MAGELLAN PETROLEUM CORP /DE/
10-K, 1996-09-18
CRUDE PETROLEUM & NATURAL GAS
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                                    FORM 10-K
                                  United States
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended                      June 30, 1996
                          ----------------------------------

                                       OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

              For the transition period from _________to __________

                          Commission file number 1-5507

                         MAGELLAN PETROLEUM CORPORATION
             (Exact name of registrant as specified in its charter)

DELAWARE                                                 06-0842255
State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization                        Identification No.)

149 Durham Road, Madison, Connecticut                      06443
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code    (203) 245-8380

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

                                                 Name of each exchange on
Title of each class                                 which registered

Common stock par value $.01 per share            Boston Stock Exchange

                                                 Pacific Stock Exchange

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

                                      NONE
                                (Title of Class)

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.
                                                          |X|  Yes |_|  No

<PAGE>

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K ss.229.405 of this chapter) is not contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
From 10-K or any amendment to this Form 10-K |X|

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant was $72,092,000 at September  4,1996 (based on the last sale price of
such stock as quoted on the Pacific Stock Exchange).

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

Common Stock,  par value $.01 per share,  24,691,245  shares  outstanding  as of
September 4, 1996.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of  the  Proxy  Statement   related  to  the  Annual  Meeting  of
Stockholders  for the fiscal  year  ended June 30,  1996,  are  incorporated  by
reference in Part III of this Form 10-K to the extent stated herein.

<PAGE>

                                TABLE OF CONTENTS


                                     PART I

                                                                       Page

Item 1  Business.                                                       4

Item 2  Properties.                                                    18

Item 3  Legal Proceedings.                                             23

Item 4  Submission of Matters to a Vote of Security Holders.           26

                                     PART II

Item 5  Market for the Company's Common Stock and Related
        Stockholder Matters.                                           28

Item 6  Selected Financial Data.                                       29

Item 7  Management's Discussion and Analysis of Financial
        Condition and Results of Operations                            30

Item 8  Financial Statements and Supplementary Data.                   38

Item 9  Changes in and Disagreements with Accountants on
        Accounting and Financial Disclosure.                           70

                                    PART III

Item 10 Directors and Executive Officers of the Company.               70

Item 11 Executive Compensation.                                        70

Item 12 Security Ownership of Certain Beneficial Owners and
        Management.                                                    70

Item 13 Certain Relationships and Related Transactions                 70

                                     PART IV

Item 14 Exhibits, Financial Statement Schedules, and Reports
        on Form 8-K.                                                   71


     Unless  otherwise  indicated,  all dollar  figures set forth  herein are in
United States currency.  Amounts expressed in Australian  currency are indicated
as  "A.$00".  The  exchange  rate at  September  4,  1996  was  A.$1.00  equaled
U.S.$.7922.

<PAGE>



                                     PART I

Item 1.  Business.

     Magellan  Petroleum  Corporation  (the  "Company"  or  "MPC")  is  engaged,
directly and through its majority-owned  subsidiary,  in the sale of oil and gas
and the  exploration  for and  development of oil and gas reserves.  At June 30,
1996,  the  Company's  principal  asset  was a  50.7%  equity  interest  in  its
subsidiary,  Magellan Petroleum Australia Limited ("MPAL"),  which has one class
of stock that is publicly held and traded in Australia.

     MPAL owns  interests in various oil and gas  properties in  Australia,  the
United States and Belize,  Central America.  MPAL's major Australian  assets are
two  petroleum  production  leases  covering the Mereenie oil and gas field (35%
working  interest) and one petroleum  production  lease covering the Palm Valley
gas field  (50.775%  working  interest).  Both fields are located in the Amadeus
Basin in the Northern Territory of Australia ("NTA"). Santos Ltd ("Santos"),  an
Australian  company,  which owns a 37.4% interest in the Palm Valley field and a
65% interest in the Mereenie field, also owns 18.2% of MPAL's outstanding stock.
Boral Limited, an Australian company owns 1.2% of the Palm Valley field and also
owns a 18.1% interest in MPAL's outstanding stock.

     MPAL and its  co-venturers in the Mereenie and Palm Valley fields have been
discussing  the sale of additional  quantities of gas from these fields with the
Power  and  Water  Authority  ("PAWA")  in  the  Northern  Territory  and  other
purchasers.  While another new gas supply contract for the sale of gas from both
fields appears likely, the ultimate purchaser,  the timing, and terms of any new
contracts are uncertain.

     In  Canada,  the  Company  has a  direct  2.67%  carried  interest  in  the
Kotaneelee  gas field in the Yukon  Territory  of Canada.  The  Company  has not
received any revenues from this field to date. See Item 3 - Legal Proceedings.

     MPC also has a 10% working interest in a Baca County,  Colorado exploration
program  with MPAL (90%).  In  addition,  the Company  also has a 2 1/2% working
interest in the Belize Joint Venture in which MPAL has a 20% working interest.

<PAGE>


     The  following  chart  illustrates  the various  relationships  between the
Company and the various companies discussed above.









     The following graphic presentation has been omitted, but the following is a
tabular presentation of the omitted material:

                         MPC - MPAL RELATIONSHIPS CHART


             MPC owns 50.7% of MPAL. 
             MPAL owns 50.8% of the Palm Valley Field, Australia.
             MPAL owns 35% of the Mereenie Field, Australia.
             BORAL owns 18.1% of MPAL.
             BORAL owns 1.2% of the Palm Valley Field, Australia.
             SANTOS owns 18.2% of MPAL.
             SANTOS owns 37.4% of the Palm Valley Field, Australia.
             SANTOS owns 65% of the Mereenie Field, Australia.



<PAGE>


     (a) General Development of Business.

         Operational Developments Since the Beginning of the Last Fiscal Year.

AUSTRALIA

Mereenie
                                Field Operations

     MPAL (35%) and Santos (65%), the operator,  (together known as the Mereenie
Joint  Venture or "MJV") own the Mereenie  field which is located in the Amadeus
Basin of the NTA.  MPAL's share of  production  from the field is subject to net
overriding royalties aggregating 3.0625% and the statutory government royalty of
10%.  MPAL's  share of the  Mereenie  field  proved  developed  oil reserves was
approximately 1.2 million barrels at June 30, 1996.

     Four  development  wells  were  drilled  in  fiscal  1996 and  subsequently
completed  as oil wells.  The field was  producing  about 2800 (MPAL  share 980)
barrels  of crude oil per day  ("bpd")  from 36 wells at June 30,  1996.  During
1996, MPAL's share of oil sales was 365,000 barrels and 2.8 bcf of gas sold. The
oil is transported by means of a 167 mile eight-inch oil pipeline from the field
to the Brewer Estate industrial park near Alice Springs. Most of the oil is then
shipped  south  approximately  950 miles by rail and road to a  refinery  in the
Adelaide area. The cost of  transporting  the oil to the refinery is being borne
by the producers.

     The MJV is also  providing  Mereenie  gas to the Power and Water  Authority
("PAWA")  of the NTA for use in Darwin and other NTA  centers.  See  "Darwin Gas
Supply Contracts".

Palm Valley
                                Field Operations

     MPAL has a 50.775%  interest  in the Palm Valley gas field which is located
in the NTA. Ten wells have been drilled in the field, six of which are currently
connected to the gas  treatment  plant and are flowed at maximum  deliverability
levels to meet the Alice Springs and Darwin supply  contracts with PAWA.  During
fiscal 1996, MPAL's share of gas sales was 3.4 bcf.


<PAGE>


     In 1981, the Palm Valley Joint Venture  ("PVJV")  agreed to supply the PAWA
facility  in Alice  Springs  with 48 bcf of natural  gas (MPAL share - 24.4 bcf)
from the field.  During the twenty-five year period 1983-2008,  PAWA is required
to take and/or pay for at least 28 bcf (MPAL share -14.2 bcf).  The price of gas
is adjusted quarterly to reflect fully changes in the Australian  Consumer Price
Index.


     The PVJV is also  providing Palm Valley gas for use in Darwin and other NTA
centers. See "Darwin Gas Supply Contracts".

     MPAL's  share  of Palm  Valley  production  revenues  is  subject  to a 10%
statutory government royalty and net overriding royalties aggregating 4.2548%.

Darwin Gas Supply Contracts

     In 1985,  MPAL signed an  agreement as a  participant  in the PVJV and also
signed an agreement as a participant  in the MJV for the sale of gas to PAWA for
use in PAWA's  Darwin  generating  station  and at a number of other  generating
stations in the Northern Territory.  The gas is being delivered via the 922 mile
Amadeus  Basin  to  Darwin  gas  pipeline  which  was  built  by  an  Australian
consortium.

                              Palm Valley Agreement

     The PVJV has  contracted  to supply a maximum of 175 bcf (MPAL share - 88.9
bcf) of gas from the Palm  Valley  field and PAWA has  agreed to take or pay for
134 bcf (MPAL  share - 68 bcf) during the 25 year  period of the  contract.  The
price is subject to quarterly  adjustments to partially  reflect  changes in the
Australian   Consumer  Price  Index  and  certain  increases  in  the  price  of
electricity.

                               Mereenie Agreement

     The MJV has agreed to supply a maximum of 56 bcf (MPAL share - 19.6 bcf) of
gas from the Mereenie  field and PAWA has agreed to take or pay for 40 bcf (MPAL
share - 14 bcf) during the 25 year period of the contract.  This  agreement also
provides  for price  adjustments  identical  to the Palm Valley  agreement.  The
difference  in price  between  Palm Valley gas and Mereenie gas for the first 20
years of the  contract  takes into account the  additional  cost to the pipeline
consortium  to build a spur line to the Mereenie  field and increase the size of
the pipeline from Palm Valley to Mataranka.


<PAGE>


     On May 29, 1995,  the MJV  concluded a contract  for sale of an  additional
21.4 bcf of gas to PAWA. The additional gas was required to meet the power needs
of new mining developments in the NTA including the McArthur River Mine.

                     Agreements Between the PVJV and the MJV

     In  consideration  for the PVJV forgoing 20% of the Amadeus Basin to Darwin
gas supply  contract  during the first  twenty  contract  years,  the MJV made a
payment to the PVJV to partially compensate the PVJV for the reduced net present
value of the future gas sales revenue which were postponed from contract years 1
to 20 to contract  years 21 to 26. The  agreement  also provides that if the MJV
sells any  additional  gas from the Mereenie  field,  the PVJV is  entitled,  as
additional  consideration,  to 35% of the  revenues  from the first 38 bcf (MPAL
share - 19.5 bcf) of gas sold.  At June 30,  1996,  the  balance  of the MJV gas
subject to this entitlement was 29 bcf (MPAL share - 15 bcf).

                              Other Related Matters

     The PVJV  and the MJV are now  entitled  to  receive  a share  of  pipeline
tariffs earned for transporting gas in excess of the contracted volumes referred
to above. In fiscal 1996, MPAL's share was approximately A.$1,126,000.

                  Summary of Amadeus Basin Gas Supply Contracts

     The  following  is a summary of MPAL's  interest in the Palm  Valley  Joint
Venture and the Mereenie Joint Venture gas supply contracts.
<TABLE>
<CAPTION>

                           Maximum contract                   Take or pay                     Percentage of
                       (Before/after royalties)         (Before/after royalties)           contract completed
                                 (bcf)                           (bcf)                   Maximum       Take or Pay
<S>                      <C>             <C>               <C>            <C>             <C>              <C>

Palm Valley:
  Alice Springs           24.4            21.0             14.2            12.3            40               53
  Darwin                  88.9            76.6             68.0            58.6            34               45
                         -----            ----             ----            ----
                         113.3            97.6             82.2            70.9
                         -----            ----             ----            ----
Mereenie:
  Darwin (1985)           19.6            17.0             14.0            12.2            37               52
  Darwin (1995)            7.5             6.5              6.0             5.2            27               34
  Cosmo Howley             1.8             1.5              1.8             1.5            78               78
  N.T. Gas                  .3              .3               .3              .3             -                -
                       -------        --------         --------          ------
                          29.2            25.3             22.1            19.2             -                -
                        ------          ------           ------            -----
Total                    142.5           122.9            104.3            90.1
                         =====           ======           =====            ====
</TABLE>
<TABLE>
<CAPTION>

                                                            Contract Price
                                 Contract Period           at June 30, 1996
                                                                 (mcf)
<S>                          <C>                                <C>               <C>

Palm Valley:
  Alice Springs              25 years (1983-2008)               A.$2.94
  Darwin                     25 years (1987-2012)               A.$2.02

Mereenie:
  Darwin (1985)              25 years (1987-2012)               A.$  .48*         (Contract years 6-21)
  Darwin (1985)              25 years (1987-2012)               A.$2.07           (Contract years 22-26)
  Darwin (1995)              10 years (1995-2009)               A.$2.70
  Cosmo Howley               10 years (1989-1999)               A.$2.92
  N.T. Gas                   10 years (1996-2006)               A.$2.72

<FN>
(*) To the extent that PAWA  purchases gas from the Mereenie  field in excess of
probable requirements, then the MJV receives A.$2.07 per mcf.
</FN>
</TABLE>
<PAGE>


Dingo Gas Field


     MPAL has a 34.26  percent  interest  in the Dingo  gas field  which is held
under Retention License 2. The Dingo gas field,  which is located in the Amadeus
Basin in the NTA, has  approximately  18 bcf of presently proved and recoverable
reserves based on three production gas wells.  Sufficient reserves are indicated
to fulfill a modest  gas  contract,  however,  the  initial  well flow rates and
consequent  reserves per well are considered  too low to be currently  economic,
given the high  drilling  costs of the  wells.  The  current  retention  license
requires  that a well be drilled  by May,  1997 at an  estimated  cost of A.$3.5
million (MPAL share - A.$1.2 million).  Because of the sub-commercial  status of
the field, an application to waive the drilling  commitment will be filed. It is
expected that the waiver will be granted.  MPAL's share of potential  production
from these permit  areas is subject to a 10%  statutory  government  royalty and
overriding royalties aggregating 2.5043%.

The Surat Basin

     MPAL  currently  has a 15.625%  working  interest in the Burunga  permit in
Queensland (ATP 378P).  During fiscal 1996, the Scotia No. 3 well was drilled to
test  for coal bed  methane  gas.  The gas well is  presently  being  tested  to
determine whether it would be economic to develop the discovery.

Ngalia Basin

     MPAL has been  granted a renewal of permit EP-15 in the Ngalia basin in the
NTA which expires in May 1999. The renewal permit covers 1.9 million acres.  The
minimum obligations of this permit total A.$1.2 million for the period 1997-1999
including an obligation to drill a well by May 1998.  Previously MPAL had held a
permit in the Ngalia  basin where a 6,000 foot  wildcat  well,  Davis No. 1, was
drilled in 1981.  Although the well was  abandoned  as a dry hole,  it did yield
minor shows of natural gas. MPAL is seeking co-venturers in this project.


<PAGE>


Maryborough Basin

     MPAL is seeking  partners for  exploration  permit ATP 613P, a 670,000 acre
block, in the Maryborough Basin in Queensland,  Australia. During fiscal 1996, a
seismic survey was completed on the permit.  Processing and analysis of the data
is being completed.  The minimum  expenditure  obligation of the permit is A.$.9
million over the term of the permit which ends March 1999.

UNITED STATES

Baca County, Colorado

     MPC (10%) and MPAL (90%) are  participating  in an  exploration  program in
Colorado.  During  late  April  1995,  MPAL  commenced  an  initial  three  well
exploration  drilling program. The initial three well appraisal program has been
completed.  All three  wells  were dry  holes.  MPC has the  right,  but not the
obligation, to a 10% participation in drilling of future prospects. Based on the
data derived from the  appraisal  program  during  fiscal 1996,  the Company has
written off  $2,500,000 in costs  incurred to date.  In early 1997,  the Company
expects  to  drill  an  additional  exploration  well  on the  most  prospective
structure.

Belize

Gladden Basin PSA

     During January 1996,  MPAL acquired a 20% working  interest in a Production
Sharing  Agreement  ("Gladden  PSA") which covers  approximately  351,000  acres
offshore Belize, Central America. On May 30, 1996, MPC acquired a 2 1/2% working
interest  in the  Gladden  PSA.  The  Gladden  PSA  expires on May 31,  2001 and
requires that a well be drilled by December 1, 1996.  The estimated  cost of the
well is $10 million (MPAL share $2 million, MPC share $250,000).

Block 13 PSA

     MPC (2 1/2%) and MPAL (20%) are also  participants in a Production  Sharing
Agreement  ("Block 13 PSA") offshore Belize  adjourning the western and southern
boundaries  of the Gladden  PSA. The Block 13 PSA covers  approximately  788,000
acres.  The Block 13 PSA expires on January 31, 2004.  The  aggregate  estimated
cost for 1997 and 1998 is approximately $68,000 for MPAL and MPC.

<PAGE>


CANADA

     The Company owns a 2.67%  carried  interest in a lease (31,885 gross acres,
850 net acres) in the southeast  Yukon  Territory,  Canada,  which  includes the
Kotaneelee  gas field.  This partially  developed  field is connected to a major
pipeline  system.  Three wells have been completed to date and are capable of an
estimated output of in excess of 60 mmcfd, the capacity of the field dehydration
plant.  Present  production is  approximately  40-45 million cubic feet per day.
Anderson Oil & Gas, Inc., ("Anderson") is the operator of the field.

     Production  at the  Kotaneelee  field  commenced  in February  1991.  Total
production from the field according to government reports, has been as follows:

       Calendar Year                                  Production (BCF)
       -------------                                  ----------------
           1991                                                8.1
           1992                                               18.0
           1993                                               17.5
           1994                                               16.7
           1995                                               15.7
           1996 (To June 30)                                   7.4

In a 1989  application  to the National  Energy  Board,  a reserve  study by the
operator  estimated  gas in place at 1.6  trillion  cubic  feet with  proved and
probable recoverable reserves of 781 bcf.

     The operator has not permitted the Company  access to detailed  pricing and
volume  information,  citing the  litigation  regarding the field.  See Item 3 -
Legal  Proceedings  for a discussion  of litigation  relating to the  Kotaneelee
field which may affect the status of the carried  interest and the amount of the
carried interest account.

