CLINTON GAS SYSTEMS INC, 10-K, 1996-03-29

CLINTON GAS SYSTEMS INC
10-K, 1996-03-29
PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS)

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the year ended DECEMBER 31, 1995

Commission file number 0-10833

CLINTON GAS SYSTEMS, INC.
(Exact name of registrant as specified on its charter)

OHIO 31-0813959
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

4770 INDIANOLA AVENUE, P. O. BOX 14981, COLUMBUS, OH 43214-0981
(Address of principal executive offices including zip code)

(614) 888-9588
(Registrant's telephone number)

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

Title of each class Name of each exchange on which registered
NONE NONE

Securities registered pursuant to section 12(g) of the Act:
COMMON SHARES, NO PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 Form 10-K or any amendment to this
Form 10-K.

/ /

The aggregate market value of Common Stock, no par value per share, held by
non-affiliates BASED UPON THE CLOSING SALE PRICE, AS REPORTED ON THE NASDAQ
STOCK MARKET, ON MARCH 20, 1996, WAS $17,146,876.

Number of Common Shares, no par value, outstanding at March 20, 1996:
5,642,143.

DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT INCORPORATED AS TO
Proxy Statement for the Part III, Items 10, 11, 12 and 13.
1996 Annual Meeting of Shareholders

Page 1 of 51 Pages

Exhibit Index appears on Page 40.
<PAGE> 2

(This page intentionally left blank.)

Page 2 of 51 Pages
<PAGE> 3

PART I

ITEM 1. BUSINESS

BACKGROUND

Clinton Gas Systems, Inc. (the "Registrant") was incorporated in the State of
Ohio in January, 1972. Registrant's largest operating subsidiary, The Clinton
Oil Company, was incorporated in 1946. Registrant and its subsidiaries are
primarily engaged in the business of natural gas and oil exploration,
development, production, acquisition of reserves and the management and
marketing of natural gas.

The Company has five (5) wholly-owned subsidiaries as follows: The Clinton Oil
Company ("Clinton Oil"); Clinton Gas Marketing, Inc. ("CGM"), CGAS Investment
Corp.; CGAS Services Corporation; and The Leader Corporation (inactive). The
Clinton Oil Company has one wholly-owned subsidiary, Eagle Mountain Energy
Corporation. CGAS Services Corporation has six (6) wholly-owned subsidiaries as
follows: CGAS Securities, Inc.; Clinton Nominee Corporation; Haulco, Inc.;
Metertech, Inc.; Ohio Gasportation, Inc.; and LDC Securities, Inc.

The Company's natural gas and oil business is conducted principally through its
direct subsidiaries, Clinton Oil and CGM. CGAS Services Corporation and its
subsidiaries support the activities of Clinton Oil and CGM.

The Registrant announced on February 14, 1996 that it was engaged in discussions
regarding the possible sale of the Company and that the other party had been
granted an exclusive period of 45 days to conduct a review. On March 20, 1996
the Registrant agreed to an extension of the exclusivity period to April 11,
1996. No sale agreement has been negotiated and no sales price has been
determined. The Registrant cannot predict when or whether such agreements will
be reached.

NATURAL GAS AND OIL ACTIVITIES

GENERAL. The Company's business consists primarily of exploration, development,
production, acquisition and marketing of natural gas and oil.

Since 1990 the Company has emphasized exploration activities, primarily in Ohio.
In its exploration the Company normally retains or acquires up to 50% of the
working interest in wells sponsored by Clinton, as Operator. In addition, the
Company acquires interests in wells sponsored by other oil and gas operators.
Those interests have normally ranged from 1% to 25% in size. In both cases other
oil and gas companies typically provide the rest of the funds necessary for the
exploratory activities.

The exploratory emphasis constitutes a significant change in the Company's
business plan from years prior to 1990 when the Company was engaged almost
exclusively in development well drilling. While the exploratory activity
involves greater risk of unproductive wells, the Company believes that there is
also increased potential for developing larger gas and oil reserves with the
exploratory wells.

Most of the Company's recent exploratory wells have been drilled to the "Rose
Run, Trempealeau and Beekmantown" formations in central and eastern Ohio.
Between 1991 and March 1996 the Company's exploratory results are as follows:

<TABLE>
<S> <C>
Company Operated Wells Drilled 76
Productive Wells 54

Interests in Wells Drilled by Other Operators 107
Productive Wells 65
</TABLE>

The totals include eight exploratory wells drilled in 1996 of which seven were
successful. Of the 119 productive wells drilled during the period from 1991
through March 1996, approximately 33% have already returned production income in
an amount in excess of their respective drilling and completion costs.

Page 3 of 51 Pages
<PAGE> 4

Prior to 1990, with the exception of the Company's natural gas marketing
activities, the Company's natural gas and oil activities were primarily
conducted in connection with development well drilling programs which the
Company sponsored, and which involved the sale of working interest or limited
partnership interests to third parties.

In its natural gas marketing activities, the Company provides technical support
services for industrial consumers normally for a set fee per unit, and, in
addition, buys and resells natural gas, receiving a gross margin or spread equal
to the difference between the purchase price and the resale price of such
natural gas. Through its knowledge of the industry and contacts with industry
personnel, the Company identifies customers wishing to purchase natural gas,
contracts for the sale of natural gas to the customers and for the purchase of
natural gas from suppliers, and finally arranges for transmission of the natural
gas to the customers over pipeline systems owned by others. The Company also
provides natural gas management services for industrial customers which include
custom designed plans to evaluate, schedule and manage natural gas supplies.

NATURAL GAS AND OIL EXPLORATION AND DEVELOPMENT

DRILLING OF WELLS. The following table summarizes, for the periods indicated,
the results of drilling activity for the wells which the Company contracted to
drill or in which it owns an interest. All wells are located in Ohio, except
three exploratory wells in Louisiana in 1995 in which the Company's interest was
4.2%.

<TABLE>
<CAPTION>
Total Wells Productive Wells Dry Holes
- --------------------------------------------------------------------------------------------------- --------------------------
Gross Net Gross Net Gross Net
---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
DEVELOPMENTAL WELLS
1995...................... 3 1.42 2 1.16 1 .26
1994...................... 8 2.28 8 2.28 0 0
1993...................... 2 .32 1 .11 1 .21
1992...................... 3 1.83 3 1.83 0 0
1991...................... 6 3.60 6 3.60 0 0

EXPLORATORY WELLS
1995...................... 48 10.20 28 7.01 20 3.19
1994...................... 52 8.49 34 5.23 18 3.26
1993...................... 47 7.77 33 5.70 14 2.07
1992...................... 16 1.87 11 1.22 5 .65
1991...................... 12 2.13 6 .93 6 1.20
</TABLE>

OPERATION OF WELLS. The Company serves as operator for the wells in the drilling
programs it has sponsored and, to a limited extent, also for wells owned by
third parties. Where possible, the Company also attempts to serve as operator
for any producing properties it acquires and for its exploration projects. As
operator, the Company is responsible for operating, pumping and maintaining the
well, preparing and verifying all production records, contracting for natural
gas and oil sales, distributing proceeds and production information to
investors, complying with federal and state regulations and managing other
administrative matters. The Company charges a fee for its services as operator.

Page 4 of 51 Pages
<PAGE> 5

SALE OF COMPANY'S NATURAL GAS AND OIL PRODUCTION. The following table sets
forth, for the periods indicated, the approximate net natural gas and oil
production attributable to the revenue interests of the Company, average prices
received per unit, average production costs per dollar of natural gas and oil
sales and gross revenues from natural gas and oil production:

<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NATURAL GAS
Deliveries (Mcf)..................................... 4,663,000 3,370,000 3,090,000
Average Sales Price (Per Mcf) ....................... $2.20 $2.51 $2.49
OIL
Production (Bbls).................................... 210,000 167,000 134,000
Average Sales Price (Per Bbl) ....................... $16.76 $15.91 $17.74
Average Production Costs per Dollar of Natural

Gas and Oil Sales.................................... $0.40 $0.39 $0.36
Gross Revenues from Gas and Oil Production................ $18,690,000(1) $11,257,000 $10,447,000
</TABLE>

(1) Includes $4,666,000 from the settlement of the Registrant's claims in the
bankruptcy of Columbia Gas Transmission Corp.

For the year ended December 31, 1995, the Company sold approximately 47% of its
natural gas production through CGM, a subsidiary of the Company engaged in the
business of natural gas marketing. See "Natural Gas Marketing Activities" below.
The balance of the Company's natural gas production was sold to approximately 6
purchasers, consisting of natural gas marketing companies, utilities and
interstate and intrastate pipeline companies.

During the year ended December 31, 1995, the Company sold its crude oil
production to 3 purchasers. The typical sale contract for the Company's oil
production is terminable by either party upon thirty (30) days' prior written
notice. The price paid to the Company for its oil production is the price posted
by the purchaser for the specific grade oil on the date the oil is taken. In
addition, the Company receives a premium ranging from $.40 to $.80 per barrel
for full load shipments.

The Company does not believe that it is dependent on any of the purchasers of
its natural gas and oil production, the loss of which would have material
adverse effect on its business.

The price of natural gas and crude oil decreased significantly from 1982 to
1992. There was an over supply of natural gas during that period. Beginning in
1992 through the summer of 1994, natural gas prices improved. But the market
price of gas decreased in the fall of 1994 through 1995. The severe winter
weather in the Midwest and Northeast sections of the U.S. from November 1995
through March 1996 has led to natural gas supply and deliverability problems
which caused the cash prices for natural gas to increase substantially. The
NYMEX futures market has reflected the situation and futures contract prices
through November 1996 are substantially higher than those for the corresponding
months of 1995. If the natural gas price market continues at current levels the
Company anticipates that the average prices it may realize in 1996 may be 10% to
15% higher than the 1995 averages. Crude oil prices have fluctuated in recent
years and generally decreased from 1992 through 1994. The average price realized
by the Company in 1995 was $16.76 per barrel, which is about 5% above the
average 1994 price. The posted price on March 22, 1996 was $19.00 per barrel.
The price of crude oil is influenced by local market conditions as well as
national and worldwide market and economic conditions.

Page 5 of 51 Pages
<PAGE> 6

NATURAL GAS MARKETING ACTIVITIES. The Company's natural gas marketing activities
are conducted principally through its subsidiary CGM and consist of providing
technical support and gas management services for industrial consumers, locating
competitively priced supplies of natural gas and negotiating natural gas
purchase contracts with these suppliers. CGM acquires its supplies from Clinton
Oil and its programs, other independent natural gas producers, major natural gas
companies, intrastate and interstate marketing companies and other sources. CGM
sells these natural gas supplies to industrial and commercial end-users,
interstate or intrastate pipeline companies, other natural gas marketers, and
local distribution companies. CGM coordinates all arrangements for the
transmission of natural gas from the suppliers to the customers including
arranging for transmission of the natural gas and the handling of billing and
accounting matters.

CGM also offers complete natural gas technical support and management services.
The available services include assistance in transportation arrangements
(including capacity release), contract negotiations, contract administration,
government approvals and consumption monitoring. After supply arrangements are
completed, CGM administers natural gas scheduling, billing audits and payment,
and provides long-term planning services.

