  Accrued production and property taxes                                    474                    738
  Prepayments from joint interest owners                                   196                    200
  Accrued expenses                                                         499                    494
  Income taxes payable (Note 3)                                              6                     30
  Other                                                                      2                     32
                                                                        ------                 ------

        Total current liabilities                                        3,657                  4,232
                                                                        ------                 ------

Long-term bank debt (Note 2)                                             4,400                  5,500

Commitments and contingent liabilities
  (Notes 4, 5 and 9)

Stockholders' equity:
  Preferred stock authorized 5,000,000
    shares, no par value, none issued                                        -                      -
  Common stock authorized 20,000,000
    shares of $.20 par value; shares issued
    4,658,777 in 2000, and 4,645,303 in 1999
    (outstanding 3,753,868 in 2000 and
    3,800,558 in 1999)                                                     932                    929
  Additional paid-in capital                                            20,139                 20,069
  Accumulated deficit                                                   (1,721)                (2,655)
                                                                        ------                 ------
                                                                        19,350                 18,343
  Less: Treasury stock at cost
          904,909 shares in 2000 and
          844,745 shares in 1999                                        (5,884)                (5,545)
                                                                        ------                 ------
        Total stockholders' equity                                      13,466                 12,798
                                                                        ------                 ------
                                                                     $  21,523              $  22,530
                                                                        ======                 ======
</TABLE>


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


                                       4
<PAGE>



                              COLUMBUS ENERGY CORP.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                       Nine Months Ended      Three Months Ended
                                           August 31,             August 31,
                                       -----------------      ------------------
                                        2000       1999        2000        1999
                                        ----       ----        ----        ----
                                         (in thousands, except per share data)
Revenues:
  Oil and gas sales                   $10,742    $ 7,064     $ 4,671     $ 2,760
  Operating and management
    services                            1,035      1,025         342         353
  Interest and other income               114         70          45          23
                                      -------    --------    --------    -------
       Total revenues                  11,891      8,159       5,058       3,136
                                      -------    --------    --------    -------

Costs and expenses:
  Lease operating expenses              1,566      1,357         544         514
  Property and production taxes           995        741         410         242
  Operating and management
    services                              598        693         164         220
  General and administrative            1,217      1,075         340         299
  Depreciation, depletion and
   amortization                         2,414      2,571         932         847
  Impairments                             500        503         500           -
  Exploration expense                   1,940        971         250         627
  Litigation expense                      380         41          13          24
  Advisory fees                           490          -         371           -
                                      --------   --------    --------    -------
      Total costs and expenses         10,100      7,952       3,524       2,773
                                      --------   --------    --------    -------

       Operating income                 1,791        207       1,534         363
                                      --------   --------    --------    -------

 Other expenses (income):
  Interest                                325        273         108          98
  Other                                     7          4           7           1
                                      -------    -------     --------    -------
                                          332        277         115          99
                                      -------    -------     --------    -------
     Earnings (loss) before
        income taxes                    1,459        (70)      1,419         264

Provision (benefit) for income
  taxes (Note 3)                          525        (27)        511         100
                                      -------    --------    -------     -------
     Net earnings (loss)              $   934    $   (43)    $   908     $   164
                                      =======    ========    =======     =======

Earnings (loss) per share (Note 7):

  Basic                               $   .25    $  (.01)    $   .24     $   .04
                                      =======    ========    ========    =======
  Diluted                             $   .25    $  (.01)    $   .24     $   .04
                                      =======    ========    ========    =======

Weighted  average  number  of
common  shares  and  common
equivalent   shares
outstanding:

  Basic                                 3,757      3,920       3,749       3,870
                                      =======    ========    =======     =======
  Diluted                               3,764      3,920       3,784       3,873
                                      =======    ========    =======     =======

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


                                       5
<PAGE>
                              COLUMBUS ENERGY CORP.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    For the Nine Months Ended August 31, 2000
                                   (Unaudited)


<TABLE>
<CAPTION>

                                           Common Stock            Additional                     Treasury Stock
                                    --------------------------      Paid-in    Accumulated    ---------------------
                                         Shares        Amount       Capital     Deficit         Shares       Amount
                                    -------------  -----------    ----------  -----------     ----------    -------
                                                  (dollar amounts in thousands)
<S>                                   <C>              <C>           <C>        <C>             <C>          <C>
Balances,
  December 1, 1999                    4,645,303        $  929        $20,069    $(2,655)        844,745      $(5,545)

Exercise of employee
  stock options                           2,200             1              9          -               -            -
Purchase of shares                            -             -              -          -          63,000         (358)
Shares issued for Stock
  Purchase Plan                          11,274             2             61          -          (2,836)          19
Net earnings                                  -             -              -        934               -            -
                                      ---------        ------        -------    -------         -------       ------

Balances,
  August 31, 2000                     4,658,777        $  932        $20,139    $(1,721)        904,909      $(5,884)
                                      =========        ======        =======    =======         =======       ======
</TABLE>



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


                                       6
<PAGE>

                              COLUMBUS ENERGY CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                  Nine Months Ended August 31,
                                                     -----------------------
                                                      2000              1999
                                                     ------            -----
                                                           (in thousands)

Net earnings (loss)                                 $   934           $   (43)

Adjustments to reconcile  net earnings
  (loss)to net cash  provided by operating
  activities:
    Depreciation, depletion, and
      amortization                                    2,414              2,571
    Impairments                                         500                503
    Deferred income tax provision (benefit)             507                (81)
    Exploration expense, noncash portion                  -                 80
    Other                                                45                108
Net change in operating assets and
  liabilities                                          (561)              (630)
                                                   --------            -------
        Net cash provided by
          operating activities                        3,839              2,508
                                                   --------            -------

Cash flows from investing activities:

  Proceeds from sale of assets                           66                  -
  Additions to oil and gas properties                (1,866)            (2,487)
  Additions to other assets                             (49)               (11)
                                                   --------            -------
        Net cash used in
          investing activities                       (1,849)            (2,498)
                                                   --------            -------

Cash flows from financing activities:

