OCEANIC EXPLORATION CO, 424B1, 1996-01-19

OCEANIC EXPLORATION CO
424B1, 1996-01-19
CRUDE PETROLEUM & NATURAL GAS

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<PAGE>
FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO. 033-63277

6,001,000 Shares

OCEANIC EXPLORATION COMPANY

Common Stock
($.0625 par value)

As more fully set forth herein, Oceanic Exploration Company (the "Company")
is offering to the holders of its Common Stock, $.0625 par value (the "Common
Stock") the right to subscribe (the "Rights Offering") for additional shares of
Common Stock ("Additional Common Stock") on the basis of 1.5325 shares of Common
Stock for each share of Common Stock (the "Rights"), held of record at the close
of business on January 16, 1996 (the "Record Date"). The Rights, including the
Over-Subscription Privilege, may not be transferred, divided, combined,
purchased or sold.

THE RIGHTS WILL EXPIRE AT 5:00 P.M., DENVER, COLORADO TIME ON FEBRUARY 23,
1996. FAILURE TO EXERCISE RIGHTS COULD RESULT IN SUBSTANTIAL DILUTION TO
NON-EXERCISING STOCKHOLDERS. SEE "RISK FACTORS-DILUTION OF NON-EXERCISING
STOCKHOLDERS." EXERCISING STOCKHOLDERS WILL BE ENTITLED TO AN
OVER-SUBSCRIPTION PRIVILEGE BY EXERCISING ALL OF THEIR RIGHTS. THE
OVER-SUBSCRIPTION PRIVILEGE MUST BE EXERCISED, IF AT ALL, AT THE TIME THE RIGHTS
ARE EXERCISED. SEE "PLAN OF DISTRIBUTION - RIGHTS OFFERING -- OVER-SUBSCRIPTION
PRIVILEGE."

The Rights Offering is being made on an any or all basis, which means that
the Company may accept any subscription received even if all 6,001,000 shares of
Additional Common Stock offered are not purchased. International Hydrocarbons,
the Company's principal stockholder, has entered into a firm commitment to
purchase all shares of Additional Common Stock offered pursuant to the Rights
Offering not purchased by other stockholders. This commitment is not secured
and, if not fulfilled, the Company could sell less than all Additional Common
Stock offered in this Rights Offering. SEE "RISK FACTORS-RIGHTS OFFERING IS
MADE ON AN ANY OR ALL BASIS."

The Common Stock is not listed on any exchange. SEE "RISK FACTORS-
DELISTING FROM THE PACIFIC STOCK EXCHANGE" and "DESCRIPTION OF CAPITAL STOCK."
The reported closing price of the Common Stock on October 3, 1995, was $.25.
SEE "MARKET FOR COMMON EQUITY."
_______________

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS SET FORTH IN "RISK FACTORS." SEE
"RISK FACTORS" AT PAGE 6 OF THIS PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

_______________

<PAGE>

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY (1)
-------- ------------- -----------
<S> <C> <C> <C>
Per Share . . . . $.10 N/A $.10

Total . . . . . $600,100 N/A $600,100
</TABLE>

(1) Before deducting estimated expenses of the offering of $70,000 payable by
the Company.

_______________

The date of this Prospectus is January 19, 1996

<PAGE>

PROSPECTUS SUMMARY

THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS TO BE
CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS.

THE COMPANY

The Company was incorporated in 1969 and has been engaged in the business
of acquiring oil and gas concessions covering large blocks of acreage and in
conducting exploration activities thereon, including seismic and other
geophysical evaluation and exploratory drilling where appropriate. The Company
conducts its operations directly or through wholly-owned subsidiaries. The term
"concession" is used herein to mean exploration, development and production
rights with respect to a specific area, which rights may be created by agreement
with a government, governmental agency or corporation. When a discovery of oil
or gas occurs, the Company has pursued the development of reserves and the
production of oil or gas to the extent considered economically feasible and has
financed development by farming out or selling a portion of its interest in the
discovery. The Company's property interests are located in the North Aegean
Sea, offshore Greece ("Prinos") and in the East China Sea. The Company has
identified a prospect in Bolivia, has prepared a preliminary plan for
exploration and is attempting to find participants to finance the exploration
costs. Since 1994 the Company has not been able to participate in active
operations and exploration and development, other than limited activities in
Bolivia to the extent funding is available, and has concentrated its efforts on
the litigation regarding Prinos. SEE "BUSINESS OF THE COMPANY."

The Company's only significant source of revenue, its 15% net profit
interest in certain oil and gas producing areas offshore Greece (the "Prinos
Interest"), is currently the subject of litigation. The prospects for the
Company continuing as a going concern are dependent on obtaining a favorable
judgment or settlement in the litigation and collecting or enforcing the
judgment or settlement. Since litigation commenced and through November 1995,
payments under the Prinos Interest were suspended. The Company funded its
operations through draws against the line of credit established with NWO
Resources, Inc. ("NWO"), the parent of the Company's principal stockholder.
Prior to the end of fiscal year 1995, the Company's credit line was exhausted
and the Company had no resources to make monthly interest payments on the
advances under the line of credit.

On September 19, 1995, the Company entered into a Modification Agreement
with NWO (the "Modification Agreement"). SEE "BUSINESS OF THE COMPANY-NWO LINE
OF CREDIT." The Modification Agreement provides for limited funding of
litigation expenses and temporary relief from any collection actions by NWO.
The Modification Agreement also allows the Company to retain up to $200,000 of
any proceeds received from its Prinos Interest for general working capital
purposes. The Modification Agreement does not provide any further funding for

<PAGE>

operating expenses of the Company other than limited funding of the litigation
with respect to the Prinos Interest.

On November 27, 1995, the Company received $810,522 from Denison Mines
Limited ("Denison") representing unpaid revenues on the Prinos Interest. These
revenues cover the period from January 1, 1993 through October 31, 1995, and are
calculated under the terms of the 1975 license agreement between the Greek
government and the consortium operating the Prinos properties (the "License
Agreement") as amended in 1993. This payment was made in connection with the
agreement of Denison to withdraw the counterclaim filed by Denison against the
Company. As of December 1995, Denison resumed monthly revenue payments to the
Company for its Prinos Interest as calculated under the terms of the amended
License Agreement. Pursuant to the Modification Agreement, the Company retained
$200,000 from the payment received from Denison and paid NWO $610,522 on
November 30, 1995.

The Company's business activities involve only one industry segment, oil
and gas exploration and development.

The Company employs six people, four of whom are full-time employees. The
full-time employees also provide services to two related entities pursuant to
management agreements entered into by the Company and those entities. SEE
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

The Company's principal executive offices are located at 5000 South Quebec
Street, Suite 450, Denver, Colorado 80237, and its telephone number is (303)
220-8330.

<PAGE>

THE RIGHTS OFFERING

Common Stock Offered 6,001,000 shares

Terms 1.5325 shares of Additional Common Stock
for each share of Common Stock owned on
the Record Date, rounded up to the
nearest whole share.

Subscription Price $.10 per share

Expiration Date of Rights February 23, 1996,
5:00 p.m., Denver, Colorado time.

Use of Proceeds The Company intends to use the net
proceeds of the Rights Offering to fund
future operations of the Company, make
estimated reimbursements to NWO of
current advances for legal fees,
including accrued interest, up to
$100,000 and pay accounts payable.

SUMMARY FINANCIAL INFORMATION

The following table sets forth summary financial data of the Company. The
summary financial data in the table is derived from the financial statements of
the Company. The data should be read in conjunction with the financial
statements, related notes and other financial information included therein.

SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
---------------------- ---------------------
1995 1994 1995 1994
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:

Revenue . . . . . . . . . $ 321,495 835,329 202,243 506,023

Costs and Expenses . . . $1,195,369 1,153,304 588,892 600,996

Loss before Income Taxes $ (873,874) (317,975) (386,649) (94,973)

Net Loss . . . . . . . . $ (796,602) (448,746) (327,449) (175,169)

Net Loss per Share of
Common Stock . . . . . . $ (.20) (.11) (.08) (.04)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MARCH 31, 1995 SEPTEMBER 30, 1995
-------------- ----------------------------
ACTUAL ACTUAL AS ADJUSTED(1)
----------- ---------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:

Net working capital (deficit) . . . $(2,554,850) (803,074) (272,974)

Total assets. . . . . . . . . . . . $ 1,557,322 1,357,928 1,888,028

Stockholders' deficit . . . . . . . $(2,007,281) (2,334,730) (1,804,630)
</TABLE>

(1) As adjusted to give effect to the sale of 6,001,000 shares of Additional
Common Stock offered hereby at an assumed offering price of $.10 per share
and the application of the estimated net proceeds therefrom. SEE "USE OF
PROCEEDS" AND "CAPITALIZATION."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). This Prospectus, which
constitutes a part of a registration statement on Form SB-2 (the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), omits certain of the information set
forth in the Registration Statement. Reference is hereby made to the
Registration Statement and to the exhibits thereto for further information with
respect to the Company. Statements contained herein concerning the provisions
of such documents are necessarily summaries of such documents. The Registration
Statement, including exhibits and schedules filed therewith, and the reports,
proxy statements and other information filed by the Company with the Commission
may be inspected without charge at the public reference facilities maintained by
the Commission at its principal office at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at regional offices of the Commission
located at Northwestern Atrium Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and its public reference facilities in Chicago,
Illinois and New York, New York, at prescribed rates. The Company's Common
Stock is not listed on any exchange. SEE "RISK FACTORS-DELISTING FROM THE
PACIFIC STOCK EXCHANGE."

RISK FACTORS

Prospective purchasers of shares of Additional Common Stock should
carefully read the entire Prospectus. Purchasers should consider, among other
things, the following factors which make an investment in the Company extremely
high risk:

<PAGE>

RECURRING MATERIAL NET LOSSES. The Company has suffered recurring material
net losses and losses from operations during the most recent interim period and
in recent fiscal years. The Company had a net loss of $796,602 for fiscal year
1995 and a cumulative net loss of $1,245,348 for the two most recent fiscal
years. During the six-month period ended September 30, 1995, the Company had a
net loss of $327,449. SEE "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."

OFFERING PRICE NOT BASED ON ACTUAL VALUE. The price at which the
Additional Common Stock is being sold to the stockholders is not based on an
independent valuation of the Company or its assets or other recognized criteria
of investment value. The subscription price of $.10 per share for the
Additional Common Stock (the "Subscription Price") was negotiated with NWO, the
parent company of International Hydrocarbons, the Company's principal
stockholder. The Subscription Price is based on the highest price at which
International Hydrocarbons would agree to purchase all Additional Common Stock
not subscribed for by other stockholders. It does not indicate that the
Additional Common Stock has a value of or could be resold at the Subscription
Price. SEE "DETERMINATION OF OFFERING PRICE."

GOING CONCERN DEPENDENT ON LITIGATION - AUDITOR'S REPORT INCLUDES
EXPLANATORY PARAGRAPHS WITH RESPECT TO LITIGATION AND THE COMPANY'S ABILITY TO
CONTINUE AS A GOING CONCERN. The Company's only significant source of revenue,
its Prinos Interest, is currently the subject of litigation. The prospects for
the Company continuing as a going concern are dependent on obtaining a favorable
judgment or settlement in the litigation and collecting or enforcing the
judgment or settlement. While the Company believes there is a reasonable
possibility of prevailing in the litigation, the ultimate outcome of the lawsuit
cannot be determined at this time. Furthermore, there are no assurances that
the Company will be able to collect on a successful judgment or settlement of
the pending litigation. If the Company is not able to obtain a favorable
judgment or settlement and collect on the judgment or settlement, the Company
may be forced to liquidate its assets, and in such case, little if any assets
will be available for distribution to shareholders. The report of the Company's
independent auditors for the most recently completed fiscal year states that the
financial statements were prepared assuming that the Company will continue as a
"going concern". However, the report expresses substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that may be necessary if the Company is unable to
continue as a going concern. The auditor's report also indicates that no
provision for any liability or loss that may result upon adjudication of the
lawsuit with Denison is made in the financial statements and that the outcome of
that lawsuit is uncertain. SEE "LEGAL PROCEEDINGS," "BUSINESS OF THE COMPANY"
AND "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."

LOANS FROM NWO DUE DECEMBER 31, 1996. Pursuant to the Modification
Agreement, the Company must repay $2,000,000 plus accrued interest to NWO by
December 31, 1996. On November 30, 1995, the Company paid NWO $610,522.
$92,402 was applied to accrued interest and $518,120 was applied to the loan
leaving an outstanding loan balance of $1,481,880.

<PAGE>

Beginning in December 1995, all monthly revenue payments received by the
Company for its Prinos Interest will be paid to NWO and applied first to
accrued interest and then to the outstanding loan balance. As of December
31, 1995, the outstanding loan balance was $1,431,922. If the loan is not
repaid when due and if the loan is not extended, of which there is no
guarantee, NWO may institute legal proceedings to collect the amounts due.
NWO holds a first priority lien on the Company's Prinos Interest and may seek
foreclosure of that security interest if the Company is not able to repay the
amounts due. SEE "BUSINESS OF THE COMPANY-NWO LINE OF CREDIT."

ADDITIONAL FUNDS NEEDED TO FUND OPERATIONS OVER AN EXTENDED PERIOD. The
Company has been dependent upon the Prinos Interest as its primary source of
income. From the initiation of the litigation involving the Prinos Interest
through November 1995, the Company had not received any revenue applicable to
it. The Company had depended on draws on a line of credit facility provided by
NWO to fund its operations. NWO is the parent corporation of the Company's
principal stockholder, International Hydrocarbons. Prior to the end of fiscal
year 1995, the line of credit with NWO was exhausted and the Company had no
funds to repay NWO the advances under the line of credit. In December 1995,
Denison resumed making payments under the Prinos Interest calculated under the
terms of the License Agreement as amended in 1993. This reduced amount is not
sufficient to fund operations on an ongoing basis. The Company has entered into
a Modification Agreement with NWO, which provides for temporary forbearance in
collection of interest and principal under the NWO line of credit and limited
financial assistance to the Company for payment of litigation costs with respect
to the Prinos Interest. The Company will require additional funds to pay its
litigation costs and continue limited operations. The proceeds of the Rights
Offering are intended to fund future operations of the Company, make estimated
reimbursements to NWO of current advances for legal fees, including accrued
interest, up to $100,000, and pay accounts payable. However, additional funds
may also be required in excess of the proceeds of the Rights Offering depending
on the cost of litigation, appeals, if any, and the time it may take to collect
on a judgment or settlement. Because of the Company's financial condition,
there is no assurance that the Company will have adequate funding to complete
the litigation or continue operations if the litigation is protracted.
Obtaining the additional financing may be difficult and there can be no
assurances that the Company will be successful in doing so. The Company has no
alternative plans to obtain commitments to provide additional financing if such
financing is necessary. The Company's counsel has been unable to conclude that
the likelihood of an adverse determination in the litigation with Denison is
remote. Even if the Company is successful in the litigation, there is no
guarantee that the Company could collect a judgment from Denison. SEE
"MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."

SIGNIFICANT LIABILITIES DUE WITHIN 18 MONTHS. The Company has two
significant liabilities that will likely require payment within the next 18
months. First, the Company will be obligated to repay advances made by NWO for
the Company's legal fees. This reimbursement is anticipated to be made with the
proceeds of this Rights Offering but is due by January 31, 1996. Second, the
repayment of the outstanding balance on the NWO line of credit

<PAGE>

plus accrued interest is due on December 31, 1996. Only if the Company is
successful in the litigation and is able to collect funds from Denison or is
able to secure funds from other sources will the Company be able to repay the
funds borrowed under the NWO line of credit. It is highly unlikely that the
Company will be able to secure funds from third parties. The financial
statements do not include any adjustments that might result from the
uncertainties associated with the outcome of the lawsuit or the ability to
raise additional financing. SEE "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

DELISTING FROM THE PACIFIC STOCK EXCHANGE. Previously, the Company's
Common Stock was traded on the Pacific Stock Exchange (the "Exchange").
However, the Company has failed to maintain the minimum standards required by
the Exchange to maintain its listing as a Tier II Security on the Exchange. On
August 25, 1995, the Company was notified that it was subject to the initiation
of delisting procedures. Its listing status was reviewed by the Exchange at a
meeting of the Equity Listing Committee (the "Committee") held on October 3,
1995. The Company was informed that the Committee had decided to delist its
Common Stock. The Company's Common Stock was suspended from trading on October
4, 1995. The Committee based its decision upon the Company's deficiencies with
respect to the following components of the Exchange's listing maintenance
requirements: net tangible assets of at least $500,000, aggregate market value
of publicly held shares of at least $500,000, a minimum bid price per share of
at least $1, and the Committee's serious doubts about the Company's ability to
meet the requirements for an ongoing concern. On December 8, 1995,
representatives of the Company appealed the decision to delist the stock before
the Board Appeals Committee of the Exchange. Finding no compelling evidence to
recommend that the October 3, 1995, decision of the Committee be revised, the
decision to delist was upheld and affirmed. The delisting of the Company from
the Exchange will likely have an adverse effect on the market value of the
Common Stock. The Company is attempting to secure a broker-dealer or dealers to
serve as market makers for trades in its Common Stock. There is no assurance
that the Company will be able to secure such a relationship. SEE "DESCRIPTION
OF CAPITAL STOCK" AND "MARKET FOR COMMON EQUITY."