Under the provisions of many of its natural gas contracts, CGM agrees to
exercise its best efforts to purchase or sell the natural gas. CGM's purchase
and sales contracts may have durations as short as thirty days, or as long as
three years or for the life of the reserves dedicated to the contract. CGM may
contract to purchase a specified volume of natural gas, subject to production
variances, or to purchase all of the natural gas available for delivery from
specified wells. CGM's contracts are usually written to accommodate changing
natural gas prices consistent with industry practice. Except for the short-term
contracts, upon the occurrence of a change in market prices (usually determined
by reference to a change in an identified index price) the parties have the
right (in some cases) to revise prices. If the parties are unable to agree on a
new price, then either party may have the right to cancel the contract. Despite
the right to cancel a contract or to renegotiate the price, the parties may
nonetheless continue to observe the terms of a contract if the circumstances
warrant.

CGM purchases natural gas from producers and other suppliers which typically can
sell their natural gas to other purchasers. By offering competitive prices
and/or more favorable terms, CGM can sometimes outbid other purchasers. However,
the supply of natural gas available for purchase by CGM is affected by a number
of factors. Among these are the drilling of new wells, the ability of wells to
deliver natural gas at pipeline quality, quantity and pressure, and the life of
the wells. The availability of new natural gas is dependent on market demand for
natural gas and the price which producers expect to receive for their supplies.

The marketing activities of CGM require an adequate supply of
competitively-priced natural gas. The supply of natural gas is affected by a
number of factors, including the price of and demand for natural gas, the
success and cost of exploration and the effect of existing and future
regulations. There has been an oversupply of natural gas and the Company
believes that the resulting low natural gas and oil prices have significantly
reduced the exploration and development for new natural gas reserves.

Business in the natural gas industry is both temperature sensitive and cyclical.
Since space heating is the largest use for natural gas, demand for the natural
gas is higher during years with long, cold winters. The second largest use of
natural gas is for feedstock and fuel consumption in manufacturing. Thus, the
market for natural gas has tended to increase in years when industrial activity
is expanding.

During 1995, CGM purchased natural gas from approximately 162 producers and
suppliers, not including the drilling programs it has sponsored. The Company
does not believe that CGM is dependent on any single supplier, the loss of which
would have a material adverse effect on its business.

During 1995, CGM sold natural gas to approximately 175 accounts, including a
variety of commercial and industrial end-users, interstate and intrastate
pipelines, other gas marketers and local distribution companies. During the year
ended December 31, 1995, the largest customer (in terms of gross revenues
received from the sale

Page 6 of 51 Pages
<PAGE> 7

of natural gas and services provided) was The Timken Company ("Timken").
Revenues from Timken during the year aggregated approximately $13 million.

REAL ESTATE INVESTMENTS

The Company has pursued a strategy in recent years of selling its real estate
properties with the objective of using the proceeds to reduce debt and augment
working capital. During 1995 three properties were sold and the only remaining
property owned by the Company, other than its home office building, is a fast
food restaurant building in Cleveland, Ohio with a book value of $99,000 at
December 31, 1995.

EMPLOYEES

At December 31, 1995 the Company had 146 employees. The Company has never had a
work stoppage and management believes that the relationship with its employees
is good.

COMPETITION

NATURAL GAS AND OIL PROPERTIES AND PRODUCTION. The natural gas and oil industry
is highly competitive in all its phases. Competition is particularly intense
with respect to the acquisition of desirable exploratory projects, producing
properties and the sale of natural gas and oil production. The competitors of
the Company in natural gas and oil property acquisition, drilling, development
and production include the major oil companies, in addition to numerous
independent oil and gas companies, individual proprietors and investment
programs. Many of these competitors possess and employ financial and personnel
resources substantially in excess of those available to the Company. The
Company's competitors may be willing to pay greater amounts for desirable leases
and to define, evaluate, bid for and purchase a greater number of potential
producing prospects than the financial or personnel resources of the Company
will permit. The ability of the Company to acquire and discover natural gas and
oil reserves in the future will be dependent on its ability to select and
acquire suitable producing properties and prospects for future drilling in
competition with these entities. Competition for investment capital for drilling
programs is intense.

NATURAL GAS MARKETING. Natural gas marketing is a highly competitive business.
The Company serves and sells natural gas to customers who can purchase natural
gas from other suppliers. The Company competes with traditional regulated
distribution companies as well as an increasing number of natural gas producers,
marketers and brokers for the business of buying and selling natural gas. Other
entities, including unregulated affiliates of regulated pipeline companies
attempting to arrange direct sales of their own, have created natural gas
marketing companies which also compete with the Company. To compete effectively,
the Company must often offer more attractive prices, terms or services than its
competitors.

Natural gas also competes with other types of fuel. The possibility of existing
natural gas users switching to alternate fuels increases as the price of natural
gas increases relative to the price of alternate fuels. For example, if the
price of heating oil were to decline relative to the price of natural gas for a
significant period, it is likely that some natural gas users would switch to
heating oil, which would decrease the demand for natural gas. Consumption in the
natural gas industry is also seasonal, with demand higher for winter heating and
summer cooling.

REGULATION

GENERAL. Domestic exploration, development, production, and marketing of natural
gas and oil are regulated by federal and state governmental agencies. Statutes
generally covering land, water and road use, as well as statutes specifically
covering the drilling and transport of natural gas and oil increase the cost of
the production and sale of natural gas and oil. In addition, numerous
governmental agencies, both federal and state, are authorized to issue

Page 7 of 51 Pages
<PAGE> 8

regulations which can be difficult and costly to comply with, and which carry
substantial penalties for failure to comply. The regulatory burden on the oil
and natural gas industry increases the cost of doing business and consequently
affects the industry's profitability.

NATURAL GAS REGULATION BY THE FEDERAL GOVERNMENT. Federal regulation of
interstate transportation of natural gas has historically had a significant
effect on the natural gas marketing activities of the Company and its
competitors. In recent years these activities have been largely deregulated, but
these activities are still affected by the Federal Energy Regulatory Commission
("FERC") rules and orders issued pursuant to the Natural Gas Act ("NGA") and the
Natural Gas Policy Act of 1978 ("NGPA"). In general, both of these acts
authorize the FERC to regulate certain activities of companies engaged in the
sale and transport of natural gas. Most of the price ceilings established by the
NGPA have been abolished and many categories of natural gas have been
deregulated. The Company must comply with the price ceilings for the very
limited volume of gas still subject to the price ceilings, if any.

The natural gas industry has undergone significant change because of the
implementation in 1993 by FERC of "Order 636". The Order directly affects the
natural gas pipeline companies regulated by FERC, primarily with regard to
natural gas transportation services provided by those companies. Because of
Order 636, most of those pipeline companies are no longer directly acting as gas
suppliers to the natural gas distribution companies serving gas consumers to the
United States. Due to these changes, local distribution companies now negotiate
for the purchase of their natural gas requirements from producers, natural gas
marketers, and others.

CRUDE OIL REGULATION BY THE FEDERAL GOVERNMENT. Crude oil is no longer subject
to federal price and allocation controls.

STATE REGULATION. State statutes and regulations require drilling permits,
drilling bonds and operation reports. Many states, including Ohio where most of
the wells of the Company are located, also have statutes and regulations
governing conservation matters, including the spacing of natural gas and oil
wells and the unitization or pooling of natural gas and oil properties. Certain
states, but not Ohio, by statute or regulation also restrict production to the
market demand for natural gas and oil or establish maximum rates of production.
Such states and regulations may limit the rate at which natural gas and oil
could otherwise be produced from properties. Certain states, but not Ohio, also
have enacted statutes prescribing ceiling prices for natural gas sold within the
state.

ENVIRONMENTAL REGULATION. The Company's operations are subject to numerous
statutes and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection, including
regulations establishing requirements for the disposal of brine, a substance
produced during the production of wells. These statutes and regulations may
require the acquisition of a permit before drilling commences, prohibit drilling
activities on certain lands lying within wilderness and other protected areas
and impose substantial liabilities for pollution resulting from drilling and
production operations. In addition, environmental regulations require
restoration of the drilling site at the end of production.

PROPOSED REGULATIONS. A number of proposals are being considered in Congress and
in federal agencies and in state legislatures and agencies which, if enacted,
could significantly and adversely affect the natural gas and oil industry. Such
proposals may involve, among other things, the imposition of environmental
measures, land use controls (such as prohibiting drilling activities on certain
federal and state lands in roadless wilderness areas) and other measures. At the
present time, it is impossible to predict what proposals, if any, will actually
be enacted and what effect, if any, such proposals will have on the operations
of the Company.

Page 8 of 51 Pages
<PAGE> 9

ITEM 2. PROPERTIES

NATURAL GAS AND OIL PROPERTIES

In addition to properties acquired by purchase, most of the Company's new
properties have resulted from the Company's exploratory drilling program,
described in Item 1. under Natural Gas and Oil Activities. These properties
primarily involve wells which produce from the Rose Run, Trempealeau and
Beekmantown formations. In general, the wells producing from these formations
have been significantly more productive than the productive wells drilled in the
Company's previous development well drilling programs.

Because of the Company's emphasis on development drilling prior to 1990, most of
the Company's producing wells produce from the Clinton and Berea geologic
formations in eastern Ohio. These are natural gas and oil bearing sandstone
geological formations which underlie a large section of the eastern region of
Ohio in varying thicknesses at depths ranging from 900 to 6,200 feet. These
wells are normally characterized by low production and long lives.

PRODUCING WELLS AND DEVELOPED AND UNDEVELOPED LEASEHOLD ACREAGE. For purposes of
this Report, developed acreage refers to leasehold acreage on which a well has
been drilled and undeveloped acreage refers to leasehold acreage on which a well
has not been drilled but which is available for drilling. The number of gross
acres or wells refers to the number of acres or wells in which the Company owns
a revenue interest (including a working interest, royalty interest and/or an
overriding royalty interest) and the number of net acres or wells refers to the
sum of the fractional revenue interests owned by the Company in the gross acres
or wells. Substantially all of the wells in which the Company owns a revenue
interest are combination wells in that they produce natural gas and oil and,
although a well may produce predominantly natural gas or oil, no such
differentiation has been made for purposes of this Report. For purposes of this
Report, a well is considered to be commercially productive if it appeared to
justify installation of production equipment for the production of natural gas
or oil, at the time it was drilled. The fact that a well is classified as
productive does not necessarily mean that it will produce sufficient natural gas
or oil to return the costs of drilling and production. A well is considered to
be a dry hole if it was determined to be incapable of commercial production, at
the time it was drilled.