  Proceeds from long-term debt                          300              1,100
  Reduction in long-term debt                        (1,400)              (400)
  Proceeds from issuance of
    common stock                                         73                161
  Purchase of treasury stock                           (358)            (1,471)
                                                   --------            -------
        Net cash used in financing
          activities                                 (1,385)              (610)
                                                   --------            -------

Net increase (decrease) in cash and
  cash equivalents                                      605               (600)
Cash and cash equivalents at
  beginning of period                                 1,850              2,003
                                                     ------            -------
Cash and cash equivalents at
  end of period                                     $ 2,455           $  1,403
                                                     ======            =======


                                                                     (continued)


                                       7
<PAGE>



                              COLUMBUS ENERGY CORP.
               CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                                   (Unaudited)


                                                  Nine Months Ended August 31,
                                                     -----------------------
                                                      2000              1999
                                                     ------            -----
                                                           (in thousands)


Supplemental disclosure of cash flow information:
    Cash paid (received) during the period for:
      Interest                                       $   329          $    271
                                                      ======           =======
      Income taxes, net of refunds                   $    42          $     28
                                                      ======           =======

Supplemental disclosure of non-cash investing
  and financing activities:
    Non-cash compensation expense
      related to common stock                        $    44          $    103
                                                      ======           =======





























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


                                       8
<PAGE>


                              COLUMBUS ENERGY CORP.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(1)  BASIS OF PRESENTATION

          The  accompanying   consolidated   financial  statements  include  the
     accounts of Columbus Energy Corp. ("Columbus") and its wholly-owned
subsidiaries,  Columbus Gas Services,  Inc.  ("CGSI") and Columbus  Texas,  Inc.
("Texas").  All  significant  intercompany  balances  have  been  eliminated  in
consolidation.  The term  "Company"  as used herein  includes  Columbus  and its
subsidiaries.

     The consolidated  financial statements of the Company have been prepared in
accordance with generally accepted accounting  principles and require the use of
management's  estimates.   The  financial  statements  contain  all  adjustments
(consisting  only  of  normal  recurring  accruals)  which,  in the  opinion  of
management,  are  necessary  to present  fairly the  financial  position  of the
Company as of August 31,  2000 and  November  30,  1999,  and the results of its
operations and cash flows for the periods  presented.  The results of operations
for such  interim  periods  are not  necessarily  indicative  of  results  to be
expected for the full year.

     The accounting  policies followed by the Company are set forth in Note 2 to
the  Company's  consolidated  financial  statements in the Annual Report on Form
10-K for the year ended November 30, 1999. These  accounting  policies and other
footnote disclosures previously made have been omitted in this report so long as
the interim information  presented is not misleading.  These quarterly financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements and notes included in the 1999 Form 10-K.

(2)  LONG-TERM DEBT

     The Company  has a credit  agreement  with Wells Fargo Bank West,  National
Association  ("Bank"),  formerly  known as Norwest Bank Denver,  N.A.,  that was
amended on June 30, 2000 to extend the revolving  period to July 1, 2002 when it
entirely  converts to an amortizing  term loan which  matures July 1, 2006.  The
credit is collateralized by a first lien on oil and gas properties. The interest
rate options are the Bank's prime rate or LIBOR plus 1.50%.

     The borrowing  base is limited to  $10,000,000  and subject to  semi-annual
redetermination  for any  increase or decrease.  At August 31, 2000  outstanding
borrowings  on the  revolving  line of credit  were  $4,400,000  and the  unused
borrowing base available was  $5,600,000.  A commitment fee of 1/4 of 1% for any
unused portion of the amount which is the difference  between the borrowing base
and the outstanding borrowings is payable quarterly.



                                       9
<PAGE>

                              COLUMBUS ENERGY CORP.

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                   (Unaudited)


(3)  INCOME TAXES

          The provision (benefit) for income taxes consists of the following (in
thousands):

                                                   Nine Months Ended August 31,
                                                   ----------------------------
                                                       2000           1999
                                                       ----           ----
Current:
          Federal                                     $    3         $   25
          State                                           15             29
                                                       -----          -----
                                                          18             54
                                                       -----          -----

Deferred:
          Federal                                        487            (84)
          Use of loss carryforwards                        -              6
          State                                           20             (3)
                                                       -----          -----
                                                         507            (81)
                                                       -----          -----

  Total income tax (benefit) expense                  $  525         $  (27)
                                                      ======         ======

     During the nine months of fiscal  2000,  certain  tax assets  (shown in the
table below) were utilized.  The tax effect of significant temporary differences
representing  deferred tax assets and  liabilities and changes were estimated as
follows (in thousands):

                                                    Current Year
                                      ----------------------------------------
                                      December 1,    Operations/    August 31,
                                          1999           Other         2000
                                        --------         -----        -----

Deferred tax assets:
  Pre-1987 loss carryforwards           $   440       $     -         $  440
  Post-1987 loss carryforward               617             -            617
  Percentage depletion
    carryforwards                         1,650            (4)         1,646
  State income tax loss
    carryforwards                           124             -            124
  Other                                     387             7            394
                                         ------        ------         ------
            Total                         3,218             3          3,221
     Valuation allowance
       (long-term)                       (1,286)            -         (1,286)
                                        -------        ------         ------
     Deferred tax assets                  1,932             3          1,935
                                        -------        ------         ------

Deferred tax liabilities-
  Depreciation, depletion and
    amortization and other                 (795)         (510)        (1,305)
                                        -------        ------         ------
    Net tax asset (liability)           $ 1,137       $  (507)       $   630
                                        =======       =======        =======



                                       10
<PAGE>


                              COLUMBUS ENERGY CORP.

