PRESIDIO OIL CO, 10-K405, 1995-03-29

PRESIDIO OIL CO
10-K405, 1995-03-29
CRUDE PETROLEUM & NATURAL GAS

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<PAGE> 1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1994

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________

COMMISSION FILE NUMBER 1-8241

PRESIDIO OIL COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE 95-3049484
(State of Incorporation) (I.R.S. Employer Identification No.)

5613 DTC PARKWAY, SUITE 750
ENGLEWOOD, COLORADO 80111-3065
(Address of principal executive offices) (Zip Code)

(303) 773-0100
(Registrant's telephone number, including area code)

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

Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------

CLASS A COMMON STOCK, $.10 PAR VALUE PER SHARE AMERICAN STOCK EXCHANGE
CLASS B COMMON STOCK, $.10 PAR VALUE PER SHARE AMERICAN STOCK EXCHANGE
9% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2015 AMERICAN STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X No
----- -----

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1995 was $4,102,000.

The number of shares outstanding of each of the registrant's classes of common
stock as of March 15, 1995 was as follows:

Class Number Outstanding
----- ------------------

CLASS A COMMON STOCK, $.10 PAR VALUE PER SHARE 25,318,085
CLASS B COMMON STOCK, $.10 PAR VALUE PER SHARE 3,216,585

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Form (Items 10, 11, 12 and 13) is
incorporated by reference from the registrant's Proxy Statement to be filed
pursuant to Regulation 14A with respect to the registrant's Annual Meeting to
be held on or about June 20, 1995.

1
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
EXPLORATION AND PRODUCTION OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
EXPLORATION AND PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Estimated Proved Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Productive Wells and Developed Acreage . . . . . . . . . . . . . . . . . . . . . . . . . 8
Production, Unit Prices and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Undeveloped Acreage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Drilling Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
OFFICE LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . 10

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . 11
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 21
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1994 and 1993 . . . . . . . . . . . . . . . 22
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . 48
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . 48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 48

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 49
LIST OF DOCUMENTS FILED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>

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PART I

ITEM 1. BUSINESS.

GENERAL

Presidio Oil Company is an independent oil and gas company organized under the
laws of the State of Delaware in April 1976 to continue the business of
Presidio Exploration, Inc. (organized in 1968) of engaging, primarily through
subsidiaries, in onshore oil and gas exploration, development and production in
selected regions in the continental United States. The Company maintains its
corporate offices at 5613 DTC Parkway, Suite 750, Englewood, Colorado 80111-
3065. Its telephone number at that location is (303) 773-0100. Unless the
context otherwise requires, all references in this Annual Report on Form 10-K
(this "Report") to "Presidio" or the "Company" are to Presidio Oil Company and
its consolidated subsidiaries.

The Company conducts most of its exploration, development and production
operations in two regional areas: (i) the Rocky Mountains, with operations
primarily in Wyoming and North Dakota, and (ii) the Mid-Continent, with
operations primarily in western Oklahoma and south Louisiana. Within these
regional areas, the Company's operations are concentrated in five core areas:
the Green River Basin in Wyoming; the Powder River Basin in Wyoming; the
Williston Basin in North Dakota; the Anadarko Basin in western Oklahoma; and
south Louisiana.

During 1994 and the first three months of 1995, the financial condition and
operating cash flows of the Company were materially and adversely affected by a
significant industry-wide decline in the price of natural gas.

Although the Company was successful in 1994 in replacing both the oil and gas
reserves produced and those divested by it during such year and increasing its
gas production compared to 1993, a decline in oil production in 1994 and the
severe decline in gas prices during the second half of 1994 more than offset
such positive operating results. The Company's revenues and operating cash
flows thus declined significantly in 1994 and early 1995, creating substantial
uncertainties regarding the Company's ability to continue as a going concern in
its current financial structure. Without a significant increase in hydrocarbon
prices in the near future, the Company believes that it will be unable to
continue to service all of its interest payment obligations during the
remainder of 1995 and may have difficulty meeting other future financial
obligations as well.

The Company is actively considering various alternatives intended to improve
its financial condition and increase its operating cash flows, and has initiated
discussions with respect to a restructuring of its 11.5% Senior Secured Notes
Due 2000 (the "Senior Secured Notes"), Senior Gas Indexed Notes Due 2002 (the
"Senior GINs") and 9% Convertible Subordinated Debentures Due 2015 (the "9%
Debentures") with a number of the holders of such securities. The Company has
retained financial advisors to assist in such efforts. No assurance, however,
can be given that the Company will be able to successfully conclude any of the
arrangements being considered. See Items 7 and 8 of this Report for additional
information as to the Company's operating losses, working capital deficiency
and stockholders' deficit.

In 1994 Presidio recorded substantial success in adding 4.2 million barrels
("MMBbls") of oil and 66.2 billion cubic feet ("BCF") of gas or 15.2 million
equivalent barrels of oil to its proved hydrocarbon reserves, compared to
production of 1.1 MMBbls of oil and 17.2 BCF of gas and sales of lower-margin
and non-core oil and gas properties consisting of 2.8 MMBbls of oil and 28 BCF
of gas, and thereby replacing 133% of its production and property sales at a
cost per equivalent barrel of $2.27. In terms of natural gas equivalents, the
Company added 91 billion equivalent cubic feet of gas at a finding cost of $.38
per equivalent thousand cubic feet of gas.

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Most of this increase in proved reserves resulted from the Company's successful
field extension and other developmental operations, with the remainder being
principally attributable to the acquisition of additional interests in oil and
gas wells operated by the Company (see Note 13 to the Company's Consolidated
Financial Statements contained in Item 8 of this Report for detailed
information concerning the Company's oil and gas reserves, including certain
producing property sales completed subsequent to yearend 1994). Moreover,
notwithstanding the divestiture of 28 BCF of gas and the production of 17.2 BCF
of gas, the Company's proved developed gas reserves increased from 164.5 BCF to
176.2 BCF during 1994.

Due to the current uncertainty as to its financial condition and the future
trends in oil and gas pricing, the Company has determined to limit its capital
expenditures, subject to the availability of funds (as to which no assurance
can be given), during the remainder of 1995 to those that are required to
maintain its producing oil and gas properties as well as certain essential
development and other drilling operations.

EXPLORATION AND PRODUCTION OPERATIONS

The exploration and production activities of the Company consist of the
geological and geophysical evaluation of prospective oil and gas properties,
the acquisition of oil and gas leases or other interests in exploratory
prospects, the drilling of exploratory test wells, and the development and
operation of properties for the production and sale of oil and gas. The
Company's drilling activities include participation in a substantial amount of
low-risk development drilling operations, as well as in selected high-risk,
high-potential exploration prospects. The Company generates most of its
exploration prospects, particularly in the Rocky Mountains, through its
in-house geological staff. However, exploration and development drilling
prospects may be identified by third parties, including independent petroleum
consultants and other oil and gas companies through joint interest programs,
particularly in the Mid-Continent. All of the drilling activities of the
Company are performed by independent drilling contractors. The Company's two
principal regional operating areas, and the operations conducted therein, are
briefly described below. The reserves outside of such two regional operating
areas totaled 27.3 BCF of gas, of which 1.2 BCF of gas was proved developed
reserves.

ROCKY MOUNTAINS

At December 31, 1994, the Company had 452 gross (178 net) producing wells,
106,300 gross (43,000 net) developed acres and 667,100 gross (322,400 net)
undeveloped acres in this area, primarily located in (i) the Moxa Arch and Red
Desert areas of the Green River Basin in Wyoming, (ii) the Powder River Basin
in Wyoming and (iii) the Williston Basin in North Dakota. The Company operates
343 of these gross wells. For the month ended January 31, 1995, net production
from the Rocky Mountain area averaged approximately 30.5 million cubic feet
("MMCF") of gas per day and 2.3 thousand barrels ("MBbls") of oil per day,
representing approximately 70% of the Company's average daily production for
such period. At December 31, 1994 the Rocky Mountain area had proved reserves
of 171.1 BCF of gas and 10.9 MMBbls of oil, representing approximately 58% of
the Company's total proved oil and gas reserves, of which 106.1 BCF of gas and
8 MMBbls of oil were proved developed reserves.

MID-CONTINENT

At December 31, 1994, the Company had 321 gross (94 net) producing wells,
52,100 gross (20,300 net) developed acres and 36,500 gross (13,300 net)
undeveloped acres in this area, primarily located in (i) south Louisiana and
(ii) the Anadarko Basin in western Oklahoma. The Company operates 106 of these
gross wells. For the month ended January 31, 1995, net production from the
Mid-Continent area averaged approximately 16.5 MMCF of gas per day and .4 MBbls
of oil per day, representing approximately 30% of the Company's average daily
production for such period. At December 31, 1994 the Mid-Continent area had
proved reserves of 125.6 BCF of gas and 2.4 MMBbls of oil, representing
approximately 35% of the Company's total proved oil and gas reserves, of which
68.9 BCF of gas and 1.5 MMBbls of oil were proved developed reserves.

4
<PAGE> 5
EMPLOYEES

As of March 15, 1995, the Company had 133 employees of which 33 were field
employees. The Company's employment level will change over time as required by
its operations. In addition, the Company intends to engage the services of
independent geological, engineering, land, accounting and other consultants
from time to time to assist with its operations.

MARKETS

The Company's gas production has historically been sold under contracts with
marketing and transportation companies and with end-users. In past years a
surplus of gas has been available to the marketplace in certain areas of the
United States, resulting in industry-wide price weakness. During 1993 and
early 1994 gas prices strengthened, and the Company benefitted from such
improved prices since its contracts with third-party purchasers provide for
short-term and/or market sensitive pricing for the majority of its gas
production. However, since mid-1994 gas prices have declined significantly and
the outlook for gas prices during the remainder of 1995 is uncertain, with
there being no current indication that 1995 prices will substantially
strengthen in the near term. See Item 7 of this Report for additional
information as to the Company's markets and prices.

The Company markets most of its oil production with independent third-party
resellers and refiners at market ("posted") prices. These posted prices
generally reflect the prices determined by the trading of West Texas
Intermediate ("WTI") oil futures contracts on the New York Mercantile Exchange
("NYMEX"), with adjustments for the geographical area in which the producing
properties are located and for the quality of the oil produced. NYMEX prices
continue to be influenced by worldwide production levels and a variety of
political and economic events over which the Company has no control.

COMPETITION

Competition in the oil and gas industry is intense. Many companies and
individuals compete to acquire prospective oil and gas leases and other mineral
interests, as well as to obtain exploration and development funding. Many of
these competitors are large, well-established companies with substantially
larger operating staffs and greater capital resources than the Company, and
they have been engaged in the energy business for a much longer period than the
Company. The Company may be at a competitive disadvantage with these larger
entities.

There is also competition in the marketing of gas, insofar as numerous
companies are active gas marketers, including marketing affiliates of
interstate pipelines, major integrated oil companies, Canadian gas producers
and pipelines, and local and national gas gatherers, brokers and marketers of
widely varying sizes, financial resources and experience. Certain competitors
have capital resources many times greater than the Company's, and they control
substantially greater supplies of gas. Local utilities and distributors of gas
(some of which are customers of the Company) are, in some cases, engaged
directly and through affiliates in marketing activities that compete with those
of the Company.

REGULATION

The Company's oil and gas operations are subject to various federal, state and
local governmental regulations. Matters subject to regulation include
discharge permits for drilling operations, drilling bonds, reports concerning
operations, the spacing of wells, unitization and pooling of properties and
taxation. 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.

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Oil and gas operations are also subject to extensive federal, state and local
laws regulating the discharge of materials into the environment or otherwise
relating to the protection of human health and the environment. These
regulations are often difficult and costly to comply with and carry substantial
penalties for failure to comply. In addition, these regulations may restrict
the rate of oil and gas production below the rate that would otherwise exist.
The regulatory burden on the oil and gas industry increases its cost of doing
business and, consequently, affects its profitability. To date, expenditures
by the Company related to compliance with these laws have not been significant.
The Company believes, however, that environmental regulations, including
regulations with respect to the handling and disposal of oil and gas
exploration and production wastes and oil field wastes contaminated by
naturally occurring radioactive materials, and the imposition of financial
responsibility requirements with respect to environmental cleanup costs (e.g.
regulations requiring environmental liability insurance or other types of
financial assurance) may result in additional costs to the Company in the
future. For example, amendments to the Resource Conservation and Recovery Act
to regulate further the handling, transportation, storage and disposal of oil
and gas exploration and production wastes have been considered by Congress and
may be adopted. Also, in August 1993 the U.S. Minerals Management Service
published an advance notice of its intent to adopt regulations that may require
owners of oil and gas facilities that could be the source of an oil spill into
waters of the United States to provide $150 million in financial assurances to
cover costs that might be incurred by governmental authorities in responding to
and cleaning up an oil spill. Furthermore, at least two courts have recently
ruled that certain wastes associated with the production of crude oil may be
classified as "hazardous substances" under the Comprehensive Environmental
Response, Compensation, and Liability Act (commonly called the "Superfund") and
thus such wastes may be subject to the cleanup and liability standards
established under the federal Superfund program. Such legislation, regulations
and court decisions, if enacted, adopted or upheld, could have a significant
adverse impact on the Company's operating costs.

ITEM 2. PROPERTIES.

EXPLORATION AND PRODUCTION

The Company's operations are concentrated in five core areas where the Company
conducts most of its exploration and development drilling and acquisition
activity: the Green River Basin in Wyoming; the Powder River Basin in Wyoming;
the Williston Basin in North Dakota; the Anadarko Basin in western Oklahoma;
and south Louisiana. None of the Company's oil and gas production is subject
to long-term supply or similar agreements with foreign governments or
authorities.

OPERATIONS

At December 31, 1994, the Company operated approximately 77% of the net
producing wells in which it owned an interest. The operator of a well
supervises production, maintains production records, employs field personnel
and performs other functions on behalf of all owners of such operated wells.
See "Business - Exploration and Production Operations" contained in Item 1 of
this Report for information concerning the Company's operating areas.

The Company's oil and gas operations are subject to all of the operating
hazards and risks normally incident to drilling for and producing oil and gas,
such as fires, explosions, encountering formations with abnormal pressures,
blowouts, cratering and oil spills, any of which can result in loss of
hydrocarbons, environmental pollution, personal injury claims and loss of life.
Such hazards can also severely damage or destroy equipment, sub-surface
structures, surrounding areas or property of others. As protection against
such operating hazards, the Company maintains insurance coverage, including
operator's extra expense, physical damage on certain risks, employer's
liability, comprehensive general liability and workers' compensation. The
Company believes that such insurance is adequate and customary for companies of
a similar size engaged in operations similar to those of the Company, but
losses can occur from uninsurable risks or in amounts in excess of existing

6
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insurance coverage. The Company does not carry business interruption insurance
in respect of most of its operations and the occurrence of an event that is not
fully covered by insurance could have an adverse impact upon the Company's
financial condition and results of operations.

ESTIMATED PROVED RESERVES

The following tables set forth estimates of proved oil and gas reserves and the
present value of estimated future net revenues attributable to such reserves,
based on the assumptions that oil and gas prices will remain fixed at yearend
levels, with escalation up to prices which prevail under fixed and determinable
escalation provisions of existing oil and gas contracts, and that operating
costs will remain fixed at yearend levels. The present value of the estimated
future net revenues from proved oil and gas reserves at the dates indicated
below was computed by discounting the aggregate estimated future net revenues
by 10% per year. The present value does not represent the fair market value of
such reserves. This information is based primarily upon reserve reports
prepared by the Company and reviewed by Huddleston & Co., Inc., Houston, Texas,
an independent petroleum and geological engineering firm.

Proved reserves are the estimated quantities of oil, gas and natural gas
liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under
existing economic and operating conditions. Proved developed reserves are
proved reserves that can be expected to be recovered through existing wells
with existing equipment and operating methods. The estimation of reserves
requires substantial judgment on the part of petroleum engineers resulting in
imprecise determinations, particularly with respect to new discoveries. The
accuracy of any reserve estimate depends on the quality of available data and
engineering and geological interpretation and judgement. Results of drilling,
testing and production subsequent to the date of the estimate may result in
revisions of such estimate. Accordingly, estimates of reserves are often
materially different from the quantities of oil and gas that are ultimately
recovered and such estimates will change as future production and development
information becomes available. The reserve data represents estimates only and
should not be construed as being exact. Estimates of proved reserves at
December 31, 1994 have not been previously filed by the Company with, or
included in reports to, any federal authority or agency.

<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1994 (1)(3) 1993 (1) 1992 (1)
------------ -------- --------
<S> <C> <C> <C>
Estimated proved oil and gas reserves:
Oil and condensate (MBbls) 13,273 13,036 13,863
Gas (MMCF) 323,978 302,954 268,871
Present value of future net revenues (thousands) (2) $236,639 $294,650 $284,911
Estimated proved developed oil and gas reserves:
Oil and condensate (MBbls) 9,494 9,942 10,001
Gas (MMCF) 176,207 164,530 131,164
Present value of future net revenues (thousands) (2) $161,173 $184,055 $172,689
</TABLE>

(1) Includes proved undeveloped gas reserves of 26.1 BCF, 27.5 BCF
and 28.1 BCF at December 31, 1994, 1993 and 1992,
respectively, which are subject to a joint drilling
participation agreement as discussed in Note 11 to the
Company's Consolidated Financial Statements contained in Item
8 of this Report.
(2) Represents the present value, discounted at 10%, of the
estimated future net revenues from proved oil and gas
reserves, before a provision for future income taxes.
(3) See Notes 12 and 13 to the Company's Consolidated Financial
Statements contained in Item 8 of this Report for information
concerning oil and gas property sales completed by the Company
subsequent to yearend 1994.

See Note 13 to the Company's Consolidated Financial Statements contained in
Item 8 of this Report for an analysis of changes in proved oil and gas reserves
and changes in the present value of future net revenues.

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PRODUCTIVE WELLS AND DEVELOPED ACREAGE

The following table sets forth the Company's developed acreage and productive
wells at December 31, 1994. "Gross" refers to the total acres or wells in
which the Company has a working interest, and "Net" refers to gross acres or
wells multiplied by the percentage of working interest owned by the Company.

<TABLE>
<CAPTION>
Productive Wells (2)
------------------------------------------------------------------------
Developed Acreage(1) Oil Gas Total
----------------- ------------------- ------------------ ------------------
Gross Net Gross Net Gross Net Gross Net
------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
159,000 63,500 275 116 517 161 792 277
</TABLE>

(1) Developed acreage is acreage assignable to productive wells.
(2) Productive wells consist of producing wells and wells capable of
production, including gas wells awaiting pipeline connections or
necessary governmental certification to commence deliveries, and
oil wells awaiting connection to production facilities. Wells
which are completed in more than one producing horizon are counted
as one well. The gross wells reported above which had multiple
completions totaled 11.

