TRANSMONTAIGNE OIL CO - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[ x ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
For the transition period from July 1, 1995 to April 30, 1996 File No. 1-11763

TRANSMONTAIGNE OIL COMPANY

Delaware 06-1052062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

370 Seventeenth Street, Suite 900
Denver, Colorado 80202
(Address, including zip code, of principal executive offices)
(303) 605-1798
(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
------------------- -------------------

Common Stock; $.01 par value The 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 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 report), 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 ]

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value is computed by reference to the last
sale price of the Registrant's Common Stock, on the American Stock Exchange on
July 12, 1996, $11.125.

$46,703,250

Shares of Common Stock outstanding on July 12, 1996: 20,805,667.

TABLE OF CONTENTS

Item Page No.

Part I 1. Business................................................ 2

2. Properties..............................................13

3. Legal Proceedings.......................................13

4. Vote of Security Holders................................13

Part II 5. Market for Common Stock.................................14

6. Selected Financial Data.................................15

7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........16

8. Financial Statements and Supplementary Data.............23

9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures................24

Part III 10. Directors and Executive Officers........................25

11. Executive Compensation..................................28

12. Security Ownership of Certain Beneficial
Owners and Management..................................33

13. Certain Relationships and Related Transactions..........36

Part IV 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K....................................38

1

PART I

ITEM 1. BUSINESS

General

The Company is a holding company which pursues, through its subsidiaries,
business opportunities in the downstream sector of the petroleum industry. The
Company's principal operating subsidiary, Continental Ozark, Inc. ("COZ"), is
engaged in the transporting, storing and terminaling and the wholesale marketing
of refined petroleum products (primarily unleaded gasoline, No. 2 diesel oil and
jet fuel) in the mid-continent region of the United States and in the gathering,
storing and transporting of crude oil in east Texas.

TransMontaigne Oil Company ("Old TransMontaigne") merged (the "Merger") with
and into Sheffield Exploration Company, Inc. ("Old Sheffield"), effective June
4, 1996. Old Sheffield was incorporated in the state of Delaware in 1981. Old
Sheffield became the surviving corporation of the Merger, its name was changed
to "TransMontaigne Oil Company" ("the Company") and its fiscal year end was
changed to April 30. Under the terms of the Merger (i) each share of common
stock, $.10 par value per share, of Old TransMontaigne ("Old TransMontaigne
Common Stock") issued and outstanding immediately prior to the closing of the
Merger was converted at the closing into the right to receive one share of
common stock, $.01 par value per share, of the Company ("New Common Stock"),
(ii) each 2.432599 shares of Old Sheffield common stock issued and outstanding
immediately prior to the Effective Time ("Old Sheffield Common Stock") became
at the Effective Time one share of New Common Stock, and (iii) the number of
authorized shares of New Common Stock was increased to 40,000,000. After the
Merger, the previous holders of Old TransMontaigne Common Stock owned
approximately 93% of the outstanding New Common Stock, and designees of Old
TransMontaigne accounted for a majority of the Company's Board of Directors.
The Merger was accounted for as a reverse acquisition and therefore information
(except for stock prices) included herein is principally that of Old
TransMontaigne and, where relevant, that of the Company.

In February 1996, Old TransMontaigne participated with Old Sheffield in the
formation of Bear Paw Operating Company, LLC ("BPOC"), which is engaged in the
contract management and operation of downstream petroleum facilities, the owners
of which desire to reduce operating costs without disposing of their smaller
systems. BPOC is currently managing 15 such systems for a major interstate
pipeline company. Before the Merger, Old TransMontaigne and Old Sheffield each
owned 45% of BPOC. Since the Merger, the Company owns 90% of BPOC.

In April 1995, Old TransMontaigne privately placed $30 million of new common
equity, of which $20 million was invested in and used to pay down debt of its
wholly-owned subsidiary, COZ. In April 1996, Old TransMontaigne completed the
private placement of an additional $25 million of new common equity. The
Company plans to make further investments to support COZ's and BPOC's
businesses, as well as investments in other complementary businesses engaged in
the downstream sector of the petroleum industry.

The executive offices of the Company are located at 370 17th Street, Republic
Plaza, Suite 900, Denver, Colorado 80202, and its telephone number is (303)
605-1798.

2

Business of COZ

General

The Company's principal operating subsidiary, COZ, is engaged in the
transporting, storing and terminaling and the wholesale marketing of refined
petroleum products (principally unleaded gasoline, No. 2 diesel oil and jet
fuel) in the mid-continent region of the United States and in the gathering,
storing and transporting of crude oil in east Texas. COZ owns and operates 741
miles of pipeline (the NORCO pipeline, the Razorback pipeline and the CETEX
pipeline) and ten storage or terminal facilities in seven states with a combined
tank storage capacity of 3,633,500 barrels, serving over 500 customers. A 65%
owned subsidiary of COZ also owns a 27.75% interest in Lion Oil Company ("Lion")
which owns a modern 65,000 BPD refinery in El Dorado, Arkansas, a 188-mile crude
oil transportation pipeline in east Texas, a 1,100-mile crude oil gathering and
transmission system, and two refined products terminals. COZ does not explore
for, or produce, crude oil or natural gas, and it owns no crude oil or natural
gas reserves.

Pipelines

COZ utilizes mid-continent refined petroleum product pipeline systems to
transport products to market destinations and to conduct exchange transactions
with major and independent petroleum companies. COZ owns and operates a 452-
mile refined petroleum products pipeline from Ft. Madison, Iowa through the
Greater Chicago area, to Toledo, Ohio (the "NORCO pipeline") and associated
storage facilities located at Hartsdale, Indiana and Toledo, Ohio. COZ also
owns a 60% interest in a 67-mile refined petroleum products pipeline operating
from Mt. Vernon, Missouri to Rogers, Arkansas (the "Razorback pipeline") and an
associated storage facility at Mt. Vernon. COZ also owns and operates a 220-
mile crude oil gathering pipeline system, with 807,500 barrels of tank storage
capacity, located in east Texas (the "CETEX pipeline").

The NORCO and Razorback pipelines are common carriers and are subject to tariff
regulation by the Federal Energy Regulatory Commission (the "FERC"). CETEX is
an intrastate common carrier subject to Texas Railroad Commission regulations.
Transportation through the pipelines as common carriers is available, under
published tariffs filed with the FERC or the Texas Railroad Commission, as
appropriate, to any shipper requesting such services and satisfying the
conditions and specifications set forth in the tariff. See "Rate Regulation" in
this Item 1.

In general, a shipper, including COZ, owns the refined petroleum products or
crude oil and transfers custody of the products to the NORCO or Razorback
pipelines or the crude oil to the CETEX pipeline for shipment to a delivery
location at which point custody again transfers. Tariffs for the transportation
service are charged by COZ to shippers based upon the origination point on the
pipelines to the point of product delivery. These tariffs do not include fees
for the storage of products at the storage facilities of the NORCO or Razorback
pipelines or crude oil at the CETEX pipeline storage facilities, or for the
terminaling and storage of products at COZ terminals, any of which fees are
separately charged if those facilities are utilized.

The refineries providing products shipped on the NORCO pipeline obtain their
supplies of crude oil primarily from Gulf Coast, mid-continent and Canadian
sources. The refineries providing products shipped on the Razorback pipeline
obtain their supplies of crude oil, to a substantial extent, from

3

foreign sources and, to a lesser extent, from producing fields located in
Alaska, Oklahoma, Kansas and Texas. If operations at any one refinery were
discontinued, the Company believes (assuming unchanged demand for refined
petroleum products in the markets it serves) that any effect would be short-term
and that COZ's business would not be materially adversely affected over the long
term since such discontinued production could be replaced by other refineries or
by other sources.

COZ's pipeline business depends in large part on the level of demand for refined
petroleum products in the markets served by the pipelines and the ability and
willingness of refiners and marketers having access to the pipelines to supply
that demand by shipments through the pipelines. Pipelines are the safest and
lowest cost method for intermediate and long-haul overland transportation of
refined petroleum products. Several competing pipeline systems are located in
the NORCO pipeline service area, and those pipelines generally have capital and
financial resources substantially greater than COZ. The Razorback pipeline is
the only refined petroleum products pipeline providing transportation services
to northwest Arkansas. Competition is based primarily on pipeline operational
dependability, quality of customer service provided and proximity to end users,
although product pricing at either the origin or terminal destination on a
pipeline may outweigh transportation cost considerations. The Company believes
that high capital costs, tariff regulation, environmental considerations and
problems in acquiring rights-of-way make it unlikely that additional competing
pipeline systems comparable in size to the NORCO and Razorback pipelines will be
built in the near term, since the COZ pipelines have available capacity to
satisfy shipper product movement requirements and the tariffs are considered
competitive.

Terminals

The COZ-owned and operated terminals and storage facilities connect with
product transportation systems and product distribution locations. These
facilities are located in Rogers, Arkansas; Little Rock, Arkansas; Indianapolis,
Indiana; South Bend, Indiana; Bryan, Ohio; and Mt. Vernon, Missouri. The South
Bend, Indiana terminal is under renovation and is scheduled to be reactivated in
late 1996. The terminals receive products in bulk quantities via connecting
pipeline systems. Products are stored in bulk at the terminals and made
available to wholesale, shipment and exchange customers for transport by truck
to commercial and retail destinations, and then to the end user. COZ markets
refined petroleum products over truck loading racks at owned terminals, as well
as through exchanges with numerous companies at other non-owned terminals
located throughout the COZ distribution area. In addition, COZ-owned terminals
are used by major and independent petroleum companies to distribute products
outside their primary distribution systems.

In addition to refined petroleum products terminal and storage facilities owned
by independent operators such as COZ, major and independent petroleum companies
also own terminal and storage facilities. Although such facilities often may
have the same capabilities as those owned by independent operators, they
generally do not provide terminaling services to third parties. In many
instances, the major petroleum companies which own terminal and storage
facilities are also significant customers of independent terminal operators.
These major petroleum companies frequently provide strong demand for terminals
owned by independent operators, particularly when the independent terminals have
more cost effective locations near key transportation connections. The major
petroleum companies also utilize independent terminal storage when their
proprietary storage facilities are inadequate, either because of size
constraints, the nature of the products stored or specialized handling
requirements.

4

Independent terminal and storage facility owners compete based on the location
and versatility of the facilities and services they provide. A well located
terminal will have access to cost effective transportation to and from the
terminal, including highways, railroads and pipelines.

Storage of refined petroleum products at COZ-owned terminals pending delivery is
considered by COZ to be an integral but separate segment of the refined
petroleum product handling service. Ancillary services, including injection of
shipper-furnished or COZ-furnished additives, are also available for a fee at
the COZ terminals. The terminal and storage facilities include automatic tank
alarm systems and have been designed with preventative structural measures to
minimize the occurrence and level of damage in the event of a spill or fire.
All loading areas, tanks, pipes and pumping areas are contained in order to
collect any spillage and water run-off. Routine maintenance is performed on a
regularly scheduled basis at the terminal and storage facilities.

Products Supply and Distribution

COZ's products supply and distribution activity involves the bulk purchase and
sale of refined petroleum products and the wholesale marketing of products at
terminal truck loading rack locations.

Prices of refined petroleum products depend largely upon factors beyond COZ's
control, including the supply of and demand for gasoline, distillates and other
refined products, which in turn are affected by domestic and foreign economies,
political affairs, production levels, availability of imports, marketing by
competitors, alternative fuels, energy conservation efforts and government
regulation. The prices received by COZ for refined petroleum products are also
affected by regional factors, such as local market conditions, transportation
costs and the operations of competitors.

COZ attempts to minimize its exposure to price volatility related to the
purchase and sale of refined petroleum products by selectively hedging with
futures and options contracts that are intended to offset the effects of price
fluctuations, as well as by using real-time inventory monitoring and pricing
computer programs which provide accurate and timely transactional and
forecasting information. COZ's risk management strategies are subject to
policies that control purchases and sales on a daily basis in order to maintain
designated inventory positions subject to price risk, achieve prevailing margins
and effectively hedge forward, when appropriate.

The Company's Risk and Product Management Committee reviews the total inventory
on a weekly basis in order to ensure compliance with the Company's inventory
management policies, including all hedging activity. The Company has adopted
policies whereby its net inventory position subject to price risk requires the
prior approval of the Risk and Product Management Committee.

There can be no assurance, however, that COZ's risk management strategies will
be effective in limiting any adverse effects of price fluctuations on the
Company's operations or its overall profitability.

Generally, when COZ purchases refined petroleum products, it also simultaneously
enters into corresponding sale or exchange transactions involving physical
deliveries of the refined petroleum product to a third party, or corresponding
sales of futures contracts on the NYMEX. This procedure gives COZ a stable and
reliable refined petroleum product supply which can be sold at prevailing market
prices to customers having recurring and spot purchase requirements. Exchange
agreements are

5

generally for 30 days and month-to-month thereafter until terminated by either
party. The Company believes these short-term contracts minimize the effect of
volatile market prices and regional economic aberrations and considers them
essential in order to retain the flexibility to respond to local demands and to
changing market prices, conditions and seasonal variations. However, termination
of short-term contracts could result in a reduction of pipeline and terminal
volumes. COZ's operating policy imposes dollar limits on the acquisition of
refined petroleum products and futures contracts or other derivative products
for the purpose of price change trading.

Lion Oil Company Investment

In 1985, Continental Ozark Holding, Inc., a 65% subsidiary of COZ, purchased
27.75% of the shares of Lion, which owns a modern 65,000 BPD refinery in El
Dorado, Arkansas, a 188-mile crude oil transportation pipeline in east Texas
from Nederland on the U.S. Gulf Coast to Longview, a 1,100-mile crude oil
gathering system in south Arkansas and north Louisiana, and refined petroleum
products terminals located at Memphis and Nashville, Tennessee. Lion is
operated under a management contract. The manager, Ergon, Inc., owns a 48.6%
interest in Lion. The remaining 23.65% interest in Lion is owned by others.
The last dividend distribution made by Lion to its shareholders was in 1992.
Two officers of COZ are directors of Lion.

