INLAND RESOURCES INC, DEF 14A, 1999-11-15

INLAND RESOURCES INC
DEF 14A, 1999-11-15
CRUDE PETROLEUM & NATURAL GAS

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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)

Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:

[ ] Preliminary proxy statement

[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.

INLAND RESOURCES INC.
(Name of Registrant as Specified in Its Charter)

_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

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(4) Proposed maximum aggregate value of transaction:

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(5) Total Fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

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(2) Form, schedule or registration statement no.:

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(3) Filing party:

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(4) Date filed:

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INLAND RESOURCES INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Inland
Resources Inc. (the "Company") will be held on Friday, December 10, 1999, at
9:00 a.m., local time, at the Hyatt Regency Downtown located at 1200 Louisiana
Street, Houston, Texas 77002, for the following purposes:

(1) To elect five members of the Board of Directors to serve until
the 2000 annual meeting of stockholders or until their respective
successors are duly elected and qualified, with four members of the Board
of Directors to be elected by the holders of Series D Preferred Stock and
one member of the Board of Directors to be elected by the holders of Common
Stock and Series Z Preferred Stock voting as one voting class;

(2) To approve (A) an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock
from 25,000,000 shares to 100,000,000 shares (without affecting par value),
(B) a 1-for-10 reverse stock split of the Company's then authorized
(without affecting par value) and presently issued and outstanding shares
of Common Stock and the 5,882,901 shares of Common Stock into which the
Series Z Preferred Stock will be automatically converted upon the increase
in the authorized shares of Common Stock (the "Reverse Split"), and (C) an
amendment to the Company's Articles of Incorporation, following the
effective date of the Reverse Split, to increase the post-split number of
authorized shares of Common Stock from 10,000,000 shares to 25,000,000
shares (without affecting par value), all of which shall be considered as
one proposal (the "Proposal") submitted to a vote of the holders of Series
D Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock and
Common Stock; and

(3) To consider and act upon any other matters which may properly
come before the meeting or any adjournment thereof.

The holders of record of Series D Preferred Stock, Series E Preferred
Stock, Series Z Preferred Stock and Common Stock of the Company at the close of
business on November 1, 1999 will be entitled to vote at the meeting, as
described above.

For a period of at least ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be open to the examination of
any stockholder during ordinary business hours at the Company's offices at 410
17th Street, Suite 700, Denver, Colorado.

By order of the Board of Directors

MICHAEL J. STEVENS
Secretary

November 17, 1999

__________________

You are cordially invited to attend the meeting in person. Even if you plan
to be present, you are urged to sign, date and mail the enclosed proxy promptly.
However, if you attend the meeting, you may vote in person or by your proxy.
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INLAND RESOURCES INC.

PROXY STATEMENT

FOR

ANNUAL MEETING OF STOCKHOLDERS

December 10, 1999

This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Inland Resources Inc. ("Inland" or the
"Company"). The proxies solicited in connection with this proxy statement will
be used at the annual meeting of stockholders of the Company to be held on
Friday, December 10, 1999, at 9:00 a.m., local time, at the Hyatt Regency
Downtown located at 1200 Louisiana, Houston, Texas 77002, and at any adjournment
thereof, for the purposes set forth in the foregoing notice of the meeting.
Properly executed proxies received in time for the meeting will be voted as
specified therein. If one of the enclosed forms of proxy is executed and
returned, it may nevertheless be revoked by written notice to either of the
persons named as a proxy or the Secretary of the Company at any time before it
is exercised, by voting in person at the meeting or by giving a later proxy.
This proxy statement and the enclosed forms of proxy are being mailed on or
about November 17, 1999.

The Company's principal executive office is located at 410 17th Street,
Suite 700, Denver, Colorado 80202, and its telephone number is (303) 893-0102.

At the close of business on November 1, 1999 (the "Record Date"), the
Company had outstanding and entitled to vote 23,093,689 shares of Common Stock,
$.001 par value (the "Common Stock"); 10,757,747 shares of Series D Redeemable
Preferred Stock, $.001 par value (the "Series D Preferred Stock"); 121,973
shares of Series E Redeemable Preferred Stock, $.001 par value (the "Series E
Preferred Stock"); and 5,882,901 shares of Series Z Convertible Preferred Stock,
$.002 par value (the "Series Z Preferred Stock"). The holders of record of such
shares on such date will be entitled to one vote at the annual meeting for each
share held by them.

The Annual Report to Stockholders for the year ended December 31, 1998,
including financial statements, is enclosed with this proxy statement.

MATTERS TO BE ACTED UPON

Matter 1 - Election of Directors

At the annual meeting, the holders of Series D Preferred Stock will be
asked to consider and act upon a resolution to elect four members of the Board
of Directors and the holders of Series Z Preferred Stock and Common Stock,
voting together as one voting class, will be asked to consider and act upon a
resolution to elect one member of the Board of Directors. The holder of Series E
Preferred Stock has the right to designate one additional member of the Board of
Directors, but has not elected to exercise this right. The presence, in person
or by proxy, of a majority of the outstanding shares of Series D Preferred Stock
and a majority of the outstanding shares of Series Z Preferred Stock and Common
Stock, voting as one voting class, entitled to vote at the annual meeting will
constitute a quorum of the Series D Preferred Stock and the combined voting
class of Series Z Preferred Stock and Common Stock, respectively. Votes will be
counted at the meeting by an election judge to be appointed by the Company prior
to the meeting. Directors will be elected by a plurality of votes. An abstention
or non vote will not be counted in the election of directors and will have no
consequence on the election of directors.

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Pursuant to a Shareholders Agreement dated September 21, 1999 between the
holders of all of the outstanding shares of Series D Preferred Stock, Series E
Preferred Stock and Series Z Preferred Stock, and various persons and entities
affiliated with Smith Energy Partnership ("SEP") owning in the aggregate
5,712,071 shares of Common Stock (the "Smith Group"), the holders of the
outstanding shares of Series D Preferred Stock, Series E Preferred Stock and
Series Z Preferred Stock, and the Smith Group agreed not to vote the shares of
Series Z Preferred Stock or Common Stock held by them at the meeting for the
election of the Board member to be elected by the Series Z Preferred Stock and
Common Stock as a single voting class. Consequently, this member of the Board
will be elected by a plurality of the remaining 2,817,694 shares of Common Stock
outstanding on the record date.

Matter 2 - Reverse Split and Amendments to Articles of Incorporation

At the annual meeting, the holders of Series D Preferred Stock, Series E
Preferred Stock, Series Z Preferred Stock and Common Stock will be asked to
consider and act upon the approval of the Board of Directors' recommendation to
(1) amend the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock from 25,000,000 shares to 100,000,000 shares
(without affecting par value), (2) effect a 1-for-10 reverse stock split of the
Company's then authorized (without affecting par value) and presently issued and
outstanding shares of Common Stock and the 5,882,901 shares of Common Stock into
which the Series Z Preferred Stock will be automatically converted upon the
increase in the authorized shares of Common Stock (the "Reverse Split"), and (3)
amend the Company's Articles of Incorporation, following the effective date of
the Reverse Split, to increase the post-split number of authorized shares of
Common Stock from 10,000,000 shares to 25,000,000 shares (without affecting par
value), all of which shall be considered as one proposal (the "Proposal")
submitted to a vote of the holders of Series D Preferred Stock, Series E
Preferred Stock, Series Z Preferred Stock and Common Stock. The vote will be
taken for or against the Proposal so that all three elements are considered in
one vote. Votes will be counted at the meeting by an election judge to be
appointed by the Company prior to the meeting. The affirmative vote, either in
person or by proxy, of the holders of (1) more than 50% of the shares of Series
D Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock and Common
Stock outstanding as of the Record Date, voting as one combined voting class,
and (2) more than 50% of the shares of Common Stock outstanding as of the Record
Date, voting as a separate voting class, is necessary to approve the Proposal.
Accordingly, if a stockholder abstains from voting certain shares on the
approval of the Proposal, or a beneficial owner fails to deliver written
instructions to his nominee holder of shares so that the nominee holder is not
able to vote such shares, it will have the effect of a negative vote.

The holder of Series D Preferred Stock and Series Z Preferred Stock owns
approximately 71% of the total shares represented by the combined voting class
of Series D Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock
and Common Stock, and approximately 50.4% of the outstanding shares of Common
Stock, and has indicated to the Company that it will vote all of its shares in
favor of the Proposal. Consequently, approval of the Proposal is assured at the
annual meeting.

Discretionary Matters

As of the date of this proxy statement, the Board of Directors of the
Company knows of no other matters which are likely to be presented for
consideration at the annual meeting, except for Matters 1 and 2 described above.
The Company has not received notice from any stockholder prior to the date of
this proxy statement regarding any other matter to be presented at the annual
meeting. Consequently, if any other matters should properly come before the
meeting or any adjournment thereof, the persons named in the enclosed proxies
will have discretionary authority to vote such proxies in accordance with their
best judgment on such matters and with respect to matters incident to the
conduct of the meeting.