PRODUCTION, UNIT PRICES AND COSTS

Information with respect to production and average unit prices and costs for
the years ended December 31, 1994, 1993 and 1992 is set forth below:

<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Production:
Oil and condensate (MBbls) 1,137 1,436 1,877
Gas (MMCF) 17,219 15,340 19,407
Average sales price:
Oil and condensate (per Barrel) $13.81 $14.55 $16.68
Gas (per MCF) (1) $ 1.45 $ 1.73 $ 1.71
Average production costs per
equivalent barrel (2)(3) $ 3.71 $ 4.10 $ 4.38
Average production costs per
equivalent MCF (2)(3) $ .62 $ .68 $ .73
</TABLE>

(1) In December 1992 the Company sold its West Virginia proved developed
properties which had received an above-market contract price for gas
sales. The Company's pro forma gas price excluding such West
Virginia properties was $1.54 for the year ended December 31, 1992.
(2) Oil and gas are converted to a common unit of measure ("equivalent
barrel" or "equivalent MCF") on the basis of six MCF of gas to one
barrel of oil.
(3) The components of production costs may vary substantially among
wells, depending on the methods of recovery employed and other
factors, but generally include production taxes, administrative
overhead, workovers, maintenance and repair, labor and utilities.

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UNDEVELOPED ACREAGE

At December 31, 1994, the Company owned 873,200 gross (424,200 net) undeveloped
acres, all of which are located in the continental United States. The table
below sets forth the states in which such acreage is located and the number of
gross and net acres in each.

<TABLE>
<CAPTION>
State Gross Acres Net Acres
----- ----------- ----------
<S> <C> <C>
Wyoming 468,900 269,700
West Virginia (1) 169,600 88,500
Montana 161,600 29,200
North Dakota 27,600 16,100
Texas 13,000 5,000
Louisiana 9,600 2,800
Oklahoma 6,900 3,400
New Mexico 2,100 1,000
Other 13,900 8,500
------- -------
TOTAL 873,200 424,200
======= =======
</TABLE>

(1) This acreage is subject to a joint drilling participation
agreement as discussed in Note 11 to the Company's
Consolidated Financial Statements contained in Item 8 of this
Report.

DRILLING ACTIVITY

During the periods indicated, the Company drilled or participated in the
drilling of the following exploratory and development wells:

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------------------
1994 1993 1992
---------------------------- -------------------------- -------------------------
Success Success Success
Gross Net Ratio Gross Net Ratio Gross Net Ratio
----- ------- ------- ----- ------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exploratory:
Productive 1 .24 11.2 3 1.57 71.0 3 1.21 45.0
Non-Productive 6 1.91 88.8 2 .64 29.0 6 1.48 55.0
-- ----- ----- -- ----- ----- -- ----- -----
7 2.15 100.0 5 2.21 100.0 9 2.69 100.0
-- ----- ----- -- ----- ----- -- ----- -----

Development:
Productive 56 15.99 92.4 51 12.66 91.7 28 11.49 82.1
Non-Productive 3 1.32 7.6 3 1.14 8.3 6 2.50 17.9
-- ----- ----- -- ----- ----- -- ----- -----
59 17.31 100.0 54 13.80 100.0 34 13.99 100.0
-- ----- ----- -- ----- ----- -- ----- -----

Total:
Productive 57 16.23 83.4 54 14.23 88.9 31 12.70 76.1
Non-Productive 9 3.23 16.6 5 1.78 11.1 12 3.98 23.9
-- ----- ----- -- ----- ----- -- ----- -----
66 19.46 100.0 59 16.01 100.0 43 16.68 100.0
== ===== ===== == ===== ===== == ===== =====
</TABLE>

The above well information excludes wells in which the Company has only an
overriding royalty interest.

At December 31, 1994, the Company was participating in the drilling or
completion of 15 gross (5.86 net) wells.

9
<PAGE> 10
OFFICE LEASES

The Company has entered into certain leases for office space in Denver and New
York City.

ITEM 3. LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Company is a
party, or to which any of its properties are subject.

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

Not applicable.

10
<PAGE> 11
PART II

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

The Company's common stock is listed for trading on the American Stock Exchange
and The International Stock Exchange, London. The following table sets forth
the high and low sales prices of the Company's common stock on the American
Stock Exchange:

<TABLE>
<CAPTION>
Class A Class B
-------------------------- --------------------
High Low High Low
------ ----- ------ -----
<S> <C> <C> <C> <C>
1993:
1st Quarter . . . . . . . . . . . . . 1 3/8 9/16 1 5/8 1 1/16
2nd Quarter . . . . . . . . . . . . . 2 1/8 15/16 2 1 15/16
3rd Quarter . . . . . . . . . . . . . 2 1/16 1 5/16 1 15/16 1 3/8
4th Quarter . . . . . . . . . . . . . 2 9/16 1 3/8 2 3/8 1 3/8

1994:
1st Quarter . . . . . . . . . . . . . 2 3/8 1 5/8 2 1/2 1 5/8
2nd Quarter . . . . . . . . . . . . . 1 15/16 1 1/4 1 7/8 1 5/8
3rd Quarter . . . . . . . . . . . . . 1 13/16 1 1/16 1 5/8 1 1/8
4th Quarter . . . . . . . . . . . . . 1 5/16 3/8 1 3/8 5/8
</TABLE>

At March 15, 1995, the Company estimates that there were approximately 995
record holders of Class A Common Stock and 500 record holders of Class B Common
Stock.

The last reported sales prices of the Company's Class A Common Stock and Class
B Common Stock on the American Stock Exchange on March 15, 1995 were $.1875 and
$.50 per share, respectively.

From July 1987 through December 1992, the Company paid a quarterly cash
dividend of $.025 per share on all outstanding shares of Class A Common Stock,
and has never paid dividends on Class B Common Stock. In January 1993 the
Company announced the elimination of Class A Common Stock dividends. The
Company's ability to pay dividends is currently subject to the provisions of
various covenants contained in the Company's revolving credit facility and
certain indentures relating to its public debt.

In addition to the factors discussed above, the determination of the amount of
any future cash dividends to be declared and paid on Class A Common Stock will
depend upon, among other things, the Company's financial condition, its cash
flow from operating activities, the level of the Company's capital and
exploration expenditures and its future business prospects.

11
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data indicates certain trends in the Company's
financial condition and results of operations. For a more complete
presentation of such trends and a discussion of items which affect the
comparability of the information reflected below, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in
Item 7 of this Report and the Company's Consolidated Financial Statements and
the Notes thereto contained in Item 8 of this Report.

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD:

Oil and gas revenues $ 40,643 $ 47,476 $ 64,442 $ 95,151 $109,276
Gross profit (loss) 8,132 12,757 1,093 (42,439) 37,366
Net earnings (loss) from
continuing operations (24,562) (18,783) (32,696) (76,112) 4,311
Net earnings (loss) attributable
to common shares (24,562) (7,233) (23,869) (74,268) 393
Net earnings (loss) from
continuing operations per share
of Class A Common Stock (.91) (.70) (1.13) (2.65) .16
Net earnings (loss) from
continuing operations per share
of Class B Common Stock (.91) (.70) (1.23) (2.75) .06
Earnings (loss) per share of
Class A Common Stock (.91) (.27) (.82) (2.58) .03
Loss per share of Class B
Common Stock (.91) (.27) (.92) (2.68) (.07)
Dividends per share of
Class A Common Stock - - .10 .10 .10

AT END OF PERIOD:

Total assets $259,572 $280,420 $276,959 $440,389 $507,828
Long-term bank debt, excluding
current installments 21,000 15,000 73,000 187,500 158,945
Senior Secured Notes 75,000 75,000 - - -
Convertible Subordinated Debentures 50,000 50,000 50,000 50,000 50,000
Gas Indexed Notes 100,000 100,000 100,000 100,000 100,000
Stockholders' equity (deficit) (20,548) 3,565 10,851 37,945 124,121
</TABLE>

The Company's historical results have been affected by a number of transactions
during the five years shown above, the most significant of which were: (i) in
December 1989 the Company completed an acquisition for approximately $157
million in cash which was financed through the issuance in February 1990 of $50
million of 9% Convertible Subordinated Debentures, 10 million shares of the
Company's Class A Common Stock at $7.50 per share and the incurrence of bank
debt; (ii) as a result of the low oil and gas prices received at certain times
during 1992 and 1991, the Company was required to reduce the carrying value of
its oil and gas properties by $15 million and $68 million, respectively, which,
in turn, reduced its stockholders' equity by an equivalent amount; (iii) in
July 1992, the Company completed the sale of Mountain Gas Resources, Inc.
("MGRI"), a subsidiary of the Company which then owned its Wyoming gas
gathering and processing business, as well as its marketing operations (all of
which have been accounted for as discontinued operations) for net cash proceeds
of $77.5 million which were used to prepay an equivalent amount of bank debt;
(iv) in December 1992, the Company completed the sale of its proved developed
reserves and associated gathering systems in West Virginia for net cash
proceeds of $32.6 million which was used to repay bank and other indebtedness
of the Company; and (v) in July 1993 the Company received $11.6 million from
the sale of the Company's remaining equity interest in MGRI (which has been
accounted for as discontinued operations).

12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto contained in Item 8 of
this Report.

LIQUIDITY AND CAPITAL RESOURCES

CURRENT FINANCIAL CONDITION AND RECENT DEVELOPMENTS

Current Financial Condition. During 1994 and the first three months of 1995,
the financial condition and operating cash flows of the Company were materially
and adversely affected by a significant industry-wide decline in the price of
natural gas.

Although the Company was successful in 1994 in replacing both the oil and gas
reserves produced and those divested by it during such year and increasing its
gas production compared to 1993, a decline in oil production in 1994 and the
severe decline in gas prices during the second half of 1994 more than offset
such positive operating results. The Company's revenues and operating cash
flows thus declined significantly in 1994 and early 1995, creating substantial
uncertainties regarding the Company's ability to continue as a going concern in
its current financial structure. Without a significant increase in hydrocarbon
prices in the near future, the Company believes that it will be unable to
service all of its interest payment obligations during the remainder of 1995
and may have difficulty meeting other future financial obligations as well.

Ability to Service Debt. Because of its current financial condition and
operating cash flow deficit, the Company believes that, absent a restructuring
of its debt, it will be unable to meet all of its interest payment obligations
on the Senior Secured Notes, the Senior GINs and on the 9% Debentures as they
become due during the remainder of 1995. In addition, substantially all of the
Company's oil and gas reserves are pledged to secure the Company's bank debt
and the Senior Secured Notes, with the result that the Company is not able to
sell such assets in order to fund the above-mentioned interest payments. See
"Long-Term Debt" and "Debt Service" below. The failure to make such payments
would constitute a Default under each of the indentures governing the Senior
Secured Notes, the Senior GINs and the 9% Debentures.

Each of these indentures provide a 30-day grace period in which the Company may
cure a Default thereunder caused by the failure to pay interest before an Event
of Default occurs. If the Company were to fail to pay any defaulted interest
during the applicable grace period, then an Event of Default under each of the
indentures would occur. If an Event of Default with respect to the Senior
Secured Notes occurs, the outstanding $75 million of Senior Secured Notes could
be declared to be immediately due and payable, and the trustee under the
indenture governing the Senior Secured Notes (the "Senior Secured Notes
Indenture") would be entitled to exercise various remedies, including
foreclosure of a mortgage on a substantial portion of the Company's oil and gas
properties. If an Event of Default with respect to the Senior GINs occurs, the
outstanding $100 million of Senior GINs could be declared immediately due and
payable. If an Event of Default occurs with respect to the 9% Debentures, the
outstanding $50 million of 9% Debentures could also be declared due and
payable.

13
<PAGE> 14
In addition, the failure to pay interest on the Senior Secured Notes, the
Senior GINs or the 9% Debentures would constitute a Default under the Company's
bank credit agreement (the "Credit Agreement") and thus the Company would be
prohibited from borrowing additional funds thereunder until such Default was
cured. An Event of Default with respect to the Senior Secured Notes, the
Senior GINs or the 9% Debentures would also cause an Event of Default under the
Credit Agreement, which could lead to the $19.7 million outstanding thereunder
at March 16, 1995 being declared immediately due and payable, and the
subsequent foreclosure of a mortgage on substantially all of the Company's oil
and gas properties not pledged to secure the Senior Secured Notes.

Collateral Value Requirement for the Senior Secured Notes. The Senior Secured
Notes are secured by a lien on certain proved oil and gas reserves (the
"Pledged Assets") pursuant to a pledged assets agency agreement (the "Pledged
Assets Agency Agreement"). The Pledged Assets Agency Agreement requires that,
as of various dates, the Security Value (as defined below) of the Pledged
Assets and the Security Value of the Pledged Assets that are proved developed
producing reserves (the "Pledged Producing Assets") must be equal to or greater
than certain specified percentages of the then outstanding amount of Senior
Secured Notes. For the purposes of this discussion, "Security Value" means the
aggregate present value (computed at a discount rate equal to 10% per annum) of
the future net revenues of proved oil and gas reserves, calculated in
accordance with the rules of the Securities and Exchange Commission.

On or before each March 31, the Company is required to calculate the Security
Values of the Pledged Assets and the Pledged Producing Assets as of the
preceding December 31. Because of the severe decline in gas prices during the
second half of 1994, the Security Values of both the Pledged Assets and the
Pledged Producing Assets as of December 31, 1994 were less than the required
percentages, resulting in deficiencies (the "Deficiencies") in respect of
Pledged Assets and Pledged Producing Assets of $4 million and $7.3 million,
respectively. The Deficiencies may be cured if (i) prior to May 31, 1995, the
Company pledges sufficient additional Pledged Assets and Pledged Producing
Assets to eliminate the Deficiencies or purchases $7.3 million of the Senior
Secured Notes or (ii) during the period April 1 - September 1, 1995, the
Security Values of the Pledged Assets and the Pledged Producing Assets increase
due to higher hydrocarbon prices or reserve volumes. The Company estimates
that an increase in such Security Values sufficient to cure the Deficiencies
would require an approximate $.50 per MCF rise in the price the Company
receives for its natural gas over the average of $1.15 per MCF the Company
received in February 1995. To the extent the Deficiencies are not so cured
prior to May 31, 1995, then the Company is required, prior to June 30, 1995, to
offer to purchase (the "Purchase Offer") at par an amount of Senior Secured
Notes sufficient to cure the remaining Deficiencies.

The Company currently anticipates that it will pledge assets with a Security
Value sufficient to cure most of the Deficiencies, and that the net amount of
Senior Secured Notes that will be subject to the Purchase Offer would be up to
approximately $2.5 million; however, a significant increase in hydrocarbon
prices during the period that the Purchase Offer is open for acceptance (July 1
- August 29, 1995), which pricing increase is not currently anticipated by the
Company, could reduce the amount of Senior Secured Notes that the Company would
be required to purchase as a result of the Purchase Offer.

If the Company were to be unable to comply with any of the requirements
described above in respect of curing the Deficiencies by the dates set forth
for such compliance, the Company would be in Default under the Senior Secured
Notes Indenture. If such a Default were to continue for more than 30 days
without being cured, an Event of Default under the Senior Secured Notes
Indenture would occur and the trustee under such indenture and the holders of
Senior Secured Notes would have the remedies described above in respect of an
Event of Default under the Senior Secured Notes Indenture. Such an Event of
Default would also result

14
<PAGE> 15
in cross-defaults under the Credit Agreement and the indentures relating to the
Senior GINs and the 9% Debentures. See "Ability to Service Debt" above.

Ability to Replace Reserves Produced and Maintain Production Levels. The
ability of the Company to maintain and/or increase its current levels of oil
and gas production and to find and develop new proved reserves of oil and gas
to replace the reserves being produced in 1995 depends on the availability of
funds for capital expenditures. Due to the Company's current financial
condition and operating cash flow deficit, the Company has limited funds
available for development and other drilling operations during 1995. See
"Capital Expenditures" below. Unless the Company is able to restructure its
debt and thus spend significant amounts on capital expenditures during the
remainder of 1995, the Company's production and volumes of proved oil and gas
reserves are likely to decline significantly during 1995. Such a decline in
production would increase the Company's operating cash flow deficit, and a
decline in reserve volumes would adversely affect the ability of the Company to
raise capital and could cause further Deficiencies under the collateral value
requirement relating to the Senior Secured Notes. See "Collateral Value
Requirement for the Senior Secured Notes" above. Oil and gas reserve volumes
are also significantly impacted by changes in the prices of oil and gas. See
"Markets and Prices" below.

LONG-TERM DEBT

At March 16, 1995, the total long-term debt of the Company was $244.7 million.
Of such amount, $19.7 million was outstanding under the Credit Agreement, a $25
million revolving credit facility with a current borrowing availability of
$21.4 million. Available borrowing capacity under the Credit Agreement was
$1.7 million at March 16, 1995. Borrowings under the Credit Agreement bear
interest at a per annum rate of either prime plus 1% or LIBOR plus 2 1/2% and
are secured by mortgages on substantially all of the Company's oil and gas
properties (the "Mortgaged Properties") other than the Pledged Assets. The
Credit Agreement requires quarterly commitment reductions of approximately $1.4
million from October 1, 1995 through July 1, 1999. In addition, the Credit
Agreement contains certain covenants and financial tests which may from time to
time restrict the Company's activities. See Note 2 to the Company's
Consolidated Financial Statements contained in Item 8 of this Report. At March
16, 1995, the estimated future minimum principal payment requirements under the
Credit Agreement were $0 in 1995, $4.3 million in 1996 and $5.6 million in each
of 1997 and 1998, and $4.2 million in 1999. The Company has initiated
discussions with respect to modifying the available borrowing capacity and
certain other provisions of the Credit Agreement in connection with the
possible restructuring of its other debt obligations.

The other long-term debt of the Company consists of $50 million of 9%
Debentures, $75 million of Senior Secured Notes, and $100 million of Senior
GINs. The Senior Secured Notes bear interest at 11.5% per annum and are
secured by a mortgage on the Pledged Assets as described above. The Senior
GINs currently bear interest at 13.3% per annum; however, such rate may
increase pursuant to a formula, based upon certain published average spot gas
prices, as set forth in Note 2 to the Company's Consolidated Financial
Statements contained in Item 8 of this Report. As discussed above, the Company
has initiated discussions with respect to restructuring the Senior Secured
Notes, Senior GINs and 9% Debentures with a number of the holders of such
securities. No assurance, however, can be given that the Company will be able
to successfully conclude any of the arrangements being considered.

15
<PAGE> 16
DEBT SERVICE

Assuming (i) interest on the Senior GINs and the prime rate remain at 13.3% per
annum and 9% per annum, respectively (their levels at March 16, 1995), and (ii)
borrowings outstanding under the Credit Agreement remain at $19.7 million (the
level at March 16, 1995), the Company would have required principal payments of
$0, $4.3 million and $5.6 million, respectively, during 1995, 1996 and 1997 and
interest payments of approximately $28.4 million, $28.2 million and $27.6
million, during the same three years. Based on these assumptions, during the
period April 1 - December 31, 1995, the Company's monthly interest payments
under the Credit Agreement would be $165,000 and the following amounts would
also be due in respect of the Senior Secured Notes, Senior GINs and 9%
Debentures:

<TABLE>
<CAPTION>
Amount Due Date Due Obligation
----------- -------------------- -------------------
<S> <C> <C>
$3,325,000 May 15, 1995 Senior GINs
2,156,000 June 15, 1995 Senior Secured Notes
3,325,000 August 15, 1995 Senior GINs
2,156,000 September 15, 1995 Senior Secured Notes
2,250,000 September 15, 1995 9% Debentures
3,325,000 November 15, 1995 Senior GINs
2,156,000 December 15, 1995 Senior Secured Notes
</TABLE>

In addition, if the Company is unable to cure the Deficiencies in respect of
the Security Values related to the Senior Secured Notes as described above, the
Company could be required to make the Purchase Offer. See "Collateral Value
Requirements for the Senior Secured Notes".