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                   (Unaudited)


(4)  LITIGATION

     On May 4, 2000,  Columbus was served with a complaint  in a lawsuit  styled
Fred E. Long and ENCO  Exploration  Company  v.  Columbus  Energy  Corp.,  Cause
B-00-1171-0-CV-B in the 156th Judicial District Court of Bee County, Texas. Fred
E.  Long and his  company,  ENCO  Exploration  Company,  have sued  Columbus  as
operator  regarding  the Long No. 4 well.  Long/ENCO  own a combined 25% working
interest.  They contend that  Columbus was  negligent in its duty as operator to
drill  a  vertical  hole  without  deviation  at the  location  approved  by the
participating  working interest owners.  They seek return of their proportionate
share of the drilling  costs as damages,  approximately  $300,000.  Columbus has
denied all of the Long/ENCO  allegations  and believes them to be without merit.
Discovery has not commenced.

(5)     COMMITMENTS AND CONTINGENT LIABILITIES

     The  Company's  natural  gas and crude oil swaps are  considered  financial
instruments  with  off-balance  sheet risk which are entered  into in the normal
course of business to partially reduce its exposure to fluctuations in the price
of crude oil and natural gas. Those  instruments  involve,  to varying  degrees,
elements  of market and credit  risk in excess of the amount  recognized  in the
balance sheets.

     The Company has had in place a twelve  month  costless  "collar"  for 7,500
barrels of crude oil each month for the period  September 1, 1999 through August
31, 2000. This "collar" was settled monthly against the calendar monthly average
price on the NYMEX with a $17.50 per  barrel  floor  price and $22.25 per barrel
ceiling price. Columbus received or paid the difference below the floor or above
the ceiling that each monthly price averaged.  During the third quarter and nine
months  of fiscal  2000,  oil sales  were  reduced  by  $192,000  and  $441,000,
respectively,  since average oil prices  exceeded the $22.25  ceiling price each
month of those periods but no further  reductions  will occur during the balance
of fiscal 2000 because of the expiration of the collar.

     The Company is not aware of any events of  noncompliance  in its operations
with  environmental  laws  and  regulations  nor  of  any  potentially  material
contingencies  related to environmental  issues.  Management cannot predict what
future   environmental   control  problems  may  arise  or  what   environmental
regulations and requirements  might be enacted by jurisdictional  authorities in
its various operational areas in future.



                                       11
<PAGE>



                              COLUMBUS ENERGY CORP.

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                   (Unaudited)


(6)     RELATED PARTY TRANSACTIONS

     CEC Resources Ltd. ("Resources") was a wholly-owned  subsidiary of Columbus
prior  to its  divestiture  on  February  24,  1995.  Reimbursement  was made by
Resources to Columbus for services  provided by its officers and  employees  for
managing  Resources in the past which effectively  reduced Columbus' general and
administrative  expense.  Such reimbursement totaled $33,000 for the nine months
of 1999. On March 31, 1999,  the agreement was  terminated  pursuant to a 90 day
notice period.

     The Company has been a party to an arrangement with Mark Butler,  geologist
and 50% owner of Trumark Production Company ("TPC"), during fiscal 1999 and 2000
whereby Mr. Butler would provide  Columbus with 70 hours per month of geological
and geophysical  consulting services (including related work station usage) at a
rate of $170  per  hour.  John B.  Trueblood,  son of  Columbus'  CEO  Harry  A.
Trueblood,  Jr.,  owns the other 50% of TPC. The retainer  fees paid to TPC were
$122,000 and $111,000 during nine months of 2000 and 1999, respectively.








                                       12
<PAGE>



                              COLUMBUS ENERGY CORP.

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                   (Unaudited)


(7)     EARNINGS PER SHARE

        The  following  table  provides a  reconciliation  of basic and  diluted
earnings per share (EPS):

                                             Nine Months     Three Months
                                           Ended August 31, Ended August 31,
                                           ---------------- ----------------
                                             2000     1999    2000     1999
                                             ----     ----    ----     ----
                                                   (in thousands,
                                                except per share data)

Reconciliation of basic and diluted
  EPS share computations:
  Income (loss) available to common
    shareholders - basic and
    diluted EPS (numerator)                 $  934   $  (43)  $  908  $  164
                                             =====    =====    =====   =====

Shares (denominator):
  Basic EPS                                  3,757    3,920    3,749   3,870
  Effect of dilutive option shares               7        -       35       3
                                             -----    -----    -----   -----
  Diluted EPS                                3,764    3,920    3,784   3,873
                                             =====    =====    =====   =====

Per share amount:
  Basic EPS                                 $  .25   $ (.01)  $  .24  $  .04
                                             =====    =====    =====   =====
  Diluted EPS                               $  .25   $ (.01)  $  .24  $  .04
                                             =====    =====    =====   =====

Number of shares not included in
  dilutive EPS that would have been
  antidilutive because exercise price
  of options was greater than the
  average market price of the common
  shares                                       502      612      232     626
                                             =====    =====    =====   =====

(8)     INDUSTRY SEGMENTS

     The Company operates  primarily in two business segments of (1) oil and gas
exploration and development and (2) providing  services as an operator,  manager
and gas marketing advisor.



                                       13
<PAGE>



                              COLUMBUS ENERGY CORP.

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                   (Unaudited)


        Summarized financial information  concerning the business segments is as
follows:

                                    Nine Months      Three Months
                                  Ended August 31, Ended August 31,
                                  ---------------- ----------------
                                   2000     1999    2000     1999
                                   ----     ----    ----     ----
                                            (in thousands)

Operating revenues from
  unaffiliated services:
    Oil and gas                  $10,751   $7,071   $4,675  $2,762
    Services                       1,140    1,088      383     374
                                  ------    -----   ------  ------
      Total                      $11,891   $8,159   $5,058  $3,136
                                  ======    =====    =====   =====

Depreciation, depletion
  and amortization:
    Oil and gas                  $ 2,338   $2,528   $  887  $  833
    Services                          76       43       45      14
                                   -----    -----    -----   -----
      Total                      $ 2,414   $2,571   $  932  $  847
                                  ======    =====    =====   =====

Operating income (loss):
  Oil and Gas                    $ 3,412   $  930   $2,085  $  523
  Services                            86      351      160     138
  General corporate
    expense                       (1,707)  (1,074)    (711)   (298)
                                  ------    -----    -----   -----
      Total operating income       1,791      207    1,534     363
Interest expense and other          (332)    (277)    (115)    (99)
                                  ------    -----    -----   -----

  Earnings (loss) before
    income taxes                 $ 1,459   $  (70)  $1,419  $  264
                                  ======    =====    =====   =====

(9)     MERGER AGREEMENT

     Columbus and Key Production  Company,  Inc.  (NYSE:KP) jointly announced on
August 29,  2000 that Key has agreed to acquire  all of the  outstanding  common
stock of Columbus.  Under the terms of the executed merger  agreement  Columbus'
shareholders will receive 0.355 of a share of Key common stock for each Columbus
share in a tax-free  reorganization  subject to a favorable Columbus shareholder
vote. Columbus expects to hold a special sharehold ers' meeting for that purpose
during November 2000 provided the SEC's review of the proxy statement/prospectus
is completed during October, 2000. The Board of Directors of both companies have
unanimously approved the transaction.