     The Company is not entitled to any revenue from the field until the working
interest  owners recover their costs.  The operator last reported to the Company
unrecovered  development costs totaling  approximately Cdn. $30,264,000 (Company
share - Cdn. $807,000) at January 31,1996.  It is expected that the Company will
begin to receive proceeds from the field in 1998 based upon present prices.  The
period before payment to the Company begins may be shorter or longer,  depending
on  prevailing  market  conditions,  gas  volumes  sold and the  results  of the
litigation.  Under  ordinary  circumstances,  increased  natural  gas  prices or
increased volumes would result in a shorter period to payout.

<PAGE>


     For financial statement purposes in fiscal 1987 and 1988, the Company wrote
down its Canada cost center  which  included the  Kotaneelee  field to a nominal
value because of the  uncertainty  as to the date when sales of  Kotaneelee  gas
might  begin and the  immateriality  of the  carrying  value of the  investment.
Although  the field is now  producing,  the Company has not yet  classified  its
share of the  Kotaneelee  gas reserves as proved  because the gas field is still
the subject of  litigation.  The Company  will  reclassify  the  reserves at the
Kotaneelee field as proved when there is greater  assurance as to the timing and
assumptions regarding the investment.

    (b) Financial Information about Industry Segments.

     Since the  Company  is engaged in only one  industry,  namely,  oil and gas
exploration, development, production and sale this item is not applicable to the
Company.

    (c) (1) Narrative Description of the Business.

     The  Company  was  incorporated  in 1957  under the laws of Panama  and was
reorganized  under the laws of Delaware  in 1967.  The Company is engaged in the
exploration  for, and the  development  and  production  and sale of oil and gas
reserves in the United States,  Canada,  and Belize and,  through its subsidiary
MPAL, in Australia, the United States and Belize.

     (i) Principal Products.

     MPAL has an interest in the Palm Valley gas field which began production in
1983 and in the Mereenie oil and gas field which began  production in 1984.  See
Item 1(a) - Australia - for a discussion of the oil and gas production  from the
Mereenie and Palm Valley fields. The Company has a direct 2.67% carried interest
in the Kotaneelee gas field in Canada.

     (ii) Status of Product or Segment.

     See Item 1(a) -  Australia  - for a  discussion  of the  current and future
operations of the Mereenie and Palm Valley fields in Australia.


<PAGE>


     (iii) Raw Materials.

     Not applicable.

     (iv) Patents, Licenses, Franchises and Concessions Held.

     In Australia, the Company has interests directly and indirectly through its
subsidiaries  in the  following  permits.  Permittees  are required to carry out
agreed work and expenditure programs.
<TABLE>
<CAPTION>

         Permit                                    Expiration Date                    Location
<S>                                                <C>                               <C>

Retention License 2 (Dingo)                        May 24, 1997                       Northern Territory
Exploration Permit 15 (Ngalia)                     May 14, 1999                       Northern Territory
Authority to Prospect 378P (Surat)                 September 30, 1996                 Queensland
Authority to Prospect 613P (Maryborough)           March 31, 1999                     Queensland
</TABLE>

     In 1981, the NTA issued  Petroleum  Leases No. 4 and No. 5 in the NTA which
cover the  Mereenie  oil and gas field to  MPAL's  subsidiaries.  As part of the
lease conditions,  MPAL and its Mereenie partners had agreed to construct an oil
refinery  near Alice  Springs,  if it were  determined  that such a refinery  is
economically  feasible.  MPAL  believes  that  the  oil  refinery  would  not be
economically viable under current market conditions,  and the NTA has not raised
any current  objection to this conclusion.  In the event that a refinery becomes
economically  viable and the MJV does not construct  the refinery,  MPAL and its
partners will be required to pay the NTA  liquidated  damages based on the value
of the crude oil produced  from the lands under lease.  The amount to be paid to
the  Territory  is an amount per barrel  which is the greater of (a) A.$3.00 per
barrel or (b)  A.$2.00  per  barrel  plus 10% of the  amount by which the market
price of  Mereenie  crude oil  exceeds  A.$27.50.  Production  is  subject  to a
statutory 10 percent royalty payable to the NTA.

     In 1982 the NTA granted a production lease for the Palm Valley gas field to
a MPAL  subsidiary.  Production  is subject to a  statutory  10 percent  royalty
payable to the NTA.

     The above leases are subject to the Petroleum  (Prospecting and Mining) Act
of the Northern Territory. Lessees have the exclusive right to produce petroleum
from the land  subject to a lease upon  payment of a rental and a royalty at the
rate of 10% of the wellhead value of the petroleum produced. Rental payments may
be offset against the royalty paid. The term of a lease is 21 years,  and leases
may be renewed for successive terms of 21 years each.


<PAGE>


     During 1992,  the  Australian  High Court  overthrew  the doctrine of terra
nullius  ("no man's  land") in the  so-called  "Mabo"  case.  Although the wider
implications of this specific  judgment have yet to be tested in the Courts,  it
allows  particular  groups  of  Aborigines  who can prove an  uninterrupted  and
continuing  link with their  traditional  lands to claim  ownership of such land
provided it has not  previously  been alienated by the Crown (either the Federal
or State  Governments).  Subsequently,  the Australian Federal Government passed
the  Native  Title  Act  validating  all  titles  granted  to June 30,  1993 and
providing that any compensation  payable to Aboriginals for the dispossession of
their lands will be funded by the  Government  and not by the title  owner.  The
Company does not consider that this issue will have a material adverse impact on
MPAL's properties.

     In  Belize,  Central  America,  the  Company  has  interests  directly  and
indirectly  through a subsidiary in the following  Production Sharing Agreements
("PSA").  Permits in Belize are issued for eight years but work and  expenditure
obligations  are calculated in two year blocks.  Application is made ninety days
prior to the two year block expiration.

PSA              Expiration Date                    Next Block Application Date

Gladden Basin    May 31, 2001                       Year 5 - March 1, 1998

Block 13         January 31, 2004                   Year 3 - November 1, 1998




<PAGE>

           SUMMARY OF BENEFICIAL OWNERSHIP OF MAJOR WORKING INTERESTS
                               (BEFORE ROYALTIES)
                                  June 30, 1996

<TABLE>
<CAPTION>

                                               Palm                      Dingo                                   Belize
                                              Valley      Mereenie        Gas      Baca County,     Surat       Gladden
                                               Field        Field         Field       Colorado        378P        Basin
                                                 %            %            %             %             %           %
<S>                                            <C>          <C>         <C>              <C>         <C>         <C>

MPAL                                                                           
                                               50.775       35.00       34.2583          90          15.625      20.0
Santos Ltd.                                    37.354       65.00       52.9333           -          84.375
Kufpec Australia Pty. Ltd.                      1.248           -          -              -             -
Boral Limited                                   1.248           -       10.9744           -             -
GFE Resources Ltd                               9.375           -        1.7558           -             - 
Canada Southern Petroleum Ltd.                      -           -         .0782           -             -
Magellan Petroleum Corporation                      -           -          -             10.            -          2.5
Dover Technology, Inc.                              -           -          -              -             -         20.0
Fina Exploration Belize B.V.                        -           -          -              -             -         30.0
Deminez Belize Petroleum Ltd.                       -           -          -              -             -         20.0
Mountain States Petroleum Corporation               -           -          -              -             -          5.0
Mallon Production Co.                               -           -          -              -             -          2.5
________________________________________________________________________________________________________________________
   TOTAL                                          100         100        100            100           100         100
________________________________________________________________________________________________________________________
</TABLE>

     (v) Seasonality of Business.

     Although the  Company's  business is not  seasonal,  the demand for oil and
especially gas is subject to fluctuations in the Australian weather.

     (vi) Working Capital Items.

     See Item 7 -  Liquidity  and Capital  Resources  for a  discussion  of this
information.

     (vii) Customers.

     Although the majority of the Company's oil and gas  properties  are located
in a relatively remote area in central Australia (See Item 1 - Business and Item
2 -  Properties),  the completion in January 1987 of the Amadeus Basin to Darwin
gas pipeline has provided  access to and expanded the  potential  market for the
Company's gas production.

     MPAL's principal customer and the most likely customer for future gas sales
is PAWA, a governmental  authority of the Northern Territory  Government,  which
also has substantial regulatory authority over MPAL's oil and gas operations.


<PAGE>

     Oil Production

     There is presently a small local market for the  Australian  Mereenie crude
oil in the Alice Springs area. Most of the crude oil production is being shipped
and sold to a refinery in Adelaide.

     Natural Gas Production

     (viii)    Backlog.

               Not applicable.

       (ix)    Renegotiation of Profits or Termination of Contracts or
               Subcontracts at the Election of the Government.

               Not applicable.

        (x)    Competitive Conditions in the Business.

     The  exploration  for and production of oil and gas are highly  competitive
operations.  The ability to exploit a discovery of oil or gas is dependent  upon
such   considerations  as  the  ability  to  finance   development   costs,  the
availability  of  equipment,   and  engineering  and  construction   delays  and
difficulties.  The Company  also must compete  with major  companies  which have
substantially greater resources than the Company.

     Furthermore,  competitive  conditions  may  be  substantially  affected  by
various  forms of  energy  legislation  which  have been or may be  proposed  in
Australia,  Canada, the United States and Belize; however, it is not possible to
predict the nature of any such  legislation  which may  ultimately be adopted or
its effects upon the future operations of the Company.

     At the present time, the Company's  principal income  producing  operations
are in  Australia  and  for  this  reason,  current  competitive  conditions  in
Australia are material to the Company's future. Currently, most indigenous crude
oil is consumed within Australia. In addition,  imports of crude oil are made by
refiners and others to meet the overall demand in Australia.  MPAL and its joint
venture partners in Mereenie and Palm Valley are  coordinating  their efforts to
develop and market the  production  from each field.  Because of the  relatively
remote  location of the Amadeus Basin and the inherent  nature of the market for
gas, it would be  impractical  for each working  interest  partner to attempt to
market its respective share of production from each field.


<PAGE>

     (xi) Research and Development.

          Not applicable.

     (xii) Environmental Regulation.

     The Company is subject to the  environmental  laws and  regulations  of the
jurisdictions  in which it carries on its business,  and existing or future laws
and  regulations  could have a  significant  impact on the  exploration  for and
development of natural resources by the Company.  However,  to date, the Company
has not been required to spend any unusual  material  amounts for  environmental
control  facilities.  The federal and state  governments  in Australia  strictly
monitor  compliance  with these laws but  compliance  therewith  has not had any
adverse impact on the Company's operations or its financial resources.

     (xiii) Number of Persons Employed by Company.

     At June 30,  1996,  the  Company had no full time  employees  in the United
States and MPAL had 32 employees  in  Australia.  The Company  relies to a great
extent on consultants for legal, accounting and administrative services.

     (d) Financial  Information About Foreign and Domestic Operations and Export
Sales.

     (1) Financial Information Relating to Foreign and Domestic Operations.

     See Note 1 to the Consolidated Financial Statements.

     (2) Risks Attendant to Foreign Operations.

     Most of the  properties  in which the  Company  has  interests  are located
outside  the United  States and are  subject to certain  risks  involved  in the
ownership  and  development  of such  foreign  property  interests.  These risks
include  but  are not  limited  to  those  of:  nationalization;  expropriation;
confiscatory   taxation;   changes  in  foreign  exchange   controls;   currency
revaluations;  price controls or excessive royalties; export sales restrictions;
limitations on the transfer of interests in exploration licenses; and other laws
and regulations which may adversely affect the Company's properties, such as


<PAGE>


those providing for conservation,  proration,  curtailment,  cessation,  or
other   limitations  of  controls  on  the  production  of  or  exploration  for
hydrocarbons.  Thus, an investment in the Company  represents a speculation with
risks in addition to those inherent in domestic petroleum exploratory ventures.

     (3) Data Which are Not Indicative of Current or Future Operations.

     MPAL and its  co-venturers in the Mereenie and Palm Valley fields have been
negotiating  with  PAWA  and  other  parties  to  sell  production  out  of  the
uncommitted  gas  reserves at both  fields.  A new gas supply  contract  for the
uncommitted  reserves in the Palm Valley or Mereenie fields could  substantially
increase  revenue  from gas  sales in the  future.  While new  contracts  appear
likely,  the ultimate  purchaser,  the timing and the terms of any new contracts
are uncertain.

Item 2.  Properties

     (a) The Company has interests in properties in Australia, United States and
Canada and Belize.  In  Australia,  it has  interests  through its 50.7%  equity
interest in MPAL in  exploratory  permits,  a retention  license and  production
leases in the Northern  Territory  and  Queensland.  In Canada,  the Company has
direct interests in 5 leases and one exploration  license.  The Company also has
interests in properties in the United States and Belize directly  through MPAL's
interests in these areas.  For  additional  information  regarding the Company's
properties, See Item 1 - Business.

     (b)  (1)  The  information  regarding  reserves,   costs  of  oil  and  gas
activities,  capitalized costs,  discounted future net cash flows and results of
operations is contained in Item 8 - Financial Statements and Supplementary Data.


<PAGE>

     The following graphic presentation has been omitted, but the following is a
description of the omitted material:






                           AMADEUS BASIN PROJECTS MAP







     The map indicates the location of the Amadeus and Ngalia Basin interests in
the Northern Territory of Australia. The following items are identified:


                 Palm Valley Gas Field
                 Mereenie Oil & Gas Field
                 Dingo Gas Field
                 Ngalia Basin
                 Palm Valley - Alice Springs Gas Pipeline
                 Palm Valley - Darwin Gas Pipeline
                 Mereenie Spur Gas Pipeline


<PAGE>


     The following graphic presentation has been omitted, but the following is a
description of the omitted material:






                         CANADIAN PROPERTY INTERESTS MAP







     The map  indicates  the location of the  Kotaneelee  Gas Field in the Yukon
Territories of Canada. The map identifies the following items:



                              Kotaneelee Gas Field
                              Wells drilled on the permit
                              Pointed Mountain Gas Field
                              Beaver River Gas Field
                              Westcoast Transmission Pipeline



<PAGE>


     (2)   Reserves reported to other agencies.

           None

     (3)   Production

     The average  sales price per unit of production  for the  following  fiscal
years are as follows:
<TABLE>
<CAPTION>
                                                                                     June 30,
                                                                -----------------------------------------------
                                                                      1996             1995              1994
                                                                  ------------     ------------      ----------

<S>                                                               <C>              <C>               <C>

Australia:
Gas (per mcf)                                                       A.$ 2.24         A.$ 2.06          A.$ 1.99
Crude oil (per bbl)                                                 A.$23.85         A.$23.83          A.$23.76

Americas:
Gas (per mcf)                                                         $    -          $  1.56            $ 1.54
Crude oil (per bbl)                                                   $    -          $ 17.31            $15.29
</TABLE>


     The average production cost per unit of production for the following fiscal
years has been impacted by transportation costs on Mereenie oil in Australia:
<TABLE>
<CAPTION>

                                                                                     June 30,
                                                                ----------------------------------------------------
                                                                      1996             1995              1994
                                                                  ------------     ------------      --------

<S>                                                                <C>            <C>                <C> 

Australia:
Gas (per mcf)                                                       A.$  .32        A.$  .21         A.$    .29
Crude oil (per bbl)                                                 A.$ 6.68        A.$10.37         A.$  10.83


Americas:
Gas (per mcf)                                                         $    -          $ 2.09           $   3.42
Crude oil (per bbl)                                                   $    -          $ 4.15           $   6.07
</TABLE>

     (4) Productive Wells and Acreage.

     Productive wells and acreage at June 30, 1996:
<TABLE>
<CAPTION>

                                         Productive Wells
                                 Oil                         Gas                        Developed Acreage
                                 ---                         ---                        -----------------
                         Gross          Net          Gross          Net          Gross Acres          Net Acres
                         -----          ---          -----          ---          -----------          ---------
<S>                        <C>          <C>             <C>         <C>             <C>                   <C>

Australia                   36          12.60           28          10.69            72,025               30,001
Americas                     -              -            3            .08             3,350                   89
                         -----       --------         ----        -------             -----            ---------
                            36          12.60           31          10.77            75,375               30,090
                            ==          =====           ==          =====            ======               ======
</TABLE>

<PAGE>



(5)      Undeveloped Acreage.


     The Company's undeveloped acreage (except as indicated) is set forth in the
table below:

                   GROSS AND NET ACREAGE AS OF JUNE 30, 1996

     (i) MPAL has interests in the following properties (before royalties).  The
Company has an interest in these properties through its 50.7% interest in MPAL.

Properties held by MPAL:
<TABLE>
<CAPTION>
                                                                                                       The Company
                                                                  MPAL
                                                                   Net           Interest          Net          Interest
                                               Gross Acres        Acres             %             Acres             %
<S>                                            <C>              <C>              <C>             <C>             <C>

Australia
Northern Territory:
  Amadeus Basin:
    Mereenie (OL4&5) (1)                           69,407          24,292          35.00           12,316         17.74
    Palm Valley (OL3)(2)                          151,905          77,130          50.78           39,105         25.74
    Dingo (RL2)                                   115,596          39,601          34.26           20,078         17.37
                                               ----------       ---------                       ---------
    Total Amadeus Basin                           336,908         141,023                          71,499

  Ngalia Basin (EP-15)                          1,914,497       1,914,497         100.00          970,650         50.70
Queensland:
      Bowen-Surat Basin (ATP 378P)                 76,076          11,887          15.63            6,027          7.92
      Maryborough Basin(ATP 613P)                 631,085         618,463          98.00          313,561         49.69
                                               ----------      ----------                       ---------
Total Australia                                 2,958,566       2,685,870                       1,361,737
                                                ---------       ---------                       ---------

United States
Colorado (Baca County)                             75,088          67,579          90.00           34,263         45.63
                                              -----------     -----------                      ----------
Belize
  Gladden Basin                                   350,740          70,148          20.00           35,565         10.14
  Block 13                                        787,436         157,487          20.00           79,846         10.14
                                               ----------      ----------                      ----------
                                                1,138,176         227,635                         115,411
                                                ---------      ----------                       ---------
Total MPAL                                      4,171,830       2,981,084                       1,511,411
                                               ----------       ---------                       ---------

Properties held directly by the Company:
United States
  Colorado (Baca County) (3)                            -               -              -            7,509         10.00
Belize
  Gladden Basin (3)                                     -               -              -            8,769          2.50
  Block 13 (3)                                          -               -              -           19,686          2.50
                                                                                              -----------
                                                                                                   28,455
Canada
  Yukon and Northwest Territories:
    Carried interest (4)                           35,076                                               935        2.67
                                              -----------                                     -------------
Total                                           4,206,906                                       1,548,310
                                                =========                                      ==========
- ----------------------------

<FN>

(1)      Includes 41,644 gross developed acres and 14,575 net acres.
(2)      Includes 30,381 gross developed acres and 15,426 net acres .
(3)      Gross acres shown above.
(4)      Includes 3,350 gross developed acres and 89 net acres.
</FN>
</TABLE>

<PAGE>



(6)      Drilling activity.


