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 May 31, 1997 
                              ----------------
                                       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: 1-9872
                        ----------------

                              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 July 11, 1997
---------------------------                         ----------------------------
Common stock, $.20 par value                                  3,903,628




<PAGE>



                              COLUMBUS ENERGY CORP.

                                      INDEX


                                                                          PAGE
                                                                          ----
PART I.  FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Consolidated Balance Sheets -
                May 31, 1997 and
                November 30, 1996                                          3

              Consolidated Statements of Income -
                Three Months and Six Months
                Ended May 31, 1997 and 1996                                5

              Consolidated Statement of
                Stockholders' Equity -
                Six Months Ended May 31, 1997                              6

              Consolidated Statements of Cash Flows -
                Six Months Ended May 31, 1997
                and 1996                                                   7

              Notes to the Financial Statements                            9

     Item 2.  Management's Discussion and Analysis
                of Financial Condition and
                Results of Operations                                     17

PART II.  OTHER INFORMATION

     Item 1.     Legal Proceedings                                        27

     Items 2-3.  Not Applicable

     Item 4.     Submission of Matters to a Vote
                 of Security Holders                                      27

     Item 5.     Not applicable

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

     Signatures                                                           28








<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                              COLUMBUS ENERGY CORP.

                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>

                                                                       May 31,            November 30,
                                                                        1997                  1996
                                                                      -------             -----------
                                                                    (unaudited)
                                                                               (in thousands)
<S>                                                                  <C>                   <C>   
Current assets:
  Cash and cash equivalents                                          $  1,186               $  1,396
  Accounts receivable:
    Joint interest partners                                             1,919                    889
    Oil and gas sales                                                   1,428                  1,544
    Less allowance for doubtful accounts                                 (116)                  (116)
  Deferred income taxes (Note 3)                                          304                    631
  Inventory of oil field equipment,
    at lower of average cost or market                                     85                    115
  Other                                                                    82                     77
                                                                      -------                -------

        Total current assets                                            4,888                  4,536
                                                                      -------                -------

Property and equipment:
  Oil and gas assets, successful efforts
    method (Note 2)                                                    30,944                 28,031
  Other property and equipment                                          2,015                  2,001
                                                                      -------                -------

                                                                       32,959                 30,032
  Less:  Accumulated depreciation,
     depletion and amortization
     and valuation allowance                                          (14,379)               (12,943)
                                                                      -------                -------

        Net property and equipment                                     18,580                 17,089
                                                                      -------                -------

                                                                     $ 23,468               $ 21,625
                                                                     ========               ========

</TABLE>
                                                                  (continued)
                                        3


<PAGE>



                              COLUMBUS ENERGY CORP.

                    CONSOLIDATED BALANCE SHEETS - (continued)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<CAPTION>

                                                                       May 31,           November 30,
                                                                         1997                 1996
                                                                       -------            -----------
                                                                     (unaudited)
                                                                               (in thousands)
<S>                                                                  <C>                   <C>   
Current liabilities:
  Accounts payable                                                   $   2,507             $   1,292
  Undistributed oil and gas
   production receipts                                                      33                    54
  Accrued production and property taxes                                    385                   555
  Prepayments from joint interest owners                                   180                   258
  Accrued expenses                                                         330                   348
  Income taxes payable (Note 3)                                            109                    33
  Other                                                                     34                    30
                                                                        ------                ------

        Total current liabilities                                        3,578                 2,570
                                                                        ------                ------

Long-term bank debt (Note 2)                                             1,500                 2,200
Deferred income taxes (Note 3)                                           1,160                   630

Commitments and contingent liabilities (Note 2)

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
    4,431,524 in 1997, and 3,499,915 in 1996
    (outstanding 3,892,484 in 1997 and
    3,155,346 in 1996)                                                     886                   700
  Additional paid-in capital                                            17,442                17,361
  Retained earnings, since
    December 1, 1987                                                     2,284                   720
                                                                        ------                ------
                                                                        20,612                18,781
  Less: Treasury stock at cost
          539,040 shares in 1997 and
          344,569 shares in 1996                                        (3,382)               (2,556)
                                                                        ------                ------
        Total stockholders' equity                                      17,230                16,225
                                                                        ------                ------
                                                                     $  23,468             $  21,625
                                                                        ======                ======

</TABLE>

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

                                       4

<PAGE>



                              COLUMBUS ENERGY CORP.

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                Six Months Ended                   Three Months Ended            
                                                                ----------------                   ------------------
                                                                1997       1996                    1997          1996
                                                                ----       ----                    ----          ----
                                                    (in thousands, except per share data)
<S>                                                      <C>               <C>    <C>    <C>    <C>    <C>
Revenues:
  Oil and gas sales                                      $ 6,644            $ 5,231              $ 2,879              $ 2,639
  Operating and management
    services                                                 577                558                  301                  270
  Interest and other income                                   72                235                   35                   31
                                                        --------           --------             --------             --------

       Total revenues                                      7,293              6,024                 3,215               2,940
                                                        --------           --------              --------            --------

Costs and expenses:
  Lease operating expenses                                   951                975                  433                  410
  Property and production taxes                              625                504                  304                  239
  Operating and management
    services                                                 388                417                  191                  215
  General and administrative                                 867                541                  529                  330
  Depreciation, depletion and
   amortization                                            1,490              1,373                  737                  698
  Impairment of long-lived
   assets                                                      -                165                    -                    -
  Exploration expense                                        380                144                  318                  111
  Litigation (Note 4)                                         11                 10                    4                    1
                                                         --------           --------             --------             -------

      Total costs and expenses                             4,712              4,129                2,516                2,004
                                                         --------           --------             --------             -------
       Operating income                                    2,581              1,895                  699                  936
                                                         --------           --------             --------             -------

 Other expenses (income):
  Interest                                                    65                142                   30                   71
  Other                                                       (6)                 7                   (9)                   6
                                                         -------            --------             --------             -------
                                                              59                149                   21                   77
                                                         -------            --------             --------             -------
       Earnings before
        income taxes                                       2,522              1,746                  678                  859