TRADING OF COMMON STOCK MAY BE SUBJECT TO PENNY STOCK RULES. The Common
Stock is Penny Stock as defined by the Exchange Act. Brokers must comply with
complex disclosure rules prescribed by the Exchange Act prior to effecting
trades in a Penny Stock. The classification of the Common Stock as a Penny
Stock will likely reduce the tradeability of the Common Stock and will likely
result in a reduction in the market value of the Common Stock.

RIGHTS OFFERING IS MADE ON AN ANY OR ALL BASIS. The Rights Offering is
being made on an any or all basis which means that the Company may accept any
subscription received even if all 6,001,000 shares of Additional Common Stock
offered are not purchased. International Hydrocarbons, the Company's principal
stockholder, has entered into a firm commitment to purchase all shares of
Additional Common Stock offered pursuant to the Rights Offering not purchased by
other stockholders. This commitment is not secured and, if not fulfilled, the
Company could sell less than all Additional Common Stock offered in this Rights
Offering. The Company would then not raise the full amount of the Rights
Offering and, as a result, would not be able to fund the ongoing operations to
the extent contemplated in this Prospectus. SEE "PLAN OF DISTRIBUTION-RIGHTS
OFFERING."

<PAGE>

PROCEEDS TO BE USED TO REPAY PARENT OF PRINCIPAL STOCKHOLDER. The Company
intends to use a portion of the proceeds, up to $100,000 (approximately 17% of
the offering proceeds), to repay NWO, the parent of the Company's principal
stockholder, for advances made by NWO to the Company to pay legal fees. SEE
"USE OF PROCEEDS."

DILUTION OF NON-EXERCISING STOCKHOLDERS. The Company has received a firm
commitment by International Hydrocarbons, the Company's principal stockholder,
to purchase all shares of Additional Common Stock not subscribed for by other
stockholders pursuant to the Rights Offering. Consequently, the Company believes
that it will sell all Additional Common Stock offered in this Rights Offering.
As a result, the effective percentage ownership of any non-exercising
stockholder will be reduced by approximately sixty percent. For example, a
stockholder that currently owns one percent of the Company and does not exercise
its Rights will own approximately four-tenths of one percent after completion of
the Rights Offering. If further equity financing is required, additional
dilution may take place. If all stockholders fully exercise their Basic
Subscription Rights, the effective percentage ownership of each stockholder will
remain unchanged. In addition, the Subscription Price of $.10 is substantially
less than the price at which the Common Stock has traded during the last twelve
months. The effect of the Rights Offering will likely be to decrease the
current market value of the Common Stock.

The Company's liabilities exceed its assets. After the Rights Offering the
Company's liabilities will continue to exceed its assets. Accordingly, proceeds
contributed as a result of the Rights Offering will not result in a positive
book value after the Rights Offering.

COMPETITION. The oil and gas industry is competitive, and the Company must
compete with many long-established companies having far greater resources and
operating experience. Furthermore, the demand for financing of oil and gas and
mineral exploration and development programs substantially exceeds the available
supply, and the Company competes with other exploration and development
companies of far greater means for the available funds. Because of the
Company's financial condition, the Company is not currently able to participate
in exploration and development activities. Even if funds are raised from the
offering, the scope of the Company's exploration activities will be constrained
by the shortage of funds.

OIL AND GAS PRODUCTION. Oil and gas exploration activities, especially in
foreign areas, are subject to a wide variety of risks which affect not only the
concessions themselves but also their salability (whether of partial interests
or otherwise) to third parties. The industry is also subject to fluctuations in
the price of and the demand for oil and gas. In addition, there is no guarantee
that the Prinos Interest, the Company's principal source of revenue, will
continue to produce revenue in the future as it has in the past. While the
Prinos Interest includes new wells either drilled or being drilled on or near
the Prinos producing field, there is no assurance that these wells will produce
significant quantities of oil and gas. SEE "MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

FOREIGN OPERATIONS. The Company's oil and gas concessions are generally
located in territories controlled by foreign governments. As a result the
concessions may be subject to the following risks:

<PAGE>

(i) Potential expropriation or nationalization of concessions or
facilities by foreign governments;

(ii) Jurisdictional disputes between foreign governments concerning
areas in which the Company's concessions are located;

(iii) Civil unrest or significant political changes in foreign
countries in which the Company holds concessions;

(iv) Taxation by foreign governments of the Company's income derived
within their jurisdiction combined with uncertainties over the availability
in the United States of foreign tax credits for taxes actually paid to
foreign governments; and

(v) Fluctuations in the price of and the demand for oil and gas.

Certain of the Company's properties are subject to current disputes
between foreign governments which have essentially, in addition to the
Company's lack of funds, precluded development of those properties. There is
no assurance that such disputes will be resolved in a timely manner. SEE
"BUSINESS OF THE COMPANY."

LACK OF DIVIDENDS. The Company has never paid a dividend on its Common
Stock and does not intend to do so in the foreseeable future. Any future
payment of dividends by the Company is subject to the discretion of the Board of
Directors.

CONTROL BY PRINCIPAL SHAREHOLDER. The principal shareholder of the Company
is International Hydrocarbons. International Hydrocarbons currently owns 43.8%
of the Common Stock. If all stockholders fully exercise their Basic
Subscription Rights, the effective percentage ownership of each stockholder will
remain unchanged. If Basic Subscription Rights are not exercised by any other
stockholder and International Hydrocarbons fulfills its commitment to purchase
all shares of Common Stock not purchased by other stockholders, International
Hydrocarbons will control approximately 77.8% of the issued Common Stock.
Accordingly, International Hydrocarbons will potentially increase its ability to
exert significant influence over the policies and affairs of the Company.

PLAN OF DISTRIBUTION - RIGHTS OFFERING

The Company is offering to holders of its outstanding Common Stock of
record at the close of business on the Record Date, the right to subscribe for
and purchase 1.5325 shares of Additional Common Stock for each share of Common
Stock held of record on the Record Date. The Rights may be exercised by
executing the Subscription Agreement and by paying $.10 per share as described
below. International Hydrocarbons, the Company's principal stockholder, has
entered into a firm commitment to purchase all shares of Additional Common Stock
not purchased by other stockholders.

<PAGE>

SUBSCRIPTION EXPIRATION DATE

The Rights will expire at 5:00 P.M., Denver, Colorado Time on February 23,
1996 (the "Expiration Date"). AS DESCRIBED BELOW, RIGHTS MUST BE EXERCISED, IF
AT ALL, BEFORE THE EXPIRATION DATE AFTER WHICH TIME THE RIGHTS WILL BE VOID AND
VALUELESS.

BASIC SUBSCRIPTION RIGHTS

The Rights entitle the holders to subscribe at the Subscription Price of
$.10 per share for shares of Additional Common Stock on the basis of 1.5325
shares of Additional Common Stock for each share of Common Stock held on the
Record Date (the "Basic Subscription Rights"). The number of shares for which a
stockholder may subscribe will be rounded up to the nearest whole share. No
fractional shares will be issued. Exercise of the Basic Subscription Rights
will also entitle the holders to the Over-Subscription Privilege described
below. SEE "OVER-SUBSCRIPTION PRIVILEGE."

METHOD OF EXERCISING RIGHTS

To exercise the Rights, the holder should fill in Section 1 on the
Subscription Agreement and sign and transmit it along with the required payment,
in the envelope provided, to the Company at 5000 South Quebec Street, Suite 450,
Denver, Colorado 80237. The Subscription Agreement must arrive on or before the
Expiration Date.

PAYMENT

Rights exercised under the Basic Subscription Rights and the
Over-Subscription Privilege must be accompanied by payment of the full
Subscription Price in U.S. Dollars for all shares. Such payment may be made by
mail. Payment may be made by certified check or bank draft drawn upon a United
States bank, or postal, telegraphic or express money order, payable to the order
of "Oceanic Exploration Company". Sufficient mailing time should be allowed for
the Subscription Agreement and payment to be RECEIVED by the Company before the
Expiration Date of the subscription period at 5:00 P.M., Denver, Colorado Time,
February 23, 1996, after which time the Rights will be void and valueless.
Payment may also be made by hand delivery to the Company, in cash or by
certified check or bank draft drawn upon a United States bank, or postal,
telegraphic or express money order, payable to the order of "Oceanic Exploration
Company".

<PAGE>

The Company reserves the right to reject any Subscription Agreement and
payment not properly submitted. The Company has no duty to give notification of
defects in any Subscription Agreement and/or payment and will have no liability
for failure to give such notification. The Company will return any Subscription
Agreement and/or payment not properly submitted.

PURCHASE AND SALE OF RIGHTS

Rights may not be transferred, divided, combined, purchased or sold.

DELIVERY OF CERTIFICATES

Certificates for shares of Additional Common Stock issuable on exercise of
Rights will be mailed as soon as practicable after the Expiration Date.

OVER-SUBSCRIPTION PRIVILEGE

If some stockholders do not fully exercise all of their Basic Subscription
Rights, the remaining Additional Common Stock will be offered to those holders
of Basic Subscription Rights who wish to acquire more than the number of shares
to which their Basic Subscription Rights entitle them (the "Over-Subscription
Privilege"). Each holder of Basic Subscription Rights who fully exercises Basic
Subscription Rights will be entitled to participate in such Over-Subscription
Privilege and will be asked to indicate on the Subscription Agreement how many
additional shares that stockholder would be willing to acquire pursuant to the
Over-Subscription Privilege. Each stockholder wishing to exercise its
Over-Subscription Privilege must exercise its Over-Subscription Privilege and
must tender payment for the Additional Common Stock subscribed for pursuant to
the Over-Subscription Privilege at the time it exercises its Basic Subscription
Rights. If there remain sufficient shares of Additional Common Stock after the
exercise of Basic Subscription Rights, all over-subscriptions will be honored in
full. If there are not sufficient shares of Additional Common Stock to honor
all over-subscriptions, the available Additional Common Stock will be allocated
among those who over-subscribe based solely on the number of shares subscribed
for by each over-subscribing holder pursuant to the Basic Subscription Rights.
For example, if after the exercise of the Basic Subscription Rights (1) there
remain 150,000 shares of Additional Common Stock that were not subscribed for
pursuant to Basic Subscription Rights, (2) two stockholders each indicated that
they wished to acquire shares of Additional Common Stock pursuant to the
Over-Subscription Privilege, (3) the first stockholder oversubscribed for
150,000 shares and the second stockholder oversubscribed for 200,000 shares and
each tendered payment for that number of shares and (4) the first stockholder
acquired 100,000 shares pursuant to its full Basic Subscription Rights and the
second stockholder acquired 200,000 shares pursuant to its full Basic
Subscription Rights; then the first stockholder would be entitled to one-third
or 50,000 shares of the Additional Common Stock and the second stockholder would
be entitled to two-thirds or 100,000 shares of the Additional Common Stock.

<PAGE>

The percentage of remaining shares of Additional Common Stock each
over-subscribing holder may acquire may be rounded up or down to result in
delivery of whole shares. The allocation process may involve a series of
allocations in order to assure that the shares available for over-subscription
are distributed proportionately among all over-subscribing holders.
Accordingly, the degree to which each stockholder's request for shares of
Additional Common Stock pursuant to the Over-Subscription Privilege will be
honored will depend on the number of shares of Additional Common Stock
requested, the number of shares acquired by the exercise of Basic Subscription
Rights and the total number of shares of Additional Common Stock available for
over-subscription. After the expiration of the Rights, the Company will send
notice of the number of shares of Additional Common Stock acquired pursuant to
the Over-Subscription Privilege to each stockholder that over-subscribed and
promptly remit to such stockholder any payment tendered for shares not acquired
under the Over-Subscription Privilege. The Company has received a firm
commitment from International Hydrocarbons, its principal stockholder, to
purchase all shares of Additional Common Stock not purchased by other
stockholders pursuant to the Basic Subscription Rights or the Over-Subscription
Privilege.

FEDERAL INCOME TAX INFORMATION

The federal income tax consequences to stockholders of the issuance and
disposition of Rights to purchase Additional Common Stock generally will be as
follows:

RECEIPT OF RIGHTS. The receipt of Rights will not result in taxable income
to stockholders.

TAX BASIS OF RIGHTS AND COMMON STOCK FOR DETERMINING GAIN OR LOSS ON
SUBSEQUENT SALES. For purposes of determining gain or loss on subsequent sales
of Common Stock, the tax basis of Rights in the hands of each stockholder to
whom such Rights are issued will be zero and the tax basis in the Additional
Common Stock with respect to which Rights are issued will remain unchanged.
Notwithstanding this general rule, each stockholder may elect, with respect to
all Rights issued to it, to allocate the tax basis of all shares of Common Stock
that it holds on the Record Date between such shares and the Rights issued to it
in proportion to their fair market values on the date the Rights are issued. To
be valid, this election must be made by the stockholder in a statement attached
to its timely-filed Federal income tax return for the year in which the Rights
are received, and once made, is irrevocable. However, if on the date the Rights
are issued the fair market value of the Rights is 15% or more of the fair market
value of the Common Stock, each stockholder will be required to allocate the tax
basis of its shares of Common Stock in the manner described above in determining
gain or loss on any subsequent sales of Common Stock.

EXERCISE OF RIGHTS. The exercise of Rights will not result in taxable
income or loss. The tax basis of the Additional Common Stock acquired upon the
exercise of Rights will be the Subscription Price of such Additional Common
Stock, increased by the tax basis (if any) of the Rights exercised to acquire
such Additional Common Stock.

<PAGE>

EXPIRATION OF RIGHTS. A stockholder who allows Rights issued to him to
expire without exercise is not required and may not elect to allocate any tax
basis to such Rights, and will therefore not recognize a loss on account of the
expiration.

HOLDING PERIOD. The holding period of the Rights received on distribution
from the Company is measured from the acquisition date of the Common Stock which
gave rise to the Rights. The holding period of Additional Common Stock acquired
by exercise of Rights commences with the date on which such Rights are
exercised.

STATE TAX INFORMATION

Participants should consult with their own income tax advisors to determine
the applicable state income tax consequences of the issuance and exercise of
Rights to purchase the Additional Common Stock.

THE FOREGOING IS A GENERAL SUMMARY OF FEDERAL INCOME TAX TREATMENT UNDER
PRESENT LAW. THESE RULES ARE COMPLEX AND SUBJECT TO CHANGE. EACH STOCKHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR FOR MORE DETAILED INFORMATION AS TO
THE TAX CONSEQUENCES APPLICABLE TO HIS OR HER OWN SITUATION.

RESALE OF ADDITIONAL COMMON STOCK

Subject to applicable state securities laws, stockholders who are not
"affiliates" of the Company may generally resell, without restriction, the
Additional Common Stock acquired pursuant to the Basic Subscription Rights or
the Over-Subscription Privilege. Stockholders who are deemed to be "affiliates"
of the Company may resell the Additional Common Stock acquired pursuant to the
Basic Subscription Rights or the Over-Subscription Privilege only pursuant to
Rule 144 under the Securities Act or in a transaction otherwise exempt from
registration under the Securities Act and subject to applicable state securities
laws.