The Lion refinery generates a product mix of gasoline, diesel and heating oil
and asphalt. Lion owns and has access to pipeline systems which permit the
purchase and shipment of crude oil feedstocks to its refinery from regional
independent producers, as well as from reliable foreign sources of supply. In
recent years Lion has made substantial capital improvements to upgrade its
refining facilities resulting in reduced routine maintenance costs, increased
facility utilization and compliance with environmental and regulatory
requirements. COZ purchases refined petroleum products from Lion and sells
refined petroleum products to Lion.

An increase in crude oil prices could adversely affect Lion's operating margins
and sales volumes. Since the cost of crude oil and the prices of refined
products are subject to significant fluctuation, Lion's earnings and cash flow
have been and may continue to be adversely affected. The profitability of
Lion's operations is significantly influenced by the "crack spread," which is
the difference between the sales price of refined petroleum products and the
cost of associated feedstocks (principally crude oil) delivered to the refinery
for processing. Since COZ's interest in Lion is recorded for financial
statement purposes using the equity method of accounting, adverse fluctuations
in Lion's reported earnings will also have an adverse effect on the Company's
earnings.

Lion is subject to extensive regulation by local, state and federal
environmental laws, including the Clean Air Act, the Federal Water Pollution
Control Act, and the Resource Conservation and Recovery Act ("RCRA"). As a
result of the long history of operations at Lion's refinery, there has been some
impact on groundwater and soil. Lion has conducted and continues to conduct
studies to investigate the nature and extent of contamination at certain
locations on the refinery site. Remediation and corrective action are currently
being conducted. The continuing studies will determine the required additional
remediation and corrective action to be undertaken. While Lion's management
believes that the net cost of any remedial action will not have a material
adverse effect on Lion's financial condition or liquidity, there can be no
assurance that the impact of such matters on its results of operations for any
given reporting period will not be material.

6

Environmental Regulation

General. The operations of COZ are subject to federal, state and local laws and
regulations relating to protection of the environment. Although the Company
believes that the operations of COZ are in general compliance with applicable
environmental regulations, and COZ has not budgeted any material amounts for
environmental compliance for the current fiscal year, risks of substantial costs
and liabilities are inherent in pipeline and terminal operations, and there can
be no assurance that significant costs and liabilities will not be incurred.
Moreover, it is possible that other developments, such as increasingly strict
environmental laws, regulations and enforcement policies thereunder, and claims
for damages to property or persons resulting from the operations of COZ, could
result in substantial costs and liabilities.

Water. The terminal and pipeline facilities are extensively regulated by the
Federal Water Pollution Control Act of 1972 ("FWPCA"), the Oil Pollution Act of
1990 ("OPA") and other statutes relating to prevention of and response to oil
spills. In order to prevent and respond appropriately to spills, the facilities
have Spill Prevention Control and Countermeasure Plans and OPA 1990 Spill
Response Plans, as required. In addition, certain of the pipelines are
regulated by the Department of Transportation under regulations entitled
Transportation of Hazardous Liquids by Pipeline, which contain safety standards
and reporting requirements for certain spills and other accidents. As part of
spill response procedures, the facilities have internal and external
notification procedures for field and corporate emergency response management
teams to ensure that management, contractors and governmental authorities are
properly notified. Contractual arrangements with emergency response contractors
are also in place.

OPA subjects owners of facilities to strict, joint and potentially unlimited
liability for removal costs and certain other consequences of an oil spill,
where such spill is into navigable waters, along shorelines or in the exclusive
economic zone. In the event of an oil spill into such locations, substantial
liabilities could be imposed upon COZ. States in which COZ operates have also
enacted similar laws. Regulations are currently being developed under OPA and
state laws that may also impose additional regulatory burdens.

COZ's pipelines cross several navigable rivers and streams. Some facilities are
also located near water bodies and sensitive areas, such as wetlands. The FWPCA
imposes strict controls against the discharge of oil and its derivatives into
navigable waters, provides possible penalties for any discharge of petroleum
products in reportable quantities, and imposes substantial potential liability
for the costs of removing an oil spill. Additionally, the OPA exposes parties
liable for spills to damages for loss of use or impairment of natural resources.
State laws for the control of water pollution also provide varying possible
civil and criminal penalties and liabilities in the case of a release of
petroleum.

Contamination resulting from spills or releases of refined petroleum products
are not unusual within the petroleum pipeline industry. Several facilities of
COZ have soil and groundwater contamination. COZ, however, is indemnified by
previous owners for most of the known contamination. Contamination resulting
from other spills has been handled in the normal course of business and is not
expected to have a material adverse effect on the Company, although there can be
no assurance that it will not have a material adverse effect on the Company.
Petroleum recovered from a spill site is typically transported to the nearest
company facility for further processing. If the

7

recovered petroleum was required to be sent to a disposal site instead, costs of
addressing a spill would increase substantially.

In the purchase agreements for the Little Rock south terminal and the CETEX and
NORCO pipelines, the sellers agreed to be responsible for certain defined
contamination that might have existed at the time of the sale. Under the
purchase agreement for the NORCO pipeline, the seller has addressed, or is
currently addressing, contamination at several sites, including conducting
monitoring and remediation activities. There can be no assurance that the
sellers of any of these sites will not dispute coverage and refuse to accept
responsibility for any discovered contamination.

On September 15, 1993, after the purchase of the pipeline system by a subsidiary
of COZ, NORCO Pipeline, Inc., a leak occurred in DeKalb County, Indiana, when
the operator of the control center at that time, ARCO, ordered the field
personnel to begin pumping without first verifying that the pipeline valves were
properly aligned. As a result, a line ruptured in a soy bean and corn field
surrounded by agricultural and rural residential land and released approximately
660 barrels of diesel fuel, contaminating soil and groundwater in the field.
Some of the fuel followed a drainage ditch for approximately one-half mile,
where it entered Fish Creek. Cleanup operations recovered about one-half of the
diesel fuel. Soil and groundwater were impacted, and it is possible that
additional assessment and remediation could be required. In addition, the
Natural Resource Damage Assessment ("NRDA") Trustees for the U.S. Fish and
Wildlife Service and for the states of Indiana and Ohio alleged that the release
caused natural resource damages in Fish Creek. NORCO Pipeline, Inc. has made a
claim regarding this incident to its insurance carrier. The parties have
reached a settlement with the trustees, which is undergoing a public comment
period. The Company does not believe that its portion of the settlement will
have a material effect on the Company's financial condition.

Many of the facilities are subject to National Pollutant Discharge Elimination
System ("NPDES") permits regulating the discharge of pollutants into navigable
waters. To meet NPDES requirements, COZ has in place or access to wastewater
treatment systems, as needed. As those permits expire and are renewed, the
facilities can come under increasingly stringent requirements. The
Environmental Protection Agency ("EPA") and certain states have also
promulgated regulations that may trigger the need to apply for permits to
discharge storm water runoff. Where and as additional requirements become
applicable, modifications to NPDES permits and procurement of storm water
permits will be requested, as appropriate. Although no assurance in this regard
can be given, the Company believes that any such modifications or storm water
permits should not have a material effect on the Company's financial condition.

Regulation of Aboveground Storage Tanks. The states in which the facilities
operate regulate aboveground storage tanks containing liquid substances. While
state regulations require that such tanks be constructed and operated in
conjunction with industry standards that have been adopted by reference into
federal regulations, there is no uniform federal regulation of aboveground
storage tanks. However, bills have been introduced in the United States Senate
and House of Representatives this year which would require the administrator of
the Environmental Protection Agency to review existing regulations for
deficiencies and to issue a regulation that consolidates all environmental laws
and health and safety laws applicable to the design, construction, maintenance
and operation of aboveground storage tanks. These bills have been referred to
committee and it is not presently known if or when action will be taken. The
Company believes that it is in substantial compliance with all current
requirements applicable to aboveground storage tanks, and that the pending House
and Senate bills will not materially impact COZ's operations. Although no
assurance can be given, the Company believes

8

that the future implementation of additional requirements applicable to
aboveground storage tank laws by either the states in which COZ operates or by
the federal government will not have a material adverse effect on the Company's
financial condition or results of operations.

Air Emissions. The operations of COZ are subject to the Federal Clean Air Act
and comparable state and local statutes. The Company believes that COZ's
operations are in substantial compliance with such laws in all states in which
it operates. The gasoline facilities generally are subject to an air permit
requirement. In addition, many of the facilities are required to have vapor
recovery or combustion units. To the extent that any terminals are nearing
volume limitations, permit modifications could be required. Although no
assurance in this regard can be given, the Company believes that any such
modifications should not have a material effect on its financial condition.

Amendments to the Federal Clean Air Act enacted in late 1990 will require most
industrial operations in the United States to incur future capital expenditures
in order to meet the air emission control standards that are to be developed and
implemented by the EPA and state environmental agencies during the next decade.
Pursuant to these Clean Air Act Amendments, those facilities that emit volatile
organic compounds ("VOC") or nitrogen oxides and are located in non-attainment
areas will be subject to increasingly stringent regulations, including
requirements that certain sources install reasonably available control
technology. Several gasoline facilities may also be subject to new source
performance standards. The EPA is also required to promulgate new regulations
governing the emissions of hazardous air pollutants. Some of the facilities are
included within the categories of hazardous air pollutant sources that may be
affected by these regulations. In order to comply with applicable air pollution
laws, COZ may have to install additional vapor control equipment as necessary to
comply with the regulations.

Solid Waste. RCRA governs the generation and disposal of solid wastes,
including hazardous wastes. In 1990, the EPA promulgated regulations expanding
the definition of characteristic hazardous waste by adding 25 organic
constituents that were not previously included in determining that a waste is
hazardous and by adding a new testing procedure called the Toxicity
Characteristic Leaching Procedure to detect the concentrations of those
constituents. These changes increase the costs of handling certain wastes
generated. Additional changes in the regulations or interpretation of these
regulations may result in increased capital expenditures or operating expenses.

Environmental Impact Statement. The National Environmental Policy Act of 1969
("NEPA") applies to certain extensions or additions to a pipeline system. Under
NEPA, if any project that would significantly affect the quality of the
environment requires a permit or approval from any federal agency, a detailed
environmental impact statement must be prepared. The effect of NEPA may be to
delay or prevent construction of new facilities or to alter their location,
design or method of construction.

9

Rate Regulation

Interstate Regulation. The interstate petroleum product pipeline operations of
COZ are subject to regulation by the FERC under the Interstate Commerce Act (the
"ICA") which requires, among other things, that pipeline transportation rates be
"just and reasonable" and not unduly discriminatory. New and changed rates must
be filed with the FERC, which may investigate their lawfulness on shipper
protest or its own motion. The FERC may suspend the effectiveness of such rates
for up to seven months. If the suspension expires before completion of the
investigation, the rates go into effect, but the pipeline can be required to
refund to shippers, with interest, any difference between the level the FERC
determines to be lawful and the filed rates under investigation. Rates that
have become final and effective may be challenged by complaint to a court or the
FERC filed by a shipper or on the FERC's own initiative, and reparations may be
recovered by the party filing the complaint for the two year period prior to the
complaint if the FERC finds the rate to be unlawful.

In general, petroleum product pipeline rates are required to be cost based to be
deemed just and reasonable. Cost based rates are permitted to generate
operating revenues, based on projected shipment volumes, not greater than the
total of the following components: (i) operating expenses, (ii) depreciation and
amortization, (iii) "normalized" federal and state income taxes and (iv) an
overall allowed rate of return on the pipeline's "rate base." Generally, rate
base is a measurement of the investment in or value of the pipeline's assets.

The Energy Policy Act of 1992 (the "EP Act") mandated simplified procedures for
FERC rate regulation under the ICA. In response to the EP Act, the FERC has
adopted indexation as a simplified rate making methodology for pipeline rate
changes. Current indexation is based on the annual change in the Producer Price
Index less one percent.

Just and reasonable pipeline rates in effect on December 31, 1994 are the "Base
Rates" for indexation. A pipeline may increase its rates to the ceiling rate
calculated by indexing without filing a formal cost based justification and with
limited shipper rights to protest. The index is cumulative, applying to the
applicable ceiling rate and not to the actual rate charged. Thus, a rate that
is not increased to the ceiling level in any year may still be increased to the
cumulative indexed ceiling in a later year. A rate decrease may be required if
the index lowers the ceiling. Shippers are still permitted to protest rates,
even if the rate change does not exceed the index ceiling, if the shipper can
demonstrate that the "increase is so substantially in excess of the actual cost
increases incurred by the pipeline" that the proposed rate would be unjust and
unreasonable.

The indexing mechanism does not set initial rates for a pipeline, which still
generally must be cost based. However, a pipeline can file an initial rate
based upon the agreement of at least one non-affiliated shipper, without filing
full cost-of-service justification for the rate. If this negotiated rate is
protested by another shipper, the pipeline will be required to justify the
initial rate on a cost-of-service basis. The initial rate that is established
by a pipeline becomes the pipeline's "Base Rate" for indexation.

COZ's current rates are based on settlements with its then current shippers in
August 1995. The Company believes that COZ's current rates are just and
reasonable and would withstand challenge under the FERC's cost based rate
standards. Because of the complexity of rate making, however, the lawfulness of
any rate is never assured.

10

The Company cannot predict how future regulation of interstate petroleum product
pipelines may change or what impact such changes will have.

Intrastate Regulation. The intrastate operations of the CETEX pipeline are
subject to regulation by the Texas Railroad Commission. Like interstate
regulation, the Texas regulation requires that proposed intrastate tariff
increases be filed with the Railroad Commission and allows shippers to challenge
such increases.

Business of BPOC

In February of 1996, Old TransMontaigne participated with Old Sheffield in the
formation of BPOC. Each company had a 45% interest in BPOC with the balance
held by BPOC's management. Since the Merger, the Company holds a 90% interest
in BPOC. BPOC is currently managing 15 small gathering systems for a major
interstate pipeline company. In addition to earning a fee for the management of
these systems it will be compensated for any additional volumes which it
connects to these systems.