RECENT CHANGE OF CONTROL

On September 21, 1999, the Company and its subsidiaries, Inland Production
Company ("IPC") and Inland Refining, Inc. ("Refining"), entered into an Exchange
Agreement (the "Exchange Agreement") with Trust Company of the West, as Sub-
Custodian for Mellon Bank for the benefit of Account No. CPFF 873-3032 ("Fund
V"), TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. ("Portfolio")
(Portfolio and Fund V collectively being referred to as "TCW"), Inland Holdings
LLC ("Holdings") and Joint Energy Development Investments II Limited Partnership

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("JEDI"). Pursuant to the Exchange Agreement, Fund V agreed to exchange $75
million in principal amount of subordinated indebtedness of IPC plus accrued
interest of $5.7 million and Portfolio agreed to exchange warrants to purchase
158,512 shares of Common Stock for the following securities of Inland issued to
Holdings, whose members are Fund V and Portfolio: (1) 10,757,747 shares of
Series D Preferred Stock, (2) 5,882,901 shares of Series Z Preferred Stock and
(3) 11,642,949 shares of Common Stock; and JEDI agreed to exchange the 100,000
shares of Inland's Series C Cumulative Convertible Preferred Stock ("Series C
Preferred Stock") owned by JEDI, together with $2.2 million of accumulated
dividends thereon, for (A) 121,973 shares of Series E Preferred Stock and (B)
2,920,975 shares of Common Stock (the "Recapitalization"). The Series C
Preferred Stock bore dividends at a rate of $10 per share, had a liquidation
preference of $100 per share and was required to be redeemed at a price of $100
per share not later than January 21, 2008.

Following closing of the Exchange Agreement, Holdings owns 11,642,949
shares of Common Stock, representing approximately 50.4% of the outstanding
shares of Common Stock at the Record Date, and JEDI owns 2,920,975 shares of
Common Stock, representing approximately 12.6% of the outstanding shares of
Common Stock at the Record Date. The Company's Articles of Incorporation, as
amended (the "Articles"), provide that the Common Stock, Series D Preferred
Stock, Series E Preferred Stock and Series Z Preferred Stock shall vote together
as a single class and not as a separate voting group or class on all matters
presented to the stockholders of the Company, except as mandated by law or as
expressly set forth in the Articles. The Series D Preferred Stock and the Series
E Preferred Stock vote with the Common Stock on a share-for-share basis and the
Series Z Preferred Stock votes with the Common Stock on a share-for-share basis,
but is entitled to the number of votes which would be equal to the total number
of shares of Common Stock into which the Series Z Preferred Stock would be
convertible, which is presently one share of Common Stock for each share of
Series Z Preferred Stock. Pursuant to the Articles, the total number of votes of
the combined class of Common Stock, Series D Preferred Stock, Series E Preferred
Stock and Series Z Preferred Stock outstanding as of the Record Date is
39,856,310 votes, of which 28,283,597 votes (representing approximately 71% of
the total) are owned by Holdings, and 3,042,948 votes (representing
approximately 7.6% of the total) are owned by JEDI. TCW Asset Management Company
has the power to vote and dispose of the securities owned by Holdings.

In connection with the Exchange Agreement, the Company, Holdings, Fund V
and JEDI entered into the Shareholders Agreement with the Smith Group. Certain
members of the Smith Group could be viewed as having been in control of the
Company prior to the Recapitalization. Under the Shareholders Agreement,
Holdings, JEDI and the Smith Group also agreed with each other to vote their
respective shares to ensure that the Board of the Company would consist of six
members and that one member would be designated for election to the Board by the
holders of Common Stock and Series Z Preferred Stock, voting together as one
voting class. Each of JEDI and Holdings further agreed not to vote their
respective shares of Common Stock and Series Z Preferred Stock in the election
of such one designated Board member for as long as they owned Series D Preferred
Stock or Series E Preferred Stock and the Smith Group continued to hold 10% or
more of the combined outstanding shares of Common Stock and Series Z Preferred
Stock; provided, that if Holdings does not at such time hold enough Series D
Preferred Stock to entitle it to elect four members to the Board, Holdings will
be entitled to vote an amount of its Common Stock proportionate to the reduction
in number of directors it is entitled to designate as a holder of Series D
Preferred Stock; and, provided, further, that if the Smith Group elected not to
vote their shares of Common Stock, then JEDI and Holdings are entitled to vote
their shares of Common Stock and Series Z Preferred Stock for the Common Stock
designee to the Board. Each member of the Smith Group agreed not to vote their
shares of Common Stock for the election of the one board member to be designated
for election by the holders of Common Stock and Series Z Preferred Stock, voting
together as a single voting class, as long as the Smith Group continued to hold
10% or more of the combined outstanding shares of Common Stock and Series Z
Preferred Stock. JEDI has elected not to exercise its right to designate a Board
member and, therefore, there will only be five members of the Board. Moreover,
JEDI and Holdings have stated to the Company they will not vote their shares of
Common Stock or Series Z Preferred Stock in the election of the Common Stock
designee to the Board.

MATTER 1
ELECTION OF DIRECTORS

At the meeting, five directors are to be elected to hold office until the
2000 annual meeting of stockholders or until their successors are elected and
qualified. The Company's Articles provide that the number of directors shall be

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fixed by the Board of Directors, but shall not be less than three members. The
Board of Directors has fixed the number of directors at five. Four members of
the Board of Directors are to be elected by the holders of Series D Preferred
Stock and one member of the Board of Directors is to be elected by the holders
of Common Stock and Series Z Preferred Stock voting together as one voting
class.

Holder of Series D Preferred Stock

The holder of Series D Preferred Stock is entitled to elect four of the
five nominees for election to the Board of Directors. The nominees for
consideration by the holder of Series D Preferred Stock are identified below
under "Management."

Proxies for shares of Series D Preferred Stock may not be voted for a
greater number of persons than the number of Series D Preferred Stock nominees
named in this proxy statement. It is the intention of the persons named in the
enclosed form of proxy to vote such proxy FOR the election of the Series D
Preferred Stock nominees named below unless authorization is withheld on the
proxy. Management does not contemplate that any Series D Preferred Stock nominee
will be unable or unwilling to serve as a director or become unavailable for any
reason, but if such should occur before the meeting, a proxy voted for any such
individual will be voted for another Series D Preferred Stock nominee to be
selected by management.

The enclosed form of Series D Preferred Stock proxy provides a means for
the holder of Series D Preferred Stock to vote for all of the Series D Preferred
Stock nominees listed therein, to withhold authority to vote for one or more of
such nominees or to withhold authority to vote for all such nominees. Each
properly executed proxy received in time for the meeting will be voted as
specified therein. If the holder of Series D Preferred Stock does not specify
otherwise, the shares represented by such stockholder's proxy will be voted for
the Series D Preferred Stock nominees listed therein or, as noted above, for
other Series D Preferred Stock nominees selected by management. The withholding
of authority or abstention will have the effect of a negative vote because there
is only one holder of Series D Preferred Stock. Under Washington law, directors
are elected by a plurality of the votes cast, assuming a quorum is present. The
presence of a majority of the outstanding shares of Series D Preferred Stock
will constitute a quorum. The shares held by the holder of Series D Preferred
Stock who signs and returns the enclosed form of Series D Preferred Stock proxy
will be counted for purposes of determining the presence of a quorum at the
meeting, but such holder must also vote for the election of each Series D
Preferred Stock nominee for such nominee's election to be valid.

The Board of Directors recommends a vote FOR the four Series D Preferred
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Stock nominees to the Board of Directors identified below under "Management."

Holders of Common Stock

Holders of Common Stock are entitled to elect one of the five nominees for
election to the Board of Directors. The nominee for consideration by holders of
Common Stock is identified below under "Management."

Proxies for shares of Common Stock may not be voted for a greater number of
persons than the Common Stock nominee named in this proxy statement. It is the
intention of the persons named in the enclosed form of proxy to vote such proxy
FOR the election of the Common Stock nominee named below unless authorization is
withheld on the proxy. Management does not contemplate that the Common Stock
nominee will be unable or unwilling to serve as a director or become unavailable
for any reason, but if such should occur before the meeting, a proxy voted for
such individual will be voted for another Common Stock nominee to be selected by
management.

The enclosed form of Common Stock proxy provides a means for holders of
Common Stock to vote for the Common Stock nominee listed therein or to withhold
authority to vote for such nominee. Each properly executed proxy received in
time for the meeting will be voted as specified therein. If a holder of Common
Stock does not specify otherwise, the shares represented by such stockholder's
proxy will be voted for the Common Stock nominee listed therein or, as noted
above, for another Common Stock nominee selected by management. The withholding
of authority or abstention will have no effect upon the election of the director
by holders of Common Stock because under Washington law directors are elected by
a plurality of the votes cast, assuming a quorum is present. As noted above,
holders of Series

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Z Preferred Stock and Common Stock are entitled to vote together as one voting
class. However, the holder of Series Z Preferred Stock has agreed not to vote
its shares in the election of the Common Stock nominee. Further, the holder of
Series D Preferred Stock and Series E Preferred Stock and the Smith Group have
agreed not to vote their respective shares of Common Stock in the election of
the Common Stock nominee, but the shares of Common Stock held by the holders of
Series D Preferred Stock and Series E Preferred Stock, and the Series Z
Preferred Stock will be considered to be present at the meeting for purposes of
assuring that a quorum of the combined outstanding shares of Common Stock and
Series Z Preferred Stock is present. The election of the Common Stock nominee,
however, will be based on a plurality vote of the remaining 2,817,694 shares of
Common Stock outstanding.

The Board of Directors recommends a vote FOR the Common Stock nominee to
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the Board of Directors identified below under "Management."

