BASIN EXPLORATION INC, DEF 14A, 1999-04-09

BASIN EXPLORATION INC
DEF 14A, 1999-04-09
CRUDE PETROLEUM & NATURAL GAS

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SCHEDULE 14A

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

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

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

Basin Exploration, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required

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

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

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

------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.

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

(1) Amount Previously Paid:

------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

BASIN EXPLORATION, INC.
370 17TH STREET, SUITE 3400
DENVER, COLORADO 80202
(303) 685-8000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1999

TO THE STOCKHOLDERS:

The Annual Meeting of the Stockholders of BASIN EXPLORATION, INC. will
be held in the Central City Room at the Brown Palace Hotel, 321 17th Street,
Denver, Colorado, on May 12, 1999 at 8:30 a.m. for the following purposes:

1. To re-elect Class I directors to the Board of Directors.

2. To approve the appointment of Arthur Andersen LLP as independent
auditors for the current fiscal year.

3. To amend the Equity Incentive Plan of Basin Exploration, Inc.,
previously approved by stockholders, to qualify stock options and
performance shares granted pursuant to the Plan as "performance-based
compensation" for purposes of Section 162(m) of the Internal Revenue
Code and applicable regulations.

4. To approve an amendment to the Company's Equity Incentive Plan to
allocate 200,000 shares of the Company's Common Stock exclusively to
the grant of performance shares under the Equity Incentive Plan, and
correspondingly to increase by 200,000 shares, from 2,075,344 to
2,275,344, the number of shares of the Company's Common Stock
currently available for issuance under the Equity Incentive Plan for
specific allocation to performance shares.

5. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.

Only stockholders of record as of the close of business on March 25,
1999 (the "Record Date") will be entitled to notice of or to vote at this
meeting or any postponement or adjournment(s) thereof. A copy of the Annual
Report to Stockholders for the Fiscal Year Ended December 31, 1998 is
enclosed with this Notice and Proxy Statement.

WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. ALTERNATIVELY, YOU CAN USE THE TOLL-FREE
TELEPHONE NUMBER OR INTERNET VOTING SITE LISTED ON THE ENCLOSED PROXY CARD.
STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON IF THEY SO DESIRE.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ HOWARD L. BOIGON
Howard L. Boigon
Secretary

March 31, 1999

<PAGE>

BASIN EXPLORATION, INC.

PROXY STATEMENT

FOR THE

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 12, 1999

This Proxy Statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of Basin Exploration, Inc.
(the "Company") for use at the Annual Meeting of Stockholders of the Company
(the "Meeting") to be held in the Central City Room at the Brown Palace
Hotel, 321 17th Street, Denver, Colorado, on May 12, 1999, at 8:30 a.m. or at
any adjournment or postponement thereof. This Proxy Statement and Proxy are
being mailed to stockholders on or about April 12, 1999.

The Company is paying the cost of soliciting Proxies. In addition to
the mailings, the Company's officers, directors and other regular employees,
without additional compensation, may solicit Proxies personally or by other
appropriate means.

ELECTION OF DIRECTORS
(PROPOSAL NO. 1)

There are currently eight members of the Board of Directors. All
directors of the Company serve staggered terms of three years. The terms of
Messrs. John F. Greene, Michael A. Nicolais and Neil L. Stenbuck expire at
the Annual Meeting of Stockholders in 1999. The Board of Directors
recommends that Messrs. Greene, Nicolais and Stenbuck be re-elected as Class
I Directors for three-year terms to expire at the annual meeting in 2002.

Directors are elected by the affirmative vote of a majority of the
shares of Common Stock of the Company represented in person or by proxy at
the Annual Meeting. All of the nominees have expressed their willingness to
serve, but if any of the nominees are not available for election, the Proxy
holders named in the enclosed Proxy form intend to vote for such other person
or persons as the Board of Directors may nominate. Information with respect
to each nominee is set forth under the heading entitled "Management --
Directors and Executive Officers."

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION AS DIRECTORS OF THE PERSONS NOMINATED.

APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)

The Board of Directors has selected Arthur Andersen LLP to be the
independent auditor of the Company for the current fiscal year. Stockholders
will be requested to approve that selection at the Meeting. Arthur Andersen
LLP has served as the Company's independent auditor since January 1992.
Arthur Andersen LLP does not have and has not had at any time any direct or
indirect financial interest in the Company and does not have and has not had
at any time any connection with the Company in the capacity of promoter,
underwriter, voting trustee, director, officer or employee. Neither the
Company, nor any officer, director, or associate of the Company, has any
interest in Arthur Andersen LLP.

A representative of Arthur Andersen LLP will be present at the Meeting
and will have the opportunity to make a statement if he or she so desires and
will be available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF SUCH
APPOINTMENT.

<PAGE>

APPROVAL OF AMENDMENTS TO EQUITY INCENTIVE PLAN
(PROPOSAL NO. 3)

All full-time employees of the Company and its subsidiaries whose
judgment, initiative and efforts are important to the successful conduct of
the Company's business are eligible to participate in the Equity Incentive
Plan. The Equity Incentive Plan is administered by the Compensation and
Incentive Committee of the Board (the "Incentive Plan Committee"), pursuant
to the terms of the Equity Incentive Plan permitting the Board to delegate
such authority. Subject to the terms of the Equity Incentive Plan, the
Incentive Plan Committee determines the persons to whom awards are granted,
the type of award granted, the number of shares granted, the vesting
schedule, the type of consideration to be paid to the Company upon exercise
of options and the terms of any option. Under the Equity Incentive Plan, the
Company may grant to officers, employees and consultants awards of restricted
stock, stock options and performance awards or any combination thereof.

Under the Equity Incentive Plan, the Company may grant both incentive
stock options ("incentive stock options") intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
options that are not qualified as incentive stock options ("non-statutory
stock options"). Incentive stock options may be granted only to persons who
are employees of the Company, while non-statutory stock options may also be
granted to persons who are non-employee directors or are consultants. The
exercise price of incentive stock options may not be less than 100% of the
fair market value of a share of Common Stock on the option grant date (and
not less than 110% of such fair market value in the case of options granted
to persons who own more than 10% of the outstanding Common Stock). The terms
of options granted under the Equity Incentive Plan may not exceed ten years,
or five years in the case of incentive stock options granted to persons
owning more than 10% of the outstanding Common Stock.

Under the performance award component of the Equity Incentive Plan,
participants may be granted an award denominated in shares of Common Stock
("performance shares") or in dollars ("performance units"). The Incentive
Plan Committee establishes performance targets relating to corporate, group,
unit or individual performance for a performance cycle designated by the
Committee, and the achievement of those targets entitles the participant to
payment at the end of the applicable performance cycle to the full amount of
performance shares or performance units awarded to that participant, subject
to adjustment by the Committee in the event of performance exceeding or
falling below the minimum performance target. Payment may be made in cash,
Common Stock or any combination thereof, as determined by the Committee, and
shall be prorated in the event the participant ceases to be an employee of
the Company before the end of a performance cycle by reason of death,
disability or retirement. Failure of the participant to remain employed by
the Company for the full performance cycle for any other reason disqualifies
the participant from any award for that performance cycle. Under the
Performance Share Plan adopted by the Incentive Plan Committee to implement
performance awards, all employees who have demonstrated significant
management potential or who have contributed in a substantial measure to the
successful performance of the Company, as determined by the Incentive Plan
Committee, are eligible to receive performance awards.

Section 162(m) of the Code generally provides that no deduction is
allowed to a publicly held corporation for remuneration to a covered employee
in excess of $1 million annually. "Covered" employees for this purpose
generally includes the corporation's chief executive officer and the four
other highest paid executive officers. Under Section 162(m)(4)(C), the $1
million limit on deductibility does not apply to "performance-based
compensation." This exception to section 162(m) for "performance-based
compensation" applies to stock options and performance shares provided that
the underlying equity incentive plan is properly drafted and administered
pursuant to the requirements of Section 162(m) and the applicable
regulations. To qualify as "performance-based," compensation must satisfy
the following tests:

(1) The award must be payable solely on account of pre-established,
objective performance goals determined by a compensation committee of
the board of directors which consists of two or more outside
directors. The performance goals may be based upon one or more
"business criteria," e.g., earnings, sales, market share, costs, etc.
The objective performance goals must state, by means of a formula or
standard, the method for computing the award, and must preclude
discretion in its application. An award of stock options generally is
deemed to satisfy this test if the award is made by the duly
constituted compensation committee and the option plan states the
maximum number of options which may be granted per employee per
period.