     Productive  and dry net wells  drilled  during the  following  years  (data
concerning Canada is insignificant):
<TABLE>
<CAPTION>

                                                                      Australia
                                                                      ---------
             Year ended                           Exploratory                            Development
                                                  -----------                            -----------
              June 30,                   Productive             Dry             Productive             Dry
              --------                   ----------             ---             ----------             ---
<S>             <C>                          <C>                <C>               <C>                  <C>
                1996                         .16                 -                 1.75                 -
                1995                          -                  -                 1.40                .51
                1994                          -                  -                 2.10                 -

                                                                     United States
                                                                     -------------
             Year ended                           Exploratory                           Development
                                                  -----------                           -----------

              June 30,                   Productive             Dry             Productive             Dry
              --------                   ----------             ---             ----------             ---

                1996                          -                1.00                 -                   -
                1995                         .24               1.00                 -                   -
                1994                         .24                 -                  -                   -
</TABLE>

(7)      Present Activities.

     At June 30, 1996, there were no wells being drilled.

(8)      Delivery Commitments.

     See discussion under Item 1 concerning the Palm Valley and Mereenie fields.

Item 3.  Legal Proceedings.

Kotaneelee Gas Field

     The Company's 2.67% carried interest in the Kotaneelee gas field is held in
trust by Canada  Southern  Petroleum Ltd.  ("Canada  Southern")  which has a 30%
carried   interest  in  the  field.   Canada   Southern  and  the  Company  (the
"Plaintiffs")  believe that the working  interest  owners in the  Kotaneelee gas
field have not  adequately  pursued the  attainment of contracts for the sale of
Kotaneelee gas; accordingly,  legal action in the United States was commenced by
Canada  Southern  in 1987  against  Allied  Signal Inc.  and Allied  Corporation
(collectively,  Allied Signal).  This suit was ultimately  dismissed in December
1988.


<PAGE>


     In October 1989 and in March 1990,  Canada  Southern  filed  statements  of
claim in the Court of Queens  Bench of  Alberta,  Judicial  District of Calgary,
Canada,  against the working interest  partners in the Kotaneelee gas field. The
named defendants were Amoco Canada Petroleum  Corporation,  Ltd., Dome Petroleum
Limited  (now  Amoco  Canada  Resources  Ltd.),  and  Amoco  Production  Company
(collectively  the "Amoco Dome Group"),  Columbia Gas Development of Canada Ltd.
("Columbia"),  Mobil Oil Canada Ltd.  ("Mobil") and Esso Resource of Canada Ltd.
("Esso") (collectively the "Defendants").

     The  Plaintiffs  claim  that the  Defendants  breached  either  a  contract
obligation  or a fiduciary  duty owed to the  Plaintiffs  to market gas from the
Kotaneelee gas field when it was possible to so do. The Plaintiffs  asserts that
marketing  the  Kotaneelee  gas was  possible  in 1984 and  that the  Defendants
deliberately failed to do so. The Company seeks money damages and the forfeiture
of the Kotaneelee gas field.  The Plaintiffs  expects to argue at trial that the
money  damages  sustained  by the  Plaintiffs  are at least  Cdn.  $ 96  million
(Company share-Cdn. $8 million).

     In addition,  the  Plaintiffs  have claimed  that the  Plaintiff's  carried
interest  account  should be reduced  because of the negligent  operation of the
field and improper  charges to the carried  interest  account by the Defendants.
The Plaintiffs claim that when the Defendants in 1980 suspended  production from
the field's gas wells, they failed to take  precautionary  measures necessary to
protect and maintain the wells in good operating condition. The wells thereafter
deteriorated,  which caused unnecessary  expenditures to be incurred,  including
expenditures  to  redrill  one well.  In  addition,  the  Plaintiffs  claim that
expenditures made to repair and rebuild the field's dehydration plant should not
have been necessary had the facilities been properly  constructed and maintained
by the Defendants. The expenditures,  the Plaintiffs claim, were inappropriately
charged to the field's  carried  interest  account.  The effect of an  increased
carried  interest  account is to extend the period  before  payout begins to the
carried interest account owners.

     The Plaintiffs  claim that  production from the field should have commenced
in 1984. At that time the field's  carried  interest  account was  approximately
Cdn. $63 million.  The Company  claims that by 1993 at least Cdn. $34 million of
unnecessary  expenses  had  been  wrongfully  charged  to the  carried  interest
account.  The Company's 2.6% share of these expenses would be approximately Cdn.
$.9 million.  The Plaintiffs  further claim that, if production had commenced in
1984, the carried interest account would have been paid off in approximately two
years and the  Company  would have begun to receive  revenues  from the field in
1986. At present, the Company does not expect to receive revenues until 1998.


<PAGE>


     Columbia has filed a counterclaim  against the Plaintiffs  seeking,  if the
Plaintiffs  are  successful  in its  claim  for  the  forfeiture  of the  field,
repayment  from  the  Plaintiffs  of  all  sums  Columbia  has  expended  on the
Kotaneelee lands before the Plaintiffs are entitled to their interest.

     The parties to the litigation have conducted  extensive discovery since the
filing of the claims. The Court has scheduled a six-month trial which started on
September 3, 1996.

Matters Ancillary to Kotaneelee Litigation

     In its 1989  statement  of  claim,  the  Plaintiffs  sought  a  declaratory
judgment regarding two issues:

     (1) whether interest accrued on the carried interest account; and

     (2) whether expenditures for gathering lines and dehydration  equipment are
expenditures chargeable to the carried interest account or whether the Plaintiff
will be assessed a processing fee on gas throughput.

     With respect to the first issue, the Plaintiffs  maintains that no interest
should  accrue  on the  account  and the  Defendants  have  not  contested  this
position.  With regard to the second  issue,  the  Plaintiffs  maintain that the
expenditures are chargeable to the carried  interest  account.  Mobil,  Esso and
Columbia have essentially  agreed to the Company's position while the Amoco Dome
Group continues to contest this issue.

     On January 22, 1996, the Plaintiffs settled two claims outstanding  against
the Company in the Court of Queens Bench, Calgary,  Alberta,  which related to a
suit brought against  AlliedSignal  Inc.  ("AlliedSignal")  in Florida which was
dismissed on the basis that Canada was the appropriate forum for the litigation.
AlliedSignal  had sought  additional  relief  against  the  Company in Canada to
preclude  other  types of suits by the  Company  and to recover the costs of the
defense of the initial  action.  The settlement bars Allied Signal from making a
claim against the  Plaintiffs  for any costs in connection  with the  Kotaneelee
Litigation.  The Plaintiffs agreed not to bring any action against  AlliedSignal
in connection  with the  Kotaneelee  gas field.  Neither party made any monetary
payment to the other party.

     In 1991,  Anderson  Exploration Ltd. acquired all of the shares in Columbia
and changed its name to Anderson  Oil & Gas Inc.  ("Anderson").  Anderson is now
the sole  operator of the field and is a direct  defendant  in the Canada  Court
lawsuits.  Columbia's previous parent, The Columbia Gas System,  Inc., which was
reorganized in a bankruptcy  proceeding in the United States,  is  contractually
liable to Anderson in the legal proceeding described above.


<PAGE>


     The working  interest  owners  have  reported  that they have been  selling
Kotaneelee  gas since February 1991. The Company is uncertain as to what impact,
if any, these sales may have on the status of the litigation.

     Under Canadian law,  certain costs of the  litigation are assessed  against
the  nonprevailing  party.  These costs consist primarily of attorney and expert
witness fees during trial. The trial is presently  scheduled to last six months,
therefore,  these  costs  could be  substantial.  While  the  costs  are not now
determinable, the Company estimates that such costs, assuming a six month trial,
would not exceed Cdn. $1.1 million (Company share - Cdn. $88,000) . There are no
assurances  however,  that such costs will not  exceed  this  amount or that the
duration of the trial will not exceed six months.

     Canada  Southern  has been  advancing  and  paying  all the legal and other
expenses  of  the  Kotaneelee  litigation.  The  Company  has  not  received  an
accounting of the amounts spent to date.  However the Company  believes that the
outcome of the Kotaneelee litigation is not reasonably likely to have a material
adverse  effect on the  Company's  future  consolidated  financial  condition or
results of operations.

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

         None.


<PAGE>


Executive Officers of the Company

     The following  information  with respect to the  executive  officers of the
Company is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>

                                                                       Length of Service       Other Positions Held
     Name                  Age        Office Held                        as an Officer             with Company
<S>                        <C>        <C>                               <C>                          <C>

James R. Joyce             55         President and Chief Financial     President since              Director
                                      Officer                            July 1, 1993

Dennis D. Benbow           57         General Manager - MPAL              Since 1993                 Director
</TABLE>

     The Company is not aware of any arrangements or understandings  between any
of the  individuals  named  above and any  other  person  pursuant  to which any
individual named above was selected as an officer.

     All  officers of MPC are elected  annually  by the Board of  Directors  and
serve at the pleasure of the Board of Directors.


<PAGE>

                                     PART II

Item 5.  Market for the Company's Common Stock and Related Stockholder
Matters.

     (a) Principal Market

     The principal  markets for the Company's  common stock is the Pacific Stock
Exchange [MPC] and the NASDAQ SmallCap  market [MPET].  The stock is also traded
on the Boston Stock  Exchange.  The quarterly high and low closing prices on the
Pacific Stock Exchange during the calendar  quarterly  periods indicated were as
follows:
<TABLE>
<CAPTION>
1996                              1st quarter           2nd quarter           3rd quarter*          4th quarter
- ----                              -----------           -----------           -----------           -----------
<S>                               <C>                   <C>                   <C>                   <C>

High..................               2 7/16                     3                     3
Low...................              1 15/16                 2 3/8                2 3/16


1995                              1st quarter           2nd quarter           3rd quarter           4th quarter
- ----                              -----------           -----------           -----------           -----------

High..................                1 1/2                 2 3/8                2 3/16                4 1/16
Low...................                  3/4                1 7/16                1 9/16                2 1/16


1994                              1st quarter           2nd quarter           3rd quarter           4th quarter
- ----                              -----------           -----------           -----------           -----------

High..................                    1                 13/16                   3/4                     1
Low...................                  3/4                 11/16                   5/8                  9/16
- ---------------------------------
<FN>

* Through September 4, 1996, on which date the closing price was $2 15/16.
</FN>
</TABLE>
     (b) Approximate Number of Holders of Common Stock at September 4, 1996

           Title of Class                          Number of Record Holders

           Common stock, par
           value $.01 per share                             13,000




<PAGE>



     (c) Frequency and Amount of Dividends


     The Company has never paid a cash dividend on its common stock. The Company
will  consider  the  payment of  dividends  when it has the ability to make such
payments.

Item 6.  Selected Consolidated Financial Information

     The following  table sets forth selected data (in thousands) of the Company
insofar as it relates to each of the five fiscal  years in the period ended June
30,  1996.  This data should be read in  conjunction  with Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>

                                                                          Year ended June 30,

                                             --------------- -------------- --------------- --------------- ---------------
                                                  1996           1995            1994            1993            1992
<S>                                               <C>           <C>             <C>             <C>             <C>
                                                  ----           ----            -----           -----           ----
Financial Data                                    $                $               $               $               $

Operating revenues                                15,667         13,556          12,528          12,999          13,959
                                                  ======         ======          ======          ======          ======

Total revenues                                    18,073         15,424          13,318          13,863          14,763
                                                  ======         ======          ======          ======          ======

Net income (loss)                                    881           821              502             660           (916)
                                                  ======         ======          ======          ======          ======

Net income (loss) per share                          .04            .03             .02             .03           (.04)
                                                  ======         ======          ======          ======          ======

Working capital                                    9,858          8,806           8,559           7,722           8,220
                                                  ======         ======          ======          ======          ======

Cash provided by operating activities              9,185          8,587           4,376           6,969           7,091
                                                  ======         ======          ======          ======          ======

Total assets                                      58,422         48,828          46,431          43,281          44,897
                                                  ======         ======          ======          ======          ======

Long-term liabilities                             12,957         11,005           9,157           8,333          11,471
                                                  ======         ======          ======          ======          ======

Minority interests                                18,966         16,616          16,764          14,931          14,310
                                                  ======         ======          ======          ======          ======

Stockholders' equity:
  Capital                                         43,492         43,358          43,227          43,223          43,214
  Accumulated deficit                            (18,735)       (19,616)        (20,437)        (20,939)        (21,598)
  Foreign currency translation adjustments        (2,785)        (4,833)         (4,474)         (5,760)         (4,290)
                                                 -------        -------         -------          -------        -------
                                                  21,972         18,909          18,316          16,524          17,326
                                                 =======        =======         =======          ======         =======

Exchange rate A.$=U.S. at end of period            .7875          .7097           .7287           .6667           .7484
                                                 =======        =======         =======          ======         =======

Common stock outstanding                          24,691         24,544          24,387          24,382          24,382
                                                 =======        =======         =======          ======          ======

Book value per share                                 .89            .77             .75             .68             .71
                                                 =======        =======         =======          ======          ======   

Quoted market value per share                       2.50           1,94             .69            1.19             .81
                                                 =======        =======         =======          ======          ======

Operating Data

Annual production (Net of royalties)
  Gas (BCF)                                        5.422          5.066           5.141           4.751           6.856
                                                 =======        =======         =======          ======          ======  

  Oil(BBLS)(In thousands)(net of royalties)          318            369             374             300             289
                                                 =======        =======         =======          ======          ======

Standard measure of discounted future cash
 flow relating to proved oil and gas reserves.
 (49.3% attributable to minority interests        44,213         38,381          46,720          46,127          44,433    
                                                 =======        =======         =======          ======          ======
</TABLE>

<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.

(1)  Liquidity and Capital Resources - June 30, 1996

Consolidated

     At June 30, 1996,  the Company on a  consolidated  basis had  approximately
$11,279,000 of cash and cash equivalents as compared to approximately $8,983,000
at June 30, 1995. A summary of the major changes in cash items during the period
is as follows:

    Cash and cash equivalents at beginning of period       $ 8,983,000
    Cash provided by operations                              9,185,000
    Dividends to MPAL minority shareholders                 (1,619,000)
    Net additions to property and equipment                 (5,596,000)
    Other                                                      326,000
                                                            ----------
    Cash and cash equivalents at end of period             $11,279,000
                                                           ===========
As to the Company (unconsolidated)

     At  June  30,  1996,   Magellan  Petroleum   Corporation   ("MPC"),  on  an
unconsolidated basis, had cash and cash equivalents of approximately $2,067,000.
MPC's annual  operating  budget is  approximately  $700,000 and its current cash
position  and annual MPAL  dividend  should be adequate to meet its current cash
requirements.  During fiscal 1997, MPC has budgeted  approximately  $350,000 for
oil and gas  exploration.  MPC also has  available a $1.5  million  bank line of
credit.  MPC has in the past invested and may in the future  invest  substantial
portions  of its  cash to  maintain  its  majority  interest  in its  subsidiary
company, Magellan Petroleum Australia Limited ("MPAL").

     During  December 1995, MPC received a dividend from MPAL of $1,662,000 less
Australian  withholding  taxes of $249,000.  The net proceeds of $1,413,000 were
added to MPC's working capital.

As to MPAL

     At June 30,  1996,  MPAL had cash  and cash  equivalents  of  approximately
$9,212,000.  MPAL has budgeted  approximately  $2.9 million for  exploration  in
fiscal 1997 as compared to the $5.6 million  incurred  during  fiscal 1996.  The
current  composition  of MPAL's oil and gas reserves are such that the Company's
future revenues in the long term are expected to be derived from the sale of gas
in Australia.

<PAGE>


     MPAL  expects  to fund its  exploration  costs  through  its cash flow from
Australian  operations  and any  balance  from its  A.$10  million  bank line of
credit.

(2)      Results of Operations

1996 vs. 1995

     The  Company  had  consolidated  net income of  $880,606  for  fiscal  1996
compared  to  net  income  of  $820,843  for  fiscal  1995.  The  components  of
consolidated net income for the comparable periods were as follows:

                                                   Year ended June 30,

                                              1996                  1995
                                              ----                  ----
MPC unconsolidated pretax loss            $ (889,808)          $  (845,349)
MPC income tax expense                      (251,888)             (260,580)
Share of MPAL pretax income                2,574,166             3,044,725
Share of MPAL income tax                    (551,864)           (1,117,953)
                                         -----------           -----------
Consolidated net income                   $  880,606           $   820,843
                                          ==========           ===========

Net Income per share                          $.04                   $.03
                                              ====                   ====

                                    Revenues

    Oil and Gas Sales

     Oil and gas sales (in thousands) by geographic  location for the comparable
periods were as follows:

                          1996                                1995
                -----------         -----      ------------             ----

                  Sales               %           Sales                   %
Australia        $15,667             100         $13,078                 96
Americas               -                             478                  4
                ----------         -----        ---------              -----
                 $15,667             100         $13,556                100
                 =======           =====        ========                ===

     Oil sales increased 4% in fiscal 1996. Oil sales in Australia increased 11%
to $5,922,000 from $5,693,000 in 1995 because of a 13% increase in the number of
units produced with a 1% increase in oil prices and a 2% increase in the average
value of the Australian dollar. Sales of Mereenie crude increased in fiscal 1996
as a result of additional  development drilling.  There were no oil sales in the
United States  ($363,000 in 1995) because the producing  properties were sold on
March 31, 1995. Oil unit sales


<PAGE>


(before  deducting  royalties)  in barrels  ("bbls")  and the average  price per
barrel sold during the periods indicated were as follows:
<TABLE>
<CAPTION>

                                                   Fiscal 1996 Sales                      Fiscal 1995 Sales
                                                   -----------------                      -----------------
                                                                 Average                                   Average
                                                                  Price                                     Price
                                               bbls               per bbl              bbls                 per bbl
<S>                                          <C>                 <C>                 <C>                    <C>

    Australia - Mereenie                     365,325              A.$23.85           322,414                A.$23.83
</TABLE>

     Gas sales in Australia  increased 24% in fiscal 1996.  Gas sales  increased
from $7,863,000 in 1995 to $9,746,000 in 1996 because of increases in gas prices
under long term  contracts,  an 8%  increase  in the volume of gas sold and a 2%
increase  in the  average  value  of the  Australian  dollar.  Total  gas  sales
increased  primarily  because of the 1995 Mereenie gas contract.  The volumes in
billion cubic feet ("bcf") (before deducting royalties) and the average price of
gas per thousand  cubic feet ("mcf") sold during the periods  indicated  were as
follows:
<TABLE>
<CAPTION>

                                                 Fiscal 1996 Sales                         Fiscal 1995 Sales
                                                 -----------------                         -----------------
                                                                 Average                                   Average
                                                                  Price                                     Price
                                                bcf               per mcf               bcf                 per mcf
<S>                                        <C>                   <C>                    <C>                <C>

    Australia:                                                   (A.$)                                     (A.$)
    Palm Valley
      Alice Springs contract                1.070                 2.89                   1.012               2.77
      Darwin contract                       2.328                 2.01                   2.854               1.98
    Mereenie
      Darwin contract                       1.917                 1.97                   1.700               1.71
      Other                                  .908                 2.65                    .208               2.68
                                           ------                                        -----
              Total                         6.223                                        5.774
                                            =====                                        =====
</TABLE>

     Other  production  income  increased 128% to $1,360,000 in 1996 compared to
$597,000 in 1995.  The primary  reason for this increase is that MPAL's share of
gas pipeline tariffs increased to $1,126,000 compared to $167,000 in 1995.