Provision for income taxes
  (Note 3)                                                   958                663                  257                  326
                                                         -------            --------             -------              -------
        Net earnings                                     $ 1,564            $ 1,083              $   421              $   533
                                                         =======            ========             =======              =======

Earnings per share (Note 1)                              $   .40            $   .28              $   .11              $   .14
                                                         =======            ========             ========             =======

Average number of common
  shares outstanding (Note 1)                              3,932              3,810                3,901                3,799
                                                         =======            ========             =======              =======
<FN>

Note 1 -  1996  shares  and  earnings  per  share  restated  for  May  27,  1997
     five-for-four stock split.
</FN>
</TABLE>

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

                                       5
<PAGE>

                              COLUMBUS ENERGY CORP.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      For the Six Months Ended May 31, 1997
                                   (Unaudited)
 
<TABLE>
<CAPTION>
                                                                                        
                                                                                                
                                             Common Stock      Additional                      Treasury Stock
                                             ------------       Paid-in       Retained         --------------
                                         Shares      Amount     Capital       Earnings       Shares       Amount
                                         ------      ------     -------       --------       ------       ------
                                                   (dollar amounts in thousands)
<S>                                   <C>         <C>        <C>           <C>           <C>          <C>

Balances,
  December 1, 1996                    3,499,915   $     700   $    17,361    $     720      344,569    $  (2,556)
 
Exercise of employee
  stock options                          42,772           8           236           --       13,333         (131)
Purchase of shares                           --          --            --           --       87,514         (806)
Shares issued for Stock
  Purchase Plan                           2,913           1            29           --        (733)            5
Shares issued for
  Incentive Bonus Plan
  and directors' fees                        --          --            (7)          --      (13,451)         106
Shares issued under
  five-for-four stock
  split (Note 1)                        885,924         177          (177)          --       107,808          --
Net earnings                                 --          --            --        1,564            --          --
                                      ---------   ---------     ---------    ---------     ---------    --------
Balances,
  May 31, 1997                        4,431,524  $      886   $     17,442   $    2,284      539,040   $  (3,382)
                                      =========   =========      =========    =========    =========    ========

</TABLE>

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

                                       6


<PAGE>

                              COLUMBUS ENERGY CORP.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                             Six Months Ended
                                                        ---------------------------
                                                        May 31, 1997   May 31, 1996
                                                        ------------   ------------
                                                               (in thousands)
<S>                                                        <C>           <C>   
Net earnings                                               $ 1,564       $ 1,083
  
Adjustments to reconcile net earnings
  to net cash provided by operating
  activities:
    Depreciation, depletion, and
      amortization                                           1,490         1,373
    Impairment of assets                                        --           165
    Deferred income tax provision                              857           594
    Gain on asset sale                                          --          (175)
    Other                                                       62            69
Net change in operating assets and
  liabilities                                                  160          (658)
                                                           -------       -------

        Net cash provided by
          operating activities                               4,133         2,451
                                                           -------       -------

Cash flows from investing activities:
  Additions to oil and gas properties                       (2,913)       (4,038)
  Additions to other assets                                    (67)           (5)
  Proceeds from sale of assets                                  --           336
                                                           -------       -------
        Net cash used in
          investing activities                              (2,980)       (3,707)
                                                           -------       -------

Cash flows from financing activities:
  Proceeds from long-term debt                                 500         2,700
  Reduction in long-term debt                               (1,200)       (1,000)
  Proceeds from issuance of
    common stock                                               143            26
  Purchase of treasury stock                                  (806)         (332)
                                                           -------       -------
      Net cash provided by (used in)
        financing activities                                (1,363)        1,394

Net increase (decrease) in cash and
  cash equivalents                                            (210)          138
Cash and cash equivalents at
  beginning of period                                        1,396         1,414
                                                           -------       -------
Cash and cash equivalents at
  end of period                                            $ 1,186       $ 1,552
                                                           =======       =======

                                                                   (continued)
</TABLE>

                                       7

<PAGE>

                              COLUMBUS ENERGY CORP.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                             Six Months Ended
                                                        ---------------------------
                                                        May 31, 1997   May 31, 1996
                                                        ------------   ------------
                                                               (in thousands)
<S>                                                        <C>           <C>   

 Supplemental disclosure of cash flow information:
    Cash paid during the period for:
      Interest                                             $    78       $   163
                                                           =======       =======
      Income taxes                                         $    25       $    16
                                                           =======       =======


</TABLE>


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

                                       8


<PAGE>

                              COLUMBUS ENERGY CORP.

                        NOTES TO THE FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  BASIS OF PRESENTATION

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

     The consolidated  financial statements of the Company have been prepared in
accordance with generally accepted accounting  principles and require the use of
managements'  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 May 31, 1997 and November 30, 1996,  the results of its operations
and cash flows for the three and six  months  ended May 31,  1997 and 1996.  The
results of operations for such interim periods are not necessarily indicative of
results to be expected for the full year.

     For purposes of the  statements  of cash flows,  the Company  considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash  equivalents.  Hedging  activities  are  included  in cash  flow from
operations in the cash flow statements.

     The Company uses crude oil and natural gas swaps to manage price  exposure.
Realized  gains and losses on the swaps are  recognized  in oil and gas sales as
settlement occurs.

     Earnings per share are computed using the weighted average number of common
shares outstanding. Stock options are included as common stock equivalents, when
dilutive,  using the treasury  stock method.  Common stock  equivalents  include
shares  issuable  upon  assumed  exercise of dilutive  stock  options  using the
average price for primary shares and the period end price, if higher,  for fully
diluted  shares.  For 1997 and  1996  such  common  stock  equivalents  were not
dilutive. Historical average number of shares outstanding and earnings per share
have been adjusted for the  five-for-four  stock split distributed June 16, 1997
to shareholders of record as of May 27, 1997.