<PAGE>

(2) The material terms governing the award must be disclosed to
stockholders and approved by majority vote. These terms include the
class of employees eligible for the grant, a description of the
"business criteria" on which the performance goals are based, and the
maximum amount of compensation that could be paid to any employee per
period (or a formula used to calculate the award).

(3) The compensation committee must certify that the performance goals and
any other material terms were satisfied before the award is paid.

The Incentive Plan Committee has approved amendments to the Equity
Incentive Plan, and is requesting that stockholders approve those amendments,
to insure that performance share awards and stock option grants under the
Equity Incentive Plan will satisfy the requirements of Section 162(m). These
amendments are as follows:

(A) The Equity Incentive Plan will be amended to state that the maximum
number of options which may be granted per employee per year is
150,000. At present, only the aggregate grant of options in 1998 to
Michael Smith, the chief executive officer of the Company, reaches
this limit. No other grant to any Company employee has exceeded
75,000 shares in any year.

(B) The Equity Incentive Plan will be amended to accomplish the following:

1. Limit performance-based goals to the following business criteria:
earnings, growth in earnings, ratio of earnings to equity or
assets, cash flow, growth in cash flow, ratio of cash flow to
equity or assets, growth in proved reserves quantities or values,
stockholder return vs. peer group returns, levels of costs per
unit of production, finding and development costs per unit, and
levels of debt per proved reserves quantities or values;

2. Eliminate the discretion of the Incentive Plan Committee to
establish such other measures or standards for performance
targets as it might determine.

3. Provide for the performance-based goals to be determined
exclusively by the Incentive Committee and not by the full Board
of Directors.

4. Provide that the maximum amount of any award of performance
shares that can be paid to any employee in any calendar year is
30,000 shares (or equivalent amount in cash, determined on the
basis of the market price as of the effective date of the award,
if the Incentive Plan Committee determines to pay the award in
cash rather than in shares). To date, the largest grant of
performance shares for any performance cycle is 20,000 shares to
Mr. Smith, which may be increased to a maximum of 30,000 shares
if the Company exceeds all of its stated performance goals by
predetermined margins.

The Incentive Plan Committee believes that stock options and performance
share awards play a critical role in tying executive compensation to the
interests of stockholders, in attracting and retaining executives, and in
motivating executives to excel. The limitation on deductibility in Section
162(m) could penalize the Company for exceptional performance by either
handicapping its financial position or limiting its ability to recognize
meaningful executive contribution. Either result compromises the Company's
competitive position vis-a-vis its peers and enhances the risk to the Company
that it will not be able to retain its key executives who may have
opportunities at other companies not operating under these constraints.
Accordingly, the Incentive Plan Committee believes that it is important that
the Company's Equity Incentive Plan meet all the criteria specified in
Section 162(m) of the Code so that the Committee may make compensation
decisions that it deems to be in the best interests of the Company while
maximizing related tax attributes for the Company. The proposed amendments
to the Plan are designed to assure this.

The full text of the proposed amendments to the Equity Incentive Plan is
attached to this Proxy Statement as Appendix A and should be read in its
entirety.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THESE
AMENDMENTS TO THE EQUITY INCENTIVE PLAN.

<PAGE>

AMENDMENT TO EQUITY INCENTIVE PLAN
(PROPOSAL NO. 4)

The Board has unanimously approved and recommended to the stockholders
for approval an amendment to the Company's Equity Incentive Plan that would
(i) allocate 200,000 shares of the Company's Common Stock exclusively to the
grant of performance shares and (ii) correspondingly increase by 200,000
shares, from 2,075,344 to 2,275,344, the number of shares of the Company's
Common Stock that are currently available for issuance under the Equity
Incentive Plan for specific allocation to performance shares.

The performance award component of the Equity Incentive Plan is
described above in Proposal No.3, which requests stockholders to approve
amendments to the Equity Incentive Plan to qualify performance shares issued
under the Plan as "performance-based" for purposes of Section 162(m) of the
Code. The effect of this Proposal No. 4 would be to set aside 200,000 shares
of the Company's Common Stock for award exclusively as performance shares
under the Equity Incentive Plan. Such shares could not be awarded as stock
options, restricted stock, or any other stock grant under the Equity
Incentive Plan. Thus, if they were not used for performance share awards,
they would not be available for any other purpose under the Equity Incentive
Plan. This proposal would also increase the total number of shares available
for grant under the Equity Incentive Plan by 200,000 shares to cover the
shares available for performance share awards.

Currently 2,075,334 shares of Common Stock have been authorized for
issuance under the Equity Incentive Plan. This amount is increased
automatically on each succeeding annual anniversary of May 5, 1998, by a
number of shares equal to one-half of one percent of the Company's then
outstanding shares of Common Stock. Under this formula, based on current
outstanding shares, on May 5, 1999 the total number of shares of Common Stock
that can be issued under the Equity Incentive Plan will be increased by
70,136 shares, for a total of 2,145,470 shares available for issuance as of
the date of the 1999 Annual Meeting of Stockholders.

If this Equity Incentive Plan amendment is approved by the stockholders,
the number of shares available for issuance under the Equity Incentive Plan
would be increased by 200,000, plus automatic increases on each succeeding
annual anniversary of the 1999 Annual Meeting by a number of shares equal to
one-half of one percent of the Company's then outstanding shares of Common
Stock. However, the Company would be able to utilize this additional 200,000
shares only for the grant of performance share awards under the Equity
Incentive Plan.

The Incentive Plan Committee has approved grants aggregating 155,000
performance shares for the 1997-99, 1998-2000, and 1999-2001 performance
cycles, which are subject to increase by an aggregate of up to 77,500 shares
if all performance goals for all three performance cycles were to be exceeded
by specified amounts. Thus, it is possible that 200,000 shares will not be
enough to cover the aggregate performance share grants to date as well as
grants of performance shares that may be made by the Incentive Plan Committee
for performance cycles in the years ahead. In that event, the shortfall
would be made up by shares available generally for grant under the Equity
Incentive Plan, which would in turn reduce the availability of shares for the
grant of other incentive awards of stock options and restricted stock.
Through the date of this Proxy Statement, the total of outstanding options,
performance shares and restricted stock awards issued under the Equity
Incentive Plan was 1,863,077, leaving 212,257 shares available for grant. By
adding 200,000 shares to the shares available for grant under the Equity
Incentive Plan and segregating those shares for use exclusively as
performance shares, this amendment will allow the Company to retain the
flexibility to continue to make other incentive awards as deemed appropriate
by the Incentive Plan Committee to preserve the effectiveness of the Equity
Incentive Plan as an incentive compensation vehicle for the Company's
employees until the Plan's scheduled termination in 2002. The total amount
of shares available for issuance, if the Stockholders approve this proposal,
would constitute 16.2% of the Company's total currently issued and
outstanding shares.

The full text of the proposed amendment to the Equity Incentive Plan is
attached to this Proxy Statement as Appendix A and should be read in its
entirety.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE
EQUITY INCENTIVE PLAN.

<PAGE>

ACTION TO BE TAKEN UNDER THE PROXY

If your shares of Common Stock are held by a broker, bank or other
nominee (in "street name"), you will receive instructions from them on how to
vote your shares. If you hold shares of Common Stock in your own name (as a
"stockholder of record"), you may give instructions on how your shares are to
be voted by:

- marking, signing, dating and returning the enclosed proxy card in the
postage-paid envelope provided; or

- using the toll-free telephone number or Internet voting site listed on
the enclosed proxy card. Specific directions for using the telephone and
Internet voting systems are shown on the proxy card.

When using telephone or Internet voting, the systems verify that you are a
stockholder through the use of a company number for Basin and a unique
control number for you. If you vote by telephone or Internet, please do not
mail the enclosed proxy card.