                                       14
<PAGE>



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

     The following  summarizes the Company's  financial condition and results of
operations and should be read in  conjunction  with the  consolidated  financial
statements and related notes.

Liquidity and Capital Resources

         As previously  announced in February 2000 and reported in our Form 10-Q
for the  quarter  ended  May 31,  2000,  Arthur  Andersen  LLP's  Global  Energy
Corporate  Finance  team was  selected to assist  directors  to explore  various
strategic alternatives that could maximize shareholder value. A merger agreement
with Key was executed on August 28, 2000 and, assuming shareholder approval, the
effective  date is expected in late  November  2000.  Thereafter,  Columbus will
continue as a wholly-owned subsidiary of Key.

     During third quarter of 2000, liquidity was further strengthened as oil and
gas sales  increased  69% over 1999's like  period.  The  Company's  natural gas
prices averaged 79% higher than 1999's third quarter while crude oil prices were
36% higher.  There was increased natural gas production but this improvement was
partially offset by a decline in oil production.

     Third quarter 2000 had a pre-tax,  non-cash impairment loss of $500,000 and
exploration  expenses of $250,000 which reduced net earnings.  Net earnings were
also adversely  affected by a non- recurring  charge for advisory fees and other
expenses  connected with the auction  process and completion of  negotiations of
the terms of a  proposed  tax-free  exchange  of  shares  in a merger  with Key.
Excluding the exploration  expense,  those other unusual  charges  amounted to a
reduction  (after tax) of net earnings by $557,000,  or $.15 per share.  Despite
that  reduction,  quarterly net earnings for 2000's third  quarter  attained the
second  highest ever of $908,000,  or $0.24 per share,  which compares with last
year's quarter of $164,000, or $0.04 per share.

     Stockholders'  equity as of the end of 2000's  third  quarter  increased to
$13,466,000  from  $12,798,000 at November 30, 1999 even after the repurchase of
63,000  treasury shares for $358,000.  Also,  working capital at August 31, 2000
had risen to $2,141,000 from $1,169,000 at the end of fiscal 1999.

     This positive working capital combined with the Company's greatly increased
cash flow is expected to provide  considerably  more than the required funds for
the remainder of fiscal 2000's capital expenditure  program. It is expected that
excess cash flow will be utilized to reduce bank debt. The unused portion of the
$10,000,000  bank credit facility has previously been targeted by management for
acquisitions of oil and gas properties,  but can be used for any legal corporate
purpose.


                                       15
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


     Generally accepted  accounting  principles ("GAAP") require cash flows from
operating  activities  to be determined  after giving effect to working  capital
changes.  Accordingly,  GAAP's net cash provided from  operating  activities can
fluctuate widely depending on the scope of such activities. Net cash provided by
operating  activities was $3,839,000 for the nine months of 2000, which compares
with $2,508,000 provided by operating  activities for the same period last year.
GAAP  defined  operating  cash flow for the nine  months  of 2000 was  adversely
affected by the unusually large first quarter expenses attributed to exploratory
dry holes primarily located in the El Squared Prospect near Beeville, Texas.

     As regularly  noted in prior reports,  management  places greater  reliance
upon an important  alternative  method of computing cash flow which is generally
known as Discretionary Cash Flow ("DCF"). DCF is not in accordance with GAAP but
is commonly  used in the  industry as this  method  calculates  cash flow before
working  capital  changes or deduction of exploration  expenses since the latter
can be increased or decreased at management's  discretion.  DCF is often used by
successful  efforts  companies  to compare  their cash flow  results  with those
independent  energy  companies who use the full cost  accounting  method whereby
exploration  expenses are capitalized and do not  immediately  adversely  affect
either operating cash flow or net earnings. Columbus' DCF for the nine months of
fiscal 2000 was $6,340,000 up 57% from 1999's similar period of $4,029,000.  DCF
increased during third quarter of 2000 to $3,105,000, a new quarterly record and
up substantially from the $1,729,000 reported for the second quarter of 2000. As
discussed  below  in  "Results  of  Operations,"  cash  flow  generated  by  the
significant  production increase from a new well will not be repeated during the
fourth quarter  because  Columbus'  interest was reduced  following  payout that
occurred  during  August.  DCF  is  calculated  without  debt  retirement  being
considered.  However, in Columbus' case this is not important since the existing
bank debt requires no principal  payments  before August 1, 2002 and is expected
to be eliminated  before that date.  Interest  expense has already been deducted
before arriving at DCF.


                                       16
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


     Management  notes in each of its  public  filings  and  reports  its strong
exception  to the  Statement  of  Financial  Accounting  Standards  No. 95 as it
applies  to  Columbus  which  directs  that  operating  cash  flow  must only be
determined after  consideration of working capital changes.  Management believes
such a  requirement  by GAAP ignores  entirely the  significant  impact that the
timing of income  received for, and expenses  incurred on behalf of, third party
owners  in  properties  may  have  on  working  capital.  This  is  particularly
significant  where  Columbus  owns  only a  small  working  interest  but is the
operator of several properties.