The gathering, processing and marketing sector of the natural gas industry is
currently in a consolidation phase. As this consolidation takes place, it
becomes more difficult for many companies to earn acceptable returns on smaller
systems. Many producers that have operated their own facilities now realize
they lack the skills necessary to maximize the return on their investments and
prefer to monetize such assets in order to generate drilling capital.

The Company believes that additional opportunities, similar to BPOC's existing
operations, will become available. Additionally, the Company believes that with
the capital available to BPOC from the Company there will be opportunities to
acquire gathering, processing and marketing assets at competitive prices.
Quality customer service is a key objective of BPOC with new industry service
standards being targeted for smaller downstream facilities.

Risk Factors and Cautionary Statements

This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 such as the words or phrases
"believes", "is to be", "will depend", "will become" and "plans to" or similar
expressions. The Company wishes to advise readers that the forward-looking
statements in this report are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in or implied by
the statements, including, but not limited to, the following:

. the Company's thin margins on high volumes of products
. volatility in the price of the Company's products
. the risk that, to the extent the Company attempts to selectively hedge its
inventory positions, those hedges are not effective
. the risk that the Company could be required to recognize a financial statement
loss through a lower of cost or market write down of inventories
. compliance with current and possibly future environmental regulations
. potential changes in the rates which applicable federal and state agencies
allow the Company to charge for the use of its facilities

11

Employees

The Company had 136 employees at July 16, 1996. No employees are subject to
representation by unions for collective bargaining purposes.

12

ITEM 2. PROPERTIES

For information regarding the properties of COZ, see "Business of COZ",
"Pipelines" and "Terminals" sections under Item 1. For information regarding
the properties of Lion Oil Company, see "Lion Oil Company Investment" section
under Item 1.

ITEM 3. LEGAL PROCEEDINGS

Not Applicable.

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

The Company did not submit any matters to a vote of security holders during the
quarter ended April 30, 1996.

The following matters were submitted to a vote of security holders subsequent to
April 30, 1996:

The stockholders of Old TransMontaigne acted by unanimous written consent to
approve and adopt the Restated Agreement and Plan of Merger between Old
Sheffield and Old TransMontaigne dated as of February 6, 1996 and the Merger
contemplated thereby.

At a special meeting on June 3, 1996, the stockholders of Old Sheffield voted to
approve and adopt the Restated Agreement and Plan of Merger between Old
Sheffield and Old TransMontaigne dated as of February 6, 1996 and the Merger
contemplated thereby. 3,459,512 shares were entitled to vote. 2,500,418
shares voted. The manner in which the votes were cast was:

For 2,478,308
Against or Withheld 17,557
Abstention 4,553

13

PART II

ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS

The Old Sheffield Common Stock had been traded on the American Stock Exchange
(Emerging Company Marketplace) since December 14, 1993 under the symbol "SHE."
There was no public market for Old TransMontaigne Common Stock. The shares of
New Common Stock have been listed on the American Stock Exchange (Primary List)
since completion of the Merger. The following table sets forth, for the periods
indicated, the range of high and low per share sale prices for Old Sheffield
Common Stock as reported on the American Stock Exchange (Emerging Company
Marketplace) prior to the Merger, adjusted for the reverse stock split
accomplished by the Merger, and the New Common Stock as reported on the American
Stock Exchange (Primary List) subsequent to the Merger:

Periods Low High
----------------------------------- -----------------

Pre Merger

Three Month Periods Ended:
September 30, 1994 $4.57 $5.47
December 31, 1994 $3.36 $4.72
March 31, 1995 $2.89 $3.50
June 30, 1995 $3.04 $3.97
September 30, 1995 $3.65 $3.97
December 31, 1995 $3.36 $4.40
March 31, 1996 $3.04 $10.80

Period:
April 1, 1996 through June 3, 1996 $10.03 $17.94

Post Merger

Period:
June 5, 1996 through July 12, 1996 $11.00 $15.13

No dividends have been declared or paid on the Company's New Common Stock to
date. No dividends were paid in 1996 or in 1995 on either the Old Sheffield
Common Stock or the Old TransMontaigne Common Stock. The Company has no
intention of paying dividends in the immediate future. The Company's current
revolving credit facility contains restrictions on the payment of dividends.

At July 12, 1996, there were 171 holders of record of the New Common Stock.

14

ITEM 6. SELECTED FINANCIAL DATA

Effective June 4, 1996, Old TransMontaigne merged with and into Old Sheffield.
The Merger was accounted for as reverse acquisition. Therefore, this selected
financial data is that of Old TransMontaigne for its fiscal years ended April
30, 1996 and 1995, the seven months ended April 30, 1994, and the fiscal years
ended September 30, 1993, 1992 and 1991, and has been derived from the audited
consolidated financial statements of Old TransMontaigne. This selected
financial data should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations, Item 7, and the
consolidated financial statements and notes thereto of Old TransMontaigne
included in Item 8, "Financial Statements and Supplementary Data."

Seven months
Fiscal years ended ended
April 30, April 30, Fiscal years ended September 30,
------------------------ ----------------- ----------------------------------------
1996 1995 1994 1993 1992 1991
----------- ---------- ----------------- ---------- ----------- -----------

STATEMENT OF
OPERATIONS DATE:

REVENUE $533,106,747 324,591,409 296,086,981 507,936,810 515,547,695 417,834,881

OPERATING INCOME (LOSS) 6,548,953 406,042 (1,509,581) (1,710,242) (1,930,614) (3,368,105)

NET EARNINGS (LOSS) 4,617,969 (3,217,635) (2,853,609) (4,490,468) (4,200,922) (4,150,161)

EARNINGS (LOSS) PER SHARE $0.31 (1.32) (1.15) (1.85) (1.73) (1.62)

April 30, September 30,
--------------------------------------------- --------------------------------------------
1996 1995 1996 1993 1992 1991
------------- ------------ ------------- ------------- ------------ -----------

BALANCE SHEET DATA:

WORKING CAPITAL $55,651,839 37,989,205 11,554,715 11,470,225 20,685,446 16,601,819

TOTAL ASSETS 120,962,976 104,220,346 75,470,266 86,334,703 76,336,971 69,240,513

LONG-TERM DEBT,
excluding current maturities 28,948,867 36,945,610 37,671,329 33,953,590 35,256,698 25,476,695

STOCKHOLDER'S EQUITY 57,819,191 28,470,702 2,480,835 5,334,500 9,825,060 14,026,063

No common stock dividends were declared or paid during the periods presented.

15

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

General

Effective June 4, 1996, Old TransMontaigne merged with and into Old Sheffield.
The Merger was accounted for as reverse acquisition. After the Merger, the
previous holders of Old TransMontaigne Common Stock owned approximately 93% of
the outstanding New Common Stock, and designees of Old TransMontaigne accounted
for a majority of the Company's Board of Directors. Therefore, the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes principally information for Old TransMontaigne and, where
relevant, current information relating to the Company.

The Company is, and Old TransMontaigne was, a holding company which pursues,
through its subsidiaries, business opportunities in the downstream sector of the
petroleum industry. The Company's principal operating subsidiary is COZ, which
is engaged in the transporting, storing and terminaling and the wholesale
marketing of refined petroleum products (primarily unleaded gasoline, No. 2
diesel oil and jet fuel) in the mid-continent region of the United States and in
the gathering, storing and transporting of crude oil in east Texas. COZ owns
and operates 741 miles of pipeline (the NORCO pipeline, the Razorback pipeline
and the CETEX pipeline) and ten storage or terminal facilities in seven states.

Old TransMontaigne recognized a $7,836,000 increase in net earnings to
$4,618,000 for the year ended April 30, 1996, primarily due to significantly
improved pipeline, terminal and products supply and distribution net operating
margins and related increases in volumes of product transported, handled and
sold at its principal operating locations, while also controlling general and
administrative expenses and reducing interest charges. Old TransMontaigne
incurred net losses from the year ended September 30, 1993 through the year
ended April 30, 1995, primarily due to the under-utilization of its pipelines
and terminals, realization of small or negative margins from bulk product sales
and wholesale marketing activities and a lack of adequate equity capital.
Pipeline utilization averaged 52% for the year ended April 30, 1996, 38% for
the year ended April 30, 1995, 40% for the seven months ended April 30, 1995 and
36% for the year ended September 30, 1993. Terminal utilization averaged 53%
for the year ended April 30, 1996, 50% for the year ended April 30, 1995, 50%
for the seven months ended April 30, 1994, and 55% for the year ended September
30, 1993. The under-utilization of the pipelines and terminals was primarily
the result of Old TransMontaigne's inability to finance the inventory required
to more fully utilize these facilities. Net operating margins were insufficient
to cover general and administrative expenses, depreciation and amortization, and
interest and other financing costs which were incurred to support and finance
its activities. Volatile market prices of refined petroleum products during
these periods also resulted in losses from inventory write-downs and from the
sales of products at prices lower than cost.

Subsequent to April 30, 1995, Old TransMontaigne established new inventory
management policies, procedures and operating controls, and also added
managerial personnel to supervise the products supply and distribution
operations in an effort to control inventory levels and related carrying costs,
and more effectively manage inventory price risks. The Company's Risk and
Product Management Committee reviews the total inventory on a weekly basis in
order to ensure compliance

16

with the Company's inventory management policies, including all hedging
activity. The Company has adopted policies whereby its net inventory position
subject to price risk requires the prior approval of the Risk and Product
Management Committee.

There can be no assurance that these actions will serve to reduce the level of
inventory and successfully manage inventory price risks over the long term.

Liquidity and Capital Resources

The Company is continuing Old TransMontaigne's practice of securing sources of
long-term capital prior to committing to new projects. In April 1995, Old
TransMontaigne sold $30 million of common stock to institutional and individual
investors. $20 million of this amount was advanced to COZ to reduce its bank
debt. The remaining $10 million was invested in interest bearing instruments
pending identification of further investment opportunities.

In December 1995, Old TransMontaigne entered into a new bank credit agreement
with a money center bank which provides for revolving credit of up to $45
million, including cash advances and letters of credit. The credit agreement
has a final maturity date of November 30, 1999 and provides for interest at
either the bank's base rate or a designated premium over short-term Eurodollar
rates. As of April 30, 1996, approximately $25 million was outstanding under
the credit agreement.

In April 1996, Old TransMontaigne completed a private placement for $25 million
of common stock at $5.50 per share to existing stockholders and institutional
investors.

Since April 1995, Old TransMontaigne has raised $55 million in common equity and
established a new $45 million revolving loan facility to provide working capital
and to support letters of credit for COZ. At April 30, 1996, $55 million ($35
million in cash and $20 million of unused borrowing capacity) of this amount was
available to fund new capital expenditures and acquisitions in the downstream
petroleum industry.

Capital expenditures were $4,120,000, $750,000, $460,000 and $4,700,000 million
for the years ended April 30, 1996 and 1995, the seven months ended April 30,
1994 and the year ended September 30, 1993, respectively.

The Company has budgeted approximately $15,000,000 for capital expenditures for
the fiscal year ended April 30, 1997. Actual future capital expenditures will
depend on numerous factors, including the availability of appropriate
acquisitions; the demand for pipeline, terminaling and storage services; local,
state and federal governmental regulations; environmental compliance
requirements; fuel conservation efforts; and the availability of financing on
acceptable terms.

Old TransMontaigne had working capital of $55,650,000 at April 30, 1996.
Management believes the Company's current working capital position, future cash
provided by operating activities, borrowing capacity under its credit agreement
and its relations with institutional lenders and equity investors should enable
it to meet its future capital requirements, although there can be no assurance
that the Company will be able to obtain additional capital when needed on
acceptable terms.

17

Results of Operations

Old TransMontaigne's revenues were derived primarily from three activities:
transporting refined petroleum products and crude oil in pipelines, storing and
terminaling refined petroleum products and refined petroleum products supply and
distribution. The Company's revenues are also derived primarily from these
activities.

Pipeline revenues are based on the volume of refined petroleum products or crude
oil transported and the distance from the origin point to the delivery point.
The NORCO and Razorback pipelines transport refined petroleum products and their
rates are regulated by the FERC. The CETEX pipeline transports crude oil and
its rates are not regulated.

Terminal revenues are based on the volume of refined petroleum products handled,
generally at a standard industry fee of 1/2 cent per gallon. Terminal fees are
not regulated. Storage fees are generally based on a per gallon rate, which
varies with the duration of the storage arrangement, the refined petroleum
product stored and special handling requirements. The operating costs of the
pipeline and terminal businesses include wages and employee benefits, utilities,
communications, maintenance and repairs, property taxes, rent, insurance,
vehicle expenses, environmental protection costs, materials and supplies.

The products supply and distribution business includes bulk sales of refined
petroleum products and the wholesale distribution of refined petroleum products
from terminals. Bulk purchase and sale transactions in quantities of 25,000
barrels to 50,000 barrels are common and are generally made at very small
margins. Wholesale distribution of refined petroleum products from proprietary
and nonproprietary terminal truck loading rack locations are primarily
represented by truck load sales of 8,000 gallons of refined petroleum product.
These sales are generally also made at small margins.

Year Ended April 30, 1996 Compared to Year Ended April 30, 1995.

Revenue and operating information for the year ended April 30, 1996 and 1995 is
summarized below.

Products
Supply and
Pipeline Terminal Distribution
Operations Operations Operations Total
- ----------------------------------------------------------------------------
(in thousands)

1996
- ----
Volumes (1) 18,902 587,000 958,000
Revenues $ 9,577 3,346 520,184 533,107
Net Operating Margin (2) 4,454 2,434 5,829 12,717

1995
- ----
Volumes (1) 13,721 547,000 620,000
Revenues $ 5,827 3,145 315,619 324,591
Net Operating Margin (2) 2,678 2,340 761 5,779

(1) Pipeline volumes are expressed in barrels (42 gallons per barrel), and
terminal and products supply and distribution sales volumes are expressed
in gallons.

18

(2) Net operating margin represents revenues less direct operating expenses for
pipeline and terminal operations, and revenues less cost of refined
petroleum products purchased for products supply and distribution
operations.

