PEASE OIL & GAS CO /CO/
S-3/A, 1998-04-07
CRUDE PETROLEUM & NATURAL GAS
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    As Filed with the Securities and Exchange Commission on April 7, 1998
                                                   Registration  No. 333-44305
                                                                     ---------
    
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            -------------------------
   
                                AMENDMENT NO. 1
    
                                    FORM S-3
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            -------------------------

                            PEASE OIL AND GAS COMPANY
                 ----------------------------------------------
                (Name of registrant as specified in its charter)

                                     Nevada
          ------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                   87-0285520
                       ----------------------------------
                      (I.R.S. Employer Identification No.)
                          751 Horizon Court, Suite 203
                                 P.O. Box 60219
                       Grand Junction, Colorado 81506-8758
                                 (970) 245-5917
                --------------------------------------------------
               (Address, including zip code, and telephone number,
                 including area code, of registrant's principal
                               executive offices)

                              Willard H. Pease, Jr.
                          751 Horizon Court, Suite 203
                                 P.O. Box 60219
                       Grand Junction, Colorado 81506-8758
                                 (970) 245-5917
             --------------------------------------------------------
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

              -----------------------------------------------------
                                 With Copies to:
                              Alan W. Peryam, Esq.
                               Alan W. Peryam, LLC
                         1120 Lincoln Street, Suite 1000
                             Denver, Colorado 80203
                                 (303) 866-0900
              -----------------------------------------------------

     Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If the only securities  being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]

If any of the  securities  being  registered on this Form are to be offered on a
delayed or continuous  basis  pursuant to Rule 415 under the  Securities  Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the  Securities  Act  registration  statement  number of the  earlier  effective
registration statement for the same offering. [ ]

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. [ ]


<PAGE>
   
<TABLE>
<CAPTION>

                         CALCULATION OF REGISTRATION FEE
================================================================================================================================
                                                                    Proposed Maximum       Proposed Maximum       Amount of
Title of Each Class of                     Amount to be              Offering Price           Aggregate         Registration
Securities To Be Registered(3)              Registered                 Per Share            Offering Price          Fee
- -----------------------------            ----------------         ---------------------    ----------------     ------------
<S>                                      <C>                        <C>                   <C>                     <C>   
Common Stock .......................     9,935,043 Shares(1)          $1.03125 (2)         $10,245,513.09(2)       $3,022.43
Comm Stock Underlying Warrants .....       323,800 Shares(3)          $1.03125 (2)         $   333,918.75          $   98.51
                                         ---------                                          ---------------         --------
Total .............................     10,258,843                        XXXX             $10,579,431.84          $3,120.94(4)
================================================================================================================================
</TABLE>

     (1)  Includes  7,749,265  shares of Common Stock  currently  issuable  upon
          conversion  of  outstanding  Series  B 5% PIK  Cumulative  Convertible
          Preferred Stock ("Series B Preferred")  and up to 2,185,778  shares of
          Common  Stock  which  would be issuable  upon  conversion  of Series B
          Preferred which may be issued as payment in kind ("PIK")  dividends on
          Series B Preferred. The conversion price for the Series B Preferred is
          equal to the lowest reported sales price for the  Registrant's  Common
          Stock during the five trading days prior to  conversion,  reduced by a
          discount which  increases to 25% for  conversions  after 360 days from
          the effective date of this  registration.  For purposes of determining
          the  number of  shares  to be  registered,  Registrant  has  assumed a
          conversion  price of  $0.73125  (determined  by reducing  $0.975,  the
          average of the lowest  sales  prices for the five  trading  days ended
          April 3, 1998 by a discount of 25%, the maximum possible discount.).

     (2)  The  registration  fee was calculated in accordance  with Rule 457 (c)
          and (g)(3)  and is based on the  average of the high and low prices of
          Registrant's  Common Stock, as reported on the NASDAQ Small-Cap Market
          on April 3, 1998.

     (3)  Shares  issuable  upon exercise of  outstanding  warrants held by five
          persons.

     (4)  When Registrant  filed the  Registration  Statement  January 15, 1998,
          5,545,802  shares were  registered.  Amendment No. 1 is registering an
          additional 4,713,041 shares for which additional  registration fees of
          $1,433.80 are required.

     (5)  In  accordance  with Rule 416,  there are hereby being  registered  an
          indeterminate number of additional shares of Common Stock which may be
          issued  as a  result  of  changes  in  the  conversion  price  or  the
          anti-dilution  provisions  of the Series B Preferred or as a result of
          any future stock split or stock dividend.
    
     THE REGISTRANT  HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER  AMENDMENT  WHICH  SPECIFICALLY  STATES  THAT  THIS  REGISTRATION
STATEMENT SHALL  THEREAFTER  BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE  SECURITIES  ACT OF 1933 OR UNTIL THE  REGISTRATION  STATEMENT  SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION,  ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

                                      (ii)

<PAGE>

<TABLE>
<CAPTION>


                            PEASE OIL AND GAS COMPANY
                               REOFFER PROSPECTUS
                              CROSS REFERENCE SHEET

      Location in Prospectus of Information Required by Part I of Form S-3.


<S>           <C>                                              <C>
Item          Heading                                           Caption in Prospectus
- ----          -------                                           ----------------------

1.            Forepart of the Registration Statement and Out-   Outside Front Cover Page of Prospectus
              side Front Cover of Prospectus
2.            Inside Front and Outside Back Cover Pages         Available Information; Certain Documents
               of Prospectus                                    Incorporated by Reference; Table of Contents;
                                                                Back Cover Page
3.            Summary Information, Risk Factors                 Front Cover Page of Prospectus; Prospectus Sum-
                                                                mary; Risk Factors
4.            Use of Proceeds                                   Use of Proceeds
5.            Determination of Offering Price                   Not Applicable
6.            Dilution                                          Not Applicable
7.            Selling Security Holders                          Selling Securityholders
8.            Plan of Distribution                              Plan of Distribution
9.            Description of Securities to be Registered        Description of Securities
10.           Interest of Named Experts and Counsel             Legal Matters; Experts
11.           Material Changes                                  Not Applicable
12.           Incorporation of Certain Information by           Incorporation of Certain Documents by Reference
              Reference
13.           Disclosure of Commission Position on              Certain Provisions of the Articles of Incorporation
               Indemnification for Securities Act Liabilities   and Bylaws
</TABLE>


                                      (iii)

<PAGE>
   
                                       SUBJECT TO COMPLETION DATED APRIL 6, 1998



PROSPECTUS



                            PEASE OIL AND GAS COMPANY

                        10,258,843 Shares of Common Stock



     This  Prospectus  relates  to the  resale  by  the  holders  (the  "Selling
Securityholders")  named  herein of up to  10,258,843  shares (the  "Shares") of
$0.10 par value  Common Stock  ("Common  Stock") of which  7,749,265  shares are
issuable upon  conversion of Series B 5% PIK  Cumulative  Convertible  Preferred
Stock ("Series B Preferred") outstanding on the date of this Prospectus, 323,800
are issuable upon exercise of  outstanding  warrants  (the  "Warrants")  and the
balance  of  2,185,778  are  issuable  upon  conversion  of  shares  of Series B
Preferred  which may be  issued  from time to time as  payment  in kind  ("PIK")
dividends on Series B Preferred.  The number of shares which may be resold using
this Prospectus may be increased or decreased,  based on the Conversion Price of
the Series B Preferred in effect at the time of conversion.  See "Description of
Securities-Series B Preferred."

     The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Security  holders,  nor any proceeds from the conversion of
the Series B Preferred.  Proceeds to the Company from  exercise of the Warrants,
if any, will be used for corporate purposes.
    
     For  information  concerning  certain factors which should be considered by
purchasers of the Common Stock offered hereby, see "Risk Factors."

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

     The offer and sale of the Shares will be made in  accordance  with the plan
of distribution  described in the Prospectus.  See "Plan of  Distribution."  The
Company  will pay all expenses of this  offering  (the  "Offering"),  other than
selling  commissions to, or expenses of, brokers or dealers or underwriters,  if
any,  retained by the Selling Security  holders,  which commissions and expenses
will be paid by the Selling Securityholders.

     If any agent of any Selling Securityholder or an underwriter or a dealer is
involved in the sale of the Shares in respect of which the  Prospectus  is being
delivered, the net proceeds to the Selling Securityholders from sale will be the
purchase price of such Shares less such commission in the case of an agent,  the
purchase price of such Shares in the case of an underwriter or dealer, and less,
in each case, other attributable  issuance  expenses.  The aggregate proceeds to
the Selling  Securityholders  from all the Shares will be the purchase  price of
Shares sold less the  aggregate  of agents'  commissions  and other  expenses of
issuance   and   distribution.   See  "Plan  of   Distribution"   for   possible
indemnification arrangements for the agents and dealers.



   
                  The date of this Prospectus is April __, 1998
    

<PAGE>


                              AVAILABLE INFORMATION


     The Company is subject to the informational  requirements of the Securities
Exchange Act of 1934 (the "Exchange  Act"),  and in accordance with the Exchange
Act  files  periodic  reports  and other  information  with the  Securities  and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
(at prescribed rates) at the Commission's  Public Reference Section,  Room 1024,
Judiciary  Plaza,  450 Fifth Street,  N.W.,  Washington,  D.C. 20549, and at the
Regional Offices of the Commission  located at Northwestern  Atrium Center,  500
West Madison Street, Suite 1400, Chicago,  Illinois 60661-2511 and 7 World Trade
Center,  13th Floor,  New York, New York 10048.  The Commission  maintains a Web
site  at  http://www.sec.gov   that  contains  reports,  proxy  and  information
statements and other information  regarding the Company.  In addition,  reports,
proxy statements and other  information  concerning the Company can be inspected
and copied at the office of the  National  Association  of  Securities  Dealers,
Inc., 9513 Key West Avenue, Rockville, Maryland 20850-3389.
   
     The Company has filed with the  Commission a  registration  statement  (the
"Registration  Statement")  under the  Securities  Act of 1933 (the  "Securities
Act") on Form  S-3  with  respect  to the  Common  Stock  offered  hereby.  This
Prospectus,  which is part of the Registration  Statement,  does not contain all
the  information  set forth in the  Registration  Statement and the exhibits and
schedules  thereto,  certain items of which are omitted in  accordance  with the
rules and regulations of the Commission. For further information with respect to
the Company and the Common Stock,  reference is hereby made to the  Registration
Statement and such exhibits and schedules.
    
                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The  following  documents  filed by the  Company  with the  Commission  are
incorporated in this Prospectus by reference.
   
     (a)  Annual Report on Form 10-KSB for the year ended December 31, 1997 (the
          "Annual Report on Form 10-KSB");
     (b)  Proxy  Statement,  dated  April 30,  1997 for the  Annual  Meeting  of
          Shareholders of the Company held May 31, 1997 (the "Proxy Statement");
     (c)  Current Report on Form 8-K/A dated January 13, 1998;
     (d)  Current Report on Form 8-K dated March 9, 1998;
     (e)  The  description  of the Company's  shares of Common Stock,  $0.10 par
          value,  contained in the Company's Registration Statement No. 33-94536
          on Form  SB-2,  filed  under  the  Securities  Act,  and  any  further
          amendment  or any report  filed under the Exchange Act for the purpose
          of updating such description; and
     (f)  All documents  filed after the date of this  Prospectus by the Company
          pursuant to Sections  13(a),  13(c),  14 or 15(d) of the  Exchange Act
          prior to the termination of the Offering.

     Any statement  contained in the  documents  referenced in items (a) through
(f) above  shall be deemed to be  modified or  superseded  for  purposes of this
Prospectus to the extent that a statement  contained in this Prospectus modifies
or supersedes such statement. Likewise, any statement contained in such document
or in this Prospectus  shall be deemed to be modified or superseded for purposes
of this  Prospectus  to the extent that  information  contained  in any document
referenced in item (g) above  modifies or supersedes  such  statement.  Any such
statement so modified or superseded  shall not be deemed,  except as so modified
or superseded, to constitute a part of this Prospectus.

     Copies of any documents or portions of such other documents incorporated in
this Prospectus,  not including exhibits to the information that is incorporated
by reference, unless such exhibits are specifically incorporated by reference in
this  Prospectus,  may be  obtained  at no charge by any person  (including  any
beneficial  owner) to whom this  Prospectus  is  delivered  by a written or oral
request to Patrick J. Duncan,  Corporate Secretary,  751 Horizon Court, P.O. Box
60219, Grand Junction,  Colorado 81506-8758,  telephone (970) 245-5917,  e-mail:
[email protected].
    
                                      - 2 -


<PAGE>

                               PROSPECTUS SUMMARY
   
     This  Prospectus  and documents  incorporated  herein by reference  contain
certain  "forward-looking  statements"  within the meaning of Section 27A of the
Securities  Act and Section 21E of the  Exchange  Act that  involve  substantial
risks  and  uncertainties.  When  used  in  this  Prospectus  or  the  documents
incorporated  herein by  reference,  the  forward-looking  statements  are often
identified  by the use of such terms and phrases as  "anticipates,"  "believes,"
"intends,"  "estimates," "plans," "expects," "seeks," "scheduled,"  "foreseeable
future" and  similar  expressions  as they relate to the Company or its business
or the management of the Company.  While the Company believes the assumptions on
which the  forward-looking  statements are based are  reasonable,  the Company's
actual results,  performances and achievements  could differ materially from the
results in, or implied by, these forward-looking statements.  Factors that could
cause  or  contribute  to such  differences  include  those  discussed  in "Risk
Factors."
    