MATTER 2
REVERSE SPLIT AND AMENDMENTS TO ARTICLES OF INCORPORATION

Introduction

The Board of Directors of the Company has adopted a resolution approving,
and recommends to the holders of Series D Preferred Stock, Series E Preferred
Stock, Series Z Preferred Stock and Common Stock that they approve, (1) an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock from 25,000,000 shares to 100,000,000 shares
(without affecting par value) ("Amendment No. One", a copy of which is attached
hereto as Annex A), (2) a 1-for-10 reverse stock split of the Company's then
authorized (without affecting par value) and presently issued and outstanding
shares of Common Stock and the 5,882,901 shares of Common Stock into which the
Series Z Preferred Stock will be automatically converted upon the filing of
Amendment No. One (the "Reverse Split"), and (3) an amendment to the Company's
Articles of Incorporation, following the effective date of the Reverse Split, to
increase the post-split number of authorized shares of Common Stock from
10,000,000 shares to 25,000,000 shares (without affecting par value) ("Amendment
No. Two", a copy of which is attached hereto as Annex B), all of which shall be
considered as one proposal (the "Proposal") submitted to a vote of the holders
of Series D Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock
and Common Stock. The vote will be taken for or against the Proposal so that all
three elements are considered in one vote. The Proposal was adopted by the
Company's Board of Directors and is subject to approval by the holders of Series
D Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock and Common
Stock.

On the Record Date, Holdings owned 11,642,949 shares of Common Stock,
representing approximately 50.4% of the outstanding shares of Common Stock as a
single class, and 10,757,747 shares of Series D Preferred Stock and 5,882,901
shares of Series Z Preferred Stock, representing, together with its Common
Stock, approximately 71% of the total outstanding shares of Series D Preferred
Stock, Series E Preferred Stock, Series Z Preferred Stock and Common Stock as a
combined voting class. Holdings has indicated to management of the Company that
it intends to vote its shares for the approval of the Proposal, which will
ensure such approval by the holders of Series D Preferred Stock, Series E
Preferred Stock, Series Z Preferred Stock and Common Stock.

Upon approval of the Proposal at the annual meeting, the following actions
will take place:

1. Amendment No. One will be filed with the State of Washington on
December 14, 1999 (the "Effective Date") and the number of authorized shares of
Common Stock will be increased from 25,000,000 shares to 100,000,000 shares
(without affecting par value) as of the Effective Date.

2. The Reverse Split of the Company's 100,000,000 authorized (without
affecting par value) and existing issued and outstanding Common Stock and the
5,882,901 shares of Common Stock into which the Series Z Preferred Stock will
automatically convert on the filing of Amendment No. One will occur and such
authorized and issued and outstanding shares will automatically be divided by
10, and each holder of 10 shares of Common Stock will automatically

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become the holder of one post-split share of Common Stock. No fractional shares
will be deemed issued in connection with the Reverse Split, and any fractional
shares that may result will be rounded up to the nearest whole post-split share.
The certificates representing the existing pre-split outstanding shares of
Common Stock will not be required to be exchanged for new certificates
representing post-split shares. Rather, the existing certificates shall be
deemed to automatically constitute and represent the correct number of post-
split shares without further action by the stockholders, and new certificates
will only be issued as old certificates are delivered to the Company's transfer
agent as transfers of shares occur after the Effective Date. As a result of the
Reverse Split, the number of authorized shares will be reduced from 100,000,000
to 10,000,000 shares (without affecting par value) and the number of outstanding
shares of Common Stock on the Effective Date will be reduced from 28,976,590
shares to approximately 2,897,659 shares (subject to minor adjustments due to
the rounding up of fractional shares).

3. Immediately following the Effective Date, Amendment No. Two will be
filed with the State of Washington and the number of post-split authorized
shares of Common Stock will be increased from 10,000,000 post-split shares to
25,000,000 post-split shares (without affecting par value). Immediately after
filing Amendment No. Two with the State of Washington, the Company will have
authorized 25,000,000 shares of Common Stock, of which approximately 2,897,659
shares will be issued and outstanding (subject to minor adjustments due to the
rounding up of fractional shares).

The enclosed forms of proxy provide a means for holders of Series D
Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock and Common
Stock to vote for or against the Proposal, or to withhold authority to vote for
the Proposal. Each properly executed Proxy received in time for the meeting will
be voted as specified thereon. If a holder of Series D Preferred Stock, Series E
Preferred Stock, Series Z Preferred Stock or Common Stock does not specify
otherwise, the shares represented by such stockholder's proxy will be voted for
the Proposal. The affirmative vote, either in person or by proxy, of the holders
of (1) more than 50% of the shares of Series D Preferred Stock, Series E
Preferred Stock, Series Z Preferred Stock and Common Stock outstanding as of the
Record Date, voting as one combined voting class, and (2) more than 50% of the
shares of Common Stock outstanding as of the Record Date, voting as a separate
voting class, is necessary to approve the Proposal. Accordingly, if a
stockholder abstains from voting certain shares on the approval of the Proposal,
or a beneficial owner fails to deliver written instructions to his nominee
holder of shares so that the nominee holder is not able to vote such shares, it
will have the effect of a negative vote. However, as noted above, Holdings has
advised management that it intends to vote for the Proposal and, as a result,
approval of the Proposal is assured.

The voting rights and other rights attributable to Common Stock will not be
altered by the Proposal. Except for the rounding up of fractional shares (which
will result in only minor adjustments), the proposed Reverse Split will not
affect any stockholder's proportionate equity interest in the Company. The
Proposal will not change the par value of Common Stock. The only effect on the
Company's consolidated financial statements will be a reclassification of the
capital accounts on the Company's balance sheet and a recalculation of loss per
share and weighted average shares outstanding as if the Reverse Split had
occurred on the first day of each period presented.

Reasons for Proposed Reverse Split

The Board of Directors of the Company is of the opinion that the current
price per share of the Company's Common Stock has a tendency to diminish the
effective marketability of such stock because of the reluctance of many leading
brokerage firms to recommend lower-priced stocks to their clients. Additionally,
the policies and practices of a number of brokerage houses tend to discourage
individual brokers within those firms from dealing in lower-priced stocks. Some
of such policies and practices pertain to the payment of broker's commissions
and to time consuming procedures that operate to make the handling of lower-
priced stocks unattractive to brokers from an economic perspective. The
structure of trading commissions also tends to have an adverse impact upon
holders of lower-priced stocks since the brokerage commission payable on the
sale of a lower-priced stock generally represents a higher percentage of the
sales price than the commission on a relatively higher-priced stock. The
foregoing factors adversely affect the price and liquidity of the Common Stock,
and could also affect the Company's ability to raise additional capital through
a sale of equity securities. While the Company may pursue attempts to raise
additional equity capital through a sale of equity securities at some future
time following the Reverse Split, there are no current plans to raise such

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additional capital and there can be no assurance that additional capital can be
raised on terms acceptable to the Company, even if the Reverse Split is
approved.

The Board of Directors is hopeful that the decrease in the number of shares
of Common Stock outstanding as a consequence of the proposed Reverse Split, and
the anticipated corresponding increased price per share, will stimulate interest
in the Company's post-split Common Stock and possibly promote greater liquidity
for the Company's stockholders with respect to those shares held by them.
However, the possibility does exist that such liquidity could be adversely
affected by the reduced number of shares which would be outstanding after the
proposed Reverse Split.

The Board of Directors is also hopeful that the proposed Reverse Split will
result in a price level for the shares that would mitigate the present
reluctance, policies and practices on the part of brokerage firms referred to
above and diminish the adverse impact of trading commissions on the potential
market for the Company's stock. However, there can be no assurance that the
proposed Reverse Split will achieve the desired results which have been outlined
above, nor can there be any assurance that the Reverse Split will not adversely
impact the market price of the Common Stock or, alternatively, that any
increased price per share of the Common Stock immediately after the proposed
Reverse Split will be sustained for any prolonged period of time. In addition,
the Reverse Split may have the effect of creating odd lots of stock for some
stockholders and such odd lots may be more difficult to sell or have higher
brokerage commissions associated with the sale of such odd lots.

Management of the Company is not aware of any present efforts by any person
or persons to accumulate Common Stock in order to obtain control of the Company
and the proposed Reverse Split is not intended to be an anti-takeover device.
The approval of the Proposal is being sought simply to enhance the image of the
Company and to price the Common Stock in a price range more acceptable to the
brokerage community and to investors.

Reasons for Increase of Post-Split Number of Authorized Shares

Amendment No. Two will be filed immediately after the Effective Date in
order to increase the post-split number of authorized shares of Common Stock
from 10,000,000 shares to 25,000,000 shares. After giving effect to the Reverse
Split on the Effective Date, the Company will have approximately 2,897,659
shares (subject to minor adjustments due to rounding of fractional shares)
outstanding, which would represent approximately 30% of the authorized shares if
Amendment No. Two was not implemented. In order to provide the Company with
flexibility to engage in financing and other acquisition transactions with
Common Stock, and to otherwise have sufficient shares of Common Stock available
for issuance from time to time by the Board of Directors upon its determination
that such issuance is appropriate and in the best interest of the Company, the
Board has approved, and recommends that the holders of Common Stock approve as
part of the Proposal, Amendment No. Two increasing the number of post-split
authorized shares of Common Stock to 25,000,000 shares. Other than various
options and warrants representing approximately 144,516 post-split shares, the
Company is not presently a party to any agreement, letter of intent or
understanding with any other party respecting any merger, acquisition, or other
transaction that would result in the issuance of additional Common Stock.