CAPITAL EXPENDITURES

The Company's capital expenditures for its oil and gas operations totaled
approximately $34.5 million in 1994, as compared to capital expenditures on
such operations of $21 million and $15.9 million in 1993 and 1992,
respectively. Of the capital expenditures made during 1994, $24.4 million was
used in development and recompletion activities, $3.5 million was used in
exploratory activities, and $6.6 million was used in various other activities,
including acquisitions of producing properties and undeveloped acreage. The
Company funded its capital expenditures during 1994 with borrowings under the
Credit Agreement and the proceeds of asset sales. Due to the current
uncertainty as to its financial condition and future trends in oil and gas
pricing, the Company has determined to limit its capital expenditures, subject
to the availability of funds (as to which no assurance can be given), during
the remainder of 1995 to those that are required to maintain its producing oil
and gas properties as well as certain essential development and other drilling
operations. Except for a requirement under the Credit Agreement that the
Company spend $5 million per year on the Mortgaged Properties during the
three-year period ending October 1, 1996, the timing of most of the Company's
capital expenditures is discretionary and there are currently no material long-
term commitments associated with the Company's capital expenditure plans. The
unavailability of funds for capital projects could also materially and
adversely impact the value of the Company's interest in properties it owns
jointly with others. Pursuant to the operating agreements governing these
joint ownership relationships, the Company could be forced to contribute funds
for capital projects in respect to these properties or suffer "non-consent"
penalties. Such penalties could materially and adversely affect the value of
the Company's ownership interest in any such properties.

16
<PAGE> 17
MARKETS AND PRICES

Oil and gas prices depend on a number of factors outside the control of the
Company, including industry-wide inventory levels, the availability of imported
oil and gas, the availability and marketing of competitive fuels, governmental
regulation, seasonal weather patterns, and general economic conditions. As a
result, an accurate prediction cannot be made as to what the prices of oil and
gas may be in future periods.

During 1994, the average prices received for oil and gas by the Company were
$13.81 per barrel and $1.45 per MCF, respectively, as compared to $14.55 per
barrel of oil and $1.73 per MCF of gas in 1993 and $16.68 per barrel of oil and
$1.71 per MCF of gas in 1992. During February 1995, the average prices
received for oil and gas by the Company were $15.42 per barrel and $1.15 per
MCF, respectively. The Company estimates that (i) a $1.00 per barrel change in
the average oil price received by the Company during 1995 would result in an
estimated change of approximately $.9 million to both the Company's net income
and cash flow for 1995; and (ii) a $.10 per MCF change in the average gas price
received by the Company during 1995 would result in an estimated change of
approximately $1.6 million to both the Company's net income and cash flow for
1995. Therefore, any substantial and extended decline in the price of oil or
gas would have a further material adverse effect on the Company's financial
condition and its results of operations. Conversely, a substantial and
extended increase in oil and gas prices would improve the Company's financial
condition and results of operations.

The Company's revenues, net income and cash flows are directly linked to the
price of oil and natural gas. During 1994 and the first three months of 1995,
a significant industry-wide decline in the price of natural gas materially and
adversely affected the financial condition and operating cash flows of the
Company. See "Current Financial Condition and Recent Developments." These gas
price declines also have had an adverse impact on the value of the Company's
proved oil and gas reserves. A downward revision in the value of such reserves
could impair the ability of the Company to obtain additional financing in the
future and could also cause Deficiencies in the collateral value requirement
under the Senior Secured Notes Indenture similar to those discussed above.

OTHER

Certain of the West Virginia gas reserves sold by the Company to Belden & Blake
in 1992 are subject to a long-term gas contract providing for prices above the
current spot market price for West Virginia gas. In connection with the sale,
the Company guaranteed certain minimum levels of performance, on an annual
basis, by the gas purchaser under this contract such that should performance
under this contract be less than the levels guaranteed by the Company, Belden &
Blake can draw on a letter of credit established for such purpose by the
Company. See Note 11 to the Company's Consolidated Financial Statements
contained in Item 8 of this Report.

17
<PAGE> 18
RESULTS OF OPERATIONS

LOSS FROM CONTINUING OPERATIONS

The Company recognized losses from continuing operations of $24,562,000,
$18,783,000 and $32,696,000 for 1994, 1993 and 1992, respectively.
Contributing to the loss during 1992 was a reduction in the carrying value of
the Company's oil and gas properties of $15,000,000.

Oil and Gas Revenues. Oil and gas revenues have decreased during each of
the past three years due primarily to lower oil production and lower oil
and gas prices. Oil production for 1994 and 1993 decreased 21% and 23%,
respectively, from their prior-year levels. Sales of certain producing
properties accounted for 74% of the decrease in oil production in 1994 and
27% of the decrease in 1993 with the remaining decrease in oil production
resulting from lower production rates in several significant fields. Gas
production for 1994 increased 12% from 1993 due to the Company's successful
drilling operations. Gas production declined 21% for 1993 as compared to
1992 with sales of certain producing properties accounting for all of such
decrease in gas production.

The following table reflects the average prices received for oil and gas
and the amount of oil and gas production for 1994, 1993 and 1992.

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Average Price:
Oil and condensate (per Bbl) $13.81 $14.55 $16.68
Gas (per MCF) $ 1.45 $ 1.73 $ 1.71 (1)

Production:
Oil and condensate (MBbls) 1,137 1,436 1,877
Gas (MMCF) 17,219 15,340 19,407
</TABLE>

Operating Expenses. Lease operating expenses, production taxes and
depletion, depreciation and amortization have each decreased when
comparing 1994 to 1993 and when comparing 1993 to 1992. The decrease
in lease operating expenses was due primarily to the sale of various
higher operating cost properties and also due to the increased
operating efficiencies realized by the Company. The decrease in
production taxes resulted from the reduced oil and gas revenues
received when compared to those received a year earlier. The reduced
amount of depletion, depreciation and amortization was due to a
decrease in production (on an equivalent barrel basis), the reduction
in the carrying value of the Company's oil and gas properties as
described below, and an increase in the Company's reserves at a
finding cost substantially below its depletion rate.

Under the rules of the Securities and Exchange Commission for
companies utilizing the full cost method of accounting, the carrying
value of oil and gas properties is limited to the present value, as of
the end of each fiscal quarter, of the estimated future net revenues
from proved reserves using current pricing (with consideration of
price changes only to the extent provided by contractual agreements),
discounted at 10%, after adjusting for tax effects. As a result of
the declines in oil and gas prices during 1992, the Company was
required to reduce the carrying value of its oil and gas properties by
$15,000,000. No such reduction has been required since the first
quarter of 1992.

<PAGE> 19
The following table shows certain costs associated with oil and gas
revenues per equivalent barrel of oil for 1994, 1993 and 1992.

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(per equivalent barrel)
<S> <C> <C> <C>
Production Costs $3.71 $4.10 $4.38
Depletion, Depreciation and Amortization $4.41 $4.60 $5.08
</TABLE>

General and Administrative Expense. General and administrative
expense increased 14% during 1994 as compared to 1993 due to a general
increase in the Company's expenses together with certain non-recurring
legal and other costs. General and administrative expense decreased
17% during 1993 as compared to 1992 due to the consolidation and
downsizing of certain of the Company's division offices and associated
operations during 1991 and during the first half of 1992. The
reduction in general and administrative expense during 1993 is also
due in part to the Company's adoption of a new method of accounting
for its Employee Stock Ownership Plan as discussed in Note 6 to the
Company's Consolidated Financial Statements contained in Item 8 of
this Report.

Interest Expense. The Company's interest expense increased in 1994 as
compared to 1993 as a result of (i) the Company's issuance of $75
million of its 11.5% Senior Secured Notes in the second half of 1993
and the utilization of the net proceeds thereof to repay an equivalent
amount of bank debt with a 7.3% borrowing rate during the 1993 period
and (ii) an increase in the interest rate on the Company's Senior GINs
to an average of 14% in 1994 as compared to an average of 13.5% in
1993. The Company reduced its level of interest expense in 1993 as
compared to 1992 primarily due to a lower level of bank debt during
1993. The Company's bank debt averaged $48.7 million during 1993 as
compared to the $98.8 million associated with continuing operations
during 1992. Such decrease was the result of the Company's sale of
its West Virginia proved developed reserves in December 1992 for $32.6
million, the sale of the Company's remaining equity interest in MGRI
in July 1993 for $11.6 million, the sale of a total of $75 million of
Senior Secured Notes in August and November 1993, and the utilization
of the proceeds of each of these sales to prepay bank debt. Also, the
Company reduced the amount of amortization of deferred bank debt
charges during 1993 as compared to 1992, due to the accelerated
amortization of such costs during 1993 and 1992 which are included in
debt repayment expense as discussed below. These reductions to the
Company's interest expense were partially offset by the interest
expense on the Company's Senior Secured Notes issued during 1993 and
due to the Company capitalizing less interest expense in 1993 as
compared to 1992.

Debt Repayment Expense. Debt repayment expense for 1993 and 1992
includes the amortization of prepaid loan fees and costs associated
with the Company's bank debt. The Company accelerated the
amortization of such costs in connection with the significant
reduction of, and amendments to, the Company's bank debt during such
periods.

Income Taxes. The Company did not record a tax benefit associated
with the losses incurred during 1994, 1993 and 1992, because a
valuation allowance was provided for the deferred assets otherwise
recorded.

19
<PAGE> 20
DISCONTINUED OPERATIONS.

Discontinued operations reflect the results of the Company's Mountain Gas
Resources subsidiary which owned and operated the majority of the Company's gas
gathering, processing and marketing operations. Such subsidiary was sold in
July 1992 for a gain of $7,808,000 and certain equity interests retained in
such sale were sold in July 1993 for $11,550,000 as discussed in Note 10 of the
Company's Consolidated Financial Statements contained in Item 8 of this Report.
The components of the earnings from discontinued operations are shown in the
table below:

<TABLE>
<CAPTION>
1992 (1)
--------
<S> <C>
Revenues:
Sale of natural gas liquids $ 6,982
Transportation revenues 4,509
Sale of residue and other gas 26,810
-------
Total revenues 38,301
-------
Costs and expenses:
Operating expense 5,437
Gas purchases 24,895
General and administrative expenses 1,474
Depreciation 2,100
Interest expense 3,376
-------
Total costs and expenses 37,282
-------
Net income $ 1,019
=======
(1) Reflects operations through July 16, 1992.
</TABLE>

INFLATION.

In recent years inflation has not had a significant impact on the Company's
operations. Although oil and gas prices have significantly fluctuated during
such periods, the Company has generally experienced a decline in the costs
incurred to acquire quality exploration and development prospects as well as in
the costs of drilling and completing wells.

20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEPENDENT AUDITORS' REPORT

Presidio Oil Company:

We have audited the accompanying consolidated balance sheets of Presidio Oil
Company and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Presidio Oil Company and
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 2 to the
financial statements, the Company's recurring losses from operations, working
capital deficiency and stockholders' deficit raise substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Notes 1 and 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.

As discussed in Note 6 to the consolidated financial statements, the Company
changed its method of accounting for its employee stock ownership plan
effective January 1, 1993.

DELOITTE & TOUCHE LLP
Denver, Colorado

March 28, 1995

21
<PAGE> 22
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS

<TABLE>
<CAPTION>
December 31,
-----------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,423 $ 13,559
Accounts receivable:
Oil and gas sales 6,759 6,388
Joint interest owners and other 6,828 8,182
Other 1,203 2,394
-------- --------
Total current assets 21,213 30,523
-------- --------

PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties using full cost accounting:
Subject to amortization 488,054 480,911
Not subject to amortization 23,816 23,601
Other 4,268 3,611
-------- --------
Total 516,138 508,123
Less accumulated depletion,
depreciation and amortization 287,463 269,349
-------- --------

Net property, plant and equipment 228,675 238,774
-------- --------

OTHER ASSETS:
Deferred charges 8,055 8,833
Other 1,629 2,290
-------- --------
Total other assets 9,684 11,123
-------- --------
$259,572 $280,420
======== ========
</TABLE>

See notes to consolidated financial statements.
22
<PAGE> 23
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
December 31,
-----------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Oil and gas sales $ 3,368 $ 4,739
Trade and other 12,724 13,137
Accrued interest 3,576 3,621
Accrued ad valorem and severance taxes 3,492 4,408
Other accrued liabilities 1,921 1,798
-------- --------
Total current liabilities 25,081 27,703
-------- --------

BANK DEBT 21,000 15,000
-------- --------

SENIOR SECURED NOTES 75,000 75,000
-------- --------

GAS INDEXED NOTES 100,000 100,000
-------- --------

CONVERTIBLE SUBORDINATED DEBENTURES 50,000 50,000
-------- --------

OTHER NONCURRENT LIABILITIES 9,039 9,152
-------- --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT):
Class A Common Stock, $.10 par value; 25,317,000
and 25,312,000 outstanding at December 31, 1994
and 1993, respectively 2,532 2,532
Class B Common Stock, $.10 par value; 3,218,000
and 3,223,000 outstanding at December 31, 1994
and 1993, respectively 322 322
Additional paid-in capital 129,029 133,503
Deferred compensation (2,394) (7,317)
Retained deficit (150,037) (125,475)
--------- --------
Total stockholders' equity (deficit) (20,548) 3,565
--------- --------
$ 259,572 $280,420
========= ========
</TABLE>

See notes to consolidated financial statements.
23
<PAGE> 24
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1994 1993 1992
----------- -------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Oil and gas revenues $ 40,643 $ 47,476 $ 64,442
Less - direct costs:
Lease operating 12,483 13,431 18,106
Production taxes 2,373 2,931 4,259
Depletion, depreciation and amortization 17,655 18,357 25,984
Reduction in the carrying value of
oil and gas properties - - 15,000
--------- --------- --------
8,132 12,757 1,093
--------- --------- --------

General and administrative expense 6,089 5,326 6,410
--------- --------- --------

Other income (expense):
Interest expense (28,130) (25,034) (27,865)
Debt repayment expense - (1,971) (1,954)
Interest income 148 31 249
Other 1,377 760 2,191
--------- --------- --------
(26,605) (26,214) (27,379)
--------- --------- --------

Net loss from continuing operations (24,562) (18,783) (32,696)
Discontinued operations:
Earnings from gas gathering,
processing and marketing - - 1,019
Gain on sale - 11,550 7,808
--------- --------- --------
Net loss $ (24,562) $ (7,233) $(23,869)
========= ========= ========

Loss per share of Class A Common Stock:
Loss from continuing operations $ (.91) $ (.70) $ (1.13)
Discontinued operations - .43 .31
--------- --------- --------
Loss per share $ (.91) $ (.27) $ (.82)
========= ========= ========
Loss per share of Class B Common Stock:
Loss from continuing operations $ (.91) $ (.70) $ (1.23)
Discontinued operations - .43 .31
--------- --------- --------
Loss per share $ (.91) $ (.27) $ (.92)
========= ========= ========
Dividends per share of Class A Common Stock $ - $ - $ .10
========= ========= ========
</TABLE>

See notes to consolidated financial statements.
24
<PAGE> 25
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock Additional Deferred
------------------ ------------------ Paid-in Compen- Retained
Shares Amount Shares Amount Capital sation Deficit
------ ------ ------ ------ ----------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1991 25,183 $2,518 3,319 $332 $136,309 $(6,841) $(94,373)
Net loss - - - - - - (23,869)
Dividends on Class A
Common Stock - - - - (2,521) - -
Issuance of Class A Common Stock 33 4 - - 108 - -
ESOP purchases of stock in excess
of current year contributions - - - - - (816) -
------- ------- -------- ------ --------- ------- ----------
BALANCE, December 31, 1992 25,216 2,522 3,319 332 133,896 (7,657) (118,242)
Net loss - - - - - - (7,233)
Difference between historical
cost and fair market value
of allocated ESOP shares - - - - (428) - -
ESOP contribution in excess
of ESOP stock purchases - - - - - 340 -
Exchange of Class A Common Stock
for Class B Common Stock 96 10 (96) (10) - - -
Other - - - - 35 - -
------- ------- ------- ------ -------- -------- ----------
BALANCE, December 31, 1993 25,312 2,532 3,223 322 133,503 (7,317) (125,475)
Net loss - - - - - - (24,562)
Reduction of the ESOP
outstanding notes payable - - - - (4,481) 4,481 -
Difference between historical
cost and fair market value
of allocated ESOP shares - - - - (65) - -
ESOP contribution in excess
of ESOP stock purchases - - - - - 442 -
Exchange of Class A Common Stock
for Class B Common Stock 5 - (5) - - - -
Other - - - - 72 - -
------- -------- -------- ------ -------- -------- ----------

BALANCE, December 31, 1994 25,317 $ 2,532 3,218 $ 322 $129,029 $ (2,394) $(150,037)
======= ======== ======== ====== ======== ======== =========
</TABLE>

See notes to consolidated financial statements.
25
<PAGE> 26
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(24,562) $ (7,233) $(23,869)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depletion, depreciation and amortization 18,122 18,856 29,446
Reduction in the carrying amount of
oil and gas properties - - 15,000
Gain on sale of discontinued operations - (11,550) (7,808)
Amortization of debt issuance costs included
in interest and debt repayment expense 1,241 3,683 5,865
Other 1,694 1,897 1,655

Changes in other assets and liabilities:
Decrease in accounts receivable 983 1,458 7,291
Decrease (increase) in other current assets 428 (2,347) (287)
Payment of loan fees (463) (4,375) (2,588)
Decrease (increase) in other
noncurrent assets 661 (73) (2,373)
Decrease in accounts payable (1,784) (897) (2,583)
Decrease in accrued
interest and liabilities (838) (5,714) (3,051)
Increase (decrease) in other
noncurrent liabilities (532) 358 (667)
-------- -------- --------

Net cash provided by (used in)
operating activities $ (5,050) $ (5,937) $ 16,031
-------- -------- --------
</TABLE>

See notes to consolidated financial statements.
26
<PAGE> 27
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Continued)

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment $(35,208) $(21,096) $(18,559)
Proceeds from asset sales 27,161 12,684 120,118
-------- -------- --------

Net cash provided by (used in)
investing activities (8,047) (8,412) 101,559
-------- -------- --------

CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings of bank debt 54,277 61,900 71,503
Payments of bank debt (48,277) (119,900) (186,003)
Other noncurrent financing (39) (549) (5,838)
Issuance of Senior Secured Notes - 75,000 -
Dividends on Class A Common Stock - - (2,521)
-------- --------- --------

Net cash provided by (used in)
financing activities 5,961 16,451 (122,859)
-------- -------- --------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (7,136) 2,102 (5,269)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 13,559 11,457 16,726
-------- -------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 6,423 $ 13,559 $ 11,457
======== ======== ========
</TABLE>

See notes to consolidated financial statements.
27
<PAGE> 28
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Consolidated Financial Statements present the financial
position of Presidio Oil Company and its wholly-owned subsidiaries (the
"Company" or "Presidio").