     Neither DCF nor operating cash flow before working  capital  changes may be
substituted  for net income or for cash available from  operations as defined by
GAAP.  Furthermore,  currently  reported cash flows,  however  defined,  are not
necessarily  indicative that there will be sufficient  funds for all future cash
requirements. For the nine months of 2000 and 1999 GAAP cash flow was materially
lower than DCF.

     When used,  the  Company's  natural gas and crude oil swaps are  considered
financial instruments with off-balance sheet risk. These are entered into in the
normal course of business to partially  reduce its exposure to  fluctuations  in
the price of crude oil and natural  gas and may  involve  elements of market and
credit risk in excess of the amount recognized in the balance sheets.

     During the nine  months of fiscal  2000 the  Company  partially  hedged its
crude oil prices while the Company's  natural gas revenues were fully exposed to
price  fluctuations  which fortunately were positive.  The non-hedged portion of
our crude oil revenues were similarly exposed to price  fluctuations  which were
also positive.

     The only  hedge in  existence  during  third  quarter  2000 was a  costless
"collar" for 7,500 barrels per month which expired  August 31, 2000.  This hedge
is more fully described in Note 5, "Commitments and Contingent Liabilities",  in
the Notes to the Consolidated Financial statements.

         At August  31,  2000,  Columbus  had  outstanding  bank  borrowings  of
$4,400,000  against its  $10,000,000  line of credit with Wells Fargo Bank West,
N.A. which is collateralized  by its oil and gas properties.  On that same date,
the ratio of net long-term debt (debt less working  capital) to total assets was
0.10. The outstanding  debt used a LIBOR option with an average interest rate of
8.1%.  Subsequent to the end of the third  quarter and through  October 6, 2000,
long-term debt was further  reduced by $500,000 to $3,900,000.  The net increase
(or  decrease)  in long-term  debt  directly  affects cash flows from  financing
activities as do the purchase of



                                       17
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


treasury  shares.  For the Company's  floating rate debt,  interest rate changes
generally do not affect its fair market value but does impact future  results of
operations and cash flows, assuming other factors remain constant.  The carrying
amount of the Company's debt approximates its fair value.

     The Company's Board of Directors has authorized over the last several years
the repurchase of common shares from the market at various "not to exceed" price
levels. As of August 31, 2000 a total of 60,384 shares remained unpurchased from
the most recent authorizations at a price not to exceed $6.00 per share but none
is expected to be purchased in light of current  market price and the  impending
merger with Key.

     During nine months of 2000, capital expenditures  actually incurred for oil
and gas properties  totaled  $1,895,000  (which amount excludes $1.9 million for
exploratory  dry holes and other  exploration  expenses)  and  differs  from the
capital  expenditure  shown in the  Consolidated  Statement  of Cash Flows.  The
latter also includes cash payments made during 2000 for 1999 expenditures  which
had been  incurred  but not yet paid as of  1999's  year  end.  Similarly,  some
expenditures  accrued  during fiscal 2000's nine months period were not actually
paid until subsequent to the end of the period.


                                       18
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)

RESULTS OF OPERATIONS

     Gross  revenues  increased  by 61%  over  last  year's  third  quarter  and
operating  income  increased to  $1,534,000 in the current  quarter  compared to
$363,000  last  year.  Other  comparisons  for the 2000  quarter  and nine month
periods  versus 1999 related to prices,  production and oil and gas sales appear
in tabular form below.

     During  2000's  third  quarter six gross wells (2.89 net WI) were  drilled.
These included two (.30 net WI) gas development wells in Webb County, Texas, and
one (.92 net WI) gas development well located in Bee County, Texas. One (.34 net
WI) well in Oklahoma was an attempted extension in a horizontal hole drilled out
of an  existing  cased well bore but the Morrow oil  reservoir  encountered  was
previously  depleted  and that zone in the lateral was  abandoned.  However,  an
existing  oil  zone in the  original  well  bore  could  be  recompleted  and is
currently producing about 10 barrels per day with no fracture  stimulation.  One
(1.00 net WI) other exploratory oil well was a successful  recompletion as a new
zone discovery in an existing well. This was a "behind-the-pipe" Duperow zone in
a well  located  in  Richland  County,  Montana  which  had not been  considered
prospective.  This zone initially raised  production to in excess of 100 barrels
of crude oil per day and has apparently  leveled out at approximately 50 barrels
per day. The Long #5 well in Bee County  commenced  production at about 700 Mcfd
in late July and has  improved to 1,500 Mcfd  following  frac  treatment.  It is
currently producing  approximately 1,300 Mcfd on a small choke. The BMT #15 (.26
net WI) in Webb County was completed  but not hooked-up to a gas pipeline  until
after the  quarter's  end. Its initial rate of 2,000 Mcfd and over 20 barrels of
condensate  per day  has  leveled  out at  about  1,800  Mcfd  and has not  been
stimulated  yet. The other Webb County well (.04 net WI) was connected in August
and is making  approximately  1,400 Mcf per day. During the fourth quarter,  the
production  from  these  wells  will help  offset the  decreased  production  to
Columbus' interest from the Hachar #36 following payout in August.

     As  highlighted  in the second  quarter  report,  the Hachar  #36, in which
Columbus owns a 53.7% net revenue interest,  until 200% of the well costs of the
well are recovered,  was an  outstanding  gas well completed in the Lobo sand in
the Laredo field area. It was connected to a pipeline  during May 2000 producing
at a rate in excess of  5,000,000  cubic feet of natural  gas and 100 barrels of
condensate  per day. This revenue from the Hachar #36 had a very large impact on
results for the third  quarter by yielding  $965,000 of net lease level  income.
This is defined as revenue less operating costs and production taxes.  Payout of
200% of costs of the well  occurred in  mid-August  in three  months and reduced
Columbus'  monthly net revenue stream from over $300,000 to an estimated $25,000
in September at its current net revenue interest of 3.8%.