     The Company will adopt Financial  Accounting  Standards No. 128,  "Earnings
per Share," ("SFAS-128") effective for the 1998 fiscal year. Earlier application
is not  permitted.  The purpose of SFAS- 128 is to simplify the  computation  of
earnings  per share.  The new  standard  replaces  the  calculation  of "primary
earnings per share" with a  calculation  called  "basic  earnings per share" and

                                       9

<PAGE>

                              COLUMBUS ENERGY CORP.

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

redefines  "diluted  earnings  per  share".  The  Company  does not  expect  the
application of SFAS-128 to have a material impact on its EPS calculation.

     Oil and Gas Properties

     The Company  follows the  successful  efforts  method of account ing. Lease
acquisition  and development  costs  (tangible and intangible) for  expenditures
relating to proved oil and gas  properties  are  capitalized.  Delay and surface
rentals are charged to expense in the year incurred. Dry hole costs incurred for
exploratory  operations are expensed.  Dry hole costs associated with developing
proved fields are  capitalized.  Expenditures  for  additions,  betterments  and
renewals are  capitalized.  Exploratory  geological  and  geophysical  costs are
expensed when incurred.

     Upon sale or  retirement  of proved  properties,  the cost  thereof and the
accumulated depreciation or depletion are removed from the accounts and any gain
or  loss  is  credited  or  charged  to  income  if  significant.   Abandonment,
restoration, and dismantlement costs and salvage value are taken into account in
determining  depletion  rates.  These  costs are  generally  about  equal to the
proceeds  from  equipment  salvage upon  abandonment  of such  properties.  When
estimated abandonment costs exceed the salvage value, the excess cost is accrued
and expensed. Maintenance and repairs are charged to operating expenses.

     Provision for  depreciation  and depletion of capitalized  exploration  and
development costs are computed on the unit-of-production  method based on proved
developed  reserves of oil and gas, as estimated by  petroleum  engineers,  on a
property by property  basis.  Unproved  properties are assessed  periodically to
determine  whether  they  are  impaired.  When  impairment  occurs,  a  loss  is
recognized  by  providing  a  valuation  allowance.  When  leases  for  unproved
properties expire, any remaining cost is expensed.

     An impairment  loss on oil and gas properties is reported as a component of
income from  continuing  operations.  The Company  recognizes an impairment loss
when the carrying value exceeds the expected  undiscounted future net cash flows
of each  property  pool at which time the  property  pool is written down to the
fair value. Fair value is estimated to be a discounted present value of expected
future net cash flows with appropriate risk consideration.

     The Company follows the entitlements method of accounting for gas balancing
of gas  production.  The Company's gas imbalances are immaterial at November 30,
1996 and May 31, 1997.

                                       10

<PAGE>

                              COLUMBUS ENERGY CORP.

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


     Other Property and Equipment

     Depreciation  of other assets are provided on the straight line method over
their estimated useful lives. Gains and losses from retirement or replacement of
other properties and equipment are included in income.  Betterments and renewals
are capitalized. Maintenance and repairs are charged to operating expenses.

     Accounting for Stock-Based Compensation

     The Financial  Accounting  Standards Board issued  Statement No. 123 on the
"Accounting  for  Stock-Based  Compensation".   This  statement  prescribes  the
accounting and reporting standards for stock-based  employee  compensation plans
and is effective for the Company's  1997 fiscal year. The Company has determined
it will use the alternative pro forma disclosures as permitted in the Standard.

(2)  LONG-TERM DEBT

     The Company has a credit agreement with Norwest Bank Denver,  N.A. that was
amended and  restated on October 23,  1996.  The credit is  collateralized  by a
first lien on oil and gas properties.

     As requested by the Company, the borrowing base was increased to a limit of
$10,000,000  from  $7,000,000  effective  May 13,  1997,  without  regard to the
maximum  allowable  amount that would be set by the bank during its  semi-annual
redetermination.  A commitment  fee of .25% is payable for any unused portion of
the  credit  which  is  the  difference  between  the  borrowing  base  and  the
outstanding borrowings.

(3)  INCOME TAXES

     The  Company  files a  consolidated  income  tax  return  with CGSI and has
executed a tax allocation agreement which provides for an allocation and payment
of income taxes based upon each  company's  separate tax liability  calculation.
Consolidated income taxes are payable only when taxable income exceeds available
net operating loss carryforwards and other credits.

     Pursuant  to  provisions  enacted  as part of the Tax  Reform  Act of 1986,
utilization  of these  corporate  tax  carryforwards  in any one taxable year is
limited  if a  corporation  experiences  a 50%  change  of  ownership.  Columbus
experienced such a change of ownership in October 1987 effectively  limiting the

                                       11

<PAGE>

                              COLUMBUS ENERGY CORP.

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

utilization  of  pre-change  ownership  net  operating  losses to  approximately
$900,000  in each  subsequent  year.  Subsequent  additional  ownership  changes
accumulated  to more  than 50% by  August  25,  1993  thereby  causing  a second
ownership change to occur.  Approximately $160,000 of these restricted post-1987
net  operating  loss  carryforwards  are available for fiscal 1997 or subsequent
years.

     The  Company  uses the asset and  liability  method to  account  for income
taxes.  Under this method,  deferred tax  liabilities  and assets are determined
based on the temporary  differences between financial statement and tax basis of
assets and  liabilities  using enacted rates in effect for the year in which the
differences  are  expected to reverse.  Deferred  tax assets (net of a valuation
allowance)  primarily result from net operating loss  carryforwards,  percentage
depletion  and  certain  accrued  but unpaid  employee  benefits.  Deferred  tax
liabilities   result  from  the  recognition  of  depreciation,   depletion  and
amortization in different periods for financial reporting and tax purposes.

     Because of the Company's previous 1987 quasi-reorganization, the Company is
required to report the effect of its net  deferred  tax asset  arising  prior to
December  1, 1987 as an  increase  in  stockholders'  equity  rather  than as an
increase to net earnings.

                                       12


<PAGE>


                              COLUMBUS ENERGY CORP.