General Effect of Proposal

The effect of the Proposal on the aggregate number of shares of the
Company's Common Stock is as follows:

Prior to After
Number of shares Proposal Proposal
- ---------------- -------- --------

Common Stock
Authorized 25,000,000 25,000,000
Outstanding 23,093,689 2,897,659/(1)/
Available for issuance 1,906,311 22,102,341/(1)/
Par value per share $ .001 $ .001

-7-
<PAGE>

Prior to After
Number of shares Proposal Proposal
- ---------------- -------- --------

Preferred Stock
Authorized 20,000,000 20,000,000
Outstanding Series D 10,757,747 10,757,747
Outstanding Series E 121,973 121,973
Outstanding Series Z 5,882,901 -

Pro forma financial data (in thousands)/(2)/
- --------------------------------------------

Prior to Proposal After Proposal
----------------- --------------

Mezzanine equity
Series D Preferred Stock $ 60,500 $ 60,500
Series E Preferred Stock 8,000 8,000

Stockholders' equity
Series Z Preferred Stock 7,280 -
Common stock 23 3/(1)/
Additional paid-in capital 66,694 73,994/(1)/
Accumulated deficit (35,729) (35,729)
--------- ---------
Total stockholders' equity $ 38,268 $ 38,268
========= =========

_________________________

(1) Subject to minor adjustment due to rounding of fractional shares. Also
includes conversion of Series Z Preferred Stock into Common Stock.
(2) Based upon audited financial information at December 31, 1998, as adjusted
on a pro forma basis to give effect to the Recapitalization of the Company
on September 21, 1999 and the resulting issuance of 10,757,747 shares of
Series D Preferred Stock, 121,973 shares of Series E Preferred Stock,
5,882,901 shares of Series Z Preferred Stock and 14,563,924 shares of
Common Stock, and the cancellation of 100,000 shares of Series C Preferred
Stock and the accrued dividends thereon. The Series Z Preferred Stock
automatically converts into 5,882,901 shares of Common Stock upon approval
of the Proposal.

Effect Upon Outstanding Options and Warrants

In connection with the Proposal, all outstanding options and warrants
exercisable for 144,516 shares of Common Stock will be adjusted so that the
number of shares issuable upon the exercise of such outstanding options or
warrants will be decreased in proportion to the 1-for-10 Reverse Split, and the
exercise price per share under such outstanding options and warrants will be
proportionately increased. Outstanding options and warrants will be rounded up
to the nearest whole share and no cash payment will be made in respect of any
fractional share. The Company's Amended 1988 Option Plan and the 1997 Option
Plan (the "Plans") presently provide for 212,800 shares and 500,000 shares,
respectively, which will be decreased proportionately so that the number of
post-split shares authorized under the Plans will equal 21,280 shares and 50,000
shares, respectively.

Effect on Series D and Series E Preferred Stock

The Company also has outstanding, 10,757,747 shares of Series D Preferred
Stock and 121,973 shares of Series E Preferred Stock. Neither the Proposal nor
the Reverse Split will have an effect on the Series D Preferred Stock or Series
E Preferred Stock.

-8-
<PAGE>

Effect on Series Z Preferred Stock

The Company also has outstanding 5,882,901 shares of Series Z Preferred
Stock which are convertible into 5,882,901 shares of Common Stock immediately
upon filing of Amendment No. One with the State of Washington. The converted
shares of Common Stock will be split 1-for-10 as part of the Reverse Split, so
that the holder of former shares of Series Z Preferred Stock will have 588,291
post-split shares of Common Stock upon conversion of the Series Z Preferred
Stock.

No Exchange of Stock Certificates

As noted above under "Introduction", each current certificate representing
issued and outstanding shares of Common Stock prior to the Reverse Split shall
be deemed to automatically constitute and represent the correct number of post-
split shares after the Effective Date without further action by the
stockholders, and it will not be necessary for any stockholder to surrender the
existing certificates representing such Common Stock.

Federal Income Tax Consequences

A summary of the federal income tax consequences of the proposed Reverse
Split is set forth below. The following discussion is based upon present federal
tax law and does not purport to be a complete discussion of such consequences.
Accordingly, STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR MORE
DETAILED INFORMATION REGARDING THE EFFECTS OF THE PROPOSED REVERSE SPLIT ON
THEIR INDIVIDUAL TAX STATUS.

1. The proposed Reverse Split will not be a taxable transaction to the
Company.

2. A stockholder will not recognize any gain or loss as a result of the
Reverse Split.

3. The aggregate tax basis of a stockholder's post-split shares of Common
Stock (including any fractional shares issued in connection with the rounding up
of fractional shares) will equal the aggregate tax basis of the stockholder's
shares of pre-split Common Stock. The holding period of the post-split Common
Stock generally will include the holding period of the stockholder's pre-split
Common Stock, provided the pre-split shares of Common Stock were capital assets
in the hands of such stockholder.

No Dissenters' Rights

Under Washington law, stockholders are not entitled to dissenters' rights
with respect to the Reverse Split or any other element of the Proposal.

The Board of Directors recommends a vote FOR approval of the Proposal.
---

MANAGEMENT

Director Nominees and Executive Officers

The following table provides information as of November 1, 1999, with
respect to each of the Company's directors, director nominees and executive
officers:

-9-
<PAGE>

<TABLE>
<CAPTION>
Served as Executive
Officer or
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
Directors and Director Nominees
Series D Preferred
Stock Nominees:

John D. Lomax /(1)/ 75 Director (Chairman) 1999

Bill I. Pennington 47 Director, Chief Executive 1994
Officer and Chief Financial
Officer

Marc MacAluso 39 Director 1999

T Brooke Farnsworth /(1)/ 54 Director 1999

Common Stock Nominee:

John E. Dyer /(2)/ 37 Director, President 1993
and Chief Operating Officer

Other Executive Officers

Michael J. Stevens 34 Vice President, Secretary 1993
and Treasurer

William T. War 56 Vice President 1998
</TABLE>

____________________

(1) Member of the Audit Committee.
(2) Mr. Dyer is resigning as President and Chief Operating Officer of the
Company effective December 31, 1999, unless the Company causes such
resignation to be effective on November 30, 1999. He has also agreed to
resign as a director upon the written request of a majority of the Board or
TCW Asset Management Company.

John D. Lomax. Mr. Lomax has served as Chairman since September 23, 1999
and a director of the Company since September 13, 1999. He also served as
Chairman and a director of the Company from September 1994 until September 1996.
Mr. Lomax has been retired for the past five years.

Bill I. Pennington. Mr. Pennington has served as Chief Financial Officer of
the Company since September 21, 1994, and as Chief Executive Officer since
September 23, 1999. He also served as Vice President from March 22,1996 until
his election as Chief Executive Officer. He was appointed as a director of the
Company on September 23, 1999. He served as a director of the Company from
September 21, 1994 until September 25, 1996 and as Treasurer of the Company from
September 21, 1994 until March 22, 1996. He also served as President, Chief
Operating Officer

-10-
<PAGE>

and a Director of Lomax Exploration Company, now known as Inland Production
Company ("IPC"), from May 1987 until the Company's acquisition of IPC on
September 21, 1994. From March 1986 until May 1987, Mr. Pennington was a manager
with the accounting firm of Coopers & Lybrand in Houston, Texas. Mr. Pennington
is a certified public accountant.

Marc MacAluso. Mr. MacAluso was appointed as a director on October 14,
1999. He has been Senior Vice President of TCW Asset Management Company in
Houston, Texas since August 1994, where he is involved in all aspects of
mezzanine financing for TCW's Energy Group. He joined TCW Asset Management
Company after leading new business development at American Exploration Company.
Prior to American Exploration Company, his experience includes various
assignments with Shell Oil Company and Shell Western E&P, Inc.

T Brooke Farnsworth. Mr. Farnsworth was appointed as a director on
September 13, 1999. He was a director of the Company from September 1994 until
September 1996. Mr. Farnsworth has practiced law in Houston, Texas for more than
27 years, where presently he is the Managing Partner of the law firm of
Farnsworth & vonBerg. He served as Secretary of IPC from 1985 until September
21, 1994 and as a director of IPC from 1992 until September 21, 1994.

John E. Dyer. Mr. Dyer has been Chief Geologist of the Company since March
1, 1993, President since November 20, 1998, Vice President of the Company from
April 28, 1993 until November 20, 1998 and Chief Operating Officer of the
Company since March 22, 1996. He was appointed as a director on September 23,
1999. Mr. Dyer will resign as President and Chief Operating Officer of the
Company effective December 31, 1999, unless the Company elects to cause such
resignation to be effective November 30, 1999. From January 1992 until his
association with the Company, Mr. Dyer was an independent consulting geologist
to the oil and gas industry for various companies. From March 1988 through
December 1991, he was the Chief Geologist for Miller Oil Company.

Michael J. Stevens. Mr. Stevens has been the Controller of the Company
since June 28, 1993, the Secretary since September 30, 1993 and a Vice President
since April 30, 1997. He was the Treasurer of the Company from September 30,
1993 until September 21, 1994, and was reappointed as Treasurer on March 22,
1996. Prior to his association with the Company, he was a manager with Coopers
& Lybrand and senior internal auditor at Diversified Energy, Inc., a publicly
traded oil and gas company in Minneapolis, Minnesota. Mr. Stevens is a
certified public accountant.