The following table summarizes the producing wells and the developed and
undeveloped leasehold acreage in which the Company owned a revenue interest at
December 31, 1995:

Page 9 of 51 Pages
<PAGE> 10

<TABLE>
<CAPTION>
PRODUCING WELLS Developed Acreage Undeveloped Acreage
-------------------------- -------------------------- --------------------------
GROSS Net Gross Net Gross Net
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Holmes......................... 11 0 488 20 665 582
Knox........................... 3 3 152 152 1,139 899
Lake........................... 7 6 690 666 3,339 2,921
Lawrence....................... 2 2 80 80 237 207
Licking........................ 31 19 1,316 653 55,945 26,436
Madison........................ 0 0 0 0 149 130
Mahoning....................... 111 99 6,314 5,668 2,101 1,838
Medina......................... 18 14 433 286 3,545 1,998
Meigs.......................... 3 3 221 221 185 162
Morgan......................... 145 98 4,957 3,215 7,030 6,152
Morrow......................... 3 1 419 101 10,017 6,425
Muskingum...................... 314 257 12,873 10,326 19,143 14,226
Noble.......................... 85 72 4,147 3,470 2,608 2,282
Perry.......................... 12 12 571 561 636 556
Pickaway....................... 1 0 20 5 7,498 3,940
Portage........................ 176 145 8,168 6,713 8,413 6,727
Richland....................... 3 1 160 29 2,050 1,545
Ross........................... 0 0 0 0 11,669 10,210
Shelby......................... 3 1 120 57 0 0
Stark.......................... 92 78 4,284 3,634 2,383 2,085
Summit......................... 38 36 1,554 1,494 19 17
Trumbull....................... 27 25 1,410 1,335 2,745 2,376
Tuscarawas..................... 77 59 4,415 3,090 2,117 1,852
Vinton......................... 0 0 0 0 335 293
Washington..................... 81 71 3,489 3,004 2,648 2,317
Wayne.......................... 53 30 1,555 724 11,692 6,935
----------- ------------ ----------- ----------- ----------- ------------
OHIO TOTALS.................... 2,125 1,683 93,166 72,852 233,593 159,414

Illinois....................... 3 1 0 0 0 0
Indiana........................ 1 0 40 4 0 0
Kentucky....................... 1 0 40 2 0 0
Louisiana...................... 27 0 1,080 14 0 0
Pennsylvania................... 3 3 271 271 3,439 3,010
----------- ------------ ----------- ----------- ----------- ------------
OTHER STATES TOTAL............. 35 4 1,431 291 3,439 3,010
----------- ------------ ----------- ----------- ----------- ------------
UNITED STATES TOTAL............ 2,160 1,687 94,597 73,143 237,032 162,424
=========== ============ =========== =========== =========== ============
</TABLE>

The Company's natural gas and oil properties are subject to royalties,
overriding royalties, carried and other similar interests and contractual
arrangements customary in the oil and gas industry. The properties are leased on
a short-term basis and the leases typically expire in from one to three years.
However, under the terms of the typical lease, the Company can retain its
interest in the undeveloped acreage covered by a lease by drilling activity
which establishes production, or by the payment of delay rentals during the
primary term of the lease. During the year ended December 31, 1995, the Company
paid aggregate delay rentals of $695,000 to maintain in effect leases covering
undeveloped acreage.

ESTIMATES OF PROVED RECOVERABLE RESERVES. The Company has estimated the
remaining recoverable reserves and the present value (discounted at 10%) of
future net cash flow attributable to the Company's revenue interest ownership in
the proved reserves in which it owns a revenue interest. Information regarding
reserve quantities and

Page 10 of 51 Pages
<PAGE> 11

standardized measure of discounted future net cash flows based on such estimates
may be found in the Unaudited Supplementary Information included after the Notes
to the Consolidated Financial Statements of the Company.

Since December 31, 1995 the Company has participated in eight exploratory wells
of which seven are being completed for production. However, not enough
information is available to make an estimate of reserves for those wells, and
problems in the completion process could make a well or wells nonproductive. No
estimates of the Company's proved reserves have been filed or included in
reports to any federal authority or agency, other than to the SEC.

An estimate of natural gas and oil reserves is, at best, an informed
professional judgment based on many objective and subjective factors. There can
be no assurance that the Company's estimated reserves can or will, in fact, be
realized.

OTHER PROPERTIES

The Company's principal executive offices are located at 4770 Indianola Avenue,
Columbus, Ohio in a building owned by the Company. The Company occupies
approximately 26,000 square feet of space in the building or about 72% of the
available space. The remaining space is rented or is available for rent.

ITEM 3. LEGAL PROCEEDINGS

As of the date of this Report there were no pending legal proceedings to which
the Company was a party or to which any of its property was subject other than
ordinary routine litigation incidental to its business.

LITIGATION

The following previously reported legal proceedings were settled in 1995:

1. The action filed in mid 1992 in the Common Pleas Court of Muskingum County,
Ohio and styled as Thomas David Humphrey, et al..v. Halliburton Services, et
al.. Case No. CC-92874 named Clinton Oil as a defendant. One of the three
plaintiffs settled his claim against all defendants in 1994 and the other
plaintiffs settled in the fourth quarter of 1995.

2. The various claims against Columbia Gas Transmission Corporation identified
in Item 3. Legal Proceedings of the Registrant's Form 10K for the year ended
December 31, 1994 were settled in the second quarter of 1995. The proceeds
from the settlement were distributed to the parties of interest in 1995. The
Company recognized revenue of $4,666,000 from the settlement (see Note 1. of
the Notes to Consolidated Financial Statements).

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

Not applicable.

Page 11 of 51 Pages
<PAGE> 12
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The common shares of the Company are traded on the Nasdaq National Market tier
of The Nasdaq Stock Market under the symbol "CGAS".

The table below sets forth the range of high and low sales prices for the common
shares for the periods indicated, as reported on The Nasdaq Stock Market.

<TABLE>
<CAPTION>
CALENDAR QUARTER ENDED High Low
- ----------------------------------------------------------- ---------------------- ----------------------
<S> <C> <C>
1995
- -----------------------------------------------------------
March 31................................................... $4.500 $3.750
June 30.................................................... $4.500 $3.438
September 30............................................... $5.875 $4.125
December 31................................................ $5.625 $4.875

1994
- -----------------------------------------------------------
March 31................................................... $3.875 $3.000
June 30.................................................... $4.125 $2.750
September 30............................................... $4.125 $3.625
December 31................................................ $4.500 $3.625
</TABLE>

The number of record holders of the common shares of the Company on March 20,
1996 was approximately 1,091. The closing sales price of the common shares of
the Company on March 20, 1996 was $6.375.

It is the present intention of the Board of Directors of the Company not to pay
cash dividends, but rather to use the Company's cash resources for the expansion
of its business. Future dividend policy will depend upon the earnings and
financial condition of the Company and the Company's need for funds and other
factors. See also Note 2 of Notes to the Consolidated Financial Statements
concerning restrictions on payment of dividends under the terms of the Company's
credit arrangement.

Page 12 of 51 Pages
<PAGE> 13

ITEM 6. SELECTED FINANCIAL DATA

The following table presents certain selected consolidated financial data which
is derived from, and should be read in conjunction with, the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total revenue................................... $87,887,000 $99,313,000 $85,409,000 $68,710,000 $68,030,000
Income before cumulative effect of
change in accounting principle............. $2,456,000 $85,000 $570,000 $80,000 $568,000
Cumulative effect of change in
accounting for income taxes................ $-0- $-0- $-0- $916,000 $-0-
Net income...................................... $2,456,000 $85,000 $570,000 $996,000 $568,000
Total assets.................................... $51,918,000 $50,183,000 $54,568,000 $47,482,000 $48,626,000
Long-term debt (1).............................. $13,378,000 $17,106,000 $16,887,000 $15,907,000 $16,452,000
Income per share before cumulative
effect of change in accounting
principle (2).............................. $0.43 $0.02 $0.10 $0.01 $0.10
Cumulative effect of change in
accounting for income taxes per
share (2).................................. $-0- $-0- $-0- $0.16 $-0-
Net income per share (2)........................ $0.43 $0.02 $0.10 $0.17 $0.10
Cash dividends per share........................ $-0- $-0- $-0- $-0- $-0-
Book value per share............................ $4.13 $3.69 $3.68 $ 3.58 $ 3.39
</TABLE>

(1) Excludes current maturities.

(2) Primary and fully diluted.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company added 7.4 billion equivalent cubic feet of natural gas to the
Company's proved reserves from the acquisition of well interests during 1995.
The Company's exploratory and developmental drilling activities added 7.1
billion equivalent cubic feet of natural gas. From January 1, 1995 through the
first quarter of 1996 the Company participated in the successful completion of
thirty-five exploratory wells--twenty-eight in 1995 and seven in 1996. The
future sales of natural gas and oil production from the acquisitions and
discoveries will provide cash flow to improve the liquidity of Company.

The Company's cash flow from operations and bank credit facility are the major
sources of funds to meet its financing requirements. The net cash provided by
operating activities was $7,964,000 in 1995 compared to $3,800,000 in 1994. 1995
income includes $4,666,000 from the settlement of the Company's claim in the
bankruptcy of Columbia Gas Transmission. At December 31, 1995 the Company had a
$15,000,000 credit arrangement with its two banks and $11,250,000 had been
borrowed. The amount owed to banks at March 22, 1996 was $9,500,000. The credit
line is reviewed by the banks semiannually and the amount of available credit is
based on the estimated net revenues from the Company's proved developed natural
gas and oil reserves. See Note 2 of Notes to the Consolidated Financial
Statements which discusses certain restrictions on the transfer of funds from
the subsidiaries to the Company. At December 31, 1995 the Company was in
compliance with all restrictions and debt covenants.

Page 13 of 51 Pages
<PAGE> 14

The Company's working capital improved to $1,687,000 at December 31, 1995 from
$1,556,000 at December 31, 1994. Total current and long term debt decreased
$3,134,000 to $14,354,000 at December 31, 1995 from $17,488,000 at December 31,
1994. As a result, the debt to equity ratio decreased to 1.23 to 1.00 at
December 31, 1995 from 1.40 to 1.00 at December 31, 1994.

Capital expenditures were $5,318,000 in 1995 compared to $4,415,000 in 1994.
Approximately $2,164,000 was expended in 1995 for the acquisition of reserves
and $1,694,000 for the drilling and completion of exploratory wells. The
remaining capital outlays of $1,460,000 were expended for transportation systems
and other expenditures. At December 31, 1995 the Company's treasury stock
consists of 533,000 shares at a cost of $1,191,000 or $2.23 per share.

The Financial Accounting Standards Board has issued Statement No. 121
"Accounting for the Impairment of Long Lived Assets and For Long Lived Assets to
Be Disposed Of" which is effective beginning January 1, 1996. Management has
assessed the requirements of this statement and believes that it will not have a
significant effect on the financial condition or results of operations based
upon current economic conditions.

RESULTS OF OPERATIONS

COMPARISON OF 1995 TO 1994

Net income increased to $2,456,000 or $.43 per share in 1995 compared to $85,000
or $.02 per share in 1994. Operating income rose to $4,505,000 in 1995 from
$967,000 in 1994. The improvement was principally due to the settlement of the
Company's claim in the bankruptcy of Columbia Gas Transmission Corp., increased
production from reserve acquisitions, and greater operating income from gas
marketing activities. These increases were partially offset by lower gas prices,
higher dry hole costs for exploratory wells and increased geological and
geophysical costs.

Revenue from natural gas marketing activities decreased to $63,431,000 in 1995
from $81,456,000 in 1994. The change was due to a 12% decrease in volumes sold
combined with an 11% decrease in the average price of natural gas sold. The cost
of natural gas purchased also decreased to $60,447,000 in 1995 from $79,127,000
in 1994 as a result of the lower volumes purchased combined with a 13% decrease
in the average price paid for natural gas supplies. As a result of these
factors, the operating income from natural gas marketing activities improved by
$655,000 to $2,984,000 in 1995 from $2,329,000 in 1994.