                 NOTES TO THE FINANCIAL STATEMENTS - (Continued)
                                   (Unaudited)


     The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>

                                                        Six Months Ended May 31,
                                                        ------------------------
                                                           1997           1996
                                                           ----           ----
<S>                                                        <C>           <C>   

Current:
         Federal                                           $ 25           $ 35
         State                                               76             34
                                                           ----           ----
                                                            101             69
                                                           ----           ----

Deferred:
         Federal                                            546            176 
         Use of loss carryforwards                          311            418
                                                           ----           ----
                                                            857            594
                                                           ----           ----
  Total income tax expense                                 $958           $663
                                                           ====           ====

</TABLE>

     The total tax  provision  has resulted in effective  tax rates which differ
from the statutory  Federal income tax rates. The reasons for these  differences
are:
<TABLE>
<CAPTION>

                                                        Percent of Pretax Earnings
                                                        --------------------------
                                                         Six Months Ended May 31,
                                                        --------------------------
                                                        1997                  1996
                                                        ----                  ----
<S>                                                     <C>                   <C>   
U.S. Statutory rate                                      34%                   34%
State income taxes                                        3                     2
Other                                                     1                     2
                                                        ----                  ----
                                                         38%                   38%
                                                        ====                  ==== 
</TABLE>

                                       13

<PAGE>


                              COLUMBUS ENERGY CORP.

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


     During  the six months of fiscal  1997,  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):
<TABLE>
<CAPTION>

                                                                     Current Year
                                                       ---------------------------------------
                                                       Dec. 1,                         May 31,
                                                       1996           Operations        1997
                                                       -------        ----------       -------
<S>                                                   <C>             <C>            <C>   
Deferred tax assets:
  Pre-1987 loss carryforwards                          $ 1,361           $  --        $ 1,361
  Post-1987 loss carryforwards                             596            (298)           298
  Percentage depletion
    carryforwards                                        1,130              --          1,130
  State income tax loss
    carryforwards                                           88             (13)            75
  Other                                                    308             (16)           292
                                                       -------          -------       -------
             Total                                       3,483            (327)         3,156
     Valuation allowance                                (1,469)             --         (1,469)
                                                       -------          -------       -------
    Deferred tax assets                                  2,014            (327)         1,687
                                                       -------          -------       -------

Deferred tax liabilities-
  Depreciation, depletion and
    amortization and other                              (2,013)           (530)        (2,543)
                                                       -------         -------        -------
    Net tax asset (liability)                          $     1         $  (857)       $  (856)
                                                       =======         =======        =======
</TABLE>

     The Company has net operating loss  carryforwards (in thousands)  available
at November 30, 1996 as follows:

                                                           Net
          Expiration Year                             Operating loss
          ---------------                             --------------
              1999                                        $2,710
              2000                                           907
              2001                                           386
              2003                                            45
              2004                                           115
              2010                                         1,593
                                                          ------
                                                          $5,756
                                                          ======

         For Alternative Minimum Tax purposes the Company had net operating loss
carryforwards of  approximately  $6,900,000 as of November 30, 1996. The Company
also has percentage  depletion  carryforwards of $2,974,000 which do not expire.
State income tax operating loss  carryforwards  of $1,450,000  were available at
November 30, 1996.

                                       14


<PAGE>


                              COLUMBUS ENERGY CORP.

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


(4) LITIGATION

     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.

(5) CONTINGENCY

     The Company  entered  into a natural gas swap by selling  60,000  Mmbtu per
month for the period from March 1997  through  October  1997 at $2.20 per Mmbtu.
This  volume  represents  approximately  23% of  Columbus'  second  quarter  gas
production.

     Columbus  also  entered  into a crude oil swap by selling a strip of 10,000
barrels per month for the twelve month period from November 1996 through October
1997 at an average  daily  price of $21.17 per barrel.  This  amount  represents
approximately  48% of Columbus' May 1997 crude oil  production.  The  difference
between  the hedge  price and the  actual  daily  closing  price on the New York
Mercantile Exchange ("NYMEX") is settled monthly.

     The  Company's  natural  gas and crude oil swaps are  considered  financial
instruments  with  off-balance  sheet risk  which  were in the normal  course of
business to 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 had natural gas and crude oil swaps  outstanding  subsequent  to May 31,
1997 as follows:

                                 Notional                     Market Value as of
                                  Value                            5/31/97
                                 -------                      ------------------
                                

         Natural gas
           (6/97-10/97)         $  660,000                      $  640,000

         Crude oil
           (6/97-10/97)          1,059,000                       1,079,000


                                       15
<PAGE>


                              COLUMBUS ENERGY CORP.

                 NOTES TO THE FINANCIAL STATEMENTS - (continued)


(6) RELATED PARTY TRANSACTIONS

     CEC Resources Ltd. ("Resources") was a wholly-owned  subsidiary of Columbus
prior  to its  divestiture  on  February  24,  1995.  Reimbursement  is  made by
Resources to Columbus for services  provided by Columbus  officers and employees
for managing  Resources and reduces  general and  administrative  expense.  This
reimbursement totaled $131,000 and $150,000 for the six months of 1997 and 1996,
respectively.


                                       16
<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

     Second  quarter  results  were  quite  respectable,  and one of the  better
quarters in history,  but were no match for the record results  achieved  during
the first  quarter  of 1997.  This was mostly  due to  decreases  in oil and gas
prices  although  some support was received from the  Company's  favorable  swap
positions of crude oil and natural gas. Nevertheless,  1997's second quarter did
surpass  1996's like  quarter in  discretionary  cash flow ("DCF") and sales but
expensed 3-D seismic costs and increased  incentive bonuses reduced net earnings
to  $421,000,  or $0.11  per  share,  which was less  than  last  year's  net of
$533,000,  or $0.14 per share.  The six months results in 1997 surpassed  1996's
easily with net earnings of $1,564,000, or $0.40 per share, which were 44% above
the  $1,083,000,  or $0.28 per  share,  reported  in 1996.  As of the end of the
second  quarter  1997,   shareholders'   equity  was  $17,230,000   compared  to
$16,225,000  at November  30,  1996.  Substantial  positive  working  capital of
$1,310,000  on May 31, 1997 plus the Company's  forecasted  future cash flow for
the  balance of the year should be more than a  sufficient  source of capital to
finish the $7.1 million  program  budgeted for developing  undeveloped  reserves
plus fund a significantly  expanded  exploratory program. As discussed later, an
increased  percentage working interest in the Louisiana Austin Chalk exploratory
well will up total 1997 capital  expenditures  by a minimum of $1 million.  This
will  require a draw of funds from the  Company's  bank  credit  facility  until
increased   monthly  cash  flow  during  the  balance  of  1997  overcomes  this
accelerated rate of drilling expenditures.  While the $10,000,000 bank borrowing
base of the credit  facility  has been  primarily  targeted  by  management  for
acquisitions of oil and gas  properties,  this credit can always be used for any
legal  corporate  purpose and is always  available  for such  expanded  budgeted
expenditures.