     The  following  summary is qualified  in its entirety by the more  detailed
information and financial  statements and related notes  appearing  elsewhere in
this Prospectus or contained in other reports and documents of the Company which
are incorporated by reference in this Prospectus.

                                   The Company
   
     Pease  Oil and Gas  Company  ("Company"),  a Nevada  corporation,  has been
engaged in the oil and gas  exploration,  development  and  production  business
since 1972.  Until 1997 the Company's  operations  were  conducted  primarily in
Colorado,  Nebraska,  Utah and Wyoming. In late 1996 and early 1997, the Company
acquired  interests in  producing  and  exploratory  oil and gas  properties  in
Louisiana and intends to focus its future  efforts on the Gulf Coast area of the
United States.

     The Company's  current and future business strategy will focus on expanding
its reserve base and future cash flows by cultivating the prior  acquisitions in
the Gulf Coast  Region,  nurturing the strategic  alliances and  exploiting  the
existing exploration opportunities in the Gulf Coast Region.  Specifically,  the
Company  will  attempt  to execute  this  strategy  by  focusing  its  immediate
exploration  efforts and resources on what the Company  considers its three core
areas in the Gulf Coast, which are:

     1.   The  54-square  mile  Bayou  Sorrel  3-D  Area  in  Iberville  Parish,
          Louisiana, operated by National Energy Group, Inc.;

     2.   The Formosa,  Texana and Ganado 3-D  prospects,  encompassing  130,000
          acres in and  around  Jackson  County,  Texas,  operated  by  Parallel
          Petroleum; and

     3.   The Maurice Prospect in Fayetteville  Parish,  Louisiana,  operated by
          Amerada Hess Corporation.

In  addition,  the  Company  intends to  emphasize  the  following  precepts  in
implementing its strategy:

o    Make  disciplined  use of  advanced  exploration  technologies-such  as 3-D
     seismic and computer-aided exploration ("CAEX") technology;
o    Mitigate exploration risk by spreading investment over a significant number
     of prospects to improve the probability of success;
o    Develop alliances with experienced and competent  technical  personnel that
     have been trained by major oil companies  and can  demonstrate a successful
     track record;
o    Reinvest  future  operating  cash  flows  into  development   drilling  and
     recompletion activities;
o    Pursue the acquisition of properties  and/or  potential  merger  candidates
     that could build upon and enhance the Company's existing asset base;
o    Divest Rocky Mountain oil and gas assets to focus on the Gulf Coast Region;
o    Position  itself with  strategic  sources of capital and industry  partners
     that can  react to  opportunities  in the oil and gas  business  when  they
     present themselves.

     As of January 1, 1998, the Company had varying  ownership  interests in 185
gross  productive  wells (164 net) located in five states.  The Company operates
176 of the  wells  (134 net  wells),  with the other  wells  being  operated  by
independent  operators  under  contracts that are standard in the industry.  The
Company is  negotiating  a transaction  with a potential  purchaser in which the
Company would divest most of its Rocky Mountain oil and gas and related  assets,
and has sought  purchasers  for its other assets in the Rocky  Mountain area. If
such transaction is not completed, the Company intends to continue to attempt to
divest the assets during 1998. If and when this occurs,  the Company's  interest
for producing properties as of the date of this Prospectus would be reduced to 3
gross (.40 net) non-operated  wells located solely in Southern  Louisiana.  This
divestment would dramatically reduce the Company's proved reserves, revenues and
cash flows.

                                      - 3 -


<PAGE>


     The following  table  presents oil and gas reserve  information  within the
Company's major operating areas as of December 31, 1997:

                                                 Net Proved Reserves
                                      ---------------------------------------
       REGION                            Bbls          Mcf          BOE (6:1)
 --------------------                 ---------     ---------      ----------
 Rocky Mountains -
     principally in the DJ Basin        777,000     3,175,000       1,306,000
 Gulf Coast -
     principally in S. Louisiana        308,000     1,360,000         535,000
                                      ---------     ---------       ---------
          Total                       1,085,000     4,535,000       1,841,000
                                      =========     =========       =========
    
     The Company's  address is 751 Horizon  Court,  Suite 203,  Grand  Junction,
Colorado 81506-8718 and its telephone number is (970) 245-5917.

                                      - 4 -

<PAGE>

                                  RISK FACTORS
   
     Prospective  purchasers  of shares of Common  Stock of the  Company  should
consider  carefully  the  following  factors,  in addition to other  information
concerning  the  Company  and its  business  contained  in this  Prospectus  and
documents  incorporated herein by reference.  The following risk factors are not
considered a  definitive  list of all risks  associated  with an  investment  in
shares of the Company's Common Stock.

     Company's  Continuing Losses and Financial  Condition.  As described in the
financial statements contained in the Company's Annual Report on Form 10-KSB for
the fiscal year ended  December 31, 1997,  the Company has  sustained  operating
losses during each of the last five fiscal years.  The Company had net losses of
approximately $1,274,000 and $15,895,000 for the fiscal years ended December 31,
1996 and 1997 respectively,  and net losses applicable to common shareholders of
$1,477,000  and  $15,985,000  for fiscal  years 1996 and 1997,  respectively.  A
substantial  portion  of the  loss in 1997  was  attributed  to a $12.9  million
non-cash  impairment  change  related to the expected sale of its Rocky Mountain
oil and gas assets,  year end oil and gas prices,  the dry holes drilled in 1997
and the effect of the Company's conversion to full cost accounting.  Most of the
impairment  was  recognized  during the fourth  quarter  of 1997.  Although  the
Company's  current  assets and the estimated  present value of the Company's oil
and gas reserves  exceeded the  Company's  liabilities  as of December 31, 1997,
there can be no assurance  that the Company can produce the oil and gas reserves
or otherwise liquidate those assets during the times or at the prices assumed in
valuing those reserves.  In addition,  no assurance can be made that the Company
will generate cash flows from operations or operate  profitably in the future as
an oil and gas exploration,  development and production company.  Any likelihood
of  future  profitability  of the  Company  must be  considered  in light of the
problems,   expenses,   difficulties,   complications   and  delays   frequently
encountered in connection with the oil and natural gas exploration,  development
and  production  business  in  which  the  Company  is  engaged.  The  financial
statements  included and  incorporated  by  reference  herein do not include any
adjustments that may result from these uncertainties.

     Need for Additional Capital.  The Company's ability to complete its planned
drilling and development  programs which are intended to expand its reserve base
and diversify its operations,  is dependent upon the Company's ability to obtain
the necessary  capital.  The Company's cash flow and borrowing capacity will not
be sufficient for the Company to complete its planned  drilling and  development
programs.  Additional  sources of  financing  will be needed and there can be no
assurance that additional  sources of financing will be available at all or at a
reasonable cost. See "Management's Discussion and Analysis" in the Annual Report
on Form 10-KSB.

     Convertible  Debenture  Repayment  Priority.  As of December 31, 1997,  the
Company's  obligations  under its  outstanding  10%  collateralized  convertible
debentures,   (the  "Convertible  Debentures"),   in  the  principal  amount  of
$3,975,000,  together  with  interest  thereon,  is secured by a first  priority
security  interest in substantially all of the Company's oil and gas reserves in
Larimer and Weld Counties, Colorado (the "Debenture Collateral"), which reserves
totaled over 50% of all the Company's  Rocky  Mountain area reserves at December
31, 1997. The Company  intends to sell its Rocky Mountain oil and gas properties
in 1998,  including the Debenture Collateral and will hold separate a portion of
the proceeds  attributable to the Debenture Collateral for the exclusive benefit
of holders of the Debentures  unless and until holders  authorize the Company to
substitute  a  security  interest  in  other  property  as  collateral  for  the
Debentures. Until such a substitution is effected, the majority of proceeds from
a sale of the  Debenture  Collateral  will not be available to the Company.  The
Convertible  Debentures are due in 2001 and interest is paid  quarterly.  If the
Company's  obligations  under  the  Convertible  Debentures  are  ever  declared
immediately  due and payable,  the holders of the Convertible  Debentures  would
have a first lien on the Debenture Collateral or cash proceeds therefrom.

     Price  Volatility.  The  revenues  generated  by the Company and  estimated
future net revenue are highly  dependent upon the prices of oil, natural gas and
natural gas liquids.  The volatile  energy market makes it difficult to estimate
future prices of oil, natural gas or natural gas liquids.  The Company's average
collected  price for oil in 1994 was $15.94 per barrel and for  natural  gas was
$1.36  per  thousand  cubic  feet  ("mcf"),  for  1995  was  $16.77  and  $1.18,
respectively,  for 1996, $20.35 and $1.26,  respectively and for 1997 $18.89 and
$1.74, respectively. The reserve valuations shown in the Company's Annual Report
on Form 10-KSB are based on prices being received by the Company at December 31,
1997 which  were  $16.15 per  barrel of oil for Rocky  Mountain  properties  and
$17.11 for Gulf  Coast  properties  and $1.78 per mcf of  natural  gas for Rocky
Mountain properties and $2.61 for Gulf Coast propereties,  which are higher than
the average prices  received  during the first quarter of 1998.  Various factors
beyond  the  control  of the  Company  affect  prices  of oil and  natural  gas,

                                      - 5 -


<PAGE>


including  worldwide  and domestic  supplies of, and demand for, oil and natural
gas,  the  ability of the members of the  Organization  of  Petroleum  Exporting
Countries  ("OPEC") to agree to and maintain oil price and production  controls,
political  instability or armed conflict in oil-producing  regions, the price of
foreign  imports,  the level of consumer  demand,  the price and availability of
alternative fuels, the availability of pipeline capacity and changes in existing
federal regulation and price controls. In December 1997 and the first quarter of
1998 oil and natural gas prices  dropped  significantly.  The Company's  average
wellhead  prices were  approximately  $2.00 per barrel of oil and  approximately
$0.35 per mcf lower for natural gas. A material or extended decline in the price
of oil or gas may render the development of the Company's oil and gas properties
commercially  unattractive,  have a  material  adverse  effect on its  financial
condition and results of operations, and limit its ability to incur indebtedness
or otherwise finance its operations and future capital  expenditures.  Also, the
Company's planned sale of its Rocky Mountain oil and gas assets may be adversely
affected by a further price  decline.  As in the past, it is likely that oil and
gas prices will continue to fluctuate in the future which may  adversely  affect
the Company's business.

     Limitations on Accuracy of Reserve  Estimates and Future Net Revenue.  This
Prospectus  and the Annual  Report on Form 10-KSB  contain,  and future  reports
filed by the Company with the Securities and Exchange  Commission  will contain,
estimates  of the  Company's  oil and gas  reserves  and the future net  revenue
therefrom  which have been prepared by independent  petroleum  engineers.  These
estimates  are based on  various  assumptions  and,  therefore,  are  inherently
imprecise. Estimates of reserves and of future net revenue prepared by different
petroleum  engineers  may  vary  substantially   depending,   in  part,  on  the
assumptions  made and may be  subject  to  adjustment  either  up or down in the
future.  Actual future production,  revenue,  taxes,  development  expenditures,
operating  expenses and quantities of recoverable  oil and gas reserves may vary
substantially  from those assumed in the estimates.  In addition,  the Company's
reserves may be subject to downward or upward  revision,  based upon  production
history,  results of future exploration and development,  prevailing oil and gas
prices and other factors.  If these  estimates of  quantities,  prices and costs
prove  inaccurate,  the Company is  unsuccessful  in  expanding  its oil and gas
reserves  base with its  capital  expenditure  program,  and/or  declines in and
instability of oil and natural gas prices occur, then further  writedowns in the
capitalized  costs  associated  with the  Company's  oil and gas  assets  may be
required.
    
     Development  Risks and  Production.  A portion of the Company's oil and gas
reserves are proved undeveloped reserves.  Successful development and production
of such reserves,  although they are categorized as "proved," cannot be assured.
Additional  drilling  will  be  necessary  in  future  years  both  to  maintain
production  levels  and to define  the extent  and  recoverability  of  existing
reserves.  There is no  assurance  that present oil and gas wells of the Company
will continue to produce at current or  anticipated  rates of  production,  that
development  drilling will be  successful,  that  production of oil and gas will
commence  when  expected,  that there will be favorable  markets for oil and gas
which may be produced in the future or that  production  rates achieved in early
periods can be maintained.
   