Revenues from the sale of natural gas and oil production increased by $7,433,000
in 1995. 1995 includes $4,666,000 from the Columbia Gas Transmission Corp.
bankruptcy which arose from contract rejection and breach of "take or pay"
contracts. The remaining change was due to increased production offset in part
by lower sales prices. Revenues increased by $3,929,000 due to a 35% increase in
natural gas and oil volumes produced in 1995 over 1994. Net decreases in average
sales prices reduced revenues by $1,162,000. The weighted average sales price of
natural gas decreased by 12% to $2.20 per MCF in 1995 from $2.51 in 1994 while
the average price of oil improved by 5% to $16.76 per barrel in 1995 from $15.91
in 1994. Depreciation, depletion and amortization of natural gas and oil
properties increased to $4,004,000 in 1995 from $3,257,000 in 1994. The change
was due primarily to the increase in production. Production costs rose to
$5,660,000 in 1995 from $4,424,000 in 1994 due principally to expenses
associated with natural gas oil reserve acquisitions. The overall operating
income from natural gas and oil production improved by $5,450,000 to $9,026,000
in 1995 from $3,576,000 in 1994.

Revenues from Well Operating, Transportation and Other decreased by $1,551,000
to $1,845,000 in 1995 from $3,396,000 in 1994. The Company purchased, as of
January 1, 1995, most of the remaining investor interest in the assets of 150
limited partnerships and co-ownership projects for which the Company is the
general partner

Page 14 of 51 Pages
<PAGE> 15

or project manager. As a result of these purchases the revenues from the
operation of the wells charged to investor interests in these programs decreased
in 1995. This change plus lower gains from the sale of well properties and
equipment of $322,000 account for most of the decrease in revenues from Well
Operating, Transportation and Other.

Other costs and expenses include expenses related to operating and managing
producing wells, maintenance of transportation systems and support costs for
exploratory activities. Total costs increased by $548,000 to $4,860,000 in 1995
from $4,312,000 in 1994. Costs related to exploratory activities increased by
$952,000 due to greater geological and geophysical costs and staffing expenses.
The purchase of investor interests in programs decreased the costs attributable
to investor interests and increased the costs related to company owned interests
by approximately $1,000,000 in 1995. The costs attributable to company owned
interests are shown as Costs and Expenses - Natural Gas and Oil Production in
the Consolidated Statements of Income. The remaining change in other costs was
primarily due to the increased costs of operating wells and pipelines.

Revenues from drilling and completion activities increased to $3,921,000 in 1995
from $3,204,000 in 1994 as a result of the expanded number of exploratory wells
sponsored by the Company. Related drilling costs increased to $4,876,000 in the
current year from $3,527,000 in the prior year. Drilling costs include the
Company's share of dry hole costs of $955,000 in 1995 and $323,000 in 1994.

Selling, general and administrative expenses decreased to $3,535,000 in 1995
from $3,699,000 in 1994. The principal cause of the decrease in expense was a
reduction in the provision for doubtful accounts in 1995.

Interest expense increased to $1,380,000 in 1995 compared to $1,268,000 in 1994.
The increase was due to higher interest rates on the Company's credit line,
partially offset by reduced debt levels. The weighted average interest rate
increased to 8.99% in 1995 from 7.31% in 1994. At December 31, 1995 the weighted
average rate was 8.19%. The weighted average debt on the Company's credit
facility decreased to $11,743,000 in 1995 compared to $12,913,000 in 1994.

Interest, dividend and other income increased to $153,000 in 1995 from $31,000
in 1994. 1995 includes a gain of $78,000 from the sale of an investment.

The Company's federal income tax expense was $822,000 in 1995 compared to a
benefit of $355,000 in 1994. See Note 4 of Notes to the Consolidated Financial
Statements for an analysis of various items affecting the 1995 and 1994 income
taxes.

COMPARISON OF 1994 TO 1993

Net income was $85,000 or $.02 per share in 1994 compared to $570,000 or $.10
per share in 1993. The decrease in income was due principally to the increases
in well operating and servicing expenses, exploratory drilling activities,
provisions for uncollectible accounts and lower gains from the sale of real
estate investments. These decreases were partially offset by increased operating
income from gas marketing activities.

Natural gas marketing revenues increased by 17% to $81,456,000 in 1994 from
$69,362,000 in 1993. The improvement was due to a 28% increase in the volumes
sold to new and existing customers. Purchases of natural gas also rose by 17% to
$79,127,000 from $67,814,000 in the prior year primarily from the additional
volumes sold. As a result of these factors, the operating income from natural
gas marketing activities improved by $781,000 to $2,329,000 in 1994 from
$1,548,000 in 1993.

Revenues from natural gas and oil production improved by $810,000 to $11,257,000
in 1994 from $10,447,000 in 1993. The increase was due to additional production
from exploratory wells combined with the acquisitions of reserves. The Company
experienced a 12% increase in natural gas and oil volumes produced in 1994 over

Page 15 of 51 Pages
<PAGE> 16

1993. These improvements were offset, in part, by the normal expected declines
in production from existing wells and by lower prices for oil. Oil prices
decreased by 10% to $15.91 per barrel in 1994 compared to $17.74 in 1993. The
weighted average price of natural gas improved slightly to $2.51 per MCF in 1994
compared to $2.49 in 1993. Depreciation, depletion and amortization of natural
gas and oil properties increased by 3% to $3,257,000 in 1994 from $3,147,000 in
1993. The change was due to increases in production from exploratory wells and
acquisitions of reserves. Production costs increased to $4,424,000 in 1994 from
$3,793,000 in 1993 due to expenses associated with reserve acquisitions and
exploratory wells. Overall, operating income from natural gas and oil production
improved to $3,576,000 in 1994 from $3,507,000 in 1993.

Revenues from well operating, transportation and other decreased to $3,396,000
in 1994 from $3,824,000 in 1993. The 1993 period included gains from the sale of
real estate of $239,000. The remaining change was due to lower pipeline and
compressor income and decreased rental income from real estate sold in 1993.
Other costs include expenses relating to operating producing wells, maintenance
of transportation systems, real estate operations and administrative support
costs for exploration activities. Costs increased by $654,000 to $4,312,000 in
1994 from $3,658,000 in 1993. Approximately $490,000 of the increase was due to
personnel, delay rental and seismic costs incurred for exploratory activities.
The remaining change was primarily due to higher personnel costs associated with
maintaining and operating a greater number of wells.

The Company incurred operating losses of $323,000 in 1994 and $305,000 in 1993
as a result of dry hole costs on exploratory wells. Drilling and completion
revenues increased to $3,204,000 in 1994 from $1,776,000 in 1993 as a result of
the expanded number of exploratory wells sponsored by the Company. Drilling and
completion expense consists of costs incurred for exploratory and developmental
wells including dry hole costs. Total costs increased to $3,527,000 in 1994
from $2,081,000 in 1993.

Selling, general and administrative expenses were $3,699,000 in 1994 compared to
$3,267,000 in 1993, including provisions for uncollectible accounts receivable
of $360,000 and $100,000, respectively. The remaining increase in expenses was
primarily due to greater personnel and other costs associated with expanded
natural gas marketing activities.

Interest expense increased by $130,000 to $1,268,000 in 1994 from $1,138,000 in
1993. The increase was due to higher interest rates on the Company's credit
line. The weighted average interest rate on the credit line rose to 7.31% in
1994 from 6.09% in 1993. At December 31, 1994 the weighted average interest rate
on the credit line was 8.83%. The weighted average debt on the Company's credit
facility decreased slightly to $12,913,000 in 1994 compared to $13,291,000 in
1993.

The federal income tax benefit was $355,000 in 1994 compared to $38,000 in 1993.
See Note 4 of Notes to the Consolidated Financial Statements for an analysis of
various items affecting the 1994 and 1993 income taxes.

INFLATION AND CHANGING PRICES

The 1995 rate of inflation was 2.5%, representing the fifth straight year in
which inflation has been below the 3% level. The lower inflation rate combined
with the reduced demand for drilling services has meant that the costs of
operating and completing wells have been relatively stable in recent years. The
Company does not anticipate a decrease in drilling and well operating costs in
1996, nor does it expect costs to increase at an overall rate higher than the
general inflation rate.

The Ohio posted price for crude oil improved to $16.50 per barrel at December
31, 1995 compared to $15.50 in 1994. The posted price on March 20, 1996 was
$19.00 per barrel. The Company believes that the price of crude oil may continue
to be effected by developments in the Mid East and worldwide economic
conditions. The Company's proved reserves are 79% natural gas and 21% oil. The
overall market price for natural gas decreased in 1995 over 1994, but prices
have recently trended upward due to the severe winter. Natural gas produced and

Page 16 of 51 Pages
<PAGE> 17

purchased by the Company is sold under various contractual arrangements, but
many of the contracts are sensitive to changes in the market price of natural
gas. To mitigate the impact of fluctuating prices on its natural gas marketing
operations, the Company uses market sensitive price clauses in its natural gas
purchase and sales contracts. If the rate of inflation in drilling costs or
operating costs should increase in 1996, the Company's management believes that
it would have sufficient flexibility in setting contract drilling prices and
well operating fees to offset the impact of increased inflation.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for the historical information, the matters discussed in this annual
report are forward-looking statements which involve risks and uncertainties,
including but not limited to: (1) economic factors, such as natural gas and oil
prices and demand for those products, (2) competitive factors, such as the
inability of the Company to obtain leases or equipment, (3) governmental factors
such as government price controls or operational restraints, or (4)
technological factors such as failure of geologic, geophysical or engineering
techniques, which affect the Company's operations, markets, products, services
and prices, and other factors discussed in the Company's filings with
Securities and Exchange Commission.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements and Schedules.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

Page 17 of 51 Pages
<PAGE> 18

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information, as of March 20, 1996,
concerning the directors and executive officers of the Company. Unless otherwise
indicated, each such person has held his principal occupation for more than 5
years.

<TABLE>
<CAPTION>
DIRECTOR
OFFICE HELD WITH THE COMPANY AND ITS OF THE
PRINCIPAL SUBSIDIARIES, PRINCIPAL OCCUPATION COMPANY
NAME AGE AND CERTAIN DIRECTORSHIPS HELD SINCE

- ----------------------- --------- ------------------------------------------------------------------------ ------------
<S> <C> <C> <C>
Jerry D. Jordan 61 Director of CGAS. Chairman of the Board and Chief Executive 1986
Officer of CGAS, Clinton Oil and CGM effective June, 1988;
Director of CGM since April, 1995; prior thereto, attorney and
partner with Vorys, Sater, Seymour and Pease, Columbus, Ohio.
Currently President of the Ohio Oil and Gas Association, and a
member of the Board of Directors of the Gas Industry Standards
Board.

F. Daniel Ryan 46 President and Director of CGAS since June, 1987. Vice Chair 1987
man and Director of Clinton Oil since January, 1989; Chairman
and Director of CGM since April 1995 and Vice Chairman from
January 1989 to April 1995.

Donald A. Nay 63 Director of CGAS. Vice President, Treasurer and Chief Financial 1988
Officer of CGAS since June, 1987; Director
of COC since 1982 and Executive Vice
President since 1984; Director and
Executive Vice President of CGM since
1984.

R. L. Richards 47 Director and Secretary of CGAS. Since December, 1994, 1986
Managing Director of RDT, Ltd.; prior thereto, President and
Director of RDT Corp., both of Dublin, Ohio. Also Director of
Acceptance Insurance Co.