The Company's Senior Subordinated Gas Indexed Notes, Senior Gas Indexed Notes
and Senior Secured Notes (collectively the "Notes") are guaranteed by all
significant subsidiaries of the Company (the "Guarantors"). Separate financial
statements of the Guarantors are not included herein because the Guarantors
have fully, unconditionally, jointly and severally guaranteed the Company's
obligations with respect to the Notes and the Company (which is primarily a
holding company and whose operating income is generated by its subsidiaries)
has no separate operations of its own. The operations, assets, liabilities and
equity of the subsidiaries of the Company that are not Guarantors are
inconsequential.

Current Financial Position

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During 1994 and the first three
months of 1995, the financial condition and operating cash flows of the Company
were materially and adversely affected by a significant industry-wide decline
in the price of natural gas.

Although the Company was successful in 1994 in replacing both the oil and gas
reserves produced and those divested by it during such year and increasing its
gas production compared to 1993, a decline in oil production in 1994 and the
severe decline in gas prices during the second half of 1994 more than offset
such positive operating results. The Company's revenues and operating cash
flows thus declined significantly in 1994 and early 1995, creating substantial
uncertainties regarding the Company's ability to continue as a going concern in
its current financial structure. Without a significant increase in hydrocarbon
prices in the near future, the Company believes that it will be unable to
service all of its interest payment obligations during the remainder of 1995
and may have difficulty meeting other future financial obligations as well.

The Company is actively considering various alternatives intended to improve
its financial condition and cash flows position, and has initiated discussions
with respect to a restructuring of its 11.5% Senior Secured Notes Due 2000,
Senior Gas Indexed Notes Due 2002 and 9% Convertible Subordinated Debentures
Due 2015 with a number of the holders of such securities. The Company has
retained financial advisors to assist in such efforts. No assurance, however,
can be given that the Company will be able to successfully conclude any of the
arrangements being considered. (See also Note 2 for a description of the
Company's debt).

28
<PAGE> 29
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Property, Plant and Equipment and Depletion, Depreciation and Amortization

The Company follows the full cost method of accounting for oil and gas
producing activities whereby all costs incurred in the acquisition, exploration
and development of oil and gas properties are capitalized. Sales of oil and
gas properties are recorded as an adjustment of capitalized costs, with no gain
or loss recognized. Capitalized costs are subject to a ceiling limitation test
based on a computed value of the Company's present value of estimated future
net revenues from proved reserves using current prices (with consideration of
price changes only to the extent provided by contractual arrangements),
discounted at 10%, after adjusting for tax effects at the end of each period.
Due to the low oil and gas prices being received during 1992, the Company was
required to reduce the carrying value of its oil and gas properties by
$15,000,000 in such year.

The provision for depletion, depreciation and amortization of oil and gas
properties is calculated by multiplying current period oil and gas production
by a rate which is determined by dividing capitalized oil and gas costs (except
for costs of certain unevaluated acreage discussed below) plus estimated future
costs to develop the Company's proved oil and gas reserves, by the quantities
of estimated proved oil and gas reserves. The Company excludes investments in
unevaluated acreage from costs to be amortized pending determination as to the
existence of proved reserves on such acreage. The Company's unevaluated
acreage is subject to a periodic review for impairment and, if necessary, the
amount of impairment is included in the costs to be amortized. The Company
capitalizes interest on unevaluated properties not subject to amortization.
The Company capitalized interest of $1,141,000, $1,278,000 and $2,639,000 (out
of total interest costs, including amounts associated with discontinued
operations, of $29,271,000, $26,312,000 and $33,880,000) for the years ended
December 31, 1994, 1993 and 1992, respectively.

Income Taxes

The Company files a consolidated income tax return and provides deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in the Company's consolidated financial statements or tax returns
(see Note 3).

29
<PAGE> 30
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Loss Per Common Share

<TABLE>
<CAPTION>
Loss per common share is computed as follows:
Years Ended December 31,
--------------------------------------------------------------
1994 1993 1992
-------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Weighted average number of common shares
outstanding 28,535 28,535 28,535
Less: Weighted average number of unallocated
shares held by the Company's Employee Stock
Ownership Plan (see Note 6) (1,497) (1,479) N/A (1)
-------- -------- --------

27,038 27,056 28,535
======== ======== ========

Net loss from continuing operations $(24,562) $(18,783) $(32,696)
Dividends on Class A Common Stock - - (2,521)
-------- -------- --------
Loss from continuing operations
attributable to common shares after
dividends on Class A Common Stock (24,562) (18,783) (35,217)
Discontinued operations - 11,550 8,827
-------- -------- --------
Loss attributable to common shares after
dividends on Class A Common Stock $(24,562) $ (7,233) $(26,390)
======== ======== ========

Loss from continuing operations per
share of Class B Common Stock $ (.91) $ (.70) $ (1.23)
Dividends per share of
Class A Common Stock - - .10
-------- -------- --------
Loss from continuing operations
per share of Class A Common Stock $ (.91) $ (.70) $ (1.13)
======== ======== ========

Discontinued operations per share of Class A
and Class B Common Stock $ - $ .43 $ .31
======== ======== ========

Loss per share of Class A Common Stock $ (.91) $ (.27) $ (.82)
======== ======== ========

Loss per share of Class B Common Stock $ (.91) $ (.27) $ (.92)
======== ======== ========
</TABLE>

(1) As of January 1, 1993 the Company adopted a new method of
accounting for its Employee Stock Ownership Plan ("ESOP")
which requires unallocated shares held by the ESOP to be
excluded from outstanding shares for purposes of calculating
loss per share. The N/A for the year ended December 31, 1992
indicates that such new accounting method does not apply to
such year and, therefore, the weighted average number of
unallocated shares held by the ESOP for the year ended
December 31, 1992 of 1,324,000 was reflected as outstanding
for purposes of calculating loss per common share.

30
<PAGE> 31
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Deferred Charges

The Company records the fees and expenses associated with its bank and public
debt as deferred charges and amortizes such costs to interest expense over the
life of the debt using the effective interest method. Debt repayment expense
reflects the accelerated amortization of certain of such costs during the years
ended December 31, 1993 and 1992.

Consolidated Statements of Cash Flows

The Company considers investments purchased with an original maturity of three
months or less to be cash equivalents. Included in the Consolidated Statements
of Cash Flows is $26,896,000, $23,945,000 and $29,365,000 of interest paid,
including amounts paid associated with discontinued operations, net of amounts
capitalized, during the years ended December 31, 1994, 1993 and 1992,
respectively. During the year ended December 31, 1993, $99,770,000 of Senior
Subordinated Gas Indexed Notes were exchanged for an equivalent amount of
Senior Gas Indexed Notes (see Note 2); and, insofar as such exchange was a
non-cash transaction, it is not reflected in the Consolidated Statements of
Cash Flows.

Gas Balancing Arrangements

The Company uses the entitlement method of recording gas revenues. Under such
method, sales are recorded based upon the Company's proportionate share of gas
sold. The Company then records a receivable (payable) to the extent it sells
less (more) than its proportionate share of the revenues. At December 31, 1994
and 1993, the Company had net gas balancing liabilities of $4,074,000
associated with approximately 2.6 billion cubic feet ("BCF") of gas and
$3,930,000 associated with 2.1 BCF of gas, respectively.

2. DEBT

Bank Debt

At December 31, 1994, the Company had bank debt of $21 million outstanding
under a $25 million revolving credit facility (the "Credit Agreement") which
permits loans of up to $21.4 million with such amount being able to be
increased to $24.3 million with the approval of the Company's lenders and if
the Company elects to pledge additional oil and gas properties under the
mortgages securing the Credit Agreement. The Company had $15 million
outstanding under such Credit Agreement at December 31, 1993.

The Credit Agreement (i) is secured by mortgages on certain of the Company's
oil and gas properties (the "Mortgaged Properties"); (ii) provides for an
interest rate of either prime plus 1% or LIBOR plus 2 1/2%; (iii) requires that
the commitment be reduced by 100% of the proceeds realized from the sale of
Mortgaged Properties; (iv) requires that 75% of the proceeds (in excess of $5
million sold subsequent to September 30, 1994) from the sale of assets other
than Mortgaged Properties be used to develop the Company's hydrocarbon
reserves; (v) requires regular quarterly commitment reductions of approximately
$1.4 million beginning on October 1, 1995 through July 1, 1999; (vi) requires
capital expenditures of not less than $5 million per annum during the
three-year period ending October 1, 1996 in respect of the development of the
Mortgaged Properties; and (vii) provides that, on a quarterly basis, the
Company's ratio of bank debt to total capitalization (excluding the effect of
any reduction in the carrying amount of oil and gas properties) to be greater
than .15 on the last day of each quarter, and the Company maintain at least a
1:1 ratio of its operating cash flows plus

31
<PAGE> 32
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

the proceeds of asset sales during the preceding four quarters (the "Period")
to interest paid by the Company during the Period plus the amount of any
required commitment reductions during the four quarters following the Period.

At December 31, 1994, the estimated minimum principal repayments associated
with the Credit Agreement were $0, $5,600,000, $5,600,000, $5,600,000 and
$4,200,000 in each of the years 1995 through 1999.

Gas Indexed Notes; Senior Secured Notes

On August 6, 1993, the Company completed various transactions (the "Private
Exchange") with certain holders (and their affiliates) (the "Holders") of the
Company's Senior Subordinated Gas Indexed Notes Due 1999 (the "Old Notes"),
pursuant to which a total of $75 million aggregate principal amount of the Old
Notes was exchanged for an equivalent principal amount of the Company's
newly-issued Senior Gas Indexed Notes Due 2002 (the "Senior GINs") and the
Holders purchased $56.25 million aggregate principal amount of the Company's
11.5% Senior Secured Notes Due 2000 (the "Senior Secured Notes"). The net
proceeds of the sale of the Senior Secured Notes were used to prepay $55
million of bank debt.

On November 30, 1993, the Company completed a public exchange offer (the
"Exchange Offer") pursuant to which (i) $24.77 million of the $25 million of
the Old Notes remaining after the Private Exchange were exchanged for an
equivalent principal amount of the Senior GINs and (ii) $18.75 million of
Senior Secured Notes were sold with the proceeds of such sale being used to
prepay bank debt.

The terms of the Senior GINs are generally the same as those of the Old Notes,
except that the Senior GINs: (i) rank pari passu with other senior debt of the
Company (including bank debt and the Senior Secured Notes, as discussed below,
which are also secured by mortgages on certain of the Company's oil and gas
properties which provide preferential claims to such properties) and rank
senior to the Old Notes; (ii) mature in 2002 and have no sinking fund
requirements; (iii) have a 15% maximum interest rate above which the 13.25%
base interest rate may not be increased as a result of the gas indexing feature
as discussed below (which is the same as that in the Old Notes), instead of the
18% maximum contained in the Old Notes; and (iv) are redeemable, at the option
of the Company, at the prices (expressed as a percentage of principal amount)
and during the indicated years beginning August 15: 1996 - 106%; 1997 - 103%;
and 1998 - 100%. Both the Old Notes and Senior GINs bear interest at a base
rate of 13.25% per annum. Concurrently with each quarterly interest payment
the Company will pay to the holders additional interest, if any, based upon the
amount by which the average gas spot price ("Average Spot Price") based upon
spot gas prices published by Natural Gas Clearinghouse, Inc. exceeds $1.75 per
million British Thermal Units (MMBTU) during a twelve-month period preceding
such quarterly interest payment period up to a maximum overall interest rate of
15% per annum for the Senior GINs and 18% per annum for the Old Notes. At
December 31, 1994, the twelve-month Average Spot Price was $1.77 per MMBTU
resulting in an interest rate of 13.3% per annum for the period February 15,
1995 to May 14, 1995.

The Senior Secured Notes (i) rank pari passu with other senior debt of the
Company (including bank debt and the Senior GINs) and rank senior to the Old
Notes and the Company's 9% Convertible Subordinated Debentures Due 2015 (the
"9% Debentures"), (ii) mature in 2000 and have no sinking fund requirements,
(iii) bear interest at the rate of 11.5%, (iv) are secured by a lien on certain
of the Company's oil and gas properties (the "Pledged Assets"), with the amount
and type of such properties being subject to adjustment, based upon the value
of the properties and certain other factors, and (v) are redeemable, at the
option of

32
<PAGE> 33
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

the Company, at the prices (expressed as a percentage of principal amount) and
during the indicated years beginning September 15: 1996 - 103%; 1997 - 102%;
1998 - 101%; and 1999 - 100%. In accordance with the provisions of (iv) above,
the Security Value (as defined below) of the Pledged Assets must be $93.8
million or more as of December 31, 1994 (with $78.8 million thereof being
attributable to proved developed producing properties). See "Collateral Value
Requirements for the Senior Secured Notes" below.

Convertible Subordinated Debentures

In February 1990 the Company issued $50,000,000 in aggregate principal amount
of the 9% Debentures. The 9% Debentures are currently convertible at any time
prior to redemption or maturity into Class A Common Stock, at a conversion
price per share of $9.38, subject to adjustment. The 9% Debentures will be
redeemable through the operation of a mandatory sinking fund pursuant to which
on March 15 in each of the years 2000 to 2014 (the "Redemption Period") 5% of
the outstanding principal amount of the 9% Debentures will be redeemed at 100%
of the principal amount thereof plus accrued interest. At its option, the
Company may make additional sinking fund payments in amounts sufficient to
redeem annually up to an additional 10% of the outstanding principal amount of
the 9% Debentures. The 9% Debentures are redeemable, otherwise than through
the mandatory sinking fund, at the Company's option, at 106% of their principal
amount plus accrued interest through March 15, 1995, and thereafter reducing by
1% each year to 100% of their principal amount plus accrued interest at March
15, 2000 and thereafter.

Ability to Service Debt

Because of its current financial condition and operating cash flow deficit, the
Company believes that, absent a restructuring of its debt, it will be unable to
meet all of its interest payment obligations on the Senior Secured Notes, the
Senior GINs and on the 9% Debentures as they become due subsequent to April 1,
1995. In addition, substantially all of the Company's oil and gas reserves are
pledged to secure the Company's bank debt and the Senior Secured Notes, with
the result that the Company is not able to sell such assets in order to fund
the above-mentioned interest payments. The failure to make such payments would
constitute a Default under each of the indentures governing the Senior Secured
Notes, the Senior GINs and the 9% Debentures.

33
<PAGE> 34
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

In addition, the failure to pay interest on the Senior Secured Notes, the
Senior GINs or the 9% Debentures would constitute a Default under the Credit
Agreement and thus the Company would be prohibited from borrowing additional
funds thereunder until such Default was cured. An Event of Default with
respect to the Senior Secured Notes, the Senior GINs or the 9% Debentures would
also cause an Event of Default under the Credit Agreement, which could lead to
the borrowings outstanding thereunder being declared immediately due and
payable, and the subsequent foreclosure of a mortgage on substantially all of
the Company's oil and gas properties not pledged to secure the Senior Secured
Notes.

Collateral Value Requirement for the Senior Secured Notes

The Senior Secured Notes are secured by the Pledged Assets pursuant to a
pledged assets agency agreement (the "Pledged Assets Agency Agreement"). The
Pledged Assets Agency Agreement requires that, as of various dates, the
Security Value (as defined below) of the Pledged Assets and the Security Value
of the Pledged Assets that are proved developed producing reserves (the
"Pledged Producing Assets") must be equal to or greater than certain specified
percentages of the then outstanding amount of Senior Secured Notes. For the
purposes of this discussion, "Security Value" means the aggregate present value
(computed at a discount rate equal to 10% per annum) of the future net revenues
of proved oil and gas reserves, calculated in accordance with the rules of the
Securities and Exchange Commission.

The Company anticipates that it will pledge assets with a Security Value
sufficient to cure most of the Deficiencies, and that the net amount of Senior
Secured Notes that will be subject to the Purchase Offer would be up to
approximately $2.5 million; however, a significant increase in hydrocarbon
prices during the period that the Purchase Offer is open for acceptance (July 1
- August 31, 1995), which pricing increase is not currently anticipated by the
Company, could reduce the amount of Senior Secured Notes that the Company would
be required to purchase as a result of the Purchase Offer.

34
<PAGE> 35
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

3. INCOME TAXES

Actual tax expense differs from the statutory rate as shown below:

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1994 1993 1992
---------------------- ------------------ -------------------
Amount % Amount % Amount %
------- ----- ------- ----- ------- -----
(in thousands, except percent amounts)
<S> <C> <C> <C> <C> <C> <C>
Income tax based on federal
statutory rate $(8,351) (34.0) $(2,459) (34.0) $(8,115) (34.0)
Expired net operating losses and
investment tax credits 217 1.0 - - - -
Valuation allowance against
deferred tax asset 8,134 33.0 2,459 34.0 8,115 34.0
------- ----- ------- ----- ------- -----

Total actual tax expense $ - - $ - - $ - -
======= ===== ======= ===== ======= =====
</TABLE>

The components of the Company's tax assets and liabilities are shown below:

<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Assets
------
Net operating loss carryforwards $ 79,112 $ 73,327 $ 65,493
Capital loss carryforwards - - 23
Statutory depletion carryforwards 3,269 3,269 3,263
Excess of financial statement depletion,
depreciation and amortization over
income tax amounts 60,646 55,342 53,294
Investment tax credit carryforwards 537 583 610
Valuation allowance (49,744) (41,610) (39,151)
-------- -------- --------
93,820 90,911 83,532
-------- -------- --------

Liabilities
-----------
Intangible drilling costs and other costs
capitalized for financial statement purposes
and deducted for income tax purposes 92,043 88,984 81,914
Other 1,777 1,927 1,618
-------- -------- --------
93,820 90,911 83,532
-------- -------- --------

$ - $ - $ -
======== ======== ========
</TABLE>

35
<PAGE> 36
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

At December 31, 1994 the Company had net operating loss carryforwards for
income tax purposes of approximately $232,683,000 expiring 1995 through 2009 if
not previously utilized. The Company's net operating losses are subject to
various restrictions that could significantly limit their utilization. The
Company has investment tax credit carryforwards of approximately $537,000
expiring 1995 through 2000 if not previously utilized. The Company also has
statutory depletion carryforwards of approximately $9,616,000 which may be
carried forward until utilized.

4. COMMON STOCK

The Company has two classes of common stock, Class A Common Stock and Class B
Common Stock. Each share of Class B Common Stock is convertible into one share
of Class A Common Stock. Both classes of common stock are $.10 par value per
share. There are 80,000,000 authorized shares of Class A Common Stock and
20,000,000 authorized shares of Class B Common Stock.