     Generally accepted  accounting  principles ("GAAP") require cash flows from
operating  activities to be deducted  after effect of working  capital  changes.
Accordingly,  GAAP net cash provided by operating  activities was $4,133,000 for
the first six  months of 1997  compared  to  $2,451,000  during  1996's  period.
Management  believes that a very  important  alternative  measure of a company's
cash flow (not GAAP but commonly used in the industry) is one determined  before
considering working capital changes and without deducting  exploration expenses.
This is generally known as DCF and is used by successful  efforts  companies for
comparability purposes with results from the full cost accounting method used by
a majority of independent  energy companies.  Using the latter,  all exploration
costs are capitalized and therefore do not adversely affect  operating cash flow

                                       17
<PAGE>


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

or net  earnings.  Since  exploration  costs can be  increased  or  decreased at
management's discretion, DCF is usually more comparable to the cash flow of full
cost  companies.  Columbus'  DCF for the first six  months  1997 was  $4,353,000
compared to $3,253,000 in 1996. This 34% improvement reflects higher natural gas
and crude oil prices and  increased  natural gas  production  over last  year's.
While DCF is calculated before debt retirement  requirements,  in Columbus' case
it does not matter because  outstanding bank debt requires no principal payments
before July 1999. Furthermore, interest expense on the outstanding debt has been
relatively  insignificant  but has been  deducted  when  arriving  at DCF in any
event.

     Management  notes its strong  exception to Financial  Accounting  Standards
Board  Statement  No. 95 which  directs  that  operating  cash flow must only be
determined  after  consideration of working capital changes and will continue to
reflect  that  position  in  all of  its  public  filings  and  reports.  Such a
requirement  ignores entirely the significant impact on working capital that the
timing of income  received for, and expenses  incurred on behalf of, third party
owners in wells can have on a company  which  serves as an  operator  of several
properties with only a small working interest therein as does Columbus.

     Neither  discretionary  cash flow nor  operating  cash flow before  working
capital may be substituted  for net income or cash available from  operations as
defined by GAAP.  Furthermore,  cash flows do not necessarily indicate that they
are  sufficient  to fund all cash  requirements  of a  company  under any of the
definitions.

     Columbus'  hedges (swaps) of natural gas and oil prices are discussed below
in Results of Operations as well as in Note 5 to the financial statements.

     The Company's  operation and management services segment remains profitable
but has not contributed meaningfully to earnings since Resources was spun-off in
February, 1995.

     Columbus  had  outstanding  borrowings  of  $1,500,000  as of May 31,  1997
against its line of credit with Norwest Bank  Denver,  N.A.  which has a current
borrowing base of $10,000,000 and is  collateralized  by oil and gas properties.
At the end of the second quarter 1997,  the ratio of bank debt to  shareholders'
equity was 0.09 and to total assets was 0.06. The debt  outstanding used a LIBOR
option at an interest  rate of 7.2%.  The net  increase or decrease of long-term
debt affects  reported cash flow from financing  activities as does the purchase
of treasury stock and proceeds from the exercise of stock options.

                                       18

<PAGE>

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

     Working capital at May 31, 1997 remained positive at $1,310,000 compared to
$1,966,000  at November 30,  1996.  This was achieved  despite  expenditures  of
$2,913,000  for new additions to oil and gas  properties  out of the  $7,100,000
budgeted for development and exploratory capital expenditures for 1997.

     A 300,000-share  repurchase  authorized in February 1995 at less than $8.75
per share was completed in March 1997 for an average  repurchase  price of $7.21
($5.77 after five-for-four stock split).

     Recently,  during March 1997, an additional  100,000-share  repurchase  was
authorized at less than $7.80 (giving effect to  five-for-four  stock split) per
share.  To date,  71,500  shares were  acquired at an average price of $7.38 per
share.  A second  authorization  was granted in May,  1997  effective  following
distribution  of split  shares  in  June,  1997  which  permits  purchase  of an
additional 200,000 shares at a price not to exceed $8.25 per share. None of this
authorization has as yet been acquired.

RESULTS OF OPERATIONS

     During 1997's second quarter,  the Company's  revenues  increased by 9% but
operating income  decreased by 25% compared to 1996 due to significantly  higher
exploration  charges and  general and  administrative  expenses  which  included
annual incentive bonuses granted in May. Other comparisons  appear below for the
quarter and first half of 1997 versus like periods in 1996.

     As previously indicated,  a record drilling budget was approved for 1997 so
it should be expected that there will be a record number of well participations.
During the second  quarter,  seven  gross wells  (1.18 net) were  completed  and
resulted  in five (0.28  net)  successful  gas wells in the Laredo  area and two
(1.80 net) oil wells in Montana  which  included  a new zone oil  discovery.  In
addition,  one development  well (0.53 net) which was drilled in the Laredo area
during 1995 and previously  considered as "in progress awaiting  completion" was
abandoned during the second quarter as uneconomic.  The first of the two Montana
oil  wells,  the  McCabe  #1- X,  which was a  replacement  Red River  formation
completion in the S.E.  Froid field,  began pumping in early second quarter with
an initial potential of 88 barrels of oil per day and a similar amount of water.
Recently water percentage has increased such that a larger pump will be required
to improve oil  production.  The second  well,  the McCabe #1, was a  successful
recompletion  (and a new zone oil discovery) in the Winnepegosis  formation at a
depth of about 11,100 feet. This was achieved after  successfully  removing junk
from the casing at about the 9,000 foot level  which had  previously  obstructed
using the lower part of the wellbore. It was flow tested on May 23, 1997 with an
initial  potential  of 112  barrels of oil and two  barrels  of water  through a
14/64ths choke with a tubing pressure of 100 psi but could not sustain a flowing