Hal W. Field 66 Director of CGAS. Since June, 1994, Consultant, Amcena 1987
Corporation, New York, New York, a holding company owning
Specialty Department Stores, Inc. and other companies. From
1984 to May, 1994, Group Executive for Amcena Corporation.

Michael S. Guy 58 Director of CGAS. President of Michael S. Guy and Associates, 1981
Inc., Hilliard, Ohio, a firm involved in insurance and financial
planning. Director of County Savings Bank.

Duke W. Thomas 59 Director of CGAS. Attorney and partner with Vorys, Sater, 1986
Seymour and Pease, Columbus, Ohio; Director of Symix
Systems, Inc. and Ohio Bar Liability Insurance Company.

R. David Thomas 63 Director of CGAS. Chairman of the Board of CGAS from May, 1986
1986 to June, 1987; Senior Chairman of the
Board, Director and Founder of Wendy's
International, Inc., Dublin, Ohio, a
restaurant operator and franchisor.
</TABLE>

There are no family relationships among the executive officers and/or directors
of the Company.

Page 18 of 51 Pages
<PAGE> 19

The information to be set forth under the caption "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" in the Company's definitive proxy
statement in connection with its 1996 annual meeting of shareholders is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information to be set forth under the captions "Compensation of Executive
Management," "Board of Directors Report on Executive Compensation", "Company
Performance Chart," and "Executive Committee Interlocks and Insider
Participation" in the Company's definitive proxy statement ("Proxy Statement")
in connection with the 1996 annual stockholders meeting, is incorporated herein
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information appearing under the caption "Security Ownership of Management
and Certain Beneficial Owners" in the Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information appearing under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 K

(a) (1)+(2) See Index to Financial Statements and Schedules.
(3) See Exhibit List and Index.

(b) None.

(d) See Index to Financial Statements and Schedules.

Page 19 of 51 Pages
<PAGE> 20

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY

Independent Auditors' Report.................................................... F-1

CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1994......................... F-2

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993....................... F-4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993....................... F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993....................... F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................................... F-7

SUPPLEMENTARY INFORMATION (UNAUDITED):
NATURAL GAS AND OIL PRODUCING ACTIVITIES................................... F-12

RESERVE QUANTITY INFORMATION AND STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS............................ F-13

FINANCIAL STATEMENT SCHEDULES OF THE COMPANY

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993....................... F-15

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993....................... F-18
</TABLE>

Page 20 of 51 Pages
<PAGE> 21

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Clinton Gas Systems, Inc.

We have audited the accompanying consolidated balance sheets of Clinton Gas
Systems, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. Our audits
also included the financial statement schedules listed in the Index at Item 14.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedules 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Clinton Gas Systems, Inc. and its
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Columbus, Ohio
March 22, 1996

F-1
Page 21 of 51 Pages
<PAGE> 22

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
ASSETS 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 1,729,000 $ 1,169,000
Receivables ........................................ 13,991,000 10,140,000
Prepaid expenses and other ......................... 652,000 1,141,000
Costs in excess of billings on uncompleted wells ... -0- 301,000
Deferred income taxes .............................. 185,000 486,000
----------- -----------
Total current assets ............................... 16,557,000 13,237,000
----------- -----------
PROPERTY - AT COST:
Proved natural gas and oil properties
(successful efforts method) .................... 55,799,000 53,000,000
Pipeline systems and other ......................... 12,671,000 12,330,000
Land, buildings and improvements ................... 2,437,000 4,008,000
Well and field equipment ........................... 3,207,000 2,722,000
Office equipment ................................... 2,125,000 1,850,000
----------- -----------
Total property ..................................... 76,239,000 73,910,000
Accumulated depreciation, depletion and amortization 41,401,000 37,528,000
----------- -----------
Property - net ..................................... 34,838,000 36,382,000

OTHER ASSETS ....................................... 523,000 564,000
----------- -----------
TOTAL .............................................. $51,918,000 $50,183,000
=========== ===========
</TABLE>

- --------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-2
Page 22 of 51 Pages
<PAGE> 23

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt:
Notes payable ......................................... $ 120,000 $ 276,000
Mortgages payable ..................................... 856,000 106,000
Accounts payable .......................................... 11,707,000 10,210,000
Accrued liabilities and expenses .......................... 1,299,000 1,089,000
Receipts in excess of costs on uncompleted wells .......... 322,000 -0-
Accrued income taxes ...................................... 566,000 -0-
------------ ------------
Total current liabilities ................................. 14,870,000 11,681,000
- ------------------------------------------------------------------------------------------
LONG-TERM DEBT (LESS CURRENT MATURITIES):

Notes payable ............................................. 13,234,000 15,773,000
Mortgages payable ......................................... 144,000 1,333,000
------------ ------------
Total long-term debt ...................................... 13,378,000 17,106,000
- ------------------------------------------------------------------------------------------

DEFERRED INCOME TAXES ..................................... 390,000 506,000
- ------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; authorized 2,000,000 shares,
issued and outstanding - none
Common stock, $.0833 stated value; authorized 15,000,000
shares, issued 1995 and 1994 - 6,175,000 shares ....... 514,000 514,000
Additional paid-in capital ................................ 7,552,000 7,552,000
Retained earnings ......................................... 16,405,000 13,949,000
------------ ------------
Total ..................................................... 24,471,000 22,015,000
Less treasury stock of 533,000 and 517,000 shares,
respectively, at cost at December 31, 1995 and 1994 ... (1,191,000) (1,125,000)
------------ ------------
Total stockholders' equity ................................ 23,280,000 20,890,000
------------ ------------
TOTAL ..................................................... $ 51,918,000 $ 50,183,000
============ ============
- ------------------------------------------------------------------------------------------

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3

Page 23 of 51 Pages
<PAGE> 24

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Natural gas marketing ....................... $ 63,431,000 $ 81,456,000 $ 69,362,000
Natural gas and oil sales ................... 18,690,000 11,257,000 10,447,000
Well operating, transportation and other .... 1,845,000 3,396,000 3,824,000
Drilling .................................... 3,921,000 3,204,000 1,776,000
------------ ------------ ------------
Total revenue ............................... 87,887,000 99,313,000 85,409,000
- --------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Natural gas marketing ....................... 60,447,000 79,127,000 67,814,000
Natural gas and oil production:
Depreciation, depletion and amortization 4,004,000 3,257,000 3,147,000
Production costs ....................... 5,660,000 4,424,000 3,793,000
Other costs and expenses .................... 4,860,000 4,312,000 3,658,000
Drilling .................................... 4,876,000 3,527,000 2,081,000
Selling, general and administrative ......... 3,535,000 3,699,000 3,267,000
------------ ------------ ------------
Total costs and expenses .................... 83,382,000 98,346,000 83,760,000
------------ ------------ ------------
OPERATING INCOME ............................ 4,505,000 967,000 1,649,000
- --------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense ............................ (1,380,000) (1,268,000) (1,138,000)
Interest, dividend and other income ......... 153,000 31,000 21,000
------------ ------------ ------------
Income (loss) before income taxes ........... 3,278,000 (270,000) 532,000

Income taxes (benefit) ...................... 822,000 (355,000) (38,000)
------------ ------------ ------------
NET INCOME .................................. $ 2,456,000 $ 85,000 $ 570,000
============ ============ ============
NET INCOME PER COMMON SHARE: ................ $ 0.43 $ 0.02 $ 0.10
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ............................ 5,652,097 5,657,626 5,657,724
============ ============ ============
- --------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4

Page 24 of 51 Pages
<PAGE> 25

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Treasury Stock Stockholders'
-------------------- ---------------------
Shares Amount Capital Earnings Shares Amount Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992.. 6,175,000 $514,000 $7,552,000 $13,294,000 516,000 ($1,122,000) $20,238,000
Net Income.................. 570,000 570,000
Purchase of Treasury Stock, at
cost................... 1,000 (3,000) (3,000)
----------- --------- ----------- ------------- --------- ------------- -----------------
Balance, December 31, 1993.. 6,175,000 514,000 7,552,000 13,864,000 517,000 (1,125,000) 20,805,000
Net Income.................. 85,000 85,000
----------- --------- ----------- ------------- --------- ------------- -----------------
Balance, December 31, 1994.. 6,175,000 514,000 7,552,000 13,949,000 517,000 (1,125,000) 20,890,000
Net Income.................. 2,456,000 2,456,000
Purchase of Treasury Stock, at
cost................... 16,000 (66,000) (66,000)
----------- --------- ----------- ------------- --------- ------------- -----------------
Balance, December 31, 1995.. 6,175,000 $514,000 $7,552,000 $16,405,000 533,000 ($1,191,000) $23,280,000
=========== ========= =========== ============= ========= ============= =================
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
Page 25 of 51 Pages
<PAGE> 26

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................ $ 2,456,000 $ 85,000 $ 570,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion, and amortization ............ 5,293,000 4,248,000 4,109,000
Provision (benefit) for deferred income taxes ........ 185,000 (356,000) (113,000)
Loss (gain) from property, investments, and other .... 142,000 (118,000) (257,000)
Changes in operating assets and liabilities:
Receivables .......................................... (3,851,000) 5,284,000 (6,048,000)
Prepaid expenses and other ........................... 489,000 (509,000) (245,000)
Costs in excess of billings on uncompleted wells ..... 301,000 (301,000) -0-
Accounts payable ..................................... 1,851,000 (3,696,000) 5,133,000
Accrued liabilities and expenses ..................... 210,000 (103,000) 118,000
Receipts in excess of costs on uncompleted wells ..... 322,000 (659,000) 542,000
Accrued income taxes ................................. 566,000 (75,000) (28,000)
------------ ------------ ------------
Net cash provided by operating activities ................. 7,964,000 3,800,000 3,781,000
------------ ------------ ------------
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property ...................................... (5,575,000) (3,560,000) (6,223,000)
Proceeds from sale of property ............................ 1,464,000 222,000 685,000
Change in other assets .................................... 4,000 (37,000) 159,000
------------ ------------ ------------
Net cash used in investing activities ..................... (4,107,000) (3,375,000) (5,379,000)
------------ ------------ ------------
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from notes and mortgages payable ................. 20,315,000 18,150,000 22,551,000
Principal payments on notes and mortgages payable ......... (23,546,000) (18,509,000) (21,356,000)
Purchase of treasury stock ................................ (66,000) -0- (3,000)
------------ ------------ ------------
Net cash (used in) provided by financing activities ....... (3,297,000) (359,000) 1,192,000
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents .......... 560,000 66,000 (406,000)
Cash and cash equivalents at beginning of year ............ 1,169,000 1,103,000 1,509,000
------------ ------------ ------------
Cash and cash equivalents at end of year .................. $ 1,729,000 $ 1,169,000 $ 1,103,000
============ ============ ============
- ----------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-6

Page 26 of 51 Pages
<PAGE> 27

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

Notes to Consolidated
Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation - The consolidated financial statements include the
accounts of Clinton Gas Systems, Inc. and its subsidiaries (collectively
referred to as the Company), and the Company's proportionate share of assets,
liabilities, revenue and expenses of its natural gas and oil drilling programs.
Significant intercompany accounts and transactions have been eliminated.

