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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

[X]

For the Quarterly Period Ended September 30, 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: 0-5525

CASTLEGUARD ENERGY, INC.

(Exact name of Registrant as specified in its charter)

Florida
(State or other jurisdiction of
of incorporation or organization)

75-2615565
(I.R.S. Employer
Identification No.)

4625 Greenville Avenue, Suite 203, Dallas, TX
(Address of principal executive offices)

75206
(Zip Code)

(214) 361-1755

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock Without Par Value

(Title of Class)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 [   ]

At September 30, 2000, there were 15,491,626 Common shares outstanding.

______________________________

Transitional Small Business Disclosure Format (check one): Yes [   ] No [X]

CASTLEGUARD ENERGY, INC.

INDEX

Part 1.

Financial Information:

Item 1.

Financial Statements

Accountant's Review Report

Balance Sheets -
September 30, 2000 (Unaudited) and December 31, 1999 (Audited)

Statements of Operations -
For the Three Months and Nine Months Ended September 30,   2000 and 1999 (Unaudited)

Statements of Cash Flows -
For the Nine Months Ended September 30, 2000 and 1999   (Unaudited) 

  For the Year ended December 31, 1999 (audited) and the
  Nine Months ended September 30, 2000 (Unaudited)

Notes to Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Part II.

Other Information:

Item 1.

Legal Proceedings

Item 2.

Changes in Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Submission of Matters to a Vote of Security Holders

Item 5.

Other Information

Item 6.

Exhibits and Reports on Form 8-K

Signatures

Item 1.

CASTLEGUARD ENERGY, INC.

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors

Castleguard Energy, Inc.

We have reviewed the accompanying balance sheets of Castleguard Energy, Inc. as of September 30, 2000, and the related statements of income for the three and nine month periods and cash flows and stockholders' equity for the nine month period then ended. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of analytical procedures applied to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.

                                                                   Jackson & Rhodes P.C.

Dallas, Texas

November 7, 2000

CASTLEGUARD ENERGY INC.

BALANCE SHEETS

September 30, 2000 and December 31, 1999

9/30/2000
(Unaudited)

12/31/1999

Assets

Current assets:

Cash and cash equivalents

$

180,721  

$

65,957  

Accounts receivable

    265,260  

          471  

Total current assets

445,981  

66,428  

Petroleum and natural gas interests, net

1,181,840  

1,117,296  

Office equipment, net

        857  

          165  

Debt issue costs, net

      10,549  

          -    

TOTAL ASSETS

$

1,639,227  

$

1,183,889  

Liabilities & Stockholders' Equity

Current liabilities:

Accounts payable

$

115,087  

$

124,168  

Notes payable - current maturities

360,000  

-     

Loans payable to related parties

            -    

     56,000  

Total current liabilities

     475,087  

   180,168  

Notes Payable, less current maturities

     680,000  

           -    

Subscriptions received

           -    

   100,900  

Stockholders' equity:

Common stock, $0.001 par value,
     50,000,000 shares authorized,
     17,353,626 issued and 15,491,626
     outstanding in 2000, 14,750,626

     issued and outstanding in 1999

17,354  

14,751  

Additional paid-in capital

805,332  

1,287,035  

Accumulated deficit

   (282,546) 

    (398,965) 

Total

540,140  

902,821  

Less: Treasury stock, 1,862,000 shares

    (56,000) 

        -    

Total stockholders' equity

  484,140  

     902,821  

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$

 1,639,227  

$

  1,183,889  

CASTLEGUARD ENERGY INC.