     Interest  income  increased  16% to $696,000 in 1996 from $597,000 in 1995.
The combination of additional funds available for investment and higher interest
rates is the reason for this increase.


<PAGE>


                               Costs and Expenses

     Production costs increased 22%. The 22% increase in Australia relates to an
increase  in  costs  at Palm  Valley  in  preparation  for the  installation  of
compression  units in the field. The increase was also the result of development
activities being undertaken in the Mereenie field. The U.S. producing properties
were sold March 31,1995.  Production costs (in thousands) by geographic area are
as follows:

                          1996                                   1995
                       --------                                 ------
Australia               $4,409                                 $3,455
United States                -                                    145
                       -------                                 ------
                        $4,409                                 $3,600
                        ======                                 ======

     Salaries  increased  16%  from  $1,500,000  in 1995 to  $1,742,000  in 1996
because of increased  compensation  costs in Australia  and a 2% increase in the
value of the Australian dollar.

     Depreciation,  depletion and amortization decreased 2% in 1996. There was a
20% increase in the Australian  component  because of the increase in the number
of units sold in  Australia  and an  increase  in  capitalized  costs.  The U.S.
component was eliminated because the U.S.  producing  properties were sold March
31, 1996. The following  table is a summary of the  depreciation,  depletion and
amortization expense (in thousands) by geographic area:

                      1996                         1995            % Change
                    --------                     --------          --------
Australia            $3,288                        $2,734             20
United States             -                           621
                     ------                        ------
                     $3,288                        $3,355
                     ======                        ======

     Shareholder  communications  increased  15%  in  1996.  The  increase  from
$157,000 in 1995 to  $181,000 in 1996 is  attributable  to higher  printing  and
mailing costs.

     Abandonments  and write  downs  include a  $2,500,000  write  down of costs
relating to the United  States cost  center  that  pertains to the Baca  County,
Colorado  project.  The write  down was based on a  thorough  evaluation  of the
remaining  prospects and the drilling data derived from the three dry holes that
were drilled in 1995.

     Other costs  increased 11%. In 1996 other costs  increased from $928,610 to
$1,026,889. The increase is primarily due to higher travel and insurance costs.


<PAGE>


                                  Income Taxes

     MPC's income tax provision (in thousands) was computed as follows:
<TABLE>
<CAPTION>


                                                                              Fiscal 1996           Fiscal 1995
                                                                              -----------           -----------
<S>                                                                                <C>                <C>

Pretax consolidated net income                                                     $ 1,684             $2,199
Losses (income) not recognized:
    MPC's U.S. operations                                                              890                845
    MPAL's non Australian operations                                                   423                (63)
    Permanent differences                                                             (818)              (109)
                                                                                   --------           --------
Book taxable income                                                                 $2,179             $2,872
                                                                                    ======             ======

Australian income tax rate                                                           36%                36%
                                                                                     ===                ===

Australian income tax provision                                                    $   784             $1,034
Australian withholding taxes on dividend                                               252                261
Tax provision attributable to reconciliation
  of year end tax liability                                                           (232)                84
                                                                                  ---------          --------
Consolidated income tax provision                                                  $   804             $1,379
                                                                                   =======             ======
</TABLE>

                                 Exchange Effect

     The value of the Australian dollar relative to the U.S. dollar increased to
$.7875 at June 30, 1996  compared to the value of $.7097 at June 30, 1995.  This
resulted in a  $2,049,000  credit to  accumulated  translation  adjustments  for
fiscal 1996.  The 11% increase in the value of the Australian  dollar  increased
the reported  asset and liability  amounts in the balance sheet at June 30, 1996
from the June 30,  1995  amounts.  The  annual  average  exchange  rate  used to
translate MPAL's operations in Australia for fiscal 1996 was $.7593,  which is a
2% increase compared to a $.7427 rate for the comparable 1995 period.

1995 vs. 1994

     The  Company  had  consolidated  net income of  $820,843  for  fiscal  1995
compared  to  net  income  of  $501,868  for  fiscal  1994.  The  components  of
consolidated net income for the comparable periods were as follows:

                                                    Year ended June 30,
                                                1995                  1994
                                                ----                  ----
MPC unconsolidated pretax loss             $  (845,349)          $(1,321,218)
MPC income tax expense                        (260,580)             (222,900)
Share of MPAL pretax income                  3,044,725             2,025,999
Share of MPAL income (tax) credit           (1,117,953)               19,987
                                           -----------           -----------
Consolidated net income                    $   820,843          $    501,868
                                           ===========          ============

Net Income per share                           $.03                  $.02
                                               ====                  ====

<PAGE>


         Oil and Gas Sales

     Oil and gas sales (in thousands) by geographic  location for the comparable
periods were as follows:
<TABLE>
<CAPTION>

                                                               1995                                1994
                                                  -----------         -----           ------------           ----
                                                    Sales                   %           Sales                   %
<S>                                                 <C>                  <C>            <C>                  <C>

Australia                                           $13,078                96           $11,816                94
United States                                           478                 4               712                 6
                                                  ---------             -----           -------               ---
                                                    $13,556               100           $12,528               100
                                                    =======               ===           =======               ===
</TABLE>

                                    Oil Sales

     Oil sales decreased 1% in fiscal 1995. Oil sales in Australia  increased 2%
despite a 2% decrease in the number of units  produced  with a relatively  small
increase in oil prices  because of a 7%  increase  in the  average  value of the
Australian  dollar.  Sales of Mereenie  crude are expected to increase in fiscal
1996 as a result of additional  development  drilling.  U.S. oil sales decreased
33% as a result of declining  production  (40%) which was partially  offset by a
13% increase in prices.  Oil unit sales (before deducting  royalties) in barrels
("bbls") and the average price per barrel sold during the periods indicated were
as follows:
<TABLE>
<CAPTION>

                                                 Fiscal 1995 Sales                         Fiscal 1994 Sales
                                                 -----------------                         -----------------

                                                                 Average                                   Average
                                                                  Price                                     Price
                                               bbls               per bbl              bbls                 per bbl
<S>                                          <C>              <C>                    <C>                  <C>
    Australia - Mereenie                     322,414             A.$23.83            328,287                 A.$23.76

    U. S. - Navajo Venture (*)                 28,359         U.S. $17.31            47,197                U.S.$15.29
<FN>
(*)  Properties sold March 31, 1995.
</FN>
</TABLE>

                                   Gas Sales

     Gas sales in Australia  increased 16% in fiscal 1995.  Gas sales  increased
with modest increases in gas prices under long term contracts,  a 4% increase in
the volumes of gas sold and a 7% increase in the average value of the Australian
dollar. Total gas



<PAGE>


volumes  are  expected  to  increase  in  fiscal  1996 as the  result of the new
Mereenie  gas  contract.  The  volumes in billion  cubic  feet  ("bcf")  (before
deducting  royalties)  and the  average  price of gas per  thousand  cubic  feet
("mcf") sold during the periods indicated were as follows:
<TABLE>
<CAPTION>

                                                 Fiscal 1995 Sales                         Fiscal 1994 Sales
                                                 -----------------                         -----------------
                                                                 Average                                   Average
                                                                  Price                                     Price
                                                bcf               per mcf               bcf                 per mcf
<S>                                            <C>               <C>                  <C>                  <C>

    Australia:                                                   (A.$)                                     (A.$)
    Palm Valley
      Alice Springs contract                   1.012              2.77                 .948                  2.70
      Darwin contract                          2.854              1.98                3.565                  1.97
    Mereenie
      Darwin contract                          1.700              1.71                 .834                  1.12
      Other                                     .208              2.68                 .225                  2.52
                                          --    ----                           --      ----
              Total                            5.774                                  5.572
                                               =====                                  =====
</TABLE>

                            Interest and Other Income

     Interest and other income increased 51% in 1995.  Interest and other income
includes  $167,000,  MPAL's share of gas pipeline tariffs which commenced in May
1995. Interest income also increased $248,000.

                      Gain on Sale of Producing Properties

     Effective  March 31, 1995, MPAL sold its interest in the Navajo venture for
approximately $906,000 and recognized a gain of $672,533.

                               Costs and Expenses

     Production  costs  decreased 7%. The 2% decrease in Australia  relates to a
reduction in costs at Palm Valley.  U. S. costs in 1995 have declined  primarily
because  production  decreased and field  operations were scaled back during the
year.  In  addition,  the U.S.  producing  properties  were sold March  31,1995.
Production  costs (in thousands) by geographic area and the  relationship to oil
and gas sales is as follows:
<TABLE>
<CAPTION>

                                     1995                                                     1994
                                    -----                                                     ----
                    Production          %                   %             Production            %                 %
                      costs        total sales      sales by country         costs         total sales    sales by country
<S>                   <C>              <C>               <C>                <C>                 <C>               <C>

Australia            $3,455            25                26                 $3,524               28               30
United States           145             1                30                    354                3               50
                     ------          ----                                   ------              ---
                     $3,600            26                                   $3,878               31
                     ======                                                 ======               ==
</TABLE>

     Salaries increased 21% because of increased compensation costs in Australia
and a 7% increase in the value of the Australian dollar.


<PAGE>


     Depreciation, depletion and amortization increased 1% in 1995. There was an
increase in the  Australian  component  because of the increase in the number of
units sold in Australia.  The U.S.  component  decreased because of a decline in
U.S. production. The following table is a summary of the depreciation, depletion
and amortization expense (in thousands) by geographic area:
<TABLE>
<CAPTION>

                                      Fiscal 1995                   Fiscal 1994                   % Change
                                      -----------                   -----------                   --------
<S>                                      <C>                           <C>                           <C>

Australia                                $2,734                        $2,424                        13
United States                               621                           898                        31
                                        -------                       -------
                                         $3,355                        $3,322
                                         ======                        ======
</TABLE>

                                  Income Taxes

     Effective July 1, 1995,  the Australian  income tax rate increased from 33%
to 36%.  The effect of the change was to increase  the  consolidated  income tax
provision for fiscal 1995 by $375,000.

     MPC's income tax provision (in thousands) was computed as follows:

<TABLE>
<CAPTION>

                                                                              Fiscal 1995               Fiscal 1994
                                                                              -----------               -----------
<S>                                                                                <C>                    <C>    

Pretax consolidated net income                                                      $2,199                 $ 705
Losses (income) not recognized:
    MPC's U.S. operations                                                              845                 1,321
    MPAL's U.S. operations                                                             (63)                  309
    Permanent differences                                                             (109)                   59
                                                                                   --------             --------
Book taxable income                                                                  2,872                 2,394
                                                                                    ======                ======

Australian income tax rate                                                           36%                   33%
                                                                                     ===                   ===

Australian income tax provision                                                     $1,034                 $ 790
Australian withholding taxes on dividend                                               261                   223
Tax credit attributable to settlement of Australian tax audit                            -                  (810)
Tax provision attributable to reconciliation
  of year end deferred tax liability                                                    84                     -
                                                                                  --------              --------
Consolidated income tax provision                                                   $1,379                $  203
                                                                                    ======                ======
</TABLE>


                                 Exchange Effect

     The value of the Australian dollar relative to the U.S. dollar decreased to
$.7097 at June 30, 1995  compared to the value of $.7287 at June 30, 1994.  This
resulted in a $360,000 charge to accumulated  translation adjustments for fiscal
1995.  The 3%  decrease  in the value of the  Australian  dollar  decreased  the
reported asset and liability  amounts in the balance sheet at June 30, 1995 from
the June 30, 1994 amounts.  The annual  average  exchange rate used to translate
MPAL's  operations  in  Australia  for  fiscal  1995 was  $.7427,  which is a 7%
increase compared to a $.6922 rate for the comparable 1994 period.


<PAGE>

Item 8.  Financial Statements and Supplementary Data


                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Magellan Petroleum Corporation

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Magellan
Petroleum   Corporation  as  of  June  30,  1996,  and  1995,  and  the  related
consolidated statements of operations,  changes in stockholders' equity and cash
flows for each of the three  years in the  period  ended  June 30,  1996.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Magellan  Petroleum  Corporation at June 30, 1996 and 1995, and the consolidated
results of its  operations and its cash flows for each of the three years in the
period ended June 30, 1996, in conformity  with  generally  accepted  accounting
principles.



                                                         ERNST & YOUNG LLP


Hartford, Connecticut
September 5, 1996


<PAGE>


                         MAGELLAN PETROLEUM CORPORATION
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                          June 30,
                                                                                          --------
                                                                                1996                    1995
<S>                                                                          <C>                      <C>
                               ASSETS
Current assets:
  Cash and cash equivalents                                                   $11,278,957             $ 8,982,582
  Accounts receivable                                                           2,496,085               1,772,342
  Reimbursable development costs                                                  237,112                 141,015
  Inventories                                                                     371,925                 208,334
                                                                              -----------             -----------
          Total current assets                                                 14,384,079              11,104,273
                                                                              -----------             -----------

Property and equipment:
  Oil and gas properties (full cost method)                                    65,621,151              54,334,921
  Land, buildings and equipment                                                 2,328,174               2,084,616
  Field equipment                                                               1,621,561               1,457,894
                                                                              -----------             -----------
                                                                               69,570,886              57,877,431
  Less accumulated depletion, depreciation and amortization                   (26,053,222)            (20,516,580)
                                                                             -------------            ------------
                                                                               43,517,664              37,360,851
                                                                             ------------              ----------

  Other assets                                                                    519,759                 363,084
                                                                           --------------            ------------
                                                                              $58,421,502             $48,828,208
                                                                              ===========             ===========
      LIABILITIES,   MINORITY   INTERESTS  AND   STOCKHOLDERS'   EQUITY  Current
liabilities:
  Accounts payable                                                          $   1,504,167            $  1,416,315
  Accrued liabilities                                                           1,041,372                 881,734
  Income taxes payable                                                          1,980,817                        -
                                                                            -------------      -------------------
          Total current liabilities                                             4,526,356               2,298,049
                                                                            -------------            ------------

Long term liabilities:
  Deferred income taxes                                                         9,054,117               8,877,253
  Reserve for future restoration costs                                          3,902,909               2,127,805
                                                                             ------------             -----------
                                                                               12,957,026              11,005,058
                                                                              -----------              ----------

Minority interests                                                             18,966,281              16,616,405
                                                                              -----------              ----------

Commitments (Note 2)                                                                    -                       -

Stockholders' equity:
  Common stock, par value $.01 per share:
    Authorized  50,000,000 shares
    Outstanding 24,691,245 and 24,543,745 shares, respectively                    246,912                 245,437
  Capital in excess of par value                                               43,244,901              43,112,376
                                                                              -----------              ----------
                                                                               43,491,813              43,357,813
  Accumulated deficit                                                         (18,735,378)            (19,615,984)
  Foreign currency translation adjustments                                     (2,784,596)             (4,833,133)
                                                                             -------------            ------------
                                                                               21,971,839              18,908,696
                                                                              -----------             -----------
                                                                              $58,421,502             $48,828,208
                                                                              ===========             ===========

                                               See accompanying notes.
</TABLE>


<PAGE>


                         MAGELLAN PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                  Year ended June 30,
                                                                       1996                1995               1994
                                                                     --------            --------            -------
<S>                                                                 <C>               <C>                   <C>

Revenues:
  Oil sales                                                         $ 5,921,529       $  5,693,108          $5,764,794
  Gas sales                                                           9,745,520          7,863,457           6,762,688
  Other production related revenues                                   1,360,403            597,451             441,262
  Interest income                                                       695,613            597,423             348,985
  Gain on sale of assets                                                349,953            672,533                     -
                                                                    -----------         ----------     -----------------
                                                                     18,073,018         15,423,972          13,317,729
                                                                     ----------        -----------          ----------
Costs and expenses:
  Production costs                                                    4,409,440          3,600,452           3,878,339
  Salaries and employee benefits                                      1,741,721          1,500,289           1,238,757
  Depletion, depreciation and amortization                            3,287,774          3,355,081           3,322,394
  Auditing, accounting and legal services                               703,833            689,400             664,654
  Shareholder communications                                            181,039            157,222             162,811
  Interest expense                                                       30,690             27,937              28,416
  Other                                                               1,026,889            928,610             931,385
  Abandonments and write downs                                        2,500,000                  -                   -
  Tender offer and litigation expenses                                          -                   -          412,840
                                                                -----------------  ------------------      -----------
                                                                     13,881,386         10,258,991          10,639,596

Income before minority interests and income taxes                     4,191,632          5,164,981           2,678,133
Minority interests                                                    2,507,274          2,965,605           1,973,352
                                                                     ----------         ----------          ----------

Income before income taxes                                            1,684,358          2,199,376             704,781
Income tax provision                                                    803,752          1,378,533             202,913
                                                                    -----------         ----------         -----------