     Risks  Inherent in Oil and Gas  Operations  The search for oil and gas is a
highly speculative activity that may be marked by numerous unproductive efforts.
Many wells will be dry, and  productive  wells may not produce enough oil or gas
to produce a profit or even  return  the  invested  capital.  The  Company  must
continually  acquire and  explore  for and  develop new oil and gas  reserves to
replace  those being  depleted by  production.  Without  successful  drilling or
acquisition  ventures,  the  Company's  assets,  properties  and  revenues  will
decline. Oil and gas exploration and development are speculative, involve a high
degree of risk and are subject to all the hazards typically  associated with the
search  for,  development  of,  and  production  of oil and gas.  The  Company's
operations  are  subject to all of the risks  incident  to  exploration  for and
production of oil and gas including blow-outs,  cratering,  pollution and fires,
each of which could result in damage to or  destruction  of oil and gas wells or
production facilities or damage to persons and property. The Company's insurance
may not fully cover  certain of these risks and the  occurrence of a significant
event not fully  insured  against  could have a material  adverse  effect on the
Company's  financial  position.  The process of drilling  for oil and gas can be
hazardous and carry the risk that no  commercially  viable oil or gas production
will be obtained. The cost of drilling,  completing and operating wells is often
uncertain.  Moreover,  drilling  may be  curtailed,  delayed or  canceled as the
result of many factors, including title problems, weather conditions,  shortages
of or delays in delivery of equipment,  as well as the financial  instability of
well operators,  major working interest owners and well servicing companies. The
availability of a ready market for the Company's oil and gas depends on numerous
factors beyond its control,  including the demand for and supply of oil and gas,
the proximity of the Company's  natural gas reserves to pipelines,  the capacity
of such pipelines,  fluctuations in production and seasonal demand,  the effects
of inclement weather and governmental  regulation.  New gas wells may be shut-in
for lack of a market  until a gas pipeline or  gathering  system with  available
capacity is extended into the area. New oil wells may have production  curtailed
until production facilities and delivery arrangements are acquired or developed.
The Company's business will always be subject to these types of risks.

                                      - 6 -


<PAGE>


     Exploration  Risks. The Company is pursuing a significant number of wildcat
exploratory  drilling projects in southern  Louisiana,  Texas and other areas of
the Gulf Coast,  and through  March 1998 had  drilled,  participated  in, or was
currently  drilling 15  exploratory  wells,  of which seven were dry, four wells
were  successful  efforts  (two  are  currently  producing  and  two  are  being
completed)  and three were still drilling as of April 1, 1998. One well, in East
Bayou Sorrell,  has been  temporarily  abandoned  pending  receipt of additional
seismic  information.  The  Company  incurred  approximately  $14.5  million  in
acquisition,  drilling and exploration  activities in 1997, and expects to incur
between  $7.5  million  and  $13.0  million  in  acquisition,   development  and
exploratory drilling and related exploration activities during 1998. Exploratory
drilling  involves a high degree of financial and operating risk,  including the
risk that no  commercially  productive  natural  gas or oil  reservoirs  will be
encountered.  The cost of drilling and completing  exploratory  and  development
wells may vary materially  from initial  estimates.  Drilling  operations may be
curtailed,  delayed or canceled as a result of many factors,  including, but not
limited  to,  unexpected   formations  and  drilling  conditions,   pressure  or
mechanical  irregularities in formations,  equipment  failures or accidents,  as
well  as  title  problems,  weather  conditions,  compliance  with  governmental
requirements,  shortages or delays in the delivery of  equipment,  and financial
instability of well operators,  major working interest owners and well servicing
companies.  With respect to its properties for which it is not the operator, the
Company is  dependent  upon the  independent  operator  of the wells to properly
conduct leasing,  drilling and completion  activities and ongoing  operations of
the wells. The Company's decisions to participate in the drilling of exploratory
wells and, ultimately,  the success of its participation  depends largely on the
results of seismic survey data and other  geological and  geophysical  data. The
acquisition and  interpretation  of such data involves  subjective  professional
judgment. Reliance upon such data and the interpretations thereof poses the risk
that a decision to  participate  in the drilling of an  exploratory  well may be
founded on incorrect or  insufficient  data,  erroneous  interpretations  of the
data, or both.
    
     Lack of Control Over Oil and Gas  Operations.  After the Company  completes
the  disposition of its Rocky Mountain oil and natural gas  properties,  it will
not be the operator of any of its oil or natural gas projects. All the Company's
oil and natural gas properties will then consist of minority undivided interests
in properties  operated by other unaffiliated  entities.  For the most part, the
Company will not have the right to determine the means,  timing or  expenditures
made in connection with operations.  In addition,  the Company will be unable to
control other material aspects of  commercialization of its principal assets and
will be  dependent  upon  the  expertise,  experience,  ability,  diligence  and
financial condition of those who operate the various properties. The independent
operator's failure to properly perform could adversely affect the Company.

     Risks  of  Purchasing  Interests  in Oil and Gas  Properties.  The  Company
expects to continue to make  acquisitions  of producing and  exploratory oil and
gas  properties in the future.  The Company often will not control the operation
of properties in which an interest is acquired. It is generally not feasible for
the Company to review  in-depth every property it purchases and all records with
respect to such properties.  However,  even an in-depth review of properties and
records may not necessarily reveal existing or potential  problems,  nor will it
permit the Company to become familiar enough with the properties to assess fully
their deficiencies and capabilities.  Evaluation of future recoverable  reserves
of oil, gas and natural gas liquids,  which is an integral  part of the property
selection  process,  is a process  that  depends  upon  evaluation  of  existing
geological,  engineering and production  data, some or all of which may prove to
be unreliable or not indicative of future performance.  To the extent the seller
does not operate the properties,  obtaining access to properties and records may
be more  difficult.  Even when  problems are  identified,  the seller may not be
willing  or  financially  able  to  give  contractual  protection  against  such
problems,  and  the  Company  may  decide  to  assume  environmental  and  other
liabilities in connection with acquired properties.

     Competition.  The  oil and  gas  industry  is  highly  competitive  in many
respects,  including  identification  of attractive  oil and gas  properties for
acquisition,  drilling and development,  securing  financing for such activities
and obtaining the necessary  equipment and personnel to conduct such  operations
and activities.  In seeking suitable opportunities,  the Company competes with a
number  of other  companies,  including  large oil and gas  companies  and other
independent  operators with greater financial resources and, in some cases, with
more experience. Many other oil and gas companies in the industry have financial
resources,  personnel  and  facilities  substantially  greater than those of the
Company and there can be no assurance  that the Company will continue to be able
to compete effectively with these larger entities.
   
     Shortage of Equipment,  Services,  Supplies and  Personnel.  There is often
competition for scarce drilling and completion equipment, services and supplies,
and there can be no assurance that sufficient drilling and completion equipment,
services and supplies will be available when needed. The likelihood of shortages
is greater at the present  time than in the past  because  increases in drilling
activity and a resulting decrease in available material and equipment.  Any such

                                      - 7 -


<PAGE>

shortages  could  delay  the  proposed  exploration,   development,   and  sales
activities  of the  Company  and could  cause a material  adverse  affect to the
financial condition of the Company.
    
     The demand for, and wage rates of,  qualified  rig crews have begun to rise
in the drilling  industry in response to the increasing number of active rigs in
service.  Such  shortages  have in the past occurred in the industry in times of
increasing demand for drilling  services.  If the number of active drilling rigs
continues to increase,  the oil and gas  industry  may  experience  shortages of
qualified  personnel to operate  drilling rigs,  which could delay the Company's
drilling  operations and adversely affect its financial condition and results of
operations.

     Dependence  on Key Personnel  and  Consultants.  The success of the Company
will largely be dependent upon the efforts and active  participation  of Willard
H. Pease, Jr. the President of the Company, R. Thomas Fetters, Jr., a consulting
geologist, Ralph W. Baird, a consulting  petrophysicist,  Patrick J. Duncan, the
Chief  Financial  Officer of the Company,  and certain other key employees.  The
loss of the  services of any of its  officers,  other key  employees  or certain
consultants may adversely affect the Company's business.

     Government  Regulation and Environmental  Risks. The production and sale of
gas and oil are  subject to a variety  of  federal,  state and local  government
regulations,  including  regulations  concerning  the  prevention of waste,  the
discharge of materials into the environment, the conservation of natural gas and
oil,  pollution,  permits  for  drilling  operations,  drilling  bonds,  reports
concerning  operations,  the spacing of wells,  the  unitization  and pooling of
properties,  and various other matters, including taxes. Many jurisdictions have
at  various  times  imposed  limitations  on the  production  of gas  and oil by
restricting  the rate of flow for gas and oil wells below their actual  capacity
to produce.  In addition,  many states have raised state taxes on energy sources
and  additional  increases may occur,  although  increases in state energy taxes
would have no  predictable  effect on natural  gas and oil  prices.  The Company
believes it is in substantial compliance with applicable environmental and other
government  laws  and  regulations,  however,  there  can be no  assurance  that
significant costs for compliance will not be incurred in the future.

     The  production  and sale of oil and  natural  gas are  subject  to various
federal,  state and local  governmental  regulations,  which may be changed from
time to time in response to economic or political conditions. Matters subject to
regulation  include discharge permits for drilling  operations,  drilling bonds,
reports concerning operations,  the spacing of wells, unitization and pooling of
properties, taxation and environmental protection. From time to time, regulatory
agencies  have  imposed  price   controls  and   limitations  on  production  by
restricting  the  rate of flow of oil and  gas  wells  below  actual  production
capacity  in order to  conserve  supplies  of oil and  gas.  From  time to time,
regulatory  agencies have also reviewed certain aspects of the operations of oil
and gas  companies in the D-J Basin to determine if  additional  regulations  or
regulatory action is necessary.  State statutes, rules and regulations affecting
oil and gas companies  may, if changed as proposed by certain  interest  groups,
render  drilling in certain  locations  more  expensive or  uneconomical  due to
increased surface owner  compensation and bonding  requirements or environmental
regulatory  constraints.  The  Colorado  Oil  and  Gas  Conservation  Commission
recently enacted and is considering  stricter  regulation of matters such as oil
conservation,  land  reclamation,  fluid  disposal  and  bonding  of oil and gas
companies.  Additionally,  various  cities  and  counties  in which the  Company
operates  have  conducted  and  continue  to conduct  hearings  to review  their
ordinances  to determine the level of  regulatory  authority  they should assert
over such matters.  At present,  it cannot be determined to what degree stricter
regulations would adversely impact the Company's operations.

     Various  federal,  state  and  local  laws  and  regulations  covering  the
discharge  of  materials  into the  environment,  or  otherwise  relating to the
protection  of the public health and the  environment,  may affect the Company's
operations,  expenses and costs.  Moreover,  the recent  trend  toward  stricter
standards in  environmental  legislation  and regulations is likely to continue.
For example,  legislation and regulations concerning the disposal of oil and gas
waste were adopted by the Colorado Oil and Gas  Conservation  Commission  during
the summer of 1993.  The Colorado  Air Quality  Control  Commission  has adopted
regulations to implement the federal Clean Air Act. These regulations  generally
exempt oil and gas  exploration and production  activities,  except from certain
routine  filings.  These  governmental  agencies may impose  further  regulatory
restrictions  and  reporting  requirements  which  could  adversely  impact  the
Company's operating costs.  However, at present the Company cannot predict if or
to what degree its costs and operations will be impacted.

     Finding and Acquiring  Additional  Reserves.  The Company's  future success
depends  upon its ability to find,  develop and acquire  additional  oil and gas
reserves  that  are  economically  recoverable.   Unless  the  Company  conducts
successful   exploration  or  development   activities  or  acquires  properties
containing reserves,  the reserves will decline as they are produced.  There can
be no  assurance  that  the  Company's  development  projects  and  acquisition,

                                      - 8 -


<PAGE>


development or exploration  activities  will result in additional  reserves.  If
prevailing  oil and gas prices were to  increase  significantly,  finding  costs
(calculated by dividing the capitalized  costs of oil and gas properties as of a
particular  date by the amount of net proved  reserves shown on a reserve report
on the same date) to add new reserves could increase. The business of purchasing
oil and gas  properties  involves a high degree of business and financial  risk,
especially  the risk that prices may  subsequently  decline or that the reserves
actually  recovered may be less than those  anticipated at the time of purchase.
The cost of drilling,  completing and operating wells is uncertain, and drilling
or production may be curtailed or delayed as a result of many factors.

     Anti-Takeover  Protections.  The Company's  Articles of  Incorporation  and
Bylaws  include  certain  provisions,  the  effect of which may be to  inhibit a
change of control of the Company.  These include the  authorization for issuance
of  additional  classes of Preferred  Stock and  classification  of the Board of
Directors so that approximately one-third of the Company's directors are elected
annually.  In  addition,  certain of the  Company's  officers  have entered into
employment  contracts  providing  for  certain  payments  to be  made  upon  any
termination  of employment.  These  provisions may discourage a third party from
attempting to obtain control of the Company.

     Dividend  Policy.  Payment  of  dividends  on Common  Stock is  subject  to
declaration  by the Board of Directors.  The Company does not currently pay cash
dividends on its Common Stock and does not  anticipate  paying such dividends in
the foreseeable future.
   
     Shares Available For Future Sale. As of April 1, 1998, a total of 5,904,497
outstanding  shares of Common Stock are "restricted  securities" as that term is
defined under Rule 144 of the Securities Act. An additional  7,075,889 shares of
Common Stock, issuable upon conversion of outstanding convertible Debentures and
exercise of outstanding  Warrants and 1,315,800  shares of Common Stock issuable
upon  exercise of options and up to 7,749,265  shares  currently  issuable  upon
conversion of outstanding  Series B Preferred  would be "restricted  securities"
upon issuance. Substantially all of such Common Stock (which includes the shares
of Common Stock offered for resale by this  Prospectus)  has been or is expected
to be registered  under the Securities Act for resale by the holders at or prior
to the time the Shares may be acquired in this  Offering.  Sales of  substantial
amounts of Common Stock into the market by such holders or the potential of such
sales may have a depressive  effect on the market price of the Company's  Common
Stock.