STATEMENTS OF OPERATIONS

(Unaudited)

Three months
ended
     9/30/2000    

Three months
ended
     9/30/1999    

Nine months
ended
     9/30/2000

Nine months
ended
     9/30/1999    

Net Sales:

Oil and gas sales

$          144,532  

$           7,018  

$        259,957  

  $        35,608  

Royalties

             -     

           (86) 

             -     

      (2,903) 

    144,532  

      6,932  

   259,957  

     32,705  

Expenses:

Lease operating expense

5,952  

2,129  

9,216  

54,612  

Production tax

4,520  

1,268  

10,499  

1,268  

Depreciation, amortization and
    depletion

7,165  

10,666  

25,577  

15,128  

General and administrative

      16,045  

      11,690  

      83,360  

     126,856  

      33,682  

      25,753  

     128,652  

    197,864  

Income (Loss) before interest income

     110,850  

     (18,821) 

     131,305  

    (165,159) 

Interest income

14  

108  

Interest and financing expense

       (14,886) 

               -     

       (14,886) 

               -     

       (14,886) 

              14  

       (14,886) 

              14  

Net income (loss)

$            95,964  

$          (18,807) 

$         116,419  

$      (165,051) 

Net Income (Loss) per weighted average
             share

$                  .01  

$              (.00) 

$               .01  

$             (.01) 

Weighted average number of common
             shares outstanding

17,133,000  

14,751,000  

15,761,000  

13,875,000  

CASTLEGUARD ENERGY INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

   9/30/2000  

   9/30/1999  

Cash Flows from Operating Activities:

Net Income (Loss)

$

116,419  

$

(165,051) 

Adjustments to reconcile net
         loss to net cash provided by
         operating activities:

Depletion and amortization

25,878  

15,128  

Decrease (increase) in

accounts receivable

(214,789) 

4,606  

Increase (Decrease) in

accounts payable

     64,006  

 203,752  

Net cash provided by (used in) operating

activities

(8,486) 

58,435  

Cash Flows from Investing Activities:

Purchase of petroleum and

natural gas interests

     (963,900) 

(415,949) 

Net cash (used in) investing activities

(963,900) 

(415,949) 

Cash Flows from Financing Activities:

Proceeds from bank note payable

1,040,000  

-     

Debt issue costs

(10,850) 

-     

Proceeds from sale of common stock

170,000  

261,888  

Subscriptions received

-     

60,000  

Repayment of loans to related parties

(56,000) 

10,000  

Purchase of treasury stock

  (56,000) 

         -     

Net cash provided by financing activities

1,087,150  

  331,888  

Net increase in cash and cash equivalents

114,764  

(25,626) 

Cash and cash equivalents,

beginning of period

   65,957  

   36,851  

Cash and cash equivalents,

end of period

$

  180,721  

$

   11,225  

CASTLEGUARD ENERGY, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited for the year 2000 first nine Months)

Common Stock

Additional

Treasury

Accumulated

    Shares    

     Amount    

 Paid-in Capital 

        Stock       

       Deficit       

       Total       

Balance at December 31, 1998

12,000,000 

$       12,000 

$      183,000  

$          -   

$       (79,188)

$      115,812 

Issuance of common stock for:

          Cash proceeds

1,250,626 

1,251 

355,535 

356,786 

          Interest in property (Note 4)

1,500,000 

1,500 

748,500 

750,000 

Net loss:

          January 1, 1999 to

                    December 31, 1999

                 -     

                 -   

                 -     

                 -     

      (319,777)

      (319,777)

Balance at December 31, 1999

14,750,626 

$    14,751 

$    1,287,035

$          -   

$     (398,965)

$    902,821 

Issuance of common stock for:

          Cash proceeds

4,103,000 

4,103 

266,797 

270,900 

Reverse property acquisition (Note 4)

(1,500,000)

(1,500)

(748,500)

(750,000)

Purchase of treasury stock

(56,000)

(56,000)

Net income, nine months ended

                    September 30, 2000

                -     

                -     

                  -     

                -     

        116,419

        116,419

Balance, September 30, 2000

17,353,626 

$ 17,354 

$      805,332

$     (56,000)

$    (282,546)

$     484,140 

CASTLEGUARD ENERGY, INC

NOTES TO FINANCIAL STATEMENTS

Nine months ended September 30, 2000

Note 1 - Future Operations

     The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company's improving operating results produced positive cash flow for the nine months of this year, and reduced the deficit from $398,905 at December 31, 1999, to $282,546 at September 30, 2000. The Company is in the process of growing through the acquisition of oil and gas interests (note 3) and intends to finance this growth through the issuance of common stock and external debt. Future operations are dependent on the Company's ability to obtain financing from share issuances and external debt to finance acquisitions of property and on its ability to achieve earnings from its acquired operations.