Whichever of these methods you use to transmit your instructions, your
shares of Common Stock will be voted as you direct. If you sign and return
the Proxy or otherwise designate the proxies named on the proxy card to vote
on your behalf but do not specify how to vote, then the shares will be voted
FOR the recommendations of the Board of Directors. You may revoke a Proxy at
any time prior to its exercise by written notice to the Secretary of the
Company, by submission of another Proxy bearing a later date (by mail,
telephone or Internet) or by attending the Meeting and voting in person.

Your Proxy will also be voted on other business properly presented at
the Meeting. Management knows of no matters other than those described above
to be considered at the Meeting. If, however, any other matter properly comes
before the Meeting, the persons named in your Proxy will vote your Proxy in
accordance with their best judgment. The persons named in the accompanying
Proxy will also, if they believe it advisable, vote to adjourn the Meeting
from time to time, and your Proxy will be voted on any matter that may
properly be raised at the subsequent Meeting.

RECORD DATE AND VOTING SECURITIES

Only holders of the Company's $0.01 par value common stock ("Common
Stock") of record as of the close of business on March 25, 1999 (the "Record
Date"), will be entitled to vote on matters presented at the Meeting. On
March 25, 1999 there were outstanding 13,977,000 shares of Common Stock,
which constituted all the outstanding voting securities of the Company. Each
share of Common Stock will be entitled to one vote on all matters presented
at the Meeting, and there is no cumulative voting. The affirmative vote of a
majority of the total number of shares represented and voted at the Meeting,
assuming a quorum is present, is necessary for the approval of each of the
matters being voted upon.

With respect to the proposals for amending the Equity Incentive Plan,
abstentions will be counted as votes against and broker non-votes will be
treated as not voting on the proposal. "Broker non-votes" are proxies with
respect to shares held in street name as to which (i) instructions have not
been received from beneficial owners or persons entitled to vote and (ii) the
party holding the shares does not have discretionary voting power under
applicable national securities exchange rules or the instrument under which
it holds the shares.

The Company will request banks, brokerage houses, and other institutions
which act as nominees or fiduciaries for owners of Common Stock to forward
this proxy material to persons for whom they hold shares and to obtain
authorization for the execution of proxies.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as to the number of
shares of Common Stock of the Company beneficially owned as of the date of
this Proxy Statement, March 31, 1999, by (i) each person who is known to the
Company to be the beneficial owner of more than 5% of the Common Stock of the
Company; (ii) each of the Company's directors; (iii) the five most highly
compensated executive officers, including the Chief Executive Officer; and
(iv) all

<PAGE>

of the executive officers and directors of the Company as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such holders,
have sole investment and voting power with respect to such shares, subject to
community property laws, where applicable.

<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME AND ADDRESS SHARES OWNED
------------------ -------- ------------
<S> <C> <C>
Michael S. Smith................................ 3,042,254(a) 21.5%
Suite 3400
370 17th Street
Denver, Colorado 80202

State Street Research & Management Company...... 1,412,100(b) 10.1%
One Financial Center, 30th Floor
Boston, MA 02111-2690

Neil L. Stenbuck............................... 128,833(c) *
Suite 3400
370 17th Street
Denver, Colorado 80202

Howard L. Boigon................................ 119,167(d) *
Suite 3400
370 17th Street
Denver, Colorado 80202

Dalton F. Polasek............................... 62,809(e) *
Suite 4656
1001 Fannin
Houston, Texas 77002

Samuel D. Winegrad.............................. 107,000(f) *
Suite 3400
370 17th Street
Denver, Colorado 80202

Donald H. Anderson.............................. 6,333(g) *
Suite 2750
370 17th Street
Denver, Colorado 80202

John F. Greene.................................. 39,500(h) *
P. O. Box 2168
Silverthorne, Colorado 80498

J. Paul Hellstrom............................... 39,784(i) *
75 Overlook Rd.
Morristown, NJ 07960

Michael A. Nicolais............................. 36,500(j) *
40 East 52nd Street, 9th Floor
New York, NY 10022

Larry D. Unruh.................................. 26,500(k) *
717 17th Street, Suite 1600
Denver, Colorado 80202

All directors and executive officers
as a group (13 persons)......................... 3,820,860(l) 26.2%

</TABLE>

<PAGE>

- ------------------------
* Less than 1%

(a) Includes 2,458,394 shares held by Mr. Smith, 304,300 shares held by Mr.
Smith's wife, 96,000 shares held by trusts for Mr. Smith's children, of
which Mr. Smith is trustee, 4,000 shares held by Mr. Smith's daughters,
and 85,393 shares held by KaiTar Foundation, a nonprofit charitable
foundation of which Mr. Smith's wife is president and Mr. Smith is vice
president. Mr. Smith has no voting or investment power with respect to
the shares held by his wife and disclaims beneficial ownership of such
shares. Mr. Smith in his capacity as the trustee of the trusts for his
children and as vice president of KaiTar Foundation has voting and
investment power with respect to the shares held in such capacity and
may be deemed to be the beneficial owner of such shares but disclaims
beneficial ownership of such shares. Also includes stock options for
94,167 shares exercisable within 60 days, 10,666 shares of restricted
stock, the restrictions on which lapse on February 3, 2000, and 55,000
performance shares, the restrictions on which lapse December 31, 1999,
December 31, 2000 and December 31, 2001 in increments of 20,000, 20,000
and 15,000 shares, respectively.

(b) According to a Schedule 13G filed with the Securities and Exchange
Commission, State Street Research & Management Company beneficially owns
1,174,100 shares with sole voting power and 1,412,100 shares with sole
dispositive power. These shares are stated to be in fact owned by
clients of State Street Research & Management Company, and it disclaims
any beneficial interest in them.

(c) Includes stock options for 95,833 shares exercisable within 60 days,
5,000 shares of restricted stock, the restrictions on which lapse on
February 3, 2000, and 15,000 performance shares, the restrictions on
which lapse December 31, 1999, December 31, 2000 and December 31, 2001
in three equal increments.

(d) Includes stock options for 98,167 shares exercisable within 60 days,
5,000 shares of restricted stock, the restrictions on which lapse on
February 3, 2000, and 15,000 performance shares, the restrictions on
which lapse December 31, 1999, December 31, 2000 and December 31, 2001
in three equal increments.

(e) Includes stock options for 41,667 shares exercisable within 60 days,
4,167 shares of restricted stock, the restrictions on which lapse on
February 3, 2000, and 15,000 performance shares, the restrictions on
which lapse December 31, 1999, December 31, 2000 and December 31, 2001
in three equal increments.

(f) Includes stock options for 47,500 shares exercisable within 60 days,
5,000 shares of restricted stock, the restrictions on which lapse on
February 3, 2000, and 15,000 performance shares, the restrictions on
which lapse December 31, 1999, December 31, 2000 and December 31, 2001
in three equal increments.

(g) Includes stock options for 3,333 shares exercisable within 60 days.

(h) Includes stock options for 15,500 shares exercisable within 60 days.

(i) Includes stock options for 25,500 shares and a warrant for the purchase
of 3,284 shares exercisable within 60 days.

(j) Includes stock options for 25,500 shares exercisable within 60 days.

(k) Includes stock options for 25,500 shares exercisable within 60 days.

(l) Includes stock options for 547,667 shares exercisable within 60 days,
39,833 shares of restricted stock, the restrictions on which lapse on
February 3, 2000, 155,000 performance shares, the restrictions on which
lapse December 31, 1999 as to 55,000 shares, December 31, 2000 as to
50,000 shares and December 31, 2001 as to 50,000 shares, and a warrant
for the purchase of 3,284 shares exercisable within 60 days.

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and titles of the
executive officers and the members of the Board of Directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Michael S. Smith(1).......... 43 Chairman of the Board, President and
Chief Executive Officer
Neil L. Stenbuck(1).......... 45 Chief Financial Officer, Vice President and Director
Howard L. Boigon(1).......... 52 Vice President-General Counsel, Secretary and Director
Thomas J. Corley............. 39 Vice President-Engineering and Production
Patrick A. Jackson........... 46 Vice President-Onshore Exploration
Dalton F. Polasek............ 47 Vice President-Gulf Coast Engineering
David A. Pustka.............. 45 Vice President-Gulf Coast Exploration
Samuel D. Winegrad........... 40 Vice President-Corporate Development
Donald H. Anderson(2)(3)..... 50 Director
John F. Greene(2)(3)......... 58 Director
J. Paul Hellstrom(2)......... 58 Director
Michael A. Nicolais(2)....... 73 Director
Larry D. Unruh(2)(3)......... 48 Director

</TABLE>

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

(1) Member of the Executive Committee.