The net operating margin from pipeline operations increased 66% or $1,776,000,
to $4,454,000 for the year ended April 30, 1996 as compared to $2,678,000 for
the year ended April 30, 1995. This increase primarily was due to a 38%
increase in volumes shipped and increased utilization which resulted in a 64%
increase in revenues of $3,750,000 during the period. The increase in revenues
partially was offset by a 63% increase in operating costs of $1,974,000,
primarily due to incremental power costs due to increased volumes, additional
personnel costs and reductions in the reimbursement of certain costs previously
paid by third parties.

The net operating margin from terminal operations increased 4%, approximately
$94,000, to $2,434,000 in 1996. This increase resulted from a 7% increase in
volumes, primarily from the Little Rock, Arkansas terminal, offset in part by an
increase in terminal operating costs of 13% in 1996.

The net operating margin from product sales increased $5,068,000 during the year
ended April 30, 1996 compared to the year ended April 30, 1995, while net
revenues increased $204,565,000 on additional volume of 338,000,000 gallons
sold. The improved net margins were primarily due to increased bulk and rack
product sales volumes, and higher market prices for products sold in the peak
seasonal period of gasoline demand occurring in Old TransMontaigne's last fiscal
quarter ended April 30, 1996, during which period gasoline prices reached a five
year high of over $.70 per gallon.

During the year ended April 30, 1996, general and administrative expenses
increased approximately 18% over the year ended April 30, 1995, primarily due
to increases in salaries and related employee benefits costs associated with the
hiring of additional personnel.

Equity in earnings of affiliates primarily represent Old TransMontaigne's share
of the earnings of Lion Oil Company ("Lion"). Old TransMontaigne's 65% owned
subsidiary, Continental Ozark Holdings, Inc. ("COH"), owns a 27.75% interest in
Lion. Minority interest represents the other COH shareholders' interest in the
earnings of Lion. During the year ended April 30, 1996, equity in earnings of
affiliates (net of the related minority interests) increased to approximately
$605,000 from approximately $295,000 for the year ended April 30, 1995,
primarily due to improved crack spreads at Lion.

Interest expense represents interest on the revolving bank line of credit used
to finance inventory and accounts receivable and interest on the Company's
senior subordinated debentures. Interest expense decreased $588,074, or 19%,
primarily as a result of lower average balances outstanding under the line of
credit. Other financing costs include fees paid for letters of credit issued to
product suppliers and loan commitment fees paid in connection with the revolving
loan facility.

Interest income during the year ended April 30, 1996, was attributable to the
investment in interest bearing securities of approximately $10 million of cash
held for future investments during the period.

Primarily as a result of the increases in pipeline, terminal, and products
supply and distribution net operating margins, reduction in interest expense
and the increase in interest income, discussed above, net earnings for the year
ended April 30, 1996 increased $7,836,000 to $4,618,000 from a loss of
$3,218,000 for the year ended April 30, 1995.

19

Year Ended April 30, 1995 Compared to the Seven Months Ended April 30, 1994 and
the Year Ended September 30, 1993.

Revenue and operating information for the year ended April 30, 1995, the seven
months ended April 30, 1994 and year ended September 30, 1993 are summarized
below:

Products
Supply and
Pipeline Terminal Distribution
Operations Operations Operations Total
- ----------------------------------------------------------------------------
(in thousands)

1995
- ----

Volumes (2) 13,721 547,000 620,000
Revenues $ 5,827 3,145 315,619 324,591
Net Operating Margin (3) 2,678 2,340 761 5,779

1994 (seven months)
- ----

Volumes (2) 8,654 321,100 645,000
Revenues $ 3,989 1,773 290,325 296,087
Net Operating Margin (loss) (3) 2,096 1,119 (1,902) 1,313

1993
- ----

Volumes (2) 12,245 433,200 941,000
Revenues $ 6,167 2,476 499,294 507,937
Net Operating Margin (loss) (3) 2,848 1,817 (2,077) 2,588

(1) The NORCO pipeline system was acquired in November 1992.
(2) Pipeline volumes are expressed in barrels (42 gallons per barrel), and
terminal and products supply and distribution sales volumes are expressed
in gallons.
(3) Net operating margin represents revenues less direct operating expenses for
pipeline and terminal operations, and revenues less cost of refined
petroleum products purchased for products supply and distribution
operations.

Net operating margins from pipeline operations remained relatively constant over
the periods. Net operating margins were $2,678,000 for the year ended April 30,
1995, $2,096,000 for the seven months ended April 30, 1994 and $2,848,000 for
the year ended September 30, 1993.

Terminal operations generated net operating margins of $2,340,000 for the year
ended April 30, 1995, $1,119,000 for the seven months ended April 30, 1994 and
$1,817,000 for the year ended September 30, 1993. This increase in net
operating margins during these periods was due primarily to the increased
volumes and revenues attributable to the acquisition of the Little Rock south
terminal in May 1993 and the increased utilization of the Rogers terminal. As a
result, terminal operations volumes handled increased to 547,000,000 gallons for
the year April 30, 1995 from 433,200,000 gallons for the twelve months ended
September 30, 1993, and revenues increased to $3,145,000 from $2,476,000 for the
earlier period. Although terminal operations volumes increased significantly
during these periods, operating expenses remained relatively constant, thereby
increasing the net operating margins in these periods.

20

Net operating margins (losses) on product sales were $761,000 for the year ended
April 30, 1995, $(1,902,000) for the seven months ended April 30, 1994 and
$(2,077,000) for the year ended September 30, 1993. During these periods, there
were significant fluctuations in refined petroleum product purchase and sale
prices reflecting the volatility of world-wide energy markets. In many cases
this resulted in reduced or negative margins on sales of refined petroleum
products and an inventory write-down. During the seven months ended April 30,
1994, Old TransMontaigne recorded a write-down of approximately $3,640,000 to
reduce inventories to the lower of cost or market. The write-down was a result
of a steep decline in refined petroleum product prices in the latter part of
1993.

Revenues from product sales also declined subsequent to April 30, 1994 as a
result of discontinuing the business of a limited partnership in which Old
TransMontaigne owned a one-third interest and was the managing general partner.
The partnership conducted trading operations primarily in the cash market by
purchasing and selling refined petroleum products and crude oil. While
significant revenues were generated during the seven months ended April 30, 1994
and the year ended September 30, 1993, the effect on net earnings (losses)
during these periods was not significant.

General and administrative expenses increased 32.1% from the year ended
September 30, 1993 through the year ended April 30, 1995 as a result of the
acquisition of the NORCO pipeline, the growth of the Razorback pipeline/Rogers
terminal operations, the acquisition of the Little Rock south terminal, and the
expansion of product supply and distribution activities, all of which increased
personnel costs and related supporting administrative expenses.

There was a 4.4% increase in depreciation and amortization expense from the year
ended September 30, 1993 through the year ended April 30, 1995, primarily due to
the 1993 acquisition of the Little Rock south terminal.

Equity in earnings (losses) of affiliates, net of the related minority interest,
was $295,000 in the year ended April 30, 1995, $479,000 in the seven months
ended April 30, 1994, and $(59,000) in the year ended September 30, 1993.
During these periods, the operating results of Lion fluctuated widely as a
result of volatile crude oil and refined petroleum products prices and crack
spreads. During periods of fluctuating prices, Lion experiences reductions in
crack spreads when market prices of refined petroleum products do not change in
correlation to increases in crude oil prices.

Interest expense during the periods from 1993 through 1995 fluctuated with
changes in the average outstanding loan balances and with changes in the
interest rates on the loans, which ranged from 7% to 9% during these periods.
The average outstanding loan balance increased from approximately $34,500,000
for the year ended September 30, 1993 to approximately $37,100,000 and
$35,700,000 for the seven months ended April 30, 1994 and the year ended April
30, 1995, respectively. Interest expense also includes interest on outstanding
senior subordinated debentures during these periods.

The loss on cancellation of aircraft lease of $287,000 recorded in the fourth
quarter of the year ended April 30, 1995 was a non-recurring expense in
connection with the termination of a long-term lease. The Company does not own
or have any lease obligations with respect to corporate aircraft.

Old TransMontaigne incurred net losses for the year ended April 30, 1995, the
seven months ended April 30, 1994, and the year ended September 30, 1993 of
$3,218,000, $2,854,000 and $4,490,000, respectively, primarily as a result of
the under-utilization of its pipeline and terminal

21

facilities, a lack of adequate working capital to finance inventory requirements
and the fluctuations in the net operating margins, discussed above.

Accounting Standards

Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets to be Disposed of" (SFAS 121) was issued in March, 1995, by
the Financial Accounting Standards Board. It requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS 121 is
required to be adopted for fiscal years beginning after December 15, 1995. The
adoption of this statement by the Company is not expected to have a significant
effect on the financial statements.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123) was issued by the Financial Accounting Standards Board
in October 1995. This standard addresses the timing and measurement of stock-
based compensation expense. Entities electing to continue to follow Accounting
Principles Board Opinion No. 25 (APB 25) must make pro forma disclosures of
net income and earnings per share, as if the fair value based method of
accounting defined by SFAS 123 had been applied. SFAS 123 is applicable to
fiscal years beginning after December 15, 1995. The company has elected to
retain the approach of APB 25, (the intrinsic value method), for recognizing
stock-based compensation in the consolidated financial statements. The Company
will include the disclosures required by SFAS 123 in future financial
statements.

22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

As a result of the reverse acquisition of Old Sheffield by Old TransMontaigne,
the historical financial statements of the Company required to be presented in
this Item 8 for periods prior to the Merger are those of Old TransMontaigne.
The consolidated financial statements of Old TransMontaigne are attached hereto
beginning on page F-1.

23

Independent Auditors' Report
----------------------------

The Board of Directors and Stockholders
TransMontaigne Oil Company:

We have audited the accompanying consolidated balance sheets of TransMontaigne
Oil Company and subsidiaries as of April 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended April 30, 1996 and 1995, the seven months ended April 30, 1994
and the year ended September 30, 1993. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TransMontaigne Oil
Company and subsidiaries as of April 30, 1996 and 1995, and the results of their
operations and their cash flows for the years ended April 30, 1996 and 1995, the
seven months ended April 30, 1994 and the year ended September 30, 1993, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
June 20, 1996

F-1

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Consolidated Balance Sheets

April 30, 1996 and 1995
- -------------------------------------------------------------------------------

Assets 1996 1995
- ------ ------------- -----------

Current assets:
Cash and cash equivalents $ 38,403,234 1,801,828
Trade accounts receivable 20,905,812 17,608,564
Amounts receivable under stock purchase agreements - 30,000,002
Inventories 23,609,136 21,361,341
Prepaid expenses and other 1,475,612 905,794
------------- -----------
84,393,794 71,677,529
------------- -----------
Property, plant and equipment:
Land 1,072,798 1,047,324
Plant and equipment 24,926,309 20,915,921
Accumulated depreciation (6,461,244) (5,360,082)
------------- -----------
19,537,863 16,603,163
------------- -----------
Investments and other assets:
Investments 15,830,006 14,798,228
Other assets 814,713 994,598
Deferred debt issuance costs, net 386,600 146,828
------------- -----------
17,031,319 15,939,654
------------- -----------
$ 120,962,976 104,220,346
============= ===========
Liabilities and Stockholders' Equity
- ------------------------------------

Current liabilities:
Current portion of long-term debt $ - 1,103,826
Trade accounts payable 10,698,199 22,365,444
Inventory due under exchange agreements 8,874,645 3,895,830
Excise taxes payable 6,483,756 4,649,599
Other accrued liabilities 2,685,355 1,673,625
------------- -----------
28,741,955 33,688,324
------------- -----------

Long-term debt, less current portion 28,948,867 36,945,610

Minority interests 5,452,963 5,115,710

Stockholders' equity:
Preferred stock, par value $.10; authorized
3,000,000 shares, none issued - -
Common stock, par value $.10 per share; authorized
27,000,000 shares, issued and outstanding 19,331,171
shares at April 30, 1996 and 14,780,715 shares
at April 30, 1995 1,933,117 1,478,071
Capital in excess of par value 61,187,476 36,912,002
Accumulated deficit (5,301,402) (9,919,371)
------------- -----------
57,819,191 28,470,702
------------- -----------
$ 120,962,976 104,220,346
============= ===========

See accompanying notes to consolidated financial statements.

F-2

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Consolidated Statements of Operations

Years Ended April 30, 1996 and 1995, Seven Months Ended April 30, 1994
and Year Ended September 30, 1993

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

1996 1995 1994 1993
---- ---- ---- ----

Revenue:
Product sales, pipeline tariffs
and terminaling fees $ 533,106,747 324,591,409 296,086,981 507,936,810

Costs and expenses:
Product costs and direct
operating expenses 520,389,482 318,811,953 294,773,790 505,348,576
General and administrative 4,998,771 4,226,123 2,156,817 3,199,223
Depreciation and amortization 1,169,541 1,147,291 665,955 1,099,253
------------- ----------- ----------- -----------
526,557,794 324,185,367 297,596,562 509,647,052
------------- ----------- ----------- -----------

Operating income (loss) 6,548,953 406,042 (1,509,581) (1,710,242)

Other income (expenses):
Interest income 520,900 -- -- --
Equity in earnings (losses)
of affiliates 942,216 407,208 710,626 (136,511)
Minority interests (337,253) (112,555) (231,156) 77,802
Interest expense (2,530,945) (3,119,019) (1,524,473) (2,319,180)
Other financing costs (333,155) (393,031) (228,468) (354,195)
Cancellation of aircraft lease __ (286,735) -- --
------------- ----------- ----------- -----------
(1,738,237) (3,504,132) (1,273,471) (2,732,084)
------------- ----------- ----------- -----------

Earnings (loss) before
income taxes 4,810,716 (3,098,090) (2,783,052) (4,442,326)

Income taxes - current (192,747) (119,545) (70,557) (48,142)
------------- ----------- ----------- -----------
Net earnings (loss) $ 4,617,969 (3,217,635) (2,853,609) (4,490,468)
============= =========== =========== ===========
Weighted average common
shares outstanding 15,129,637 2,860,390 2,694,830 2,694,830
============= =========== =========== ===========
Earnings (loss) per common share $ 0.31 (1.32) (1.15) (1.85)
============= =========== =========== ===========

See accompanying notes to consolidated financial statements.