                                       19
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


     Oil and Gas Revenues and Operating Costs

          The  following  table  shows  comparative  crude oil and  natural  gas
revenues,  sales  volumes,  average prices and  percentage  changes  between the
periods presented as follows:

<TABLE>
<CAPTION>
                                           Third Quarter                             Nine Months
                                 ---------------------------------       --------------------------------
                                  2000         1999         Change           2000        1999     Change
                                 ------       ------        ------           ----        ----     ------

<S>                              <C>          <C>            <C>             <C>       <C>          <C>
Natural gas revenues M$          $3,627       $1,943         87 %            7,758     $ 5,261      47 %
Oil revenue M$                   $1,044       $  817         28 %          $ 2,984     $ 1,803      66 %

Natural gas sales volumes:
  Millions of cubic feet (MMCF)     799          765          4 %            2,228       2,451      (9)%
  MCF/day                         8,680        8,310                         8,101       8,945

Oil sales volumes:
  Barrels                        41,854       44,434         (6)%          123,717     121,781       2 %
  Barrels/day                       455          483                           450         444

Average price received:
  Natural gas - $/MCF            $ 4.54       $ 2.54         79 %           $ 3.48      $ 2.15      62 %
  Oil - $/BBL                    $24.96       $18.38         36 %           $24.12      $14.80      63 %
</TABLE>

         Natural gas revenues for the quarter increased by 87% over 1999's third
quarter due to 79% higher  prices and 4% higher sales  volumes.  Similarly,  the
nine month period for 2000 had 47% higher natural gas revenues due to 62% higher
prices  partially  offset by 9% lower  sales  volumes.  Average  gas prices have
improved steadily from depressed price levels  experienced during the early part
of 1999  which  reflected  a prior  warm  winter  and  relatively  high  storage
inventory.  This storage level has not been  maintained  throughout 2000 to date
because of this  summer's  strong  demand for  cooling  load which has  severely
restricted  excess  supply for storage  refill.  Disaster  was averted by a warm
winter heating season in early 2000 but increased  demand and lack of additional
supply for injection due to very limited  excess gas capacity have caused prices
to exceed $5.00 per Mcf recently.  Higher  natural gas  production  during third
quarter 2000  compared  with 1999 was not  sufficient to overcome the decline in
production between comparable nine month periods.  Normal production declines in
older wells due to depletion were not reversed by new production since there was
less  exploratory  drilling  success than had been  expected,  there was reduced
inventory of new prospects or development  locations available to drill, and the
effects  from the lack of drilling in fiscal 1998 and 1999  because of the price
debacle brought about those low cash flow years.

     Oil  revenues  for  2000's  third  quarter  increased  by 28% over the 1999
quarter  because  average  prices rose by 36% although there were 6% lower sales
volumes.  Comparative  nine month's  results show 66% greater oil revenues since
average  prices  were up 63% and sales  volumes  were up 2%.  Oil  revenues  and
average  prices for 2000 were  impacted  adversely by the crude oil collar.  The
reduction  amounted  to $192,000  ($4.59 per  barrel) for the third  quarter and
$441,000 ($3.56 per barrel)  for the nine  months.  Oil production  has declined


                                       20
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)

steadily for the past few years commensurate with a lack of development drilling
activity and no exploratory  incentives in keeping with low crude oil prices and
lack of certainty of future  improvement.  During  1999's first half several oil
wells  were  temporarily  shut-in  due to those low crude oil prices and did not
resume  production until later that year. One exploratory well searching for gas
did discover a flowing oil well in Harris County,  Texas.  This well was drilled
during fiscal 1998 but would not be connected to a gas line. It began production
flowing  200  barrels  of oil per day with  associated  gas  during  June  1999.
Columbus'  19.5%  working  interest  in that  well did help  improve  crude  oil
production  during 1999 but only  temporarily  overcame  the ongoing  decline in
other  wells  which  caused the  reduction  of third  quarter  2000 oil  volumes
compared to the prior  year's  quarter.  Prices for crude oil have  continued to
move  upwards  due  to  strong  demand  and  a  restrictive  production  program
instigated by OPEC which has not kept pace with that demand.

     Columbus'  third quarter  sales volumes of natural gas averaged  8,680 Mcfd
while oil and liquids  sales volumes were 464 barrels per day which equates to a
daily sales volume of 11,467 MCF  equivalent  (Mcfe).  This compares with 1999's
third quarter rate of 11,245 Mcfe, a 2% increase.  As stated before,  this small
increase was  attributable  to increased  sales volumes net to Columbus from the
Hachar #36 well which  temporarily  overcame the lack of new  development  wells
being drilled along with a lack of  exploratory  success at Columbus' El Squared
prospect.  Production from the Hachar #36 and Lien #2 wells temporarily reversed
the decline in oil  production  but the fourth quarter of 2000 is expected to be
less than third quarter volumes.  For comparative nine month's periods,  average
daily sales volumes were 10,845 Mcfe in 2000 versus 11,646 Mcfe in 1999 and were
affected adversely for the aforementioned reasons.

     Lease operating expenses for the third quarter and nine months of 2000 were
6% and 15%  higher,  respectively,  than  similar  periods in 1999.  Most of the
increase  was in the  Williston  Basin in Montana  and the Sralla  Road field in
Texas where several wells had workover costs including  repairs and replacements
of  equipment.  Periodic  expensive  workovers and  replacement  of downhole and
surface  equipment on older wells is a normal  occurrence.  Also,  several older
Williston  Basin oil wells were shut-in  during 1999's first half which accounts
for lower operating  costs in that year.  Lease operating costs on an Mcfe basis
were  $0.52 in the  third  quarter  of 2000  compared  to  $0.50  in 1999  while
operating  costs as a percentage of revenues were 12% in 2000 versus 19% in 1999
with its lower prices but with reduced costs. For the nine month periods,  lease
operating  costs  were  $0.53  per  Mcfe in 2000 and  $0.43  in 1999  and  lease
operating costs as a percentage of revenues were 15% in 2000 and 19% in 1999.


                                       21
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


     Production  and  property  taxes  approximated  9% of  revenues in the nine
months of 2000 and 10% in 1999.  These  taxes  vary  based on Texas'  percentage
share of the total  production where oil tax rates are lower than gas tax rates.
The relationship of taxes and revenue is not always directly  proportional since
most of the local jurisdiction's  property taxes in Texas are based upon reserve
evaluations as opposed to revenues  received or production rates for a given tax
period.