Natural Gas and Oil Activities - The Company engages in the exploration and
development of natural gas and oil reserves by participation in exploratory and
developmental drilling as well as by purchase of minerals in place. The Company
is the sponsor of many of the drilling programs and has also invested in
projects developed by outside industry partners. The Company receives fees for
managing, supervising, and operating its natural gas and oil programs.

The Company's business also includes natural gas marketing. Natural gas
marketing activities include the purchase, marketing and resale of natural gas,
primarily to industrial and commercial end users, as well as the management of
natural gas supply for many of its customers.

Property - The Company uses the successful efforts method of accounting for
natural gas and oil properties whereby lease acquisition costs and costs of
drilling development wells are capitalized. Costs of drilling exploratory wells
are capitalized pending determination of whether the wells have found proved
reserves. If reserves are not found, the drilling costs are expensed as dry hole
costs. Depletion and depreciation are provided for tangible and intangible costs
of natural gas and oil properties using the units-of-production method based on
production and estimated proved reserves. Pipeline systems and other property
are depreciated using the straight line method over ten years and
units-of-production methods. Depreciation of buildings and improvements, well
and field equipment and office equipment is computed on the straight-line method
over estimated useful lives ranging from three to forty years.

The Company monitors the carrying value of its investment in natural gas and oil
properties in relation to estimated undiscounted future net revenues, net of
applicable income taxes, from such properties. If estimated net revenues are
less than carrying value, the Company records a charge to income (impairment) to
reduce its carrying value.

Other Assets - Other assets include at December 31, 1995 and 1994 notes
receivable from related parties of $136,000 and $180,000, respectively. The
notes are net of an allowance for uncollectible amounts of $276,000 of which
$44,000 was recorded in the fourth quarter of 1995. The notes bear interest at
1% over prime. No interest income was recorded on the notes in 1995, 1994 or
1993 based on the Company's assessment of collectibility. Effective January 1,
1996 the Company purchased certain natural gas and oil partnership interests of
the related parties in exchange for the notes receivable and cash.

Employee Benefits - The Company has established a 401(K) defined contribution
plan covering substantially all employees. The Company's 1995, 1994, and 1993
annual contributions were $97,000, $88,000, and $85,000 respectively.

Revenue Recognition - The Company recognizes the revenues from the sale of their
products in the period of delivery. Revenues for services are recognized in the
period the services are performed. In 1995 the Company recognized income of
$4,666,000 (including $480,000 in the fourth quarter) from its share of the
bankruptcy claim with Columbia Gas Transmission Corporation which is included as
part of natural gas and oil revenues on

F-7

Page 27 of 51 Pages
<PAGE> 28

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

the accompanying statement of income. These claims arose from contract rejection
and breach of "take or pay" contracts.

Drilling Revenue and Costs - Revenue and related costs from drilling programs
are recognized as wells are completed and are ready to begin production.
Drilling costs include the Company's share of the cost of exploratory dry holes
that are incurred for unsuccessful wells. Exploratory dry hole costs were
$955,000, $323,000, and $305,000 in 1995, 1994 and 1993, respectively. Receipts
from program investors in excess of costs incurred on uncompleted programs are
included in current liabilities. Costs in excess of billings on uncompleted
wells are included in current assets.

Income Taxes - Deferred income taxes are provided for the temporary differences
between the financial reporting and the tax basis of the Company's assets and
liabilities by applying enacted statutory tax rates applicable to future years
to the book-tax basis differences.

Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Per Share Amounts - All per share amounts are based on the weighted average
number of common shares outstanding. Assumed conversion of the Company's
convertible subordinated debentures has no dilutive effect on the Company's per
share amounts.

Fourth Quarter Transactions - During the fourth quarter of 1995 the Company
recognized pre-tax income of $500,000 that related to increased production from
the acquisition of oil and natural gas reserves. In the fourth quarter of 1994
the Company recorded pre-tax income of $244,000 from the recognition of gas
measurement variances.

2. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
AT DECEMBER 31,
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank borrowings under lines of credit .................................. $11,250,000 $13,750,000
Convertible subordinated debentures, 9.0%, unsecured, due in annual
installments of $220,000 beginning in 1997 ........................ 1,718,000 1,723,000
Installment note secured by pipeline, paid in 1995 ..................... -0- 150,000
Installment notes and capital leases, 7.0% to 10.0%, secured principally
by equipment, payable in monthly installments to 2000 ............. 386,000 426,000
----------- -----------
Total .................................................................. 13,354,000 16,049,000
Less current maturities ................................................ 120,000 276,000
----------- -----------
Notes payable - noncurrent ............................................. $13,234,000 $15,773,000
=========== ===========
- ----------------------------------------------------------------------------------------------------
</TABLE>

In April, 1993, three of the Company's subsidiaries entered into a revolving
credit arrangement with its principal banks providing for up to $18,000,000 of
credit. The amount of available credit is redetermined on a semi-annual basis
each July 1 and January 1 based on the amount of underlying collateral. At
December 31, 1995, $15,000,000 was available under the credit agreement and
$11,250,000 had been borrowed. The revolving credit agreement runs through March
31, 1998 and then provides for equal quarterly payments through March 31, 2001
of any outstanding balance at March 31, 1998. The debt is collateralized by
certain accounts receivable, natural gas and oil properties, and operating
equipment with a net book value of approximately $48,008,000 at

F-8

Page 28 of 51 Pages
<PAGE> 29

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

December 31, 1995. The credit agreement contains restrictive and other covenants
that relate to the operation of the Company. The agreement is guaranteed by the
Company and also restricts the transfer of funds from the subsidiaries to the
Company. At December 31, 1995, no retained earnings can be distributed without
the banks' approval. Interest rate options for the credit arrangement are based
on prime and Eurodollar rates. At December 31, 1995 the weighted average
interest rate for the revolving credit was 8.19%.

The debentures are subordinate to other liabilities of the Company and are
convertible at any time prior to maturity into common shares of the Company at a
conversion price of $7.50 per share. At December 31, 1995 the Company had
retired $482,000 of debentures which can be used to satisfy the annual
installment payments beginning in 1997.

The net book value of property under capital leases was $204,000 and $275,000 at
December 31, 1995 and 1994, respectively. The fair value of the debt
approximates the carrying value based on debt with similar interest rates and
maturities currently available to the Company.

Minimum maturities of notes payable are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------------------------
<S> <C>
1996 ...................................... $ 120,000
1997 ...................................... 132,000
1998 ...................................... 2,899,000
1999 ...................................... 3,970,000
2000 ...................................... 3,976,000
Thereafter ................................ 2,257,000
-----------
Total .......................................... $13,354,000
===========
- --------------------------------------------------------------------------------
</TABLE>

3. MORTGAGES PAYABLE

Mortgages payable are collateralized by land and buildings included in property
(total net book value of $845,000 at December 31, 1995). Interest rates on
mortgages payable range from 9 - 10.55% and require current monthly payments
(principal and interest) of approximately $14,000 through May 1996 and $3,000
thereafter.

Included in other costs and expenses in the accompanying statements of income is
interest expense on real estate properties of approximately $20,000, $27,000,
and $39,000 for 1995, 1994, and 1993, respectively.

Mortgages payable mature as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------------------------
<S> <C>
1996 ...................................... $ 856,000
1997 ...................................... 20,000
1998 ...................................... 21,000
1999 ...................................... 23,000
2000 ...................................... 26,000
Thereafter ................................ 54,000
----------
Total .......................................... $1,000,000
==========
- --------------------------------------------------------------------------------
</TABLE>

F-9
Page 29 of 51 Pages
<PAGE> 30

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

4. INCOME TAXES

Income taxes (benefit) are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current ............... $637,000 $ 1,000 $ 75,000
Deferred .............. 185,000 (356,000) (113,000)
-------- --------- ---------
Total Income Taxes (Benefit) $822,000 $(355,000) $ (38,000)
======== ========= =========
- ----------------------------------------------------------------
</TABLE>

A reconciliation of recorded Federal income tax (benefit) expense to the
expected expense computed by applying the Federal statutory income tax rate of
34% in 1995, 1994 and 1993 to income before income taxes follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected (benefit) expense at statutory rate ....... $ 1,115,000 $ (92,000) $ 181,000
Increase (decrease) in income tax resulting from:
Statutory depletion in excess of cost depletion (283,000) (217,000) (186,000)
Non-conventional fuel credits earned .......... (11,000) (36,000) (34,000)
Other ......................................... 1,000 (10,000) 1,000
----------- --------- ---------
Total Federal Income Taxes (Benefit) ............... $ 822,000 $(355,000) $ (38,000)
=========== ========= =========
- ---------------------------------------------------------------------------------------------
</TABLE>

Deferred income taxes recorded in the consolidated balance sheets at December
31, 1995 and 1994 consist of the following:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DEFERRED TAX ASSETS: 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment tax credit carryover ......................................... $ 936,000 $ 1,381,000
Percentage depletion carryover .......................................... -0- 443,000
Net operating loss carryover ............................................ 360,000 426,000
Alternative minimum tax credit carryover ................................ 466,000 463,000
Other ................................................................... 165,000 150,000
----------- -----------
Total deferred tax assets ............................................... 1,927,000 2,863,000
----------- -----------
DEFERRED TAX LIABILITIES:
- ------------------------------------------------------------------------------
Book-tax basis differences in property, equipment and investments in real
estate .............................................................. (1,941,000) (2,713,000)
Other ................................................................... (191,000) (170,000)
----------- -----------
Total deferred tax liabilities .......................................... (2,132,000) (2,883,000)
----------- -----------
Net deferred tax liability .............................................. $ (205,000) $ (20,000)
=========== ===========
- -----------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1995 the Company has net operating loss carryforwards and unused
tax credits totaling approximately $1,058,000 and $1,402,000, respectively,
expiring in varying amounts primarily in 2001 and 2002, which can be used to
offset future Federal income taxes, subject to limitations imposed by the Tax
Reform Act of 1986.

F-10

Page 30 of 51 Pages
<PAGE> 31

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

5. BUSINESS SEGMENTS AND MAJOR CUSTOMERS

The Company operates primarily in one business segment. The drilling,
acquisition, production and sale of natural gas and oil reserves and related
operations are conducted primarily in the Appalachian Basin. Natural gas
marketing, management and supply services are provided to customers primarily in
the eastern United States. One gas marketing customer accounted for
approximately $12,978,000, $15,818,000 and $13,436,000 of total revenue,
respectively, in 1995, 1994 and 1993. There were no other customers that
accounted for greater than 10% of consolidated revenue in any year during the
three years ended December 31, 1995.

6. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

Accounting Policies: The Company considers all highly liquid investments with an
original maturity of three months or less when purchased to be "cash
equivalents." Substantially all of the Company's cash and short term investments
are located in an Ohio commercial bank in various checking and investments
accounts.

Non-Cash Investing and Financing Activities: The Company incurred capital lease
and other obligations of $97,000, $232,000, and $112,000, respectively, for the
years 1995, 1994, and 1993, in connection with agreements to purchase equipment.
In 1993 the Company obtained a mortgage note receivable of $113,000 in
connection with the sale of an investment in real estate. Accounts payable at
December 31, 1995 and 1994, include unpaid liabilities of $269,000 and $623,000,
respectively, for the purchase of natural gas and oil properties.