(2) Member of the Compensation and Incentive Committee.

(3) Member of the Audit Committee.

MICHAEL S. SMITH is Chairman of the Board, President, Chief Executive
Officer, a director and a founder of the Company. Mr. Smith has been Chairman
of the Board since 1983 and has been a director since inception. Mr. Smith
was elected President and Chief Executive Officer in 1988. Mr. Smith is past
president and a director of the Colorado Oil and Gas Association and served
on the State of Colorado Governor's Minerals, Energy & Geology Policy
Advisory Board.

NEIL L. STENBUCK is Vice President-Finance, Chief Financial Officer,
Treasurer and a director of the Company. He joined the Company in 1995. He
was previously with United Meridian Corporation where he served as vice
president-capital via the 1994 merger between UMC and General Atlantic
Resources, Inc., where he held the same position beginning in 1989. He
joined General Atlantic in 1987 as vice president-finance and accounting.
Mr. Stenbuck is a certified public accountant.

HOWARD L. BOIGON is Vice President-General Counsel, Secretary and a
director of the Company. Mr. Boigon joined the Company in March 1992.
Previously, he had been a partner in the Denver office of Davis, Graham &
Stubbs since 1978, having been with the firm since 1973 specializing in the
practice of oil and gas law. Mr. Boigon began representing the Company as
outside counsel in 1989. He is past president and currently a director of
the Colorado Oil and Gas Association, a member of the Executive Committee of
RMOGA-Colorado and a member of the Advisory Board of the International Oil
and Gas Educational Center of the Southwestern Legal Foundation. He has
served as Chair of the Mineral Law Section of the Colorado Bar Association
and Trustee of the Rocky Mountain Mineral Law Foundation. He has lectured
and written on various topics of oil and gas law.

THOMAS J. CORLEY is Vice President-Engineering and Production of the
Company. He joined the Company in March 1996. For the previous three years
he was vice president-manager of engineering at St. Mary Land & Exploration
Company where he was responsible for the acquisition efforts and engineering
functions of the company. From 1983 to 1993 he held various positions of
increasing responsibility at General Atlantic Resources, Inc., involving
operations, acquisitions and reservoir engineering and served there last as
director of acquisitions. Mr. Corley is a

<PAGE>

member of the Society of Petroleum Engineers and served as a distinguished
panel member at the 1995 SPE Annual Meeting.

PATRICK A. JACKSON is Vice President-Onshore Exploration. Mr. Jackson
joined the Company in February 1999. He spent the previous 19 years actively
exploring in the United States and around the world with Amoco Production
Company. From 1996 to 1999 Mr. Jackson was a member of a small team that
evaluated the risks and opportunities of prospects in Amoco's worldwide
portfolio. From 1993 to 1996 he served as Amoco's Onshore United States
Exploration Manager. Prior to 1993, his responsibilities included prospect
generation and evaluation, and management in the western United States.

DALTON F. POLASEK, JR. is Vice President-Gulf Coast Engineering of the
Company. Mr. Polasek has been employed in that position since February 1996.
From 1994 to 1996, he was employed by SMR Energy Income Funds, as vice
president of engineering. From 1991 to 1994, Mr. Polasek served as the
director of Gulf Coast acquisitions/engineering for General Atlantic
Resources. Prior to joining General Atlantic, Mr. Polasek served as manager
of planning and business development for Mark Producing Company from 1983 to
1991.

DAVID A. PUSTKA is Vice President-Gulf Coast Exploration and Gulf Coast
Division Manager of the Company. He joined the Company in November 1995.
From 1992 to 1995 he was vice president in charge of United States
exploration for British-Borneo Exploration, Inc., a wholly-owned subsidiary
of British-Borneo Petroleum Syndicate, PLC. From 1983 to 1992, he was
responsible for exploration activities at Walter Oil & Gas Corporation, a
privately held Gulf of Mexico exploration company, becoming a vice president
in 1990. Mr. Pustka is a member of the American Association of Petroleum
Geologists and the Houston Geological Society.

SAM D. WINEGRAD is Vice President-Corporate Development of the Company.
He joined the Company in August 1995. Mr. Winegrad was previously with
United Meridian Corporation where he was vice president-land, the same
position he occupied at General Atlantic Resources, Inc. at the time of its
merger in 1994 with UMC. He joined General Atlantic in 1987 and became vice
president-land the same year.

DONALD H. ANDERSON is a director of the Company. He was elected to that
position in November 1997. He is the executive director and a principal of
Western Growth Capital LLC, a Colorado-based private equity investment and
consulting firm. He joined WGC in March 1997 and has assumed responsibility
for the firm's private equity and consulting services activities. Prior to
joining WGC, Mr. Anderson was chairman, president and chief executive officer
of PanEnergy Services, PanEnergy's non-jurisdictional operating subsidiary,
from December 1994 until PanEnergy's announced merger with Duke Energy in
March 1997. In that capacity, he was responsible for PanEnergy's natural gas
and electric marketing, natural gas gathering and processing, and crude oil
and natural gas liquids trading and pipeline transportation activities. Mr.
Anderson was previously president, chief operating officer and director of
Associated Natural Gas Corporation, the primary purchaser of the Company's
production in the Denver-Julesburg Basin, from 1989 until its merger with
PanEnergy in 1994. He is a director of Genesis Energy, LLC.

JOHN F. GREENE is a director of the Company. He was elected to that
position in February 1996. From 1985 until his retirement in 1995, he served
as executive vice president of exploration and production for the Louisiana
Land and Exploration Company, where he served on the board of directors from
1989 until his retirement. From 1981 to 1985, Mr. Greene was president and
chief executive officer for Milestone Petroleum and then executive vice
president of exploration for Meridian Oil and Gas Company via its merger with
Milestone. He began his career at Continental Oil Company holding various
positions including director of exploratory projects for onshore and offshore
offices and division exploration manager for the western United States. Mr.
Greene serves as a director of the Colorado Wyoming Reserves Company, an oil
and gas exploration company.

J. PAUL HELLSTROM is a director of the Company. He was elected to that
position in March 1992. Mr. Hellstrom was employed by The First Boston
Corporation from 1975 to 1989. At the time of his retirement in 1989, Mr.
Hellstrom was co-head of First Boston's Real Estate Group, earlier having
served as head of its Energy and Project Finance Groups. Prior to joining
First Boston, he was a first vice president in charge of the Project Finance
Group at Blyth Eastman Dillon & Co., Inc. and an Assistant Treasurer with
Manufacturers Hanover Trust Company. Mr. Hellstrom currently serves as a
director of First Reserve Corporation. First Reserve is a direct investor in
natural resource and energy-related industries.

<PAGE>

MICHAEL A. NICOLAIS is a director of the Company. He was elected to that
position in March 1992. Since April 1993 he has been employed by Carret &
Co., Inc. as Senior Managing Director. From June 1991 to April 1993, he was
employed by Goldman Capital Management, Inc. as Managing Director. From 1949
to 1991, Mr. Nicolais was employed by The Clark Estates, Inc., serving as
president from 1968 to 1990. Mr. Nicolais served as a director of Mesa
Petroleum Company from 1969 until 1984. He serves as a director of Hitox
Corp. of America.

LARRY D. UNRUH is a director of the Company. He was elected to that
position in March 1992. Since 1982 he has been the managing tax partner at
Hein + Associates, certified public accountants. During 1980 and 1981, he was
chief financial officer of Otis Energy Inc. Prior to 1980, Mr. Unruh held tax
and accounting positions with Hein + Associates, Coopers & Lybrand and Peat,
Marwick Mitchell & Co. Mr. Unruh is a certified public accountant and is a
member of the Federal Tax Division of American Institute of Certified Public
Accountants. Mr. Unruh serves as a director of Altris Software, Inc., an
electronic imaging company.