     Operating and Management Services

         This segment of the Company's  business is comprised of operations  and
services  conducted  on  behalf  of  third  parties  which  includes  compressor
operations and salt water disposal facilities.

          Operating and management services gross profit was as follows:

                                                 2000             1999
                                                 ----             ----

                 Third quarter                 $178,000         $133,000
                 Nine months                   $437,000         $332,000

     Operating  revenues  increased  during 2000  partially  due to Columbus' 5%
share of transportation  revenues from a gas pipeline in the Sralla Road area of
Texas.  Effective  March 1, 2000,  the  Company no longer is serving as contract
operator  for wells in the Berry R. Cox field in South  Texas,  which  generated
$23,000 of profit during 2000's first quarter.  Operating and management service
costs were less in 2000 due to fewer compressor repairs in Texas and lower costs
after payroll recoveries billed to others in the Williston Basin area.

     Interest Income

     Interest  income is earned  primarily  from  short-term  invest ments whose
rates  fluctuate with changes in the commercial  paper rates and the prime rate.
Interest  income  increased in the third quarter of 2000 to $45,000 from $23,000
in 1999's third quarter because of a larger amount of investments resulting from
higher natural gas and crude oil prices and short-term interest rates.

     General and Administrative Expenses

     General and administrative expenses are considered to be those which relate
to the direct  costs of the Company  which do not  originate  from  operation of
properties or providing of services.  Corporate expense  represents a major part
of this category.


                                       22
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


     The Company's general and administrative expenses were as follows:

                                            2000                      1999
                                            ----                      ----

                 Third quarter           $  340,000                $  299,000
                 Nine months             $1,217,000                $1,075,000

     Nine month expenses  exceeded last year's  primarily due to cash bonuses of
$178,000 paid in May but there were no stock option  grants.  This compares with
1999  incentive  bonuses  of $80,000  ($58,000  non-cash)  plus  grants of stock
options  to all  officers.  Also,  as  previously  disclosed  there  was a total
phase-out of reimbursement  for management  services  provided  Resources during
1999. Salary increases were granted  effective  December 1, 1999 for non-officer
employees  and officer  salaries  were  increased  May 1, 2000 after having been
frozen at prior year levels during 1999.  However,  total officer and directors'
expense was reduced  because  there was one less  officer and one less  director
during 2000. Expenses accrued for vacation and retirement pay were higher during
both the third  quarter and nine month periods this year compared to 1999 due to
a higher salary base. Medical claims under the Company's  self-insured plan were
higher for 2000's third quarter and nine months.  Office rent was about the same
during  third  quarter in 2000  compared  to 1999 as a result of a sublease of a
portion of the leased space but for the nine months  period,  rental expense and
parking  was higher  due to an  increase  in the  monthly  rate.  Both the third
quarter and nine month periods' outside contract and professional  services were
lower in fiscal 2000 versus 1999.

     Unusual  expenses were incurred  during third quarter and nine months which
relate to exploring  various  strategic  alternatives  for the Company by use of
financial advisors as well as subsequent related merger negotiation costs. These
fees  totaled  $371,000  for the third  quarter  and appear  under  expenses  as
"Advisory fees".

     Depreciation, Depletion and Amortization

     Depreciation,  depletion  and  amortization  of  oil  and  gas  assets  are
calculated  based upon the units of production for the period compared to proved
reserves of each successful  efforts  property  field.  This expense is not only
directly  related to the level of  production,  but is also  dependent upon past
costs to find,  develop,  and  recover  related  reserves in each of the fields.
Depreciation and amortization of office equipment and computer  software is also
included in the total charge.

     Charges for this expense item  increased  from 1999's third  quarter due to
updated  estimates of proved oil and gas reserves in connection  with the merger



                                       23
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


and its third  quarter  review.  Estimates by  independent  engineers  show that
proved  reserves as of June 30, 2000 totaled  21.2 Bcfe,  down from 26.1 Bcfe at
the end of the Company's  previous  fiscal year (November 30, 1999).  During the
first seven months of fiscal year 2000,  Columbus produced 2.3 Bcfe and downward
reserve  adjustments  totaled 3.6 Bcfe which were partially offset by a 1.0 Bcfe
increase due to higher  prices.  The major  reserve  adjustments  resulted  from
Columbus  receiving  information  that other  operators and  participants in two
properties had determined not to proceed with drilling or recompletion of new or
existing wells.  Recent drilling activity and performance of wells as well as an
evaluation of certain  technical data, also contributed to those decisions.  The
depletion  rate for third  quarter  2000 was $.83 per Mcfe  compared to $.79 per
Mcfe for that like period of 1999. For the nine month periods  depletion expense
decreased as a result of decreased  production  from fields  having higher rates
and increased  production  from the Laredo area where there is a lower depletion
rate.  The depletion rate per Mcfe was $.77 for this period during 2000 compared
to $.78 per Mcfe in 1999.

     Exploration Expense

     In  general,   the  exploration  expense  category  includes  the  cost  of
Company-wide   efforts  to  acquire  and  explore  new  prospective  areas.  The
successful  efforts  method of accounting  for oil and gas  properties  requires
expensing  the costs of  unsuccessful  exploratory  wells  including  associated
leaseholds.  Other  exploratory  charges such as seismic and geologic costs must
also be  immediately  expensed  regardless  of whether a prospect is  ultimately
proved to be  successful.  All such  exploration  charges not only  decrease net
earnings but also reduce  reported  GAAP cash flow from  operations  even though
they are  discretionary  expenses;  however,  such  charges  are added  back for
purposes  of  determining  DCF  which is why it more  nearly  tracks  cash  flow
reported by full cost accounting companies which capitalize such costs.

     Exploration  charges of $250,000  for 2000's  third  quarter were down from
1999's  $627,000 and included  $186,000  related to the drilling of a horizontal
well in Oklahoma.  A total of $531,000 was expensed last year in connection with
deepening an exploratory  well in the El Squared prospect which did not find any
proved reserves along with $30,000 for seismic interpretation costs.