Net income                                                          $   880,606        $   820,843        $    501,868
                                                                    ===========        ============       ============

Average number of shares                                             24,599,899         24,421,309          24,382,291
                                                                    ===========         ==========          ==========

Per share, based on average number of shares
 outstanding during the period:
    Net income                                                         $.04                $.03               $.02
                                                                       ====                ====               ====

                                               See accompanying notes.
</TABLE>

<PAGE>


                                          MAGELLAN PETROLEUM CORPORATION
                                             CONSOLIDATED STATEMENT OF
                                          CHANGES IN STOCKHOLDERS' EQUITY
                                          Three years ended June 30, 1996



<TABLE>
<CAPTION>
                                                                                                  Foreign
                                                          Capital in                              currency
                         Number           Common           excess of         Accumulated        translation
                       of shares          stock            par value           Deficit          adjustments           Total
<S>                    <C>           <C>                  <C>               <C>                 <C>                 <C>

June 30, 1993          24,381,890    $    243,819         $42,978,833       $(20,938,695)       $(5,760,431)        $16,523,526

Net income                      -               -                   -            501,868                  -             501,868
Currency
translation                     -               -                   -                  -          1,286,811           1,286,811
  adjustments
Common stock issued
 to directors               5,217              52               3,861                  -                  -               3,913
                       ----------    ------------         -----------       ------------        -----------         -----------

June 30, 1994          24,387,107         243,871          42,982,694        (20,436,827)        (4,473,620)         18,316,118
Net income                      -               -                   -            820,843                  -             820,843
Currency
translation                     -               -                   -                  -           (359,513)           (359,513)
  adjustments
Common stock issued
 to directors              16,638             166              12,957                  -                  -              13,123
Exercise of stock
  options                 140,000           1,400             116,725                  -                  -             118,125
                      -----------     -----------        ------------       ------------        -----------         -----------

June 30, 1995          24,543,745         245,437          43,112,376        (19,615,984)        (4,833,133)         18,908,696
Net income                                      -                   -            880,606                  -             880,606
Currency
translation                                     -                   -                  -          2,048,537           2,048,537
  adjustments
Exercise of stock
  options                 147,500           1,475             132,525                    -                   -          134,000
                     ------------     -----------        ------------     ----------------   -----------------      -----------
June 30, 1996          24,691,245       $ 246,912         $43,244,901       $(18,735,378)       $(2,784,596)        $21,971,839
                       ==========       =========         ===========       =============       ============        ===========

                                              See accompanying notes.
</TABLE>


<PAGE>


                         MAGELLAN PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                 Year ended June 30,

                                                                                1996              1995               1994
                                                                                ----              ----               ----
<S>                                                                        <C>                <C>                <C>
Operating Activities:

  Net income                                                               $    880,606       $   820,843        $   501,868
  Adjustments to reconcile net income to
  net cash provided by operating activities:
     Abandonments and write downs                                             2,500,000                 -                  -
     Depletion, depreciation and amortization                                 3,287,774         3,355,081          3,322,394
     Deferred income taxes                                                     (360,659)          849,766            653,457
     Minority interests                                                       2,507,274         2,965,605          1,973,352
  Increase (decrease) in operating assets and liabilities:
    Accounts receivable                                                        (991,763)          358,474           (800,388)
    Reimbursable development costs                                             (122,153)          (44,536)           406,025
    Other assets                                                               (217,509)          (42,539)            (8,704)
    Inventories                                                                (203,575)           86,750            (36,569)
  Accounts payable and accrued liabilities                                      (75,766)          237,064         (1,635,618)
  Income taxes payable                                                        1,980,817                 -                  -
                                                                             ----------     -----------------  ----------------
Net cash provided by operating activities                                     9,185,046         8,586,508          4,375,817
                                                                             ----------        ----------          ---------

Investing Activities:
  Additions to property and equipment                                        (5,596,156)       (7,283,821)        (3,898,629)
  Sale of assets                                                                      -           905,556                  -
                                                                          ---------------     -----------      ----------------
Net cash used in investing activities                                        (5,596,156)       (6,378,265)        (3,898,629)
                                                                             -----------       -----------        -----------

Financing Activities:
  Dividends to MPAL minority shareholders                                    (1,619,104)       (1,673,345)        (1,447,208)
  Sales of common stock by MPC                                                  134,000           131,248              3,913
                                                                            -----------       -----------        ------------
Net cash used in financing activities                                        (1,485,104)       (1,542,097)        (1,443,295)
                                                                             -----------       -----------        -----------
Effect of exchange rate changes on cash
  and cash equivalents                                                          192,589           (34,141)           334,812
                                                                            -----------       ------------        ----------
Net increase (decrease) in cash and cash
  equivalents                                                                 2,296,375           632,005           (631,295)
Cash and cash equivalents at beginning of year                                8,982,582         8,350,577          8,981,872
                                                                             ----------        ----------         ----------

Cash and cash equivalents at end of year                                    $11,278,957        $8,982,582         $8,350,577
                                                                            ===========        ==========         ==========

                                               See accompanying notes.
</TABLE>


<PAGE>


                         MAGELLAN PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 1996


1.       Summary of significant accounting policies

         (a)      Principles of consolidation

         The accompanying consolidated financial statements include the accounts
of  Magellan  Petroleum  Corporation  ("MPC")  and its  subsidiaries,  hereafter
referred to collectively as the Company. All intercompany transactions have been
eliminated.  At June 30, 1996, MPC owned a 50.7% interest in Magellan  Petroleum
Australia Limited ("MPAL").

         (b)      Oil and gas properties

         The Company  follows the full cost method of accounting for oil and gas
properties. The Company's cost centers are Australia,  United States, Canada and
Belize. All costs, whether successful or unsuccessful,  associated with property
acquisition,  exploration and development  activities are capitalized within the
appropriate cost center. The estimated cost of restoring the properties to their
original  state at the end of the life of the producing  fields is also included
in oil and gas  properties.  The Company does not recognize  gain or loss on the
sale of proved  oil and gas  properties  unless  significant  proved oil and gas
reserves  of that cost  center are sold.  Sales  proceeds  are  credited  to the
appropriate cost center.

         Capitalized costs are depleted on the  unit-of-production  method based
on proved oil and gas reserves.  Take or pay adjustment payments are included in
gas sales when the applicable gas is actually delivered.

         The Company assesses whether its unproved  properties are impaired on a
periodic  basis.  This assessment is based upon work completed on the properties
to  date,  the  status  of  drilling  activities  and  technical  data  from the
properties  and  adjacent  areas.  Based on the  exploration  activities  on the
properties completed to date, the Company expects to recover its $2.9 million of
capitalized costs. However, there can be no assurance that it will be successful
and that costs associated with these properties will be realized.


<PAGE>


1.       Summary of significant accounting policies (Cont'd)

         (c)      Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

         (d)      Land, buildings and equipment

         Land,  buildings and equipment and field equipment are carried at cost.
Depreciation and  amortization are provided on a straight-line  basis over their
estimated useful lives.

         (e)      Inventories

         Inventories  consist of crude oil in  various  stages of transit to the
point of sale and are valued at the lower of cost (determined on an average cost
basis) or market.

         (f)      Foreign currency translations

         The accounts of the Company's  Australian  subsidiaries  are translated
into U.S. dollars in accordance with Statement of Financial Accounting Standards
No. 52. The translation  adjustment is included as a component of  stockholders'
equity, whereas gain or loss on foreign currency transactions is included in the
determination of income.  All assets and liabilities are translated at the rates
in effect at the balance sheet dates. Revenues,  expenses,  gains and losses are
translated using a quarterly  weighted average exchange rate for the period.  At
June 30, 1996 and 1995, the Australian dollar was equivalent to U.S. $.7875, and
$.7097, respectively.

         (g)      Accounting for income taxes

          The Company  follows  FASB  Statement  109,  the  liability  method in
accounting  for  income  taxes.  Under  this  method,  deferred  tax  assets and
liabilities are determined based on differences  between the financial reporting
and tax bases of assets and  liabilities  and are measured using the enacted tax
rates and laws  that will be in effect  when the  differences  are  expected  to
reverse.



<PAGE>


1.        Summary of significant accounting policies (Cont'd)

          (h)     Cash and cash equivalents

          The Company  considers all highly liquid short term  investments  with
maturities  of  three  months  or less to be cash  equivalents.  Cash  and  cash
equivalents are carried at cost which approximates  market value. The components
of cash and cash equivalents are as follows:
                                                          June 30,
                                                    1996               1995
                                                    ----               ----
Cash                                         $    394,224         $   300,873
U. S. Treasury Bills                            1,678,858           1,183,559
Australian money market accounts and short
  term commercial paper.                        9,205,875           6,892,594
                                              -----------          ----------
                                               11,278,957           8,377,026
Marketable securities (*)                               -             605,556
                                              -----------          ----------
                                              $11,278,957          $8,982,582
                                              ===========          ==========

     (*) Includes  534,000  shares of Harken Energy  Corporation  as of June 30,
1995. See Note 2(c).

     (I) Earnings per share

     Earnings  per common  share is based upon the  weighted  average  number of
common and common equivalent shares outstanding  during the period.  Primary and
fully diluted earnings per share are the same.


<PAGE>


1.       Summary of significant accounting policies (Cont'd)

         (j)      Geographic information

         As of  each of the  stated  dates,  the  Company's  revenue,  operating
income,  net  income  or  loss  and  identifiable  assets  (in  thousands)  were
geographically attributable as follows:
<TABLE>
<CAPTION>

                                                                                  Year ended June 30,
                                                                       1996               1995             1994
                                                                    ---------          ---------          -------
<S>                                                                 <C>               <C>                 <C>
Revenue:
  Australia                                                         $17,639            $14,113            $12,365
  Americas                                                              434              1,311                953
                                                                 ----------           --------           --------
                                                                    $18,073             15,424            $13,318
                                                                    =======            -------            =======
Operating income:
  Australia                                                        $  5,891           $  4,874            $ 4,081
  Americas                                                           (3,108)              (650)              (826)
                                                                  ---------          ---------           --------
                                                                      2,783              4,224              3,255
  Corporate overhead and interest
    net of other income                                               1,409                941               (577)
                                                                   --------           --------            -------
  Consolidated operating income before
    minority interests and income taxes                            $  4,192           $  5,165             $2,678
                                                                   ========           ========             ======

Net income:
  Australia                                                        $  3,617           $  1,864           $  2,355
  Americas                                                           (2,736)            (1,043)            (1,853)
                                                                   --------           --------             ------
                                                                  $     881          $     821          $     502
                                                                  =========          =========          =========
Identifiable assets:
  Australia                                                         $52,901            $43,421            $43,515
  Americas                                                            2,831              3,400              1,778
                                                                  ---------           --------            -------
                                                                     55,732             46,821             45,293
  Corporate assets                                                    2,690              2,007              1,138
                                                                  ---------           --------            -------
                                                                    $58,422            $48,828            $46,431
                                                                    =======            =======            =======
</TABLE>

     Substantially  all of the Company's  Australian gas sales were to the Power
and Water  Authority  ("PAWA") of the Northern  Territory of Australia  ("NTA").
Most of the Company's  crude oil  production  was sold to the Mobil Port Stanvac
Refinery near Adelaide.

<PAGE>


1.        Summary of significant accounting policies (Cont'd)

          (k)     Other financial information.
<TABLE>
<CAPTION>

                                                                             Year ended June 30,

                                                                 1996                 1995                 1994
                                                              ----------           ----------            -------
<S>                                                            <C>                  <C>                 <C>

Costs and expenses - Other
  Consultants                                                  $  135,135           $  174,499          $  159,308
  Directors' fees and expense                                     167,002              163,922             163,056
  Insurance                                                       272,275              241,023             215,002
  Rent                                                            283,954              350,290             271,067
  Taxes                                                           220,968              234,008             152,351
  Travel                                                          337,132              183,351             143,624
  Other (net of overhead reimbursements)                         (389,577)            (418,483)           (173,023)
                                                               -----------           ----------            -------
                                                               $1,026,889           $  928,610         $   931,385
                                                               ==========           ==========         ===========

Royalty payments                                               $1,544,508           $1,596,516          $1,415,283
                                                               ==========           ==========          ==========

Interest payments                                            $     30,690          $    27,937        $     28,416
                                                             ============          ===========        ============

Income tax payments                                           $   251,888           $  260,580         $   222,900
                                                              ===========           ==========         ===========
</TABLE>

2.        Oil and gas properties

          (a)     Australia

Mereenie
                      Field Development and Oil Production

     MPAL has a 35% working  interest in the  Mereenie  oil and gas field in the
NTA.  MPAL's  share of  production  from the field is subject to net  overriding
royalties aggregating 3.0625% and the statutory government royalty of 10%.

     The field was  producing  about 2,800 (MPAL share 980) barrels of crude oil
per day ("bpd") from 36 producing  oil wells at June 30, 1996.  The oil is being
transported by means of a 167 mile, eight-inch oil pipeline from the field to an
industrial  park  near  Alice  Springs.  Most of the oil is then  shipped  south
approximately 950 miles by rail and road to a refinery in the Adelaide area.


<PAGE>


2.        Oil and gas properties (Cont'd)

MPAL and its partner (the Mereenie Joint Venture - MPAL share 35%) are providing
Mereenie  gas for use in Darwin and other NTA  centers.  (See  Darwin Gas Supply
Contracts below).

                               Refinery Obligation

     Under  the terms of the  Mereenie  petroleum  leases,  the  Mereenie  Joint
Venture  ("MJV") is obligated to construct a refinery in the Alice  Springs area
if it is  determined  that  such a  refinery  is  economically  viable.  The MJV
submitted  a study  in  early  1986  which  concluded  that a  refinery  was not
economically  viable at that time, and under the terms of the leases, an updated
study may be  required  at any time.  The  Company  believes a refinery in Alice
Springs would not be economically  viable under current market  conditions.  The
Northern  Territory  Government  has not raised any  current  objection  to this
conclusion.

Palm Valley

                      Field Development and Gas Production

     MPAL has a 50.775%  interest  in the Palm Valley gas field which is located
in the  Northern  Territory  of  Australia.  Ten wells have been  drilled in the
field,  six of which are  currently  connected  to the gas  treatment  plant and
flowed as required to meet the Alice  Springs and Darwin supply  contracts  with
PAWA. During fiscal 1996, MPAL's share of gas sales was 3.4 bcf.

     In 1981, the Palm Valley Joint Venture  ("PVJV")  agreed to supply the PAWA
facility  in Alice  Springs  with 48 billion  cubic feet  ("bcf") of natural gas
(MPAL share 24.4 bcf) from the Palm Valley field.  During the  twenty-five  year
period 1983-2008,  PAWA is required to take and/or pay for at least 28 bcf (MPAL
share -14.2 bcf).  The price of the gas is adjusted  quarterly to reflect  fully
changes in the Australian Consumer Price Index.


<PAGE>

2.        Oil and gas properties (Cont'd)

     The PVJV is  providing  Palm  Valley  gas for use in  Darwin  and other NTA
centers. (See Darwin Gas Supply Contracts below)

     MPAL's  share  of Palm  Valley  production  revenues  is  subject  to a 10%
statutory Government royalty and net overriding royalties aggregating 4.2548%.

Darwin Gas Supply Contracts

     In 1985,  MPAL signed an  agreement as a  participant  in the PVJV and also
signed an agreement as a participant  in the MJV for the sale of gas to the PAWA
for use in PAWA's Darwin generating  station and at a number of other generating
stations in the Northern Territory.  The gas is being delivered via the 922 mile
Amadeus  Basin  to  Darwin  gas  pipeline  which  was  built  by  an  Australian
consortium.

                              Palm Valley Agreement

     The PVJV has  contracted  to supply a maximum of 175 bcf of gas (MPAL share
- -88.9 bcf) from the Palm Valley field and PAWA has agreed to take or pay for 134
bcf (MPAL share - 68 bcf) during the 25 year period of the  contract.  The price
of gas being sold is subject  to  quarterly  adjustments  to  partially  reflect
changes in the  Australian  Consumer  Price Index and certain  increases  in the
price of electricity.

     Under the terms of the contract, PAWA is required to reimburse MPAL and its
PVJV partners,  subject to certain conditions,  for any development expenditures
(applicable  to the Darwin  contract)  plus  interest  over a 10 year period (40
quarterly  payments)  after the  expenditures  are incurred.  However,  PAWA has
elected to reimburse  the PVJV on a current basis (free of any interest) for the
costs incurred to date.

                               Mereenie Agreement

     The MJV has  contracted  to supply a maximum of 56 bcf of gas (MPAL share -
19.6 bcf) from the Mereenie  field and PAWA has agreed to take or pay for 40 bcf
(MPAL share - 14 bcf) during the 25 year period of the contract.  This agreement
also provides for price adjustments identical to the Palm Valley agreement.

     On May 29, 1995,  the MJV concluded a new ten year contract for the sale of
an additional  21.4 bcf of gas to PAWA.  The additional gas was required to meet
the power needs of new mining  developments  in the NTA  including  the McArthur
River Mine.

<PAGE>


2.        Oil and gas properties (Cont'd)

                     Agreements Between the PVJV and the MJV

     The  agreement  provides  that if the MJV  sells  additional  gas  from the
Mereenie field, the PVJV will be entitled to 35 percent of the revenues from the
first 38 bcf of additional  gas sold.  At June 30, 1996,  the balance of the MJV
gas subject to this  entitlement was 34 bcf (MPAL share - 17 bcf).  MPAL's share
of the above revenues in fiscal 1996, 1995 and 1994 was  A.$716,000,  A.$552,000
and A$249,000, respectively.

     The PVJV  and the MJV are now  entitled  to  receive  a share  of  pipeline
tariffs  earned for  transporting  gas in the Amadeus Basin to Darwin  pipeline.
MPAL's share was $1,126,000 in fiscal 1996 and $167,000 in fiscal 1995.

Dingo Gas Field

     MPAL has a 34.26%  interest in Retention  License 2 in the Amadeus basin in
the NTA. The Dingo gas field has  approximately  18 bcf of presently  proved and
recoverable  reserves based on three production gas wells.  Sufficient  reserves
are indicated to fulfill a modest gas contract,  however,  the initial well flow
rates and  consequent  reserves per well are  considered too low to be currently
economic,  given the high  drilling  costs of the wells.  The current  retention
license  requires  that a well be drilled by May,  1997 at an estimated  cost of
A.$3.5  million  (MPAL  share - A.$1.2  million).  Because of the  subcommercial
status of the field,  an  application to waive the drilling  commitment  will be
filed. It is expected that the waiver will be granted. MPAL's share of potential
production  from these  permit  areas is subject to a 10%  statutory  government
royalty and overriding royalties aggregating 2.5043%.