International Hydrocarbons has no current intent to distribute the
Additional Common Stock acquired pursuant to its firm commitment to purchase all
shares of Additional Common Stock not purchased by other stockholders. If
International Hydrocarbons determines to sell all or a part of that Additional
Common Stock, it may do so at the market price through transactions with brokers
or dealers or through one or more privately negotiated transactions.
International Hydrocarbons will be required to deliver a prospectus in
connection with any such sales. International Hydrocarbons is an affiliate of
the Company for purposes of Rule 144 under the Securities Act. Accordingly, the
resale of the Additional Common Stock acquired by International Hydrocarbons
will be subject to the limitations set forth in Rule 144 with respect to amounts
of securities sold by an affiliate and the manner of sale unless the Additional
Common Stock is sold by International Hydrocarbons in a transaction otherwise
exempt from registration under the Securities Act and other applicable
securities laws.

<PAGE>

USE OF PROCEEDS

The following table illustrates the Company's current expectations as to
the use of the proceeds from the Rights Offering described herein. The Company
has no firm understanding or agreement concerning items listed and no binding
budget has been established, except for reimbursement obligations to NWO (SEE
"BUSINESS OF THE COMPANY-NWO LINE OF CREDIT"). The amounts stated herein are
estimates only and the actual expenditures may vary from the estimate.

<TABLE>

<S> <C>
Gross Proceeds $600,100
Cost of Offering (1) (70,000)
--------
Net Proceeds $530,100
--------
--------

Estimated reimbursement to NWO of current advances
including estimated accrued interest (2) 100,000
Fund future operations and pay accounts payable (3) 430,100
--------
Net Proceeds $530,100
--------
--------
</TABLE>

(1) The costs of offering includes professional fees incurred in the
preparation of this Prospectus and printing, copying and miscellaneous
expenses.

(2) Pursuant to the Modification Agreement between the Company and NWO, the
Company has agreed to reimburse NWO from the proceeds of the Rights
Offering for advances made by NWO to pay the Company's ongoing legal fees
in connection with the litigation against Denison together with interest at
10% per annum. NWO has agreed to advance the Company up to $100,000 to pay
ongoing legal fees as reflected in statements received by the Company
subsequent to August 1, 1995. SEE "BUSINESS OF THE COMPANY-NWO LINE OF
CREDIT." Based on the estimated timetable of the litigation with Denison
(SEE LEGAL PROCEEDINGS"), the Company believes it will have sufficient
funds to finance the remaining litigation through June 30, 1996, the date
prior to which the Company anticipates a judgment to be rendered in the
litigation. There is no provision for costs of appeals from the judgment,
if any, or collection expenses.

(3) This amount should be sufficient to fund limited operations through
December 1996.

The Company reserves the right to allocate the resources of the Company in
a different manner if necessary or appropriate.

<PAGE>

DETERMINATION OF OFFERING PRICE

The Rights Offering is being conducted by the Company in connection with
the Modification Agreement with NWO and is being offered based on the firm
commitment of International Hydrocarbons to purchase all shares of Additional
Common Stock not purchased by other stockholders. After NWO rejected the
Company's proposal to extend or increase the line of credit, the terms of the
Rights Offering and the Modification Agreement were negotiated with NWO by the
two independent members of the Company's Board of Directors (the "Independent
Directors"). The Subscription Price is based on the highest price at which
International Hydrocarbons would agree to purchase all Additional Common Stock
not subscribed for by other stockholders. The terms of the Rights Offering and
the Modification Agreement negotiated with NWO were unanimously recommended by
the Independent Directors and approved by a majority of the Company's Board of
Directors on August 8, 1995. SEE "BUSINESS OF THE COMPANY-NWO LINE OF CREDIT".

The principal factors in the negotiations with NWO were the
non-availability of revenue from other sources and the opportunity for
stockholders to participate in the financing through the Rights Offering. The
Company has not sought an independent third party opinion with respect to the
value of the Company or the appropriateness of the Subscription Price. The
Subscription Price has no relation to the market value of the Common Stock of
the Company, the value of the Company's assets or the Company's prospects as a
going concern.

BUSINESS OF THE COMPANY

The Company was incorporated in 1969 and is engaged in the business of
acquiring oil and gas concessions covering large blocks of acreage and in
conducting exploration activities thereon, including seismic and other
geophysical evaluation and exploratory drilling where appropriate. The Company
conducts its operations directly or through wholly-owned subsidiaries. The term
"concession" is used herein to mean exploration, development and production
rights with respect to a specific area, which rights may be created by agreement
with a government, governmental agency or corporation. When a discovery of oil
or gas occurs, the Company will pursue the development of reserves and the
production of oil or gas to the extent considered economically feasible and may
finance development by farming out or selling a portion of its interest in the
discovery. The Company's property interests are located in the North Aegean
Sea, offshore Greece, and in the East China Sea. The Company has identified a
prospect in Bolivia, has prepared a preliminary plan for exploration and is
attempting to find participants to finance exploration costs. Since 1994 the
Company has not been able to participate in exploration and development, other
than limited activities in Bolivia to the extent that funding is available, and
has concentrated its efforts on the litigation regarding the Prinos Interest.

<PAGE>

The Company's business activities involve only one industry segment, oil
and gas exploration and development.

The Company's principal executive offices are located at 5000 South Quebec
Street, Suite 450, Denver, Colorado 80237, and its telephone number is (303)
220-8330.

MODE OF OPERATION

The Company has generally undertaken exploration of concessions through
various forms of joint arrangements with unrelated companies, whereby the
parties agree to share the costs of exploration, as well as the costs of and any
revenue from a discovery. Such arrangements do not always equate the proportion
of expenditures undertaken by a party with the share of revenues to be received
by such party.

The Company has usually obtained concessions directly from a government or
governmental agency and has then entered into arrangements with other
participants whereby the Company has received cash payments and has had its
share of exploration expenditures paid (either before or after being expended)
in whole or in part by other participants.

Since the Company's establishment, sales of partial interest in its
concessions have been part of its normal course of business and have provided
funds for the acquisition of further concessions and for exploration of existing
concessions. Some of the competition and risk factors relating to this method
of doing business are referred to above in "RISK FACTORS."

In order to maintain its concessions in good standing, the Company is
usually required to expend substantial sums for exploration and, in many
instances, for surface rentals or other cash payments. Additionally, the
development of any discoveries made upon concessions in which the Company holds
an interest generally involve the expenditure of substantial sums of money. The
Company has, in the past, satisfied required expenditures on its concessions.
The Company cannot be certain that its revenues in the future will be sufficient
to satisfy expenditures required to be made on its concessions.

PROPERTIES

The Company holds various interests in concessions or leases for oil and
gas exploration which are listed below. Oil and gas property interests as
reflected in the accompanying financial statements include costs attributable
only to the Prinos Interest. Costs on all other foreign concessions described
below have been charged to expense in prior years.

<PAGE>

GREECE. The Company has the right to receive the Prinos Interest payable
by Denison from the proceeds of production of oil and gas from certain
concession areas totaling approximately 430,000 acres in the North Aegean Sea,
offshore Greece. "Development areas" for the Prinos Oil Field covering 23,390
gross acres and for the Kavala Gas Field covering 11,787 gross acres have been
defined by the Greek government and given "development status." The term of
each "development" license is 26 years, with an automatic 10-year renewal. The
remaining exploration area adjoining Prinos and South Kavala covers 153,316
acres and an exploration area east of the island of Thasos covers an additional
243,367 acres. The Prinos Interest is subject to a lien in favor of NWO, which
lien secures payment of the amounts due to NWO by the Company. SEE "BUSINESS OF
THE COMPANY-NWO LINE OF CREDIT."

Daily production from the Prinos/South Kavala Fields averaged 10,652
barrels of oil and 151 tons of sulphur during fiscal year ended March 31, 1995.
According to Denison's 1994 Annual Report, calendar year 1994 production was
essentially maintained at levels achieved in calendar year 1993 as a result of
the completion of workovers and the drilling of infill wells and that two more
infill wells are being considered for 1995 in order to maintain economic rates
of production.

Due to high Greek income taxes and royalties in combination with declining
production levels, low oil prices and increasing operating costs, the consortium
believed that the Greek operation was at its economic breakeven point. As a
result, Denison and its partners commenced negotiations in 1992 with senior
Greek government officials to obtain relief from the high level of government
taxes and royalties. On February 23, 1993, the consortium reached an agreement
with the Greek government resulting in an amendment to the June 1975 license
agreement (the "License Agreement") known as Law 98/1975 which regulates the
operation of the field. The amendment was ratified by the Greek Parliament on
June 23, 1993 and was retroactive to January 1, 1993.

The amendment provides for a sliding scale for both the cost recovery
factor and the Greek royalty interest based on the annual adjusted gross income
from operations on a calendar year basis. The new law also provides for a
reduction in the effective Greek income tax rate from 50% to 40%.

In addition, the new law required Denison and its partners to spend $15
million during 1993 and 1994 on infill drilling in order to enhance the
recoverability of the hydrocarbons. In March 1994, the consortium operating the
Prinos properties announced the discovery of a new oil field by the drilling of
the Prinos North-2 well. Denison's 1994 Annual Report states that two oil
bearing zones were flow tested with a 30 meter upper section flowing at about
3,200 barrels per day and a 7 meter lower section flowing at 150 barrels per
day. Oil in place was calculated at about 18 million barrels of which 5 million
may be recoverable. The crude from this discovery has an API gravity of about
25 degrees, contains about 7% sulphur and may have a selling value of between
$1.50 and $4.00 per barrel less than Prinos crude. Recent discussions

<PAGE>

with Denison indicate that the consortium is not considering development of
Prinos North at this time.

Denison, who has the contractual obligation to pay the Prinos Interest, has
asserted that the calculation of the amounts due the Company should be based on
the amended agreement with the Greek government. The amended agreement provides
for higher cost recoveries than the License Agreement before the 1993 amendment.
If the higher cost recoveries are used in calculating the amount due under the
Prinos Interest, the amount will be significantly lower than the amount
calculated under the License Agreement before the 1993 amendment. The Company
disagrees with this interpretation and has commenced legal action seeking a
declaration by the Court that amounts due the Company attributable to its Prinos
Interest be calculated based on the terms of the License Agreement before the
1993 amendment. The Company is seeking damages of approximately $5,000,000 for
the period from January 1, 1993 through March 31, 1994 plus damages since that
date and undetermined future damages. The Company estimates that damages for
the unpaid revenues for the period from April 1, 1994 through September 30, 1995
are approximately $6,300,000. The Company's counsel is unable to conclude that
the likelihood of an adverse determination in the litigation with Denison is
remote. In addition, if the Company obtains a favorable judgment against
Denison, there is no assurance that the Company will be able to collect the
judgment due to Denison's current financial condition. SEE "LEGAL PROCEEDINGS."

When the legal action against Denison commenced, Denison suspended payments
under the Prinos Interest. Denison also asserted a counterclaim for $4,700,000
against the Company for alleged past overpayments by Denison. On November 27,
1995, the Company received $810,522 from Denison representing unpaid revenues on
the Prinos Interest. These revenues cover the period from January 1, 1993
through October 31, 1995, and are calculated under the terms of the License
Agreement as amended in 1993. This payment was made in connection with the
agreement of Denison to withdraw the counterclaim filed by Denison against the
Company. As of December 1995, Denison resumed monthly revenue payments to the
Company for its Prinos Interest as calculated under the terms of the amended
License Agreement. The Company will continue to pursue its litigation against
Denison challenging Denison's position that the calculation of the Prinos
Interest should be based on the amended License Agreement.

Pursuant to the Modification Agreement, the Company retained $200,000 from
the payment received from Denison. On November 30, 1995 the Company paid NWO
$610,522. $92,402 was applied to accrued interest and $518,120 was applied to
the loan leaving an outstanding loan balance of $1,481,880. Future payments by
Denison under the Prinos Interest will also be applied to the Company's
obligations to NWO pursuant to the Modification Agreement. As of December 31,
1995, the outstanding loan balance was $1,431,922. The Company does not believe
that the payments made under the Prinos Interest as calculated under the terms
of the amended License Agreement at current production and price levels will be
sufficient to repay the obligations owed to NWO.

<PAGE>

There is no assurance as to how long the Prinos property will continue to
produce oil and gas and, accordingly, how long the Company can expect revenue
from its Prinos Interest. The Company has analyzed the data provided to it from
Denison and other data that the Company has been able to verify from publicly
available sources in determining the potential revenue from the Prinos Interest.
The consortium operating the Prinos property has announced a new oil discovery
on or near the Prinos producing field, which is subject to the Prinos Interest.
The Company has not verified the data provided by Denison with respect to that
new oil discovery and its potential revenue and does not have sufficient
resources to do so reasonably. Additionally, the Company is aware that other
members of the consortium believe the estimated amounts provided by Denison may
be exceeded. These analyses are not publicly available and, accordingly, have
not been verified. There is a possibility that the revenues from the Prinos
property would substantially differ from current estimates.

REPUBLIC OF CHINA (TAIWAN). The Company holds a 22.23% working interest in
a concession located north of Taiwan in the East China Sea, covering 3,706,560
gross acres. The exploration license for this concession had a nominal term
extending to 1979, requiring exploration activity and minimum expenditures.
Preparations for initial exploratory drilling were suspended in 1977 under a
claim of force majeure, pending resolution of a territorial dispute among the
Republic of China (Taiwan), the Government of Japan and the People's Republic of
China. The Chinese Petroleum Corporation (Taiwan) has agreed to suspend
obligations under this concession until December 31, 1996.

During fiscal 1990, the Company entered into a farmout agreement with two
United Kingdom companies conveying two-thirds of its original 66.67% interest in
the concession.

Due to the uncertainty of sovereignty in the area, no immediate development
expenditures, as required under the terms of the concession agreement, are
anticipated. The Company incurred $27,171 of exploration expenses during fiscal
1995 as the result of ongoing negotiations with the governments of China and
Taiwan and the reprocessing of seismic data to assist in the future exploration
and development of the concession.

In fiscal year 1994, the Company reported that the People's Republic of
China was indicating its intention to open up adjacent concession areas for
bidding and that a resolution to the sovereignty issues may result. Nothing
occurred in fiscal year 1995 to indicate that the lifting of the current force
majeure status is imminent.

BOLIVIA. The Company has conducted a preliminary exploration study of a
10,500 square kilometer area located in the eastern part of the country near the
Paraguayan border, pursuant to a work study program with Y.P.F.B., the
government controlled agency having responsibility for oil and gas exploration
in Bolivia. The Company has preliminarily agreed to the terms of an operations
contract pertaining to such area and anticipates signing an operations contract
in fiscal year 1996. The Company is attempting to find participants to finance
exploration costs.

<PAGE>

OTHER. The Company leases 2,562 square feet of office space in an office
building located at 5000 South Quebec Street, Denver, Colorado. The office
building is owned by a related party. The lease expires on February 28, 1997.
SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

NWO LINE OF CREDIT

Since payments under the Prinos Interest were suspended, the Company had
funded its operations through draws against the line of credit established with
NWO. Prior to the end of fiscal year 1995, the Company's credit line was
exhausted. During the first half of fiscal year 1996, the Company had no
resources to make monthly interest payments on the advances under the line of
credit. Accordingly, on September 19, 1995, the Company entered into the
Modification Agreement, modifying the existing line of credit arrangement
between the Company and NWO. Prior to entering into the Modification Agreement,
the NWO line of credit provided for cumulative draws of up to $2,000,000 with
interest payable monthly on the outstanding balance at the greater of the U.S.
bank prime lending rate or 1-3/4% above the 30-day LIBOR in effect on the date
of each draw against the line of credit. Draws under the line of credit are
evidenced by promissory notes which were originally payable by the Company's
wholly-owned subsidiary, Oceanic International Properties Corporation ("OIPC")
no later than January 1, 1996 with interest at annual rates of 7% to 9%.
Cumulative draws on the NWO line of credit had reached $2,000,000 by February
15, 1995. The line of credit is secured by the Company's Prinos Interest. At
the time the Modification Agreement was entered into, the Company was in default
under the terms of the line of credit as it had not made its interest payments
for May, June, July and August 1995.

The Modification Agreement provides as follows:

1. Except as provided below, NWO will forebear on collection until
December 31, 1996 of the interest and principal on the $2,000,000 of
promissory notes evidencing draws on the NWO line of credit ("Oceanic
Notes") which it holds from OIPC.