F-3

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Years Ended April 30, 1996 and 1995, Seven Months Ended April 30, 1994
and Year Ended September 30, 1993
- --------------------------------------------------------------------------------

Redeemable Capital in
preferred Common excess of Accumulated
stock stock par value deficit Total
----------- --------- --------- --------- ----------

Balance at September 30, 1992 $ 6,678,007 269,483 941,095 1,936,475 9,825,060

Preferred stock dividends (70,034 shares) 490,238 -- -- (490,330) (92)
Net loss -- -- -- (4,490,468) (4,490,468)
----------- --------- --------- --------- ----------

Balance at September 30, 1993 7,168,245 269,483 941,095 (3,044,323) 5,334,500
Preferred stock dividends (36,921 shares) 258,447 -- -- (258,503) (56)
Net loss -- -- -- (2,853,609) (2,853,609)
----------- --------- --------- --------- ----------

Balance at April 30, 1994 7,426,692 269,483 941,095 (6,156,435) 2,480,835

Preferred stock dividends (78,515 shares) 545,195 -- -- (545,301) (106)
Common stock issued in connection with
conversion of preferred stock (7,971,887) 295,255 7,676,632 -- --
Common stock issued in connection with stock
purchase agreements -- 833,333 29,166,669 -- 30,000,002
Common stock issued in connection with a merger -- 80,000 120,000 -- 200,000
Costs related to conversion of preferred stock and
issuance of common stock -- -- (992,394) -- (992,394)
Net loss -- -- -- (3,217,635) (3,217,635)
----------- --------- --------- --------- ----------

Balance at April 30, 1995 -- 1,478,071 36,912,002 (9,919,371) 28,470,702
Common stock issued for cash -- 455,046 24,558,462 -- 25,013,508
Costs related to issuance of common stock -- -- (282,988) -- (282,988)
Net earnings -- -- -- 4,617,969 4,617,969
----------- --------- --------- --------- ----------

Balance at April 30, 1996 $ -- 1,933,117 61,187,476 (5,301,402) 57,819,191
=========== ========= ========= ========= ==========

See accompanying notes to consolidated financial statements.

F-4

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended April 30, 1996 and 1995, Seven Months Ended April 30, 1994
and Year Ended September 30, 1993
- --------------------------------------------------------------------------

1996 1995 1994 1993
---- ---- ---- ----

Cash flows from operating activities:
Net earnings $ 4,617,969 (3,217,635) (2,853,609) (4,490,468)
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 1,169,541 1,147,291 665,955 1,099,253
Equity in (earnings) losses of affiliates (942,216) (407,208) (710,626) 136,511
Minority interests 337,253 112,555 231,156 (77,802)
Dividends received from affiliates - 125,000 75,000 40,000
Loss on cancellation of aircraft lease - 286,735 - -
Write-off of noncurrent receivable - 190,000 - -
Loss (gain) on disposition of assets 167,459 (127,645) - (4,623)
Changes in operating assets and liabilities,
net of noncash activities:
Trade accounts receivable (3,297,248) 1,283,422 (10,201,357) 1,239,836
Inventories (2,247,795) (1,591,906) 23,107,751 (8,756,709)
Prepaid expenses and other (569,818) 169,196 (567,652) (63,513)
Trade accounts payable (10,979,599) (641,400) (12,845,989) 11,540,616
Inventory due under exchange
agreements 4,978,815 2,726,995 (1,801,431) 2,038,399
Excise taxes payable and other
accrued liabilities 2,845,886 (291,980) 2,713,551 2,302,687
------------ --------- --------- ---------
Net cash provided (used)
by operating activities (3,919,753) (236,580) (2,187,251) 5,004,187
------------ --------- --------- ---------

Cash flows from investing activities:
Purchases of property, plant and equipment (4,124,264) (747,774) (461,888) (4,730,726)
Proceeds from sale of assets 320,210 260,585 - 8,245
Decrease (increase) in other assets (377,323) 253,627 (579,181) 107,589
------------ --------- --------- ---------
Net cash used by investing
activities (4,181,377) (233,562) (1,041,069) (4,614,892)
------------ --------- --------- ---------

Cash flows from financing activities:
Borrowings (repayments) of long-term debt, net (9,100,568) 166,397 3,691,941 (1,315,608)
Deferred debt issuance costs (239,772) - - -
Cash dividends paid on preferred stock - (106) (56) (92)
Cash received in connection with merger - 200,000 - -
Common stock issued for cash 25,013,508 - - -
Stock subscription received in cash 30,000,002 - - -
Costs paid relating to conversion of preferred
stock and issuance of common stock (970,634) (304,748) - -
------------ --------- --------- ---------
Net cash provided (used) by
financing activities 44,702,536 61,543 3,691,885 (1,315,700)
------------ --------- --------- ---------
Increase (decrease) in cash
and cash equivalents 36,601,406 (408,599) 463,565 (926,405)

Cash and cash equivalents at beginning of period 1,801,828 2,210,427 1,746,862 2,673,267
------------ --------- --------- ---------

Cash and cash equivalents at end of period $ 38,403,234 1,801,828 2,210,427 1,746,862
============ ========= ========= =========
Supplemental disclosure of cash flow information -
Noncash investing and financing activities -
Costs accrued relating to conversion of
preferred stock and issuance of common stock $ - 687,646 - -
============ ========= ========= =========

See accompanying notes to consolidated financial statements.

F-5

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

April 30, 1996 and 1995

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

(1) Summary of Significant Accounting Policies

(a) Nature of Business and Basis of Presentation

TransMontaigne Oil Company ("the Company") is a holding company which
pursues, through its subsidiaries, business opportunities in the
downstream sector of the petroleum industry. The Company's principal
operating subsidiary is engaged in the business of pipelining,
terminaling, storing and selling refined petroleum products
principally in the Mid-Continent region of the United States.

Management makes various estimates and assumptions in determining the
reported amounts of assets, liabilities, revenues and expenses for
each period presented, and in the disclosures of commitments and
contingencies. Changes in these estimates and assumptions will occur
as a result of the passage of time and the occurrence of future
events, and actual results will differ from those estimates. The
Company provides short-term credit to its customers which, with the
exception of related parties, are generally all wholesale distributors
of these products. The Company requires collateral, such as letters of
credit, liens on products, and guarantees on a customer by customer
basis. The Company maintains allowances for potential uncollectible
accounts receivable, which historically have been minimal.

(b) Principles of Consolidation

The accompanying consolidated financial statements include,
collectively, the Company and its wholly owned subsidiary, Continental
Ozark, Inc. (COZ), and COZ's wholly owned subsidiaries and COZ's 65%
owned subsidiary, Continental Ozark Holding, Inc. (COH). All
significant intercompany accounts and transactions have been
eliminated in consolidation.

(c) Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of
three months or less when acquired to be cash equivalents.

(d) Inventories

Inventories of refined products are stated at the lower of last-in,
first-out (LIFO) cost or market. Refined products due from third
parties under exchange agreements are included in inventory and
recorded at current replacement cost. Refined products due to third
parties under exchange agreements are recorded at current replacement
cost. Adjustments resulting from changes in current replacement cost
for refined products due to or from third parties under exchange
agreements are reflected in cost of products sold. The exchange
agreements are generally for a term of 30 days and are generally
settled by delivering product to or receiving product from the party
to the exchange.

F-6

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(1) Summary of Significant Accounting Policies (continued)

(e) Property, Plant and Equipment

Depreciation of equipment is provided by the straight-line and double-
declining balance methods. Depreciation of all other assets is
provided by the straight-line method. Estimated useful lives are 25
years for plant, which includes buildings, storage tanks and pipelines
and 3 to 20 years for equipment. All items of property, plant and
equipment are carried at cost.

(f) Investment in Lion Oil Company

The Company's investment in Lion Oil Company ("Lion") is accounted for
using the equity method. Under this method, the investment, originally
recorded at cost, is adjusted to recognize the Company's share of the
net earnings or losses of Lion as incurred rather than as dividends or
other distributions are received.

(g) Recognition of Revenue

Revenue from the sale of refined petroleum products is recorded at the
time title and risk of ownership pass. Transfers of products to or
from third parties under exchange agreements do not culminate the
earnings process and are recorded as inventory and liability
transactions with no effect on income.

(h) Deferred Debt Issuance Costs

Deferred debt issuance costs related to senior subordinated debentures
and the long-term credit agreements are amortized on the interest
method over the term of the underlying debt instrument. Accumulated
amortization was $164,970 and $101,332 at April 30, 1996 and 1995,
respectively.

(i) Income Taxes

The Company utilizes the asset and liability method of accounting for
income taxes, as prescribed by Statement of Financial Accounting
Standards No. 109 (SFAS 109). Under this method, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply in the years in which these temporary
differences are expected to be recovered or settled. Changes in tax
rates are recognized in income in the period that includes the
enactment date.

F-7

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(1) Summary of Significant Accounting Policies (continued)

(j) Minority Interests

Minority interests consist of ownership interests in COH attributable
to shareholders other than the Company.

(k) Inventory Management

The Company manages the risk associated with fluctuations in the price
of refined petroleum products inventory and purchase and sales
commitments, and may selectively enter into futures contracts which
are designated as hedges of the products purchased or sold. Hedging
gains and losses are recorded in inventory and are recognized when the
inventory is sold. Since February 1996, the Company has also engaged
in the trading of futures contracts. Gains and losses from these
trading activities are recognized as they occur.

The Company's Risk and Product Management Committee reviews the total
inventory position on a weekly basis in order to ensure compliance
with the Company's inventory management policies, including all
hedging and trading activities. The Company has adopted policies
whereby its net inventory position subject to price risk requires the
prior approval of the Risk and Product Management Committee.

At April 30, 1996, the Company had no net open futures contracts
designated as hedges, and there were no deferred hedging gains or
losses.

In connection with its trading activities, the Company had outstanding
contracts to sell 50,000 barrels of products and contracts to purchase
50,000 barrels of product at April 30, 1996. The unrealized loss
relating to such contracts of approximately $267,000 has been charged
to operations for the year ended April 30, 1996. The net trading loss
on futures contracts of approximately $40,000 for the period from
the commencement of trading activities to April 30, 1996 has been
included in product costs and direct operating expenses in the
accompanying statements of operations.

Product futures contracts are traded on the New York Merchantile
Exchange (NYMEX). The change in market value of NYMEX-traded futures
contracts requires daily cash settlements in margin accounts with
brokers. NYMEX future contracts are guaranteed by the NYMEX and have
nominal credit risk. The Company is exposed to credit risk in the
event the counterparties to other third party agreements are not able
to perform their contractual obligations.

(l) Earnings (Loss) Per Common Share

Earnings (loss) per common share has been computed by application of
the treasury stock method, calculated based on the weighted average
number of common shares outstanding during the period after giving
effect to preferred stock dividends. The assumed conversion of the
outstanding shares of convertible preferred stock was anti-dilutive
for all periods presented prior to the conversion of all outstanding
shares of preferred stock into common stock effective April 26, 1995.

(m) Reclassifications

Certain amounts in the accompanying consolidated financial statements
for prior periods have been reclassified to conform to the
classifications used in 1996.

F-8

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(2) Inventories

1996 1995
---- ----

Refined petroleum products $ 12,387,371 12,929,837
Refined petroleum products due from
third parties under exchange agreements 11,208,859 8,421,611
Other 12,906 9,893
------------ ----------
$ 23,609,136 21,361,341
============ ==========

During the seven months ended April 30, 1994, the Company recorded an
adjustment of approximately $3,640,000 to reduce inventories to the lower of
cost or market, calculated as of December 31, 1993.

If the lower of average or replacement cost method of accounting had been
used instead of the LIFO method for valuing refined petroleum products,
inventories would have been $5,779,000 and $5,996,000 greater than reported
at April 30, 1996 and 1995, respectively.

During the year ended April 30, 1995 and the seven months ended April 30,
1994 inventory quantities were reduced, which resulted in a liquidation of
LIFO inventory layers carried at costs which prevailed in prior years. The
effect of the liquidations was to decrease product costs and decrease the
net loss for the year ended April 30, 1995 by approximately $863,000 and
increase product costs and the net loss for seven months ended April 30,
1994 by approximately $904,000.

The Company's refined petroleum products inventory consists primarily of
gasoline and distillates. A significant portion of this inventory
represents line fill and tank bottoms. This portion of the inventory is
required for operating balances in the conduct of the Company's daily
distribution activities and is maintained both in tanks and pipelines owned
by the Company and pipelines owned by third parties.

(3) Property, Plant and Equipment

1996 1995
---- ----

Land $ 1,072,798 1,047,324
Terminals and equipment 6,230,696 5,764,874
Pipelines, rights of way and equipment 17,182,135 13,960,421
Other plant and equipment 1,513,478 1,190,626
----------- ----------
25,999,107 21,963,245
Less accumulated depreciation 6,461,244 5,360,082
----------- ----------
$19,537,863 16,603,163
=========== ==========

F-9

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(4) Investment in Lion

The Company, through its 65% ownership of COH, effectively owns 18% of the
common stock of Lion. At April 30, 1996 and 1995, the Company's investment
in Lion was approximately $15,494,000 and $14,497,000, respectively, and the
minority interests were approximately $5,453,000 and $5,116,000,
respectively.