The Surat Basin

     MPAL  currently  has a 15.625%  working  interest in the Burunga  permit in
Queensland (ATP 378P).  During fiscal 1996, the Scotia No. 3 well was drilled to
test  for coal bed  methane  gas.  The gas well is  presently  being  tested  to
determine whether it would be economic to develop the discovery.

<PAGE>


2.        Oil and gas properties (Cont'd)

Ngalia Basin

     MPAL has been  granted a renewal of permit EP-15 in the Ngalia basin in the
NTA which expires in May 1999. The renewal permit covers 1.9 million acres.  The
minimum  obligations of this permit total A.$1.2 million for 1997-1999 including
an obligation to drill a well by May 1998.  Previously MPAL had held a permit in
the Ngalia  basin where a 6,000 foot wildcat  well,  Davis No. 1, was drilled in
1981. Although the well was abandoned as a dry hole, it did yield minor shows of
natural gas. MPAL is seeking co-venturers in this project.

Maryborough Basin

     MPAL is seeking partners for exploration permit ATP 613P, a 670,000 million
acre block in the  Maryborough  Basin in  Queensland,  Australia.  During fiscal
1996, a seismic  survey was completed on the permit.  Processing and analysis of
the data is being completed. The minimum expenditure obligation of the permit is
A.$.9 million over the term of the permit which ends March 31, 1999.

     (b) Canada

     The Company has a 2.67% carried interest in the Kotaneelee gas field in the
Yukon  Territory  which has been on production  since February  1991.  There are
three  wells  capable  of  production  in the  field  which  is part of a permit
covering 31,885 gross acres. For financial statement purposes in fiscal 1987 and
1988,  the  Company  wrote down its  Canada  cost  center,  which  included  the
Kotaneelee  field to a nominal value because of the  uncertainty  as to the date
when sales of Kotaneelee gas might begin and the  immateriality  of the carrying
value of the  investment.  Although the field is now producing,  the Company has
not yet  classified  its share of the  Kotaneelee gas reserves as proved because
the gas field is still the subject of  litigation.  The Company will  reclassify
the reserves at the Kotaneelee  field as proved when there is greater  assurance
as to the timing and assumptions regarding the investment.  Based on the current
price of gas and the unrecovered  development costs, the Company does not expect
to receive any revenue from the field until 1998.

     (c) United States

Navajo Joint Venture

     Effective  March 31,  1995,  MPAL sold its 11.625%  interest in oil and gas
exploration,  drilling,  operating and production agreements covering properties
located on


<PAGE>


2.        Oil and gas properties (Cont'd)

Navajo Tribal lands in the Four Corners Region of Arizona,  New Mexico and Utah.
MPAL realized  proceeds of $906,000 on the sale and recorded a gain of $673,000.
The  consideration  paid consisted of $300,000 in cash and 534,000 shares of the
purchaser, Harken Energy Corporation. During fiscal 1996, all of the shares were
sold at a gain of $350,000.

Baca County, Colorado

     MPC (10%) and MPAL (90%) are  participating  in an  exploration  program in
Colorado.  During  late  April  1995,  MPAL  commenced  an  initial  three  well
exploration  drilling  program.  There are  approximately 25 prospects that have
been identified  over the past 2 1/2 years from previous  seismic  surveys.  The
initial three well appraisal  program has been  completed.  All three wells were
dry holes. MPC has the right,  but not the obligation to a 10%  participation in
drilling future prospects.  Based on the data derived from the appraisal program
during fiscal 1996,  the Company has written off $2,500,000 in costs incurred to
date. In early 1997, the Company expects to drill an additional exploratory well
on the most prospective structure.

          (d)     Belize

Gladden Basin PSA

     During January 1996,  MPAL acquired a 20% working  interest in a Production
Sharing  Agreement  ("Gladden  PSA") which covers  approximately  351,000  acres
offshore Belize,  Central America. On May 30, 1996, MPC acquired a 2 1/2% in the
Gladden PSA. The Gladden PSA expires on May 31, 2001 and requires that a well be
drilled by December 1, 1996. The estimated cost of the well is $10 million (MPAL
share $2 million, MPC share $250,000).

Block 13 PSA

     MPC (2 1/2%) and MPAL (20%) are also  participants in a Production  Sharing
Agreement  ("Block 13 PSA") offshore Belize  adjourning the western and southern
boundaries  of the Gladden  PSA. The Block 13 PSA covers  approximately  788,000
acres.  The Block 13 PSA expires on January 31, 2004.  The  aggregate  estimated
cost for 1997 and 1998 is approximately $68,000 for MPAL and MPC.


<PAGE>


3.       MPC Condensed financial statements

     The following are unconsolidated condensed balance sheets (in thousands) of
MPC and condensed statements of operations and cash flows.

                         MAGELLAN PETROLEUM CORPORATION
                                  BALANCE SHEET
<TABLE>
<CAPTION>

                                                                                            June 30,

                                                                                       1996                1995
<S>                                                                                <C>              <C>
                                                                                       ----                ----
                         ASSETS
Current assets                                                                      $   2,287           $   1,691
Oil and gas properties - net                                                              283                 195
Investment in MPAL                                                                     19,493              17,085
                                                                                    ---------            --------
               Total                                                                 $ 22,063           $  18,971
                                                                                     ========           =========

                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                                                               $        91        $         62
                                                                                  -----------        ------------
Stockholders' equity:
  Capital                                                                              43,492              43,358
  Accumulated deficit                                                                 (18,735)            (19,616)
  Foreign currency translation adjustments                                              2,785)             (4,833)
                                                                                    ----------          ----------
                                                                                       21,972              18,909
                                                                                     --------           ---------
               Total                                                                 $ 22,063           $  18,971
                                                                                     ========           =========
</TABLE>

                         MAGELLAN PETROLEUM CORPORATION
                             STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>

                                                                            Year ended June 30,

                                                                  1996                 1995                 1994
                                                                  ----                 ----                 ----
<S>                                                          <C>                  <C>                     <C>
Revenues                                                     $       84           $       58              $    25
Costs and expenses                                                 (973)                (903)              (1,346)
                                                               ---------           ----------              -------
Loss before income taxes                                           (889)                (845)              (1,321)
Income tax provision                                                252                  261                  223
                                                               --------           ----------              -------
Loss before equity in MPAL                                       (1,141)              (1,106)              (1,544)
Equity in MPAL net income                                         2,022                1,927                2,046
                                                                -------            ---------                -----
Net income                                                    $     881           $      821              $   502
                                                              =========           ==========              =======
</TABLE>

<PAGE>


3.       MPC Condensed financial statements (Cont'd)

                         MAGELLAN PETROLEUM CORPORATION
                             STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                   Year ended June 30,

                                                                        1996               1995               1994
                                                                        ----               ----               ----
<S>                                                                  <C>               <C>                   <C>

Operating Activities:
  Net income                                                         $   881           $    821              $ 502
  Adjustments to reconcile net income
    to net cash used in operating activities:
    Abandonments                                                         200                  -                  -
    Equity in MPAL income                                             (2,022)            (1,927)            (2,046)
  Change in operating assets and liabilities:
    Accounts receivable                                                  (62)               239               (186)
    Accounts payable and accrued liabilities                              29                 (8)              (339)
                                                                    --------          ----------           --------
Net cash used in operating activities                                   (974)              (875)            (2,069)

Investing Activities:
  Additions to property and equipment                                   (288)              (195)                 -
                                                                     --------           --------         ---------

Financing Activities:
  Dividends from MPAL                                                  1,662              1,718              1,486
  Sales of common stock                                                  134                131                  4
                                                                     -------           --------            -------
                                                                       1,796              1,849              1,490
                                                                      ------            -------              -----
Net increase (decrease) in cash and
    cash equivalents                                                     534                779               (579)
Cash and cash equivalents at
  beginning of year                                                    1,533                754              1,333
                                                                      ------            -------             ------
Cash and cash equivalents at
  end of year                                                         $2,067            $ 1,533            $   754
                                                                      ======            =======            =======
</TABLE>

4.       MPAL transactions and condensed financial statements

     The  following  are the  condensed  consolidated  balance sheet of MPAL and
condensed consolidated statement of operations (in thousands). At June 30, 1996,
Santos Ltd.  held 18.2% of MPAL and Boral Limited held 18.1% with the balance of
12.9% held by approximately 2,500 shareholders in Australia.


<PAGE>


4.       MPAL transactions and condensed financial statements (Cont'd)

The consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles and include all of MPAL's subsidiaries.

                      Magellan Petroleum Australia Limited
                           Consolidated Balance Sheet
<TABLE>
<CAPTION>

                                                                                              June 30,

                                                                                     1996                   1995
                                                                                     ----                   ----
<S>                                                                               <C>                   <C>   

                                ASSETS

Current assets                                                                     $12,617              $   9,776
Oil and gas properties - net                                                        41,949                 36,076
Land, building and equipment - net                                                   1,166                    969
                                                                                 ---------              ---------
               Total                                                               $55,732               $ 46,821
                                                                                   =======               ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities                                                               $  4,436              $   2,236
                                                                                  --------              ---------

Long term liabilities                                                               13,052                 11,100
                                                                                  --------               --------

Stockholders' equity:
  Capital                                                                           34,408                 34,408
  Retained earnings                                                                  8,353                  7,642
  Foreign currency translation adjustments                                          (4,517)                (8,565)
                                                                                 ----------            -----------
                                                                                    38,244                 33,485
                                                                                  --------              ---------
            Total                                                                  $55,732              $  46,821
                                                                                   =======              =========
</TABLE>

<PAGE>


4.       MPAL transactions and condensed financial statements (Cont'd)

                      Magellan Petroleum Australia Limited
                      Consolidated Statement of Operations
<TABLE>
<CAPTION>

                                                                                 Year ended June 30,

                                                                     1996                1995                1994
                                                                     ----                ----                ----
<S>                                                                <C>                 <C>                 <C>

Revenues                                                           $17,989             $15,366             $13,293
Costs and expenses                                                  12,908               9,355               9,294
                                                                   -------            --------             -------
Income before taxes                                                  5,081               6,011               3,999
Income tax provision (credit)                                        1,089               2,207                 (39)
                                                                  --------            --------           ----------
Net income                                                        $  3,992            $  3,804            $  4,038
                                                                  ========            ========            ========

                      Magellan and Minority Equity in MPAL

Magellan equity interest in MPAL:
  Income before tax                                                 $2,574              $3,045              $2,026
  Income tax (credit) provision                                        552               1,118                 (20)
                                                                  --------             -------             --------
  Magellan equity in net income                                     $2,022              $1,927              $2,046
                                                                    ------              ------              ------

Minority equity interest in MPAL:
  Income before tax                                                 $2,507              $2,966              $1,973
  Income tax (credit) provision                                        537               1,089                 (19)
                                                                  --------             -------              -------
  Minority interest in net income                                    1,970               1,877               1,992

Foreign currency translation                                         1,999                (352)              1,253

Dividends paid                                                      (1,619)             (1,673)             (1,447)

Other                                                                    -                   -                  35
                                                               -----------         -----------            --------
Total minority interest increase (decrease)                         $2,350            $   (148)             $1,833
                                                                    ======            =========             ======
</TABLE>


<PAGE>


5.       Capital and stock options

     The Company's  Certificate of Incorporation  provides that any matter to be
voted upon must be approved not only by a majority of the shares voted, but also
by a majority of the  stockholders  casting  votes present in person or by proxy
and entitled to vote thereon.

     On  October 5, 1989,  the  Company  adopted a Stock  Option  Plan  covering
1,000,000 shares of the Company's common stock.

     Following  is a summary of option  transactions  for the three  years ended
June 30, 1996:
<TABLE>
<CAPTION>

Options outstanding                                       Number of shares                   Option Prices
<S>                                                              <C>                          <C>

June 30,1993                                                     388,750                      .94 - 1.125
  Granted                                                        275,000                         .8125
  Granted                                                        140,000                          .75
                                                               ---------
June 30, 1994                                                    803,750                      .75 - 1.125
  Exercised                                                     (105,000)                         .75
  Exercised                                                      (35,000)                        1.125
                                                               ----------
June 30, 1995                                                    663,750                      .75 - 1.125
  Exercised                                                      (25,000)                         .75
  Exercised                                                      (35,000)                        1.125
  Exercised                                                      (87,500)                      .75 - .94
                                                               ----------
June 30, 1996                                                    516,250                     .75 - 1.0625
                                                                 =======

Options reserved for future grants                               196,250
                                                                 =======
</TABLE>

     The Company has elected to follow  Accounting  Principles Board Opinion No.
25,  "Accounting  for  Stock  Issued  to  Employees"  (APB No.  25) and  related
interpretations in accounting for its stock options because the alternative fair
value  accounting  provided under FASB Statement No. 123,  "Accounting for Stock
Based  Compensation,"  requires  use of option  valuation  models  that were not
developed  for use in  valuing  stock  options.  Under APB No. 25,  because  the
exercise  price of the Company's  stock  options  equals the market price of the
underlying  stock on the date of grant, no  compensation  expense is recognized.
The Company will institute the disclosure  requirements of FASB No. 123 starting
in fiscal 1997.

     Upon exercise of options,  the excess of the proceeds over the par value of
the shares issued is credited to capital in excess of par value. No charges have
been made against  income in accounting for options during the three year period
ended June 30, 1996.


<PAGE>


6.       Income taxes

(a)      Components of pretax income (loss) by geographic area (in thousands)
         are as follows:
<TABLE>
<CAPTION>

                                                                               Year ended June 30,
                                                                    1996                1995                1994
                                                                ----------            -------            -------
<S>                                                                <C>                <C>                <C>

Americas                                                           $(2,484)           $  (783)           $(1,630)
Australia                                                            4,168              2,982              2,335
                                                                  --------              -----            -------
Total                                                               $1,684             $2,199            $   705
                                                                    ======             ======            =======
</TABLE>

(b)      Reconciliation  of  the  provision  for  income  taxes  (in  thousands)
         computed at the Australian statutory rate to the reported provision for
         income taxes is as follows:
<TABLE>
<CAPTION>
                                                                                  Year ended June 30,
                                                                     1996               1995               1994
                                                                  ----------         ----------          -------
<S>                                                                 <C>               <C>                 <C>

Pretax consolidated income
  before minority interests                                         $4,192            $ 5,165             $2,678
Losses not recognized:
  MPC's operations                                                     890                845              1,321
  MPAL's non Australian operations                                     831               (124)               610
  Permanent differences                                             (1,615)              (217)               115
                                                                  ---------           --------               ---
Book taxable income                                                 $4,298             $5,669             $4,724
                                                                    ======             ======             ======

Australian tax rate                                                   36%                36%                 33%
                                                                      ===                ===                 ===
Australian income tax provision                                     $1,547             $2,041            $ 1,559
Tax provision attributable to reconciliation of
  year end deferred tax liability                                      458                166                  -
Tax credit attributable to settlement of
  Australian tax audit                                                   -                  -              1,599
                                                              ------------        -----------              -----
                                                                     1,089              2,207                (40)
  Less:  Minority interests                                            537              1,089                 20
                                                                 ---------             ------            -------
Australian tax provision (credit)                                      552              1,118                (20)
MPC income tax provision                                               252                261                223
                                                                 ---------            -------                ---
Consolidated income tax provision                                 $    804             $1,379            $   203
                                                                  ========             ======            =======

Current income tax provision                                      $    804          $       -         $        -
Deferred income tax                                                      -              1,379                203
                                                               -----------              -----               ----
                                                                  $    804             $1,379            $   203
                                                                  ========             ======            =======
</TABLE>

     The amount of $9,054,000 and $8,877,000 in deferred income taxes payable at
June 30,  1996  and  June  30,  1995,  respectively,  relates  primarily  to the
deduction  of  exploration  and  development  costs  which are  capitalized  for
financial statement purposes.

<PAGE>


6.       Income taxes (Cont'd)

         (c)      United States

         The following net operating loss carryforwards ("NOLS") and foreign tax
credit carryovers ("FTC") available at June 30, 1996 (in thousands):
<TABLE>
<CAPTION>

                                          MPC                           MPC                         MPAL
        Year Expires                      NOLS                          FTC                         NOLS
        ------------                      ----                          ---                         ----
            <S>                         <C>                           <C>                         <C>

            1997                        $     -                       $   131                     $      -
            1998                              -                           115                            -
            1999                            351                           223                            -
            2000                            982                           258                            -
            2001                            684                           250                            -
            2002                            911                             -                            -
            2003                            209                             -                            -
            2004                            915                             -                            -
            2005                            570                             -                          268
            2006                              -                             -                        2,392
            2007                            865                             -                            -
            2008                          2,055                             -                            -
            2010                              -                             -                        1,669
            2011                              -                             -                        1,765
                                      ---------                      --------                        -----
                                         $7,542                         $ 977                       $6,093
                                         ======                         =====                       ======
</TABLE>

     A deferred tax asset in the amount of $6,526,000 in 1996 and  $5,639,000 in
1995  relates to the  potential  federal  and state tax benefit of the above net
operating losses and foreign tax credits carryovers. The Company has established
a valuation  allowance of $6,526,000 at June 30, 1996 and $5,639,000 at June 30,
1995 because it is more likely than not at this time that none of the losses and
credits will be realized.

     MPAL's  investments in the U.S. have created deemed dividends under Subpart
F of the Internal Revenue Code. These dividends have reduced MPC's net operating
losses in earlier years. At June 30, 1996, the amount of unpaid deemed dividends
was $4,343,000.  For financial statement  purposes,  MPC's share of MPAL's after
tax  accumulated  earnings at June 30, 1996 was  $3,941,000  with  $2,782,000 in
accumulated  currency translation losses. The tax cost of the MPAL investment at
June 30, 1996 was approximately $15,800,000.

         (d)      Australia

     Effective  July 1, 1995,  the  Australian  income tax rate increased to 36%
from 33%. The effect of this change was to increase the consolidated  income tax
provision for fiscal 1995 by $375,000.