2. Any monies collected by the Company from Denison either before or
after December 31, 1996 will first be applied to paying accrued
interest on the Oceanic Notes. After all accrued interest has been
paid, and prior to December 31, 1996, the Company will be permitted to
use up to $200,000 of monies collected from Denison for working
capital purposes. All remaining collections from Denison will be
applied first to accrued interest and then to reducing principal on
the Oceanic Notes.

3. The Security Agreement between the Company and NWO will be amended to
provide that NWO has a full security interest in all proceeds from the
Company's

<PAGE>

lawsuit against Denison and any existing and future Company
receivables from Denison.

4. The interest rate on the Oceanic Notes is adjusted to 8.25%.

5. The Company agrees to diligently pursue its lawsuit against Denison.

6. The Company will use its best efforts to file the Registration
Statement with the Securities and Exchange Commission with respect to
the Rights Offering described in the Registration Statement and use
its best efforts to cause the Registration Statement to become
effective by December 31, 1995, subsequently extended by sixty (60)
days pursuant to an Extension Agreement dated December 27, 1995.

7. In order to enable the Company to diligently pursue its lawsuit
against Denison, NWO agrees to make advances to the Company for
ongoing legal fees as reflected in statements received by the Company
subsequent to August 1, 1995 in connection with the Denison litigation
up to an estimated $100,000 in litigation expenses.

8. The Company agrees to reimburse NWO for such advances up to an
estimated $100,000 together with interest thereon computed at the
annual rate of 10% upon receipt of the proceeds of the Rights Offering
described in the Registration Statement or January 31, 1996, whichever
occurs earlier.

On November 27, 1995, the Company received $810,522 from Denison
representing unpaid revenues on the Prinos Interest. These revenues cover the
period from January 1, 1993 through October 31, 1995, and are calculated under
the terms of the License Agreement as amended in 1993. Pursuant to the
Modification Agreement, the Company retained $200,000 from the payment received
from Denison. On November 30, 1995 the Company paid NWO $610,522. $92,402 was
applied to accrued interest and $518,120 was applied to the loan leaving an
outstanding loan balance of $1,481,880. Future payments by Denison under the
Prinos Interest will also be applied to the Company's obligations to NWO
pursuant to the Modification Agreement. As of December 31, 1995, the
outstanding loan balance was $1,431,922. The Company does not believe that the
payments made under the Prinos Interest as calculated under the terms of the
amended License Agreement at current production and price levels will be
sufficient to repay the obligations owed to NWO.

International Hydrocarbons, which owns approximately 43.8% of the
outstanding common stock of the Company, is a wholly-owned subsidiary of NWO.
International Hydrocarbons has entered into a firm commitment to purchase all
shares of Additional Common Stock not purchased by other stockholders. SEE
"PLAN OF DISTRIBUTION-RIGHTS OFFERING--OVER-SUBSCRIPTION PRIVILEGE."

<PAGE>

LEGAL PROCEEDINGS

The Company has commenced an action in the Ontario Court (General
Division), Canada, against Denison. The Company claims that Denison has failed
since January 1, 1993 to pay the Company the Prinos Interest pursuant to an
agreement dated August 30, 1976, which is to be calculated on the basis of the
terms of the License Agreement.

The Company has claimed the following relief in the action:

1. a constructive trust or equitable lien over funds received by Denison
representing the unpaid portion of the Prinos Interest;

2. a vendor's lien over assets purchased by Denison from the Company including
Denison's interest in the License Agreement; and

3. $27,000,000.00 or alternatively, an accounting and payment of the Prinos
Interest in respect of the period commencing January 1, 1993.

Denison has defended the action on the basis that the Company is not
entitled to the payment claimed, and is entitled only to payment of the Prinos
Interest calculated in accordance with the terms of the License Agreement as
amended by an agreement with the Greek State dated February 23, 1993.

Denison counterclaimed for the repayment of the sum of $4,747,811 that it
alleged it mistakenly paid to the Company as part of the Prinos Interest during
the period from January 1, 1989, to December 31, 1993. On November 27, 1995,
the Company received unpaid revenues on the Prinos Interest for the period from
January 1, 1993 through October 31, 1995, calculated under the terms of the
License Agreement as amended in 1993. This payment was made in connection with
the agreement of Denison to withdraw the counterclaim filed by Denison against
the Company. As of December 1995, Denison has resumed monthly revenue payments
to the Company for its Prinos Interest as calculated under the terms of the
amended License Agreement. The Company will continue to pursue its litigation
against Denison challenging Denison's position that the calculation of the
Prinos Interest should be based on the amended License Agreement.

The statement of claim in this action was issued on June 9, 1994. The
matter was transferred to the Ontario Court (General Division) Commercial List
by order of November 25, 1994. The parties filed with the Court the following
schedule for the progress of this action:

1. Delivery of documents by April 15, 1995;

2. Examination for discovery of both parties during the week of June 26, 1995;

<PAGE>

3. Motions arising from discovery to be completed by October 31, 1995;

4. Trial to be held February 1996.

The Company is vigorously pursuing this action. Oral discovery of the
parties has commenced but has not been completed.

The Company's legal counsel, Osler, Hoskin & Harcourt in Toronto, Canada,
is unable to advise as to the probable outcome of the claim by the Company.
Management's decision to pursue a legal action against Denison was based on
management's review of information provided to the Company by Denison and oral
discussions with legal counsel. Based on that information and those
discussions, Management believed that there was a reasonable basis for
commencing a legal action against Denison and continues to believe that there is
a reasonable possibility of success in the litigation. Of course, litigation is
inherently uncertain and there is no assurance as to the final outcome. The
Company has not received a written determination from its legal counsel with
respect to the litigation.

It should be noted that if the claim is unsuccessful the Company will
remain entitled to payment of the Prinos Interest calculated in accordance with
the terms of the License Agreement, as amended. The amounts of such payments
will be substantially lower than the payments received prior to January 1, 1993.
The Company does not believe that the payments made under the Prinos Interest
calculated under the amended License Agreement at current production and price
levels will be sufficient to repay the obligations owed to NWO.

Any judgment obtained by the Company or Denison in relation to the claim
will be subject to the right of the losing party to appeal to the Ontario Court
of Appeal. Notice of appeal to the Court of Appeal must be filed within 30 days
after judgment. Barring an order to expedite the appeal, which may or may not
be available in this case, it may take approximately 2 years before an appeal is
heard. A further appeal to the Supreme Court of Canada is available with leave
of the Supreme Court.

Enforcement of a judgment in Ontario is generally carried out by seizure
and sale of assets, garnishment of debts, or appointment of a receiver. Until
recently, it appeared, based on Denison's public filings, that the financial
stability of Denison was questionable and that Denison continued to operate at
the sufferance of its secured creditors. Denison announced on October 16, 1995
that Denison's Board had approved a Plan of Arrangement which, among other
things, incorporates agreements restructuring the debt held by Denison's major
lenders, the Toronto Dominion Bank, Bank of America Canada, and the Canadian
Mortgage and Housing Corporation. In a press release dated December 21, 1995,
Denison announced that it had obtained the final order of the Ontario Court of
Justice, General Division approving its Plan of Arrangement. The press release
indicated that as a result of the contribution of all stakeholders, Denison has
been preserved as a going concern and its capital structure has been
substantially improved. The court approval of the Plan may increase the
likelihood that Denison would have

<PAGE>

assets available for satisfaction of a judgment in favor of the Company.
However, the Company does not have sufficient information in its possession
to determine whether any assets of Denison are unsecured and available for
satisfaction of a judgment in favor of the Company.

MARKET FOR COMMON EQUITY

The Company's Common Stock is not listed on any exchange. The Company's
Common Stock was previously traded on the Pacific Stock Exchange under the
symbol OXC. However, the Company has failed to maintain the minimum standards
required by the Exchange to maintain its listing as a Tier II Security on the
Exchange. On August 25, 1995, the Company was notified that it was subject to
the initiation of delisting procedures. Its listing status was reviewed by the
Exchange at a meeting of the Equity Listing Committee held on October 3, 1995.
The Company was informed that the Committee had decided to delist its Common
Stock. On October 4, 1995, the Company's Common Stock was suspended from
trading. The Committee based its decision upon the Company's deficiencies with
respect to the following components of the Exchange's listing maintenance
requirements: net tangible assets of at least $500,000, aggregate market value
of publicly held shares of at least $500,000, a minimum bid price per share of
at least $1, and the Committee's serious doubts about the Company's ability to
meet the requirements for an ongoing concern. On December 8, 1995,
representatives of the Company appealed the decision to delist the stock before
the Board Appeals Committee of the Exchange. Finding no compelling evidence to
recommend that the October 3, 1995, decision of the Committee be revised, the
decision to delist was upheld and affirmed. The delisting of the Company from
the Exchange will likely have an adverse effect on the market value of the
Common Stock. The Company is attempting to secure a broker-dealer or dealers to
serve as market makers for trades in its Common Stock. There is no assurance
that the Company will be able to secure such a relationship. SEE "RISK
FACTORS-DELISTING FROM THE PACIFIC STOCK EXCHANGE" and "DESCRIPTION OF CAPITAL
STOCK."

The range of closing prices in the Company's Common Stock over the last two
years and through September 30, 1995 (which are not necessarily representative
of actual transactions) is set out below.

THREE MONTHS FISCAL 1996 FISCAL 1995 FISCAL 1994
ENDED HIGH LOW HIGH LOW HIGH LOW
------------ ----------- ----------- -----------
June 30 $.75 .50 $1.13 .88 $1.56 1.38

September 30 .63 .25 .88 .75 1.50 .56

December 31 .75 .50 1.00 .63

March 31 .88 .63 1.13 .75

<PAGE>

The prices set forth above represent sales on the Exchange prior to the
delisting. The reported closing price of the Common Stock on October 3, 1995
was $.25. The Company is not aware of any trading in its Common Stock since it
was delisted from the Exchange.

CAPITALIZATION

The following table sets forth as of September 30, 1995 (i) the actual
capitalization of the Company and (ii) capitalization of the Company as adjusted
for the sale of 6,001,000 shares of Additional Common Stock in this Rights
Offering at an assumed offering price of $.10 per share. SEE "USE OF PROCEEDS."

SEPTEMBER 30, 1995
-----------------------------
ACTUAL AS ADJUSTED
------ -----------

Stockholders' deficit:

Common stock, authorized
12,000,000 shares of $.0625 par
value, 3,915,154 issued and
outstanding actual, 9,916,154
issued and outstanding as
adjusted . . . . . . . . . . . . $ 244,697 619,760

Additional Paid in Capital . . . 6,665 161,702

Accumulated Deficit . . . . . . . (2,586,092) (2,586,092)
------------ ------------

Total stockholders' deficit . . $(2,334,730) (1,804,630)
------------ ------------
------------ ------------

The Company's authorized capital stock also includes 600,000 shares of
Preferred Stock, par value $10.00 per share. The Board of Directors of the
Company, without further action by the stockholders, is authorized to issue the
shares of Preferred Stock in one or more series and to determine the voting
rights, preferences as to dividends, and the liquidation, conversion, redemption
and other rights of each series. The issuance of a series with voting and
conversion rights may adversely affect the voting power of the holders of Common
Stock. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the shareholders. The Company has no present plans to issue any
shares of Preferred Stock. SEE "DESCRIPTION OF CAPITAL STOCK."

<PAGE>
DIVIDENDS

The Company has never paid a dividend. The Company's management does not
anticipate paying dividends in the future. Any future payment of dividends by
the Company is subject to the discretion of the Board of Directors.

AVAILABILITY OF OIL AND GAS RESERVE INFORMATION

The Prinos Interest in Greece consists of a contractual right to receive a
15% "net profits interest." Because the Company has a net profits interest and
not a working interest in this property, the Company is only entitled to receive
information regarding current monthly production quantities and net revenue.
Consequently, certain information regarding the operations of the property is
unavailable to the Company. In previous reports to the Commission, the Company
has provided information concerning estimated quantities of proved oil and gas
reserves attributable to the Prinos Interest which had been derived from
publicly available information. Currently, there is no publicly available
information which takes into consideration the effects of the infill drilling
during 1993 and 1994 as required under the 1993 amendment to the License
Agreement known as Law 98/1975. Similarly, the Company does not have access to
the engineering data upon which the infill drilling program was based.
Therefore, the Company is not in a position to estimate the potential future
producible reserves and/or present value of future net revenues attributable to
the Prinos Interest.

The Company estimates the present value of future net cash flows
attributable to its Prinos Interest in determining the ceiling limitation on the
carrying amount of the property under the full cost method of accounting. The
estimate is based on the historical cash flows and production profiles
attributable to its interest, adjusted for current production and current
prices. For purposes of calculating the ceiling limitation, the estimate of the
present value of future net revenues attributable to its Prinos Interest is
based on the terms of the License Agreement as amended in 1993 and reflects
production estimated as continuing through the year 2000 at which time the
Company feels the field will no longer be economic under current prices and
production profiles. As of March 31, 1995, the Company's estimate of the
ceiling limitation under the full cost method of accounting is in excess of the
carrying amount in its Prinos Interest.

<PAGE>
OIL AND GAS REVENUE AND COST INFORMATION

Revenue from and costs incurred in oil and gas producing activities for
the fiscal years ended March 31, 1995, 1994 and 1993 are as follows:

YEAR ENDED MARCH 31
-------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Oil and gas revenue (1)
Greece $ - 573,100 4,523,500

Less Greek income taxes paid - (228,100) (2,245,499)
------------ ----------- -----------
$ - 345,000 2,278,001
------------ ----------- -----------
------------ ----------- -----------

Capitalized costs related to oil
and gas producing activities

Proved properties
Greece $ 39,000,000 39,000,000 39,000,000

Less accumulated depreciation,
depletion and amortization (37,629,909) (37,396,220) (37,151,590)
------------ ----------- -----------
$ 1,370,091 1,603,780 1,848,410
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

(1) The Company's gross revenues are burdened only by Greek income taxes. The
Company has no production costs since its Prinos Interest is a net profits
interest.

The rate of depreciation, depletion and amortization as a percentage of
gross revenues (net of Greek income taxes) for Greece is as follows:

YEAR ENDED MARCH 31
----------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Greece - (2) 71% 30%
</TABLE>

(2) The Company recorded a provision for depreciation, depletion and
amortization of $233,689 for fiscal year 1995 but did not record any revenues
for its Prinos Interest.

<PAGE>

SELECTED FINANCIAL DATA

YEAR ENDED MARCH 31, SIX MONTHS ENDED
------------------- ----------------
SEPTEMBER 30,
--------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:

Revenue . . . . . . . . . . . . . . . . . . $ 321,495 835,329 202,243 506,023

Costs and Expenses. . . . . . . . . . . . . $1,195,369 1,153,304 588,892 600,996

Loss before Income Taxes. . . . . . . . . . $ (873,874) (317,975) (386,649) (94,973)

Net Loss . . . . . . . . . . . . . . . . . $ (796,602) (448,746) (327,449) (175,169)

Net Loss per Share
of Common Stock . . . . . . . . . . . . . $ (.20) (.11) (.08) (.04)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1995 SEPTEMBER 30, 1995
-------------- ------------------
ACTUAL ACTUAL AS ADJUSTED(1)
------ ------ -------------
<S> <C> <C> <C>
BALANCE SHEET DATA:

Net working capital (deficit) . . . . . . . $(2,554,850) (803,074) (272,974)

Total assets . . . . . . . . . . . . . . . $ 1,557,322 1,357,928 1,888,028

Stockholders' deficit . . . . . . . . . . . $(2,007,281) (2,334,730) (1,804,630)
</TABLE>

<PAGE>

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

In the past, the Company's principal source of revenue has been from its
Prinos Interest. Payments to the Company under the Prinos Interest were
suspended in 1994 when the Company commenced legal action against Denison.
Prior to that time the revenues from the Prinos Interest varied. The
fluctuations in revenues in recent years are in part due to fluctuations in oil
prices. The average per barrel price for oil production underlying the Prinos
Interest was $14.47, $12.38 and $15.65 for the years ended March 31, 1995, 1994
and 1993, respectively.

Due to high Greek income taxes and royalties in combination with declining
production levels, low oil prices and increasing operating costs, the consortium
operating the Greek properties believed that the Greek operation was at its
economic breakeven point. As a result, Denison and its partners commenced
negotiations in 1992 with senior Greek government officials to obtain relief
from the high level of government taxes and royalties. On February 23, 1993,
the consortium reached an agreement with the Greek Government resulting in an
amendment to the License Agreement known as Law 98/1975 which regulates the
operation of the field. The amendment was ratified by the Greek Parliament on
June 23, 1993 and was retroactive to January 1, 1993.