All directors of the Company serve staggered terms of three years and
hold office until the annual meeting in the year in which their respective
terms expire or until their respective successors are duly elected and
qualified. Assuming they are re-elected, the terms of Messrs. Greene,
Nicolais and Stenbuck are scheduled to expire in 2002; the terms of Messrs.
Anderson, Smith and Unruh are scheduled to expire in 2001; and the terms of
Messrs. Boigon and Hellstrom are scheduled to expire in 2000. All officers
of the Company serve at the discretion of the Board of Directors. There are
no family relationships between any director, officer or person nominated or
chosen to become a director or officer and any other such persons.

COMMITTEES AND MEETINGS

The Board of Directors of the Company has established an Audit Committee
and a Compensation and Incentive Plan Committee. The Audit Committee's
functions include recommending to the Board of Directors the engagement of
the Company's independent public accountants and reviewing with such
accountants the plans for and the results and scope of their auditing
engagement, their discoveries, and certain other matters relating to their
services provided the Company, including the independence of such
accountants. The Audit Committee met two times in 1998. The Compensation and
Incentive Committee reviewed on behalf of, and made decisions for, the Board
of Directors with respect to executive officers and key employees and
administered the Company's Equity Incentive Plan. The Compensation and
Incentive Committee met four times in 1998.

The Board of Directors met six times in 1998 by conference call or in
person. No director attended fewer than 75 percent of the total meetings of
the Board and all committees of the Board of which such director was a member.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company's directors and executive officers and persons who are
beneficial owners of more than 10% of the Company's Common Stock ("10%
beneficial owners") are required to file reports of their holdings and
transactions in Common Stock with the Commission and furnish the Company with
such reports. Based solely upon its review of the copies the Company has
received or upon written representations it has obtained from certain of
these persons, the Company believes that, as of the date of this Proxy
Statement, all of the Company's directors, executive officers and 10%
beneficial owners had complied with all applicable Section 16(a) filing
requirements.

EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation paid by the
Company to the chief executive officer and the next four most highly
compensated executive officers of the Company for each of the Company's last
three fiscal years:

<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
RESTRICTED SECURITIES ALL
ANNUAL COMPENSATION STOCK UNDERLYING OTHER
------------------------------------ AWARDS OPTIONS COMPENSATION
NAME YEAR SALARY($) BONUS($) OTHER($)(1) ($)(2) (#) ($)(3)
---- ---- --------- -------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael S. Smith 1998 360,000 180,000 - 300,000 150,000 16,530
Chairman of the Board 1997 355,000 160,000 - 300,000 40,000 8,975
President and Chief 1996 320,980 213,000 - - - 8,616
Executive Officer

Neil L. Stenbuck 1998 230,000 95,830 - 75,000 30,000 11,205
Vice President and 1997 225,000 75,000 - 110,000 20,000 9,581
Chief Financial Officer 1996 225,000 150,000 - - - 10,063

Howard L. Boigon 1998 194,150 37,500 - 75,000 30,000 8,455
Vice President and 1997 189,150 75,000 - 110,000 10,000 7,680
General Counsel 1996 171,023 113,490 - - 25,000 7,987

Dalton F. Polasek 1998 143,750 70,000 - 75,000 20,000 7,231
Vice President - 1997 125,000 62,500 - 97,500 10,000 7,748
Gulf Coast Engineering 1996 105,000 10,417 - - 30,000 3,750

Samuel D. Winegrad 1998 150,000 37,500 - 75,000 30,000 7,521
Vice President - 1997 145,000 75,000 - 110,000 15,000 7,250
Corporate Development 1996 125,000 83,333 - - 20,000 7,983

</TABLE>

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

(1) The aggregate amount of perquisites and other personal benefits,
securities, or property is less than the lesser of $50,000 or 10% of the
total of annual salary and bonus for this executive officer for the
indicated year.

(2) The amounts reported in this column represent the value at the date of
grant of (a) performance shares to be released to the grantee if the
Company attains certain performance goals by the end of a three-year
performance cycle which begins with the year of award and (b) in 1997 of
restricted stock to be released to the grantee on February 3, 2000. The
number of shares of unvested performance shares and restricted stock and
the value of such shares calculated at the December 31, 1998 closing
price for the Company's common stock were as follows: Mr. Smith, 50,666
shares, and $636,492; Messrs. Stenbuck, Boigon, and Winegrad, 15,000
shares and $188,438, and Mr. Polasek 14,167 shares and $177,973,
respectively.

(3) These amounts reflect contributions made on behalf of the respective
individual under the Company's 401(k) Plan.

<PAGE>

The following table sets forth information concerning individual
grants of stock options made during the fiscal year ended December 31, 1998
to the Company's chief executive officer and the four named executive
officers:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
% of Total
Options
Granted Exercise Grant Date
Options to Employees or Base Present
Granted in Fiscal Price Expiration Value (4)
Name #(1) Year(2) ($/Sh)(3) Date ($)
---- ------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Michael S. Smith 125,000 36.2% 15.00 2-03-08 1,042,024
Michael S. Smith 25,000 7.2% 19.00 5-05-08 263,979
Neil L. Stenbuck 30,000 8.7% 15.00 2-03-08 250,086
Howard L. Boigon 30,000 8.7% 15.00 2-03-08 250,086
Dalton F. Polasek 20,000 5.8% 15.00 2-03-08 166,724
Samuel D. Winegrad 30,000 8.7% 15.00 2-03-08 250,086

</TABLE>

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

(1) The options become fully exercisable in four years, vesting in equal
installments over the four-year period from the date of grant, with a
ten-year term. The plan pursuant to which the options were granted
provides for tax withholding rights at the discretion of the
Compensation and Incentive Committee.

(2) The Company granted options representing 345,000 shares to employees in
fiscal 1998.

(3) The exercise price may be paid in cash, in shares of Common Stock
(valued at fair market value at time of exercise), or by a combination
of such means of payment, as may be determined by the Compensation and
Incentive Committee.

(4) The grant date present value was estimated using the Black-Sholes option
pricing model with the following weighted average assumptions: risk free
rate of 5.75%; expected dividend yield of 0%; expected life of 5 years;
and expected volatility of 58%. The Company does not believe that the
values estimated by the Black-Sholes model, or any other model, are
necessarily indicative of the values to be realized. Actual gains, if
any, on stock option exercises and Common Stock holdings are dependent
on the future performance of the Common Stock. There can be no
assurances that the amounts reflected in this table will be achieved.

<PAGE>

The following table shows the number of shares covered by all
exercisable and unexercisable stock options held by the named executive
officers as of December 31, 1998, as well as the value of unexercised "in the
money" options at such date.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT 12/31/98 OPTIONS AT 12/31/98($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Smith - - 73,333 176,667 129,792 68,333
Neil L. Stenbuck - - 81,667 43,333 538,646 74,167
Howard L. Boigon - - 79,000 45,000 288,438 102,188
Dalton F. Polasek - - 23,333 36,667 187,292 121,458
Samuel D. Winegrad 30,000 296,250 28,333 46,667 207,604 105,208

</TABLE>

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

(1) Amounts shown represent aggregated fair market value at the share price
on December 31, 1998 of $12.56 per share less aggregate exercise price
of the unexercised in-the-money options held. These values, have not
been, and may never be, realized. Actual gains, if any, on exercise
will depend on the value of the Common Stock on the date of exercise.

EMPLOYMENT CONTRACTS

The Company has entered into a three-year, automatically renewable
management contract with Mr. Smith providing for his services as President
and Chief Executive Officer. The agreement includes provisions relating to
non-competition during employment by the Company, the right to compete
following termination (except with respect to corporate opportunities known
to him prior to termination in the event of a voluntary termination by Mr.
Smith), a base salary of $300,000 subject to annual increase by the Board of
Directors, annual bonus compensation, reimbursement for financial and tax
planning, an automobile allowance, and other perquisites, compensation equal
to three years base salary and bonus compensation payable over time or in a
lump sum in the event of a change of control of the Company, disability
payments to Mr. Smith at 75% of base salary, $1,000,000 of term life
insurance, participation in the Company's benefit plans, confidentiality and
related matters.