     Outstanding  Options  and  Warrants.  As of April 1, 1998,  the Company has
outstanding  warrants and options to purchase a total of 7,066,694 shares of the
Company's  Common  Stock at an average  exercise  price of $3.91 per share.  The
exercise  prices of the  outstanding  warrants  and options  range from $.70 per
share to $6.00 per share.  If all these warrants and options should be exercised
at the present  exercise  prices,  the Company would  receive gross  proceeds of
approximately $27.6 million. The holders of the outstanding options and warrants
might have the  opportunity  to profit from a rise in the market price (of which
there is no assurance) of the shares of the  Company's  Common Stock  underlying
the warrants and options,  and their exercise may dilute the ownership  interest
in the Company held by other stockholders.
    
                                 USE OF PROCEEDS

     The Company  will not receive any  proceeds  from the sale of shares by the
Selling Securityholders.

                             SELLING SECURITYHOLDERS

     The following table sets forth certain information  regarding the shares of
Common  Stock  beneficially  owned  as of the  date of this  Prospectus  by each
Selling  Securityholder.  This table shows the number of shares of Common  Stock
beneficially  owned by each Selling  Securityholder  prior to the offering,  the
maximum  number  of  Shares  to be  offered  for each  Selling  Securityholder's
account,  the  amount of the class  owned by the  Selling  Securityholder  after
completion of the offering (assuming the Selling Securityholder sold the maximum
number  of  Shares   offered)  and  any  position,   office  or  other  material
relationship  with the Company that the Selling  Securityholder or any affiliate
of a Selling  Securityholder  had within the past three (3) years.  The  Selling
Securityholders  are not  required,  and may  choose  not,  to sell any of their
shares of Common Stock.

                                      - 9 -

<PAGE>
   
<TABLE>
<CAPTION>
                                                                                                        Shares
                                                                          Shares                         Owned
                                                                           Owned                       After the
                                                                         Prior to        Shares        Offering
                                                                         Offering         Being       (% of out-
Name of Securityholder (beneficial owner, if different)                                  Offered       standing)
==================================================================================================================
<S>                                                                    <C>             <C>              <C>
Kayne Anderson Non-Traditional Investments, L.P.(2)..................  1,577,923       1,577,923(1)      - 0 -
Arbco Associates, L.P.(2)............................................  1,402,598       1,402,598(1)      - 0 -
Offense Group Associates, L.P.(2)....................................  1,923,249(3)    1,753,249(1)    170,000(1%)
Opportunity Associates, L.P.(2).....................................     525,974         525,974(1)      - 0 -
Sandpiper & Co. (Metropolitan Life Insurance                                                       
Company Separate Account EN)(4)......................................  2,337,622(5)    2,279,222(1)     58,400(.3%)
Marine Crew & Co. (BellSouth Master Pension Trust)(4)................  1,256,374(6)    1,227,274(1)     29,100(.1%)
Tamar Securities, Inc.(7)............................................    438,312         438,312(1)      - 0 -
Ramat Securities, Ltd.(7)............................................    171,254         116,854(1)     54,400(.3%)
Everen Clearing Corp., Cust FBO Howard Amster, IRA...................    570,812(8)      438,312(1)    132,500(.8%)
The MADAV IX Foundation..............................................    175,325         175,325(1)      - 0 -
Gloria K. Berry .....................................................     14,250(10)      11,900(9)      2,350
Wanda J. Burford ....................................................     11,900          11,900(9)      - 0 -
Bruce E. Lazier .....................................................    167,000(11)     100,000(9)     67,000
Michael D. Bodino ...................................................    167,000(11)     100,000(9)     67,000
Kenneth R. Etheredge ................................................    167,000(11)     100,000(9)     67,000
- ----------------------------
</TABLE>

(1)  Reflects the number of shares of Common Stock  issuable upon  conversion of
     outstanding  Series B preferred at an assumed Conversion Price of $0.73125.
     (See  "Description  of  Securities--Series  B  Preferred"  for  information
     concerning  determination of the applicable Conversion Price at the time of
     conversion.)  The number of shares issued upon conversion and available for
     sale by a Selling  Securityholder could be larger or smaller,  depending on
     the applicable Conversion Price at the time of conversion. Also, this table
     does not  include  shares of Common  Stock  which  would be  issuable  upon
     conversion of additional  Series B Preferred Stock which might be issued to
     holders from time to time as payment in kind for  dividends on  outstanding
     Series B Preferred.  All shares of Common Stock issuable upon conversion of
     the  Series  B  Preferred  have  been   registered  for  resale  under  the
     registration statement of which this Prospectus is a part.
    
(2)  KAIM  Non-Traditional,  L.P., a registered  investment advisor ("KAIM"), is
     the general  partner of each of these entities.  Kayne Anderson  Investment
     Management,  Inc., a Nevada corporation of which Richard Kayne is President
     and 75% beneficial  owner,  is general partner of KAIM. KAIM also serves as
     manager and a partner of Kayne  Anderson  Off-Shore Ltd. which holds 30,000
     shares of Company Common Stock.  Mr. Kayne is also a co-general  partner of
     Arbco Associates, L.P.
   
(3)  Includes  170,000  outstanding  shares of Common  Stock  offered for resale
     under a separate registration statement.
    
(4)  State  Street  Research  &  Management,  a  registered  investment  adviser
     ("SSRM"),  is  the  manager  of the  Metropolitan  Life  Insurance  Company
     Separate  Account EN and the  BellSouth  Master  Pension  Trust.  SSRM also
     serves as manager of (a) State Street Research Global Resources Fund, which
     holds 287,500  shares of Company  Common Stock;  (b) State Street  Research
     Aurora Fund,  which holds 100,000 shares of Company  Common Stock;  and (c)
     Duke Endowment Energy Account,  which holds 30,000 shares of Company Common
     Stock. SSRM disavows any interest in any of the Common Stock.


                                     - 10 -


<PAGE>

   
(5)  Includes 58,400 outstanding shares of Common Stock offered for resale under
     a separate registration statement.

(6)  Includes 29,100 outstanding shares of Common Stock offered for resale under
     a separate registration statement.
    
(7)  Tamar  Securities,  Inc.  is owned  51% by Tamra  Gould  and 49% by  Howard
     Amster,  wife  and  husband.   Howard  Amster  is  831/3%  owner  of  Ramat
     Securities,  Ltd.  Shares owned by Ramat  Securities,  Ltd.  include 45,000
     shares of Common  Stock and  warrants  to  purchase  up to 9,400  shares of
     Common Stock.

(8)  Includes  132,500  outstanding  shares of Common  Stock  offered for resale
     under a separate registration statement.
   
(9)  Reflects the number of shares of Common  Stock  issuable  upon  exercise of
     outstanding  Common Stock  purchase  warrants.  The warrants were issued in
     connection with the placement of the Series B Preferred and are exercisable
     at $1.75 per share.

(10) Includes 2,350 shares underlying  exercisable warrants,  registered under a
     separate registration statement.

(11) Includes 67,000 shares underlying exercisable warrants,  registered under a
     separate registration statement.
    
                                     - 11 -


<PAGE>

                              PLAN OF DISTRIBUTION
   
     The shares of Common  Stock  issuable to the Selling  Securityholders  upon
conversion or exercise of the Warrants of the Series B Preferred  will be issued
directly by the  Company to the  holders of the Series B  Preferred  or Warrants
upon surrender of certificates  upon  conversion or exercise.  The conversion of
the Series B Preferred is subject to the terms of the Series B Preferred. Shares
issued upon conversion of Series B Preferred or exercise of the Warrants will be
restricted securities as defined in Rule 144 adopted under the Securities Act of
1933, as amended, while held by the Selling Securityholders.
    
     The Selling  Securityholders (or their pledgees,  donees,  transferees,  or
other successors in interest) from time to time may sell all or a portion of the
Shares "at the market" to or through a market maker or into an existing  trading
market, in private sales, including direct sales to purchasers,  or otherwise at
prevailing  market prices or at  negotiated or fixed prices.  By way of example,
and  not by way of  limitation,  the  Shares  may be  sold by one or more of the
following methods: (a) a block trade in which a broker or dealer so engaged will
attempt to sell the Shares as agent but may purchase and resell a portion of the
block as principal to facilitate the  transaction;  (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) an exchange distribution in accordance with the rules of
such exchange; and (d) ordinary brokerage transactions and transactions in which
the broker solicits  purchasers.  In effecting sales, brokers or dealers engaged
by the seller may arrange for other brokers or dealers to  participate.  Brokers
or dealers will receive  commissions  or discounts from the seller in amounts to
be negotiated with the Selling Securityholder  immediately prior to the sale. It
is  anticipated  that the per share  selling  price for the Shares will be at or
between the "bid" and "asked" prices of the Company's  Common Stock as quoted in
the  over-the-counter  market  immediately  preceding the sale.  Such brokers or
dealers  and any other  participating  brokers  or  dealers  may be deemed to be
"underwriters" within the meaning of the Securities Act, in connection with such
sales. Expenses of any such sale will be borne by the parties as they may agree.

     In addition,  any securities  covered by the  Prospectus  which qualify for
sale  pursuant to Rule 144 under the  Securities  Act may be sold under Rule 144
rather than pursuant to the Prospectus.

     The Selling  Securityholders  may agree to indemnify  any agent,  dealer or
broker-dealer  that  participates in transactions  involving sales of the Shares
against certain liabilities,  including liabilities arising under the Securities
Act. Any  commissions  paid or any discounts or concessions  allowed to any such
broker-dealer which purchases Shares as principal or any profits received on the
resale of such Shares may be deemed to be underwriting discounts and commissions
under the Securities Act.

     In order to comply with certain state securities  laws, if applicable,  the
Shares may not be sold in certain states unless the Shares have been  registered
or  qualified  for sale in such  states or an  exemption  from  registration  or
qualification is available and is complied with.

     The Shares offered hereby will be sold by the Selling  Securityholders  (or
their pledgees,  donees,  transferees or other successors in interest) acting as
principals for their own account.  The Company will receive none of the proceeds
from such sales.

     No  underwriting  arrangements  exist as of the date of this Prospectus for
any  Selling  Securityholders  to sell its  shares.  Upon  being  advised of any
underwriting  arrangements that may be entered into by a Selling  Securityholder
after the date of this Prospectus, the Company will prepare a supplement to this
Prospectus to disclose such arrangements.

Certain Provisions of the Articles of Incorporation, Bylaws and Nevada Law

     The Company's ability to issue shares of new classes of preferred stock and
to determine the rights, preferences,  privileges,  designations and limitations
of such stock, including the dividend rights,  dividend rate, conversion rights,
voting rights,  terms of redemption and other terms of conditions of such stock,
could make it more  difficult  for a person to engage in, or discourage a person
from engaging in, a change in control  transaction  without the  cooperation  of
management.  Also, the Company has adopted Bylaws pursuant to which the Board of
Directors has been classified such that in the future approximately one-third of
the directors will be elected at each annual meeting of stockholders for a three
year term. As a result of this "staggered" Board of Directors,  it would be more
difficult for a person to assume control of the Company by changing the Board of
Directors without the cooperation of the Board of Directors.

                                     - 12 -


<PAGE>



     The Company's  Articles of  Incorporation  contain a provision,  authorized
under  Nevada law,  which  limits the  liability of directors or officers of the
Company  for  monetary  damages  for breach of  fiduciary  duty as an officer or
director other than for intentional misconduct,  fraud or a knowing violation of
law or for payment of a dividend in  violation  of Nevada  law.  Such  provision
limits  recourse  for money  damages  which might  otherwise be available to the
Company or stockholders  for negligence by individuals  while acting as officers
or  directors  of the  Company.  Although  this  provision  would  not  prohibit
injunctive  or similar  actions  against  directors or officers,  the  practical
effect of such relief would be limited.

     The Articles of Incorporation and Bylaws also contain provisions  requiring
the Company to indemnify  officers,  directors and certain employees for certain
liabilities  incurred in connection with actions taken on behalf of the Company,
including  expenses incurred in defending  against such liabilities.  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 Securities and Exchange  Commission such  indemnification  is
against  public  policy as expressed in the  Securities  Act and is,  therefore,
unenforceable.

                            DESCRIPTION OF SECURITIES
   
     The Company is  authorized  to issue  40,000,000  shares of $0.10 par value
Common Stock and 2,000,000 shares of preferred  stock,  $0.01 par value of which
145,300  shares  are  designated  as  Series  B 5%  PIK  Cumulative  Convertible
Preferred Stock ("Series B Preferred") and 594,700 shares are  undesignated  and
the balance have been retired (hereafter the "Preferred  Stock"). As of the date
of this Prospectus  there were  outstanding  15,789,955  shares of Common Stock,
warrants to purchase up to 5,750,894  shares of Common Stock,  113,333 shares of
Series B Preferred  and options to  purchase  up to  1,315,800  shares of Common
Stock.
    
Common Stock

     Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company. Except as may be
required  by  applicable  law,  holders of shares of Common  Stock will not vote
separately as a class,  but will vote  together with the holders of  outstanding
shares of other classes of capital stock. There is no right to cumulate votes in
the election of directors. A majority of the issued and outstanding Common Stock
constitutes a majority of the  outstanding  shares is required to effect certain
fundamental  corporate  changes such as liquidation,  merger or amendment of the
Articles of Incorporation.
   