Interest and Income Tax Payments: The Company made interest and income tax
payments as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Total Interest Total Income Tax
YEAR ENDED DECEMBER 31: Payments Payments
- --------------------------------------- ----------------------- ----------------------
<S> <C> <C>
1995.............................. $ 1,385,000 $ -0-
1994.............................. $ 1,281,000 $ 153,000
1993.............................. $ 1,311,000 $ 105,000

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

</TABLE>

F-11

Page 31 of 51 Pages
<PAGE> 32

CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES

Supplementary Information (Unaudited)

NATURAL GAS AND OIL PRODUCING ACTIVITIES

Capitalized costs relating to natural gas and oil producing activities are as
follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
AT DECEMBER 31,
1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proved natural gas and oil properties .............. $ 55,799,000 $ 53,000,000 $ 51,050,000
Portion of pipeline systems and other .............. 5,189,000 5,038,000 5,031,000
Portion of well and field equipment ................ 494,000 470,000 426,000
Accumulated depreciation, depletion and amortization (34,858,000) (31,514,000) (28,728,000)
------------ ------------ ------------
Net capitalized costs .............................. $ 26,624,000 $ 26,994,000 $ 27,779,000
============ ============ ============
- ----------------------------------------------------------------------------------------------------
</TABLE>

Costs incurred in natural gas and oil property acquisition, exploration and
development activities are as follows:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Property acquisition costs $ 2,477,000 $ 2,252,000 $ 3,665,000
Exploratory well costs ... $ 4,491,000 $ 2,704,000 $ 2,072,000
Development well costs ... $ 172,000 $ 384,000 $ 336,000
</TABLE>

Included in property acquisition costs are expenditures for proved reserves of
$2,164,000, $948,000, and $3,314,000 for 1995, 1994 and 1993, respectively.

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

Results of operations for natural gas and oil producing and exploratory
activities are as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues - natural gas and oil sales ..................... $ 18,690,000 $ 11,257,000 $ 10,447,000
Production costs ......................................... (5,660,000) (4,424,000) (3,793,000)
Exploratory costs ........................................ (2,203,000) (837,000) (688,000)
Depreciation, depletion, and amortization ............... (4,004,000) (3,257,000) (3,147,000)
Income tax expense ....................................... (2,026,000) (678,000) (738,000)
------------ ------------ ------------
Results of operations from producing activities (excluding
corporate overhead and interest costs) .............. $ 4,797,000 $ 2,061,000 $ 2,081,000
============ ============ ============
</TABLE>

Included in exploratory costs are gains recognized from the sale of interests in
prospects of $570,000, $533,000, and $388,000 for 1995, 1994 and 1993,
respectively.

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

F-12

Page 32 of 51 Pages
<PAGE> 33

RESERVE QUANTITY INFORMATION AND STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET
CASH FLOWS (UNAUDITED)

The estimate of the proved natural gas and crude oil reserves, future net
revenues and the present value (discounted at the rate of 10%) of the future net
revenues attributable to the Company's interest are included in the following
tables. The estimates of the proved developed reserves were reviewed by John G.
Redic, an independent consulting engineer. Effective 1995, the Company estimated
the recoverable reserves from proved undeveloped properties.

Future net revenues were computed using natural gas and oil prices and costs
which approximate those received and paid at year end, and year end statutory
tax rates that relate to existing proved natural gas and oil reserves in which
the Company has mineral interests. Natural gas prices were adjusted for future
price changes to the extent provided by contractual arrangements presently in
existence. Gross production and ad valorem taxes and operating costs were based
on average costs per well actually experienced.

Such reserve information is an estimate and should not be construed as being
exact. The revenues from such reserves and the actual costs related thereto
could be more or less than the estimated amounts.

Estimated quantities of proved natural gas and oil reserves, substantially all
of which are located in eastern Ohio, are as follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
OIL NATURAL GAS
(BARRELS) (MCF)
- ------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1992 ................ 771,000 23,158,000
Revisions of previous estimates ........... (57,000) (410,000)
Extensions, discoveries and other additions 103,000 1,454,000
Purchase of minerals in place ............. 235,000 3,519,000
Sale of minerals in place ................. -0- -0-
Production ................................ (134,000) (3,090,000)
---------- -----------
Balance, December 31, 1993 ................ 918,000 24,631,000
Revisions of previous estimates ........... 144,000 (246,000)
Extensions, discoveries and other additions 112,000 1,122,000
Purchase of minerals in place ............. 117,000 1,390,000
Sale of minerals in place ................. -0- -0-
Production ................................ (167,000) (3,370,000)
---------- -----------
Balance, December 31, 1994 ................ 1,124,000 23,527,000
Revisions of previous estimates ........... 185,000 6,038,000
Extensions, discoveries and other additions 297,000 5,277,000
Purchase of minerals in place ............. 185,000 6,306,000
Sale of minerals in place ................. (8,000) (330,000)
Production ................................ (210,000) (4,663,000)
---------- -----------
Balance, December 31, 1995 ................ 1,573,000 36,155,000
========== ===========
Proved developed reserves:
At December 31, 1992 ................. 771,000 23,158,000
========== ===========
At December 31, 1993 ................. 918,000 24,631,000
========== ===========
At December 31, 1994 ................. 1,124,000 23,527,000
========== ===========
At December 31, 1995 ................. 1,322,000 30,491,000
========== ===========
- ------------------------------------------------------------------------
</TABLE>

F-13
Page 33 of 51 Pages
<PAGE> 34

The standardized measure of discounted future net revenues relating to proved
natural gas and oil reserves are as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Future revenues ........................................ $ 123,045,000 $ 76,875,000 $ 78,531,000
Future production and development costs ................ (50,729,000) (34,625,000) (34,778,000)
Future income tax expenses ............................. (12,573,000) (3,332,000) (3,741,000)
------------- ------------ ------------
Future net revenues .................................... 59,743,000 38,918,000 40,012,000
10% annual discount for estimated timing of net revenues (22,290,000) (13,687,000) (14,104,000)
------------- ------------ ------------
Standardized measure of discounted future net revenues . $ 37,453,000 $ 25,231,000 $ 25,908,000
============= ============ ============
- ---------------------------------------------------------------------------------------------------------
</TABLE>

Future revenues do not include an amount for salvage value on equipment owned by
the Company. The Company estimates this amount at December 31, 1995 to be
approximately $6,700,000 (net of plugging and abandoning costs) and $2,700,000
when discounted at 10%.

Following are the principal sources of change in the standardized measure of
discounted future net revenues:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sale of natural gas and oil produced net of production costs $ (8,364,000) $(6,833,000) $(6,654,000)
Net changes in prices and production costs ................. 3,626,000 (1,092,000) 781,000
Purchase of minerals in place .............................. 7,377,000 1,889,000 4,636,000
Sales of minerals in place ................................. (376,000) -0- -0-
Extensions, discoveries and other additions ................ 7,018,000 1,622,000 1,951,000
Revisions of previous quantity estimates ................... 7,114,000 559,000 (711,000)
Accretion of discount ...................................... 2,739,000 2,833,000 2,464,000
Change in income taxes ..................................... (5,722,000) 262,000 (613,000)
Other ...................................................... (1,190,000) 83,000 1,220,000
------------ ----------- -----------
Total ...................................................... $ 12,222,000 $ (677,000) $ 3,074,000
============ =========== ===========
- ----------------------------------------------------------------------------------------------------------
</TABLE>

Revisions include $2,859,000 related to the inclusion of undeveloped properties.

Page 34 of 51 Pages
<PAGE> 35

CLINTON GAS SYSTEMS, INC. SCHEDULE I
AND SUBSIDIARIES

CONDENSED BALANCE SHEETS OF PARENT
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
ASSETS:
Cash and cash equivalents ........................................ $ 13,000 $ 12,000
Deferred income taxes ............................................ 185,000 486,000
Investments in and advances to subsidiaries ...................... 25,462,000 22,340,000
Other assets and investments ..................................... 333,000 318,000
------------ ------------
TOTAL ASSETS ..................................................... $ 25,993,000 $ 23,156,000
============ ============
LIABILITIES:
Accrued expenses and accounts payable ............................ $ 39,000 $ 37,000
Accrued and deferred income taxes ................................ 956,000 506,000
Debentures payable (A) ........................................... 1,718,000 1,723,000
------------ ------------
TOTAL LIABILITIES ................................................ 2,713,000 2,266,000
------------ ------------

STOCKHOLDERS' EQUITY:
Preferred stock, no par value; authorized 2,000,000 shares, issued
and outstanding - none
Common stock, $.0833 stated value; authorized 15,000,000 shares,

issued 1995 and 1994 - 6,175,000 shares ..................... 514,000 514,000
Additional paid-in-capital ....................................... 7,552,000 7,552,000
Retained earnings ................................................ 16,405,000 13,949,000
------------ ------------
TOTAL ....................................................... 24,471,000 22,015,000
Less treasury stock of 533,000 and 517,000 shares, respectively,
at cost ..................................................... (1,191,000) (1,125,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ....................................... 23,280,000 20,890,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 25,993,000 $ 23,156,000
============ ============
</TABLE>

(A) The maturities of debentures payable are as follows: 1996 - $-0-; 1997 -
$-0-; 1998 - $-0-; 1999 - $178,000; 2000 - $220,000; thereafter $1,320,000.

F-15

Page 35 of 51 Pages
<PAGE> 36

CLINTON GAS SYSTEMS, INC. SCHEDULE I
AND SUBSIDIARIES
- --------------------------------------------

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME OF PARENT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, and 1993
- -------------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
COSTS AND EXPENSES:
Selling, general and administrative expense ................... $ 191,000 $ 197,000 $ 195,000
INTEREST EXPENSE .............................................. 155,000 155,000 155,000
----------- --------- ---------
TOTAL COSTS AND EXPENSES ...................................... 346,000 352,000 350,000
----------- --------- ---------
LOSS BEFORE EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES,
INCOME TAXES ............................................ (346,000) (352,000) (350,000)

EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES ............ 3,624,000 82,000 882,000
----------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES ............................. 3,278,000 (270,000) 532,000

INCOME TAXES (BENEFIT) (A) .................................... 822,000 (355,000) (38,000)
----------- --------- ---------
NET INCOME .................................................... $ 2,456,000 $ 85,000 $ 570,000
=========== ========= =========
</TABLE>

(A) All income taxes are reflected on the parent, see Note 4 to Consolidated
Financial Statements.

F-16
Page 36 of 51 Pages
<PAGE> 37

CLINTON GAS SYSTEMS, INC. SCHEDULE I
AND SUBSIDIARIES
- --------------------------------------------

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS OF PARENT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, and 1993
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES: 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income ..................................................................... $ 2,456,000 $ 85,000 $ 570,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization ............................................. 11,000 11,000 13,000
Provision for deferred income taxes ....................................... 185,000 (356,000) (113,000)
Undistributed earnings of subsidiaries .................................... (3,624,000) (82,000) (882,000)
Changes in operating assets and liabilities:
Other assets and investments .............................................. (26,000) (31,000) (27,000)
Accrued expenses and accounts payable ..................................... 2,000 (9,000) 8,000
Accrued income taxes ...................................................... 566,000 (75,000) (28,000)
----------- --------- ---------
Net cash used in operating activities .......................................... (430,000) (457,000) (459,000)

Investing activities:

Decrease in investments and advances to subsidiaries ........................ 502,000 422,000 471,000
Purchases of treasury stock ................................................ (66,000) -0- (3,000)
Principal payments on notes payable ......................................... (5,000) -0- -0-
----------- --------- ---------
Net cash provided by investing activities ...................................... 431,000 422,000 468,000
----------- --------- ---------
Increase (decrease) in cash and cash equivalents ............................... 1,000 (35,000) 9,000

Cash and cash equivalents at beginning of year ................................. 12,000 47,000 38,000
----------- --------- ---------
Cash and cash equivalents at end of year ....................................... $ 13,000 $ 12,000 $ 47,000
=========== ========= =========
</TABLE>

Interest Expense: The Company made interest payments of $155,000 in 1995,
1994, and 1993.