Note 2 - Summary of Significant Accounting Policies and Practices

(a)

Description of Business

Castleguard Energy, Inc. is an independent energy company engaged in the exploration for and the acquisition, development, exploitation and operation of crude oil and natural gas properties, and in the production of crude oil and natural gas in North America. The Company's activities are conducted principally in the states of Texas and Louisiana.                                             

(b)

Net Income (Loss) per Weighted Average Share

Net income (loss) per weighted average share is calculated using the weighted average number of shares of common stock outstanding.                                                                                
   

(c)

Oil and Gas Sales

Petroleum and natural gas sales are recognized upon delivery to the metered gate at the common carrier pipeline.                                                                                                           

(d)

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulations S-B. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 1999 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim  unaudited financial statements should   be read in  conjunction with those  financial statements included in the Form 10-KSB. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000.

CASTLEGUARD ENERGY, INC

NOTES TO FINANCIAL STATEMENTS

Nine months ended September 30, 2000

Note 3 - Acquisition of Oil & Gas Interests

     During the third quarter, the Company acquired additional working interests in the Minden Field in Louisiana for $1,300,000, raising its interest from 31/2 to 5% to about 121/2 to 15%. The acquisition included interests in producing and non-producing properties and increased the Company's share of oil and gas sales. An additional well is in the process of being drilled with the Company's share of costs estimated to be $160,000 which the Company expects to pay from existing resources and future cash flows.

     The acquisition was funded by a loan from a commercial bank of $1,040,000 which bears interest at 1% over Chase Manhattan prime and is repayable at $30,000 per month plus interest. The loan is secured by the Company's total Minden Field interest and is guaranteed by the Company's Chairman and a private company he controls, as well as, by the Company's President.

Note 4 - Related Party Transactions

     The Company, in 1999, received oil and gas revenue and incurred lease operating expenses from properties owned by H & S Production, a company owned by the Chairman of the Board, totaling $17,155 and $30,824, respectively. At December 31, 1999, the Company owed H & S Production $14,387, relating to operating activities.

     The loans payable of $56,000 at December 31, 1999, were $28,000 due to H & S Production and $28,000 due to the president of the Company. The loans were interest free and were repaid prior to March 31, 2000.

     In February 1999, the Company acquired an 8% working interest in oil and gas leases covering approximately 10,000 acres in Navarro County, Texas as well as 40 sq. miles of 3D seismic on this property from H & S Production in exchange for 1,500,000 shares of common stock at a fair value of $750,000 and $50,000, respectively, for a total cost of $800,000.

     During the year 2000 third quarter, the Company's Board of Directors, after considering costs of development and prospects therefrom, voted unanimously to sell the oil and gas leases and seismic data back to H & S Production for the consideration originally paid (1,500,000 of the Company's common shares and $50,000 in cash). No income (expense) effect resulted from the transactions.

Item 2.

CASTLEGUARD ENERGY, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-QSB includes "forward-looking" statements within the meaning of Section 27a of the Securities Act of 1933, as amended (the "Securities Act"), and section 21e of the Securities Exchange Act of 1934, as amended (the "exchange act"). Specifically, all statements other than statements of historical facts included in this report regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations are forward- looking statements. These forward-looking statements are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions related to certain factors including, without limitation, price levels for oil and natural gas, concentration of oil and natural gas reserves and production, drilling risks, uncertainty of oil and gas reserves, risks associated with the development of additional revenues and with the acquisition of oil and gas properties and other energy assets, operating hazards and uninsured risks, general economic conditions, governmental regulation, changes in industry practices, marketing risks, one time events and other factors described herein ("cautionary statements"). Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward- looking statements. All subsequent written and oral forward- looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable cautionary statements. Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Information - Cautionary Statements" included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999, which is incorporated herein by reference.