In addition, the new law required Denison and its partners to spend $15
million during 1993 and 1994 on infill drilling in order to enhance the
recoverability of the hydrocarbons. In March 1994, the consortium announced the
discovery of a new oil field by the drilling of the Prinos North-2 well.
According to Denison's 1994 Annual Report, two oil bearing zones were flow
tested with a 30 meter upper section flowing at about 3,200 barrels per day and
a 7 meter lower section flowing at 150 barrels per day. Oil in place was
calculated at about 18 million barrels of which 5 million may be recoverable.
The crude from this discovery has an API gravity of about 25 degrees, contains
about 7% sulphur and may have a selling value of between $1.50 and $4.00 per
barrel less than Prinos crude. Recent discussions with Denison indicate that
the consortium is not considering development of Prinos North at this time.

Denison, who has the contractual obligation to pay the Company's Prinos
Interest, has asserted that the calculation of the amounts due the Company
should be based on the amended agreement with the Greek government. The Company
disagrees with this interpretation and has commenced legal action seeking a
declaration by the Court that amounts due the Company attributable to its Prinos
Interest be calculated based on the terms of the License Agreement prior

<PAGE>

to the 1993 amendment. The Company is seeking damages of approximately
$5,000,000 for the period from January 1, 1993 through March 31, 1994 plus
damages since that date and undetermined future damages. The Company
estimates that damages for unpaid revenues for the period from April 1, 1994
through September 30, 1995 are approximately $6,300,000. SEE "LEGAL
PROCEEDINGS."

The Company also receives revenues from sales of seismic data gathered in
its oil and gas exploration and development. That revenue is sporadic and is
not sufficient to fund the Company's ongoing operations. During the six-month
period ended September 30, 1995, the Company recorded approximately $36,700 of
revenue from the sale of seismic data.

The Company currently receives approximately $322,000 per year in
connection with services it renders to Cordillera Corporation and San Miguel
Valley Corporation pursuant to management agreements providing for reimbursement
of costs for actual time and expenses incurred in activities conducted on behalf
of those entities. The amounts received under the management agreements are a
reimbursement for employee salaries and other operating expenses. SEE "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."

Denison's reduced payments to the Company under the Prinos Interest has
resulted in the Company's inability to fulfill its financial obligations as
they become due and therefore the Company faces potential insolvency.
Accordingly, the Company's auditors have issued an opinion on the Company's
financial statements for the year ended March 31, 1995 that includes
explanatory paragraphs discussing the uncertainty regarding the Company's
ability to continue as a going concern. The financial statements do not
contain any adjustments that may be necessary if the Company is unable to
continue as a going concern. In addition to the

<PAGE>

uncertainty of the Company's ability to continue as a going concern, the
auditor's report also includes an explanatory paragraph regarding the
uncertainty associated with the legal action against Denison and indicates
that no provision for any liability or loss that may result upon adjudication
has been recognized in the financial statements for the year ended March 31,
1995.

When payments under the Prinos Interest were suspended, the Company funded
its operations through draws against the line of credit established with NWO.
Prior to the end of fiscal year 1995, the Company's credit line was exhausted.
During the first half of fiscal year 1996, the Company had no resources to make
monthly interest payments on the advances under the line of credit.

On September 19, 1995, the Company entered into the Modification Agreement
with NWO. The Modification Agreement provides for limited funding of litigation
expenses and provides temporary relief from any collection actions by NWO. The
Modification Agreement also allows the Company to retain up to $200,000 of any
proceeds received from its Prinos Interest for general working capital purposes.
The Modification Agreement does not provide any further funding for operating
expenses of the Company other than limited funding of the litigation with
Denison. SEE "BUSINESS OF THE COMPANY-NWO LINE OF CREDIT."

Future operations of the Company, estimated reimbursements to NWO of
current advances for legal fees, including estimated accrued interest, up to
$100,000, and payment of accounts payable will be funded by this Rights Offering
and the $200,000 retained by the Company from the Denison payment. The Company
estimates that the funding provided from the Rights Offering will be sufficient
to fund the litigation with Denison through June 30,1996, the date prior to
which the Company anticipates a judgment will be rendered in the litigation, and
to fund limited operations through December 1996. SEE "USE OF PROCEEDS." Even
if a judgment in the Company's favor is obtained, of which there is no
assurance, there is no guarantee that the Company would be able to collect that
judgment and, if able to collect, when the judgment would be actually collected.
Until recently, it appeared, based on Denison's public filings, that the
financial stability of Denison was questionable and that Denison continued to
operate at the sufferance of its secured creditors. Denison announced on
October 16, 1995 that Denison's Board had approved a Plan of Arrangement which,
among other things, incorporates agreements restructuring the debt held by
Denison's major lenders, the Toronto Dominion Bank, Bank of America Canada, and
the Canadian Mortgage and Housing Corporation. In a press release dated
December 21, 1995, Denison announced that it had obtained the final order of the
Ontario Court of Justice, General Division approving its Plan of Arrangement.
The press release indicated that as a result of the contribution of all
stakeholders, Denison has been preserved as a going concern and its capital
structure has been substantially improved. The court approval of the Plan may
increase the likelihood that Denison would have assets available for
satisfaction of a judgment in favor of the Company. However, the Company does
not have sufficient information in its possession to determine whether any
assets of Denison are unsecured and available for satisfaction of a judgment in
favor of the Company.

<PAGE>

Unless funds are collected as a result of the litigation with Denison and
the revenue stream is resumed under the Prinos Interest as calculated under the
original License Agreement, the Company will be required to obtain some
additional source of capital, in addition to the Rights Offering described
herein, to fund continuing operations past December 1996 and pay off the NWO
loan and accrued interest when due on December 31, 1996.

If the judgment is not favorable, the Company would likely still have its
Prinos Interest, however, the revenue stream will likely be substantially
reduced. If such unfavorable outcome occurs, the Company does not believe that
the payments made under the Prinos Interest as calculated under the terms of the
amended License Agreement at current production and price levels will be
sufficient to repay the obligations owed to NWO. The Company may be forced to
liquidate its assets, and in such case, little if any assets will be available
for distribution to shareholders.

If the litigation with Denison is resolved in the Company's favor and
payments are resumed under the Prinos Interest as calculated under the License
Agreement prior to the 1993 Amendment, that revenue should be sufficient to fund
on-going operations and limited new exploration activities. All revenues from
the Prinos Interest will be initially applied to repay the Company's
obligations to NWO under the Modification Agreement. SEE "BUSINESS OF THE
COMPANY-NWO LINE OF CREDIT." There is no assurance as to how long the Prinos
property will continue to produce oil and gas and, accordingly, how long the
Company can expect revenue from its Prinos Interest.

The financial statements do not include any adjustments that might result
from the uncertainties described above.

RESULTS OF OPERATIONS

The Company reported net losses of $796,602 and $448,746 for the years
ended March 31, 1995 and 1994, respectively, and net income of $1,511,343 for
the year ended March 31, 1993. The most significant factors in the fluctuations
of net income between the periods are lower revenues under the Prinos Interest
as the result of the position taken by Denison in the calculation of the Prinos
Interest, variances in oil and gas prices received, and the effect of normal
production declines from the Prinos and South Kavala fields in Greece. The
depletion provision decreased from $678,519 in 1993 to $244,630 for 1994, and
subsequently to $233,689 for 1995, reflecting the declining base of depletable
costs for the Greece concession.

The Company reported a loss before income taxes of $386,649 for the first
six months of fiscal year 1996 compared to a loss before income taxes of $94,973
for the same period of fiscal year 1995. The increased loss before income taxes
is due to the suspension of revenues from the Prinos Interest offset by
approximately $37,000 in revenue from a non-recurring sale of seismic data.

<PAGE>

The following table summarizes the primary components of changes in net
income before the provision for income taxes for the relevant periods:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- YEAR ENDED MARCH 31,
SEPTEMBER 30, --------------------------------------------
1995 1995 1994 1993
---------------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Calculation of Greek
revenues $(366,666) (573,100) (3,377,000) (623,000)
Production decline - - (78,000) (1,315,000)
Price decrease - - (477,000) (115,000)
Reduction in
depreciation and
depletion charges 23,378 10,941 433,889 176,842
(Increase) reduction in
interest costs (19,062) (38,136) 43,741 200,211
Increase (reduction) in
other income 62,886 59,266 (182,000) -
Other 7,788 (14,870) (20,133) 65,220
--------- -------- ---------- ----------
Decrease in income
before taxes $(291,676) (555,899) (3,656,503) (1,610,727)
--------- -------- ---------- ----------
--------- -------- ---------- ----------
</TABLE>

For the year ended March 31, 1995, other components of changes in net
income are the net effect of a decrease in exploration expenses and an increase
in general and administrative expenses.

The provision for income taxes in fiscal 1995 decreased approximately
$208,000 from the fiscal 1994 provision due to a decrease in Greek income taxes
corresponding to the decrease in Greek oil and gas revenues recorded.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 12,000,000 shares of
Common Stock, par value $.0625 per share and 600,000 shares of Preferred Stock,
par value $10.00 per share. The relative rights of the Company's Common Stock
and Preferred Stock are defined by the

<PAGE>

Company's Articles of Incorporation, as described below, as well as by the
Company's Bylaws and the General Corporation Law of the State of Delaware.

COMMON STOCK

Subject to the rights of holders of any series of Preferred Stock which may
from time to time be issued, holders of Common Stock are entitled to one vote
per share on matters acted upon at any shareholders' meeting, including the
election of directors, and to dividends when, as and if declared by the Board of
Directors out of funds legally available therefor. There is no cumulative
voting and the Common Stock is not redeemable. In the event of any liquidation,
dissolution or winding up of the Company, each holder of Common Stock is
entitled to share ratably in all assets of the Company remaining after the
payment of liabilities and any amounts required to be paid to holders of
Preferred Stock, if any. Holders of Common Stock have no preemptive or
conversion rights and are not subject to further calls or assessments by the
Company. All shares of Common Stock now outstanding, and all shares to be
outstanding upon the completion of this Rights Offering, are and will be fully
paid and non-assessable.

The Common Stock is not listed on any exchange. The Common Stock was
previously listed on the Pacific Stock Exchange as a Tier II Security. As of
November 15, 1995, there were approximately 493 holders of record of Common
Stock. This number was derived from the Company's shareholder records, and does
not include owners of the Company's Common Stock whose shares are held in the
names of various dealers, clearing agencies, banks, brokers, and other
fiduciaries. The Company believes that the number of beneficial owners of
Common Stock exceeds 550.

The Company failed in several respects to maintain the minimum standards
for maintaining its listing as a Tier II Security on the Exchange. On
August 25, 1995, the Company was notified that it was subject to the
initiation of delisting procedures. Its listing status was reviewed by the
Exchange at a meeting of the Equity Listing Committee (the "Committee") held
on October 3, 1995. The Company was informed that the Committee had decided
to delist its Common Stock. The Company's Common Stock was suspended from
trading on October 4, 1995. The Committee based its decision upon the
Company's deficiencies with respect to the following components of the
Exchange's listing maintenance requirements: net tangible assets of at least
$500,000, aggregate market value of publicly held shares of at least
$500,000, a minimum bid price per share of at least $1, and the Committee's
serious doubts about the Company's ability to meet the requirements for an
ongoing concern. On December 8, 1995, representatives of the Company
appealed the decision to delist the stock before the Board Appeals Committee
of the Exchange. Finding no compelling evidence to recommend that the
October 3, 1995, decision of the Committee be revised, the decision to delist
was upheld and affirmed. The delisting of the Company from the Exchange
will likely have an adverse effect on the market value of the Common Stock.
The Company is attempting to secure a broker-dealer or dealers to serve as
market makers for trades in its Common Stock. There is no

<PAGE>

assurance that the Company will be able to secure such a relationship. SEE
"RISK FACTORS-DELISTING FROM THE PACIFIC STOCK EXCHANGE" AND "MARKET FOR
COMMON EQUITY."

PREFERRED STOCK

The Board of Directors of the Company, without further action by the
stockholders, is authorized to issue the shares of Preferred Stock in one or
more series and to determine the voting rights, preferences as to dividends, and
the liquidation, conversion, redemption and other rights of each series. The
issuance of a series with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the shareholders. The Company has no
present plans to issue any shares of Preferred Stock.

TRANSFER AGENT

The Company's Transfer Agent is Chemical Mellon Shareholder Services,
300 South Grand Avenue, Los Angeles, California 90071-3401.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the names and ages of the members of the
Company's Board of Directors and its executive officers, and sets forth the
position with the Company held by each:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James Neal Blue 60 Director; Chairman of the Board and Chief
Executive Officer of the Company

Charles N. Haas 58 Director and President of the Company

John L. Redmond 65 Director and Vice President, International
Exploration of the Company

Gene E. Burke, M.D. 66 Director

Sidney H. Stires 65 Director

Janet A. Holle 44 Vice President/Secretary of the Company
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
Diana J. Peters 38 Treasurer and Chief Financial Officer of the
Company
</TABLE>

Directors of the Company hold these positions until their respective
successors are elected and qualified. The current directors, except for John L.
Redmond, were elected in 1982 and no meeting of the stockholders has been held
since that date. Mr. Redmond was appointed in 1994 by the remaining directors
to fill a vacancy on the Board of Directors.

JAMES N. BLUE. Mr. Blue has been a director and officer of the Company
since 1981. He is also Chairman of General Atomics in San Diego, California and
President of Cordillera Corporation in Denver, Colorado.

CHARLES N. HAAS. Mr. Haas has been a director and officer of the Company
since 1981.

JOHN L. REDMOND. Mr. Redmond has been a director of the Company since
1994. He has been Vice President, International Exploration of the Company
since 1990.

GENE E. BURKE, M.D. Mr. Burke has been a director of the Company since
1972. He has been a physician in sole practice in Houston, Texas during that
time.

SIDNEY H. STIRES. Mr. Stires has been a director of the Company since
1980. During that time Mr. Stires has been the President of Stires & Co., Inc.,
an investment banking company in New York, NY.

JANET A. HOLLE. Ms. Holle has been an officer of the Company since 1987.

DIANA J. PETERS. Ms. Peters has been an officer of the Company since 1992.
From 1988 to 1992, Ms. Peters was a consultant with respect to accounting
issues.

<PAGE>

EXECUTIVE COMPENSATION

The following information summarizes compensation paid by the Company to
James N. Blue, Chief Executive Officer and Charles N. Haas, President.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- -------------------- -------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)

OTHER
FISCAL ANNUAL RESTRICTED
NAME AND YEAR COMPEN- STOCK LTIP ALL OTHER
PRINCIPAL ENDED SALARY BONUS SATION AWARD(S) OPTIONS/ PAYOUTS COMPENSA-
POSITION MARCH 31 ($) ($) ($) ($) SARS (#) ($) TION ($)
- --------- -------- ---------- ----- ------- ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James N. Blue 1995 60,000 (1) - - - - - -
Chairman of 1994 60,000 (1) - - - - - -
the Board and 1993 60,000 (1) - - - - - -
Chief
Executive
Officer

Charles N. Haas 1995 158,762 (2) - - - - - 21,899 (2)(3)
President 1994 159,862 (2) - - - - - 20,766 (2)(3)
1993 161,789 (2) - - - - - 22,892 (2)(3)
</TABLE>

(1) Monthly officer's fee of $5,000.

(2) A portion of the salary and other compensation paid to Mr. Haas has been
reimbursed based on cost sharing arrangements with other companies. SEE
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-MANAGEMENT AGREEMENTS."

(3) The Company is a participant in the Cordillera and Affiliated Companies'
Money Purchase Pension Plan and 401(K) Plan, covering all qualified
employees of the Company. The pension plan is a non-contributory defined
contribution plan. Company contributions to this plan are based on 6% of
total compensation not exceeding the limit established annually for the
Federal Insurance Contribution Act (FICA) and 11.7% of compensation in
excess of this limit. Vesting begins after two years of service at a rate
of 20% annually with full vesting subsequent to five years of service or
upon retirement, death or permanent disability. The 401(K) plan provides
for discretionary employee contribution of up to 10% of annual pre-tax
earnings, subject to the maximum amount established annually under Section
401(K) of the Internal Revenue Code. The Company is required to match
contributions to the extent of 6% of annual employee compensation.
Employer contributions to the plan vest immediately.