William T. War. Mr. War has served as Vice President of the Company since
October 5, 1998. From June, 1990 until his association with the Company, Mr.
War was Project Manager for Louisiana Land & Exploration/Burlington Resource's
Lost Cabin Gas Plant. From October 1978 to November 1987, he founded and
served as President of Fuel Chemicals Incorporated and co-founded and served as
Executive Vice President of JN Exploration and Production and JN
Incorporated/Nielson International. Prior thereto since 1966, he served in
engineering, management and executive positions with Shell, Union Carbide, Dow
Chemical and Husky Oil.

Meetings, Committees and Compensation of Directors

The Company has an Audit Committee, but does not have a nominating
committee or compensation committee.

The Audit Committee reviews financial press releases and earnings reports
and recommends to the Board the independent public accountants to be used by the
Company. Its current members are Messrs. Lomax and Farnsworth. They were
appointed as members on September 23, 1999. The members of the Audit Committee
during fiscal 1998 were Arthur J. Pasmas, Gregory S. Anderson and Paul C. Schorr
IV. The Audit Committee held one meeting in 1998.

The Board of Directors of the Company held a total of eight meetings during
1998 and took seven actions by written consent. Directors of the Company are
entitled to reimbursement for their reasonable expenses in connection with their
travel to and from, and attendance at, meetings of the Board of Directors or
committees thereof. Prior to September 23, 1999, directors of the Company who
were not employees were paid an annual fee of $12,000, plus $1,000 for each
meeting attended personally, $500 for each meeting attended telephonically and
$500 for each meeting of any committee whether attended personally or
telephonically. Effective September 23, 1999, members of the Board

-11-
<PAGE>

who are not employees of the Company will be paid an annual fee of $25,000 and
no additional meeting fees for meetings of the Board or any committee. Prior to
September 23, 1993, each non-employee director was also granted an option for
6,000 pre-split shares of Common Stock upon the date of initial election and
upon the date of each reelection to the Board at an exercise price equal to the
fair market value of the Common Stock on the business day preceding the date of
election or reelection. The Board of Directors may also grant discretionary
options to directors.

Messrs. Lomax and Farnsworth each received $25,000 as compensation for
serving on the Special Committee of the Board of Directors which evaluated the
Recapitalization and made recommendations to the full Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
beneficially own more than 10% of the Common Stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"Commission").

Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) promulgated under the
Exchange Act or upon written representations received by the Company, the
Company is not aware of any failure by any officer, director or beneficial owner
of more than 10% of the Company's Common Stock to timely file with the
Commission any Form 3, 4 or 5 during 1998.

Certain Transactions

TCW Indebtedness. IPC owed Fund V $75 million in principal amount of
subordinated indebtedness at December 31, 1998, and $75 million in principal and
accrued interest of $5.7 million at September 21, 1999. As noted above under
"Recent Change of Control," Fund V agreed to exchange such indebtedness for
shares of Series D Preferred Stock, Series Z Preferred Stock and Common Stock
issued to Holdings. Marc MacAluso is Senior Vice President of TCW Asset
Management Company. TCW Asset Management Company has the power to vote and
dispose of the securities owned by Holdings.

Exchange of Series C Preferred Stock. As noted above under "Recent Change
of Control," JEDI agreed pursuant to the Exchange Agreement to exchange its
100,000 shares of Series C Preferred Stock having a redemption price of $10
million, together with 2.2 million of accumulated dividends, for 121,973 shares
of Series E Preferred Stock and 2,920,975 shares of Common Stock.

Registration Rights Agreement. In connection with the Exchange Agreement,
the Company entered into a Registration Rights Agreement (the "Registration
Agreement") with Holdings, Portfolio, JEDI and the Smith Group pursuant to which
the Company granted Holdings, JEDI and the Smith Group piggy-back registration
rights to include their shares on any registration statement filed by the
Company under the Securities Act of 1933, as amended, subject to standard
underwriters' kick-out clauses and other conditions. The Company also granted
to Holdings, JEDI and the Smith Group demand registration rights which entitle
Holdings to require the Company to file up to three registration statements to
register its shares, entitle JEDI to require the Company to file up to two
registration statements to register its shares and entitle the Smith Group to
require the Company to file one registration statement to register its shares.
The Company will be responsible for paying the costs and expenses associated
with all registration statements, including the fees of one law firm acting as
counsel to the holders requesting registration, but excluding underwriting
discounts and commissions and any other expenses of the party requesting
registration.

Farmout Agreement. The Company entered into a Farmout Agreement with Smith
Management LLC ("Smith Management") effective June 1, 1998. As of December 31,
1998, SEP, an affiliate of Smith Management, received 152,220 pre-split shares
of Common Stock as payment of proceeds under the Farmout Agreement. Effective
November 1, 1998, an Amendment to the Farmout Agreement was executed that
suspended future drilling rights under the Farmout Agreement until such time as
both the Company, Smith Management and the Company's senior lenders agreed to
recommence such rights. In addition, a provision was added that gave Smith
Management the option to receive cash

-12-
<PAGE>

rather than Common Stock if the average stock price was calculated at less than
$3.00 per share, such cash only to be paid if the Company's senior lenders
agreed to such payment. The Farmout Agreement was further amended on September
21, 1999 as part of the Recapitalization to eliminate this option, to provide
for cash payments only effective June 1, 1999, and to allow the Company to
retain all proceeds under the Farmout Agreement accrued from November 1, 1998
through May 31, 1999. The Farmout Agreement provides that Smith Management will
reconvey all drillsites to the Company once Smith Management has recovered from
production an amount equal to 100% of its expenditures, including management
fees and production taxes, plus an additional sum equal to 18% per annum on such
expended sums.

Consulting Agreement. The Company entered into a Consulting Agreement with
Arthur J. Pasmas on September 21, 1999 pursuant to which Mr. Pasmas will receive
$200,000 annually for consulting services to be provided to the Company until
September 21, 2002. Mr. Pasmas has been Vice President of Smith Management (or
affiliated entities) since 1987.

Severance Agreement. The Company expects to enter into a Severance
Agreement with John E. Dyer in November 1999 pursuant to which the Company will
agree to pay $157,500 as his severance payment under his employment agreement
and grant him an option to become effective as of May 1, 2000, which option will
be exercisable after May 1, 2000 and before May 30, 2000, to acquire certain
real estate in Duchesne County, Utah from the Company for $100 plus the
assumption of the Company's obligations under a deed of trust with an
outstanding balance of $168,000 at October 31, 1999. The Company paid $217,000
for this real estate in May 1995.

Executive Compensation

Summary Compensation Table. The following table sets forth the
compensation earned by the Company's Co-Chief Executive Officers and each of its
three other most highly compensated executive officers for the year ended
December 31, 1998 (collectively, the "Named Officers") in salary and bonus for
services rendered in all capacities to the Company for the fiscal years ended
December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------- ------------
Securities
Underlying
Other Annual Options or
Name/Principal Position Year Salary Bonus Compensation Warrants
- ----------------------- ---- -------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Arthur J. Pasmas, 1998 -- -- -- --
Co-Chief Executive Officer

Kyle R. Miller, 1998 $250,000 -- $36,373(1) --
Co-Chief Executive Officer 1997 $199,559 $85,000 $19,147 295,000
1996 $180,000 $45,000 $71,924(2) 100,000

John E. Dyer, 1998 $175,000 -- $21,934(3) --
President and 1997 $148,187 $60,000 $ 1,681 220,000
Chief Operating Officer 1996 $109,400 $34,375 $ 4,609 50,000

Bill I. Pennington, 1998 $175,000 -- $21,705(4) --
Vice President and 1997 $148,236 $60,000 $ 3,958 185,000
Chief Financial Officer 1996 $137,500 $34,375 $ 2,043 50,000

Michael J. Stevens, 1998 $100,000 -- $13,933(5) --
Vice President, Secretary and 1997 $ 90,430 $25,000 $ 3,459 100,000
Treasurer 1996 $ 73,507 $ 5,000 $ 1,187 12,240
</TABLE>
_____________________

(1) Vacation compensation in 1998 for Mr. Miller totaled $15,623 and 401(k)
matching compensation totaled $8,750. In addition, Mr. Miller received
$12,000 compensation with respect to his automobile.

-13-
<PAGE>

(2) Includes a $50,000 payment for Mr. Miller canceling his prior employment
agreement and entering into a new one.
(3) Vacation compensation in 1998 for Mr. Dyer totaled $13,126 and 401(k)
matching compensation totaled $8,808.
(4) Vacation compensation in 1998 for Mr. Pennington totaled $12,453 and 401(k)
matching compensation totaled $9,252.
(5) Vacation compensation in 1998 for Mr. Stevens totaled $7,933 and 401(k)
matching compensation totaled $6,000.

Option/Warrant/SAR Grants. The Company granted no options, warrants or SAR
grants during 1998.

Option/Warrrant/SAR Exercises and Year-End Value Table. The following table
sets forth certain information regarding option exercises and the value of the
outstanding options and warrants to purchase Common Stock and SARS held by the
Named Officers at December 31, 1998:

<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities Underlying In-the-Money Options
Number of Shares Unexercised Options at Fiscal Year End Fiscal Year End(1)
-------------------------------------- -----------------
Acquired on Realized
Name Exercise Value Execisable Unexercisable Exercisable Unexecisable
- ---- ------------- -------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Arthur J. Pasmas -- -- 15,000 -- -- --

Kyle R. Miller -- -- 396,411 222,500 -- --

John E. Dyer -- -- 120,500 160,000 -- --

Bill I. Pennington -- -- 100,833 134,167 -- --

Michael J. Stevens -- -- 28,907 83,333 -- --
</TABLE>

_____________________

(1) Value is based on the closing bid price of $1.19 per share on December 31,
1998.