     At June 30,  1996,  A.$9,448,000  of  consolidated  losses and  capitalized
expenditures  remain  to  be  carried  forward  indefinitely  by  MPAL  and  its
subsidiaries to reduce future petroleum taxable income.

<PAGE>


7.       Bank loan

     MPC has a $1,500,000  revolving  line of credit at the bank's prime rate of
interest (8 1/4% at June 30, 1996 and 9% at June 30,  1995) plus 1%,  which will
expire in December  31, 1996.  The line is secured by  4,400,000  shares of MPAL
common stock and  requires a  compensating  balance of $100,000  plus 10% of the
amount used under the line of credit.  In addition,  there is a 1/2%  commitment
fee charged on the unused  portion of the line of credit.  MPC has an additional
$700,000  bank  commitment  to provide each director and officer with a $100,000
letter of credit.  The letters of credit secure MPC's agreement to indemnify its
directors and officers.  The directors and officers bear the cost of the letters
of credit.  At June 30, 1996 and 1995,  the line of credit and letters of credit
were not being utilized.

     MPAL has a A.$10  million  line of credit  with an  Australian  bank at the
bank's prime rate of interest (7.6% at June 30, 1996, and 7.4% at June 30, 1995)
plus .45%.  This line of credit is unsecured  and expires  December 31, 1996. In
addition,  there is an annual fee of A.$30,000  payable with respect to the line
of credit. At June 30, 1996 and 1995, the line of credit was not being utilized.

8.       Related party and other transactions

     Mr. C. Dean  Reasoner,  a director of the  Company,  is a member of the law
firm of Reasoner,  Davis & Fox,  which firm was paid fees of $109,000,  $120,000
and $132,000 for fiscal years 1996, 1995 and 1994, respectively. In fiscal 1995,
the final year of his two year  consulting  agreement,  Mr. Heath, a director of
the Company, was paid $35,000 plus an expense  reimbursement.  G&O'D INC, a firm
that provides  accounting and  administrative  services,  office  facilities and
support staff to the Company,  was paid $187,898,  $256,196 and $325,388 in fees
for  fiscal  years  1996,  1995 and  1994,  respectively.  James R.  Joyce,  the
President and Chief Financial Officer, is the owner of G&O'D INC. Mr. Timothy L.
Largay,  a director of the Company since  February  1996, is a member of the law
firm of Murtha, Cullina, Richter and Pinney, which firm was paid fees of $28,449
for fiscal 1996.  In addition,  Messrs.  Benjamin W. Heath and C. Dean  Reasoner
have  overriding  royalty  interests which were granted between 1957 and 1968 on
certain of the Company's oil and gas properties  prior to any  discoveries.  The
following gross royalty amounts  represent  payments by all of the owners of the
fields, not just the Company's share. The payments to Messrs. Heath and Reasoner
with respect to these  royalties  in fiscal 1996 were $ 45,657 and  $20,071,  in
fiscal  1995 were  $45,220  and  $21,403  and in fiscal  1994 were  $46,362  and
$22,516, respectively.


<PAGE>


9.       Leases

     MPAL  leases  various  offices.  At June 30,  1996  future  minimum  rental
payments applicable to noncancelable operating leases were as follows:

                  Fiscal Year                     Amount

                     1997                        $163,000
                     1998                         160,000
                                                  -------
                                                 $323,000
                                                 ========

The  information  regarding  the  rental  expense  for all  operating  leases is
included in Note 1 above.

10.      Pension Plan

     A defined benefit pension plan is operated by MPAL. All salaried  employees
are eligible to become participants of the plan. MPAL contributes to the plan at
rates which (based on actuarial  determination)  are sufficient to meet the cost
of employees' retirement benefits. No employee contributions are required.  MPAL
is committed to make up any  shortfall in the plan's  assets to meet payments to
employees as they become due.

     Plan  participants are entitled to defined  benefits on normal  retirement,
death  or  disability.  The  retirement  benefits  are  dependent  on  years  of
participation  and the highest average salary over three  consecutive  years. In
the event of  termination  of  employment  within  ten  years of  participation,
employees are entitled to a partial vesting of their equitable share of the plan
based on the number of years of participation. After ten years of participation,
there is full vesting of benefits.

     The investments of the plan at June 30, 1996 are comprised of units of NMFM
Superannuation  Fund,  a managed  growth  fund.  The fund's  assets are invested
primarily in growth assets such as Australian and international shares.


<PAGE>


10.      Pension Plan (Cont'd)

     The  following  table sets  forth the  actuarial  present  value of benefit
obligations and funded status for the MPAL pension plan:
<TABLE>
<CAPTION>

                                                                                            June 30,
                                                                                      1996                 1995
                                                                                      ----                 ----
<S>                                                                               <C>                   <C>

Plan assets at fair value                                                          $3,214,103           $2,469,925
                                                                                   ----------           ----------
Actuarial value of accumulated
  benefit obligation                                                               $3,062,115           $2,272,237
Effect of assumed future
  compensation increases                                                             (108,603)              10,157
                                                                                --------------      --------------
Projected benefit obligation
  for service to date                                                               2,953,512            2,282,394
                                                                                 ------------         ------------
Plan assets in excess of
  projected benefit obligation                                                        260,591              187,531
Unrecognized net loss                                                                 539,425              459,691
Unrecognized net asset at transition                                                 (280,256)            (284,139)
                                                                                 ------------         ------------
                                                                                   $  519,760           $  363,083
                                                                                 ============          ===========
</TABLE>

     The net pension expense for the MPAL pension plan was as follows:
<TABLE>
<CAPTION>

                                                                            Year ended June 30,

                                                                 1996                 1995                 1994
                                                                 ----                 ----                 ----
<S>                                                            <C>                  <C>                  <C>

Service cost                                                   $247,010             $228,421             $256,123
Interest cost                                                   204,554              157,409              128,100
Actual return on plan assets                                   (259,695)            (201,565)            (124,517)
Net amortization and deferred items                             (19,298)             (15,503)             (14,964)
                                                            ------------          -----------           ----------
Net pension cost                                               $172,571             $168,762             $244,742
                                                               ========             ========             ========

Plan contributions by MPAL                                     $279,000             $250,000             $223,000
                                                               ========             ========            =========
</TABLE>

     Significant  assumptions  used in determining  pension cost and the related
obligations were as follows:
<TABLE>
<CAPTION>

                                                              1996                 1995                 1994
<S>                                                           <C>                 <C>                   <C>

Assumed discount rate                                           8.0%                 9.0%                 9.0%
Rate of increase in future
  compensation levels                                           6.5%                15.0%                 7.5%
Expected long term rate of
   return on plan assets                                        8.5%                10.0%                10.0%

Australian exchange rate                                      $.7875               $.7097               $.7287
</TABLE>



<PAGE>

11.       Tender offer and litigation expenses

     MPC and MPAL had been  parties  to  several  legal  proceedings  that  were
instituted  directly or  indirectly  as a result of the offer in 1993 by Sagasco
Holdings Limited for all of the outstanding shares of MPC and MPAL. All of MPC's
lawsuits have been terminated.

12.       Financial instruments

     The carrying value for cash and cash equivalents,  accounts  receivable and
accounts  payable  approximates  fair value based on anticipated  cash flows and
current market conditions.

13.       Selected quarterly financial data (unaudited)

     The  following  is a summary (in  thousands)  of the  quarterly  results of
operations for the years ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>

1996                                        QTR 1               QTR 2               QTR 3               QTR 4
                                            -----               -----               -----               -----
<S>                                        <C>                  <C>                  <C>                <C>

Total revenues                              $3,935              $4,649              $4,770              $4,719
Costs and expenses                           2,748               2,929               2,745               5,459
Minority interests                             687                 963               1,062                (205)
Income taxes                                   227                 632                 368                (423)
                                            ------              ------              ------              -------
Net income (loss)                           $   273             $   125              $  595             $  (112)
                                            =======             =======              ======             ========

Per share                                    $.01                $.01                $.02                $ -
                                             ====                ====                ====                ===

1995                                        QTR 1               QTR 2               QTR 3               QTR 4
                                            -----               -----               -----               -----

Total sales and revenues                    $3,450              $3,661              $3,941              $4,372
Costs and expenses                           2,631               2,605               2,756               2,267
Minority interests                             532                 666                 653               1,114
Income taxes                                   199                 513                 239                 428
                                            ------             -------              ------              ------
Net income (loss)                          $    88             $  (123)             $  293              $  563
                                           =======             ========             ======              ======

Per share                                    $ -                $(.01)               $.01                $.03
                                             ====               ======               ====                ====
</TABLE>


<PAGE>


                         MAGELLAN PETROLEUM CORPORATION
                      SUPPLEMENTARY OIL AND GAS INFORMATION
                                   (unaudited)

                                  June 30, 1996

     The consolidated  data presented herein include  estimates which should not
be construed as being exact and verifiable  quantities.  The reserves may or may
not be recovered,  and if  recovered,  the cash flows  therefrom,  and the costs
related  thereto,  could be more or less  than the  amounts  used in  estimating
future net cash flows.  Moreover,  estimates of proved  reserves may increase or
decrease  as a result of future  operations  and  economic  conditions,  and any
production from these properties may commence earlier or later than anticipated.

Estimated net quantities of proved developed and proved oil and gas reserves:
<TABLE>
<CAPTION>

                                                      Natural Gas                               Oil
                                                         (BCF)                            (Thousand Bbls)

Proved Reserves:                             Australia             U.S.             Australia            U.S.
                                                (*)
<S>                                             <C>               <C>                  <C>               <C>

June 30, 1993                                   86.527             .176                1,710               70
Revision of previous estimates                    .018             .310                  (61)              85
Extensions and discoveries                           -                 -                   -                -
Production                                      (4.783)           (.358)                (285)             (89)
                                                -------           ------                -----            -----
June 30, 1994                                   81.762             .128                1,364               66
Revision of previous estimates                    .244             .200                    -              150
Extensions and discoveries                       6.502                 -                 412                -
Production                                      (4.934)           (.132)                (280)             (89)
Sales of minerals in place                           -            (.196)                   -             (127)
                                           -----------            ------            --------             -----
June 30, 1995                                   83.574                 -               1,496                -
Revision of previous estimates                       -                 -                   -                -
Extensions and discoveries                       1.518                 -                  23                -
Production                                      (5.422)                -                (318)               -
                                                -------        ---------               -----           ------
June 30, 1996                                   79.670                 -               1,201                -
                                                ======         =========               =====           ======

Proved Developed Reserves:

June 30, 1993                                  86.527              .176                1,710              70
                                               ======            ======                =====              ==

June 30, 1994                                  81.762              .128                1,364              66
                                               ======            ======                =====              ==

June 30, 1995                                  83.574                 -                1,496               -
                                               ======            ======                =====          ======    

June 30, 1996                                 79.670                  -                1,201               -
                                              ======             ======                =====          ======    =
- -------------------
</TABLE>

(*) The amount of proved  reserves  applicable  to the Palm Valley and  Mereenie
fields  only  reflects  the  amount  of gas  committed  to  specific  contracts.
Approximately 49.3% of reserves are attributable to minority interests.


<PAGE>

Costs of oil and gas activities (in thousands):
<TABLE>
<CAPTION>

                                                                         Australia
                                        -----------------------------------------------------------------------------
                                                     Exploration                            Development
             Fiscal Year                                  Costs                                  Costs
                <S>                                      <C>                                      <C>

                 1996                                    $    335                                 $2,989
                 1995                                          14                                  4,025
                 1994                                         224                                  3,071

                                                                         Americas
                                        -----------------------------------------------------------------------------
                                                     Exploration                            Acquisition
             Fiscal Year                                 Costs                                  Costs
                 1996                                      $2,138                                 $  426
                 1995                                       2,448                                    386
                 1994                                         652                                     83

</TABLE>

Capitalized costs subject to depletion,  depreciation and amortization  ("DD&A")
(in thousands):
<TABLE>
<CAPTION>

                                                                              June 30, 1996

                                                   Australia                  Americas                    Total
<S>                                                 <C>                        <C>                      <C>

Costs subject to DD&A                               $66,673                    $        -               $66,673
Costs not subject to DD&A                                 -                     2,898                     2,898
Less accumulated DD&A                               (26,053)                        -                   (26,053)
                                                    --------               ----------                   --------
Net capitalized costs                               $40,620                    $2,898                   $43,518
                                                    =======                    ======                   =======

                                                                             June 30, 1995

                                                   Australia                  Americas                   Total
Costs subject to DD&A                             $  55,044             $           -                   $55,044
Costs not subject to DD&A                                 -                     2,834                     2,834
Less accumulated DD&A                               (20,517)                        -                   (20,517)
                                                   ---------             ------------                   --------
Net capitalized costs                             $  34,527                  $  2,834                   $37,361
                                                  =========                  ========                   =======
</TABLE>

<PAGE>


Discounted future net cash flows:

     The following is the standardized measure of discounted (at 10%) future net
cash flows (in  thousands)  relating to proved oil and gas  reserves  during the
three years ended June 30,  1996.  Approximately  49.3% of the  reserves and the
respective  discounted  future  net cash  flows  are  attributable  to  minority
interests.
<TABLE>
<CAPTION>

                                                                                     Australia
                                                                -----------------------------------------------------
                                                                      1996              1995              1994
                                                                    -------            ------            ------
<S>                                                                 <C>              <C>                <C>

Future cash inflows                                                 $138,797         $ 132,435          $129,973
Future production costs                                              (21,065)          (23,354)          (23,264)
Future development costs                                                   -            (1,139)             (765)
Future income tax expense                                            (41,824)          (38,870           (31,680)
                                                                   ----------        ---------           --------
Future net cash flows                                                 75,908            69,072            74,264
10% annual discount for estimating timing
  of cash flows                                                      (31,695)          (30,691)          (28,524)
                                                                   ----------        ----------          --------
Standardized measures of discounted future
  net cash flows                                                   $  44,213          $ 38,381          $ 45,740
                                                                   =========          ========          ========


                                                                                   United States
                                                                -----------------------------------------------------
                                                                      1996              1995              1994
                                                                     ------            ------            ------
Future cash inflows                                                   $(*)            $    (*)          $  1,490
Future production costs                                                                                     (393)
Future development costs                                                                                       -
Future income tax expense                                                                                      -
                                                                                                         -------
Future net cash flows                                                                                      1,097
10% annual discount for estimating timing
  of cash flows                                                                                             (117)
Standardized measures of discounted future
  net cash flows                                                                                            $980

(*)  U.S. producing properties sold effective March 31, 1995.
                                                                                       Total
                                                              -----------------------------------------------------
                                                                      1996              1995              1994
                                                                     ------             -----            ------
Future cash inflows                                                 $138,797         $ 132,435          $131,463
Future production costs                                              (21,065)          (23,354)          (23,657)
Future development costs                                                   -            (1,139)             (765)
Future income tax expense                                            (41,824)          (38,870)          (31,680)
                                                                    ---------        ----------          --------
Future net cash flows                                                 75,908            69,072            75,361
10% annual discount for estimating timing
  of cash flows                                                      (31,695)          (30,691)          (28,641)
                                                                    ---------         ---------          --------
Standardized measures of discounted future
  net cash flows                                                    $ 44,213          $ 38,381           $46,720
                                                                    ========          ========           =======
</TABLE>



<PAGE>


     The  following   are  the  principal   sources  of  changes  in  the  above
standardized measure of discounted future net cash flows (in thousands):
<TABLE>
<CAPTION>

                                                                        1996              1995              1994
                                                                        ----              ----              ----
<S>                                                                   <C>              <C>                <C>

Net change in prices and production costs                             $6,330           $(3,141)           $   77
Extensions and discoveries                                                87             6,838                 -
Revision of previous quantity estimates                                    -               148              (226)
Changes in estimated future development costs                              -            (1,534)             (700)
Sales and transfers of oil and gas produced                           (9,583)           (9,266)           (8,502)
Sales of minerals in place                                                 -            (1,313)                -
Previously estimated development cost
  incurred during the period                                           1,493               765             1,983
Accretion of discount                                                  3,180             4,113             3,715
Net change in income taxes                                               (43)           (3,921)              353
Net change in exchange rate                                            4,368            (1,028)            3,893
                                                                      ------          ---------            -----
                                                                      $5,832           $(8,339)           $  593
                                                                      ======           ========           ======
</TABLE>

Additional information regarding discounted future net cash flows.


                                    Australia

Reserves - Natural Gas

     Future net cash flows from net proved gas reserves in Australia  were based
on MPAL's  share of reserves in the Palm Valley and  Mereenie  fields which have
been  limited  to the  quantities  of  gas to be  sold  under  long-term  supply
contracts. A summary of these contracts is as follows:
<TABLE>
<CAPTION>
                                                                                                    MPAL
                                             MPAL Share of contract           Contract %            share
                                                quantities of gas         completed through        (before        Contract
          Gas supply contract                   to be sold (bcf)             June 30 1996         royalties)       period
          -------------------                  ------------------          ---------------       -----------      -------
                                               (after royalties)
<S>                                                    <C>                        <C>              <C>          <C>

Palm Valley - Alice Springs                              21.0                     40               50.775%       1983-2008
Palm Valley - Darwin                                     76.6                     34               50.775%       1987-2012
Mereenie - Darwin (1985)                                 17.0                     37                 35%         1987-2012
Mereenie - Darwin (1995)                                  6.5                     27                40.5%        1995-2009
Mereenie - Cosmo Howley                                   1.5                     78                40.5%        1989-1999
Mereenie - N.T. Gas                                        .3                     -                 40.5%        1996-2006
                                                      -------
                                                        122.9
</TABLE>


<PAGE>


Prices

     The  prices  (Australian  dollars)  used  in  the  foregoing  estimates  in
Australia were based upon the following contract prices of gas per mcf:
<TABLE>
<CAPTION>

                                                              1996                1995                  1994
                                                             ------              ------                ------
<S>                                                        <C>                 <C>                    <C>

Palm Valley-Alice Springs                                   A.$2.94             A.$2.85               A.$2.73
Palm Valley-Darwin                                             2.02                2.00                  1.97
Mereenie-Darwin
  Years 6-21 (1985 contract)                                    .48                 .48                   .48
  Years 22-26 (1985 contract)                                  2.07                2.05                  2.07
   1995 contract                                               2.70                2.64                     -
Mereenie - Cosmo Howley                                        2.92                2.77                  2.70
Mereenie - NT Gas contract                                     2.72                   -                     -
Crude oil per barrel                                          25.00               23.71                 24.14
Exchange rate A.$= $U.S.                                        .79                 .71                   .73

Reserves and Costs - Oil
</TABLE>

     At June 30, 1996, future net cash flows from the net proved oil reserves in
Australia  were  calculated  by the Company.  Estimated  future  production  and
development  costs were  based on current  costs and rates for each of the three
years  ended at June 30,  1996.  All of the crude  oil  reserves  are  developed
reserves.  Undeveloped  proved  reserves have not been estimated since there are
only tentative plans to drill a few additional wells.