Income Taxes: The Company made income tax payments of $-0-, $153,000,
and $105,000, respectively, in 1995, 1994, and 1993.

F-17

Page 37 of 51 Pages
<PAGE> 38

CLINTON GAS SYSTEMS, INC. SCHEDULE II
AND SUBSIDIARIES
- --------------------------------------------

<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
- ---------------------------------------------------------------------------------------------------------------------------
Additions Charged to
----------------------------
Balance at Balance at
Beginning Costs and Other End
Description of Year Expenses Accounts Deductions of Year
- -------------------------------------------- ------------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Allowance for losses deducted from asset
accounts:
Other assets (mortgage loans receivable) $ 10,000 $ 10,000
Land buildings and improvements........ 380,000 380,000 -0-
------------- -------------- --------------
Total....................................... $390,000 $380,000 $ 10,000
============= ============== ==============
YEAR ENDED DECEMBER 31, 1994:
Allowance for losses deducted from asset
accounts:
Other assets (mortgage loans receivable) $ 10,000 $ 10,000
Land buildings and improvements........ 380,000 380,000
------------- --------------
Total....................................... $390,000 $390,000
============= ==============

YEAR ENDED DECEMBER 31, 1993:
Allowance for losses deducted from asset
accounts:
Other assets (mortgage loans receivable) $ 10,000 $ 10,000
Land buildings and improvements........ 380,000 380,000
------------- --------------
Total....................................... $390,000 $390,000
============= ==============
</TABLE>

F-18

Page 38 of 51 Pages
<PAGE> 39

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 in the City of Columbus,
State of Ohio, on this 26th day of March, 1996.

CLINTON GAS SYSTEMS, IN.

By: /s/ Jerry D. Jordan
------------------------------
Jerry D. Jordan, Director and Chairman of
the Board

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 dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ Jerry D. Jordan Director and Chairman of the Board (Principal March 26, 1996
- ---------------------------------------- Executive Officer)
Jerry D. Jordan

* Director and President (Principal Operating March 26, 1996
- ---------------------------------------- Officer)
F. Daniel Ryan

/S/ Donald A. Nay Director and Vice President, Treasurer March 26, 1996
- ---------------------------------------- (Principal Financial and Accounting Officer)
Donald A. Nay

* Director and Secretary March 26, 1996
- ----------------------------------------
R. L. Richards

* Director March 26, 1996
- ----------------------------------------
Hal W. Field

* Director March 26, 1996
- ----------------------------------------
Michael S. Guy

* Director March 26, 1996
- ----------------------------------------
Duke W. Thomas

* March 26, 1996
- ----------------------------------------
R. David Thomas
</TABLE>

/S/ Jerry D. Jordan
- ----------------------------------------
Jerry D. Jordan, Attorney-in-Fact

*Power of Attorney

Page 39 of 51 Pages
<PAGE> 40
CLINTON GAS SYSTEMS, INC.

EXHIBIT LIST AND INDEX

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT LOCATION OR PAGE NUMBER IN
NUMBER DESCRIPTION SEQUENTIAL NUMBERING SYSTEM
- ------- ------------------------------------------------------ ------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation, as amended, of Clinton Gas Incorporated by reference to Exhibit
Systems, Inc. 3.1 of Registrant's 1987 Form 10-K.

3.2 Code of Regulations, as Amended, of Clinton Gas Incorporated by reference to Exhibit
Systems, Inc. 3.2 of Registrant's 1987 Form 10-K.

4.1 Indenture dated October 15, 1986, by and between Incorporated by reference to Exhibit
Leader Development Corp. and BancOhio National 4(a) of the Company's Registration
Bank, trustee, in respect of Convertible Subordinated Statement No. 33-8319 on Form S-2
Debentures due 2006. (the "Form S-2").

10.1 CGAS Employee 401(k) Savings Plan Incorporated by reference to Exhibit
10.2 of Registrant's 1989 Form 10-K.

10.2 Fourth Restated Agreement among Clinton Gas Incorporated by reference to Exhibit
Marketing, Inc., The Clinton Oil Company, Eagle 10.6 of Registrant's 1991 Form 10-K.
Mountain Energy Corporation, Bank One, Columbus,
N.A. and NBD Bank, N.A., dated July 19, 1991

10.3 Amendment to Fourth Restated Credit Agreement, dated Incorporated by reference to Exhibit
April 8, 1993. 10.3 of Registrant's 1993 Form 10-K.

10.4 Amendment to CGAS Employee 401(k) Savings Plan, Incorporated by reference to Exhibit
dated December 30, 1994 10.4 of Registrant's 1994 Form 10-K.

10.5 Modification Agreement to Fourth Restated Credit
Agreement effective as of December 31, 1995 Page 41

21.0 Subsidiaries of Registrant Page 42

23.0 Consent of Deloitte & Touche LLP Page 43

24.0 Powers of Attorney Page 44
</TABLE>

Page 40 of 51 Pages

<PAGE> 1
Exhibit 10.5

MODIFICATION AGREEMENT

This Modification Agreement shall amend the fourth restated credit agreement
originally dated July 19, 1991 by and among Clinton Gas Marketing, Inc., the
Clinton Oil Company, Eagle Mountain Energy Corporation, Bank One, Columbus, NA
and NBD Bank, NA ("Agreement") as follows:

The "Revolver Termination Date" shall mean March 31, 1998.

The "Termination Date" shall mean March 31, 2001.

The aggregate unpaid principal amount of all Loans outstanding on the
Revolver Termination Date shall be due and payable in twelve equal
quarterly installments beginning on June 30, 1998, and continuing on the
last day of each March, June, September, and December thereafter through
the Termination Date, at which time the entire unpaid principal balance of
all Loans, together with all accrued interest thereon, shall be due and
payable.

The existing language contained in Section 8.02(k) shall be replaced by the
following: Borrowers and Guarantor will not permit their aggregate
Consolidated Tangible Net Worth to be less than $21,000,000.

This Modification Agreement shall not modify, alter or change any other terms or
conditions of the Agreement, Domestic Revolving Note(s), or Eurodollar Revolving
Notes(s). This Modification Agreement is effective as of December 31, 1995.

This Modification Agreement is hereby agreed to and accepted this 26th day of
March, 1996

BORROWERS:
Clinton Oil Company, Inc. Eagle Mountain Energy Corporation

By: /S/ Donald A. Nay By: /S/ Donald A. Nay
Donald A. Nay Donald A. Nay
Executive Vice President Executive Vice President

Clinton Gas Marketing, Inc.

By: /S/ Donald A. Nay

Donald A. Nay
Executive Vice President

GUARANTOR:

Clinton Gas Systems, Inc.

By: /S/ Donald A. Nay

Donald A. Nay
Executive Vice President

BANK:

Bank One, Columbus, NA, as Agent and on behalf of NBD Bank, N.A. with its
prior approval:

By: /S/ Warren Bebinger

Warren Bebinger
Vice President

Page 41 of 51 Pages

<PAGE> 1
Exhibit 21.0

SUBSIDIARIES OF REGISTRANT

LEGAL NAME AND NAME UNDER WHICH STATE OF
BUSINESS IS CONDUCTED INCORPORATION

The Clinton Oil Company................ Ohio

Clinton Gas Marketing, Inc............. Ohio

CGAS Investment Corp................... Ohio

Eagle Mountain Energy Corporation...... Ohio

The Leader Corporation................. Delaware

CGAS Services Corporation.............. Ohio

CGAS Securities, Inc................... Ohio

Clinton Nominee Corporation............ Ohio

Haulco, Inc............................ Ohio

MeterTech, Inc.......................... Ohio

Ohio Gasportation, Inc.................. Ohio

LDC Securities, Inc..................... Ohio

Page 42 of 51 Pages

<PAGE> 1
Exhibit 23.0

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in registration Statement No.
33-80002 of Clinton Gas Systems, Inc. on Form S-3 of our report dated March 22,
1996, appearing in this Annual Report on Form 10-K of Clinton Gas Systems, Inc.
for the year ended December 31, 1995.

DELOITTE & TOUCHE LLP

Columbus, Ohio
March 27, 1996

Page 43 of 51 Pages

<PAGE> 1
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of Clinton Gas Systems, Inc., an Ohio corporation which is about to file
with the Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, hereby constitutes Jerry D. Jordan and F. Daniel
Ryan, and each of them, his true and lawful attorneys-in-fact and agents, each
with full power to act without the other and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign such Annual Report on Form 10-K, and to file the same, with
all exhibits and financial statements and schedules thereto, and any other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes may
lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day
of March, 1996.

/S/ Jerry D. Jordan
---------------------------
Jerry D. Jordan, Chairman of the Board, Director

Page 44 of 51 Pages
<PAGE> 2

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 15th day
of March, 1996.

/S/ F. Daniel Ryan
-----------------------------------
F. Daniel Ryan, President, Director

Page 45 of 51 Pages
<PAGE> 3

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 15th day
of March, 1996.

/S/ Donald A. Nay
--------------------------------------------------
Donald A. Nay, Vice President, Treasurer, Director

Page 46 of 51 Pages
<PAGE> 4
POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day
of March, 1996.

/S/ Hal W. Field
-----------------------
Hal W. Field, Director

Page 47 of 51 Pages
<PAGE> 5

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of March, 1996.

/S/ Michael S. Guy
------------------------
Michael S. Guy, Director

Page 48 of 51 Pages
<PAGE> 6

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 19th day
of March, 1996.

/S/ R. L. Richards
-----------------------------------
R. L. Richards, Secretary, Director

Page 49 of 51 Pages
<PAGE> 7

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th day
of March, 1996.

/S/ Duke W. Thomas
------------------------
Duke W. Thomas, Director

Page 50 of 51 Pages
<PAGE> 8

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th day
of March, 1996.

/S/ R. David Thomas
-------------------------
R. David Thomas, Director

Page 51 of 51 Pages

<ARTICLE> 5
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,729,000
<SECURITIES> 0
<RECEIVABLES> 13,991,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,557,000
<PP&E> 76,239,000
<DEPRECIATION> 41,401,000
<TOTAL-ASSETS> 51,918,000
<CURRENT-LIABILITIES> 14,870,000
<BONDS> 0
0
0
<COMMON> 514,000
<OTHER-SE> 22,766,000
<TOTAL-LIABILITY-AND-EQUITY> 23,280,000
<SALES> 82,121,000
<TOTAL-REVENUES> 87,887,000
<CGS> 70,111,000
<TOTAL-COSTS> 83,382,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,380,000
<INCOME-PRETAX> 3,278,000
<INCOME-TAX> 822,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,456,000
<EPS-PRIMARY> .43
<EPS-DILUTED> 0

</TABLE>