The Company has entered into an employment agreement with Mr. Boigon,
and has agreed to execute similar agreements with Messrs. Corley, Stenbuck
and Winegrad, providing that in the event of a change in control of the
Company (as defined in the agreement) and either the subsequent termination
of their employment without cause or their resignation for "good reason" as
defined in the agreement, they will receive compensation equal to three times
their salary and bonus plus the accelerated vesting of all stock options and
other incentive awards. "Good reason" for purposes of the agreement is
defined to include, among others, alteration of duties, responsibilities or
title, reduction in salary, relocation of principal office, or termination of
Mr. Smith's service as chief executive officer.

The Company has entered into employment agreements with Messrs.
Jackson and Pustka containing change of control, termination, salary and
bonus provisions. Mr. Pustka is also entitled to participate in the
Company's Gulf Coast Geoscientist Overriding Royalty Plan, pursuant to which
the Company grants overriding royalty interests in certain Gulf Coast
properties. Mr. Jackson will be entitled to participate in an Onshore
Overriding Royalty Plan to be created by the Company for the granting of
overriding royalty interests to the Company's onshore exploration group on
exploration prospects acquired or generated by the Company as a result of the
efforts of that group.

COMPENSATION OF DIRECTORS

Each director who is not an employee of the Company (the "Non-Employee
Directors") is paid an annual retainer of $20,000 and is reimbursed for
expenses incurred in attending meetings of the Board of Directors and
committee meetings of the Board of Directors.

<PAGE>

In addition, the Company has adopted the Equity Incentive Plan which
contains provisions for incentive awards in which only Non-Employee Directors
will be eligible to participate. A total of 150,000 shares of Common Stock
has been authorized and reserved for issuance under the plan, subject to
adjustments to reflect changes in the Company's capitalization resulting from
stock splits, stock dividends and similar events. Non-employee directors are
granted options to purchase 10,000 shares which vest in equal installments
over a three-year period upon being named to the Board of Directors, and
options to purchase an additional 3,000 shares which vest in one year are
granted to each non-employee director once during each fiscal year following
election to the Board. The Equity Incentive Plan is administered by the Board
of Directors.

Each option granted to Non-Employee Directors expires ten years from
the date of grant. The option exercise price must be equal to 100% of the
fair market value on the date of grant of the option. The option price may be
paid in cash or by surrendering to the Company outstanding Common Stock
already owned by the optionee, valued at fair market value, or by a
combination of such means of payment, as may be determined by the Board.
Options granted to Non-Employee Directors pursuant to the Equity Incentive
Plan may not be exercised more than three months after the option holder
ceases to be a director of the Company, except that in the event of the death
or permanent and total disability of the option holder, the option may be
exercised by the holder (or his estate, as the case may be), for a period of
up to one year after the date of death or permanent or total disability.
Options granted to directors under the Equity Incentive Plan will be treated
as non-statutory stock options under the Internal Revenue Code.

COMPENSATION AND INCENTIVE COMMITTEE REPORT

COMPENSATION PHILOSOPHY

The Compensation and Incentive Committee (the "Committee") is
comprised of the non-employee directors of the Company. The Committee
determines payment amounts and award levels for executive officers of the
Company and makes the decisions regarding grants of stock-based compensation
under the Company's Equity Incentive Plan.

At present, the executive compensation program is comprised of salary,
cash bonus, long-term incentive opportunities in the form of stock options,
performance shares and restricted stock, and benefits typically offered.

In reviewing the Company's performance in 1998 for purposes of
compensation decisions, the Committee noted that Basin continued its growth
and operational progress in 1998, with significant gains in many important
performance measures. However, the market performance of the Company's
stock reflected investor concern over weak oil and gas prices which
unfavorably affected the oil and gas exploration and production sector as a
whole. The challenge for the Committee has been to assess fairly Basin's
1998 performance, and to reward properly the contributions of Basin's
executive officers, while a difficult industry environment has necessitated
financial conservatism and has generated unsatisfactory shareholder returns.

The Company's operational progress in 1998 is reflected in
significantly increased proved reserves, production rates, revenues and
operating cash flows. The Company also made significant improvements in cost
efficiencies, as operating and administrative expenses per unit of production
were reduced to new lows for the Company. Basin also added substantial depth
to its inventory of drilling prospects for future exploration. These
developments evidence continued successful implementation of the Company's
plan to expand operations in the Gulf of Mexico.

Basin expanded its production base in the Gulf from five producing
properties at the end of 1997 to 14 by the end of 1998, and entered the
current year with discovery wells on four more properties under development
for first production. The Company's 154% increase in production in 1998
generated a 99% increase in revenues despite a 22% drop in weighted-average
prices received. The Company was also successful on 11 of 17 wells drilled
during the year, for a success rate of 65%, and that success in turn is
expected to translate into enhanced production in 1999 from existing proved
properties. The Company replaced more than 350% of its production in 1998,
adding 78 Bcfe primarily through its drilling activities. The Company also
participated in 14 winning bids at 1998 Gulf of Mexico lease sales, thereby
increasing its prospect inventory from 31 to 41 at year end, representing
more than a two-year drilling inventory.

The Company's lease operating costs declined to $0.38 per Mcfe in
1998, and to $0.30 for the second half of 1998, from an average of $0.53 in
1997. General and administrative expenses declined from $0.43 per Mcfe in
1997

<PAGE>

to $0.20 per Mcfe in 1998, including an average of $0.18 in the second half
of the year. These per unit costs compare favorably with those of industry
leaders.

It is true that earnings per share, before the ceiling limit
write-down occasioned by low year-end oil and gas prices, were below 1997
earnings. That decline can be attributed to price declines from averages of
$18.80 per barrel and $2.64 per Mcf in 1997 to $13.42 per barrel and $2.21
per Mcf in 1998, after hedging effects. Weak commodity prices at the end of
1998 also held the growth in the present value of the Company's proved
reserves to 3%. Using year end 1997 prices, however, would have resulted in
a 44% increase in reserve value at year end 1998, compared to such value
estimated at the end of 1997.

These accomplishments were substantial and impressive, and reflect
continuing success in the Company's transformation from primarily a Denver
Julesburg Basin developer to a Gulf of Mexico explorer. The Committee
believes that these accomplishments warrant recognition. At the same time,
the Committee cannot ignore the fact that the Company's share price declined
29% from year end 1997 to year end 1998. While this compares unfavorably
with a 41% rise in the Nasdaq Market Index for 1998, Basin's performance was
in the top quartile of exploration and production companies, and was superior
to the performance of the S&P SmallCap 600 O&G E&P Index, the Company's peer
group for corporate performance, which averaged a 40% decline for 1998.
Nevertheless, the Company's share price performance was disappointing.

The Committee is also cognizant of the fact that low commodity prices
have impacted the Company's liquidity by limiting the availability of the
capital markets and the potential for enlargement of the borrowing base
established by its banks under its revolving credit facility. The Company
began 1999 with $30 million of undrawn borrowing capacity under its credit
line, and a $13.2 million working capital deficit, and it is possible that
continuing price weakness could negatively impact capital availability in
1999, such as by impacting cash flows from operations or the Company's
borrowing base. Accordingly, the Company has reduced its capital expenditure
budget by approximately 40% from 1998 levels and anticipates other measures
to protect its liquidity during this difficult period. In such a climate, it
is the Committee's view that cash awards to senior management should be
tempered.

Nevertheless, the Committee is also aware that in times like these it
is also important to protect the Company's most important asset - its people.
Failing to recognize superior individual and corporate performance would
undermine the Company's ability to retain the very people who will determine
its success in weathering the storm and exploiting the many opportunities
that difficult times create. Accordingly, in its 1998 compensation
decisions, the Committee has tried to strike a balance between performance
recognition, investor expectations and resource limitations.

In making these decisions, the Committee has also been guided by a
report it commissioned from William M. Mercer, Inc. at year end 1998, which
compared the compensation of Basin's executives to the executive compensation
levels of an industry peer group, on both an individual and aggregate basis.
Based on that report, and on continuing discussions with Mercer
representatives as well as on other data obtained by the Committee, the
Committee is satisfied that the Company's executive compensation is
competitive with its peers. This conclusion is based on an assessment of the
total compensation received by executives of the Company and of its peers,
i.e., the aggregation of not only salary and bonus but also stock options,
performance shares and other incentive awards. The Committee is employing
this "total compensation" principle to construct a competitive and
incentive-oriented compensation program. As an integral part of this
assessment, the Committee also intends to continue to analyze the
appropriateness of the peer group against which the Company's performance and
compensation are measured, with the objective of rewarding competitively
superior performance within the confines of the arena in which the Company
realistically competes.