     Holders of shares of Common  Stock are entitled to receive  dividends,  if,
as, and when declared by the Board of Directors out of finds available therefor,
after  payment  of  dividends  required  to be paid  on  outstanding  shares  of
preferred stock.  Upon  liquidation of the Company,  holders of shares of Common
Stock are entitled to share ratably in all assets of the Company remaining after
payment of  liabilities,  subject to the  liquidation  preference  rights of any
outstanding shares of Preferred Stock. Holders of shares of Common Stock have no
conversion, redemption or preemptive rights. The rights of the holders of Common
Stock will be subject to, and may be  adversely  affected  by, the rights of the
holders of Preferred Stock.  The outstanding  shares of Common Stock are and all
shares of Common Stock sold  pursuant to this  offering  will be, fully paid and
nonassessable.  The shares of Common Stock issued upon  exercise of Warrants and
payment  therefor or conversion of Series B Preferred,  will be validly  issued,
fully paid and nonassessable.
    
Preferred Stock

     Under the Company's Articles of Incorporation, as amended ("Articles"), the
Board of Directors has the power,  without  further action by the holders of the
Common Stock,  to designate the relative rights and preferences of the Company's
Preferred Stock,  when and if issued.  Such rights and preferences could include
preferences as to liquidation,  redemption and conversion rights, voting rights,
dividends or other  preferences,  any of which my be dilutive of the interest of
the  holders of the  Common  Stock.  The Board  previously  designated  Series A
Cumulative  Convertible Preferred Stock, none of which is outstanding and all of
which has been retired.

                                     - 13 -


<PAGE>



     Additional  classes of Preferred  Stock may be  designated  and issued from
time to time in one or more  series  with such  designations,  voting  powers or
other  preferences and relative other rights or qualifications as are determined
by  resolution  of the  Board of  Directors  of the  Company;  however,  no such
Preferred  Stock may adversely  affect the rights of the holders of the Series B
Preferred  described  below. The issuance of Preferred Stock may have the effect
of  delaying  or  preventing  a change in control of the Company and may have an
adverse effect on the rights of the holders of Common Stock.

Series B Preferred
   
     The Company has designated  145,300 shares of Series B Preferred,  of which
113,333  shares have been issued and the balance are reserved for issuance as of
payment in kind ("PIK") dividends on outstanding Series B Preferred.  The Series
B  Preferred  is  entitled  to a dividend  of $2.50 per year,  payable  calendar
quarterly,  which amount may be paid, at the election of the Company, in cash or
in kind.  Each share of Series B  Preferred  issued as a PIK  dividend  shall be
valued at $50. The dividend is cumulative  to the date of payment.  The Series B
Preferred  has a liquidation  preference  equal to $50 per share plus any unpaid
dividends ("Liquidation Preference").
    
     The Series B Preferred is convertible  after the date of this Prospectus at
the  option  of a  holder  into a number  of  shares  of  Company  Common  Stock
determined by dividing the Liquidation  Preference by the Conversion Price as in
effect at the time of conversion.

     The effective  Conversion  Price at the time of any conversion shall be the
lowest reported sale price, as reported by NASDAQ,  during the five trading days
prior to  receipt  by the  Company  of a notice of  conversion  from a holder of
Series B Preferred, reduced by the following discount:
   
                 Number of days after
                  March 31, 1998 that
            conversion notice is received                Discount
         -----------------------------------             -------

                    1--   30                                12%
                    1--   30                                12%
                   31--   60                                14%
                   61--   90                                15%
                   91--  120                                16%
                  121--  150                                18%
                  151--  180                                20%
                  181--  210                                22%
                  211--  360                                24%
                  361 or more                               25%
    
Notwithstanding the above, on or after June 30, 1998, the Conversion Price shall
not exceed the lower of (A) 110% of the  average  last sale price as reported by
NASDAQ for the 20 trading days  preceding  June 30, 1998, or (B) the  discounted
price determined as set forth above. In addition,  the Conversion Price would be
reduced to any lower issuance price at which the Company issues its Common Stock
after December 31, 1997 or the effective  conversion price for other convertible
securities issued thereafter.

     The Conversion Price would also be adjusted appropriately in the event of a
Common Stock split,  reverse stock split,  stock dividend or other  distribution
payable in Common Stock or other securities of the Company or its  subsidiaries,
including rights to acquire other Company securities,  or if the Company effects
a combination, consolidation or reclassification of its Common Stock.

     The Series B Preferred is non-voting and must be redeemed by the Company on
December 31, 2002 at a price equal to the  Liquidation  Preference.  On or after
June 24,  1999 the  Company  may  require  holders of all  outstanding  Series B
Preferred  to convert  their  Series B Preferred  into  Company  Common Stock in
accordance with the above provisions relating to conversion.


                                     - 14 -


<PAGE>


     Under  certain  circumstances,  upon a  decision  by a holder  of  Series B
Preferred  to convert his shares into  Company  Common  Stock at a time when the
average  last sale  price for  Common  Stock for the 20  trading  days  prior to
conversion  is lower than $1.75,  the Company will have the option to repurchase
the Series B Preferred being converted. Upon such election, the repurchase price
would be (a) $50 per share of Series B Preferred with certain  adjustments,  (b)
any  accumulated  unpaid  dividends  through  the date of  repurchase  and (c) a
premium equal to $50 times the discount set forth in the table above.

Publicly Traded Warrants
   
     As of December 31, 1997, issued and outstanding  warrants to purchase up to
3,175,808  shares of Common Stock,  are traded publicly on the Nasdaq  Small-Cap
Market under the symbol WPOGW. The Warrants expire, if not previously  exercised
by holders,  on August 13, 1999 and are subject to redemption by the Company, in
whole or in part,  on a pro rata basis,  at the option of the Company,  upon not
less  than 30 days  prior  notice,  at a  redemption  price  equal to $0.25  per
Warrant.

     Each Warrant  represents the right to purchase one share of Common Stock on
or before 5:00 p.m. Eastern Time on August 13, 1999 at an initial exercise price
of $6.00 per share.  The exercise price and the number of shares  underlying the
Warrants are subject to adjustment in certain events,  including the issuance of
Common Stock as a dividend on shares of Common Stock; subdivisions, combinations
and reclassifications of the shares of the Common Stock; the distribution to all
holders of Common Stock of evidences  of  indebtedness  of the Company or assets
(other than cash dividends);  and certain mergers,  a consolidation or a sale of
substantially  all of the  assets  of  the  Company.  Except  as  stated  in the
preceding  sentence,  the Warrants do not contain provisions  protecting against
dilution  resulting from the sale of additional  shares of Common Stock for less
than the exercise price of the Warrants or the current market price.
    
     Holders of Warrants  will be  entitled to notice if (a) the Company  grants
holders of its Common Stock  rights to purchase  any shares of capital  stock or
any other  rights,  or (b) the Company  authorizes a  reclassification,  capital
reorganization,  consolidation,  merger  or  sale  of  substantially  all of its
assets.

     The  Warrants are subject to the terms of a Warrant  Agreement  between the
Company and American  Securities  Transfer and Trust, Inc. as Warrant Agent. The
Company  and the  Warrant  Agent may from time to time  supplement  or amend the
Warrant  Agreement,  without the approval of any Warrant Holders,  to correct or
supplement defective or inconsistent  provisions or to make any other provisions
in regard to matters or  questions  arising  under the Warrant  Agreement  which
shall not adversely affect the Warrant  Holders,  including (but not limited to)
extending the Expiration Date and any conditional or unconditional  reduction in
the Exercise Price, as the Board of Directors may determine. The Company and the
Warrant  Agent  may make any  other  amendment  to the  Warrant  Agreement  upon
obtaining  the  consent of a majority of the  holders of  outstanding  Warrants,
except that the consent of all Warrant  Holders is necessary to shorten the time
of exercise of any Warrant or to increase the Exercise Price.

     The  Company  has  reserved  from  its  authorized  but  unissued  shares a
sufficient  number of shares of Common  Stock for  issuance  on  exercise of the
Warrants.  Exercise of each  Warrant may be effected by delivery of the Warrant,
duly endorsed for exercise and  accompanied by payment of the exercise price, to
the  Warrant  Agent.  The shares of Common  Stock  issuable  on  exercise of the
Warrants  will be,  when issued and paid for in the manner  contemplated  by the
Warrants, fully paid and nonassessable.

     For the life of the Warrants,  the holders  thereof have the opportunity to
profit  from a rise  in the  market  for  the  Company's  Common  Stock,  with a
resulting  dilution in the  interest of all other  stockholders.  So long as the
Warrants are outstanding, the terms on which the Company could obtain additional
capital may be adversely affected. The holders of the Warrants might be expected
to exercise them at a time when the Company would, in all likelihood, be able to
obtain  any  needed  capital  by a new  offering  of  securities  on terms  more
favorable than those provided for by the Warrants.

     Except as described  above,  the holders of the Warrants  have no rights as
stockholders until they exercise their Warrants. Shares of Common Stock issuable
upon exercise of the Warrants have been registered  under the Securities Act for
resale by holders.

                                     - 15 -


<PAGE>


                                  LEGAL MATTERS

     The  validity  of the Common  Stock will be passed  upon for the Company by
Alan W. Peryam, LLC, Denver, Colorado.

                                     EXPERTS
   
     The consolidated financial statements as of December 31, 1997, and for each
of the two  years  in the  period  ended  December  31,  1997,  incorporated  by
reference  in this  Prospectus,  have been  audited  by HEIN +  ASSOCIATES  LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference,  and have been so  incorporated  in reliance  upon the report of such
firm given upon their authority as experts in accounting and auditing.
    










                                     - 16 -


<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
   
<S>                                                                        <C>
No  dealer,  salesperson  or  other  person  has been
authorized  to give  any  information  or to make any
representation  not contained in this Prospectus and,
if given or made, such information or  representation                         PEASE OIL AND GAS COMPANY
must not be relied upon as having been  authorized by
the  Company  or  any  Selling  Securityholder.  This
Prospectus  does not constitute an offer to sell or a                    10,258,843 SHARES OF COMMON STOCK
solicitation of an offer to buy any of the securities
offered hereby in any juris diction to any persons to
whom  it is  unlawful  to  make  such  offer  in such
jurisdiction.

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


                                                Page No.                         ---------------------
                                                -------
                                                                                        PROSPECTUS
AVAILABLE INFORMATION.................................2                 
                                                                                 ---------------------
INCORPORATION OF CERTAIN
   DOCUMENTS BY REFERENCE.............................2

PROSPECTUS SUMMARY....................................3

RISK FACTORS..........................................4

USE OF PROCEEDS.......................................9

SELLING SECURITYHOLDERS...............................9

PLAN OF DISTRIBUTION.................................12

DESCRIPTION OF SECURITIES............................13

LEGAL MATTERS........................................16                                April __, 1998

EXPERTS  ............................................16


    
- ------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14.  Other Expenses of Issuance and Distribution.

     Expenses  payable  by  Registrant  in  connection  with  the  issuance  and
distribution of the securities being registered hereby are as follows:
   
     SEC Registration Fee..................................       $3,120.94
     Accounting Fees and Expenses..........................        6,000.00*
     Legal Fees and Expenses ..............................       10,000.00*
     Printing, Freight and Engraving.......................        1,000.00*
     Miscellaneous ........................................        4,879.06
                                                                  ---------
              Total........................................      $25,000.00*
                                                                  =========
- -----------------
    
         * Estimated.

Item 15.  Indemnification of Directors and Officers.

     Article VII of the Registrant's Articles of Incorporation  provides that no
director  or  officer  of the  Registrant  shall  be  personally  liable  to the
Registrant or any of its  stockholders  for damages for breach of fiduciary duty
as a director or officer, except that such provision will not eliminate or limit
the  liability of a director or officer for any act or omission  which  involves
intentional  misconduct,  fraud or a knowing violation of law or for the payment
of any dividend in violation of Section 78.300 of the Nevada Revised Statutes.

     Section  78.751 of the Nevada  Revised  Statutes  permits the Registrant to
indemnify its directors,  officers, employees and agents if such person acted in
good faith and in a manner which he reasonably  believed to be in or not opposed
to the best  interests  of the  corporation,  and,  with respect to any criminal
action or  proceeding,  has no  reasonable  cause to  believe  his  conduct  was
unlawful.

     To the extent that a director,  officer, employee or agent of a corporation
has been  successful  on the merits or otherwise  in defense of any action,  the
corporation must provide indemnification against expenses,  including attorneys'
fees, actually and reasonably incurred by him in connection with the defense.

     Section 43 of the  Registrant's  Bylaws provides that the Registrant  shall
provide indemnification to Registrant's officers, directors and employees to the
fullest extent permitted under the Nevada General Corporation Law.

Item 16.  Exhibits.

     In addition to the exhibits  previously filed by Registrant,  the following
is a list of all exhibits  filed as part of this  Registration  Statement or, as
noted, incorporated by reference to this Registration Statement:

Exhibit No.    Description and Method of Filing
- ----------     --------------------------------
   
(4.1)          Form of Warrant to Purchase Common Stock.

(4.2)          Warrant  Agency  Agreement  between  Willard  Pease  Oil  and Gas
               Company and American Securities  Transfer,  Inc. dated August 23,
               1993. (1)

(4.3)          Amendment to Warrant Agency  Agreement dated as of March 3, 1998,
               incorporated  by reference  to Exhibit  10.1 of the  Registrant's
               Form 8-K dated March 9, 1998.(3)

(4.4)          Amendment to the  Certificate  of  Designation of Series B 5% PIK
               Cumulative Convertible Preferred Stock, incorporated by reference
               to  Exhibit  3.2 of  Registrant's  Form 8-K  dated  December  31,
               1997.(2)

(5.1)          Opinion of Company counsel.