Compensation Committee Interlocks and Insider Participation

Arthur J. Pasmas served as Chairman of the Compensation Committee of Inland's
Board of Directors and also served as Co-Chief Executive Officer. Mr. Pasmas
received no compensation for his duties as Co-Chief Executive Officer in 1998.

Report from the Compensation Committee Regarding Executive Compensation

The Compensation Committee of the Board of Directors determines the
compensation of the Named Officers. The Compensation Committee has furnished the
following report on executive compensation in connection with this Annual
Report.

Compensation Philosophy. As members of the Compensation Committee, it is
our duty to administer the executive compensation program for the Company. The
Compensation Committee is responsible for establishing appropriate compensation
goals for the executive officers of the Company, evaluating the performance of
such executive officers in meeting such goals and making recommendations to the
Board of Directors with regard to executive compensation. The Company's
compensation philosophy is to ensure that executive compensation be directly
linked to continuous improvements in corporate performance, achievement of
specific operations, financial and strategic objectives and increases in
stockholder value. The Compensation Committee regularly reviews the compensation
packages of the Company's executive officers, taking into account factors which
it considers relevant, such as business conditions within and outside the
industry, the Company's financial performance, the market compensation for
executives of similar background and experience and the performance of the
executive officer under consideration. The particular elements of the Company's
compensation programs for executive officers are described below.

-14-
<PAGE>

Compensation Structure. The executive base compensation for the Named
Officers is intended to be competitive with that paid in comparably situated
industries, taking into account the scope of responsibilities and internal
relationships. The goals of the Compensation Committee in establishing the
Company's executive compensation program are:

(1) To fairly compensate the executive officers of the Company for their
contributions to the Company's short-term and long-term performance. The
elements of the Company's executive compensation program are (a) annual
base salaries, (b) annual bonuses and (c) equity incentives.

(2) To allow the Company to attract, motivate and retain the management
personnel necessary to the Company's success by providing an executive
compensation program comparable to that offered by companies with which the
Company competes for management personnel. Individual's base salaries are
determined by the Compensation Committee based on the scope of the
executive's responsibilities, a subjective evaluation of the executive's
performance and the length of time the executive has been in the position.

Executive Officer Employment Agreements. Each of the Named Officers, other
than Arthur J. Pasmas, is party to an employment agreement, as described below,
which affects the amount of his compensation.

Executive Compensation Deductibility. It is the Company's intent that
amounts paid pursuant to the Company's compensation plans will generally be
deductible compensation expenses. The Compensation Committee does not currently
anticipate that the amount of compensation paid to the Named Officers will
exceed the amounts specified as deductible pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended.

COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Arthur J. Pasmas, Chairman
Bruce M. Schnelwar

Employment Agreements

On June 1, 1996, Kyle R. Miller, Bill I. Pennington and John E. Dyer
entered into one-year employment agreements with the Company to serve as
President and Chief Executive Officer (Mr. Miller), Vice President and Chief
Financial Officer (Mr. Pennington) and Vice President and Chief Operating
Officer (Mr. Dyer), and on May 1, 1997, Michael J. Stevens entered into a one-
year employment agreement with the Company to serve as Vice President, Secretary
and Treasurer. On September 8, 1998, William T. War entered into an employment
agreement to serve as Vice President. Under their respective employment
agreements, Messrs. Miller, Pennington, Dyer, Stevens and War will receive an
annual base salary of $250,000, $175,000, $175,000, $100,000 and $150,000,
respectively, and Mr. Miller will also receive a monthly car allowance of
$1,000. Such agreements also entitle each person to participate in all employee
benefit plans and programs of the Company. Each employment agreement
automatically renews for successive one year periods, unless terminated by the
Company for cause or without cause, or by the employee. If terminated without
cause by the Company, the Company is required to pay Mr. Miller 150% of his base
salary and bonus paid during the calendar year preceding termination, to pay
Messrs. Pennington, Dyer and Stevens 100% of their respective base salaries and
bonuses paid during the 12 months preceding termination and to pay Mr. War 50%
of his base salary at termination. Each agreement also provides that if the
employee is permanently disabled during the term of the agreement, he will
continue to be employed at 50% of his base salary until the first to occur of
his death, expiration of 12 months, or expiration of the then-current term of
the employment agreement. Each employee also agreed not to compete, directly or
indirectly, against the Company for a period of one year following termination
of his employment, within a 100 mile radius of any oil or gas property owned by
the Company. Mr. Miller also agreed, as part of his employment agreement, to the
termination of his warrant agreement dated July 23, 1993 pursuant to which he
was entitled to be granted a five-year warrant equal to 5% of the number of
shares, options or warrants issued or granted by the Company at any time during
the term of such agreement, and the Company and Mr. Miller agreed that all prior
warrants granted under such warrant agreement would expire June 1, 2003. The
employment agreements of Messrs. Pennington, Dyer and Stevens contain change of
control provisions which have the effect of permitting them to terminate their
agreements and receive 12 months salary and bonus upon a change of control of
Inland.

Effective September 23, 1999, Mr. Miller resigned as Chief Executive
Officer and he and the Company entered into a Severance Agreement pursuant to
which the Company made a severance payment to him of $375,000 and Mr. Miller
agreed to cancel all outstanding warrants and options granted to him. The
Company and Mr. Miller mutually agreed to terminate his employment agreement,
including the noncompetition provision, and granted mutual releases to each
other. Mr. Miller also resigned as a member of the Board effective October 11,
1999.

-15-
<PAGE>

As noted above, the Company and Mr. Dyer expect to enter into a Severance
Agreement in November 1999 pursuant to which, among other things, the Company
and Mr. Dyer will agree to mutually terminate his employment agreement,
including the noncompetition provision, effective December 31, 1999, or November
30, 1999 if elected by the Company. The Company expects to also agree to pay Mr.
Dyer $157,500 as his severance payment due under his employment agreement and
expects Mr. Dyer to cancel all outstanding warrants and options granted to him.
Mr. Dyer has agreed to resign from the Board upon the written request for such
resignation from a majority of the remaining members of the Board or from TCW
Asset Management Company. The parties also expect to grant mutual releases to
each other.

The Company agreed to enter into new employment agreements with Messrs.
Pennington and Stevens, to be effective October 1, 1999, pursuant to which the
Company and Messrs. Pennington and Stevens mutually agreed to terminate their
prior employment agreements, Messrs. Pennington and Stevens agreed to cancel all
outstanding options or warrants granted to them, the Company agreed to grant new
options or warrants to Mr. Pennington (875,000 shares of Common Stock) and Mr.
Stevens (292,000 shares of Common Stock) exercisable at the closing sale price
of the Common Stock on the effective date of their new employment agreements
($0.9375 per share) and vesting over a five year period. Each of Messrs.
Pennington and Stevens waived their right to terminate their prior employment
agreements upon the change of control occasioned by the Recapitalization and to
waive their severance payment thereunder. Pursaunt to their new employment
agreements, the Company agreed to pay them base salaries of $250,000 (Mr.
Pennington) and $130,000 (Mr. Stevens), a retention bonus of $100,000 (Mr.
Stevens), payable $50,000 on execution of the agreement and $10,000 during each
of the next five quarters, and a performance bonus of $250,000 (Mr. Pennington)
and $125,000 (Mr. Stevens) vesting ratably over the next three years based on
the Company meeting or exceeding certain performance criteria, and payable
ratably over the following three years. Their new employment agreements also
entitle them to participate in all employee benefit plans and programs of the
Company. Each agreement also provides that if the employee is permanently
disabled during the term of the Agreement, he will continue to be employed at
50% of his base salary until the first to occur of his death, expiration of 12
months, or expiration of the employment agreement. On a subsequent change of
control of the Company, any unvested portion of their options or warrants
immediately vest and any unvested portion of their performance bonuses
immediately vest and are payable if they are terminated by the Company within 90
days. Mr. Pennington's new employment agreement provides that if his employment
is terminated by the Company for any reason prior to September 30, 2001, he will
receive a termination payment of $168,000, decreased by $21,000 for each
calendar quarter during which he was employed by the Company under the new
employment agreement. The new employment agreement of Mr. Stevens provides that
if the Company terminates his employment for any reason, he will be paid any
unpaid portion of his retention bonus.

[This Space Intentionally Left Blank]

-16-
<PAGE>

Performance Graph

The following graph shows a comparison of cumulative total stockholder
returns for the Common Stock of Inland, the Nasdaq U.S. Composite Index and the
composite peer group over the last five Inland fiscal years.

COMPARISON OF CUMULATIVE STOCKHOLDER TOTAL RETURN (1)

[GRAPHIC]

AMONG THE COMPANY, NASDAQ U.S. COMPOSITE INDEX AND COMPOSITE PEER GROUP

<TABLE>
<CAPTION>
December 31, December 30, December 29, December 31, December 31, December 31,
----------- ----------- ----------- ----------- ----------- -----------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Inland Resources Inc........ 100 100 150 268 328 42
Nasdaq U.S. Composite Index 100 98 138 170 208 293
Peer Group (2).............. 100 83 86 162 178 75
</TABLE>
_______________

(1) Total return assuming reinvestment of dividends. Assumes $100 invested on
December 31, 1993 in Common Stock of Inland, the Nasdaq Composite Index and
the composite peer group.
(2) The Company maintains as its peer group the following companies: Abraxas
Petroleum Corporation, Bellwether Exploration Company, Coho Energy, Inc.,
Credo Petroleum Corporation, Equity Oil Company, The Exploration Company,
Mallon Resources Corporation, Parallel Petroleum Corporation, Prima Energy
Corporation and Southern Mineral Corporation. This peer group was selected
based on market capitalization, total assets and general geographical area.