Income taxes

     Future  Australian  income tax  expense  applicable  to the future net cash
flows  has  been  reduced  by  the  tax  effect  of  approximately  A$9,448,000,
A.$9,583,000 and A.$13,600,000 in unrecouped capital expenditures at 1996, 1995,
and 1994,  respectively.  The tax rate in computing Australian future income tax
expense was 36% at June 30, 1996 and 1995 and 33% in 1994.

<PAGE>


     For financial  statements  purposes in fiscal 1987 and 1988, MPC wrote down
its Canada cost center  which  included  the  Kotaneelee  gas field to a nominal
value because of the  uncertainty  as to the date when sales of  Kotaneelee  gas
might  begin and the  immateriality  of the  carrying  value of the  investment.
Although  the field is now  producing,  the Company has not yet  classified  its
share of the  Kotaneelee  gas reserves as proved  because the gas field is still
the subject of  litigation.  The Company  will  reclassify  the  reserves at the
Kotaneelee field as proved when there is greater  assurance as to the timing and
assumptions of the investment.

Results of Operations

     The following are the Company's  results of operations  (in  thousands) for
the oil and gas producing activities during the three years ended June 30, 1996:
<TABLE>
<CAPTION>

                                                    United States                            Australia
                                        -------------------------------------- ---------------------------------------

                                             1996 (1)     1995 (1)       1994         1996          1995         1994
                                             -----        ----           ----         ----          ----         ----
<S>                                      <C>             <C>          <C>        <C>          <C>            <C>

Revenues:
  Oil sales                                               $363         $ 540      $ 5,922      $ 5,330        $5,224
  Gas sales                                                115           172        9,746         7748         6,592
                                                          ----         -----       ------      -------        ------
                                                           478           712       15,668       13,078        11,816
                                                          ----         -----      -------       ------        ------
Costs:
  Production costs                                         145           354        4,410        3,455         3,524
  Depletion, abandonments
    and write downs (sales)                                (54)          889        2,713        2,302         2,018
                                                         ------        -----     --------       ------        ------
                                                            91         1,243        7,123        5,757         5,542
                                                         -----         -----     --------       ------        ------
Income (loss) before taxes and
  minority interest                                        387          (531)       8,545        7,321         6,274
Minority interest (49.3%)                                 (191)          263       (4,217)      (3,612)       (3,096)
                                                         ------        -----      --------      -------       -------
Income (loss) before taxes                                 196          (268)       4,328        3,709         3,178
  Income tax provision (2)                                   -             -       (1,558)      (1,224)       (1,049)
                                                      --------         -----      --------    ---------       -------
Net income (loss) from
  operations                                             $ 196         $(268)      $2,770       $2,485        $2,129
                                                         =====         ======      ======       ======        ======

Depletion per unit of
  production                                           $14.88         $13.27       A$3.17      A.$2.96       A.$2.88
                                                       ======         ======       ======      =======       =======
- -----------------
<FN>

     (1) The Company's  interest in the Navajo Joint Venture was sold  effective
as of March 31, 1995.

     (2) Australian income tax provision 36% in 1996 and 33% in 1995 and 1994.
</FN>
</TABLE>
<PAGE>


Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure.

         None.

                                    PART III

     For information  concerning  Item 10 - Directors and Executive  Officers of
the Company,  Item 11 Executive  Compensation,  Item 12 - Security  Ownership of
Certain  Beneficial Owners and Management and Item 13 Certain  Relationships and
Related Transactions,  see the Proxy Statement of Magellan Petroleum Corporation
relative to the Annual  Meeting of  Stockholders  for the fiscal year ended June
30, 1996, which will be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference. For information concerning Item
10 - Executive officers of the Company, see Part I.

<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

         (a)      (1)      Financial Statements.

     The financial  statements listed below and included under Item 8, are filed
as part of this report.

                                                             Page reference

                                                                

Report of Independent Auditors                                     38

Consolidated balance sheet at June 30, 1996 and
  June 30, 1995                                                    39

Consolidated statement of operations
  for each of the three years in the period
  ended June 30, 1996                                              40

Consolidated statement of changes in stockholders'
  equity for each of the three years in the period
  ended June 30, 1996                                              41

Consolidated statement of cash flows for each of
  the three years in the period ended June 30, 1996                42

Notes to consolidated financial statements                       43-63

Supplementary oil and gas information (unaudited)                64-70

     (2) Financial Statement Schedules.

     All  schedules  have been  omitted  since the required  information  is not
present or not  present  in amounts  sufficient  to  require  submission  of the
schedule,  or because the information  required is included in the  consolidated
financial statements and the notes thereto.


<PAGE>


     (3) Exhibits.

     The following exhibits are filed as part of this report:

     Item Number

     2.   Plan of acquisition, reorganization, arrangement, liquidation or
          succession.

          None.

     3.   Articles of Incorporation and By-Laws.

          Restated Certificate of Incorporation as filed on May
          4, 1987 with the State of Delaware  and  Amendment of
          Article  Twelfth as filed on  February  12, 1988 with
          the  State  of   Delaware   filed  as  exhibit  3  to
          Registration  Statement No. 33-21311 are incorporated
          herein by reference.

          Copy of the By-Laws, as amended filed as exhibit 3 to
          Form 8-K filed on December  10, 1992 is  incorporated
          herein by reference.

    4.    Instruments defining the rights of security holders, including
          indentures.

          None.

     9.   Voting Trust Agreement.

          None.

     10.  Material contracts.

          (a)  Petroleum  Lease No. 4 dated  November  18,  1981  granted by the
          Northern  Territory of Australia to United Canso Oil & Gas Co.  (N.T.)
          Pty Ltd., filed as exhibit 10(c) to Report on Form 10-K for the fiscal
          year ended April 30, 1982 is incorporated herein by reference.

          (b)  Petroleum  Lease No. 5 dated  November  18,  1981  granted by the
          Northern  Territory  of Australia  to Magellan  Petroleum  (N.T.) Pty.
          Ltd.,  filed as  exhibit  10(d) to Report on Form 10-K for the  fiscal
          year ended April 30, 1982 is incorporated herein by reference.


<PAGE>


          (c) Gas Sales  Agreement  between  The Palm Valley  Producers  and The
          Northern  Territory  Electricity  Commission  dated November 11, 1981,
          filed as  exhibit  10(e) to Report on Form  10-K for the  fiscal  year
          ended April 30, 1982 is incorporated herein by reference.

          (d) Palm Valley  Petroleum Lease (OL3) dated November 9, 1982 filed as
          exhibit  10(h) to Report on Form 10-K for the fiscal  year ended April
          30, 1983 is incorporated herein by reference.

          (e) Agreements relating to Kotaneelee.

               (1) Copy of  Agreement  dated May 28, 1959 between the Company et
               al and Home Oil  Company  Limited  et al and  Signal  Oil and Gas
               Company  filed as  exhibit  10(d) to Report on Form 10-K filed by
               Canada Southern Petroleum Ltd. for the fiscal year ended June 30,
               1987 is incorporated herein by reference.

               (2) Copies of  Supplementary  Documents to May 28, 1959 Agreement
               (see (1) above), dated June 24, 1959,  consisting of Guarantee by
               Home Oil Company Limited and Pipeline  Promotion  Agreement filed
               as exhibit 10(d) to Report on Form 10-K filed by Canada  Southern
               Petroleum  Ltd.  for the  fiscal  year  ended  June  30,  1987 is
               incorporated herein by reference.

               (3) Copy of Modification to Agreement dated May 28, 1959 (see (1)
               above),  made as of January  31,  1961 filed as exhibit  10(d) to
               Report on Form 10-K filed by Canada  Southern  Petroleum Ltd. for
               the fiscal  year ended June 30,  1987 is  incorporated  herein by
               reference.

               (4) Copy of Letter  Agreement  dated February 1, 1977 between the
               Company  and  Columbia  Gas  Development  of  Canada,   Ltd.  for
               operation of the  Kotaneelee  gas field filed by Canada  Southern
               Petroleum  Ltd.  as Exhibit  10(d) to Report on Form 10-K for the
               fiscal  year  ended  June  30,  1981 is  incorporated  herein  by
               reference.

     (f)  Palm Valley  Operating  Agreement dated April 2, 1985 between Magellan
          Petroleum  (N.T.)  Pty.  Ltd.,  C. D.  Resources  Pty.  Ltd.,  Farmout
          Drillers N.L., Canso Resources Limited, International Oil Proprietary,
          Pancontinental  Petroleum  Limited,  I.E.D.C.   Australia  Pty.  Ltd.,
          Southern  Alloys  Ventures Pty.  Limited and Amadeus Oil N.L. filed as
          exhibit  10(i) to Report on Form 10-K for the fiscal  year ended April
          30, 1985 is incorporated herein by reference.


<PAGE>


     (g)  Mereenie  Operating  Agreement  dated April 27, 1984 between  Magellan
          Petroleum  (N.T.) Pty.,  United Oil & Gas Co. (N.T.) Pty. Ltd.,  Canso
          Resources Limited,  Oilmin (N.T.) Pty. Ltd., Krewliff Investments Pty.
          Ltd.,  Transoil  (N.T.) Pty.  Ltd.  and  Farmout  Drillers NL filed as
          exhibit  10(l) to Report on Form 10-K for the fiscal  year ended April
          30, 1984 and Amendment of October 3, 1984 to the above agreement filed
          as  exhibit  10(j) to Report on Form 10-K for the  fiscal  year  ended
          April 30, 1985 is incorporated herein by reference.

     (h)  Palm  Valley  Gas  Purchase  Agreement  dated  June 28,  1985  between
          Magellan  Petroleum  (N.T.) Pty.  Ltd.,  C. D.  Resources  Pty.,  Ltd,
          Farmout  Drillers N.L.,  Canso Resources  Limited,  International  Oil
          Proprietary,  Pancontinental  Petroleum  Limited,  IEDC  Australia Pty
          Limited,  Amadeus Oil N.L.,  Southern  Alloy Venture Pty.  Limited and
          Gasgo Pty.,  Limited.  Also included are the Guarantee of the Northern
          Territory of Australia  dated June 28, 1985 and  Certification  letter
          dated June 28, 1985 that the  Guarantee  is binding . All of the above
          were filed as exhibit 10(p) to Report on Form 10-K for the fiscal year
          ended April 30, 1985 and are incorporated herein by reference.

     (i)  Mereenie Gas Purchase  Agreement dated June 28, 1985 between  Magellan
          Petroleum  (N.T.) Pty.  Ltd.,  United Oil & Gas Co. (N.T.) Pty.  Ltd.,
          Canso  Resources  Limited,  Moonie Oil N.L.,  Petromin  No  Liability,
          Transoil No Liability,  Farmout Drillers N.L., Gasgo Pty. Limited, The
          Moonie Oil Company Limited,  Magellan Petroleum  Australia Limited and
          Flinders  Petroleum  N.L.  Also  included  are  the  Guarantee  of the
          Northern  Territory of Australia dated June 28, 1985 and Certification
          letter dated June 28,1985  that the  Guarantee is binding.  All of the
          above  were  filed as  exhibit  10(q) to  Report  on Form 10-K for the
          fiscal  year  ended  April  30,  1985 and are  incorporated  herein by
          reference.

     (j)  Agreements  dated June 28,  1985  relating  to Amadeus  Basin  -Darwin
          Pipeline which include Deed of Trust Amadeus Gas Trust, Undertaking by
          the Northern  Territory  Electric  Commission and Undertaking from the
          Northern  Territory  Gas Pty Ltd.  filed as exhibit 10(r) to Report on
          Form 10-K for the fiscal year ended  April 30,  1985 are  incorporated
          herein by reference.

     (k)  Agreement between the Mereenie Producers and the Palm Valley Producers
          dated June 28, 1985, filed as exhibit 10(s) to Report on Form 10-K for
          the  fiscal  year  ended  April  30,  1985 is  incorporated  herein by
          reference.


<PAGE>


     (l)  Form of  Agreement  pursuant  to Article  SIXTEENTH  of the  Company's
          Certificate of  Incorporation  and the applicable  By-Law to indemnify
          the  Company`s  directors  and  officers is filed as exhibit  10(s) to
          Registration   Statement  No.  33-21311,  is  incorporated  herein  by
          reference.

     (m)  Revolving  Credit Agreement dated as of March 19, 1987, as amended and
          restated as of May 5, 1988 between Magellan Petroleum  Corporation and
          National Australian Bank Limited and First Amendment to such agreement
          dated as of May 5, 1988 filed as exhibit (t) to Registration Statement
          No. 33-21311,  are incorporated herein by reference.  Second Amendment
          to such agreement dated as of March 19, 1990 as filed as exhibit 10(s)
          to Report on Form 10-K for the  fiscal  year  ended  June 30,  1990 is
          incorporated herein by reference.

     11.  Statement re computation of per share earnings.

          Not applicable.

     12.  Statement re computation of ratios.

          None.

     13.  Annual report to security holders.

          Not applicable.

     16.  Letter re change in certifying accountant.

          None.

     18.  Letter re change in accounting principles.

          None.

     19.  Report furnished to security holders.

          None.


<PAGE>


     21.  Subsidiaries of the registrant.

          (a) Magellan Petroleum Australia Limited,  incorporated in Queensland,
          Australia.

          (b) Magellan  Petroleum (N.T.) Pty. Ltd.,  incorporated in Queensland,
          Australia.

          (c) Paroo Petroleum Pty. Ltd., incorporated in Queensland, Australia.

          (d) Paroo Petroleum (Holdings), Inc., incorporated in Delaware, U.S.A.

          (e) Paroo Petroleum(USA), Inc., incorporated in Delaware, U.S.A.

          (f) Pacoota Resources Limited, incorporated in Alberta, Canada

          (g) Hadborough Pty. Ltd., incorporated in Queensland, Australia

          (h)  Magellan   Petroleum   (Eastern)  Pty.  Ltd.,   incorporated   in
          Queensland,  Australia.  (i) Magellan Petroleum  (Burunga) Pty., Ltd.,
          incorporated in Queensland, Australia.

          (j) Magellan Petroleum (Belize) Limited.

     22.  Published  report  regarding  matters  submitted  to vote of  security
          holders.

          Not applicable.

     23.  Consent of experts and counsel.

          Consent of Ernst & Young LLP filed herewith.

     24.  Power of attorney.

          Not  applicable.

     27.  Financial Data Schedule.

          Filed herein.

     28.  Information  from  reports  furnished  to state  insurance  regulatory
          agencies.

          None.


<PAGE>


     99.  Additional Exhibits.

          None.

          (b)  Reports on Form 8-K.

               None.



<PAGE>




                                   SIGNATURES


                  Pursuant  to the  requirements  of  Section 13 or 15(d) 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.

                                           MAGELLAN PETROLEUM CORPORATION



                                           /s/ James R. Joyce
                                           James R. Joyce, President


Dated:  September 18, 1996


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the date indicated.



/s/ Benjamin W. Heath                         /s/ James R. Joyce
Benjamin W. Heath                             James R. Joyce
Director                                      Director, President and Chief
                                              Executive Officer, Chief 
                                              Financial and  Accounting Officer


Dated:  September 18, 1996                    Dated: September 18, 1996




/s/ Dennis D. Benbow                          /s/ Walter McCann
Dennis D. Benbow                              Walter McCann
Director                                      Director


Dated:  September 18, 1996                    Dated: September 18, 1996




/s/ Timothy L. Largay                         /s/ C. Dean Reasoner
Timothy L. Largay                             C. Dean Reasoner
Director                                      Director



Dated:  September 18, 1996                    Dated: September 18, 1996

<PAGE>



                                   EXHIBIT 23






                         Consent of Independent Auditors


We consent to the incorporation by reference in the Registration Statement (Form
S-8 No.  33-38429)  pertaining  to the Stock  Option Plan of Magellan  Petroleum
Corporation  of  our  report  dated  September  5,  1996,  with  respect  to the
consolidated  financial statements of Magellan Petroleum Corporation included in
the Annual Report (Form 10-K) for the year ended June 30, 1996.



                                                     ERNST & YOUNG LLP





Hartford, Connecticut
September 12, 1996

<PAGE>

<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
     (Replace this text with the legend)
</LEGEND>
<CIK>                         0000061398
<NAME>                        Magellan Petroleum Corporation
<MULTIPLIER>                   1
<CURRENCY>                     U.S. Dollars
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>               JUN-30-1996
<PERIOD-START>                  JUL-01-1995
<PERIOD-END>                    JUN-30-1996
<EXCHANGE-RATE>                         1
<CASH>                         11,278,957
<SECURITIES>                            0
<RECEIVABLES>                   2,733,197
<ALLOWANCES>                            0
<INVENTORY>                       371,925
<CURRENT-ASSETS>               14,384,079
<PP&E>                         69,570,886
<DEPRECIATION>                 26,053,222
<TOTAL-ASSETS>                 58,421,502
<CURRENT-LIABILITIES>           4,526,356
<BONDS>                                 0
                   0
                             0
<COMMON>                          246,912
<OTHER-SE>                     21,724,927      
<TOTAL-LIABILITY-AND-EQUITY>   58,421,502       
<SALES>                        15,667,049
<TOTAL-REVENUES>               18,073,018
<CGS>                                   0
<TOTAL-COSTS>                  13,881,386         
<OTHER-EXPENSES>                2,507,274         
<LOSS-PROVISION>                        0
<INTEREST-EXPENSE>                 30,690
<INCOME-PRETAX>                 1,684,358         
<INCOME-TAX>                      803,752
<INCOME-CONTINUING>               880,606
<DISCONTINUED>                          0
<EXTRAORDINARY>                         0
<CHANGES>                               0
<NET-INCOME>                      880,606
<EPS-PRIMARY>                        0.04
<EPS-DILUTED>                        0.04
        


</TABLE>


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