From July 1987 through December 1992, the Company paid a quarterly cash
dividend of $.025 on its Class A Common Stock. In January 1993 the Company
announced the elimination of Class A Common Stock dividends. If cash dividends
are paid on Class B Common Stock, a cash dividend must also be paid on Class A
Common Stock in an amount equal to 110% of the per share amount of the cash
dividend paid on Class B Common Stock. The Company's ability to pay dividends
is subject to the provisions of certain covenants contained in the Credit
Agreement and the indentures relating to the Senior GINs and the Old Notes.
Holders of Class A Common Stock are entitled to one-twentieth of one vote per
share and holders of Class B Common Stock are entitled to one vote per share.

The Class B Common Stock is subject to certain restrictions on transfer
designed to prevent the sale of "control blocks" of Class B Common Stock at a
premium price not available to all holders of Class A Common Stock and Class B
Common Stock. No transfer of Class B Common Stock may be made (i) if the
transferee thereof would, as a result of such transfer, have acquired from such
transferor, within the last twelve months, in excess of 15% of the total voting
power of all outstanding shares of the Class A Common Stock and the Class B
Common Stock, (a "Control Block"), and (ii) if any of the shares held by the
transferee comprising the Control Block were acquired by such transferee within
twelve months of the proposed transfer at a price in excess of the market price
when acquired; unless such transferee, concurrently with the proposed transfer,
offers to purchase all of the outstanding shares of both the Class A Common
Stock and the Class B Common Stock at a price not less than the highest price
per share paid, within twelve months of the proposed transfers by such
transferee, to the transferor with respect to any of the shares comprising the
Control Block. Presidio can refuse to recognize any transfer of shares made in
violation of this limitation, including for purposes of voting and dividend
rights, and to require the sale of any such shares. Except for this
limitation, shares of both the Class A Common Stock and the Class B Common
Stock are freely transferable.

In the fiscal year ended June 30, 1986, George P. Giard, Jr., Chairman of the
Board and Chief Executive Officer of the Company, purchased for $90,000 a
warrant to acquire 120,000 shares of the Company's common stock at an exercise
price of $4.00 per share which was the market value of the common stock on the
date of purchase. Such warrant, which expires in 1997, has been subsequently
adjusted for a 10% stock dividend and during 1993 was amended and restated such
that the warrant now provides for the acquisition of 94,091 shares of Class B
Common Stock and 9,409 shares of Class A Common Stock at a price of $3.64 per
share and 16,206 shares of Class B Common Stock and 1,621 shares of Class A
Common Stock at $2.50 per share.

36
<PAGE> 37
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

During the six month period ended December 31, 1987, George P. Giard, Jr., and
Robert L. Smith, President and Chief Operating Officer of the Company,
purchased warrants from the Company for $75,000 and $40,000, respectively.
These warrants, which expire in 1997, were to acquire 75,000 shares and 40,000
shares of the Company's Class B Common Stock at an exercise price of $4.625 per
share, which equalled or exceeded the market value of such stock on the date of
purchase. During 1993 Mr. Giard's and Mr. Smith's warrants were amended and
restated and now provide for Mr. Giard to acquire 46,912 shares of Class B
Common Stock at $2.50 per share and Mr. Smith to acquire 20,000 shares of Class
B Common Stock at $4.625 per share and 10,811 shares of Class B Common Stock at
$2.50 per share.

During 1993 Christopher S. Hardesty, Treasurer and Chief Financial Officer of
the Company, purchased for $2,000 a warrant to acquire 15,000 shares of the
Company's Class A Common Stock at an exercise price of $1.0625 per share, which
equalled or exceeded the market value of such stock on the date of purchase.
This warrant expires ten years after the date of purchase.

The Company also has issued warrants to acquire: (i) 150,000 shares of Class A
Common Stock at $7.125 per share which expire in 1999; and (ii) 50,000 shares
of Class B Common Stock at $4.625 per share which expire in 1997.

5. RELATED PARTY TRANSACTIONS

In connection with the sale of Mountain Gas Resources ("MGRI") (see Note 10),
George P. Giard, Jr. and Robert L. Smith entered into consulting agreements
with MGRI which provided for Mr. Giard and Mr. Smith to provide consulting
services to MGRI for a minimum period of two years; and, in respect of such
consulting services, they each received options to purchase 6,000 shares of
Class A Common Stock of MGRI at an exercise price of $60.00 per share. In July
1993 Mr. Giard and Mr. Smith each received proceeds of $281,000 as a result of
the sale of such options in connection with the MGRI Equity Sale.

See Note 4 for information as to the purchase of warrants from the Company by
certain of the Company's officers.

6. BENEFIT PLANS

On May 17, 1990 the Company's stockholders amended the 1985 Incentive and
Non-Qualified Stock Option and Stock Appreciation Rights Plan. Under such
amended plan, options to purchase up to 6,000,000 shares of the Company's Class
A Common Stock or Class B Common Stock may be granted to key employees at an
exercise price not less than the market price of the stock at the date of
grant. The amended plan also allows for the issuance of stock appreciation
rights in conjunction with the issuance of options to key employees and
provides for granting of non-qualified stock options or incentive stock
options. The Compensation Committee of the Board of Directors determines the
number of options and exercise prices under which stock options or stock
appreciation rights are issued. At December 31, 1994, no stock appreciation
rights had been granted. The stock options either: (i) vest incrementally
over four years; or (ii) vest after one year but are not exercisable until the
earlier of December 26, 1995 or the date the closing price of the Company's
Class B Common Stock has been $6.00 per share or greater for sixty consecutive
trading days.

37
<PAGE> 38
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

The Company's stockholders approved Non-Employee Director Stock Option Plans
which granted options to purchase up to 200,000 shares of the Company's Class A
Common Stock and 267,100 shares of the Company's Class B Common Stock to
non-employee directors. Stock options granted under these plans: (i) vest
incrementally over four years; or (ii) vest after one year but are not
exercisable until the earlier of December 26, 1995 or the date the closing
price of the Company's Class B Common Stock has been $6.00 per share or greater
for sixty consecutive trading days. These options were granted at an exercise
price of not less than the market price of the stock on the date of grant and
expire after ten years.

At December 31, 1994 and 1993 options to purchase shares of common stock were
as follows:

<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
------------------------------- ----------------------------
December 31, December 31,
------------------------------- ----------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Incentive Stock Option Plan (1)
At year end -
Options outstanding (2) 1,438,500 954,500 855,800 873,600
Options exercisable 241,000 11,500 578,400 569,000
Option price $ .75-$4.09 $1.06-$4.09 $2.50-$6.00 $2.50-$6.00

Non-Employee Director Stock Option Plans (1)
At year end -
Options outstanding (3) 200,000 - 267,100 294,900
Options exercisable 50,000 - 192,200 184,800
Option price $1.81 $ - $2.50-$4.75 $2.50-$4.75
</TABLE>

(1) No options have been exercised under either the Incentive Stock Option
Plan or the Non-Employee Director Stock Option Plans during the years
ended December 31, 1994, 1993 and 1992.
(2) Of which at December 31, 1994 and 1993 options to purchase 277,000
shares and 287,000 shares, respectively, of Class B Common Stock are
not exercisable until the earlier of December 26, 1995, or the date
the Company's Class B Common Stock has been $6.00 per share or greater
for sixty consecutive trading days.
(3) Of which at December 31, 1994 and 1993 options to purchase 75,000
shares and 90,000 shares, respectively, of Class B Common Stock are
not exercisable until the earlier of December 26, 1995, or the date
the Company's Class B Common Stock has been $6.00 per share or greater
for sixty consecutive trading days.

The Company has an Employee Stock Ownership Plan ("ESOP") which allows the
Company to make contributions as determined each year by the Compensation
Committee of the Company's Board of Directors. The ESOP is leveraged with
loans provided by the Company. During 1994 the Company repriced all of the
unallocated shares of the Company's Common Stock held by the ESOP at $1.75 per
share and, thus, reduced the ESOP loans by $4,481,000. Shares are allocated to
participants based on the principal payments made each year in respect of such
loans by the ESOP. All full-time employees are eligible to participate in the
ESOP. The amount charged to general and administrative expense in connection
with the ESOP for the year ended December 31, 1992 was based upon the
historical cost paid by the ESOP for the shares contributed to the participant
accounts during such years. Effective January 1, 1993 the Company adopted a
new method of accounting for the ESOP which requires the amounts charged to
expense (which is associated with the shares contributed each year to the
participants' accounts) to be based on the market price of the Company's Common
Stock, with the difference between the historical cost paid (or for the year
ended December 31, 1994 the repriced amount of $1.75 per share) by the ESOP for
such shares and the average market price of the Company's Common Stock, to be
charged to additional paid-in capital. The total amounts charged to general
and administrative expense in connection with the ESOP for the years ended
December 31, 1994, 1993 and 1992, were $300,000, $256,000 and $1,056,000,
respectively.

38
<PAGE> 39
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

At December 31, 1994 and 1993 the ESOP held the following shares of Common
Stock:

<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Shares of Common Stock allocated to
participants' accounts 869,000 679,000
Shares of Common Stock committed to be
released to participants' accounts in
connection with such years contribution 274,000 220,000
Unallocated shares of Common Stock held
for future years contributions 1,368,000 1,621,000
--------- ---------

2,511,000 2,520,000
========= =========
</TABLE>

The fair market value of the unallocated shares of Common Stock held for future
contributions totaled $800,000 and $3,300,000 at December 31, 1994 and 1993,
respectively.

On January 1, 1994 the Company adopted a 401(k) Plan for all full-time
employees. The 401(k) Plan allows for voluntary employee contributions and for
discretionary Company contributions as determined each year by the Compensation
Committee of the Company's Board of Directors. The total amount charged to
general and administrative expense in 1994 in connection with the 401(k) Plan
was $416,000.

In 1993 the Company adopted a non-qualified supplemental employee retirement
plan ("SERP") that provides certain officers with defined retirement benefits
in excess of qualified plan limits imposed by federal tax law. At December 31,
1994 the SERP (which is unfunded) included vested benefits of $154,000 and
non-vested benefits of $209,000, resulting in an accumulated benefit obligation
of $363,000. The projected benefit obligation at December 31, 1994 totaled
$1,259,000, which when reduced by unrecognized prior service cost of $659,000,
results in a net accrued liability at December 31, 1994 of $600,000. Net
pension expense for the years ended December 31, 1994 and 1993 totaled $418,000
and $182,000, respectively.

7. COMMITMENTS AND CONTINGENCIES

The Company has lease commitments for various office facilities and computer
equipment. Future minimum annual rental payments required under such leases
for the years ending December 31, 1995 through 1999 will be $1,226,000,
$848,000, $672,000, $535,000 and $134,000, respectively. Rental expense for
the years ended December 31, 1994, 1993 and 1992 totaled $1,011,000, $1,025,000
and $1,291,000, respectively.

See Note 11 concerning the letter of credit that the Company entered into in
connection with the sale of its West Virginia proved developed reserves and
associated gathering systems.

39
<PAGE> 40
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 requires disclosure in
respect of the fair value of various financial instruments owned or issued by
the Company. The estimated fair values of such financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
-------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value (1) Amount Value (1)
-------- ------- -------- -------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents (2) $ 6,423 $ 6,423 $ 13,559 $ 13,559
Long-term bank debt (3) 21,000 21,000 15,000 15,000
Senior Secured Notes (4) 75,000 56,250 75,000 77,625
Senior Gas Indexed Notes (4) 99,770 44,897 99,770 104,758
Senior Subordinated Gas
Indexed Notes (4) 230 104 230 237
9% Convertible Subordinated
Debentures (4) 50,000 16,500 50,000 42,875
Letters of Credit (5) - 524 - 788
</TABLE>

The following methods and assumptions were used to estimate the fair
value for each class of financial instruments:

(1) The fair value is an estimate and does not necessarily
represent the amount that would be paid in an actual sale.
(2) The carrying amount approximates fair value because of the
short maturity of those instruments.
(3) The carrying amount approximates fair value because such debt
is secured by a portion of the Company's oil and gas assets
and bears interest at the prime rate plus 1% which approximates
current market conditions.
(4) The fair value was estimated based on quoted market prices.
(5) The fair value was estimated based on the fees to be incurred
in connection with the letters of credit since, under present
circumstances, no amounts will be required to be drawn against
such letters of credit.

9. MAJOR PURCHASERS

The Company had sales to two purchasers which accounted for in excess of 10% of
the Company's oil and gas revenues during 1994, 1993 and 1992. Sales to one of
such purchasers totaled $13,688,000 (34%), $11,541,000 (24%) and $9,088,000
(14%) for 1994, 1993 and 1992, respectively, and sales to the other purchaser
totaled $5,728,000 (14%), $9,078,000 (19%) and $12,423,000 (19%) for 1994, 1993
and 1992, respectively. A discontinuance of oil and gas sales to these two
purchasers would not have a material impact on the Company's operations because
the Company believes that a number of other companies are available to purchase
its oil and gas production.

10. DISCONTINUED OPERATIONS

In July 1992 the Company completed a transaction with MS Gas Resources, Inc., a
newly-formed subsidiary of The Morgan Stanley Leveraged Equity Fund II, L.P.
(the "Morgan Stanley Fund"), pursuant to which the Company's wholly-owned
subsidiary, Mountain Gas Resources, Inc., was merged into MS Gas Resources (the
"MGRI Divestiture") whose name was then changed to Mountain Gas Resources, Inc.
("MGRI"). Prior to the MGRI Divestiture, Mountain Gas Resources owned and
operated all of the Company's natural gas gathering and processing facilities
in the Green River Basin in southwestern Wyoming and marketed natural gas and
natural gas liquids. The cash consideration received in the MGRI Divestiture
was $80.7 million; and, as adjusted for working capital, capital expenditures
and other items, resulted in net cash proceeds of $77.5 million which was used
to prepay an equivalent amount of bank debt. Also, in connection with the MGRI
Divestiture, the Company received an equity interest in MGRI. Such interest
provided the Company with the right to share in any profits realized upon a
subsequent sale of MGRI prior to December 31, 1996. In July 1993 the Company
received $11.6 million from the sale (the "MGRI Equity Sale") of such equity
interest in

40
<PAGE> 41
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

MGRI. The proceeds of the MGRI Equity Sale were used to prepay an equivalent
amount of the Company's bank debt.

The MGRI Divestiture and the MGRI Equity Sale have been recorded as a sale of a
segment of the Company's business. Accordingly, the gas gathering, processing
and marketing operations of Mountain Gas Resources prior to the MGRI
Divestiture (which includes interest expense of $3,376,000 for the year ended
December 31, 1992, that was associated with the $77.5 million of bank debt that
was repaid with the net cash proceeds of the MGRI Divestiture), as well as the
gain on the sale of the MGRI Divestiture and the MGRI Equity Sale have been
reflected in the Company's Consolidated Statements of Operations as
discontinued operations. Such discontinued operations had revenues of
$38,301,000 for the year ended December 31, 1992 (including $941,000 of
intercompany sales).

11. WEST VIRGINIA PROPERTY SALE

In December 1992 the Company completed the sale of the common stock of its
wholly-owned subsidiaries, Peake Energy, Inc. and Peake Operating Company (the
"Subsidiaries"), to Belden & Blake Acquisition, Inc. ("Belden & Blake"). The
proceeds of the transaction totaled $35 million; and, after adjustments for
capital expenditures, net operating cash flow and other items, the net cash
proceeds were $32.6 million, which were utilized to repay bank and other
indebtedness of the Company. The Subsidiaries held assets which included
approximately 43 BCF of proved developed gas reserves and associated gathering
systems, as well as 50,000 barrels of oil reserves located in West Virginia.

The Company retained approximately 28 BCF of proved undeveloped gas reserves
and over 90,000 net undeveloped acres in West Virginia subsequent to the sale,
and such reserves and acreage will be developed by the Company and Belden &
Blake in accordance with a joint drilling participation agreement. This
agreement gives Belden & Blake the option to participate, to the extent of 50%
of the Company's interest (or more by mutual consent), in the development of
such reserves and acreage. The consideration for Belden & Blake's
participation in each well drilled pursuant to the joint drilling participation
agreement is (i) payment of its share of drilling and completion costs, (ii)
payment to the Company of an additional $90 per net acre for its share of the
drillsite acreage allocated to each such well and (iii) payment to the Company
of an overriding royalty of 3.125% (proportionately reduced) in accordance with
its net interest in the revenues attributable to each such well. The Company
believes that, subject to the availability of funds, virtually all of its
proved undeveloped gas reserves and unproved undeveloped acreage will be fully
developed prior to the termination of the joint drilling participation
agreement in 2008; however, the agreement provides that 50% of any such
reserves and/or acreage that might be retained by the Company as of such
termination date would be conveyed to Belden & Blake for no additional
consideration.

A portion of the gas reserves sold to Belden & Blake is subject to a long-term
gas contract providing for prices above the current spot market price for West
Virginia gas. In connection with the sale, the Company guaranteed certain
minimum levels of performance, on an annual basis, by the gas purchaser under
this contract such that should performance under this contract be less than the
levels guaranteed by the Company, Belden & Blake can draw on a letter of credit
entered into by the Company. During the years ending April 1, 1995 through
1999, respectively, the following amounts can be drawn by Belden & Blake on
such letter of credit: $1,877,000, $1,790,000, $1,735,000, $1,692,000 and
$1,656,000.

41
<PAGE> 42
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

12. EVENTS SUBSEQUENT TO DECEMBER 31, 1994

Property Sales

On March 1, 1995 the Company realized $12.5 million of net cash proceeds as the
result of the sale of certain oil and gas properties. Approximately $5 million
of the net cash proceeds from this sale was utilized to prepay indebtedness
under the Revolving Credit Facility and the remaining $7.5 million was added to
the Company's working capital.

13. OIL AND GAS COST AND RESERVE INFORMATION

Capitalized Costs Related to Oil and Gas Producing Activities

The Company's oil and gas operations are conducted entirely in the United
States. Aggregate capitalized costs relating to such operations and related
accumulated depletion, depreciation and amortization are as follows:

<TABLE>
<CAPTION>
December 31,
---------------------------
1994 1993
---------- ---------
(in thousands)
<S> <C> <C>
Oil and gas properties:
Proved $ 484,903 $ 477,756
Unproved:
Subject to amortization 3,151 3,155
Not subject to amortization (1) 23,816 23,601
Accumulated depletion,
depreciation and amortization (284,909) (267,254)
-------- ---------

Net oil and gas properties $ 226,961 $ 237,258
========= =========
</TABLE>

(1) The total as of December 31, 1994 is comprised of costs incurred during
1994, 1993, 1992 and prior to 1992 of $6.2 million, $2.1 million, $3.8
million and $11.7 million, respectively.

42
<PAGE> 43
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Costs Incurred in Oil and Gas Producing Activities

Costs incurred in oil and gas operations and related depletion, depreciation
and amortization per equivalent barrel are as follows:

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------- ------- -------
(in thousands, except per barrel amounts)
<S> <C> <C> <C>
Property acquisition costs:
Proved $ 1,831 $ 1,003 $ 306
Unproved 4,768 1,571 4,343
------- ------- -------
$ 6,599 $ 2,574 $ 4,649
======= ======= =======

Exploration costs $ 3,500 $ 2,965 $ 3,963
======= ======= =======

Development costs $24,420 $15,478 $ 7,262
======= ======= =======

Depletion, depreciation and amortization $17,655 $18,357 $25,984
======= ======= =======

Depletion, depreciation and amortization
per equivalent barrel $ 4.41 $ 4.60 $ 5.08
======= ======= =======

Reduction in the carrying value of
oil and gas properties $ - $ - $15,000
======= ======= =======
</TABLE>

Estimated Quantities of Proved Oil and Gas Reserves (Unaudited)

The reserve information presented below is based upon reports reviewed by the
Company's independent petroleum engineering firm. Reserve estimates are
inherently imprecise and estimates of new discoveries are more imprecise than
those of producing oil and gas properties. Accordingly, these estimates are
expected to change as future information becomes available.