The Company is an independent oil and gas exploration company whose strategic focus is the application of advanced seismic imaging and computer-aided exploration technologies in the systematic search for commercial hydrocarbon reserves, primarily in the states of Texas and Louisiana. The Company attempts to leverage its technical experience and expertise with seismic to identify exploration and exploitation projects with significant potential economic return. The company intends to participate in selected exploration projects as a non-operating, working interest owner, sharing both risk and rewards with its partners. The Company has and will continue to pursue exploration opportunities in regions where the Company believes significant opportunity for discovery of oil and gas exists. By reducing drilling risk through seismic technology, the Company seeks to improve the expected return on investment in its oil and gas exploration projects. The Company attempts to limit capital requirements by forming industry alliances and exchanges a portion of its interest for cash and/or a carried interest in its exploration projects.

Results of Operations - Comparison of Three Month and Nine Month Periods Ended September 30, 2000 and 1999

     Results of operations improved significantly in the third quarter of 2000 compared to the second quarter and the third quarter of 1999. Similarly, results for the nine months improved significantly from last year. Improvements were driven by higher commodity prices in this quarter and this year compared to the same periods last year and the prior quarter of this year and by higher production volumes in this quarter as well. Production volumes increased principally due to the acquisition in the third quarter of a larger working interest ( increasing from 31/2-5% to 121/2-15%) in the Minden Field in Louisiana. Increased oil and gas revenues were substantially in excess of operating costs; depreciation, amortization, and depletion; plus interest attributable to financing the acquisition. As a consequence, the Company reported net income for the three and nine months of this year compared to losses last year, and net income improved from the second quarter of this year by 233%. Reported oil volumes for the quarter were 579 barrels compared to 100 barrels last year at prices of $29.98 per barrel and $20.00 per barrel, respectively. Similarly, gas sales for the quarter aggregated 25,676 MCF compared to 1,381 MCF last year at $4.69 per MCF versus $3.53 per MCF, respectively. Operating results in 1999 were adversely affected by one-time costs of reorganizing and altering the Company's business to place it on its present course.

Liquidity and Capital Resources

     Cash flow, before working capital changes, improved significantly in the third quarter and the Company successfully completed the acquisition and financing of a substantially larger working interest in its Minden Louisiana Field play. The increased participation should produce incremental cash flow in excess of debt service casts which will provide funding for the Company's share of additional development costs.

     Executing the Company's business plan in the future will require success in obtaining additional cash resources from additional debt financings, sales of existing properties, or other sources. Another avenue potentially available is through industry alliances to limit funding requirements for future projects. Management believes future cash flows from existing properties will be adequate to fund current operating requirements.

Inflation and Changing Prices

   The impact of inflation, as always, is difficult to assess. During 1997 and 1998, the oil and gas industry remained depressed; however as of December 31, 1999, commodity prices had made a rebound and were consistently improving. This improvement has continued to increase in the third quarter of 2000. The general softening of the market prior to and into 1999 had reduced the cost of labor, materials, contract services, and other operating costs; therefore, the increase in commodity prices could cause an increase in operating costs. The Company cannot anticipate where cost and revenue trends will head; however, a sudden increase in inflation and/or an increase in operating costs coupled with a cessation of the current improved trend of oil prices could have an adverse effect on the operations of the Company.

Part II. Other Information

Item 1. Legal Proceedings

            Not Applicable

Item 2. Changes in Securities and Use of Proceeds

            Not Applicable

Item 3. Defaults Upon Senior Securities

            Not Applicable

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

            Not Applicable

Item 5. Other Information

            Not Applicable

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits -

(b)

Reports on Form 8-K - No Reports on Form 8-K were filed during the last quarter of the period covered by this report.

                                                                   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.

CASTLEGUARD ENERGY, INC.

November 10, 2000

  /s/ Bob G. Honea                                                                     

BY: Bob G. Honea, Director/President