Summarized balance sheet information for Lion as of April 30, 1996 and 1995
is as follows:

1996 1995
---- ----
(in thousands)

Assets:
Current assets $ 94,403 95,610
Property, plant and equipment, net 68,436 71,186
Other assets 4,948 1,926
-------- -------
$167,787 168,722
======== =======

Liabilities and stockholders' equity:
Current liabilities $ 40,454 37,273
Long-term debt 62,140 71,239
Deferred income taxes 9,353 7,962
Stockholders' equity 55,840 52,248
-------- -------
$167,787 168,722
======== =======

F-10

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Summarized statement of operations information for Lion for the years ended
April 30, 1996, 1995, 1994 and 1993 is as follows:

1996 1995 1994 1993
---- ---- ---- ----

(in thousands)
Net sales $ 566,812 525,037 477,573 493,244
Cost of sales 549,210 511,655 462,491 484,020
--------- ------- ------- -------

Gross profit 17,602 13,382 15,082 9,224

Selling, general and
administrative expenses 5,996 5,763 5,224 4,968
Management fees 1,467 532 1,166 55
--------- ------- ------- -------

Operating income 10,139 7,087 8,692 4,201

Interest expense and other
(income), net 4,260 4,939 4,002 3,944
--------- ------- ------- -------
Earnings before
income tax 5,879 2,148 4,690 257

Income tax expense 2,288 892 1,831 129
--------- ------- ------- -------

Net earnings $ 3,591 1,256 2,859 128
========= ======= ======= =======

The Company has $2,600,000 of letters of credit outstanding to a bank to
assist Lion in obtaining financing. No outstanding obligations exist under
these letters of credit as of April 30, 1996.

(5) Long-term Debt

Long-term debt at April 30, 1996 and 1995 is as follows:

1996 1995
---- ----
(in thousands)

12 3/4% senior subordinated debentures net
of discount (face amount $4,000,000) $ 3,948,867 3,938,468
Line of credit with a bank 25,000,000 33,000,000
Note payable to a bank at its prime rate
plus 1/2% repaid in May 1995 -- 1,100,000
Other -- 10,968
----------- ----------
28,948,867 38,049,436
Less current portion -- (1,103,826)
----------- ----------
$28,948,867 36,945,610
=========== ==========

F-11

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(5) Long-term Debt (continued)

In March 1991, the Company issued 12 3/4% senior subordinated debentures
which are guaranteed by certain subsidiaries and are due December 15, 2000,
with interest payable semi-annually on June 15 and December 15. The
debentures are subject to a required redemption of $2,000,000 on December
15, 1999 and December 15, 2000. The debentures may be prepaid prior to
maturity at a premium, under certain circumstances. In conjunction with the
issuance of these debentures, the Company issued warrants to purchase
248,686 shares of the Company's common stock. The warrant exercise price was
reduced effective April 26, 1995 from $6.10 per share to $3.60 per share,
through December 15, 2000.

On December 7, 1995 the Company entered into a revolving line of credit with
a major bank ("the Credit Agreement"). The aggregate commitment for
outstanding letters of credit and revolving note advances is up to
$45,000,000 through November 30, 1999. The funds advanced under this line
are used principally to fund working capital requirements of the Company and
to issue letters of credit to persons with whom the Company and its
subsidiaries do business. Borrowings under the Credit Agreement bear
interest at a rate per year equal to the bank's announced base rate, or at
the Company's election, a Eurodollar interest rate option. The interest
rate at April 30, 1996 was 6.875%.

As of April 30, 1996, the Company had $25,000,000 outstanding under the
Credit Agreement and its subsidiary, COZ, had outstanding standby letters of
credit to product suppliers and a bank (see Note 4) totaling approximately
$3,200,000 at April 30, 1996. Actual obligations to such suppliers at April
30, 1996 are included in trade accounts payable.

The Credit Agreement contains a negative pledge covenant by the Company and
its subsidiaries and is secured by the stock of the subsidiaries. The
Credit Agreement contains financial ratio tests relating to consolidated
income from operations, consolidated funded debt, liquidity and consolidated
tangible net worth, working capital and tangible net worth. As of April,
1996, the Company was in compliance with all of such tests.

Maturities of long-term debt for fiscal years subsequent to 1996 are as
follows:

1997 $ --
1998 --
1999 --
2000 27,000,000
2001 1,948,867
-----------
$28,948,867
===========

Cash payments for interest were approximately $2,994,000, $2,478,000,
$1,741,000 and $2,230,000 for the years ended April 30, 1996 and 1995, the
seven months ended April 30, 1994 and the year ended September 30, 1993,
respectively.

F-12

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(6) Disclosures About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each of on and off-balance sheet financial instruments, along with the
methods and assumptions used to estimate such fair values at April 30, 1996:

Cash and Cash Equivalents, Trade Receivables and Trade Accounts Payable

The carrying amount approximates fair value because of the short term
maturity of these instruments.

Long-term Debt

The carrying value of the line of credit approximates its fair value, as the
line bears interest at a variable rate.

The carrying value of the 12 3/4% senior subordinated debentures
approximates the estimated fair value of the debentures, as the effective
interest rate of the debentures approximates the current market rate for
similar debt instruments.

Futures Contracts

The carrying value and fair value of the futures contracts entered into for
trading purposes was a liability of approximately $267,000, based on the
quoted market price of the related futures contracts at April 30, 1996.

Limitations

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

F-13

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(7) Redeemable Convertible Preferred Stock

In March 1991, the Company issued 857,143 shares of voting redeemable Series
A cumulative convertible preferred stock at $7.00 per share which had a
liquidation and mandatory redemption price of the same amount. This
preferred stock had one vote per share. Dividends on the preferred stock
were payable quarterly, at 7.15% per annum of the liquidation value
outstanding, in additional shares of preferred stock or, at the Company's
option, in cash.

Effective as of April 26, 1995 all outstanding shares of preferred stock
were converted into common stock.

(8) Shareholders' Equity

(a) Common Stock

Effective as of April 26, 1995, the Company (then Continental Ozark
Corporation) and TransMontaigne Oil Company, ("TransMontaigne") entered
into a Merger Agreement pursuant to which all of the outstanding shares
of common stock of TransMontaigne were converted into 800,000 shares of
common stock of Continental Ozark Corporation. Upon consummation of the
merger, the Company received $200,000 in cash and changed its name to
TransMontaigne Oil Company. The merger was accounted for as an
acquisition of TransMontaigne by the Company using the purchase method
of accounting. TransMontaigne had no operations prior to April 26,
1995. Concurrently, the Company entered into a series of Stock Purchase
Agreements and other related transactions, with certain institutional
and individual investors pursuant to which the Company issued 8,333,334
shares of the Company's common stock for $30,000,002.

Effective as of April 26, 1995, the Company and the holders of its
redeemable convertible preferred stock entered into a Conversion
Agreement pursuant to which all of the outstanding shares of preferred
stock of the Company were converted into 2,952,551 shares of common
stock of the Company.

Effective as of April 17, 1996 the Company completed a private placement
of 4,545,456 shares of common stock at $5.50 per share for proceeds of
$25,000,008.

F-14

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(b) Stock Options

The Company has adopted two stock option plans, (the "1991 Plan" and the
"1995 Plan") under which stock options may be granted to key employees
of the Company. Under the 1991 Plan, the Company may grant options for
up to 300,000 shares of common stock at prices and for terms as
determined by the Administrative Committee of the 1991 Plan. The
Company has reserved 1,000,000 shares of common stock for options that
may be granted under the 1995 Plan. Options granted under the 1995 Plan
are exercisable at prices determined by the Incentive Plan Committee,
however, in no event shall the price be less than the fair market value
of the stock on the date of grant. Options under the 1995 Plan expire
at such time as the Incentive Plan Committee determines, but no later
than seven years from the date of grant.

Changes in stock options outstanding for the year ended April 30, 1996
and 1995, the seven months ended April 30, 1994 and the year ended
September 30, 1993 are as follows:

1991 Plan 1995 Plan
----------------------- --------------------
Option Option
price per price per
Shares share Shares share
------ ----- ------ -----

Outstanding at
September 30, 1992
and 1993 220,254 $3.50 - 6.10 -- $ --
Forfeited (124,500) 6.10 -- --
Granted -- -- 124,500 2.70
-------- ------------ ------- ------------

Outstanding at
April 30, 1994 95,754 3.50 - 6.10 124,500 2.70
Granted -- -- 358,000 2.70
-------- ------------ ------- ------------

Outstanding at
April 30, 1995 95,754 3.50 - 6.10 482,500 2.70
Granted -- -- 421,746 3.60 - 5.50
Exercised -- -- (5,000) 2.70
-------- ------------ ------- ------------

Outstanding at
April 30,1996 95,754 $3.50 - 6.10 899,246 $2.70 - 5.50
======== ============ ======= ============
Exercisable at
April 30, 1996 95,754 $3.50 - 6.10 718,373 $2.70 - 5.50
======== ============ ======= ============

F-15

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(9) Income Taxes

Income tax expense, consisting solely of state income taxes, was $192,747,
$119,545, $70,557 and $48,142 for the years ended April 30, 1996 and 1995,
the seven months ended April 30, 1994 and the year ended September 30, 1993,
respectively. Income tax expense differs from the amount computed by
applying the U.S. federal corporate income tax rate of 34% to pretax
earnings (loss) as a result of the following:

1996 1995 1994 1993
---- ---- ---- ----

Computed "expected"
tax expense $ 1,636,000 (1,053,000) (946,000) (1,510,000)
Increase (reduction) in income
taxes resulting from:
Increase (decrease) in the
valuation allowance for
deferred tax assets
allocated to income tax
expense (1,785,000) 1,174,000 1,032,000 1,617,000
State income taxes, net of
federal income
tax benefit 127,000 79,000 47,000 40,571
Other, net 214,747 (80,455) (62,443) (99,429)
----------- --------- --------- ---------
Income tax expense $ 192,747 119,545 70,557 48,142
=========== ========= ========= =========

F-16

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

(9) Income Taxes (continued)

The tax effects of temporary differences which give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April
30, 1996 and 1995 are as follows:

1996 1995
---- ----

Deferred tax assets:
Inventories, principally due to difference
in costing method used for tax purposes $ 2,196,000 2,278,000
Unrealized commodity futures contract losss 102,000 426,000
Future deductible amounts for income tax
purposes resulting from a change in the
method of accounting for inventories -- 1,038,000
Net operating loss carryforwards 5,670,000 5,560,000
Alternative minimum tax credit carryforwards 24,000 24,000
---------- ----------

Total gross deferred tax assets 7,992,000 9,326,000

Less valuation allowance (4,474,000) (6,259,000)
---------- ----------

Net deferred tax assets 3,518,000 3,067,000

Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation methods (2,994,000) (2,778,000)
Investments in affiliated company, principally
due to undistributed earnings (524,000) (289,000)
---------- ----------
Net deferred taxes $ -- --
========== ==========

The Company changed its year-end for income tax purposes from December 31 to
April 30, effective in 1995. The Company also changed its method of
accounting for inventories for income tax purposes effective January 1,
1994. The effect of this change was approximately $8,200,000 at January 1,
1994, and, under the provisions of the Internal Revenue Code, this amount is
deductible over a 3-year period.

At April 30, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $14,923,000 which are available
to offset future federal taxable income, if any, through 2009. In addition,
the Company has alternative minimum tax credit carryforwards of
approximately $24,000 available to reduce future federal regular income
taxes, if any, which can be carried forward indefinitely.

F-17

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Under SFAS 109, the Company provides for deferred income taxes on the
undistributed net earnings of Lion. Under the transition rules in SFAS
109, the Company is not required to recognize a deferred tax liability of
approximately $6,100,000 for the undistributed net earnings of Lion which
arose prior to the adoption of SFAS 109 because the Company currently does
not expect those undistributed earnings to become taxable to the Company
in the foreseeable future. A deferred tax liability will be recognized on
these undistributed earnings when the Company expects that it will recover
those undistributed earnings in a taxable manner, such as through the
receipt of dividends or the sale of the investment.

The Company paid state income taxes of approximately $106,000, $138,000,
and $45,000 for the years ended April 30, 1996 and 1995 and the seven
months ended April 30, 1994, respectively.

(10) Related Party Transactions

The Company had sales of $3,380,000, $884,000, $6,698,000 and $7,691,000
and purchases of $33,879,000, $28,997,000, $15,710,000 and $52,050,000 for
the years ended April 30, 1996 and 1995, the seven months ended April 30,
1994 and the year ended September 30, 1993, respectively, to companies
affiliated by common ownership.

Related party balances at April 30, 1996 and 1995:

1996 1995
---- ----

Accounts receivable $ 90,498 45,549
Accounts payable 84,034 1,270,335

(11) New Accounting Standards

Statement of Financial Accounting Standards No. 121, Accounting for
Impairment of Long-Lived Assets to be Disposed of (SFAS 121) was issued in
March, 1995, by the Financial Accounting Standards Board. It requires that
long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS 121 is required to be adopted for fiscal years beginning
after December 15, 1995. The adoption of this statement by the Company is
not expected to have a significant effect on the financial statements.

F-18

TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation (SFAS 123) was issued by the Financial Accounting
Standards Board in October 1995. This standard addresses the timing and
measurement of stock-based compensation expense. Entities electing to
continue to follow Accounting Principles Board Opinion No. 25 Accounting
for Stock Issued to Employees, (APB 25) must make pro forma disclosures of
net income and earnings per share, as if the fair value based method of
accounting defined by SFAS 123 had been applied. SFAS 123 is applicable to
fiscal years beginning after December 15, 1995. The Company has elected to
retain the measurement approach of APB 25, (the intrinsic value method)
for recognizing stock-based compensation in the consolidated financial
statements. The Company will include the disclosures required by SFAS 123
in future financial statements.

(12) Subsequent Event

On June 4, 1996 the Company merged (the "Merger") with Sheffield
Exploration Company, Inc., a Delaware corporation ("Old Sheffield"),
pursuant to the Restated Agreement and Plan of Merger dated as of
February 6, 1996 between the Company and Old Sheffield (the "Merger
Agreement").

As a result of the Merger, the Company merged into Old Sheffield, which
became the surviving corporation of the Merger, and (i) each share of
common stock of the Company issued and outstanding immediately prior to
the closing of the Merger was converted at the closing into the right to
receive one share of common stock of the surviving corporation ("New
Common Stock"), (ii) each 2.432599 shares of Old Sheffield common stock
issued and outstanding immediately prior to the closing of the Merger
became one share of New Common Stock, (iii) the name of Old Sheffield was
changed to TransMontaigne Oil Company and (iv) the number of authorized
shares of New Common Stock was increased to 40,000,000.