Members of the Company's Board of Directors who are not employees of the
Company or any of its affiliates receive directors' fees of $500 per month.
Members of the Board of Directors who are employees do not receive directors'
fees. Mr. Blue receives a monthly fee of $5,000 for services as an officer of
the Company.

<PAGE>

There are no employment contracts outstanding at this time. The Company
has a deferred compensation agreement with a former officer entitling this
officer to receive $175,000 payable in a maximum of ten equal installments
beginning January 1, 1988 or, if such person dies prior to receiving all
installments, payable at such time to his beneficiaries to the extent of the
remaining balance. Included in accrued expenses is $17,500 which is due January
1, 1996. The final installment of $17,500 is due January 1, 1997.

In fiscal 1983, the Board of Directors authorized a bonus of $25,000 to the
president of the Company, payable as cash flow permits. The president has not
been paid as of March 31, 1995, and the amount is included in accrued expenses
in the accompanying balance sheets.

The Company has no compensation committee. James N. Blue and Charles N.
Haas participated in all deliberations concerning executive officer
compensation.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

As of November 15, 1995 there were issued and outstanding 3,915,154 shares
of Common Stock and is the Company's only class of voting securities. Holders
of Common Stock are entitled to one vote per share on each matter upon which
shareholders may be entitled to vote.

The following table sets forth information regarding shares of Common Stock
of the Company beneficially owned as of November 15, 1995 by: (i) each person
known by the Company to beneficially own 5% or more of the outstanding Common
Stock, (ii) by each director, (iii) by each person named in the summary
compensation table and (iv) by all officers and directors as a group.

NAMES AND ADDRESSES OF OFFICERS, AMOUNT OF PERCENTAGE OF
DIRECTORS AND PRINCIPAL SHAREHOLDERS COMMON STOCK VOTING SECURITIES
------------------------------------ ------------ -----------------
<S> <C> <C>
Allen & Company 824,200 21%
and various affiliates (1)
711 Fifth Avenue
New York, NY 10022

International Hydrocarbons (2) 1,713,483 43.8%
c/o John E. Jones
5000 S. Quebec Street, Suite 450
Denver, CO 80237

James N. Blue (3) (4) None N/A
5000 S. Quebec St., Suite 450
Denver, CO 80237

Charles N. Haas (3) None N/A
5000 S. Quebec St., Suite 450
Denver, CO 80237

Sidney H. Stires (3) 34,000 less than 1%
432 Park Avenue South
New York, NY 10016

Gene E. Burke, M.D. (3) None N/A
3555 Timmons #680
Houston, TX 77027

John L. Redmond (3) None N/A
5000 S. Quebec St., Suite 450
Denver, CO 80237

All Directors and Officers 34,000 less than 1%
as a group (7 persons)

</TABLE>

<PAGE>

(1) The information regarding Common Stock owned by Allen & Company is based on
the information contained in the Amendment No. 1 to Schedule 13D dated
April 20, 1987 filed by the persons and entities identified below, which
reports the following ownership of the Common Stock:

NAMES COMMON SHARES PERCENTAGES
----- ------------- -----------
<S> <C> <C>
Allen & Company 165,000 4.2

American Diversified
Enterprises, Inc. 232,500 5.9

Herbert Anthony Allen, 47,917 1.2
Susan Kathleen Wilson and
Herbert Allen as Successor
Trustees of Trust created
by Herbert Allen pursuant to
Agreement dated 12/1/64

Terry Allen Kramer and Irwin 70,000 1.8
H. Kramer, as Trustees U/A
for Issuer of Terry Allen
Kramer pursuant to
Agreement dated 4/5/63

Toni Allen Goutal 55,500 1.4

Angela Frances Allen Kramer 43,700 1.1

Nathaniel Charles Allen Kramer 56,000 1.4

Bruce Allen 20,000 .5

C. Robert Allen, IV 5,000 .1

John Godwin Allen 5,000 .1

Luke Andrew Allen 5,000 .1

Thaddeus Mack Allen 5,000 .1

Evelyn Henry 52,000 1.3

Marjorie Bisgood 59,500 1.5

Bradley Roberts 2,083 *

* Less than .1%

</TABLE>

(2) International Hydrocarbons is a wholly-owned subsidiary of NWO. Mr. Blue
is president and a director of International Hydrocarbons. He is also
president and a director of NWO. Cordillera Corporation ("Cordillera"), of
which Mr. Blue is president and a major stockholder, and Mr. Blue
beneficially hold 60.667% of Class B common stock of NWO.

42
<PAGE>

(3) Director of the Company

(4) Does not include shares owned by International Hydrocarbons. International
Hydrocarbons is a wholly-owned subsidiary of NWO. Mr. Blue is president
and a director of both International Hydrocarbons and NWO. Cordillera, of
which Mr. Blue is president and a major stockholder, and Mr. Blue
beneficially hold 60.667% of Class B common stock of NWO.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NWO LINE OF CREDIT

The Company has a $2,000,000 line of credit with NWO, the parent company
of International Hydrocarbons, the Company's principal stockholder. The line
of credit is secured by the Company's Prinos Interest. Prior to the end of
fiscal year 1995, the Company's credit line was exhausted. During the first
half of fiscal year 1995 the Company had no resources to maintain interest
payments under the line of credit. Accordingly, on September 19, 1995, the
Company entered into a Modification Agreement with NWO, modifying the
existing line of credit arrangement between the Company and NWO. SEE
"BUSINESS OF THE COMPANY-NWO LINE OF CREDIT." On November 30, 1995 the
Company paid NWO $610,522. $92,402 was applied to accrued interest and
$518,120 was applied to the loan leaving an outstanding loan balance of
$1,481,880. As of December 31, 1995, the outstanding loan balance was
$1,431,922.

Cordillera is a stockholder of NWO holding 60.667% of Class B common
stock. Mr. Blue, the Chairman of the Board and Chief Executive Officer of the
Company, is president and a major stockholder of Cordillera.

MANAGEMENT AGREEMENTS

The Company has a cost sharing arrangement under which it provides
management services to Cordillera and to San Miguel Valley Corporation
(SMVC), an affiliate of Cordillera, pursuant to agreements providing for
reimbursement of costs for actual time and expenses incurred on Cordillera
and SMVC activities. In 1995, 1994, and 1993, such reimbursements amount to
approximately $274,000, $231,000 and $287,000, respectively, which have been
included as other revenue in the accompanying statements of operations. Mr.
Blue, the Chairman of the Board and Chief Executive Officer of the Company,
is president and a major stockholder of Cordillera.

<PAGE>

OFFICER FEES

Mr. Blue receives officers' fees of $5,000 per month for his services as
Chairman of the Board and Chief Executive Officer of the Company. Mr. Blue
is president and a director of International Hydrocarbons, the Company's
principal stockholder, and its parent, NWO. Cordillera, of which Mr. Blue is
president and a major stockholder, and Mr. Blue beneficially hold 60.667% of
Class B common stock of NWO.

EMPLOYEE BENEFIT PLANS

Cordillera has a defined contribution pension plan covering all
qualified employees of the Company. Contributions to the plan are based on a
percentage of employee compensation ranging from 6% to 11.7%. During 1995,
1994, and 1993, the Company recorded $27,038, $24,607, and $25,270,
respectively, as pension expense under this plan. Mr. Blue, the Chairman of
the Board and Chief Executive Officer of the Company, is president and a
major stockholder of Cordillera.

LEASE OF CORPORATE HEADQUARTERS

The Company leases 2,562 square feet of space in an office building
located at 5000 South Quebec Street, Denver, Colorado. The building is
owned by Sorrento West Properties, Inc., a company indirectly owned and
controlled by Mr. Blue, the Chairman of the Board and Chief Executive Officer
of the Company, and his family. Rent payments for 1995 were $32,998. Future
lease payments are estimated to be $27,000 for 1996 and $29,000 for 1997.
These lease payments include adjustments for the Company's proportionate
share of operating expenses. The Company believes that, with respect to the
lease of its corporate headquarters, it obtained terms no less favorable than
what could have been obtained from unrelated parties in arms-length
transactions.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Under Sections 145 of the Delaware General Corporate Law and the
Company's Certificate of Incorporation, the Company's directors and officers
may be indemnified against certain liabilities which they may incur in their
capacities as such.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling

<PAGE>

person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

RIGHTS AND LEGAL MATTERS

The validity of the Additional Common Stock offered hereby will be
passed upon for the Company by Ballard Spahr Andrews & Ingersoll, Salt Lake
City, Utah.

EXPERTS

The consolidated balance sheets of Oceanic Exploration Company and
subsidiaries as of March 31, 1995 and 1994 and the consolidated statements of
operations and accumulated deficit and cash flows for each of the years in
the three-year period ended March 31, 1995, have been included herein and in
the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.

The report of KPMG Peat Marwick LLP covering the aforementioned
financial statements contains two explanatory paragraphs. The first
explanatory paragraph states that the Company's inability to generate
sufficient cash flow to sustain operations and service its debt raises
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty. The second explanatory
paragraph states the Company has commenced legal action in Canada seeking a
declaration by the Court that amounts due the Company attributable to its
Prinos Interest be calculated based on the terms of a license agreement with
the Greek government before a recent amendment. The working interest owner
who has the contractual obligation to the Company for its Prinos Interest has
ceased remitting payments to the Company and has filed a counterclaim. The
ultimate outcome of this litigation cannot presently be determined.
Accordingly, no provision for any liability or loss that may result upon
adjudication has been recognized in the consolidated financial statements.

45
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1995 AND 1994

(WITH INDEPENDENT AUDITORS' REPORT THEREON)

<PAGE>

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS
OCEANIC EXPLORATION COMPANY:

We have audited the accompanying consolidated balance sheets of Oceanic
Exploration Company and subsidiaries as of March 31, 1995 and 1994, and the
related consolidated statements of operations and accumulated deficit and cash
flows for each of the years in the three-year period ended March 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion the consolidated financial statements referred to above present
fairly the financial position of Oceanic Exploration Company and subsidiaries as
of March 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the years in the three-year period ended March 31, 1995 in
conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that Oceanic Exploration Company and subsidiaries will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, the
Company's inability to generate sufficient cash flow to sustain operations and
service its debt raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also disclosed in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 3 to the consolidated financial statements, the Company has
commenced legal action in Canada seeking a declaration by the Court that amounts
due the Company attributable to its 15% net profits interest in an oil and gas
property offshore Greece be calculated based on the terms of a license agreement
with the Greek government before a recent amendment. The working interest owner
who has the contractual obligation to the Company for its 15% net profits
interest has ceased remitting payments to the Company and has filed a
counterclaim. The ultimate outcome of the litigation cannot presently be
determined. Accordingly, no provision for any liability or loss that may result
upon adjudication has been recognized in the accompanying consolidated financial
statements.

KPMG PEAT MARWICK LLP

Denver, Colorado
May 31, 1995

1
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 1995 AND 1994
- --------------------------------------------------------------------------------

ASSETS 1995 1994
---- ----
<S> <C> <C>

Cash $ 154,628 48,928

Receivables:
Federal income tax - 4,125
Affiliates 2,237 7,264
Other 9,633 777
------------ ----------
11,870 12,166

Prepaid expenses 4,347 2,235

Restricted cash 15,629 15,171
------------ ----------
Total current assets 186,474 78,500
------------ ----------

Oil and gas property interests, full-cost method
of accounting - Greece (note 2) 39,000,000 39,000,000
Less accumulated amortization, depreciation,
and valuation allowance (37,629,909) (37,396,220)
------------ ----------
1,370,091 1,603,780
------------ ----------
Other assets 757 1,325
------------ ----------
$ 1,557,322 1,683,605
------------ ----------
------------ ----------

</TABLE>
(Continued)

2
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS, CONTINUED
- --------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' DEFICIT 1995 1994
---- ----
<S> <C> <C>

Current liabilities:
Notes payable to affiliate (notes 1 and 2) $ 2,000,000 -
Accounts payable 181,879 61,894
Accounts payable to affiliates 60,000 60,000
United Kingdom taxes payable, including
accrued interest 408,958 355,303
Accrued expenses (note 6) 90,487 103,303
----------- ----------
Total current liabilities 2,741,324 580,500
----------- ----------

Note payable to affiliate (note 2) - 1,400,000

Deferred income taxes 808,062 885,334

Other noncurrent liabilities 15,217 28,450
----------- ----------

Total liabilities 3,564,603 2,894,284
----------- ----------

Stockholders' deficit (note 5):
Common stock, $.0625 par value. Authorized
12,000,000 shares; issued and outstanding
3,915,154 shares 244,697 244,697
Capital in excess of par value 6,665 6,665
Accumulated deficit (2,258,643) (1,462,041)
----------- ----------

Total stockholders' deficit (2,007,281) (1,210,679)
----------- ----------

Commitments and contingencies
(notes 1, 3 and 6)
$ 1,557,322 1,683,605
----------- ----------
----------- ----------

</TABLE>

See accompanying notes to consolidated financial statements.

3
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

YEARS ENDED MARCH 31, 1995, 1994, AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>

Revenue:
Oil and gas sales - Greece (note 3) $ - 573,100 4,523,500
Other (note 6) 321,495 262,229 444,065
----------- ---------- ----------
321,495 835,329 4,967,565
----------- ---------- ----------

Costs and expenses:
Interest and financing costs 150,164 112,028 155,769
Exploration expenses 181,566 213,115 220,935
Amortization and depreciation 233,689 244,630 678,519
General and administrative 629,950 583,531 573,814
----------- ---------- ----------
1,195,369 1,153,304 1,629,037
----------- ---------- ----------

Income (loss) before income taxes (873,874) (317,975) 3,338,528

Income tax (benefit) expense (note 4) (77,272) 130,771 1,827,185
----------- ---------- ----------

Net income (loss) (796,602) (448,746) 1,511,343

Accumulated deficit at beginning of year (1,462,041) (1,013,295) (2,524,638)
----------- ---------- ----------

Accumulated deficit at end of year $(2,258,643) (1,462,041) (1,013,295)
----------- ---------- ----------
----------- ---------- ----------

Income (loss) per common share $(.20) (.11) .39
----------- ---------- ----------
----------- ---------- ----------

Number of common shares outstanding 3,915,154 3,915,154 3,915,154
----------- ---------- ----------
----------- ---------- ----------

</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED MARCH 31, 1995, 1994, AND 1993
- --------------------------------------------------------------------------------

Cash flows from operating activities:
Net income (loss) $(796,602) (448,746) 1,511,343
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating
activities:
Amortization and depreciation 233,689 244,630 678,519
Deferred income tax benefit (77,272) (78,332) (425,000)
Decrease in receivables 296 23,699 17,257
(Increase) decrease in restricted cash (458) (280) 198,673
(Increase) decrease in prepaid expenses
and other assets (1,544) 456 442
Increase (decrease) in accounts payable 119,985 (304,487) 221,011
Decrease in accounts payable to
affiliates - - (172,432)
Increase (decrease) in United Kingdom
taxes payable, including accrued interest
payable, and accrued expenses 40,839 13,285 (36,828)
Decrease in other noncurrent liabilities (13,233) (11,506) (40,644)
--------- -------- ----------
Net cash (used in) provided by
operating activities (494,300) (561,281) 1,952,341
--------- -------- ----------

Cash flows from financing activities:
Principal payments on primary bank loan - - (2,002,534)
Borrowings from (repayments to) affiliate, net 600,000 (55,000) 650,000
--------- -------- ----------
Net cash provided by (used in)
financing activities 600,000 (55,000) (1,352,534)
--------- -------- ----------
Net increase (decrease) in cash 105,700 (616,281) 599,807

Cash at beginning of year 48,928 665,209 65,402
--------- -------- ----------

Cash at end of year $ 154,628 48,928 665,209
--------- -------- ----------
--------- -------- ----------

Interest paid $ 124,781 86,690 137,821
--------- -------- ----------
--------- -------- ----------

Federal income taxes paid (refunded) $ (4,125) (18,997) 6,686
--------- -------- ----------
--------- -------- ----------

Foreign income taxes paid $ - 228,100 2,245,499
--------- -------- ----------
--------- -------- ----------

</TABLE>

See accompanying notes to consolidated financial statements.