SALARIES

The salary of Mr. Smith was initially established by the employment
contract he signed with the Company upon consummation of the Company's
initial public stock offering in May 1992. Under that contract, the
Committee can determine to increase Mr. Smith's salary but cannot decrease it
below 1992 levels, i.e., $300,000. The salaries of the remaining executive
officers are established by the Committee to the extent not specified in
employment agreements. Messrs. Corley and Pustka had such agreements and
their salaries for 1998 were accordingly negotiated when they joined the
Company. However, the Committee continues to monitor the Company's executive
compensation in comparison to compensation for executive officers paid by the
companies in its peer group so that the Company can

<PAGE>

remain competitive. On that basis, in its salary decisions for 1998, which
were made early in the year, the Committee approved modest cost-of-living
increases for several officers.

As indicated above, the Committee will continue to evaluate the
salaries of the executive officers in relation to salaries in the industry to
assure that the Company's salary levels are competitive. At the same time,
the Committee believes that salary increases are not necessarily the
preferred method of rewarding individual and/or corporate performance.
Except for increases necessary to reflect increases in an officer's
responsibility or to reflect salaries paid by the Company's competitors, the
Committee expects to continue to focus more heavily on incentive-based
compensation for executive officers rather than salary increases.

CEO SALARY. For 1998 Mr. Smith received a modest cost-of-living
increase. The Committee intends to continue to evaluate Mr. Smith's salary
in comparison to the CEO's and chairmen of the Company's peer group but
intends to continue to emphasize compensation for Mr. Smith based on Company
success rather than salary increases.

BONUSES

In 1997, the Company had significant success in implementing its
strategy, including the development of its operations and building its asset
base in the Gulf of Mexico and raising additional capital for growth of its
business through an equity offering. The Company substantially outperformed
its peer group in stockholder return and significantly increased its
performance on all measures, including revenues, cash flow, earnings and
reserves. The Company began 1998 in a significantly stronger position than
it began the prior year. To recognize those achievements, the Committee
awarded bonuses in equal parts cash and restricted stock vesting in two years
to executive officers other than Mr. Smith aggregating approximately $875,000
in value (assuming a market value for the restricted stock at its share price
on the date of grant in February 1998).

For 1998, as indicated above, the Company performed well, although
not at the relative level experienced in 1997. The Company made important
progress in 1998 in solidifying implementation of its business plan and
achieved meaningful growth. The Company's stock price reflected this
performance to an extent, especially in the first half of the year when the
stock reached its all-time high on two occasions, but it declined over the
second half of the year to finish 29% below its 1997 year end price.
Although disappointing, that performance still placed the Company in the top
quartile among independent exploration and production companies and bettered
the 40% decline in the S&P SmallCap 600 index reflected on the Performance
Graph presented elsewhere within this Proxy Statement.

The Committee believes that these achievements merited recognition,
although not at the level of last year's bonuses. Accordingly, in its year
end 1998 compensation decisions, the Committee approved cash bonuses for
executive officers other than Mr. Smith aggregating approximately $325,000,
or 37% of the value of the aggregate bonuses awarded to executive officers
other than Mr. Smith last year.

In its 1998 bonus decisions, the Committee determined that it was
important to recognize the disproportionate contribution of the Company's
offshore operation to the Company's 1998 performance, which not only
accounted for 83% of the Company's 1998 production and all of its reserve and
revenue growth but also generated higher than normal workloads and stress
levels. Onshore, the Company's operational performance was focused largely on
preserving value in the face of deteriorating commodity prices, although the
Company did lay the groundwork for potential future growth in its onshore
operation by acquiring an interest in a basin-centered gas play in the Green
River Basin in southwestern Wyoming and recruiting experienced onshore
geoscientists to develop the Company's prospect generation capability. While
it is true that Denver executives support the Houston operation, the relative
contributions of and demands on the Houston-based executives were greater in
1998. Accordingly, higher bonuses were generally allocated to the
Houston-based officers.

CEO BONUS. The Committee awarded a cash bonus to Mr. Smith in the
amount of $180,000, which was approximately 56% of his aggregate cash and
stock bonus in 1997. The Committee believed that this level of bonus fairly
reflected the Company's significant accomplishments of 1998 as well as its
disappointing returns to shareholder and the difficult environment presently
facing the industry.

17
<PAGE>

INCENTIVE AWARDS

The Company's Equity Incentive Plan is designed to align a significant
portion of the executive compensation program with stockholder interests.
The Equity Incentive Plan permits the granting of several different types of
stock-based awards. The Committee believes that it is important to use stock
options and performance shares for its executive officers as a cornerstone of
incentive compensation to tie their remuneration directly to the growth of
stockholder value and the accomplishment of corporate goals. As indicated
above, the Committee's objective is to create a total compensation package
for executives which is competitive and incentive-oriented. Accordingly, the
Committee continues to look for ways to improve the Company's executive
incentive program. In that regard, the Committee has extended the vesting
period of executive stock options from three years to four years to enhance
their retention effect.

For similar reasons, the Committee also has approved, subject to
stockholder approval, an increase in the availability of shares under the
Equity Incentive Plan from 2,075,344 to 2,275,344 based on current
outstanding shares. These additional 200,000 shares are to be used
exclusively for performance share awards under the Equity Incentive Plan.
The Committee agrees with senior management that, as described in Proposal
No. 4 of this Proxy Statement, this increase is important for the Company to
be able to continue to recruit the high level of management talent required
to execute the Company's business plan. The effect of this proposal will be
to free up 200,000 shares for stock options (and restricted stock, if
appropriate) for use in recruiting new executive level and technical
personnel and in creating meaningful employment incentives for existing
senior management. Stock options were a significant factor in the Company's
ability to attract the new executive officers, other officers, key managers,
and Gulf Coast geoscientists in 1995, 1996 and 1997, and in attracting the
Company's new onshore exploration team in the past few months. Stock options
were also important in the recently signed renewal of the employment
agreement of David Pustka, head of the Company's Gulf of Mexico operation.
Equally as important is the fact that the new shares will be used exclusively
as performance shares, which the Committee believes is an especially
effective motivational and retention tool. It will give the Committee
increased flexibility to make performance share awards for additional
three-year performance cycles until the Equity Incentive Plan expires in
2002.

The Committee made its second award of performance shares in 1998.
As with the first award in 1997, the Company must meet a minimum threshold of
performance as to each stated performance goal for the three-year performance
cycle before any performance shares are actually earned. The percentage
earned by participating employees can range from 0 to 150% of the amounts
awarded, depending upon the results obtained for each of the performance
goals. No award is actually earned until the end of the performance cycle,
when achievement of the performance goals is determined.

The Committee awarded a total of 50,000 performance shares in the
aggregate to all executive officers for the 1998-2000 performance cycle,
based upon the following performance criteria:

1. One-third based upon the Company's three-year average of reported
costs and expenses (combined LOE, production taxes, G&A and
depletion expense) per unit of production (Mcfe), excluding
effects of any ceiling test write-down;

2. One-third based upon the Company's three-year average increase in the
value of proved reserves, excluding effects of price changes.

3. One-third based upon the Company's three-year average total
stockholder return relative to the performance of the peer group of
companies used for annual comparison of the Company's stock
performance in its proxy statements.

In addition to performance shares, in early 1998 the Committee approved
awards of stock options covering a total of 170,000 shares to certain
executive officers other than Mr. Smith to complement the performance share
awards in promoting executive retention and alignment of the interests of
executive officers with those of stockholders and remain competitive with
peers. The awards ranged between 20,000 and 30,000 shares per officer.
Prior to these grants, the executive officers as a group held a total of
454,000 stock options (not including those held by Mr. Smith), or an average
of 75,666 per officer. In considering these new awards, the Committee
reviewed analyses (based on data for

<PAGE>

1996, the last year for which information was available at the time these
awards were made in February 1998) of the stock ownership of executive
officers of the Company's peer group companies and determined that the
Company's executive officers as a group ranked below the median of their peer
group. As with bonuses, the Committee views such peer group analyses as
helpful but not controlling in its long-term compensation awards and intends
to continue to exercise its subjective judgment as to the appropriate level
and type of awards to serve as performance incentives and maximize
stockholder return.