     Nine  months of fiscal  2000  exploration  charges  of  $1,940,000  were up
significantly  over 1999's.  Most of these  charges  ($1,371,000)  were incurred
during the sidetrack  and testing  phase of the Long #4 and the  initiation of a
sidetrack  of the Long #3 as well as for the  subsequent  abandonments  of those
wells.  Also included was $196,000 for recompletion and abandonment  costs for a


                                       24
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


90%-owned  exploratory  well in Montana.  In addition  to 1999's  third  quarter
expense  described above, a total of $233,000 was expensed for three exploratory
dry holes and $47,000 for  undeveloped  leases  dropped as a result of an offset
dry hole being drilled during that nine month period.

     Whenever a company who uses the successful  efforts method of accounting is
involved in an exploratory  program which  represents a significant  part of its
budget,  that  company  is  automatically  subjected  to the  risk  that its net
earnings for any given  quarter or year will be impacted  negatively  by wildcat
dry holes.  Shareholders  have been previously  forewarned that net earnings and
GAAP cash flow for a given period may not be truly  indicative  of the Company's
operational activity. This is why management has suggested that shareholders may
wish to follow management's  program of placing more emphasis on DCF from period
to period while essentially  ignoring net earnings results.  Comparing Columbus'
results  with net  earnings  or cash  flows of  companies  who use the full cost
accounting method is unrealistic since they capitalize  exploratory drilling and
seismic costs as well as other costs related to such activity.

     Impairments

     As an outgrowth of a revised  technical  evaluation of Columbus' ability to
economically  recomplete the updip lateral's proved reserves  originally drilled
in its  Morrow  #23-1H  well in  Louisiana,  Columbus'  co-operator  participant
indicated he was no longer  interested in attempting to recover these  reserves.
Therefore,  a non-cash  impairment  expense of $500,000 during the third quarter
was recorded as the Company was unwilling to attempt such an operational expense
by itself.

     Last year at the end of the second quarter,  there was a pre- tax, non-cash
impairment loss of $503,000 as a result of reduced proved undeveloped  reserves.
The improvement in crude oil prices up to that time was considered  insufficient
to justify  restoration of proved  undeveloped  reserves in one of the Williston
Basin's  fields  because  the  indicated  return  on new  investments  would  be
unsatisfactory.  Therefore, any restoration of undeveloped reserves was deferred
and the shortfall of $253,000  between  remaining book value of the pool and the
then  current  fair  market  value  of  reserves  was  recognized  as a  charge.
Elsewhere,  an unexpected  influx of water in natural gas wells in a shallow gas
property in Jim Wells County,  Texas brought about premature  abandonment of the
producing  zones with  related  reserves.  This  generated  a pre-tax,  non-cash
impairment of $250,000.




                                       25
<PAGE>



           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


     Litigation Expense

     Almost all of the  unusually  high  litigation  expense for the nine months
period is related to the successful  defense of the Maris E. Penn, et al lawsuit
described in previous  quarters.  A small amount of legal  expenses in the third
quarter are the result of the Fred E. Long, et al lawsuit described in Note 4 of
the Notes to the Financial Statements.

     Interest Expense

     Interest expense varies in direct proportion to the amount of bank debt and
the level of bank interest rates. The average level of bank debt outstanding has
been  higher  during the  2000's  first and second  quarters  than in 1999.  The
average bank interest rate paid during the third quarter was 8.2% which compares
to 6.6% in 1999. For the nine month periods average  interest rates were 7.8% in
2000 and 6.6% in 1999.

     Income Taxes

     During the nine months of 2000,  the net  deferred  tax asset  decreased to
$630,000.  The asset is  comprised  of a $60,000  current  portion and  $570,000
long-term  asset.  The  estimated  decrease in deferred  tax assets was $507,000
during that  period.  Thus far in 2000,  the  valuation  allowance  has remained
unchanged  and the  effective  tax rate is 36%.  See Note 3 to the  consolidated
financial statements for further explanation of income taxes.

     Statement Pursuant to Safe Harbor Provision of the Private
     Securities Litigation Reform Act of 1995

     This report may contain certain "forward-looking statements" that have been
based  on  imprecise   assumptions  with  regard  to  production  levels,  price
realizations,  and  expenditures for exploration and development and anticipated
results  therefrom.  Such statements are subject to risks and uncertainties that
could cause actual results to differ  materially from those expressed  herein or
implied by such statements.


                                       26
<PAGE>



                           PART II - OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS

     Management is unaware of any asserted or unasserted  claims or  assessments
against the Company which would materially affect the Company's future financial
position or results of  operations.  See Note (4) of the Notes to the  Financial
Statements  regarding a lawsuit styled Fred E. Long and ENCO Exploration Company
v.  Columbus  Energy Corp.  filed in the 156th  Judicial  District  Court of Bee
County, Texas, Cause No. B-00-1171-0-CV-B.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's  exposure to interest  rate risk and commodity  price risk is
discussed in Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations under the heading  "Liquidity and Capital  Resources".
The Company has no exposure to foreign  currency  exchange  rate risks or to any
other market risks.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

              (a)    Exhibits

                     10.1 -  Fourth Amendment of Credit Agreement dated
                                    June 30, 2000 between Columbus Energy
                                    Corp. and Wells Fargo Bank West, National
                                    Association.

                      27 - Financial data schedule - August 31, 2000.

             (b)     Reports on Form 8-K

                                      None







                                       27
<PAGE>





                                   SIGNATURES

     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.

                                                      COLUMBUS ENERGY CORP.
                                                          (Registrant)

DATE:     October 12, 2000                        /s/ Harry A. Trueblood, Jr.
     -----------------------------                ---------------------------
                                                  Harry A. Trueblood, Jr.
                                                  Chairman, President and
                                                  Chief Executive Officer
                                                  (a duly authorized officer)



DATE:     October 12, 2000                        /s/ Ronald H. Beck
     -----------------------------                ------------------
                                                  Ronald H. Beck
                                                  Vice President
                                                  (Chief Accounting Officer)














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