The Merger constituted a reverse acquisition of Old Sheffield by the
Company, in that Old Sheffield survived the Merger, but is owned
approximately 93% by the former stockholders of the Company.

Pro forma results of the Company, assuming the Merger had occurred at the
beginning of fiscal 1996 or 1995, would not be materially different from
the results reported.

F-19

Independent Auditors' Report
----------------------------

The Board of Directors and Stockholders
Lion Oil Company and Subsidiary:

We have audited the accompanying consolidated balance sheets of Lion Oil Company
and subsidiary as of April 30, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended April 30, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lion Oil Company and
subsidiary as of April 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three-year period ended April
30, 1996, in conformity with generally accepted accounting principles.

As discussed in notes 1 and 5 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, as of May 1, 1993.

KPMG Peat Marwick LLP

Jackson, Mississippi
July 19, 1996

LION OIL COMPANY AND SUBSIDIARY

Consolidated Balance Sheets

April 30, 1996 and 1995

Assets 1996 1995
------ ---- ----

Current assets:
Cash and cash equivalents $ 4,986,616 11,909,536
Trade accounts receivable, less allowance for
doubtful accounts of $50,000 in 1996 and 1995 25,590,926 26,812,439
Inventories 60,224,008 51,921,402
Refundable income taxes 145,796 1,564,965
Current portion of deferred income taxes 231,083 82,822
Prepaid expenses and other current assets 3,224,217 3,319,025
------------ -----------
Total current assets 94,402,646 95,610,189
------------ -----------
Property, plant and equipment 109,587,635 105,757,497
Less accumulated depreciation 41,151,991 34,571,855
------------ -----------
Net property, plant and equipment 68,435,644 71,185,642
------------ -----------
Deferred turnaround costs, less accumulated amortization
of $113,094 in 1996 and $3,193,435 in 1995 3,970,002 1,405,162
Other assets 978,230 520,911
------------ -----------
$167,786,522 168,721,904
============ ===========
Liabilities and Stockholders' Equity
- ------------------------------------

Current liabilities:
Trade accounts payable $ 24,044,275 19,888,675
Current installments of long-term debt 3,142,857 3,142,857
Accrued expenses and other current liabilities 10,825,954 10,040,495
Inventory due under finished product exchange agreements 2,440,410 4,181,611
Income taxes currently payable -- 19,187
------------ -----------
Total current liabilities 40,453,496 37,272,825
------------ -----------

Long-term liabilities:
Long-term debt, excluding current installments 62,140,264 71,238,909
Deferred income taxes 9,353,122 7,961,907
------------ -----------
Total long-term liabilities 71,493,386 79,200,816
------------ -----------

Stockholders' equity:
Common stock of $.10 par value. Authorized
12,000,000 shares; issued 8,649,600 shares 864,960 864,960
Additional paid-in capital 8,572,140 8,572,140
Retained earnings 46,402,540 42,811,163
------------ -----------
Total stockholders' equity 55,839,640 52,248,263
------------ -----------
$167,786,522 168,721,904
============ ===========

See accompanying notes to consolidated financial statements.

LION OIL COMPANY AND SUBSIDIARY

Consolidated Statements of Earnings

Years ended April 30, 1996, 1995 and 1994

1996 1995 1994
---- ---- ----

Net sales $ 566,811,346 525,036,778 477,573,034
Cost of sales 549,209,750 511,654,771 462,491,358
-------------- ----------- -----------
Gross profit 17,601,596 13,382,007 15,081,676

Selling, general and administrative expenses 5,995,898 5,763,021 5,223,310
Management fees 1,466,715 531,946 1,166,099
-------------- ----------- -----------
Operating income 10,138,983 7,087,040 8,692,267
-------------- ----------- -----------
Other income (expense):
Interest and other financing costs (4,546,844) (5,214,396) (4,187,176)
Interest income 50,831 42,009 41,127
Miscellaneous, net 236,407 233,124 143,347
-------------- ----------- -----------
(4,259,606) (4,939,263) (4,002,702)
-------------- ----------- -----------
Earnings before income taxes 5,879,377 2,147,777 4,689,565

Income tax expense 2,288,000 891,500 1,830,887
-------------- ----------- -----------
Net earnings $ 3,591,377 1,256,277 2,858,678
============== =========== ===========

See accompanying notes to consolidated financial statements.

LION OIL COMPANY AND SUBSIDIARY

Consolidated Statements of Stockholders' Equity

Years ended April 30, 1996, 1995 and 1994

Common stock Additional Total
------------------------- paid-in Retained stockholders'
Shares Amount capital earnings equity
--------- ------- ---------- ---------- -------------

Balance at April 30, 1993 8,649,600 $ 864,960 8,572,140 38,696,208 48,133,308

Net earnings for 1994 -- -- -- 2,858,678 2,858,678
--------- ------- --------- ---------- ----------

Balance at April 30, 1994 8,649,600 864,960 8,572,140 41,554,886 50,991,986

Net earnings for 1995 -- -- -- 1,256,277 1,256,277
--------- ------- --------- ---------- ----------

Balance at April 30, 1995 8,649,600 864,960 8,572,140 42,811,163 52,248,263

Net earnings for 1996 -- -- -- 3,591,377 3,591,377
--------- ------- --------- ---------- ----------

Balance at April 30, 1996 8,649,600 $ 864,960 8,572,140 46,402,540 55,839,640
========= ======= ========= ========== ==========

See accompanying notes to consolidated financial statements.

LION OIL COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years ended April 30, 1996, 1995 and 1994

1996 1995 1994
---- ---- ----

Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Cash received from customers $ 570,221,293 520,302,240 490,889,065
Cash paid to suppliers and employees (555,154,833) (521,484,138) (448,637,782)
Interest and dividends received 50,831 42,009 41,127
Other operating income received 217,354 203,285 170,529
Interest paid (net of amount capitalized) (4,798,264) (5,034,862) (4,108,359)
Income taxes refunded (paid) 365,831 (1,992,419) 2,375,937
------------ ------------ ------------
Net cash provided (used) by
operating activities 10,902,212 (7,963,885) 40,730,517
------------ ------------ ------------

Cash flows from investing activities:
Capital expenditures (4,653,406) (6,510,499) (12,458,711)
Deferred turnaround costs (4,083,095) -- --
Proceeds from sale of equipment 342,586 211,233 33,097
------------ ------------ ------------
Net cash used by investing activities (8,393,915) (6,299,266) (12,425,614)
------------ ------------ ------------

Cash flows from financing activities:
Proceeds from lines of credit 730,247,950 699,044,595 609,001,450
Principal payments on lines of credit (735,995,481) (716,299,571) (617,412,186)
Proceeds from long-term debt and note payable 15,303,648 42,199,862 232,287
Principal payments on long-term
debt and note payable (18,654,762) (15,468,199) (9,284,526)
Additions to debt issue costs (332,572) (495,910) (458,813)
------------ ------------ ------------
Net cash provided (used) by
financing activities (9,431,217) 8,980,777 (17,921,788)
------------ ------------ ------------

Net increase (decrease) in cash
and cash equivalents (6,922,920) (5,282,374) 10,383,115

Cash and cash equivalents at beginning of year 11,909,536 17,191,910 6,808,795
------------ ------------ ------------

Cash and cash equivalents at end of year $ 4,986,616 11,909,536 17,191,910
============ ============ ============

(Continued)

2

LION OIL COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

1996 1995 1994
---- ---- ----

Reconciliation of net earnings to net cash provided
(used) by operating activities:
Net earnings $ 3,591,377 1,256,277 2,858,678
Adjustments:
Depreciation and amortization 8,811,662 8,791,454 7,719,264
Deferred income taxes 1,242,953 (129,202) 464,852
Loss (gain) from sale of equipment 115,637 (62,584) (10,406)
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts
receivable 1,221,513 (7,165,548) 7,925,333
(Increase) decrease in inventories (8,302,606) (12,960,966) 21,251,812
(Increase) decrease in refundable income taxes 1,419,169 (1,561,960) 2,456,487
(Increase) decrease in prepaid expenses
and other current assets 94,809 (467,728) (50,615)
Increase in other assets (472,973) (25,000) --
Increase (decrease) in trade accounts payable 4,155,600 2,368,888 (3,802,728)
Increase in accrued expenses and other
current liabilities 785,459 307,671 2,183,208
Increase (decrease) in inventory due under
finished product exchange agreements (1,741,201) 2,922,103 (1,521,845)
Increase (decrease) in income taxes
currently payable (19,187) (1,237,290) 1,256,477
----------- ------------ -----------

Net cash provided (used) by
operating activities $10,902,212 (7,963,885) 40,730,517
=========== ============ ===========

See accompanying notes to consolidated financial statements.

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

April 30, 1996, 1995 and 1994

(1) Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------

Lion Oil Company (the Company) is engaged in petroleum refining and
related lines of business. It owns and operates a petroleum refinery
and crude oil gathering pipelines, product terminals and related
equipment principally located in Arkansas, Louisiana and Mississippi.

(a) Basis of Financial Statement Presentation
-----------------------------------------

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, J. Christy Construction
Co., Inc. (J. Christy), a maintenance and construction business
located in El Dorado, Arkansas. All significant intercompany
balances and transactions have been eliminated in consolidation.

(b) Inventories
-----------

Inventories in the amount of $59,623,904 and $51,260,579 at April
30, 1996 and 1995, respectively, are stated at lower of
approximate cost (first-in, first-out) or market (net realizable
value). Inventories in the amount of $600,104 and $660,823,
respectively, are stated at lower of approximate cost (last-in,
first-out) or market (replacement cost). Had cost been determined
using the first-in, first-out method for all categories,
inventories would have been greater by approximately $322,000
and $284,000 at April 30, 1996 and 1995, respectively.

Finished petroleum products due from third parties under exchange
agreements are included in inventory and recorded at current
replacement cost. Finished petroleum products due to third
parties under exchange agreements are recorded at current
replacement cost. Adjustments resulting from changes in current
replacement cost for refined products due to or from third
parties under exchange agreements are reflected in cost of
products sold. The exchange agreements are generally short-term
and are generally settled by delivery product to or receiving
product from the party to the exchange.

(c) Property, Plant and Equipment
-----------------------------

Depreciation of plant and equipment is provided over the estimated
useful lives of the respective assets using the straight-line
method except for automotive equipment which is depreciated
using a declining-balance method. All property, plant and
equipment is carried at cost.

(Continued)

2

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(d) Recognition of Revenue
----------------------

Revenues from the sale of finished products and exchanges of product
that culminate the earnings process are recorded at the time
title and risk of ownership pass.

Exchanges of product that do not culminate the earnings process
are recorded as inventory and liability transactions with no
effect on income. Inventories under product exchange agreements
consisted primarily of finished petroleum products at April
30, 1996 and 1995.

(e) Deferred Turnaround Costs
-------------------------

Turnaround costs for major production units of the refinery are
deferred and amortized over the three-year period benefited.
Minor turnaround costs are charged to expense as incurred.

(f) Income Taxes
------------

Effective May 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standard No. 109, Accounting for Income
Taxes (Statement 109), which requires the asset and liability
method of accounting for income taxes. The cumulative effect
of this change of accounting for income taxes was not significant
and was included in income tax expense in the 1994 consolidated
statement of earnings. Under the asset and liability method
of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

(g) Cash Equivalents
----------------

The Company considers interest bearing accounts with an original
maturity of three months or less to be cash equivalents.

(Continued)

3

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(h) Tax Credits
-----------

The Company uses the flow through method to account for tax credits.

(i) Debt Issue Costs
----------------
Debt issue costs are amortized using the straight line method over the term
of the related debt agreements.

(j) Use of Estimates
----------------
The prepararation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

(2) Inventories
-----------

A summary of inventories follows:

April 30
--------------------
1996 1995
---- ----

Finished petroleum products $ 23,317,965 19,798,790
Finished petroleum products under exchange
agreements 1,735,450 5,140,396
Crude oil 21,581,919 20,308,300
Intermediates 12,381,499 5,571,607
Raw materials and supplies 1,207,175 1,102,309
------------- -----------
$ 60,224,008 51,921,402
============= ===========

(Continued)

4

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(3) Property, Plant and Equipment
-----------------------------

A summary of property, plant and equipment follows:

April 30
Estimated ------------------
useful life 1996 1995
----------- ---- ----

Land -- $ 1,716,119 1,682,378
Buildings and improvements 25-30 years 824,005 824,005
Refinery and equipment 5-20 years 79,741,454 75,885,365
Pipelines and equipment 15 years 17,373,553 17,327,827
Terminals and equipment 5-15 years 2,353,110 2,353,110
Tractors, trailers and automobiles 5-7 years 3,280,103 3,097,647
Other plant and equipment 3-8 years 1,906,060 1,814,208
Construction in progress -- 2,393,231 2,772,957
------------ -----------
109,587,635 105,757,497
Less accumulated depreciation 41,151,991 34,571,855
------------ -----------
$ 68,435,644 71,185,642
============ ===========

Construction in progress consists primarily of costs incurred for
refinery improvements. The Company estimates that it will cost
approximately $2,700,000 to complete projects in progress at April
30, 1996.

(4) Leased Assets and Lease Commitments
-----------------------------------
As of April 30, 1996, minimum lease payments due under noncancelable
operating leases are as follows:

Year ending
April 30
-----------

1997 $ 1,955,173
1998 1,377,008
1999 1,029,878
2000 944,623
2001 944,623
Thereafter 944,623
------------

Total minimum lease payments $ 7,195,928
============

(Continued)

5

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

Most of the Company's leases require the Company to pay taxes, maintenance
and insurance applicable to the leased property.

Rental expense under operating leases was approximately $2,458,000,
$1,339,000 and $1,744,000 in 1996, 1995 and 1994, respectively.