CEO INCENTIVE AWARDS. In 1998, the Committee awarded 20,000
performance shares to Mr. Smith for the 1998-2000 performance cycle and
awarded him a total of 150,000 stock options in two grants, one of which (for
25,000 shares) was contingent on stockholder approval of increasing the
number of shares available under the Equity Incentive Plan. The Committee
expects to continue to award performance shares and stock options to Mr.
Smith to reflect his critical importance to the growth of the Company and to
align his interests with those of other stockholders. Although the Committee
reviewed incentive awards for CEO's in the Company's peer group, the
Committee based Mr. Smith's award on what it believed to be an effective and
appropriate level of inducement to foster the growth in Company performance
that would benefit stockholders.

SECTION 162(m) POLICY

Under Section 162(m) of the Internal Revenue Code, and applicable
regulations, public companies are precluded from deducting for tax purposes
compensation paid to executive officers in excess of $1 million unless the
compensation is performance-based within the requirements of the regulations.
The Company's Incentive Plan awards are intended to constitute qualified
"performance-based compensation" within the meaning of Section 162(m) so that
the deduction disallowance should not be applicable to compensation paid to
executive officers in the form of stock options and performance shares. In
order to eliminate any doubt on whether such awards meet the criteria of
Section 162(m), the Committee has endorsed the amendments to the Company's
Equity Incentive Plan presented in Proposal No. 3 in this Proxy Statement.
Since the first award of performance shares will vest after year end 1999, it
is possible, depending on how many performance shares are earned, if any, and
on the price of the Company's stock, that Mr. Smith's compensation could
exceed $1 million for 2000 if the performance shares are included in that
calculation. The Committee currently does not anticipate that the
compensation of any executive officer during 1999 will exceed the limits on
deductibility for 1999. The Committee has not established a formal policy on
the extent to which its compensation decisions would be affected by the
deductibility limits of Section 162(m) but in determining a policy for future
periods, the Committee would expect to consider a number of factors,
including the tax position of the Company, the materiality of amounts likely
to be involved, and maintaining the Company's competitive position.

Donald H. Anderson
John F. Greene
J. Paul Hellstrom
Michael A. Nicolais
Larry D. Unruh

<PAGE>

PERFORMANCE GRAPH

The following graph compares the Company's Common Stock with the
performance of the S&P SmallCap 600 Oil & Gas Exploration and Production (O&G
E&P) Index and the Nasdaq Composite Index for the period December 1993
through December 1998. The graph assumes that the value of the investment in
the Company's Common Stock and in each index was $100 on December 31, 1993
and that all dividends were reinvested.

CUMULATIVE TOTAL RETURN COMPARISON

<TABLE>
<CAPTION>
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basin Exploration, Inc. 100 97 43 55 156 110
S&P SmallCap 600 (O&G E&P) 100 95 114 196 176 106
Nasdaq Stock Market-US 100 98 138 170 209 293

</TABLE>

<PAGE>

CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS

Set forth below is a description of transactions entered into between
the Company and certain of its officers, directors, and/or employees during
the last fiscal year.

OVERRIDING ROYALTY PLANS. David Pustka, vice president and general
manager of the Company's Gulf Coast Division, participates in the Company's
Gulf Coast Geoscientist Overriding Royalty Plan. Pursuant to that Plan, in
1998 Mr. Pustka received overriding royalties averaging 0.6% burdening the
Company's initial interests in 22 leases with exploratory prospects situated
in waters offshore the Gulf of Mexico.

The Company has agreed to create an onshore overriding royalty plan
comparable to the offshore plan for the benefit of Patrick Jackson, vice
president - onshore exploration, and certain other members of his exploration
group to be hired. Under this plan, the members of the onshore exploration
group will participate in overriding royalties to be granted by the Company
on onshore property acquired or generated by them.

DATE OF RECEIPT OF STOCKHOLDER PROPOSALS

Stockholder proposals for inclusion in the Proxy Statement for the 2000
Annual Meeting of Stockholders must be received at the principal executive
offices of the Company on or before December 1, 1999.

ANNUAL REPORT

1998 ANNUAL REPORT TO STOCKHOLDERS. The Annual Report to Stockholders of
the Company for the fiscal year ended December 31, 1998, is enclosed. The
Annual Report, which includes audited financial statements, does not form any
part of the materials for the solicitation of Proxies.

PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN
THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT
WILL SAVE THE EXPENSE OF FURTHER MAILING.

BY ORDER OF THE BOARD OF DIRECTORS

HOWARD L. BOIGON
SECRETARY

March 31, 1999

<PAGE>

APPENDIX A

Proposed Resolutions of the
Stockholders of
BASIN EXPLORATION, INC.

1999 Annual Meeting of Stockholders

PROPOSAL NO. 3

RESOLVED, that the following proposed amendments to the Company's Equity
Incentive Plan are hereby ratified, adopted and approved in all respects:

(A) The maximum number of options which may be granted per employee per
year is 150,000.

(B) Article 9, the performance share section of the Equity Incentive Plan,
is amended as follows:

2. Eliminate the discretion of the Incentive Plan Committee to
establish such other measures or standards for performance
targets as it might determine.

3. Provide for the performance-based goals to be determined
exclusively by the Incentive Committee and not by the full Board
of Directors.

PROPOSAL NO. 4

RESOLVED, that the proposed amendment to the Company's Equity Incentive
Plan to increase the number of shares of the Company par value $.01 per share
common stock authorized for issuance under the Plan by 200,000 shares, such
shares to be dedicated exclusively to the award of performance shares under
the Performance Share Plan, as described in the Proxy Statement, is hereby
ratified, adopted and approved in all respects.

22
<PAGE>
PROXY
BASIN EXPLORATION, INC.
370 17TH STREET, SUITE 3400
DENVER, COLORADO 80202

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Michael S. Smith and Howard L. Boigon and each of them, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of Basin Exploration, Inc. held of record by the undersigned on March 25,
1999, or with respect to which the undersigned is otherwise entitled to vote or
act, at the Annual Meeting of Stockholders to be held on May 12, 1999 or any
adjournment thereof.

1. Election of Directors
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed below
below, see instructions)
John F. Greene, Michael A. Nicolais and Neil L. Stenbuck

INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST.

2. Proposal to approve the appointment of Arthur Andersen LLP as independent
auditors for the current fiscal year.

/ / FOR / / AGAINST / / ABSTAIN

3. Proposal to amend the Equity Incentive Plan of Basin Exploration, Inc.,
previously approved by stockholders, to qualify stock options and
performance shares granted pursuant to the Plan as "performance-based
compensation" for purposes of Section 162(m) of the Internal Revenue Code
and applicable regulations.

/ / FOR / / AGAINST / / ABSTAIN

4. Proposal to increase by 200,000 shares the number of shares of the Company's
Common Stock available for issuance under the Equity Incentive Plan and to
amend the Company's Equity Incentive Plan to allocate those additional
200,000 shares exclusively to the grant of performance awards.

/ / FOR / / AGAINST / / ABSTAIN

5. In their discretion, the Proxies are authorized to vote upon such business
as may properly come before the meeting or any adjournment thereof, upon
matters incident to the conduct of the meeting and upon the election of
substituted nominees for Director designated by the Board of Directors if
one or more of the persons named in Proposal 1 above is unable to serve as a
Director.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSALS 1, 2,
3 AND 4.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN. IN THE
ABSENCE OF INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2, 3 AND 4.
Dated: __________________________________________ , 1999.
Receipt of Notice of the Annual
Meeting of Stockholders and the
accompanying Proxy Statement is
hereby acknowledged. Please sign
exactly as name appears below.
When shares are held by joint
tenants, both should sign. When
signing as attorney, as executor,
administrator, trustee, or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.

----------------------------------
Signature of Stockholder

----------------------------------
Signature if held jointly

PLEASE MARK, SIGN, DATE, AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.