5
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1995 AND 1994
- --------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) GENERAL

Oceanic Exploration Company (the Company) is principally engaged in a
worldwide search for oil and gas reserves. The Company's investment
in oil and gas properties consists primarily of interests in proven
reserves offshore Greece. Substantially all production from the
offshore Greece property is sold 50% to the Greek national refinery
and 50% to BP-France based on prices determined by reference to
current world oil prices as specified by contracts signed by the
operator with both customers.

(b) GOING CONCERN BASIS OF PRESENTATION

The financial statements have been prepared on a going concern basis
which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. Several
factors, described below, raise substantial doubt about the ability of
the Company to continue as a going concern.

Currently, the Company's operations are not generating sufficient cash
flow to fund operations and the Company's debt service. The Company
has been economically dependent upon NWO Resources, Inc. (NWO). NWO
is the parent corporation of the Company's majority stockholder,
International Hydrocarbons. The Company required financial assistance
from NWO during 1995 under a line of credit agreement (see note 2).

Through fiscal year 1995, NWO continued to advance funds to the
Company up to the limit of the line of credit agreement. NWO has no
obligation or commitment to provide further financial support and
recent discussions with NWO indicate that NWO is unwilling to extend
further financial assistance to the Company. As of May 31, 1995, the
Company is in default on the line of credit as it has not made its
interest payment for May 1995. Management has entered into
discussions with NWO with a view towards achieving an agreement which
would defer principal and interest payments and allow the Company to
finance its litigation costs and continue limited operations (see
note 3). There can be no assurance that such an agreement can be
reached with NWO.

The Company will require additional funds to fund its litigation costs
and continue limited operations until the pending litigation is
completed or settled. Management is reviewing the Company's
activities and taking actions to reduce overhead costs. The Company
is also considering various options to fund its activities, which
include raising additional capital, borrowing additional funds, the
sale of assets, or a merger with another company. Obtaining the
additional financing may be difficult and there can be no assurances
that the Company will be successful in doing so.

6
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Due to the uncertainties regarding the Company's ability to obtain
additional financing and reach an agreement with NWO to defer payments
due on its line of credit, there is substantial doubt about the
ability of the Company to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.

The consolidated financial statements include the accounts of the
Company and its wholly owned domestic and foreign subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.

(d) OIL AND GAS PROPERTIES

Oil and gas properties are accounted for using the full-cost method of
accounting in accordance with the rules prescribed by the Securities
and Exchange Commission (SEC). Under this method, all acquisition,
exploration, and development costs are capitalized on a country-by-
country basis as incurred. Gains or losses on disposition of oil and
gas properties are recognized only when such dispositions involve
significant reserves within the individual country cost pools.

Capitalized costs less related accumulated amortization may not exceed
the sum of (1) the present value of future net revenue from estimated
production, computed using current prices and costs and a discount
rate of 10%; plus (2) the cost of properties not being amortized, if
any; plus (3) the lower of cost or fair value of unproved properties
included in costs being amortized; less (4) income tax effects related
to differences in the book and tax basis of oil and gas properties.

The Company's offshore Greece oil and gas property interests represent
a 15% net profits interest in such properties. Accordingly, depletion
of oil and gas properties is computed using the future net revenue
method. Depletion expense for 1995 and 1994 has been calculated based
on the Company's estimate of the revenue due for its net profits
interest, calculated in a manner consistent with the terms of the
amended license agreement (see note 3).

Because the Company's interest in the offshore Greece oil and gas
property is a net profits interest and not a working interest, the
Company is only entitled to receive information regarding current
monthly production quantities and net revenue. Consequently, certain
reserve information regarding the operations of the property is
unavailable to the Company.

The cost of undeveloped properties is excluded from amortization
pending a determination of the existence of proved reserves. Such
undeveloped properties are assessed periodically for impairment. The
amount of impairment, if any, is added to the costs to be amortized.
At March 31, 1995 and 1994, all capitalized costs were subject to
amortization.

7
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------

(e) INCOME TAXES

The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES.
Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in operations in the period
that includes the enactment date.

Effective April 1, 1993, the Company adopted Statement 109 and has
reported no effect for this change in the method of accounting for
income taxes.

(f) INCOME (LOSS) PER SHARE

Income (loss) per share is based on the number of common shares
outstanding for the period.

(g) RECLASSIFICATIONS

Certain amounts for 1994 have been reclassified to conform to the 1995
presentation.

(2) NOTES PAYABLE

Notes payable to affiliate represents borrowings under a line of credit
with NWO. The NWO line of credit provides for cumulative draws of up to
$2,000,000 with interest payable monthly on the outstanding principal
balance at the greater of the U.S. bank prime lending rate or 1 3/4% above
the 30-day LIBOR. Borrowings under the line of credit are secured by the
Company's 15% net profits interest in the offshore Greece oil and gas
property. The borrowings are secured by promissory notes payable no later
than January 1, 1996. As of May 31, 1995, the Company is in default of the
line of credit as it has not made its interest payment for May 1995.

(3) OIL AND GAS SALES - GREECE

8
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------

license agreement before this amendment. The Company is seeking damages of
approximately $5,000,000 for the period from January 1, 1993 through
March 31, 1994 plus undetermined future damages. While the Company
believes it has a reasonable possibility of prevailing in its action, the
ultimate outcome of the matter cannot presently be determined.
Accordingly, no amounts have been recorded in the accompanying financial
statements for current revenues or damages, if any, that may ultimately
be awarded to the Company.

In response to the legal action commenced by the Company, the working
interest owner has ceased remitting payments to the Company and has filed a
counteraction seeking damages in the amount of $4,800,000 plus interest and
costs, alleging the Company was overpaid for the period January 1, 1989
through December 31, 1993. As the working interest owner has ceased
remitting payments to the Company for its 15% net profits interest, the
Company has not recorded any revenues for Greece for the current year.
While the Company also believes that it will prevail on the counterclaim,
the ultimate outcome of that matter likewise cannot be determined.
Accordingly, no provision for any liability or loss that may result upon
final resolution of the counterclaim has been recognized in the financial
statements.

(4) INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
Year ended March 31
----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>

Current:
Foreign - Greece $ - 228,100 2,245,499
U.S. federal - (18,997) 6,686
-------- ------- ---------

Total current income tax expense - 209,103 2,252,185
-------- ------- ---------

Deferred:
Foreign - Greece (93,476) (97,852) (450,465)
U.S. federal 16,204 19,520 25,465
-------- ------- ---------

Total deferred income tax benefit (77,272) (78,332) (425,000)
-------- ------- ---------

Total income tax (benefit) expense $(77,272) 130,771 1,827,185
-------- ------- ---------
-------- ------- ---------

</TABLE>

9
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------

The reconciliation between tax expense computed by multiplying pretax
income by the U.S. federal statutory tax rate of 34% and the reported
amount of income tax expense is as follows:

Year ended March 31
---------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>

Computed at U.S. statutory tax rate $ - - 1,135,100
Foreign - Greek income taxes, net (93,476) 130,248 1,795,034
Tax credit for Greek income taxes - - (1,081,906)
Other, net 16,204 523 (21,043)
-------- ------- ---------

Income tax expense $(77,272) 130,771 1,827,185
-------- ------- ---------
-------- ------- ---------

</TABLE>

Greek income taxes are withheld from oil and gas revenue payments to the
Company. The effective Greek income tax rate applicable to the Company's
15% net profits interest was reduced from 50% to 40% effective January 1,
1993 with respect to existing development areas. The 50% tax rate remains
effective for areas outside the current development area.

Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to the deferred tax
liability at March 31, 1995 and 1994 relate to the Greece oil and gas
property interest.

(5) STOCK OPTIONS AND GRANTS

The Company adopted an incentive plan in June 1976 which reserved 500,000
shares of common stock for stock options and 200,000 shares for stock
grants to be awarded to Company officers, directors, and employees,
including certain eligible consultants. At March 31, 1995, no stock
options or grants were outstanding. At that date, 223,500 shares were
available for future stock option awards and 115,626 shares were available
for future grants.

(6) RELATED PARTY TRANSACTIONS

The Company provides management services under a cost sharing arrangement
to Cordillera Corporation (Cordillera), the beneficial controlling
shareholders of the Company, and to San Miguel Valley Corporation (SMVC),
an affiliate of Cordillera, under agreements providing for reimbursement of
costs for actual time and expenses incurred on Cordillera and SMVC
activities. In 1995, 1994, and 1993, such reimbursements amounted to
approximately $274,000, $231,000, and $287,000, respectively, which have
been included as other revenue in the accompanying statements of
operations.

Cordillera has a defined contribution pension plan covering all qualified
employees of the Company. Contributions to the plan are based on a
percentage of employee compensation ranging from 6% to 11.7%. During 1995,
1994, and 1993, the Company recorded $27,038, $24,607, and $25,270,
respectively, as pension expense under this plan.

10
<PAGE>

OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------

(6) RELATED PARTY TRANSACTIONS (CONTINUED)

The Company has a deferred compensation agreement with a former officer
entitling this officer to receive $175,000 payable in a maximum of ten
equal installments beginning January 1, 1988 or, if such person dies prior
to receiving all installments, payable at such time to his beneficiaries to
the extent of the remaining balance. Included in accrued expenses is
$17,500 which is due January 1, 1996.

In fiscal 1983, the Board of Directors authorized a bonus of $25,000 to the
president of the Company, payable as cash flow permits. The president has
not been paid as of March 31, 1995, and the amount is included in accrued
expenses in the accompanying balance sheets.

The Company leases 2,562 square feet of space in an office building owned
by Sorrento West Properties, Inc., a company indirectly owned and
controlled by an officer and director of the Company. Rent payments were
$32,998 for 1995 and $32,152 for 1994. Future minimum lease payments are
$27,000 for 1996 and $29,000 for 1997.

11
<PAGE>

FINANCIAL STATEMENTS - FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1995

OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1995
------------ -----------
<S> <C> <C>
Cash $ 117,540 154,628
Receivables:
Affiliates 4,585 2,237
Other - 9,633
------------ -----------
4,585 11,870

Prepaid expenses 2,239 4,347

Restricted cash - 15,629
------------ -----------

Total current assets 124,364 186,474
------------ -----------

Oil and gas property interests, full-cost
method of accounting -- Greece 39,000,000 39,000,000

Less accumulated amortization,
depreciation and valuation allowance (37,766,909) (37,629,909)
------------ -----------

1,233,091 1,370,091
------------ -----------

Other assets 473 757
------------ -----------

$ 1,357,928 1,557,322
------------ -----------
------------ -----------
</TABLE>

(Continued)

<PAGE>

OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)

<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S DEFICIT

SEPTEMBER 30, MARCH 31,
1995 1995
------------- ---------
<S> <C> <C>
Current liabilities:
Notes payable to affiliate (note 2) $ 49,685 2,000,000
Accounts payable 234,850 181,879
Accounts payable to affiliates 62,041 60,000
United Kingdom taxes payable,
including accrued interest 408,958 408,958
Accrued expenses 171,904 90,487
------------ -----------
Total current liabilities 927,438 2,741,324
------------ -----------

Notes payable to affiliate (note 2) 2,000,000 -

Deferred income taxes (note 4) 748,862 808,062

Other noncurrent liabilities 16,358 15,217
------------ -----------
Total liabilities 3,692,658 3,564,603
------------ -----------

Stockholders' deficit:
Common stock, $.0625 par value.
Authorized 12,000,000 shares;
issued and outstanding
3,915,154 shares 244,697 244,697
Capital in excess of par value 6,665 6,665
Accumulated deficit (2,586,092) (2,258,643)
------------ -----------
Total stockholders' deficit (2,334,730) (2,007,281)
------------ -----------

Contingencies (note 3)

$ 1,357,928 1,557,322
------------ -----------
------------ -----------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
3

OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
---------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales - Greece (note 3) $ - 366,666 - 183,333
Other 202,243 139,357 82,079 69,263
--------- -------- ------- -------
202,243 506,023 82,079 252,596
--------- -------- ------- -------
Costs and expenses:
Interest and financing costs 78,042 58,980 32,820 31,416
Exploration expenses 25,927 74,654 11,326 36,175
Amortization and
depreciation 137,000 160,378 68,500 80,189
General and administrative 347,923 306,984 204,170 154,512
--------- -------- ------- -------
588,892 600,996 316,816 302,292
--------- -------- ------- -------

Loss before income taxes (386,649) (94,973) (234,737) (49,696)
Income tax (benefit) expense (note 4) (59,200) 80,196 (27,140) 40,663
--------- ------- -------- -------
Net loss $(327,449) (175,169) (207,597) (90,359)
--------- -------- -------- -------
--------- -------- -------- -------
Loss per common share $ (.08) (.04) (.05) (.02)
--------- -------- -------- -------
--------- -------- -------- -------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1995 1994
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(327,449) (175,169)

Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization and depreciation 137,000 160,378
Deferred income tax benefit (59,200) (66,470)
Decrease (increase) in
receivables 7,285 (203,435)
Decrease (increase) in
restricted cash 15,629 (193)
Decrease in prepaid expenses
and other assets 2,392 1,537
Increase (decrease) in accounts
payable and accounts
payable to affiliates 55,012 (20,406)
Increase (decrease) in accrued
expenses 81,417 (5,127)
Increase in other noncurrent
liabilities 1,141 2,133
---------- ---------

Net cash used in
operating activities (86,773) (306,752)
---------- ---------

Cash flows from financing activities:
Borrowings from affiliates 49,685 400,000
---------- ---------

Net cash provided by financing
activities 49,685 400,000
---------- ---------

Net (decrease) increase in cash (37,088) 93,248
Cash at beginning of period 154,628 48,928
---------- ---------
Cash at end of period $ 117,540 142,176
---------- ---------
---------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

SEPTEMBER 30, 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated balance sheet as of March 31, 1995, which has been
derived from audited statements, and the unaudited interim consolidated
financial statements included herein have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Registrant believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments consisting of normal reoccurring accruals have
been made which are necessary for the fair presentation of the periods
presented. The accounting policies of the Registrant are set forth in the
financial statements and notes thereto and are included in the Registrant's
latest annual report on Form 10-KSB. It is suggested that these consolidated
financial statements be read in conjunction with that document.

(2) NOTES PAYABLE

Notes payable to affiliate at September 30 and March 31, 1995 represent
borrowings under a $2,000,000 line of credit established in favor of the
Registrant by NWO Resources, Inc. (NWO), the parent company of International
Hydrocarbons, the Registrant's majority stockholder. On September 19, 1995, the
Registrant entered into a Modification Agreement with NWO, modifying the
existing line of credit arrangement between the Registrant and NWO. Prior to
entering into the Modification Agreement, the NWO line of credit provided for
cumulative draws of up to $2,000,000 with interest payable monthly on the
outstanding balance at the greater of the U.S. bank prime lending rate or 1-3/4%
above the 30-day LIBOR in effect on the date of each draw against the line of
credit. Draws under the line of credit are evidenced by promissory notes which
were originally payable no later than January 1, 1996 with interest at annual
rates of 7% to 9%. Cumulative draws on the NWO line of credit had reached
$2,000,000 by February 15, 1995. The line of credit is secured by the
Registrant's net earnings interest in certain oil and gas producing areas
offshore Greece. At the time the Modification Agreement was entered into, the
Registrant was in default under the terms of the line of credit as it had not
made its interest payments for May, June, July and August 1995.

<PAGE>

The Modification Agreement provides as follows:

1. Except as provided below, NWO will forebear on collection until December
31, 1996 of the interest and principal on the $2,000,000 of promissory
notes evidencing draws on the NWO line of credit ("Oceanic Notes") which it
holds from OIPC.

2. Any monies collected by the Registrant from Denison either before or after
December 31, 1996 will first be applied to paying accrued interest on the
Oceanic Notes. After all accrued interest has been paid, and prior to
December 31, 1996, the Registrant will be permitted to use up to $200,000
of monies collected from Denison for working capital purposes. All
remaining collections from Denison will be applied first to accrued
interest and then to reducing principal on the Oceanic Notes.

3. The Security Agreement between the Registrant and NWO will be amended to
provide that NWO has a full security interest in all proceeds from the
Registrant's lawsuit against Denison and any existing and future Registrant
receivables from Denison.