(23)           Consents of Experts (4)

                                      II-1

<PAGE>

(23.1)         Consent  of  McCartney  Engineering,  LLC,  Consulting  Petroleum
               Engineers.(4)

(23.2)         Consent of  Netherland,  Sewell &  Associates,  Inc.,  Consulting
               Petroleum Engineers.(4)

(23.3)         Consent of Alan W. Peryam, LLC.

(23.4)         Consent of Hein + Associates LLP, Certified Public Accountants

(24)           Power of Attorney (previously filed).

(27)           Financial Data Schedule (not required).

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

Footnotes for Exhibits:

     (1)  Incorporated  by reference to  Registration  Statement No. 33-64448 on
          Form SB-2.
     (2)  Incorporated by reference to Form 8-K filed January 13, 1998.
     (3)  Incorporated by reference to Form 8-K filed March 9, 1998.
     (4)  Incorporated  by reference to the  Registrant's  Annual Report on Form
          10-KSB for the fiscal year ended December 31, 1996.
    

Item 17.  Undertakings

     The undersigned registrant hereby undertakes that it will:

     (1) File, during any period in which Registrant offers or sells securities,
a  post-effective  amendment  to this  registration  statement  to  include  any
material information on the plan of distribution.

     (2)  For  determining  liability  under  the  Securities  Act,  treat  such
post-effective  amendment  as a new  registration  statement  of the  securities
offered,  and the offering of the  securities at that time shall be deemed to be
the initial bona fide offering.

     (3) File a post-effective  amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted  to  directors,  officers  and  controlling
persons of the Registrant  pursuant to the foregoing  provisions,  or otherwise,
the  Registrant  has been  advised  that in the  opinion of the  Securities  and
Exchange Commission,  such indemnification is against public policy as expressed
in the Act and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnifi  cation  against  such  liabilities  (other  than the  payment  by the
Registrant of expenses  incurred or paid by a director,  officer or  controlling
person of the  Registrant  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 Registrant 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 Act and will
be governed by the final adjudication of such issue.

     For purposes of determining any liability under the Securities Act of 1933,
each filing of the  Registrant's  annual  report  pursuant  to Section  13(a) or
Section 15(d) of the  Securities  Exchange Act of 1934 that is  incorporated  by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities  offered therein,  and the offering of such
securities  at that time shall be deemed to be the  initial  bona fide  offering
thereof.

II-2

<PAGE>
   
                                   SIGNATURES

     Pursuant to the  requirements of the Securities Act of 1933, the Registrant
certifies  that it has  reasonable  grounds  to  believe  that it meets  all the
requirements  for  filing  on Form S-3 and has  duly  caused  this  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of Grand Junction,  Mesa County, State of Colorado,  on
April 7, 1998.
    
                             PEASE OIL AND GAS COMPANY

                             By: /s/ Willard H. Pease, Jr.
                                 -----------------------------------------------
                                 Willard H. Pease, Jr. Chief Executive Officer

                             By: /s/ Patrick J. Duncan
                                 -----------------------------------------------
                                 Patrick J. Duncan, Principal Accounting Officer

     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement has been signed by the following persons in the capacity
and on the dates indicated.
   
Signature                       Title                              Date
- ---------                       -----                              ----


/s/ Willard H. Pease, Jr.
- -------------------------       Director, Principal Executive      April 7, 1998
Willard H. Pease, Jr.           Officer

/s/ Patrick J. Duncan
- -------------------------       Director, Chief Financial          April 7, 1998
Patrick J. Duncan               Officer, Treasurer and Principal
                                Accounting Officer

Steve Antry*                    Director                           April 7, 1998

R. Thomas Fetters, Jr.*         Director                           April 7, 1998

Steve Fisher*                   Director                           April 7, 1998

Homer C. Osborne*               Director                           April 7, 1998

James C. Ruane    *             Director                           April 7, 1998

Clemons F. Walker *             Director                           April 7, 1998

William F. Warnick*             Director                           April 7, 1998


*By /s/ Willard H. Pease, Jr.                                      April 7, 1998
   -------------------------
     Willard H. Pease, Jr.,
     Attorney-in-Fact
    
                                      II-3

<PAGE>

<TABLE>
<CAPTION>
                                  EXHIBIT INDEX
   
Exhibit No.    Description and Method of Filing                                      Page No.
- ----------     --------------------------------                                      --------

<C>            <S>                                                                   <C>
(4.1)          Form of Warrant to Purchase Common Stock.

(4.2)          Warrant  Agency  Agreement  between  Willard  Pease  Oil  and Gas       N/A
               Company and American Securities  Transfer,  Inc. dated August 23,
               1993. (1)

(4.3)          Amendment to Warrant Agency  Agreement dated as of March 3, 1998,       N/A
               incorporated  by reference  to Exhibit  10.1 of the  Registrant's
               Form 8-K dated March 9, 1998.(3)

(4.4)          Amendment to the  Certificate  of  Designation of Series B 5% PIK       N/A
               Cumulative Convertible Preferred Stock, incorporated by reference
               to  Exhibit  3.2 of  Registrant's  Form 8-K  dated  December  31,
               1997.(2)

(5.1)          Opinion of Company counsel.

(23)           Consents of Experts (4)                                                 N/A

(23.1)         Consent  of  McCartney  Engineering,  LLC,  Consulting  Petroleum       N/A
               Engineers.(4)

(23.2)         Consent of  Netherland,  Sewell &  Associates,  Inc.,  Consulting       N/A
               Petroleum Engineers.(4)

(23.3)         Consent of Alan W. Peryam, LLC.   

(23.4)         Consent of Hein + Associates LLP, Certified Public Accountants

(24)           Power of Attorney (previously filed).                                   N/A

(27)           Financial Data Schedule (not required).                                 N/A
</TABLE>

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

Footnotes for Exhibits:

     (1)  Incorporated  by reference to  Registration  Statement No. 33-64448 on
          Form SB-2.
     (2)  Incorporated by reference to Form 8-K filed January 13, 1998.
     (3)  Incorporated by reference to Form 8-K filed March 9, 1998.
     (4)  Incorporated  by reference to the  Registrant's  Annual Report on Form
          10-KSB for the fiscal year ended December 31, 1996.
    


<PAGE>

                               ALAN W. PERYAM. LLC
                         1120 Lincoln Street, Suite 1000
                             Denver, Colorado 80203
                                 (303) 892-0900

   
                                  April 7, 1998
    

Pease Oil and Gas Company
751 Horizon Court, Suite 203
Grand Junction, Colorado 81506-8758

Gentlemen:
   
     We  refer  to  the  Registration   Statement  on  Form  S-3  ("Registration
Statement")  of Pease Oil and Gas  Company,  a Nevada  corporation  ("Company"),
Amendment  No. 1 of which will be filed with the United  States  Securities  and
Exchange  Commission on or about April 7, 1998, relating to 10,258,843 shares of
$0.10 par value common stock (the "Common  Stock") for resale by holders of such
securities as described therein.

     We have reviewed such documents and records as we have deemed  necessary to
enable us to express an informed  opinion on the matters  covered thereby and we
are  of the  opinion  that  the  Common  Stock  described  in  the  Registration
Statement,  upon conversion of Series B 5% PIK Cumulative  Convertible Preferred
Stock into the Common Stock in accordance  with rights and  preferences  of such
preferred stock and upon exercise of outstanding warrants in accordance with the
terms of the warrants, will, be legally issued, fully paid and nonassessable.
    
                                        Sincerely,

                                        ALAN W. PERYAM, LLC


                                        By   /s/ Alan W. Peryam
                                             --------------------------
                                             Alan W. Peryam

<PAGE>



                               CONSENT OF ATTORNEY
   
     Reference is made to the Amendment No. 1 to the  Registration  Statement on
Form S-3 pursuant to which certain  Selling  Securityholders  described  therein
propose to sell a maximum  of  10,258,843  shares of the $0.10 par value  common
stock  ("Common  Stock") of the  Company.  Reference is also made to the opinion
dated April 7, 1998  included  as Exhibit  (5.1) to the  Registration  Statement
relating to the legality of the securities proposed to be issued and to be sold.

     I hereby  consent to the filing of the opinion  dated April  6,1998,  as an
exhibit to the Company's Registration Statement on Form S-3 and reference to the
undersigned in the Registration Statement under the caption "Legal Matters."



                                             /s/ Alan W. Peryam
                                             -------------------------------
                                             Alan W. Peryam

Denver, Colorado
Dated: April 7, 1998
    

<PAGE>


   
               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT


We consent to the  incorporation by reference in the  Registration  Statement of
Pease Oil and Gas Company on Form S-3 of our report  dated March 18, 1998 on our
audits of the consolidated  financial statements of Pease Oil and Gas Company as
of December 31, 1997, and for the years ended December 31, 1997 and 1996,  which
report is  included  in the Annual  Report of Pease Oil and Gas  Company on Form
10-KSB.


/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP

Denver, Colorado
April 6, 1998
    



                                                          Warrant No. 98 SJS-


                        WARRANT TO PURCHASE COMMON STOCK
                                       OF
                            PEASE OIL AND GAS COMPANY

              Warrant to Purchase __________ Shares of Common Stock
                   (subject to adjustment as set forth herein)

                         Exercise Price $1.75 Per Share
                   (subject to adjustment as set forth herein)

             VOID AFTER 5:00 P.M., GRAND JUNCTION, COLORADO TIME, ON
                               DECEMBER 31, 2002.

     THE SECURITIES  REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED  UNDER
THE  SECURITIES  ACT OF 1933 (the "Act") OR  REGISTERED  OR QUALIFIED  UNDER ANY
OTHER  APPLICABLE  FEDERAL OR STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION  STATEMENT OR  QUALIFICATION  FILED IN  ACCORDANCE  WITH THE ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT.

     Pease Oil and Gas Company,  751 Horizon Court,  Suite 203, Grand  Junction,
Colorado 81506 (the  "Company"),  hereby  certifies  that,  for value  received,
______________________,  (the "Holder"),  is entitled,  subject to the terms and
conditions set forth below, to purchase from the Company at any time on or after
the  Exercise  Date (as  defined  below) and before 5:00 p.m.,  Grand  Junction,
Colorado  time, on December 31, 2002,  up to __________  shares of the Company's
Common Stock  ("Shares") at a purchase  price of $1.75 per Share (the  "Exercise
Price").

     The number of Shares  purchasable  upon  exercise  of this  Warrant and the
Exercise Price are subject to adjustment as provided  below.  The term "Warrant"
as  used  herein  shall  include  this  Warrant  and  any  Warrants   issued  in
substitution for or replacement of this Warrant, or any Warrants into which this
Warrant may be divided or exchanged.

     The  Warrants  evidenced  by this  Warrant  Certificate  are part of a duly
authorized issue of Warrants issued pursuant to a Placement Agreement,  dated as
of December 1, 1997 (the  "Placement  Agreement"),  duly executed by the Company
and  San  Jacinto   Securities,   Inc.,  which  Placement  Agreement  is  hereby
incorporated by reference in and made a part of this instrument.

     This  Warrant may be  assigned,  transferred,  sold,  offered for sale,  or
exercised by the Holder only upon compliance  with all the pertinent  provisions
hereof.

     1. Exercise of Warrant.

     (a) Subject to the other terms and conditions of this Warrant, the purchase
rights  evidenced  by this  Warrant may be  exercised in whole or in part at any
time,  and from time to time,  on or after the first day,  if ever,  the current

                                       -1-

<PAGE>

                                                          Warrant No. 98 SJS-

market  value (as  determined  in Section 9 hereof) of a share of the  Company's
Common  Stock has averaged at least $1.75 for twenty (20)  consecutive  business
days (the "Exercise Date") and on or before 5:00 p.m., Grand Junction,  Colorado
time, on December 31, 2002, by the Holder's  presentation  and surrender of this
Warrant to the Company at its principal office or at the office of the Company's
stock transfer agent, if any, accompanied by a duly executed Notice of Exercise,
in the form attached to and by this  reference  incorporated  in this Warrant as
Exhibit A, and by payment of the aggregate Exercise Price, in certified funds or
a bank  cashier's  check,  for the number of Shares  specified  in the Notice of
Exercise.  In the event this Warrant is  exercised  in part only,  as soon as is
practicable  after the presentation and surrender of this Warrant to the Company
for exercise, the Company shall execute and deliver to the Holder a new Warrant,
containing the same terms and  conditions as this Warrant,  evidencing the right
of the Holder to purchase  the number of Shares as to which this Warrant has not
been exercised.

     (b) Upon receipt of this Warrant by the Company as described in  subsection
(a) above,  the Holder  shall be deemed to be the holder of record of the Shares
issuable upon such  exercise,  notwithstanding  that the stock transfer books of
the Company may then be closed or that certificates representing such Shares may
not have been prepared or actually delivered to the Holder.

     2. Exchange, Assignment or Loss of Warrant.

     (a) All sales, transfers, assignment or hypothecations of this Warrant must
be in  compliance  with  Section 8 hereof.  Any  assignment  or transfer of this
Warrant shall be made by the  presentation  and surrender of this Warrant to the
Company at its principal  office or the office of its stock transfer  agent,  if
any, accompanied by a duly executed Assignment form, in the form attached to and
by  this  reference  incorporated  in  this  Warrant  as  Exhibit  B.  Upon  the
presentation  and surrender of these items to the Company,  the Company,  at its
sole  expense,  shall  execute  and  deliver  to the new Holder or Holders a new
Warrant or Warrants,  containing  the same terms and conditions as this Warrant,
in the name of the new Holder or Holders as named in the  Assignment  Form,  and
this Warrant shall at that time be canceled.