Proved oil and gas reserves are the estimated quantities of oil, gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed oil and gas
reserves are those expected to be recovered through existing wells with
existing equipment and operating methods.

43
<PAGE> 44
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Net quantities of proved reserves and proved developed reserves of oil
(including condensate and natural gas liquids) and gas for the Company as of
the beginning and the end of the years ended December 31, 1994, 1993 and 1992,
as well as the changes in proved reserves during such periods, are set forth in
the tables below.

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1994 (2) 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Oil reserves (thousands of barrels):
-----------------------------------

Proved oil reserves, beginning of period 13,036 13,863 15,938
Revisions of previous estimates 1,076 304 (766)
Extensions, discoveries and other additions 2,816 397 1,329
Purchases of reserves in place 255 113 432
Sales of reserves in place (2,773) (205) (1,193)
Production (1,137) (1,436) (1,877)
------ ------- -------

Proved oil reserves, end of period 13,273 13,036 13,863
====== ======= =======
Proved developed oil reserves, end of period 9,494 9,942 10,001
====== ======= =======

Gas reserves (MMCF):
------------------

Proved gas reserves, beginning of period 302,954 268,871 251,190
Revisions of previous estimates (4,618) 15,450 14,665
Extensions, discoveries and other additions 64,666 31,113 68,892
Purchases of reserves in place 6,242 5,618 5,226
Sales of reserves in place (28,047) (2,758) (51,695)
Production (17,219) (15,340) (19,407)
------- ------- --------
Proved gas reserves, end of period (1) 323,978 302,954 268,871
======= ======= ========

Proved developed gas reserves, end of period 176,207 164,530 131,164
======= ======= ========
</TABLE>

(1) Includes proved undeveloped gas reserves at December 31, 1994,
1993 and 1992 of 26.1 BCF, 27.5 BCF and 28.1 BCF,
respectively, which are subject to a joint drilling
participation agreement as discussed in Note 11.
(2) Includes proved reserves sold subsequent to December 31, 1994
of 18 BCF of gas and .3 MMBbls of oil, of which 12.7 BCF of
gas and .2 MMBbls of oil were proved developed reserves.

44
<PAGE> 45
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
(Unaudited)

Future net cash flows presented below are computed using period-end prices and
costs with consideration of price changes only to the extent provided by
contractual arrangements. Future income tax expenses are estimated after
consideration of statutory tax rates, permanent differences and tax credits.
Future general and administrative expenses and interest expense have not been
considered.

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1994 (2)(3) 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Future oil and gas sales $741,640 $848,193 $811,097
Future production costs 226,459 241,204 216,166
Future development costs 79,959 68,172 70,289
-------- -------- --------
Future net cash flows before income tax 435,222 538,817 524,642
Discount at 10% per annum 198,583 244,167 239,731
-------- -------- --------
Discounted future net cash flows
before income taxes (1) 236,639 294,650 284,911
Future income taxes, discounted
at 10% per annum 11,141 33,011 32,687
-------- -------- --------
Standardized measure of discounted
future net cash flows, after tax $225,498 $261,639 $252,224
======== ======== ========
</TABLE>

(1) Includes proved undeveloped gas reserves at December 31, 1994,
1993 and 1992 with a present value of future net revenues
discounted at 10% of $2,294,000, $3,260,000 and $10,857,000,
respectively, which are subject to a joint drilling
participation agreement as discussed in Note 11.
(2) Includes proved reserves sold subsequent to December 31, 1994
having future net revenues before income taxes, discounted at
10% per annum, of $19.2 million.
(3) The ability of the Company to maintain and/or increase current
levels of oil and gas production and to find and develop new
proved reserves of oil and gas to replace the reserves being
produced in 1995 depends on the availability of funds for
capital expenditures. Due to the Company's current financial
condition and operating cash flow deficit, the Company has
limited funds available for development and other drilling
operations during 1995. Unless the Company is able to
restructure its debt and thus provide for significant amounts
of capital expenditures in 1995, the Company's production and
volumes of proved oil and gas reserves could decline
significantly during 1995 and would result in a reduction in
discounted future net cash flows.

45
<PAGE> 46
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

Standardized Measure of Discounted Future Net Cash Flows, After Tax (Unaudited)

The following are the principal sources of change in the standardized measure
of discounted future net cash flows, after tax.

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Beginning of period $261,639 $252,224 $234,319

Sales of oil and gas
produced, net of production costs (25,787) (31,114) (42,077)

Sales of reserves in place (41,253) (2,737) (45,019)

Purchases of reserves in place 4,476 5,783 8,026

Net changes in price and
production costs (65,284) (18,931) 39,865

Extensions, discoveries and improved
recovery, less related costs 49,656 25,356 68,817

Previously estimated development
costs incurred during the year 10,234 7,216 2,385

Revisions of previous
quantity estimates 1,276 15,036 9,241

Accretion of discount 29,465 28,491 24,294

Net change in income taxes 21,870 (324) (24,068)

Changes in production
rates and other (20,794) (19,361) (23,559)
-------- -------- --------

End of period $225,498 $261,639 $252,224
======== ======== ========
</TABLE>

46
<PAGE> 47
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)

14.SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-----------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Oil and gas revenues $ 10,542 $ 10,145 $ 9,742 $ 10,214 $ 40,643
Gross profit 2,496 1,854 1,811 1,971 8,132
Net loss from continuing operations (5,727) (6,205) (6,803) (5,827) (24,562)
Net loss (5,727) (6,205) (6,803) (5,827) (24,562)
Net loss from continuing operations per share
of Class A Common Stock (.21) (.23) (.25) (.21) (.91)
Net loss from continuing operations per share
of Class B Common Stock (.21) (.23) (.25) (.21) (.91)
Loss per share of Class A Common Stock (.21) (.23) (.25) (.21) (.91)
Loss per share of Class B Common Stock (.21) (.23) (.25) (.21) (.91)

Year ended December 31, 1993:
Oil and gas revenues $ 12,329 $ 12,352 $ 10,963 $ 11,832 $ 47,476
Gross profit 3,465 3,816 2,233 3,243 12,757
Net loss from continuing operations (3,775) (3,564) (7,055) (4,389) (18,783)
Net earnings (loss) (3,775) (3,564) 4,495 (3) (4,389) (7,233)
Net loss from continuing operations per share
of Class A Common Stock (.14) (.13) (.26) (.16) (.70)
Net loss from continuing operations per share
of Class B Common Stock (.14) (.13) (.26) (.16) (.70)
Earnings (loss) per share of
Class A Common Stock (.14) (.13) .17 (.16) (.27)
Earnings (loss) per share of
Class B Common Stock (.14) (.13) .17 (.16) (.27)

Year ended December 31, 1992:
Oil and gas revenues $ 16,668 $ 15,822 $ 16,098 $ 15,854 $ 64,442
Gross profit (loss) (12,542) (1) 3,803 4,274 5,558 1,093
Net loss from continuing operations (21,318) (4,516) (3,642) (3,220) (32,696)
Net earnings (loss) (20,402) (4,463) 4,216 (2) (3,220) (23,869)
Net loss from continuing operations per share
of Class A Common Stock (.74) (.15) (.12) (.11) (1.13)
Net loss from continuing operations per share
of Class B Common Stock (.77) (.18) (.15) (.13) (1.23)
Earnings (loss) per share
of Class A Common Stock (.71) (.16) .15 (.11) (.82)
Earnings (loss) per share
of Class B Common Stock (.74) (.18) .13 (.13) (.92)
</TABLE>

(1) Due to low oil and gas prices which were being received during
this period, the Company was required to reduce the carrying
value of its oil and gas properties (see Note 1).
(2) Includes a $7.8 million gain on the divestiture of the
Company's discontinued gas gathering, processing and marketing
operations (see Note 10).
(3) Includes a $11.6 million gain on the sale of the Company's
remaining equity interest in its discontinued gas gathering,
processing and marketing operations (see Note 10).

47
<PAGE> 48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Incorporated herein by reference to "Election of Directors", "Other Executive
Officers" and "Compliance with Section 16(a)" included in the Proxy Statement
for the Company's Annual Meeting of Stockholders to be held on or about June
20, 1995.

ITEM 11. EXECUTIVE COMPENSATION.

Incorporated herein by reference to "Executive Compensation and Other
Information" and "Compensation of Directors" included in the Proxy Statement
for the Company's Annual Meeting of Stockholders to be held on or about June
20, 1995.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

Incorporated herein by reference to "Security Ownership of Certain Beneficial
Owners and Management" included in the Proxy Statement for the Company's Annual
Meeting of Stockholders to be held on or about June 20, 1995.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Incorporated herein by reference to "Certain Transactions and Relationships"
included in the Proxy Statement for the Company's Annual Meeting of
Stockholders to be held on or about June 20, 1995.

48
<PAGE> 49
PART IV

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

(a) LIST OF DOCUMENTS FILED

(1) Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1994
and 1993
Consolidated Statements of Operations for the Years
Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity
(Deficit) for the Years Ended December 31, 1994,
1993 and 1992
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements

(2) Financial Statement Schedules:
None

(3) Exhibits:

3.1 Restated Certificate of Incorporation of the
Company as filed on March 17, 1987 with the
Secretary of State of the State of Delaware, as
amended by the Certificate of Amendment filed on
December 15, 1987 and the Second Certificate of
Amendment filed on June 8, 1990 with the Secretary
of State of the State of Delaware. (Incorporated
herein by reference to Exhibit 4.1 to Presidio's
Registration Statement on Form S-3, Registration
No. 33-37747.)

3.2 The Company's Bylaws, as amended to February 27,
1991. (Incorporated herein by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1990.)

4.1 Amendment and Restatement of Amendment, Restatement
and Consolidation of Credit Agreement dated as of
August 6, 1993 among the Company, Exploration, each
bank which is a signatory thereto and Chase, as
agent (the "Credit Agreement"). (Incorporated
herein by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the six months
ended June 30, 1993.)

4.2 Amendment No. 1, dated as of December 28, 1993
relating to the Credit Agreement. (Incorporated
herein by reference to Exhibit 4.7 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1993.)

* 4.3 Amendment No. 2, dated as of September 30, 1994
relating to the Credit Agreement.

* 4.4 Amendment No. 3, dated as of December 6, 1994
relating to the Credit Agreement.

* 4.5 Amendment No. 4, dated as of March 21, 1995
relating to the Credit Agreement.

49
<PAGE> 50
4.6 Second Amended and Restated Pledge Agreement dated
as of December 22, 1992, among the Company,
Exploration and Chase, as agent for certain banks,
and Chase as collateral agent for such banks.
(Incorporated herein by reference to Exhibit 4.14
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992.)

4.7 Guaranty dated as of December 1, 1989, from the
Company to each of the financial institutions party
to the Credit Agreement. (Incorporated herein by
reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989.)

4.8 Indenture dated as of February 16, 1989 among the
Company, the subsidiaries of the Company listed on
the signature pages thereto and United States Trust
Company of New York, a New York banking corporation
(the "Trustee"), relating to the Company's Senior
Subordinated Gas Indexed Notes Due 1999 (the "GIN
Indenture"). (Incorporated herein by reference to
Exhibit 10.15 to the Company's Registration
Statement on Form S-2, Registration No. 33-32202.)

4.9 Indenture dated as of February 14, 1990 among the
Company and Bank of Montreal Trust Company,
relating to the Company's 9% Convertible
Subordinated Debentures Due 2015. (Incorporated
herein by reference to Exhibit 4.9 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989.)

4.10 First Supplemental Indenture to the GIN Indenture
dated as of August 5, 1993 among the Company, the
subsidiaries of the Company listed on the signature
pages thereto, as Guarantors (the "Guarantors") and
the Trustee, relating to the Company's Senior
Subordinated Gas Indexed Notes Due 1999.
(Incorporated herein by reference to Exhibit 4.2 to
the Company's Quarterly Report on Form 10-Q for the
six months ended June 30, 1993.)

4.11 Indenture dated as of August 6, 1993 among the
Company, the Guarantors and the Trustee, relating
to the Company's Senior Gas Indexed Notes Due 2002.
(Incorporated herein by reference to Exhibit 4.3 to
the Company's Quarterly Report on Form 10-Q for the
six months ended June 30, 1993.)

4.12 Indenture dated as of August 6, 1993 among the
Company, the Guarantors and the Trustee, relating
to the Company's 11.5% Senior Secured Notes Due
2000. (Incorporated herein by reference to Exhibit
4.4 to the Company's Quarterly Report on Form 10-Q
for the six months ended June 30, 1993.)

4.13 Pledged Assets Agency Agreement dated as of August
6, 1993 between the Trustee, as Pledged Asset
Agent, and Exploration relating to the Company's
11.5% Senior Secured Notes Due 2000. (Incorporated
herein by reference to Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for the
six months ended June 30, 1993.)

4.14 Exchange Agreement dated as of July 19, 1993 by and
among the Company and The Prudential Insurance
Company relating to the Company's Senior
Subordinated Gas Indexed Notes Due 1999 (and such
other beneficial holders as set forth on Schedule A
attached thereto). (Incorporated herein by
reference to Exhibit 4.6 to the Company's Quarterly
Report on Form 10-Q for the six months ended June
30, 1993.)

50
<PAGE> 51
4.15 Subscription Agreement dated as of July 27, 1993
between the Company and The Prudential Insurance
Company relating to the Company's 11.5% Senior
Secured Notes Due 2000 (and such other subscribers
thereunder as set forth on Schedule A attached
thereto). (Incorporated herein by reference to
Exhibit 4.7 to the Company's Quarterly Report on
Form 10-Q for the six months ended June 30, 1993.)

Executive Compensation Plans

10.1 The Company's Incentive and Non-Qualified Stock
Option and Stock Appreciation Rights Plan as
approved by the Company's board of directors (the
"Board of Directors") on October 22, 1987 and
approved by the Company's stockholders (the
"Stockholders") on December 9, 1987 (the "Stock
Plan"). (Incorporated herein by reference to Part
I of the Company's Registration Statement on Form
S-8, Registration No. 33-20496.)

10.2 Amendment to the Stock Plan dated May 25, 1989.
(Incorporated herein by reference to Exhibit 10.12
to the Company's Registration Statement on Form
S-3, Registration No. 33-34350.)

10.3 Second Amendment to the Stock Plan dated May 17,
1990. (Incorporated herein by reference to Exhibit
10.13 to the Company's Registration Statement on
Form S-3, Registration No. 33-34350.)

10.4 Supplemental Executive Retirement Agreement dated
as of October 8, 1993 between the Company and
George P. Giard, Jr. (Incorporated herein by
reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993.)

10.5 Supplemental Executive Retirement Agreement dated
as of October 8, 1993 between the Company and
Robert L. Smith. (Incorporated herein by reference
to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.)

10.6 First Amendment to Employee Stock Ownership Plan of
Presidio Oil Company (Incorporated herein by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the three months
ended March 31, 1994.)

10.7 Second Amendment to Employee Stock Ownership Plan
of Presidio Oil Company (Incorporated herein by
reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the three months
ended March 31, 1994.)

* 10.8 Third Amendment to Employee Stock Ownership Plan of
Presidio Oil Company.

Director Compensation Plans

10.9 The Company's Stock Option Plan for Non-Employee
Directors (the "1988 Plan") as approved by the
Board of Directors on October 22, 1987 and approved
by the Stockholders on December 9, 1987.
(Incorporated herein by reference to Exhibit 10.2
to the Company's Annual Report on Form 10-K for the
six months ended December 31, 1987.)

10.10 First Amendment to the Company's 1988 Plan executed
May 25, 1989, to be effective January 1, 1989.
(Incorporated herein by reference to Exhibit 10.15
to the Company's Registration Statement on Form
S-3, Registration No. 33-34350.)

51
<PAGE> 52

10.11 The Company's 1989 Stock Option Plan for
Non-Employee Directors as approved by the Board of
Directors on March 30, 1989 and approved by the
Stockholders on May 25, 1989. (Incorporated herein
by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-2, Registration
No. 33-32202.)

10.12 The Company's 1990 Stock Option Plan for
Non-Employee Directors as approved by the Board of
Directors on March 15, 1990 and by the Stockholders
on May 17, 1990. (Incorporated herein by reference
to Exhibit 10.17 to the Company's Registration
Statement on Form S-3, Registration No. 33-34350.)

10.13 The Company's 1991 Stock Option Plan for
Non-Employee Directors as approved by the Board of
Directors on December 27, 1991 and by the
Stockholders on May 14, 1992. (Incorporated herein
by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1992.)

10.14 The Company's 1992 Stock Option Plan for
Non-Employee Directors as approved by the Board of
Directors on April 16, 1993 and by the Stockholders
on June 16, 1993. (Incorporated herein by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the six months
ended June 30, 1993.)

Management Warrants

10.15 Amended and Restated Warrant Agreement dated as of
April 16, 1993 between the Company and Oil and Gas
Finance Limited (a company wholly owned by George
P. Giard, Jr.). (Incorporated herein by reference
to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the nine months ended September
30, 1993.)

10.16 Amended and Restated Warrant Agreement dated as of
April 16, 1993 between the Company and Oil and Gas
Finance Limited (a company wholly owned by George
P. Giard, Jr.). (Incorporated herein by reference
to Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the nine months ended September
30, 1993.)

10.17 Amended and Restated Warrant Agreement dated as of
April 16, 1993 between the Company and Robert L.
Smith. (Incorporated herein by reference to
Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the nine months ended September 30,
1993.)

10.18 Warrant Agreement dated as of January 15, 1993
between the Company and Christopher S. Hardesty.
(Incorporated herein by reference to Exhibit 10.15
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993.)

Other Warrants

10.19 Warrant Agreement dated as of September 18, 1987
between the Company and Grant E. Thayer.
(Incorporated herein by reference to Exhibit 10.7
to the Company's Annual Report on Form 10-K for the
six months ended December 31, 1987.)

10.20 Warrant Agreement dated as of September 13, 1989
between the Company and InterLiberty Investments,
Inc. (Incorporated herein by reference to Exhibit
10.37 to the Company's Registration Statement on
Form S-3, Registration No. 33-34350.)

52
<PAGE> 53
Option Agreements

10.21 Option Agreement dated as of November 3, 1987
between the Company and Philip S. Sirianni
("Sirianni"). (Incorporated herein by reference to
Exhibit 10.38 to the Company's Registration
Statement on Form S-3, Registration No. 33-34350.)

10.22 Option Agreement dated as of December 16, 1988
between the Company and Sirianni. (Incorporated
herein by reference to Exhibit 10.39 to the
Company's Registration Statement on Form S-3,
Registration No. 33-34350.)