4. The interest rate on the Oceanic Notes is adjusted to 8.25%.

5. The Registrant agrees to diligently pursue its lawsuit against Denison.

6. The Registrant will use its best efforts to file a Registration Statement
with the Securities and Exchange Commission with respect to the rights
offering described below and use its best efforts to cause the Registration
Statement to become effective by December 31, 1995.

7. In order to enable the Registrant to diligently pursue its lawsuit against
Denison, NWO agrees to make advances to the Registrant for ongoing legal
fees as reflected in statements received by the Registrant subsequent to
August 1, 1995 in connection with the Denison litigation up to an estimated
$100,000 in litigation expenses. As of September 30, 1995, the Registrant
has borrowed $49,685 for legal fees. This amount is included as a current
liability in the accompanying financial statements.

8. The Registrant agrees to reimburse NWO for such advances up to an estimated
$100,000 together with interest thereon computed at the annual rate of 10%
upon receipt of the proceeds of the rights offering or January 31, 1996,
whichever occurs earlier.

<PAGE>

(3) OIL AND GAS SALES - GREECE

Effective January 1, 1993, the operator of the Greek properties
negotiated an agreement with the Greek government which amended the original
license agreement. The amendment provides for a sliding scale for
calculating the operator's recoverable costs and expenses and for the
calculation of the Greek royalty interest. Denison Mines Ltd., the working
interest owner who has the contractual obligation to the Registrant for the
15% net earnings interest, has asserted that the calculation of the amounts
due to the Registrant should be based on the amended agreement with the Greek
government. The Registrant disagrees with this interpretation and has
commenced a legal action in Canada seeking a declaration by the Court that
amounts due the Registrant attributable to its 15% net earnings interest be
calculated based on the terms of the license agreement before the 1993
amendment. The Registrant has filed for damages of approximately $5,000,000
for the period from January 1, 1993 through March 31, 1994, plus damages
since that date and undetermined future damages. The Registrant estimates
that damages for unpaid revenues for the period from April 1, 1994 through
September 30, 1995, are approximately $7,000,000. While the Registrant
believes it has a reasonable possibility of prevailing in the litigation, the
ultimate outcome of the matter cannot presently be determined. Accordingly,
no amounts have been recorded in the accompanying financial statements for
current revenues or damages, if any, that may ultimately be awarded to the
Registrant. Unpaid revenues for the net earnings interest calculated under
the terms of the amended agreement are estimated at approximately $675,000
for the period from January 1, 1993 through September 30, 1995, $490,000 of
which is attributable to the year ended March 31, 1995.

In response to the legal action commenced by the Registrant, the working
interest owner has ceased remitting payments to the Registrant and has filed
a counteraction seeking damages in the amount of $4,747,811 plus interest and
costs, alleging the Registrant was overpaid for the period January 1, 1989
through December 31, 1993. As the working interest owner has ceased
remitting payments to the Registrant for its 15% net earnings interest, the
Registrant has not recorded any revenues for Greece for the year ended March
31, 1995 or for the six months ended September 30, 1995. A revenue accrual
had been made for the six months ended September 30, 1994 but was
subsequently reversed in the financial statements for the year ended March
31, 1995. While the Registrant believes that it will prevail on the
counterclaim, the ultimate outcome of that matter likewise cannot be
determined. Accordingly, no provision for any liability or loss that may
result upon final resolution of the counterclaim has been recognized in the
financial statements.

<PAGE>

(4) INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
Current:
Foreign - Greece $ - 146,666

Deferred:
Foreign - Greece (59,200) (66,470)
---------- -------
Total income tax
(benefit) expense $ (59,200) 80,196
---------- -------
---------- -------

</TABLE>
<PAGE>

APPENDIX I
FORM OF SUBSCRIPTION AGREEMENT

PLEASE CAREFULLY REVIEW THE INSTRUCTIONS

OCEANIC EXPLORATION COMPANY
SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT REPRESENTS A SUBSCRIPTION TO ACQUIRE THE NUMBER
OF SHARES OF COMMON STOCK OF OCEANIC EXPLORATION COMPANY ("ADDITIONAL COMMON
STOCK") SET FORTH BELOW AT A SUBSCRIPTION PRICE OF $.10 PER SHARE FOR THE TOTAL
SUBSCRIPTION PRICE SET FORTH BELOW. THE REGISTERED OWNER NAMED BELOW IS
ENTITLED TO SUBSCRIBE FOR FULL SHARES OF ADDITIONAL COMMON STOCK PURSUANT TO
SUBSCRIPTION RIGHTS GRANTED TO STOCKHOLDERS UPON THE TERMS AND CONDITIONS SET
FORTH IN THE RELATED PROSPECTUS. FOR EACH SHARE OF ADDITIONAL COMMON STOCK
SUBSCRIBED FOR, THE SUBSCRIPTION PRICE OF $.10 MUST BE FORWARDED TO OCEANIC
EXPLORATION COMPANY.

THE SUBSCRIPTION RIGHTS EXPIRE AT 5:00 P.M. DENVER, COLORADO TIME ON FEBRUARY
23, 1996. NO SUBSCRIPTION AGREEMENTS WILL BE ACCEPTED THEREAFTER.

STOCKHOLDER NAME:_______________________

STOCKHOLDER ADDRESS:____________________

NUMBER OF SHARES OWNED BY
STOCKHOLDER ON JANUARY 16, 1996______________

NUMBER OF SHARES SUBJECT TO
BASIC SUBSCRIPTION RIGHTS:________________

SECTION 1 - SUBSCRIPTION AND SIGNATURE

I HEREBY IRREVOCABLY SUBSCRIBE FOR THE NUMBER OF SHARES OF ADDITIONAL COMMON
STOCK AS INDICATED BELOW, ON THE TERMS SPECIFIED IN THE RELATED PROSPECTUS.

A. SUBSCRIPTION: _____________ SHARES
B. OVER-SUBCRIPTION: _____________ SHARES
(NO MORE THAN 6,001,000 LESS
THE NUMBER SUBSCRIBED FOR IN (A))
C. TOTAL SUBSCRIPTION (A + B): _____________ SHARES
D. TOTAL COST (C X $.10): _____________ SHARES

SIGNATURE OF TELEPHONE
SHAREHOLDER______________________________ NUMBER (_____)_____________________
SECTION 2 - ADDRESS FOR DELIVERY OF STOCK CERTIFICATE IF DIFFERENT FROM ABOVE.
_____________________________________
_____________________________________
_____________________________________

<PAGE>

INSTRUCTIONS FOR USE OF SUBSCRIPTION AGREEMENT

EACH STOCKHOLDER OF OCEANIC EXPLORATION COMPANY (THE "COMPANY") HAS THE
RIGHT TO SUBSCRIBE FOR 1.5325 SHARES OF ADDITIONAL COMMON STOCK FOR EACH FULL
SHARE OF COMMON STOCK OF THE COMPANY (THE "RIGHTS") OWNED OF RECORD AT THE CLOSE
OF BUSINESS ON JANUARY 16, 1996 (THE "RECORD DATE"). THE NUMBER OF SHARES OF
ADDITIONAL COMMON STOCK YOU ARE ENTITLED TO SUBSCRIBE FOR APPEARS ON THE FRONT
OF THE SUBSCRIPTION AGREEMENT OR CAN BE CALCULATED BY MULTIPLYING THE NUMBER OF
SHARES OF COMMON STOCK OWNED OF RECORD ON THE RECORD DATE BY 1.5325 AND ROUNDING
UP TO THE NEAREST WHOLE NUMBER. THE SUBSCRIPTION PRICE OF $.10 IS NEEDED TO
SUBSCRIBE FOR EACH SHARE OF ADDITIONAL COMMON STOCK. SEE PROSPECTUS FOR
DETAILED INFORMATION ON THESE OPTIONS. YOU MAY ALSO SUBSCRIBE FOR ADDITIONAL
COMMON STOCK PURSUANT TO AN OVER-SUBSCRIPTION PRIVILEGE. TO EXERCISE YOUR
RIGHTS, YOU MUST COMPLETE THE APPROPRIATE SECTIONS ON THE SUBSCRIPTION
AGREEMENT. IF YOU WISH TO EXERCISE YOUR RIGHTS OR THE OVER-SUBSCRIPTION
PRIVILEGE, YOU MUST DO SO BY NO LATER THAN 5:00 P.M. FEBRUARY 23, 1996. RIGHTS
MAY BE EXERCISED ONLY THROUGH THE COMPANY.

TO EXERCISE YOUR RIGHTS-PLEASE COMPLETE AND RETURN
THE SUBSCRIPTION AGREEMENT

1. COMPLETE "SECTION 1-SUBSCRIPTION AND SIGNATURE."

A. BASIC SUBSCRIPTION RIGHTS. ENTER THE NUMBER OF SHARES YOU INTEND TO
PURCHASE UNDER YOUR BASIC SUBSCRIPTION RIGHTS. THE MAXIMUM NUMBER OF SHARES YOU
MAY PURCHASE ON BASIC SUBSCRIPTION APPEARS ON THE FRONT OF THE SUBSCRIPTION
AGREEMENT OR CAN BE CALCULATED BY MULTIPLYING THE NUMBER OF SHARES OF COMMON
STOCK OWNED OF RECORD ON THE RECORD DATE BY 1.5325 AND ROUNDING UP TO THE
NEAREST WHOLE NUMBER.

B. OVER-SUBSCRIPTION. ENTER THE NUMBER OF SHARES YOU DESIRE TO PURCHASE
UNDER YOUR OVER-SUBSCRIPTION PRIVILEGE. THE OVER-SUBSCRIPTION PRIVILEGE IS
AVAILABLE ONLY IF YOU EXERCISED ALL OF YOUR BASIC SUBSCRIPTION RIGHTS. THE
MAXIMUM NUMBER OF SHARES THAT YOU CAN PURCHASE ON OVER-SUBSCRIPTION IS 6,001,000
SHARES LESS THE NUMBER OF SHARES YOU PURCHASED ON BASIC SUBSCRIPTION RIGHTS.
THE NUMBER OF SHARES THAT WILL ACTUALLY BE PURCHASED BY YOU WILL BE SUBJECT TO
ALLOTMENT IF THERE ARE NOT ENOUGH SHARES REMAINING AFTER THE BASIC SUBSCRIPTION
RIGHTS TO COMPLETELY FILL ALL REQUESTS FOR PURCHASES ON OVER-SUBSCRIPTION.

C. TOTAL SUBSCRIPTION. ENTER THE TOTAL NUMBER OF SHARES YOU WANT TO
PURCHASE IN THE OFFER. THIS NUMBER IS THE SUM OF THE NUMBER OF SHARES YOU ARE
PURCHASING ON BASIC SUBSCRIPTION RIGHTS PLUS THE NUMBER OF SHARES YOU DESIRE TO
PURCHASE ON OVER-SUBSCRIPTION.

D. TOTAL COST. ENTER THE TOTAL COST OF YOUR SUBSCRIPTION. YOUR TOTAL
COST IS THE DOLLAR NUMBER OBTAINED WHEN YOU MULTIPLY THE NUMBER OF SHARES SHOWN
UNDER TOTAL SUBSCRIPTION BY $.10, THE SUBSCRIPTION PRICE PER SHARE.

2. SIGN THE SUBSCRIPTION AGREEMENT IN THE SPACE PROVIDE AT THE BOTTOM OF
SECTION 1. INCLUDE YOUR DAYTIME TELEPHONE NUMBER IN THE SPACE PROVIDED.

3. ENCLOSE THE EXECUTED SUBSCRIPTION AGREEMENT, TOGETHER WITH A CHECK OR MONEY
ORDER MADE PAYABLE TO "OCEANIC EXPLORATION COMPANY" IN THE AMOUNT OF THE TOTAL
COST (ITEM D. OF SECTION 1) IN THE ENVELOPE PROVIDED. IF YOU USE YOUR OWN
ENVELOPE, ADDRESS IT TO OCEANIC EXPLORATION COMPANY, 5000 SOUTH QUEBEC STREET,
SUITE 450, DENVER, COLORADO 80237. YOU MAY ALSO PERSONALLY

<PAGE>

DELIVER YOUR SUBSCRIPTION AGREEMENT AND PAYMENT TO OCEANIC EXPLORATION
COMPANY, 5000 SOUTH QUEBEC STREET, SUITE 450, DENVER, COLORADO 80237.

4. MAIL OR DELIVER YOUR EXECUTED SUBSCRIPTION AGREEMENT AND PAYMENT FOR THE
TOTAL COST ON A TIMELY BASIS SO THAT IT IS RECEIVED BY THE COMPANY BY NO LATER
THAN 5:00 P.M. DENVER, COLORADO TIME ON FEBRUARY 23, 1996 (THE "EXPIRATION
DATE"). IF THE COMPANY HAS NOT RECEIVED YOUR SUBSCRIPTION AGREEMENT AND PAYMENT
FOR THE TOTAL COST BY 5:00 P.M. DENVER, COLORADO TIME ON THE EXPIRATION DATE,
YOU WILL NOT BE ENTITLED TO PURCHASE SHARES PURSUANT TO THE RIGHTS.
ACCORDINGLY, IF YOU ARE SENDING YOUR EXECUTED SUBSCRIPTION AGREEMENT AND PAYMENT
BY MAIL, PLEASE ALLOW SUFFICIENT TIME FOR THEM TO BE RECEIVED BY THE COMPANY
PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.

THE RIGHTS OFFERING IS BEING MADE ON ANY OR ALL BASIS, WHICH MEANS THAT THE
COMPANY MAY ACCEPT ANY SUBSCRIPTION RECEIVED EVEN IF ALL 6,001,000 SHARES OF
ADDITIONAL COMMON STOCK OFFERED ARE NOT SUBSCRIBED FOR IN THE RIGHTS OFFERING.
INTERNATIONAL HYDROCARBONS, THE COMPANY'S PRINCIPAL STOCKHOLDER, HAS ENTERED
INTO A FIRM COMMITMENT TO PURCHASE ALL SHARES OF ADDITIONAL COMMON STOCK NOT
PURCHASED BY OTHER STOCKHOLDERS.

THE COMPANY RESERVES THE RIGHT TO REJECT ANY SUBSCRIPTION AGREEMENT AND
PAYMENT NOT PROPERLY SUBMITTED. THE COMPANY HAS NO DUTY TO GIVE NOTIFICATION OF
DEFECTS IN ANY SUBSCRIPTION AGREEMENT AND/OR PAYMENT AND WILL HAVE NO LIABILITY
FOR FAILURE TO GIVE SUCH NOTIFICATION. THE COMPANY WILL RETURN ANY SUBSCRIPTION
AGREEMENT AND/OR PAYMENT NOT PROPERLY SUBMITTED.

STOCKHOLDERS SHOULD CAREFULLY REVIEW THE RELATED PROSPECTUS PRIOR TO MAKING
AN INVESTMENT DECISION WITH RESPECT TO THE RIGHTS REFERRED TO IN THIS
SUBSCRIPTION AGREEMENT.

<PAGE>

=============================================================================

NO PERSON IS AUTHORIZED TO GIVE ANY RIGHTS OFFERING INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE COMMON SHARES OFFERED BY THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY COMMON SHARES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED BY REFERENCE HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

___________________

TABLE OF CONTENTS

PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PLAN OF DISTRIBUTION-RIGHTS OFFERING. . . . . . . . . . . . . . . . . . . 11
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DETERMINATION OF OFFERING PRICE . . . . . . . . . . . . . . . . . . . . . 17
BUSINESS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 17
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
MARKET FOR COMMON EQUITY. . . . . . . . . . . . . . . . . . . . . . . . . 26
CAPITALIZATION . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 27
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
AVAILABILITY OF OIL AND GAS RESERVE INFORMATION . . . . . . . . . . . . . 28
OIL AND GAS REVENUE AND COST INFORMATION. . . . . . . . . . . . . . . . . 29
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . 30
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . .. . . . . 35
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY . . . . . . . . . . . . . 37
EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . 40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . . . . 43
INDEMNIFICATION OF OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . 44
RIGHTS AND LEGAL MATTERS . . . . .. . . . . . . . . . . . . . . . . . . . 45
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
APPENDIX I - FORM OF SUBSCRIPTION AGREEMENT

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RIGHTS OFFERING

6,001,000 Shares

OCEANIC EXPLORATION COMPANY

Common Stock

$.0625 par value

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PROSPECTUS
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January 19, 1996

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