                                       19

<PAGE>

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

status due to  formation  water  increasing  to about  25%.  The well was flowed
intermittently  during  May and was  eventually  placed  on pump in June with an
indicated  pumping  production  rate of 116 to 141  barrels  of oil and 51 to 85
barrels of water per day.  With an almost 75% net  revenue  interest  ("NRI") in
each of these two Montana oil wells, the Company's oil production is expected to
show a significant  improvement during the third quarter.  This is regardless of
the outcome of the potential  discoveries  discussed below which were considered
as "in progress" as the quarter ended.

     In Texas,  about 20 miles southeast of EGY's Sralla Road field, the Company
participated  in an exploratory  seismic  anomaly to test for gas in the Frio 16
sand at 9,000 feet. It is located  adjacent to the old Anahuac field in Chambers
County,  Texas that has produced  several  hundred  million  barrels of oil from
uphole Frio sands over several decades. The Syphrett Heirs #1 test well resulted
in a natural gas  discovery  in the Frio 16 sand.  A drilling  unit 480 acres in
size has been  agreed  upon and the Company  will  initially  own about a 35% WI
which is subject to a 25% reduction  after it fully recovers all of its costs of
acreage,  drilling and completion  costs of this initial well. The excellent log
and gas shows  encountered led to EGY's  assumption of operatorship  and setting
casing. A gathering system and a pipeline connection was installed in advance of
perforating  ten feet of a 40-foot  gross  interval  of F-16 sand.  The well was
tested  on July 10th at a daily  rate of 4.6  million  cubic  feet of gas and 90
barrels of condensate through a 14/64ths choke with a flowing tubing pressure of
4950 psig. An additional 600 acres of prospective  acreage is owned to the south
and east of the  discovery  fault  block.  This  acreage  will  require  its own
exploratory  test  because it is in a separate  fault  block.  A well  should be
commenced later in 1997 and may be drilled to a depth of 11,000 feet to test the
underlying  Vicksburg  formation.  A recent gas  discovery was completed in this
zone about two miles east of the  Syphrett  fault  block and during the past two
weeks a new  Vicksburg  location  offsetting  this  southeast  acreage block was
announced by that same operator. The Frio 15 sand is also considered prospective
for oil  production  at a  structurally  higher  position in the  Syphrett  well
discovery fault block may also produce in the southeast block.

     In the 1996 annual report (as well as several earlier  quarterly  reports),
details were  disclosed  about the Company's  12.5% WI  participation  in 55,000
acres of leaseholds in an Area of Mutual  Interest  ("AMI")  overlying the deep,
fractured,  geo- pressured Austin Chalk play in mid-Louisiana.  Columbus and its
co- venturers sold a 75% participation of their initially  assembled 23,000 acre
block to Belco Oil & Gas at a profit along with Belco's concurrent  agreement to
carry the co-venturers for a 25% back-in after payout interest in a well drilled

                                       20
<PAGE>

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

from grass roots. That obligation was later amended so those upfront costs could
be spread over  drilling two laterals in the first well and a vertical  wellbore
in the second  well.  That first test called for  re-entry  of a  mutually-owned
existing  15,000-foot cased vertical wellbore which Belco could utilize to drill
(while  advancing all upfront costs) the two opposing  laterals  consisting of a
3,000- foot updip north lateral and a 4,400-foot downdip south lateral. Columbus
et al would pay for their 25% WI share of any required costs to get the vertical
hole in condition to be able to drill those opposing laterals.  The co-venturers
would share in the initial  revenues in a  proportion  that their share of those
vertical  expenditures  bear to the total costs of the  completed  well.  A full
12.5% WI share of  revenues  would be  received  by  Columbus  and  12.5% by its
co-venturers after payout.

     Belco  drilled  the first  updip  lateral  along  the base of the  250-foot
productive  interval of the Austin Chalk despite the co- venturers' protest that
the proposed lateral would fall outside of the known productive  interval.  That
admonition proved to be accurate as that lateral yielded non-commercial rates of
production  so Belco then decided to move up in the section  about 100 feet.  It
drilled a second  "piggyback" updip lateral which encountered  several fractures
and good  oil and gas  shows  in a  3,100-foot  horizontal  hole  which  were an
improvement over the first lateral.  Unfortunately, at about 2,800 feet out from
the vertical hole, a fault was encountered  which most likely penetrates down to
the lower  Tuscaloosa  formation.  This probably  accounts for this second updip
lateral  testing  significant  volumes of salt water along with produced oil and
gas. By the end of a 66 hour test through a 24/64ths inch choke, it had produced
4,431  barrels of water and 1,811  barrels of crude oil and the natural gas rate
had  settled  to around 600 MCFD.  The fluid flow rate was still 66 barrels  per
hour with a 21% oil cut at that time.