10.23 Option Agreement dated as of September 13, 1989
between the Company and Sirianni. (Incorporated
herein by reference to Exhibit 10.40 to the
Company's Registration Statement on Form S-3,
Registration No. 33-34350.)

10.24 Amendment to Stock Option Agreement dated November
1, 1993 between the Company and Sirianni.
(Incorporated herein by reference to Exhibit 10.4
to the Company's Quarterly Report on Form 10-Q for
the nine months ended September 30, 1993.)

10.25 Option Agreement dated November 1, 1993 between the
Company and Sirianni. (Incorporated herein by
reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the nine months
ended September 30, 1993.)

Agreements Related to Acquisition and Divestures

10.26 Agreement and Plan of Merger among Exploration,
Mountain Gas Resources, Inc. and MS Gas Resources,
Inc. dated June 11, 1992. (Incorporated herein by
reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated June 11, 1992.)

10.27 Amendment No. 1 to the Agreement and Plan of Merger
dated as of July 16, 1992 among Exploration,
Mountain Gas Resources, Inc. and MS Gas Resources,
Inc. ("Mountain Gas"). (Incorporated herein by
reference to Exhibit 2.2 to the Company's Current
Report on Form 8-K dated July 16, 1992.)

10.28 Drilling Participation Agreement dated as of
December 22, 1992 by and between Presidio West
Virginia, Inc. (a wholly-owned subsidiary of
Exploration) and Peake Operating Company.
(Incorporated herein by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated
December 22, 1992.)

* 21.1 Subsidiaries of the Registrant.

* 23.1 Consent of Deloitte & Touche LLP.

* 23.2 Consent of Huddleston & Co., Inc.

* 27 Financial Data Schedule

* Filed herewith.

53
<PAGE> 54
(b) REPORTS ON FORM 8-K

On December 12, 1994, a Form 8-K, dated December 12, 1994, was filed, which
reported under Item 5. "Other Events", the interest rate on the Company's
Senior Subordinated Gas Indexed Notes Due 1999 and Senior Gas Indexed Notes Due
2002 to be 13.300% for the period February 15, 1995 to May 14, 1995.

54
<PAGE> 55
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

PRESIDIO OIL COMPANY

<TABLE>
<S> <C> <C> <C>
By: /s/ Robert L. Smith Date: March 21, 1995
---------------------------------------- ------------------
Robert L. Smith
President and Chief Operating Officer
</TABLE>

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ George P. Giard, Jr. Chairman of the Board, Chief March 21, 1995
----------------------------- Executive Officer and Director
George P. Giard, Jr. (Principal Executive Officer)

/s/ William D. Benjes, Jr. Director March 21, 1995
-----------------------------
William D. Benjes, Jr.

/s/ Peter H. Havens Director March 21, 1995
-----------------------------
Peter H. Havens

/s/ John W. Hyland, Jr. Director March 21, 1995
----------------------------
John W. Hyland, Jr.

/s/ Raymond J. Kosi Director March 21, 1995
----------------------------
Raymond J. Kosi

Director March __, 1995
-------------------------------
J. Howard Marshall, II
</TABLE>

55
<PAGE> 56
SIGNATURES (Continued)

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Hugh A. L. Mumford Director March 21, 1995
--------------------------------
Hugh A. L. Mumford

/s/ Peter Silvester Director March 21, 1995
--------------------------------
Peter Silvester

/s/ Robert L. Smith President, Chief Operating Officer March 21, 1995
----------------------------- and Director
Robert L. Smith

/s/ Christopher S. Hardesty Treasurer and Chief Financial Officer March 21, 1995
----------------------------- (Principal Financial Officer)
Christopher S. Hardesty

/s/ Charles E. Brammeier Controller March 21, 1995
----------------------------- (Principal Accounting Officer)
Charles E. Brammeier
</TABLE>

56
<PAGE> 57

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
4.3 Amendment No. 2, dated as of September 30, 1994 relating to the Credit Agreement.

4.4 Amendment No. 3, dated as of December 6, 1994 relating to the Credit Agreement.

4.5 Amendment No. 4, dated as of March 21, 1995 relating to the Credit Agreement

10.8 Third Amendment to Employee Stock Ownership Plan of Presidio Oil Company.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Deloitte & Touche LLP.

23.2 Consent of Huddleston & Co., Inc.

27 Financial Data Schedule (Submitted to the SEC for its information).
</TABLE>

<PAGE> 1
EXHIBIT 4.3

AMENDMENT NO. 2

Amendment No. 2 dated as of September 30, 1994 ("Amendment
No. 2") to the Amendment and Restatement of Amendment, Restatement and
Consolidation of Credit Agreement dated as of August 6, 1993, as amended by
Amendment No. 1 dated as of December 28, 1993 ("Amendment No. 1") (as amended
and in effect from time to time, the "Credit Agreement"), among Presidio Oil
Company, a Delaware corporation (the "Guarantor" or "Presidio"), Presidio
Exploration, Inc., a Colorado corporation (the "Borrower" or "Exploration";
each of the Borrower and the Guarantor are referred to as an "Obligor" and
together, the "Obligors"), the banks (the "Banks") parties thereto and The
Chase Manhattan Bank (National Association), as agent for the Banks (in such
capacity, the "Agent"). Capitalized terms used but not defined herein shall
have the meanings specified in the Credit Agreement.

WHEREAS, the Obligors have requested that the Banks modify and
amend certain terms of the Credit Agreement; and

WHEREAS, the Agent and the Banks are willing to agree to such
modifications and amendments on the terms and subject to the conditions set
forth herein;

NOW, THEREFORE, in consideration of the agreements,
representations and warranties set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:

SECTION 1

Amendment

1.1 The Credit Agreement is hereby amended as follows:

(a) Section 2.1 (a) (iv) of the Credit Agreement
is deleted in its entirety.

(b) Section 2.1 (c) (i) of the Credit Agreement
is deleted in its entirety and replaced by the following:
<PAGE> 2
"(i) Working Capital Loans may only be
used for seasonal working capital needs."

(c) Section 4.8 of the Credit Agreement is
amended by deleting "Clean Up" from the phase "Borrowings of, Conversions into,
Continuations as, or duration of Interest Clean Up Period for, Eurodollar
Loans".

(d) The definition of "Clean Up Period" in Annex
I of the Credit Agreement is deleted in its entirety.

(e) Section 3.14(e) in Annex III of the Credit
Agreement is deleted in its entirety and replaced by the following:

"assets other than Mortgaged Properties and
other than assets referred to in clauses (a) - (d) of this Section
3.14 at fair market value so long as not less than 75% of the net
proceeds in excess of $5,000,000 in the aggregate of all such sales
after the date hereof are applied to make capital expenditures
otherwise permitted by Section 3.20 hereof and"

(f) Section 3.24 in Annex III of the Credit
Agreement is deleted in its entirety and replaced by the following:

"3.24 Operating Cash Flow Ratio. In respect
of each fiscal quarter commencing on or after October 1, 1994,
Presidio shall not permit, as of the last day of each such fiscal
quarter, the ratio of (a) the sum of Operating Cash Flow during the
four consecutive fiscal quarters then ending and net proceeds of asset
sales received by Presidio in such four fiscal quarters then ending to
(b) the sum of cash dividends on Presidio common stock and on any
preferred stock of Presidio paid in such four fiscal quarters then
ending, cash interest expense of Presidio and its Subsidiaries paid
during such four fiscal quarters then ending, cash requirements for
the next four succeeding fiscal quarters in respect of scheduled
permanent reductions of Aggregate Commitment and the amount in such
four succeeding

2
<PAGE> 3
fiscal quarters of scheduled principal payments on Debt other than
Debt incurred under the Credit Agreement, to be less than 1 to 1.

(g) Section 3.25 in Annex III of the Credit Agreement is
deleted in its entirety and replaced by the following:

"3.25 Report. The Obligors shall provide
the Agent with a report, certified by an authorized officer of each
Obligor, no later than thirty (30) Business Days following each
calendar quarter identifying for the immediately prior calendar
quarter, each new well drilled or developed by the Borrower or in
which the Borrower obtained an ownership interest constituting real or
personal property, the value of the Borrower's interest therein
calculated on a Securities and Exchange Commission PV 10 basis and
such other information pertaining to each such well as the Agent may
request."

SECTION 2

Representations

2.1 Each Obligor represents that this Amendment No. 2 has
been duly authorized, executed and delivered by such Obligor and is the valid
and binding obligation of such Obligor enforceable against it in accordance
with its terms.

2.2 Each Obligor represents and warrants that, after giving effect
to this Amendment No. 2, the representations and warranties in Annex II of the
Credit Agreement and the Loan Documents are true and correct on the date hereof
as though made on and as of such date (except for the first sentence of Section
2.2 of Annex II of the Credit Agreement which is true and correct as of
December 31, 1992) and that no Default has occurred and is continuing or would
result from the execution of this Amendment No. 2 or the transactions
contemplated hereby.

3
<PAGE> 4
SECTION 3

Conditions Precedent

3.1 The effectiveness of this Amendment No. 2 is subject
to the satisfaction of the following conditions precedent:

(a) this Amendment No. 2 shall have been executed
and delivered and be in full force and effect;

(b) receipt by the Agent of resolutions of the
board of directors (or the executive committee thereof) of each
Obligor authorizing this Amendment No. 2 together with relevant
incumbency certificates, all as certified by a Secretary or an
Assistant Secretary of each Obligor;

(c) all regulatory approvals, consents and other
matters, if any, necessary to complete this Amendment No. 2 shall be
in full force and effect;

(d) the representations and warranties of each
Obligor contained herein and in any Loan Document, after giving effect
to this Amendment No. 2, shall be true and correct on and as of the
date hereof (except for the first sentence of Section 2.2 of Annex II
of the Credit Agreement which is true and correct as of December 31,
1992);

(e) the Agent and the Banks shall have received
an opinion of Bruce R. DeBoer, counsel to the Obligors, relating to
this Amendment No. 2, in a form satisfactory to the Agent and the
Banks;

(f) the Agent and the Banks shall have received
confirmation of the Guaranty by the Guarantor.

SECTION 4

Ratification

4.1 Except as expressly amended hereby

4
<PAGE> 5
or otherwise provided herein, the Credit Agreement and the other Loan Documents
shall remain in full force and effect. The Credit Agreement, as hereby
amended, and all rights and powers created thereby or thereunder and under the
other Loan Documents are in all respects ratified and confirmed and remain in
full force and effect including, without limitation, the liens and security
interests created by the Mortgages which shall continue to secure the
Obligations purported to be secured thereby under the Credit Agreement as
amended hereby. All references to the Credit Agreement in the Credit Agreement
and the other Loan Documents shall be deemed to be references to the Credit
Agreement as amended hereby.

SECTION 5

Expenses

5.1 The Obligors shall pay to the Banks all expenses
(including reasonable fees and disbursements of counsel and local counsel to
the Agent) incurred by them in connection with the preparation, execution and
delivery of this Amendment No. 2.

SECTION 6

Governing Law

6.1 THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

SECTION 7

Miscellaneous

7.1 The headings and captions herein shall be accorded no
significance in interpreting this Amendment No. 2. This Amendment No. 2:

(a) shall be binding and inure to the benefit of
the Obligors, the Banks and the Agent and their respective successors,
assigns, receivers and trustees;

(b) may be modified or amended only in

5
<PAGE> 6
writing signed by each party; and

(c) may be executed in several counterparts and
by the parties hereto on separate counterparts and each such
counterpart, when so executed and delivered shall constitute but one
and the same agreement.

SECTION 8

No Novation

8.1 Except as expressly provided for herein, each Obligor
agrees and acknowledges that this Amendment No. 2 shall not effect a novation
or release of any Obligor in respect of the Obligations.

6
<PAGE> 7
The parties hereto have caused this Amendment No. 2 to be duly
executed as of the day and year first above written.

PRESIDIO OIL COMPANY
PRESIDIO EXPLORATION, INC.

By: /s/ C. S. Hardesty
--------------------------------------
Name: C. S. Hardesty
------------------------------------
Title: Vice President
-----------------------------------

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as
agent

By: /s/ Richard F. Betz
--------------------------------------
Name: Richard F. Betz
------------------------------------
Title: Vice President
-----------------------------------

THE BANK(S):

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)

By: /s/ Richard F. Betz
--------------------------------------
Name: Richard F. Betz
------------------------------------
Title: Vice President
-----------------------------------

CITIBANK, N.A.

By: /s/ Barbara A. Cohen
--------------------------------------
Name: Barbara A. Cohen
------------------------------------
Title: Vice President
-----------------------------------

<PAGE> 1
EXHIBIT 4.4
AMENDMENT NO. 3

Amendment No. 3 dated as of December 6, 1994 ("Amendment No. 3") to
the Amendment and Restatement of Amendment, Restatement and Consolidation of
Credit Agreement dated as of August 6, 1993, as amended by Amendment No. 1
dated as of December 28, 1993 and Amendment No. 2 dated as of September 30,
1994 (as amended and in effect from time to time, the "Credit Agreement"),
among Presidio Oil Company, a Delaware corporation (the "Guarantor" or
"Presidio"), Presidio Exploration, Inc., a Colorado corporation (the "Borrower"
or "Exploration"; each of the Borrower and the Guarantor are referred to as an
"Obligor" and together, the "Obligors"), the banks parties thereto (the
"Banks") and The Chase Manhattan Bank (National Association), as agent for the
Banks (in such capacity, the "Agent"). Capitalized terms used but not defined
herein shall have the meanings specified in the Credit Agreement.

WHEREAS, the Obligors have requested that the Banks modify and amend
certain terms of the Credit Agreement; and

WHEREAS, the Agent and the Banks are willing to agree to such
modifications and amendments on the terms and subject to the conditions set
forth herein.

NOW, THEREFORE, in consideration of the agreements, representations
and warranties set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:

SECTION 1

AMENDMENT

1.1 The Credit Agreement is hereby amended as follows:

(a) Section 2.1(a)(i) of the Credit Agreement is deleted
in its entirety and replaced by the following:

"(i) Each Bank severally agrees, subject to the
terms and conditions hereinafter set forth, to make Loans to
the Borrower from time to time on any Business Day during the
period from and including the Effective Date to but excluding
the Commitment Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the
amount of such Bank's Commitment as then in effect, provided
that no such Loans shall be made if after giving effect
thereto the aggregate principal amount of the Loans
outstanding would exceed the lesser of (A) the amount set
forth in Section 2.1(a)(v) hereof and (B) the applicable
amount indicated on Schedule III hereof."

-1-
<PAGE> 2
(b) Section 2.1(a)(v) of the Credit Agreement is deleted
in its entirety and replaced by the following:

"(v) The aggregate principal amount of Loans
outstanding at any one time shall not exceed $22,400,000,
provided, however, that if (A) the Obligors shall agree to
grant a Lien to the Banks in assets not otherwise constituting
Mortgaged Property hereunder, (B) such assets shall become
Mortgaged Property hereunder and (C) the Agent determines in
its sole discretion to increase the aggregate principal amount
of Loans permitted to be outstanding at any one time, then the
aggregate principal amount of Loans outstanding at any one
time shall not exceed $25,000,000."

(d) The definition of the term "Loan" in Annex I of the
Credit Agreement is amended by adding the words "(including, without
limitation, Section 2.1 of the Credit Agreement)" after the words
"Credit Agreement" in the third line thereof.

(e) Section 3.14(f) in Annex III of the Credit Agreement
is deleted in its entirety and replaced by the following:

"(f) sales of Mortgaged Property (with the consent
of each of the Banks) provided that 100% of the net proceeds
of such sales are applied to reduction of the Aggregate
Commitment; provided, however, that the net proceeds of the
sale of up to 50% of Obligor's working interest in the Table
Mountain Field and up to 50% of Obligor's working interest in
the Culp Draw Field (including the Culp Draw Unit wells,
Scorpion Federal No. 43-9 well and Conoco Federal No. 1 well)
may be used for general corporate purposes, and shall not be
required to be applied to reduce the Aggregate Commitment."

SECTION 2

REPRESENTATIONS

2.1 Each Obligor represents that this Amendment No. 3 has been
duly authorized, executed and delivered by such Obligor and is the valid and
binding obligation of such Obligor enforceable against it in accordance with
its terms.

2.2 Each Obligor represents and warrants that, after giving effect
to this Amendment No. 3, the representations and warranties in Annex II of the
Credit Agreement and the Loan Documents are true and correct on the date hereof
as though

-2-
<PAGE> 3
made on and as of such date (except for the first sentence of Section 2.2 of
Annex II of the Credit Agreement which is true and correct as of December 31,
1992) and that no Default has occurred and is continuing or would result from
the execution of this Amendment No. 3 or the transactions contemplated hereby.

SECTION 3

CONDITIONS PRECEDENT

3.1 The effectiveness of this Amendment No. 3 is subject to the
satisfaction of the following conditions precedent:

(a) this Amendment No. 3 shall have been executed and
delivered;

(b) receipt by the Agent of resolutions of the board of
directors (or the executive committee thereof) of each Obligor
authorizing this Amendment No. 3 together with relevant incumbency
certificates, all as certified by a Secretary or an Assistant
Secretary of each Obligor;

(c) all regulatory approvals, consents and other matters,
if any, necessary to complete this Amendment No. 3 shall be in full
force and effect;

(d) the representations and warranties of each Obligor
contained herein and in any Loan Document, after giving effect to this
Amendment No. 3, shall be true and correct on and as of the date
hereof (except for the first sentence of Section 2.2 of Annex II of
the Credit Agreement which is true and correct as of December 31,
1992);

(e) the Agent and the Banks shall have received an
opinion of (i) Bruce R. DeBoer, counsel to the Borrowers, and (ii)
Brown & Drew, local counsel to the Banks, relating to this Amendment
No. 3, in a form satisfactory to the Agent and the Banks;

(f) the Agent and the Banks shall have received
confirmation of the Guaranty by the Guarantor.

SECTION 4

RATIFICATION

-3-
<PAGE> 4
interests created by the Mortgages which shall continue to secure the
Obligations purported to be secured thereby under the Credit Agreement as
amended hereby. All references to the Credit Agreement in the Credit Agreement
and the other Loan Documents shall be deemed to be references to the Credit
Agreement as amended hereby.

SECTION 5

EXPENSES

5.1 The Obligors shall pay to the Banks all expenses (including
reasonable fees and disbursements of counsel and local counsel to the Agent)
incurred by them in connection with the preparation, execution and delivery of
this Amendment No. 3.

SECTION 6

GOVERNING LAW

6.1 THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

SECTION 7

MISCELLANEOUS

7.1 The headings and captions herein shall be accorded no
significance in interpreting this Amendment No. 3. This Amendment No. 3:

(a) shall be binding and inure to the benefit of the
Obligors, the Banks and the Agent and their respective successors,
assigns, receivers and trustees;

(b) may be modified or amended only in writing signed by
each party; and

(c) may be executed in several counterparts and by the
parties hereto on separate counterparts and each such counterpart,
when so executed and delivered shall constitute but one and the same
agreement.