     (b) This Warrant, alone or with other Warrants containing substantially the
same terms and conditions and owned by the same Holder,  is  exchangeable at the
option of the Holder but at the Company's sole expense, at any time prior to its
expiration  either by its terms or by its exercise in full upon presentation and
surrender to the Company at its  principal  office or at the office of its stock
transfer  agent,  if any, for another  Warrant or other  Warrants,  of different
denominations  but  containing  the same terms and  conditions  as this Warrant,
entitling the Holder to purchase the same  aggregate  number of Shares that were
purchasable  pursuant to the Warrant or Warrants  presented and surrendered.  At
the time of presentation and surrender by the Holder to the Company,  the Holder
also  shall  deliver  to the  Company a written  notice,  signed by the  Holder,
specifying the denominations in which new Warrants are issued to the Holder.

     (c) The  Company  will  execute  and  deliver to the  Holder a new  Warrant
containing  the same terms and  conditions  as this  Warrant upon receipt by the
Company  of  evidence  reasonably   satisfactory  to  it  of  the  loss,  theft,
destruction,  or mutilation  of this  Warrant,  provided that (i) in the case of
loss,  theft, or destruction,  the Company receives from the Holder a reasonably
satisfactory  indemnification and bond, and (ii) in the case of mutilation,  the
Holder presents and surrenders this Warrant to the Company for cancellation. Any

                                       -2-

<PAGE>


                                                           Warrant No. 98 SJS-

new Warrant  executed and delivered shall  constitute an additional  contractual
obligation on the part of the Company regardless of whether the Warrant that was
lost,  stolen,  destroyed,  or mutilated  shall be  enforceable by anyone at any
time.

     3. Adjustments of Exercise Price and Shares Purchasable. The Exercise Price
and the number of Shares  purchasable  upon  exercise of this  Warrant  shall be
subject to adjustment from time to time as provided in this Section.

     (a) If the Company subdivides its outstanding shares of Common Stock into a
greater  number  of  shares  of  Common  Stock,  the  Exercise  Price in  effect
immediately  prior  to  such  subdivision  shall  be  proportionately   reduced.
Conversely,  if the Company combines its outstanding shares of Common Stock into
a lesser  number  of  shares  of  Common  Stock,  the  Exercise  Price in effect
immediately prior to such combination shall be proportionally increased. In case
of a subdivision or  combination,  the adjustment of the Exercise Price shall be
made as of the effective date of the applicable  event. A distribution on shares
of Common  Stock of a number of shares of Common  Stock  equal to 25% or more of
the shares of Common Stock  outstanding on the record date for the determination
of  shareholders  entitled to receive the same shall be considered a subdivision
of shares  of  Common  Stock for the  purposes  of this  subsection  (a) of this
Section,  except that the adjustment will be made as of the record date for such
distribution.

     (b) In case of any capital  reclassification or any consolidation or merger
of the  Company  with or into  another  corporation  (other than a merger with a
subsidiary after which the Company is the continuing  corporation and which does
not result in any  change of  outstanding  shares of Common  Stock) or any sale,
lease or  conveyance to another  corporation  of the assets of the Company as an
entirety or  substantially  as an entirety,  the Company  shall,  as a condition
precedent to such transaction,  cause effective provision to be made so that the
Holder shall have the right thereafter,  by exercising this Warrant, to purchase
the kind and amount of securities  and/or other  property  receivable  upon such
reclassification,  consolidation,  merger,  sale, lease or conveyance as if such
Holder  had  exercised   this  Warrant  in  full   immediately   prior  to  such
reclassification,  consolidation,  merger,  sale, lease or conveyance.  Any such
provision  shall  include  provision  for  adjustments  which shall be as nearly
equivalent  as may  be  practicable  to the  adjustments  provided  for in  this
Agreement,  including  this  Section.  If,  as a result  of an  adjustment  made
pursuant to this subsection (b), the holder of this Warrant thereafter exercised
shall become  entitled to receive shares of two or more classes of capital stock
of the Company or any other  corporation  or entity,  the board of directors (or
other  governing  body  if  there  be no  board  of  directors)  thereof  (whose
determination  shall be conclusive and shall be described in a statement sent to
the Holder)  shall  determine  the  allocation  of the adjusted  Exercise  Price
between or among  shares of such classes of capital  stock.  In the event of any
subsequent  adjustments  to the Exercise  Price  pursuant to this Section,  such
adjustments  shall be made  separately  to the portion of the Exercise  Price so
allocated to each of such classes of capital stock. The foregoing  provisions of
this   subsection   (b)  similarly   apply  to   successive   reclassifications,
consolidations, mergers, sales, leases or conveyances.

     (c) Whenever any adjustment of an Exercise Price becomes effective pursuant
to the terms of this Section, the number of Shares purchasable upon the exercise
of this Warrant  shall be  simultaneously  adjusted to the number  determined by
dividing (i) the product of the number of Shares  purchasable  upon the exercise
of this Warrant prior to such adjustment  multiplied by the applicable  Exercise
Price in effect prior to such  adjustment by (ii) the applicable  Exercise Price
in effect after such adjustment.

                                       -3-

<PAGE>

                                                          Warrant No. 98 SJS-


     (d) In any case in which this  Section  shall  require  that an  adjustment
shall become effective immediately after a record date for an event, the Company
may defer  until the actual  occurrence  of such event (i) issuing to the Holder
after such record date and before the  occurrence  of such event the  additional
Shares  issuable  upon any exercise of this Warrant by reason of the  adjustment
required  by such event over and above the Shares  issuable  upon such  exercise
before  giving  effect to such  adjustment  and (ii)  paying to such  Holder any
amount of cash in lieu of a fractional Share, provided the Company shall deliver
to such holder a due bill or other appropriate  instrument  evidencing the right
of such  Holder  to  receive  such  additional  Shares  or such  cash  upon  the
occurrence of the event requiring such adjustment.

         (e) Subject to the  provisions of subsection  (d) of this Section,  the
form of Warrant need not be changed  because of any  adjustment  in the Exercise
Price,  the number of Shares  purchasable  upon the exercise of this Warrant and
Warrants issued after any such adjustment may state the same Exercise Price, the
same number of Warrants and the same number of Shares  purchasable upon exercise
of this  Warrant as are stated in this  Warrant  as if such  adjustment  had not
occurred.  However,  the Company may at any time in its sole  discretion  (which
shall be  conclusive)  make any change in the form of  Warrant  that it may deem
appropriate and that does not affect the substance thereof,  and any Warrant may
be in the form as so changed.

     4. Notice to Holders. If, prior to the expiration of this Warrant either by
its terms or by its exercise in full, any of the following shall occur:

          (i) the  Company  shall  declare a  dividend  or  authorize  any other
     distribution on its Common Stock; or

          (ii) the Company shall  authorize the granting to the  shareholders of
     its Common Stock of rights to subscribe  for or purchase any  securities or
     any other similar rights; or

          (iii) any  reclassification,  reorganization  or similar change of the
     Common  Stock,  or any  consolidation  or merger to which the  Company is a
     party, or the sale, lease, or exchange of any signification  portion of the
     assets of the Company; or

          (iv) the voluntary or involuntary dissolution,  liquidation or winding
     up of the Company; or

          (v) any  purchase,  retirement  or  redemption  by the  Company of its
     Common Stock;

then,  and in any such case,  the Company shall deliver to the Holder or Holders
written  notice thereof at least 30 days prior to the earliest  applicable  date
specified below with respect to which notice is to be given,  which notice shall
state the following:

          (i) the date on which a record is to be taken for the  purpose of such
     dividend,  distribution or rights,  or, if a record is not to be taken, the
     date as of which the  shareholders of Common Stock of record to be entitled
     to such dividend, distribution or rights are to be determined;

                                       -4-

<PAGE>

                                                          Warrant No. 98 SJS-


          (ii)  the  date  on  which  such   reclassification,   reorganization,
     consolidation, merger, sale, transfer, dissolution, liquidation, winding up
     or purchase,  retirement or redemption is expected to become effective, and
     the date, if any, as of which the Company's shareholders of Common Stock of
     record shall be entitled to exchange  their Common Stock for  securities or
     other  property  deliverable  upon such  reclassification,  reorganization,
     consolidation,  merger, sale, transfer, dissolution,  liquidation,  winding
     up, purchase, retirement or redemption; and

          (iii) if any matters referred to in the foregoing clauses (i) and (ii)
     are to be voted upon by shareholders of Common Stock,  the date as of which
     those shareholders to be entitled to vote are to be determined.

     5.  Officer's  Certificate.  Whenever the Exercise  Price or the  aggregate
number of Shares  purchasable  pursuant  to this  Warrant  shall be  adjusted as
required by the  provisions of Section 3 above,  the Company shall promptly file
with its Secretary or an Assistant  Secretary at its principal office,  and with
its stock  transfer  agent,  if any, an  officers'  certificate  executed by the
Company's  President  and  Secretary  or  Assistant  Secretary,  describing  the
adjustment and setting forth,  in reasonable  detail,  the facts  requiring such
adjustment  and the basis for an  calculation  of such  adjustment in accordance
with the provisions of this Warrant.  Each such officers'  certificate  shall be
made  available to the Holder or Holders of this Warrant for  inspection  at all
reasonable  times, and the Company,  after each such adjustment,  shall promptly
deliver a copy of the officers'  certificate  relating to that adjustment to the
Holder or Holders of this Warrant. The officers'  certificate  described in this
Section  5  shall  be  deemed  to be  conclusive  as to the  correctness  of the
adjustment reflected therein if, and only if, no Holder of this Warrant delivers
written notice to the Company of an objection to the  adjustment  within 30 days
after the  officers'  certificate  is delivered to the Holder or Holders of this
Warrant.  The Company will make its books and records  available for  inspection
and  copying  during  normal  business  hours by the  Holder  so as to  permit a
determination  as to the correctness of the adjustment.  If written notice of an
objection  is  delivered  by a Holder  to the  Company  and the  parties  cannot
reconcile  the dispute,  the Holder and the Company  shall submit the dispute to
arbitration  pursuant to the provisions of Section 15 below.  Failure to prepare
or provide  the  officers'  certificate  shall not modify  the  parties'  rights
hereunder.

     6. Reservation of Shares. The Company hereby agrees that at all times prior
to the  expiration or exercise of this Warrant in full, it will have  authorized
and will reserve and keep available for issuance and delivery to the Holder that
number of shares of its Common Stock that may be required  from time to time for
issuance and delivery upon the exercise of the then unexercised  portion of this
Warrant and all other similar Warrants then outstanding and unexercised.

     7. Registration Under the Securities Act of 1933.

     (a)  The  Company  will  register  for  resale  the  Shares  in  the  first
registration statement filed after April 1, 1998, by the Company with the United
States  Securities  and Exchange  Commission  pursuant to the  Securities Act of
1933,  as amended  (the  "Act").  The Company  agrees to use its best efforts to
cause this registration to become effective as promptly as practicable.

                                       -5-

<PAGE>

                                                          Warrant No. 98 SJS-

     The Company shall comply with the  requirements  of this subsection (a) and
the related  requirements  of  subsection  (d) at its own expense.  That expense
shall include, but not be limited to, legal, accounting,  consulting,  printing,
federal and state filing fees,  NASD fees,  out-of-pocket  expenses  incurred by
counsel,  accountants and consultants retained by the Company, and miscellaneous
expenses  directly  related  to the  registration  statement  and the  offering.
However,  this  expense  shall  not  include  the  portion  of any  underwriting
commissions, transfer taxes and the underwriter's accountable and nonaccountable
expense  allowances  attributable  to the offer and sale of the  Shares,  all of
which  expenses  shall be borne by the Holder or Holders of this Warrant and the
holders of the Shares registered or qualified.

     (b)  The  Company   shall   include  in  the   registration   statement  or
qualification,   and  the  prospectus  included  therein,  all  information  and
materials  necessary  or advisable  to comply with the  applicable  statutes and
regulations so as to permit the public sale of the Shares.

     (c) As to each registration statement,  the Company's obligations contained
in this Section 7 shall be  conditioned  upon a timely receipt by the Company in
writing of the following:

          (i)  Information as to the terms of the  contemplated  public offering
     furnished by and on behalf of each Holder or shareholder  intending to make
     a public distribution of Shares; and

          (ii) Such other information as the Company may reasonably require from
     such  Holders or  shareholders,  or any  underwriter  for any of them,  for
     inclusion in the registration statement.