     Belco  thereafter gave notice to the co-venturer  group of its intention to
move the drilling rig to another  location and postpone  drilling the previously
agreed to  downdip  4,400-foot  lateral.  This was  strenuously  protested  as a
significant  breach of  contract  but Belco was  offered an  alternative  to its
obligation to the co-  venturers  whereby it could assign all of its interest in
the 1,920 acre unit  (including  the well).  In turn,  the  operations  would be
assumed by the co-venturers who would proceed with drilling the downdip lateral.
Belco accepted that proposal with the co- venturers commitment to spend at least
$750,000 on this  effort.  That  obligation  is being split 75% WI to  Columbus,
12.5% WI to each of the other  co-venturers.  The  Company  would serve as joint
operator with F. W. Rabalais,  Inc. and each co-venturer is free to sell as much
of their interest as desired while remaining  responsible  for their  designated
share of all costs.  Columbus  immediately sold 30% out of its 75% participation
in the lateral portion  based on actual costs not to exceed $1.5  million.  Each

                                       21
<PAGE>

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

participant's  participation  for a like  ownership in the vertical hole portion
would not become a requirement until the downdip lateral had been drilled, liner
installed,  and the  well  tested  for at  least 48  hours.  Three  participants
(including  Mr.  Trueblood)  agreed to purchase  10% each on that  basis.  After
testing,  each individual  participant  will be able to elect to either withdraw
from further  expense and  relinquish any interest in the well (and the unit) or
else purchase a 10% ownership  interest in the vertical  cased wellbore based on
an additional payment of $1.2 million ($120,000). Participants must also pay for
their share of  additional  costs for the surface  equipment  and gas  gathering
system.  A  decision  to opt out would  effectively  become a  decision  by such
participant  that an uneconomic  lateral had been drilled if weighed against the
required  additional  costs to own a 10% working  interest in a productive well.
Such an economic  circumstance  would not necessarily apply to the Company since
most of its  percentage  ownership of the vertical holes had been acquired on an
entirely  different cost basis.  This sale to others was to be Columbus' primary
offset against possible cost overruns and hopefully would be a source of profit.
However,  problems  encountered  to date with  drilling and testing this lateral
have far exceeded the original budget of $1.5 million. It is unlikely any profit
will be  realized  assuming  the  participants  choose to buy into the  vertical
wellbore but still less than drilling a new single lateral well.

     This  Louisiana  well was  considered  as in  progress as of the end of the
second quarter and completion  operations are still underway at the date of this
report.  Increased  ownership of 45% WI has raised  EGY's  exposure to increased
future cash flow from a producing well, even if only partially  successful,  but
the exploratory  costs which must be expensed should it be totally  unsuccessful
are large.  Because of the lost circulation  encountered  after killing the well
with  mud,  this  lateral's   productivity   has  undoubtedly  been  diminished.
Nevertheless,  management  emphasizes  that this vertical  wellbore can and will
undoubtedly be utilized in future to drill at a minimum a second downdip lateral
of 4,000 feet in length using mud from the beginning.  The co-venturers' initial
effort to utilize a clear  weighted  drilling  fluid was doomed for failure from
the  beginning but the excessive  high  pressures  which could not be controlled
could not be  foreseen.  As a  result,  the  lateral  drilling  was  halted at a
measured  depth of 17,233 feet which was only 1,300 feet out from  vertical  but
extensive vertical  fracturing as well as significant high pressure shows of oil
and gas in that  short  distance  are  encouraging.  We  agreed  to  settle  for
depleting  the  reserves  from  this  interval  for the  time  being  with  full
intentions to eventually abandon this lateral and drill a second lateral downdip
which will encounter the balance of the fracture  system in the remaining  2,700
feet not yet tested. It would be total speculation at this point in time to even

                                       22

<PAGE>

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


hazard a guess as to the  productivity  of this current lateral or what a second
one might yield in the way of additional  reserves.  Only time will produce that
answer.

     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  periods for the
second quarters of 1997 and 1996 and the second quarter of 1997 versus the first
quarter of 1997.
<TABLE>
<CAPTION>

                                              Second Quarter           
                                              --------------           %          First Qtr.       %
                                           1997           1996       Change          1997        Change
                                          ------         ------      ------       -----------    ------
<S>                                       <C>            <C>          <C>           <C>          <C>    

         Natural gas revenues M$          $1,672         $1,424       17 %          $ 2,511       (33)%
         Oil revenue M$                   $1,207         $1,215       (1)%          $ 1,254        (4)%
         Natural gas sales volumes:
           Millions of cubic feet            809            662       22 %              777         4 %
           MCF/day                         8,792          7,190                       8,628

         Oil sales volumes:
           Barrels                        61,792         61,576        - %           57,801         7 %
           Barrels/day                       672            669                         642

         Average price received:
           Natural gas - $/MCF            $ 2.07         $ 2.15       (4)%           $ 3.23       (36)%
           Oil - $/BBL                    $19.53         $19.74       (1)%           $21.69       (10)%
</TABLE>

     Natural  gas  revenues  increased  17% in the  second  quarter of 1997 when
compared to 1996's  quarter as a result of higher  volumes which  overcame lower
prices.  Average  prices for natural gas  decreased 4% in the second  quarter of
1997 compared with last year due to lower demand with milder spring  weather and
improved  storage  volumes on hand.  Gas revenues in the second  quarter of 1997
were  aided by  $26,000  ($.03 per Mcf) and  1996's  revenues  were  reduced  by
$117,000 ($.18 per Mcf) from swaps of natural gas or otherwise the  differential
would have been  greater.  Sales  volumes  improved  by 22% over  1996's  second
quarter as a result of numerous wells being  completed and connected  during the
intervening  months. The latest quarter compared to first quarter of 1997 showed
a sales  volume  increase  of 4% as a result of new well  connections  but a 36%
reduction in average prices received resulting in a revenue decrease of 33%.

     Oil revenues for the 1997 second  quarter were almost flat when compared to
the similar  1996  quarter.  There was a slight  decrease  in the average  price
received of 1% and slightly higher sales volumes. Crude oil production has begun
to show a reversal of its normal  declines and there were  sufficient  new wells
completed in the second  quarter to surpass last year's volumes and a noticeable
improvement of 7% over 1997's first quarter volume.  Oil revenues for the second
quarter of 1997 were aided by $19,370 ($.31 per barrel) and second  quarter 1996
revenues reduced by $67,500 ($1.10 per barrel) from crude oil swaps.

                                       23
<PAGE>

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

     Columbus' 1997 second quarter average sales volumes of natural gas of 8,792
Mcfd and oil  production  of 672 barrels per day equates to daily  production of
2,137  barrels of oil  equivalent  (BOE).  While  this is 3% below the  previous
record quarter for U.S. daily production of 2,200 BOE,  production  should reach
record  levels  over the  summer  quarter  with the new oil and gas  discoveries
previously discussed.