-17-
<PAGE>

PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth certain information regarding the ownership
of Common Stock, Series D Preferred Stock, Series E Preferred Stock and Series Z
Preferred Stock as of October 31, 1999, by each stockholder known to the Company
to own beneficially more than five percent of the outstanding Common Stock,
Series D Preferred Stock, Series E Preferred Stock or Series Z Preferred Stock,
each current director and director nominee, each Named Officer, and all
executive officers, directors and director nominees of the Company as a group,
based on information provided to the Company by such persons. Except as
otherwise stated, each such person has sole investment and voting power with
respect to the shares set forth in the table:

<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- -------------------

Number of Shares-
Assuming
Number Number Conversion of
Name and Address of of Series Z Preferred
of Beneficial Owner Shares Percent Shares Percent Stock Percent
------------------- ------ ------- ------ ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>

Series D
Preferred Stock
---------------

Inland Holdings LLC /(1)/ 10,757,747 100.0 - - - -
TCW Asset
Management Company
1000 Louisiana Street
Suite 2175
Houston, Texas 77002

Series E
Preferred Stock
---------------

Enron Corp. /(2)/ 121,973 100.0 2,920,975 12.6 2,920,975 10.1
Joint Energy Development
Investments II Limited
Partnership
1400 Smith Street
Houston, Texas 77002

Series Z
Preferred Stock
---------------

Inland Holdings Llc /(1)/ 5,882,901 100.0 11,642,949 50.4 17,525,850 60.5
TCW Asset
Management Company
(see above)

Randall D. Smith /(3)/ - - 5,163,899 22.4 5,163,899 17.8
Pengo Securities Corp.
885 Third Avenue, 34th Floor
New York, New York 10022
</TABLE>

-18-
<PAGE>

<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- ------------------------------------------------------
Number of Shares-
Assuming
Number Number Conversion of
Name and Address of of Series Z Preferred
of Beneficial Owner Shares Percent Shares Percent Stock Percent
------------------- ------ ------- ------ ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Marc Macaluso - - 1,000 * 1,000 *
1000 Louisiana Street
Suite 2175
Houston, Texas 77002

John D. Lomax /(4)/ - - 28,155 * 28,155 *
791 Nyes Place
Laguna Beach, Ca 92651

Bill I. Pennington /(4)/ - - 931,676 3.9 931,676 3.1
410 17th Street
Suite 700
Denver, Colorado 80202

T Brooke Farnsworth /(4)/ - - 3,000 * 3,000 3.9
333 North Sam Houston Parkway
Suite 300
Houston, Texas 77060

John E. Dyer - - 57,513 * 57,513 *
410 17th Street
Suite 700
Denver, Colorado 80202

Michael J. Stevens /(4)/ - - 292,000 1.2 292,000 1.0
4100 17th Street
Suite 700
Denver, Colorado 80202

Kyle R. Miller - - - - - -
19 South Lane
Englewood, Colorado 80110

Arthur J. Pasmas/(3)/ - - 235,702 1.0 235,702 *
5858 Westheimer, Suite 400
Houston, Texas 77057

All Executive Officers, - - 1,313,344 5.4 1,313,344 4.4
Directors And Director
Nominees As A Group
(7 Persons) /(4)/
</TABLE>
__________________________________

* Less Than 1%

(1) Inland Holdings LLC ("Holdings") owns these shares of record and
beneficially. The members of Holdings are Trust Company of the West, as
Sub-Custodian for Mellon Bank for the benefit of Account No. CPFF 873-3032
("Fund V"), And TCW Portfolio No. 1555 Dr V Sub-Custody Partnership, L.P.
("Portfolio"). TCW Asset Management Company has the power to vote and
dispose of the shares owned by Holdings and may be deemed to beneficially
own such shares. Marc Macaluso is Senior Vice President Of TCW Asset
Management Company, but disclaims any beneficial ownership of these shares.
Holdings and TCW Asset Management Company disclaim any beneficial ownership
of the shares owned by Mr. Macaluso. The holder of Series D Preferred Stock
has the right to appoint four members to the Board.
(2) Joint Energy
Development Investments II Limited Partnership ("JEDI") is the record and
beneficial owner of these shares, which may also be deemed to be
beneficially owned by Enron Corp. JEDI, as the holder of Series

-19-
<PAGE>

E Preferred Stock, has the right, at its election, to appoint one member to
the Board, but has not elected to exercise this right.
(3) Pengo Securities Corp. ("Pengo"), an affiliate of Smith Management, owns of
record and beneficially 4,029,269 shares of Common Stock. SEP owns of
record and beneficially 152, 220 shares of Common Stock. Randall D. Smith
owns of record and beneficially 874,410 shares, is deemed to beneficially
own 108,000 shares of Common Stock owned of record and beneficially by
Barbara Stovall Smith, his sister, and may also be deemed to beneficially
own the shares owned of record by Pengo and SEP. Pengo and Randall D. Smith
disclaim beneficial ownership of 163,735 shares of Common Stock owned by
Jeffrey A. Smith and 163,735 shares of Common Stock owned by John W. Adams,
both of whom are officers and directors of Pengo and Smith Management, and
the shares owned by Jeffrey A. Smith and John W. Adams are not included in
the table of shares owned by Randall D. Smith and Pengo. Arthur J. Pasmas
is Vice President of Smith Management. Mr. Pasmas disclaims beneficial
ownership of the shares of the Company's Common Stock owned by Pengo and
Pengo disclaims beneficial ownership of the shares of the Company's Common
Stock owned by Mr. Pasmas, and their respective shares are not included in
the table in the shares owned by the other. The ownership by Mr. Pasmas
reflects options to acquire 15,000 shares of common stock.
(4) Includes shares issuable under outstanding stock options and warrants
granted to Messrs. Lomax, Pennington, Farnsworth and Stevens and all
executive officers, and directors and director nominees as a group for
1,000, 875,000 3,000, 292,000 and 1,171,000 shares, respectively.

STOCKHOLDER PROPOSALS FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS

The Company anticipates that proxy materials for the 2000 annual meeting of
stockholders will be released on or around May 1, 2000. Proposals of
stockholders must be received by the Company at its principal executive office
at 410 17th Street, Suite 700, Denver, Colorado 80202, by January 2, 2000 for
inclusion in the Company's proxy statement and form of proxy relating to the
2000 annual meeting of stockholders.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP served as the Company's principal independent public
accountants for 1998, and has been selected by the Company to serve in 1999.
Representatives of Arthur Andersen LLP are expected to be present at the 1999
annual meeting of stockholders with the opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.

OTHER MATTERS

The cost of solicitation of proxies in the accompanying form will be paid
by the Company. In addition to solicitation by use of the mails, certain
officers and employees of the Company may solicit the return of proxies by
telephone, telegram or personal interviews.

By Order of the Board of Directors

Michael J. Stevens
Secretary

November 17, 1999

-20-
<PAGE>

Appendix A
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
INLAND RESOURCES INC.

Pursuant to RCW 23B.10.060 of the Washington Business Corporation Act, the
undersigned corporation hereby submits the following amendment(s) to the
corporation's Articles of Incorporation.

1. The name of the corporation is Inland Resources Inc.

2. The date of filing the original Articles of Incorporation with the
Secretary of State of Washington is August 12, 1985.

3. The Articles of Incorporation of the corporation are amended by amending
paragraph 1 of Article IV to read in its entirety as follows:

"The aggregate number of shares which this Corporation shall have
authority to issue is 100,000,000 shares of common stock having a par value
of $0.001 per share, and 20,000,000 shares of Class A preferred stock
having a par value of $0.001 per share. Fully paid stock of this
Corporation shall not be liable to any further call or assessment. At the
filing of these Articles of Amendment, each outstanding share of common
stock of the par value of $.001 per share shall become one-tenth (1/10th)
share of common stock of the par value of $0.001 per share, so that at the
filing of these Articles of Amendment stockholders shall be deemed to hold
one share of common stock for every ten shares of common stock held prior
to the filing, with any fractional shares being rounded up to the nearest
whole share of common stock, and the authorized shares of common stock
which were increased to 100,000,000 shares having a par value of $0.001 per
share upon filing of these Articles of Amendment shall again be adjusted by
one-tenth (1/10th) so that after the filing of these Articles of Amendment
and the aforesaid adjustment by one-tenth (1/10th) in the issued and
outstanding shares of common stock, the authorized shares of common stock
shall also be deemed adjusted to 10,000,000 shares of common stock having a
par value of $0.001 per share."

4. The date of adoption of this amendment was December 10, 1999.

5. The amendment was duly approved by shareholder action in accordance with
the provisions of RCW 23B.10.030 and RCW 23B.10.040.

6. These Articles of Amendment will be effective upon filing.

DATED: _________________________ ___, 1999.

INLAND RESOURCES INC.

By: ____________________________________
Bill I. Pennington, Chief Executive
Officer

-21-
<PAGE>

Appendix B
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
INLAND RESOURCES INC.