     (d) The Company also shall do the following:

          (i) Supply to the Holder or Holders a  reasonable  number of copies of
     the  preliminary,  final or other  prospectus  or  offering  circular,  all
     prepared in conformity  with the  requirements of the Act and the rules and
     regulations promulgated thereunder,  and such other documents as the Holder
     or Holders shall reasonably request;

          (ii) Cooperate with respect to (A) all necessary or advisable  actions
     relating to the  preparation and the filing of the  registration  statement
     and all amendments thereto,  arising form the provisions of this Section 7,
     (B) all reasonable efforts to establish an exemption from the provisions of
     the  Act or any  other  federal  or  state  securities  statutes,  (C)  all
     necessary or advisable  actions to register or qualify the public  offering
     at issue pursuant to federal  securities  statutes and the state "blue sky"
     securities   statutes  of  each   jurisdiction   (up  to  a  maximum  of  2
     jurisdictions) that the Holder or Holders shall reasonably request, and (D)
     all other necessary or advisable actions to enable the Holder or holders of
     the Warrant and Shares to complete the  contemplated  disposition  of their
     Shares in each reasonably requested jurisdiction;

          (iii) Keep all registration statements or offering statements to which
     this Section 7 applies, and all amendments thereto, effective under the Act
     for a period of at least nine months after their initial effective date and
     cooperate  with respect to all necessary or advisable  action to permit the
     completion  of the  public  sale or  other  disposition  of the  securities
     subject to a registration statement or offering statement; and

                                       -6-

<PAGE>

                                                           Warrant No. 98 SJS-


          (iv)  Indemnify and hold harmless each Holder,  each holder of Shares,
     and each underwriter  within the meaning of the Act for each such Holder or
     shareholder, from and against all losses, claims, damages, and liabilities,
     including,  but not limited to, any and all expenses reasonably incurred in
     investigating,  preparing, defending or settling any claim, arising from or
     relating to (A) any untrue or alleged  untrue  statement of a material fact
     contained  in this  Section  7  applies,  or (B) any  omission  or  alleged
     omission  to  state  a  material  fact  necessary  to make  the  statements
     contained in a registration  statement or offering  statement to which this
     Section  7   applies   not   misleading;   provided,   however,   that  the
     indemnification  continued  in this  provision  (iv) shall not apply if the
     untrue statement or omission, or alleged untrue statement or omission,  was
     the  result of  information  furnished  in  writing  to the  Company by the
     Holder,  shareholder or underwriter seeking  indemnification  expressly for
     use in the  registration  statement or offering  statement at issue. To the
     extent that the  indemnification  contained in this provision applies,  the
     Company also shall  indemnify and hold  harmless  each  officer,  director,
     employee, controlling person or agent of an indemnified Holder, shareholder
     or underwriter.

     (e) The Company's obligations described in this Section 7 shall continue in
full force and effect  regardless of the exercise,  surrender,  cancellation  or
expiration of this Warrant.

     8. Transfer to Comply With the Securities Act of 1933.

     (a) This Warrant,  the Shares,  and all other securities issued or issuable
upon exercise of this Warrant, may not be offered,  sold or transferred in whole
or in part,  except in compliance  with the  Securities  Act of 1933, as amended
("the Act"),  and except in  compliance  with all  applicable  state  securities
statutes.

     (b) The Company may cause the following  legend,  or its equivalent,  to be
set forth on each  certificate  representing  the Shares,  or any other security
issued or issuable upon exercise of this Warrant, not theretofore distributed to
the public or sold to  underwriters,  as defined by the Act, for distribution to
the public pursuant to Section 7 above:

     "The shares  represented by this  Certificate have not been registered
     under the  Securities  Act of 1933  (the  'Act')  and are  'restricted
     securities'  as that term is  defined  in Rule 144 under the Act.  The
     shares  may not be offered  for sale,  sold or  otherwise  transferred
     except pursuant to an effective  registration  statement under the Act
     or pursuant  to an  exemption  from  registration  under the Act,  the
     availability of which is to be established to the  satisfaction of the
     Company."

     9. Fractional Shares. No fractional Shares or scrip representing fractional
shares  shall be issued upon the  exercise  of all or any part of this  Warrant.
With  respect to any  fraction of a Share  called for upon any  exercise of this
Warrant,  the  Company  shall pay to the Holder an amount in money equal to that
fraction  multiplied  by the current  market  value of that  Share.  The current
market value shall be determined as follows:

                                       -7-

<PAGE>

                                                           Warrant No. 98 SJS-

          (i) If the  Shares are listed on a  national  securities  exchange  or
     admitted to unlisted  trading  privileges  on such an exchange or listed on
     the National  Association  of  Securities  Dealers,  Inc.  National  Market
     System,  the  current  value shall be the last  reported  sale price of the
     Shares on such  exchange  or system on the last  business  day prior to the
     date of the applicable exercise of this Warrant or, if no such sale is made
     on such day, the average of the highest closing bid and lowest asking price
     for such day on such exchange or system; or

          (ii) If the Shares are not so listed or admitted  to unlisted  trading
     privileges,  the current market value shall be determined by the average of
     the last  reported  highest  bid and  lowest  asked  prices  quoted  on the
     National  Association of Securities  Dealers,  Inc.,  Automated  Quotations
     System or, if not so quoted, then by the National Quotation Bureau, Inc. on
     the last business day prior to the day of the  applicable  exercise of this
     Warrant; or

          (iii) If the Shares are not so listed or admitted to unlisted  trading
     privileges  and bid and asked prices are not reported,  the current  market
     value shall be  determined in such  reasonable  manner as may be prescribed
     from time to time by the Board of Directors of the Company,  subject to the
     objection and arbitration procedure as described in Section 5 above.

     10. Rights of the Holder. The Holder shall not be entitled to any rights as
a shareholder in the Company by reason of this Warrant, either at law or equity,
except as specifically provided by herein. The Company covenants,  however, that
for so long as this Warrant is at least partially  unexercised,  it will furnish
any  Holder of this  Warrant  with  copies  of all  reports  and  communications
furnished to the shareholders of the Company.

     11. Charges Due Upon  Exercise.  The Company shall pay any and all issue or
transfer taxes, including,  but not limited to, all federal or state taxes, that
may be payable  with  respect to the  transfer  of this  Warrant or the issue or
delivery of Shares upon the exercise of this Warrant.

     12. Shares to be Fully Paid. The Company covenants that all Shares that may
be issued and  delivered  to a Holder of this  Warrant upon the exercise of this
Warrant will,  upon such  delivery,  be validly and duly issued,  fully paid and
nonassessable.

     13. Notices. All notices,  certificates,  requests,  or other similar items
provided  for in this  Warrant  shall be in  writing  and  shall  be  personally
delivered or deposited in the United States mail, postage prepaid,  addressed to
the  respective  party as indicated  in the  portions of this Warrant  preceding
Section 1. All notices shall be deemed to be delivered upon personal delivery or
upon the  expiration of 3 business days  following  deposit in the United States
mail,  postage  prepaid.  The  addresses  of the  parties  may be  changed,  and
addresses of other  Holders and holders of Shares may be  specified,  by written
notice  delivered  pursuant to this Section 13. The Company's  principal  office
shall be deemed to be the  address  provided  pursuant  to this  Section for the
delivery of notices to the Company.

     14.  Applicable  Law.  This Warrant  shall be governed by and  construed in
accordance  with the laws of the  state  of  Colorado,  and  courts  located  in
Colorado shall have exclusive jurisdiction over all disputes arising hereunder.



                                       -8-

<PAGE>

                                                          Warrant No. 98 SJS-

     15. Arbitration. The Company and the Holder, and by receipt of this Warrant
or any Shares, all subsequent Holders or holders of Shares,  agree to submit all
controversies,  claims,  disputes and matters of difference with respect to this
Warrant,  including,  without limitation,  the application of this Section 15 to
arbitration in Grand Junction, Colorado, according to the rules and practices of
the  American  Arbitration  Association  from time to time in  force;  provided,
however,  that  if  such  rules  and  practices  conflict  with  the  applicable
procedures of Colorado courts of general jurisdiction or any other provisions of
Colorado law then in force,  those Colorado  rules and provisions  shall govern.
This agreement to arbitrate shall be specifically  enforceable.  Arbitration may
proceed in the absence of any party if notice of the  proceeding  has been given
to that  party.  The parties  agree to abide by all awards  rendered in any such
proceeding. These awards shall be final and binding on all parties to the extent
and in the manner provided by the rules of civil procedure  enacted in Colorado.
All awards may be filed, as a basis of judgment and of the issuance of execution
for its  collection,  with the clerk of one or more  courts,  state or  federal,
having jurisdiction over either the party against whom that award is rendered or
its  property.  No party shall be  considered  in default  hereunder  during the
pendency of arbitration proceedings relating to that default.

     16. Miscellaneous Provisions.

     (a) Subject to the terms and  conditions  contained  herein,  this  Warrant
shall be  binding  on the  company  and its  successors  and shall  inure to the
benefit of the original  Holder,  its  successors and assigns and all holders of
Shares.

     (b) If the Company fails to perform any of its  obligations  hereunder,  it
shall be liable to the holder for all damages, costs and expenses resulting from
the failure,  including,  but not limited to, all reasonable attorneys' fees and
disbursements.

     (c) This Warrant  cannot be changed or  terminated  or any  performance  or
condition waived in whole or in part except by an agreement in writing signed by
the party  against  whom  enforcement  of the change,  termination  or waiver is
sought.

     (d) If any provision of this Warrant  shall be held to be invalid,  illegal
or  unenforceable,  such  provision  shall be  severed,  enforced  to the extent
possible,  or  modified  in  such a way  as to  make  it  enforceable,  and  the
invalidity,  illegality  or  unenforceability  shall not affect the remainder of
this Warrant.

     (e) The Company  agrees to execute  such further  agreements,  conveyances,
certificates and other documents as may be reasonably requested by the Holder to
effectuate the intent and provisions of this Warrant.



                                       -9-

<PAGE>

                                                          Warrant No. 98 SJS-

     (f) Paragraph  headings used in this Warrant are for  convenience  only and
shall  not be  taken  or  construed  to  define  or  limit  any of the  terms or
provisions of this Warrant.  Unless  otherwise  provided,  or unless the context
shall  otherwise  require,  the use of the singular shall include the plural and
the use of any gender shall include all genders.

Date: April 1, 1998

PEASE OIL AND GAS COMPANY                    WARRANT HOLDER



By ---------------------------------         -----------------------------------
   Willard H. Pease, Jr., President

ATTEST:


- ------------------------------------
Patrick J. Duncan, Secretary










                                      -10-

<PAGE>

                                                           Warrant No. 98 SJS-

                                    EXHIBIT A
                               NOTICE OF EXERCISE

(To be executed by a Holder  desiring to exercise  the right to purchase  Shares
 pursuant to a Warrant.)

The undersigned Holder of a Warrant hereby:

     (a) Irrevocably  elects to exercise the Warrant to the extent of purchasing
              Shares;
- -------------
     (b) Makes payment in full of the aggregate  Exercise Price for those Shares
in the amount of  $------------------  by the delivery of  certified  funds or a
bank cashier's check in the amount of $--------------------;

     (c) Requests  that a  certificate  for such Shares be issued in the name of
the  undersigned,  or, if the name or address of some other  person is specified
below, in the name of such other person:

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

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

                           --------------------------------------------
                             (Name and  address  of person  other than
                              the undersigned in whose name Shares are
                              to be registered.

     (d)  Requests,  if the  number of Shares  purchased  are not all the Shares
purchasable  pursuant  to the  unexercised  portion of the  Warrant,  that a new
Warrant of like  tenor for the  remaining  Shares  purchasable  pursuant  to the
Warrant be issued and delivered to the undersigned at the address stated below.

Dated:
      ------------------------------   ----------------------------------------
                                       Signature
                                       (This signature must conform in all
                                       respects to the Name of the Holder
                                       as specified on the face of the Warrant.)

- ------------------------------------   ----------------------------------------
Social Security Number                 Printed Name
or Employer ID Number
                                       Address:
                                                -------------------------------

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

                                      -11-

<PAGE>

                                                          Warrant No. 98 SJS-

                                    EXHIBIT B
                                 ASSIGNMENT FORM

     FOR VALUE RECEIVED,  the  undersigned,                                    ,
hereby sells, assigns and transfers unto:  ------------------------------------

Name: -------------------------------------------------
         (Please type or print in block letters)

Address: 
         ----------------------------------------------

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

the right to purchase  ____________________  Shares of Pease Oil and Gas Company
(the "Company")  pursuant to the terms and conditions of the Warrant held by the
undersigned.  The undersigned  hereby  authorizes and directs the Company (i) to
issue and deliver to the above-named assignee at the above address a new Warrant
pursuant to which the rights to purchase  being  assigned may be exercised,  and
(ii)  if  there  are  rights  to  purchase  Shares  remaining  pursuant  to  the
undersigned's  Warrant after the assignment  contemplated  herein,  to issue and
deliver to the undersigned at the address stated below a new Warrant  evidencing
the right to purchase the number of Shares remaining after issuance and delivery
of the  Warrant  to the  above-named  assignee.  Except for the number of Shares
purchasable,  the new  Warrant to be issued and  delivered  by the Company is to
contain the same terms and conditions as the undersigned's  Warrant. To complete
the assignment  contemplated  by this Assignment  Form, the  undersigned  hereby
irrevocably  constitutes  and  appoints   ____________________________   as  the
undersigned's attorney-in-fact to transfer the Warrant and the rights thereunder
on the books of the Company with full power of substitution for these purposes.

Dated:
      ------------------------------   ----------------------------------------
                                       Signature
                                       (This signature must conform in all
                                       respects to the Name of the Holder
                                       as specified on the face of the Warrant.)

- ------------------------------------   ----------------------------------------
Social Security Number                 Printed Name
or Employer ID Number
                                       Address:
                                                -------------------------------

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


                                      -12-



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