     When  comparisons are made with the first quarter results for 1997,  second
quarter oil revenues were 4% lower despite 7% increase in production  because of
a 10% decrease in average price per barrel received.

     Lease  operating  expenses  for the 1997  quarter  were  higher than second
quarter  1996  because the  current  quarter  had  several  expensive  workovers
performed and equipment replaced on older wells. However,  lease operating costs
on a BOE basis were only $2.19 in 1997  compared to $2.37 in 1996 as a result of
increased  production  volumes.  Operating costs as a percentage of revenues was
15% in the 1997 second quarter and 16% in 1996's comparable quarter.

     Production and property taxes  approximated  9% of revenues in 1997 and 10%
in 1996. These vary based on Texas' percentage of the total production where oil
tax rates are lower than gas tax rates and the relationship of taxes and revenue
is not always directly  proportional.  Some local jurisdiction's taxes are based
upon reserve evaluations as opposed to actual revenues or production for a given
period.

     Operating and Management Services

     This segment of the Company's U.S.  business is comprised of operations and
services conducted on behalf of third parties and includes compressor rentals.

     Operating  and  management  services  profit is fairly  consistent  between
quarters. There was a $189,000 profit during first six months 1997 compared to a
$141,000  profit for the  equivalent  period in 1996 as the  number of  operated
wells and drilling activity has increased.

         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 1997 to $35,000  from  $33,000 in 1996's  second
quarter  primarily as result of an increased  amount of  investments  and stable
short-term interest rates.

                                       24

<PAGE>

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

     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 although other nonbillable expenses are also included.

     The Company's general and administrative  expenses in the second quarter of
1997 were much higher than last year.  Those  increased costs were due to salary
increases  in May 1997 for officers and in November  1996 for  employees  and to
incentive   bonuses,   which  are  discretionary  and  are  related  to  Company
performance for the prior year,  which totaled  $220,000  ($70,000  non-cash) in
May, 1997 compared to $83,000 (all non-cash) in May, 1996.

     Reimbursement  for services provided by Columbus officers and employees for
managing  Resources is expected to decrease  later in fiscal 1997  assuming that
Canadian-based management takes over following a business combination. Columbus'
general and  administrative  expenses will increase  accordingly  since no staff
reductions are planned when this occurs.  Reimbursement of $64,000 compares with
$78,000  received  during the second  quarter of 1996 for providing  services to
Resources.

     Depreciation, Depletion and Amortization

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

     Total charges for depletion  expense for oil and gas  properties  increased
over 1996 due to increased production and added development  expenditures in the
intervening  period. The 1997 second quarter depletion rate of $3.75 per BOE was
lower  compared to $3.82 per BOE in the like period of fiscal 1996 and $3.86 per
BOE for all of 1996.  These  amounts are below the  industry  average  primarily
because of  historically  lower finding costs  compared to others who have grown
primarily by acquisitions.

     A non-cash impairment loss of $165,000 was recognized during the 1996 first
quarter  because a development  well drilled in Oklahoma proved to be uneconomic
and its costs exceeded the remaining cash flows from other producing  properties
in the field at that time.

                                       25

<PAGE>

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

     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. Other exploratory charges
such as seismic and geologic costs must also be immediately  expensed regardless
of whether a prospect is eventually proved successful.  Exploration expenses for
comparative  second quarters  amounted to $318,000 for 1997 up from $111,000 for
1996 because of $235,000 of 3-D seismic costs incurred in the S.E. Froid area in
Montana which located new exploratory  well sites that are planned to be drilled
later in 1997.  Additional  3-D seismic  costs for the Hay Creek area of Montana
budgeted  for later in 1997 will also  reduce this  year's net  earnings.  These
exploration  expenses also reduce  reported GAAP cash flow from  operations  (as
well as net earnings) even though they are discretionary expenses; however, such
charges are added back for purposes of determining discretionary cash flow which
is more comparable to cash flow of full cost accounting companies.

     Interest Expense

     Interest  expense varies in a direct  proportion to the amount of bank debt
and the  level  of  bank  interest  rates.  The  average  amount  of  bank  debt
outstanding  has been lower  during  1997's  second  quarter  than in 1996.  The
average bank interest rate paid this latest  quarter was 7.1% which  compares to
7.2% in 1996.

     Income Taxes

     During the first six months of 1997 the U.S.  net deferred tax asset became
a net  liability of $856,000 as a result of expected use of net  operating  loss
carryforwards.  The net liability is comprised of $304,000  current deferred tax
asset and  $1,160,000  long-term tax  liability.  The estimated  utilization  of
deferred tax assets was $857,000 during the six months. The valuation  allowance
has remained  unchanged so far in 1997.  The effective tax rate for 1997 is 38%.
See also 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.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Annual Meeting held May 8, 1997 elected three directors to a two year term,
J. Samuel Butler,  Clarence H. Brown and Jerol M. Sonosky.  Continuing directors
until May 1998 are Harry A. Trueblood, Jr., William H. Blount, Jr. and Donald W.
Ringsby.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

             (a)     Exhibits

                     11    - Computation of per share earnings

                     27    - Financial data schedule

             (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:    July 14, 1997                               /s/ Harry A. Trueblood, Jr.
-----    -------------                               ---------------------------
                                                     Harry A. Trueblood, Jr.
                                                     Chairman, President and
                                                     Chief Executive Officer
                                                    (a duly authorized officer)



DATE:    July 14, 1997                              /s/ Ronald H. Beck
-----    -------------                              ------------------
                                                    Ronald H. Beck
                                                    Vice President
                                                   (Chief Accounting Officer)


                                       28


<PAGE>
                                                      Commission File No. 1-9872



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549





                                     EXHIBIT

                                       TO

                                    FORM 10-Q



                                QUARTERLY REPORT

                         PURSUANT TO SECTION 13 OR 15(d)

                                       OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                       FOR THE QUARTER ENDED MAY 31, 1997















                              COLUMBUS ENERGY CORP.
                           (Exact Name of Registrant)

                               1660 Lincoln Street
                             Denver, Colorado 80264
                     (Address of Principal Executive Office)