Pursuant to RCW 23B.10.060 of the Washington Business Corporation Act, the
undersigned corporation hereby submits the following amendment(s) to the
corporation's Articles of Incorporation.

1. The name of the corporation is Inland Resources Inc.

2. The date of filing the original Articles of Incorporation with the
Secretary of State of Washington is August 12, 1985.

3. The Articles of Incorporation of the corporation are amended by amending
paragraph 1 of Article IV to read in its entirety as follows:

"The aggregate number of shares which this Corporation shall have
authority to issue is 25,000,000 shares of common stock having a par value
of $0.001 per share, and 20,000,000 shares of Class A preferred stock
having a par value of $0.001 per share. Fully paid stock of this
Corporation shall not be liable to any further call or assessment."

4. The date of adoption of this amendment was December 10, 1999.

5. The amendment was duly approved by shareholder action in accordance with
the provisions of RCW 23B.10.030 and RCW 23B.10.040.

6. These Articles of Amendment will be effective upon filing. This is the
second Articles of Amendment filed on the date hereof with the Secretary of
State of Washington.

DATED: _________________________ ___, 1999.

INLAND RESOURCES INC.

By: ___________________________________
Bill I. Pennington, Chief Executive
Officer

-22-
<PAGE>

Common Stock Proxy

Inland Resources Inc.

This Common Stock Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Inland Resources Inc. (the "Company") to be held at
the Hyatt Regency Downtown located at 1200 Louisiana Street, Houston, Texas
77002, on December 10, 1999, beginning at 9:00 a.m., Houston Time, and the Proxy
Statement in connection therewith and (2) appoints Bill I. Pennington and
Michael J. Stevens, and each of them, the undersigned's proxies with full power
of substitution for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Common Stock of the Company
standing in the name of the undersigned, or with respect to which the
undersigned is entitled to vote and act, at the meeting and at any adjournment
thereof.

The undersigned directs that the undersigned's proxy be voted as follows:

<TABLE>
<S> <C> <C> <C>
1. ELECTION OF [ ] FOR the nominee listed below [ ] WITHHOLD AUTHORITY to vote for [ ] ABSTAIN
DIRECTOR the nominee listed below from voting

Nominee: John E. Dyer

2. APPROVAL OF [ ] FOR Approval of the Proposal [ ] AGAINST Approval of the Proposal [ ] ABSTAIN
PROPOSAL described below described below from voting
</TABLE>

The Proposal [items (i) through (iii) below] constitutes a
unified proposal to approve, and a vote "FOR" will constitute
approval of, all of the following matters:

(i) An amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock
from 25,000,000 shares to 100,000,000 shares (without
affecting par value); and

(ii) a 1-for-10 reverse stock split of the Company's then
authorized (without affecting par value) and presently
issued and outstanding shares of Common Stock and the
5,882,901 shares of Common Stock into which the Series Z
Preferred Stock will be automatically converted upon the
increase in the authorized shares of Common Stock (the
"Reverse Split"); and

(iii) an amendment to the Company's Articles of Incorporation,
following the effective date of the Reverse Split, to
increase the post-split number of authorized shares of
Common Stock from 10,000,000 shares to 25,000,000 shares
(without affecting par value).

3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING.

This proxy will be voted as specified above. If no specification is made,
this proxy will be voted for the election of the Common Stock director nominee
in item 1 above and for approval of the Proposal in item 2 above.

The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Common Stock of the Company and hereby ratifies and confirms
all that the proxies, their substitutes, or any of them may lawfully do by
virtue hereof.

If more than one of the proxies named shall be present in person or by
substitute at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.

Please date, sign and mail this proxy in the enclosed envelope.

Date __________________ ____, 1999

____________________________________
Signature of Stockholder

Please date this proxy and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator,
executor, guardian or trustee, please add
your title as such. If executed by a
corporation, the proxy should be signed by a
duly authorized officer.
<PAGE>

Series D Preferred Stock Proxy

Inland Resources Inc.

This Series D Preferred Stock Proxy is Solicited on Behalf of the Board of
Directors

The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Inland Resources Inc. (the "Company") to be held at
the Hyatt Regency Downtown located at 1200 Louisiana Street, Houston, Texas
77002, on December 10, 1999, beginning at 9:00 a.m., Houston Time, and the Proxy
Statement in connection therewith and (2) appoints Bill I. Pennington and
Michael J. Stevens, and each of them, the undersigned's proxies with full power
of substitution for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Series D Preferred Stock of
the Company standing in the name of the undersigned, or with respect to which
the undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof.

The undersigned directs that the undersigned's proxy be voted as follows:

<TABLE>
<S> <C> <C> <C>
1. ELECTION OF [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for [ ] ABSTAIN
DIRECTORS (except as marked to the contrary below) all nominees listed below from voting

Marc MacAluso, John D. Lomax, Bill I. Pennington and T Brooke Farnsworth
</TABLE>

(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)

_____________________________________________________________________

<TABLE>
<S> <C> <C> <C>
2. APPROVAL OF [ ] FOR Approval of the Proposal [ ] AGAINST Approval of the Proposal [ ] ABSTAIN
PROPOSAL described below described below from voting
</TABLE>

The Proposal [items (i) through (iii) below] constitutes a
unified proposal to approve, and a vote "FOR" will constitute
approval of, all of the following matters:

(i) An amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock
from 25,000,000 shares to 100,000,000 shares (without
affecting par value); and

3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING.

This proxy will be voted as specified above. If no specification is made,
this proxy will be voted for the election of the Series D Preferred Stock
director nominees in item 1 above and for approval of the Proposal in item 2
above.

The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Series D Preferred Stock of the Company and hereby ratifies
and confirms all that the proxies, their substitutes, or any of them may
lawfully do by virtue hereof.

Please date, sign and mail this proxy in the enclosed envelope.

Date __________________ ____, 1999

_____________________________________
Signature of Stockholder

Series E Preferred Stock Proxy

Inland Resources Inc.

This Series E Preferred Stock Proxy is Solicited on Behalf of the Board of
Directors

The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Inland Resources Inc. (the "Company") to be held at
the Hyatt Regency Downtown located at 1200 Louisiana Street, Houston, Texas
77002, on December 10, 1999, beginning at 9:00 a.m., Houston Time, and the Proxy
Statement in connection therewith and (2) appoints Bill I. Pennington and
Michael J. Stevens, and each of them, the undersigned's proxies with full power
of substitution for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Series E Preferred Stock of
the Company standing in the name of the undersigned, or with respect to which
the undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof.

The undersigned directs that the undersigned's proxy be voted as follows:

<TABLE>
<S> <C> <C> <C>
1. APPROVAL OF [ ] FOR Approval of the Proposal [ ] AGAINST Approval of the Proposal [ ] ABSTAIN
PROPOSAL described below from Voting
</TABLE>

The Proposal [items (i) through (iii) below] constitutes a
unified proposal to approve, and a vote "FOR" will constitute
approval of, all of the following matters:

(i) An amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock
from 25,000,000 shares to 100,000,000 shares (without
affecting par value); and

2. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE MEETING.

This proxy will be voted as specified above. If no specification is made,
this proxy will be voted for approval of the Proposal in item 1 above.

The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Series E Preferred Stock of the Company and hereby ratifies
and confirms all that the proxies, their substitutes, or any of them may
lawfully do by virtue hereof.

Please date, sign and mail this proxy in the enclosed envelope.

Date __________________ ____, 1999

_______________________________________
Signature of Stockholder

Series Z Preferred Stock Proxy

Inland Resources Inc.

This Series Z Preferred Stock Proxy is Solicited on Behalf of the Board of
Directors

The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Inland Resources Inc. (the "Company") to be held at
the Hyatt Regency Downtown located at 1200 Louisiana Street, Houston, Texas
77002, on December 10, 1999, beginning at 9:00 a.m., Houston Time, and the Proxy
Statement in connection therewith and (2) appoints Bill I. Pennington and
Michael J. Stevens, and each of them, the undersigned's proxies with full power
of substitution for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Series Z Preferred Stock of
the Company standing in the name of the undersigned, or with respect to which
the undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof.

The undersigned directs that the undersigned's proxy be voted as follows:

<TABLE>
<S> <C> <C> <C>
1. ELECTION OF [ ] FOR the nominee listed below [ ] WITHHOLD AUTHORITY to vote for [X] ABSTAIN
DIRECTOR the nominee listed below from voting

Nominee: There is no Series Z nominee

2. APPROVAL OF [ ] FOR Approval of the Proposal [ ] AGAINST Approval of the Proposal [ ] ABSTAIN
PROPOSAL described below described below from voting
</TABLE>

The Proposal [items (i) through (iii) below] constitutes a
unified proposal to approve, and a vote "FOR" will constitute
approval of, all of the following matters:

(i) An amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock
from 25,000,000 shares to 100,000,000 shares (without
affecting par value); and

3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING.

This proxy will be voted as specified above. If no specification is made,
this proxy will be voted for approval of the Proposal in item 2 above.

The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Series Z Preferred Stock of the Company and hereby ratifies
and confirms all that the proxies, their substitutes, or any of them may
lawfully do by virtue hereof.

Please date, sign and mail this proxy in the enclosed envelope.

Date __________________ ____, 1999

____________________________________
Signature of Stockholder

Please date this proxy and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator, executor,
guardian or trustee, please add your title as
such. If executed by a corporation, the proxy
should be signed by a duly authorized officer.