SECTION 8

NO NOVATION

8.1 Except as expressly provided for herein, each Obligor agrees
and acknowledges that this Amendment No. 3 shall not effect a novation or
release of any Obligor in respect of the Obligations.

-4-
<PAGE> 5
The parties hereto have caused this Amendment No. 3 to be duly
executed as of the day and year first above written.

PRESIDIO OIL COMPANY
PRESIDIO EXPLORATION, INC.

By: /s/ Robert L. Smith
---------------------------
Name: Robert L. Smith
---------------------------
Title: President
---------------------------

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as agent

By: /s/ Richard F. Betz
---------------------------
Name: Richard F. Betz
---------------------------
Title: Vice President
---------------------------

THE BANK(S):

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)

By: /s/ Richard F. Betz
---------------------------
Name: Richard F. Betz
---------------------------
Title: Vice President
---------------------------

CITIBANK, N.A.

By: /s/ Barbara A. Cohen
---------------------------
Name: Barbara A. Cohen
---------------------------
Title: Vice President
---------------------------

-5-
<PAGE> 6
SCHEDULE III

<TABLE>
<CAPTION>
COMMITMENT REDUCTION DATE AGGREGATE COMMITMENT
------------------------- --------------------
<S> <C>
October 1, 1995 $ 21,000,000
January 1, 1996 19,600,000
April 1, 1996 18,200,000
July 1, 1996 16,800,000
October 1, 1996 15,400,000
January 1, 1997 14,000,000
April 1, 1997 12,600,000
July 1, 1997 11,200,000
October 1, 1997 9,800,000
January 1, 1998 8,400,000
April 1, 1998 7,000,000
July 1, 1998 5,600,000
October 1, 1998 4,200,000
January 1, 1999 2,800,000
April 1, 1999 1,400,000
July 1, 1999 -0-

</TABLE>

-1-

<PAGE> 1

EXHIBIT 4.5

AMENDMENT NO. 4

Amendment No. 4 dated March 21, 1995, but effective for all purposes
as of December 30, 1994 ("Amendment No. 4") to the Amendment and Restatement
of Amendment, Restatement and Consolidation of Credit Agreement dated as of
August 6, 1993, as amended by Amendment No. 1 dated as of December 28, 1993,
Amendment No. 2 dated as of September 30, 1994 and Amendment No. 3 dated as of
December 6, 1994 (as amended and in effect from time to time, the "Credit
Agreement"), among Presidio Oil Company, a Delaware corporation (the
"Guarantor" or "Presidio"), Presidio Exploration, Inc., a Colorado corporation
(the "Borrower" or "Exploration"; each of the Borrower and the Guarantor are
referred to as an "Obligor" and together, the "Obligors"), the banks parties
thereto (the "Banks") and The Chase Manhattan Bank (National Association), as
agent for the Banks (in such capacity, the "Agent"). Capitalized terms used
but not defined herein shall have the meanings specified in the Credit
Agreement.

WHEREAS, the Obligors have requested that the Banks modify and amend
certain terms of the Credit Agreement; and

WHEREAS, the Agent and the Banks are willing to agree to such
modifications and amendments on the terms and subject to the conditions set
forth herein.

NOW, THEREFORE, in consideration of the agreements, representations
and warranties set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:

SECTION 1

AMENDMENT

1.1 The definition of the term "Property" in Annex I of the Credit
Agreement is amended by deleting the semi-colon and every word thereafter and
inserting in its place a period.

1.2 The definitions of the terms "Proved Developed Non-Producing
Reserves" and "Proved Developed Producing Reserves" in Annex I of the Credit
Agreement are amended by deleting the word "Mortgaged"" in the second line of
each definition.

1.3 The definition of the term "Proved Undeveloped Reserves" in
Annex I of the Credit Agreement is amended by capitalizing the word
"properties" in the first line thereof.

-1-
<PAGE> 2
1.4 The first sentence of Section 3.20 in Annex III of the Credit
Agreement is deleted in its entirety and replaced by the following:

"Neither Obligor shall make or commit to make, or
shall permit any of its Subsidiaries to make or commit to
make, any expenditure for fixed or capital assets, except in
respect of the exploration for hydrocarbons or the development
of Proved Developed Producing Reserves, Proved Developed
Non-Producing Reserves or Proved Undeveloped Reserves or
acquisition of oil and gas leaseholds or other similar
interests or leasehold improvements and in an aggregate amount
for each fiscal quarter as presented to the Banks by the
Obligors no later than 15 days prior to the first day of each
fiscal quarter and as reviewed by the Banks prior to the
making of such expenditures."

SECTION 2

REPRESENTATIONS

2.1 Each Obligor represents that this Amendment No. 4 has been
duly authorized, executed and delivered by such Obligor and is the valid and
binding obligation of such Obligor enforceable against it in accordance with
its terms.

2.2 Each Obligor represents and warrants that, after giving effect
to this Amendment No. 4, the representations and warranties in Annex II of the
Credit Agreement and the Loan Documents are true and correct on the date hereof
as though made on and as of such date (except for the first sentence of Section
2.2 of Annex II of the Credit Agreement which is true and correct as of
December 31, 1992) and that no Default has occurred and is continuing or would
result from the execution of this Amendment No. 4 or the transactions
contemplated hereby.

SECTION 3

CONDITIONS PRECEDENT

3.1 The effectiveness of this Amendment No. 4 is subject to the
satisfaction of the following conditions precedent:

(a) this Amendment No. 4 shall have been executed and
delivered;

(b) receipt by the Agent of resolutions of the board of
directors (or the executive committee thereof) of each Obligor
authorizing this Amendment No. 4 together with relevant incumbency
certificates, all as certified by a Secretary or an Assistant
Secretary of each Obligor;

-2-
<PAGE> 3
(c) all regulatory approvals, consents and other matters,
if any, necessary to complete this Amendment No. 4 shall be in full
force and effect;

(d) the representations and warranties of each Obligor
contained herein and in any Loan Document, after giving effect to this
Amendment No. 4, shall be true and correct on and as of the date
hereof (except for the first sentence of Section 2.2 of Annex II of
the Credit Agreement which is true and correct as of December 31,
1992);

(e) the Agent and the Banks shall have received an
opinion of Bruce R. DeBoer, counsel to the Borrowers, relating to this
Amendment No. 4, in a form satisfactory to the Agent and the Banks;

(f) the Agent and the Banks shall have received
confirmation of the Guaranty by the Guarantor.

SECTION 4

RATIFICATION

4.1 Except as expressly amended hereby or otherwise provided
herein, the Credit Agreement and the other Loan Documents shall remain in full
force and effect. The Credit Agreement, as hereby amended, and all rights and
powers created thereby or thereunder and under the other Loan Documents are in
all respects ratified and confirmed and remain in full force and effect
including, without limitation, the liens and security interests created by the
Mortgages which shall continue to secure the Obligations purported to be
secured thereby under the Credit Agreement as amended hereby. All references
to the Credit Agreement in the Credit Agreement and the other Loan Documents
shall be deemed to be references to the Credit Agreement as amended hereby.

SECTION 5

EXPENSES

5.1 The Obligors shall pay to the Banks all expenses (including
reasonable fees and disbursements of counsel and local counsel to the Agent)
incurred by them in connection with the preparation, execution and delivery of
this Amendment No. 4.

-3-
<PAGE> 4
SECTION 6

GOVERNING LAW

6.1 THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

SECTION 7

MISCELLANEOUS

7.1 The headings and captions herein shall be accorded no
significance in interpreting this Amendment No. 4. This Amendment No. 4:

(a) shall be binding and inure to the benefit of the
Obligors, the Banks and the Agent and their respective successors,
assigns, receivers and trustees;

(b) may be modified or amended only in writing signed by
each party; and

(c) may be executed in several counterparts and by the
parties hereto on separate counterparts and each such counterpart,
when so executed and delivered shall constitute but one and the same
agreement.

SECTION 8

NO NOVATION

8.1 Except as expressly provided for herein, each Obligor agrees
and acknowledges that this Amendment No. 4 shall not effect a novation or
release of any Obligor in respect of the Obligations.

-4-
<PAGE> 5
The parties hereto have caused this Amendment No. 4 to be duly
executed as of the day and year first above written.

PRESIDIO OIL COMPANY
PRESIDIO EXPLORATION, INC.

By: /s/ C.S. Hardesty
Name: C.S. Hardesty
Title: Vice President

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as agent

By: /s/ Ronald E. Lepes
Name: Ronald E. Lepes
Title: Managing Director

THE BANK(S):

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)

By: /s/ Ronald E. Lepes
Name: Ronald E. Lepes
Title: Managing Director

CITIBANK, N.A.

By: /s/ Barbara A. Cohen
Name: Barbara A. Cohen
Title: Vice President

-5-

<PAGE> 1
EXHIBIT 10.8

THIRD AMENDMENT TO
EMPLOYEE STOCK OWNERSHIP PLAN OF
PRESIDIO OIL COMPANY

WITNESSETH:

WHEREAS, Presidio Oil Company (the "Company") established the Employee
Stock Ownership Plan of Presidio Oil Company effective July 1, 1981, which was
subsequently restated in its entirety effective January 1, 1989, and amended by
those First and Second Amendments to Employee Stock Ownership Plan of Presidio
Oil Company (as amended, the "Plan"); and

WHEREAS, the Company seeks to further amend the Plan in certain
respects as provided herein in accordance with Section 10.4 thereof.

NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the Plan is hereby amended as follows:

1. Section 2.6 of the Plan is hereby amended by adding the
following to the end thereof:

"Any rehired Employee will be required to complete a Year of
Service as defined in Section 7.1 to receive credit for prior Years of
Service for vesting purposes."

2. Section 2.14 of the Plan is hereby amended by deleting the
section in its entirety and inserting the following in its place:

"2.14 [Intentionally Omitted]."

3. Section 2.36 of the Plan is hereby amended by deleting the
section in its entirety and inserting the following in its place:

"2.36 "Year of Service" shall have the meaning ascribed to
such term in Section 7.1."

4. Section 3.1 of the Plan is hereby amended by deleting the
section in its entirety and inserting the following in its place:

"3.1 ELIGIBILITY. Each Employee is eligible to become a
Participant in this Plan on the date each such Employee first
completes an Hour of Service.

-1-
<PAGE> 2
Notwithstanding the above, any Leased Employee and any
Employee who is covered by a collective bargaining agreement under
which pension, profit sharing or similar benefits have been the
subject of good faith bargaining shall not be eligible to participate
in this Plan unless such collective bargaining agreement expressly
provides for the inclusion of such person(s) as Participants in this
Plan (if they otherwise satisfy this Plan's requirements for
participation). In addition to the foregoing, each individual who is
classified as a "temporary employee" on the payroll records of the
Company shall not be eligible to participate. For purposes of
eligibility to participate in the Plan, a "temporary employee" is an
Employee who is paid on an hourly basis and who, upon hire, is advised
that he is employed for a specific project of limited duration and
that upon completion of such project, employment will cease."

5. In respect of Section 4.3 of the Plan, the second paragraph on
Page 14 thereof pertaining to annual additions is hereby amended by deleting
such paragraph in its entirety and inserting the following in its place:

"If in any Plan Year, as a result of the allocation of
forfeitures, a reasonable error in estimating a Participant's
Compensation or other facts and circumstances to which Section
1.415-6(b)(6) of the regulations of the United States Internal Revenue
Service shall be applicable, the Annual Addition to a Participant's
Account would exceed the maximum permissible Annual Addition, then
such Annual Addition shall (i) first be reduced by refunding the
Participant's deferral contributions under the Company's 401(k) plan
(and any Company contributions to the 401(k) plan) to the extent
necessary and (ii) second, if further reduction is necessary, by
applying the excess Company contributions in the Participant's Account
to reduce Company contributions for the next Limitation Year (and
succeeding Limitation Years, as necessary) for that Participant if
that Participant is covered by the plan as of the end of the
Limitation Year."

6. Section 5.4 of the Plan is hereby amended by deleting the
section in its entirety and inserting the following in its place:

"5.4 Allocation of Company Contributions and Forfeitures. As
of the last day of each Plan Year, but after the allocations required
by Section 5.3 as of such date have been completed, the Committee
shall allocate all Company contributions for such Plan Year, together
with the forfeitures occurring during such Plan Year among the
Accounts of Participants who were employed on the last day of the Plan
Year or who died, retired or became disabled during such year in the
proportion which the Compensation of each such Participant for such
Plan Year bears to the aggregate Compensation of all such Participants
for such Plan Year."

-2-
<PAGE> 3
7. Section 7.1 of the Plan is hereby amended by deleting such
section in its entirety and inserting the following in its place:

"7.1 VESTING SCHEDULE - FORFEITURES. A Participant shall
have a fully vested and nonforfeitable interest in his Account balance
upon Normal Retirement Age, death, or termination of employment
because of disability. In all other instances his vested interest
shall be calculated according to the following rules. His non-vested
interest shall be forfeited at the end of the Plan Year in which he
shall have received a distribution of his entire vested interest in
the Plan or, if he has not consented to and received such
distribution, at the end of the Plan Year in which he shall have
incurred five consecutive one year Breaks in Service.

The amount credited to the Participant's Account shall vest in
accordance with the following schedule:

<TABLE>
<CAPTION>
VESTED
YEARS OF SERVICE PERCENTAGE
---------------- ----------
<S> <C>
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
</TABLE>

For purposes of determining Years of Service for the above vesting
schedule, the following rules and definitions shall apply:

"Year of Service" shall mean the accumulation of Periods of
Service, whether or not consecutive, of 365 days. Any Period of
Service in excess of Years of Service in an amount of less than 365
days shall be disregarded in determining a Participant's vested
interest.

"Period(s) of Service" shall mean time periods of employment
between an Employee's Employment Commencement Date (or Re-employment
Commencement Date) and the Employee's Severance From Service Date.
If, however, the Employee is credited with an Hour of Service prior to
the first anniversary of his Severance From Service Date, his period
of severance shall be credited as a Period of Service.

"Employment Commencement Date" shall mean the date an Employee
is first credited with an Hour of Service with the Company.
"Re-employment Commencement Date" shall mean the date an Employee is
credited with an

-3-
<PAGE> 4
Hour of Service following a period of severance of twelve (12) months
or more.

"Severance From Service Date" shall mean the date the
employment relationship is severed due to quit, discharge or
retirement. Any Employee who is absent due to a maternity or
paternity absence described in Section 2.20(d) of the Plan shall not
incur a Severance From Service Date until the first anniversary of
such absence unless prior to such first anniversary date the Employee
quits in which event his Severance From Service Date shall be the date
such Employee quits.

Each Participant who is employed by the Company on August 1,
1994 shall receive credit for a Period of Service equal to the greater
of (i) or (ii) where (i) is 365 days of service for each Year of
Service for vesting determined under the terms of the Plan as of the
date preceding the date this amendment is adopted, plus credit for
each day of employment during the Plan Year in which the amendment is
adopted if the Participant was not credited with 1,000 Hours of
Service in such Plan Year or, if he was credited with 1,000 Hours of
Service in such Plan Year, one day of service for each day subsequent
to the date he earned 1,000 Hours of Service and (ii) is a Period of
Service based on the Participant's entire employment with the Company,
determined as if this vesting provision had been in effect for such
Participant's entire employment period.

Each Participant who has, as of August 1, 1994, at least three
Years of Service shall have his nonforfeit- able percentage computed
under the Plan based on the vesting provisions in this amendment or
the vesting provisions prior to the amendment, whichever produces the
highest percentage.

Any Participant who was both employed by the Company and
terminated employment prior to August 1, 1994 and then rehired
subsequent to August 1, 1994 shall, upon completing a one year Period
of Service, receive credit for a Period of Service equal to 365 days
for each Year of Service determined as of the date he terminated
employment plus the Period of Service beginning on his date of rehire.

8. Section 14.4 of the Plan is hereby amended by deleting the
section in its entirety and inserting the following in its place:

"Section 14.4 [Intentionally Omitted]."

9. It is the express intent of the Company that the foregoing
amendments are prospective in their effect and shall not be applied
retroactively except that a Participant's Years of Service for vesting purposes
shall include Periods of Service prior to the effective date hereof.

-4-
<PAGE> 5
10. Except as herein modified, all of the terms, conditions and
provisions of the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, this Third Amendment to Employee Stock Ownership
Plan of Presidio Oil Company has been executed to be effective as of August 1,
1994.

ATTEST: PRESIDIO OIL COMPANY

By: /s/ Bruce R. DeBoer By: /s/ Robert L. Smith
--------------------- ---------------------
Bruce R. DeBoer Robert L. Smith
Secretary President

-5-

<PAGE> 1
EXHIBIT 21.1

SUBSIDIARIES OF PRESIDIO OIL COMPANY

<TABLE>
<CAPTION>
COMPANY STATE OF INCORPORATION
------- ----------------------
<S> <C>
Presidio Exploration, Inc. Colorado

Presidio West Virginia, Inc. Delaware

Palisade Oil, Inc. Colorado
</TABLE>

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in (i) Registration Statement No.
33-6661 on Form S-8, (ii) Registration Statement No. 33-32202 on Form S-2,
(iii) Registration Statement No. 33-20496 on Form S-8, (iv) Registration
Statement No. 33-37747 on Form S-3, (v) Registration Statement No. 33-34350 on
Form S-3, (vi) Registration Statement No. 33-38620 on Form S-8 and (vii)
Registration Statement No. 33-44909 on Form S-8 of our report dated
March 28, 1995, (which expresses an unqualified opinion and includes an
explanatory paragraph relating to the Company's ability to continue as a going
concern) appearing in this Annual Report on Form 10-K of Presidio Oil Company
for the year ended December 31, 1994.

/s/ Deloitte & Touche LLP
------------------------------
DELOITTE & TOUCHE LLP

Denver, Colorado
March 28, 1995

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEER

We hereby consent to reference of our firm in the Annual Report on Form 10-K of
Presidio Oil Company and its subsidiaries (the "Company") for the year ended
December 31, 1994, and the incorporation by reference thereof into the
Company's Registration Statement on Form S-2 (No. 33-32202), Form S-8 (No.
33-6661), Form S-8 (No. 33-20496), Form S-3 (No. 33-37747), Form S-8 (No.
33-38620), Form S-3 (No. 33-34350) and Form S-8 (No. 33-44909).

Very truly yours,

HUDDLESTON & CO., INC.

By: /s/ Peter D. Huddleston
------------------------------
Peter D. Huddleston

March 23, 1995

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,423
<SECURITIES> 0
<RECEIVABLES> 13,587
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,213
<PP&E> 516,138
<DEPRECIATION> (287,463)
<TOTAL-ASSETS> 259,572
<CURRENT-LIABILITIES> 25,081
<BONDS> 246,000
<COMMON> 2,854
0
0
<OTHER-SE> (23,402)
<TOTAL-LIABILITY-AND-EQUITY> 259,572
<SALES> 40,643
<TOTAL-REVENUES> 40,643
<CGS> 0
<TOTAL-COSTS> 32,511
<OTHER-EXPENSES> 4,564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,130
<INCOME-PRETAX> (24,562)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,562)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,562)
<EPS-PRIMARY> (.91)
<EPS-DILUTED> (.91)

</TABLE>