(5) Income Taxes
------------

As discussed in note 1, the Company adopted Statement 109 as of May 1,
1993. The cumulative effect of this change in accounting for income
taxes was determined as of May 1, 1993. This amount was not material,
and therefore is not shown separately in the 1994 consolidated
statement of earnings.

Components of income tax expense (benefit) are as follows:

Federal State Total
------- ----- -----

1996:
Current $ 933,428 111,619 1,045,047
Deferred 978,137 264,816 1,242,953
--------- ------- ---------

$ 1,911,565 376,435 2,288,000
========= ======= =========
1995:
Current $ 999,088 21,614 1,020,702
Deferred (263,455) 134,253 (129,202)
--------- ------- ---------

$ 735,633 155,867 891,500
========= ======= =========
1994:
Current $ 1,343,560 22,475 1,366,035
Deferred 206,610 258,242 464,852
--------- ------- ---------

$ 1,550,170 280,717 1,830,887
========= ======= =========

Income tax expense of $2,288,000 for 1996 (effective rate of 38.9%),
$891,500 for 1995 (effective rate of 41.5%) and $1,830,887 for 1994
(effective rate of 39.0%) differs from the expected amounts (computed
by applying the U.S. Federal corporate rate of 34% to pretax earnings)
as follows:

(Continued)

6

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(5), Continued

1996 1995 1994
---- ---- ----

Computed expected tax expense $ 1,998,988 730,244 1,594,452

Increases resulting from:
State income taxes (net for Federal
income tax benefit) 248,447 102,872 185,273
Other 40,565 58,384 51,162
--------- ------- ---------

Actual tax expense $ 2,288,000 891,500 1,830,887
========= ======= =========

The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilites are presented below:

April 30
-----------------------
1996 1995
---- ----

Deferred tax assets:
Accounts receivable, due to allowance
for doubtful accounts $ 18,980 18,980
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the
Tax Reform Act of 1986 212,103 60,674
State net operating loss carryforward -- 3,167
Alternative minimum tax credit carryforward 1,600,013 1,193,762
----------- ----------
Total gross deferred tax assets 1,831,096 1,276,583
----------- ----------

Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation (9,444,857) (8,622,268)
Deferred turnaround costs (1,503,129) (533,400)
Other (5,149) --
----------- ----------
Total gross deferred tax liabilities (10,953,135) (9,155,668)
----------- ----------

Net deferred tax liabilities $ (9,122,039) (7,879,085)
=========== ==========

The Company has determined, based on its history of profitable operations and
expectations for the future, that the deferred tax assets will more likely
than not be fully realized and that no valuation allowance is necessary at
April 30, 1996.

(Continued)

7

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

At April 30, 1995 the Company had State net operating loss carryforwards
for financial statement and income tax purposes of approximately
$80,000. These operating loss carryforwards were fully utilized in
1996.

The Internal Revenue Service (IRS) is presently auditing the Company's
Federal income and excise tax returns for fiscal 1992 through 1995.
IRS has proposed to assess additional excise taxes and penalties totaling
approximately $950,000 for 1993 through 1995 and has filed a notice
of additional income taxes of approximately $629,000 for 1992 and
1993. The Company has filed a protest regarding certain of the income
tax issues and is vigorously contesting the excise tax and other
issues. Because the excise tax audit is in its early stages and the
income tax assessment is being contested, it is not possible to
determine the amount, if any, of any additional taxes which may
ultimately be due. In the opinion of management, the resolution of
these matters will not have a material adverse effect on the financial
position of the Company.

(6) Long-term Debt
--------------

A summary of long-term debt follows:

April 30
-----------------------
1996 1995
---- ----

Line of credit with NBD Bank (NBD) $ 46,925,157 52,672,688
Term note payable to The CIT Group/Equipment
Financing, Inc. (CIT) 17,809,524 21,214,285
Line of credit with Union Planters Bank 548,440 494,793
------------ ----------
65,283,121 74,381,766
Less current installments of long-term debt 3,142,857 3,142,857
------------ ----------
Long-term debt, excluding
current installments $ 62,140,264 71,238,909
============ ==========

A summary of balances outstanding at April 30, 1996 under the Company's
line of credit with NBD Bank follows:

Line of credit available $ 75,000,000
Letters of credit outstanding (13,422,826)
Loan outstanding (46,925,157)
-------------
Unused portion of line of credit $ 14,652,017
=============

(Continued)

8

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

A summary follows of scheduled maturities of long-term debt at
April 30, 1996:

Fiscal year Amount
----------- ------

1997 $ 3,142,857
1998 50,616,454
1999 3,142,857
2000 3,142,857
2001 3,142,857
Thereafter 2,095,239
----------

$ 65,283,121
==========

The line of credit with NBD provides for borrowings up to $75,000,000 with
interest payable on outstanding amounts at LIBOR plus 2.75% or the
greater of the prime rate or the federal funds rate plus 1% (floating
rate). The line is secured by cash, accounts receivable and
inventories, and by letters of credit in the amount of $13,542,000
obtained in favor of the Company by its stockholders. The effective
rate is set at the Company's discretion and may be changed
periodically. Each time the Company requests an advance under the line,
it must specify whether interest is to be calculated using LIBOR plus
2.75%, or the floating rate. At April 30, 1996 advances totaling
$20,000,000 were at LIBOR, at an effective rate of 8.226%, and advances
totaling $26,925,157 were under the floating rate, which was at the
prime rate of 8.25%. The Company is required to pay a commitment fee at
an annual percentage rate of 1/2% on the average daily unused amount of
the line of credit. These fees totaled approximately $154,000 for the
year ended April 30, 1996. Amounts due under the line of credit are not
due until August 30, 1997, the termination date of the related credit
agreement and, therefore, amounts outstanding at April 30, 1996 are
classified as long-term debt in the accompanying consolidated balance
sheet.

The Company had a line of credit with The First National Bank of Boston
which provided for borrowings up to $75,000,000, with the interest rate
floating at a stipulated percentage above the prime rate. Commitment
fees on the average daily unused amount of the line of credit accrued
at an annual percentage rate of 1/2% and totaled approximately $240,000
and $194,000 for the years ended April 30, 1995 and 1994. All amounts
due under the line were repaid and the line was canceled during the
year ended April 30, 1995.

9

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

The term note payable to CIT is due in eighty-four monthly principal
installments of $261,905 through December 2001 and is secured by
a first lien on the refinery, equipment, certain inventories and
various pipelines and bears interest at either LIBOR plus 3% or
the prime rate plus 1%. The effective rate is set at the Company's
discretion and may be changed periodically. At April 30, 1996 the
interest rate on the note was 8.50%.

The line of credit with Union Planters Bank at April 30, 1996 was a
revolving line for $600,000 which was due on demand, was collateralized
by certain equipment and had an interest rate which floated at a
stipulated percentage above the prime rate. This line matured on May
15, 1996, and was subsequently renewed and extended with similar
terms and conditions until August 31, 1997. At April 30, 1996 the
Company had $548,440 outstanding under this line of credit.

The line of credit with NBD and note payable to CIT contain restrictive
covenants which, among other things, require the Company to maintain
stated levels of tangible net worth and working capital, stated ratios of
current assets to current liabilities and limit capital expenditures and
indebtedness (other than that under this agreement) to certain levels.

(7) Accrued Expenses
----------------

Accrued expenses consist of the following:

1996 1995
---- ----

Excise taxes payable $ 4,710,581 5,185,771
Management fees 1,466,715 531,946
Profit sharing contributions 1,049,404 847,507
Pipeline tariffs payable 818,102 829,427
Salaries 778,707 423,481
Ad valorem taxes 525,266 519,979
Other 1,477,179 1,702,384
------------ ----------
$ 10,825,954 10,040,495
============ ==========

(Continued)

10

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(8) Management Contract and Related Party Transactions
--------------------------------------------------

The Company is managed by Ergon, Inc. (Ergon), its largest stockholder,
under a management contract whereby Ergon is paid a management fee by
the Company. The fee is based on a percentage of earnings before income
taxes. In the event of termination of the management contract by the
Company without cause or by mutual agreement of the Company and Ergon,
Ergon has the right, at its option, to purchase common stock of the
Company equal to 20% of the total issued and outstanding capital stock
as of the date of such termination. The purchase price of such stock
would be the same as that of the original shares issued.

In the ordinary course of business the Company makes purchases from and
sales to Ergon and its subsidiaries as well as other stockholders of
the Company. Such transactions are at prevailing market prices.

A summary follows of material related party balances and transactions as
of and for the years ended April 30, 1996, 1995 and 1994 (approximate
amounts):

1996 1995 1994
---- ---- ----

Ergon and its subsidiaries:

Asphalt sales $ 482,000 2,878,000 2,190,000
============ =========== ===========
Other sales $ 987,000 1,235,000 1,676,000
============ =========== ===========
Net purchases $ 8,056,000 3,350,000 1,482,000
============ =========== ===========
Transportation expenses $ 17,000 1,152,000 1,724,000
============ =========== ===========
Management fees $ 1,467,000 532,000 1,166,000
============ =========== ===========
Data processing fees $ 249,000 304,000 290,000
============ =========== ===========
Net amounts due from (to) Ergon at April 30 $ (3,288,000) 256,000 --
============ =========== ===========
Continental Ozark Inc.:

Sales, net of trades $ 33,442,000 27,974,000 26,895,000
============ =========== ===========
Purchases, net of trades $ 3,347,000 917,000 4,310,000
============ =========== ===========
Net amounts due from (to) Continental
Ozark Inc. at April 30 $ (149,000) 652,000 --
============ =========== ===========

(Continued)

11

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(8), Continued

1996 1995 1994
---- ---- ----

Shuler Drilling Company:

Purchases $ 676,000 786,000 824,000
========== ========= =========
Sales $ 22,000 18,000 19,000
========== ========= =========
Purchases $ 942,000 960,000 1,188,000
========== ========= =========
M. S. Delone:

Purchases $ 143,000 148,000 173,000
========== ========= =========

Ned Price:

Purchases $1,341,000 1,344,000 1,370,000
========== ========= =========

E. G. Bradberry

Purchases $ 36,000 37,000 41,000
========== ========= =========

El Dorado and Wesson Railroad Company:

Transportation expenses $ 36,500 -- --
========== ========= =========

(9) Profit Sharing Plan
-------------------

The Company has a defined contribution profit sharing plan covering
substantially all permanent full-time employees. The Company makes annual
contributions to the plan in amounts determined by the Board of
Directors. As of April 30, 1996, 1995 and 1994, contributions of
$1,049,000, $848,000 and $743,000, respectively, had been authorized
and accrued.

(10) Litigation and Contingencies
----------------------------

The Company has pending legal claims incurred in the normal course
of business which, in the opinion of management, can be disposed
of without material adverse effect on the financial position of the
Company.

The Company is in the final stages of a required assessment of inactive
surface impoundments for compliance with environmental laws and
regulations. When the assessment is completed, the Company, its
consulting engineers and regulatory authorities will determine the
extent of any required remedial action. In the opinion of management,
the net cost of any remedial action will not have a material adverse
effect on the financial position of the Company.

(Continued)

12

LION OIL COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(11) Concentration of Credit
-----------------------

The Company sells a majority of its finished products to customers in the
oil and gas industry. The Company performs on-going credit evaluations of
its customers and generally does not require collateral on accounts
receivable. The Company believes it maintains adequate allowances for any
uncollectible accounts receivable, which historically have been minimal.

(12) Fair Value of Financial Instruments
-----------------------------------

Statement of Financial Accounting Standards No. 107, ``Disclosures about
Fair Value of Financial Instruments,'' requires that the Company disclose
estimated fair values for its financial instruments (as defined). The
Company's financial instruments principally consist of cash and cash
equivalents, short-term trade receivables and payables and various debt
instruments. Due to their short term nature, the fair value of trade
receivables and payables approximates their carrying value. The fair
value of the various debt instruments has been estimated using interest
rates currently offered to the Company for borrowings having similar
character, collateral and duration. The fair market value of such
financial instruments approximates the Company's carrying amounts.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

Not Applicable.

24

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

The following table sets forth the names, dates of birth and titles of the
members of the Board of Directors and the executive officers of the Company:

NAME DATE OF BIRTH POSITION
- -----------------------------------------------------------------------------------

Cortlandt S. Dietler September 19, 1921 Chairman, Chief
Executive Officer, President
and Director

Richard E. Gathright May 3, 1954 Executive Vice
President and Director
and President and Chief
Executive Officer of COZ

Harold R. Logan, Jr. October 28, 1944 Executive Vice
President/Finance,
Treasurer and
Director

Frederick W. Boutin July 14, 1955 Senior Vice President

John A. Hill January 31, 1942 Director

Bryan H. Lawrence July 26, 1942 Director

William E. Macaulay September 2, 1945 Director

Edwin H. Morgens June 15, 1941 Director

Cortlandt S. Dietler has been the Chairman, Chief Executive Officer and
President of the Company since the Merger. Mr. Dietler was the Chairman, Chief
Executive Officer and President of Old TransMontaigne since April 1995. He was
the founder, Chairman, and Chief Executive Officer of Associated Natural Gas
Corporation prior to its 1994 merger with Panhandle Eastern Corporation (now
PanEnergy Corporation), on whose Board he serves as an Advisory Director. He
also serves as a Director of Hallador Petroleum Company, Key Production Company,
Inc., and Grease Monkey International, Inc. Industry affiliations include:
Member, National Petroleum Council; Director, American Petroleum Institute; past
Director, Independent Petroleum Association of America; Director, past President
& Life Member, Rocky Mountain Oil & Gas Association; Member, 25 Year Club of the
Petroleum Industry.

25

Richard E. Gathright has been the Executive Vice President and a Director of
the Company since the Merger. Mr. Gathright was Executive Vice President and a
Director of Old TransMontaigne since April 1995. He joined COZ in December,
1993 and is currently President, Chief Executive Officer and a Director. From
1988 to 1993 he served as President and Director of North American Operations in
Denver, Colorado for Aberdeen Petroleum PLC, a London-based public company
engaged in international oil and gas operations, of which he was also a member
of the Board of Directors. Prior to joining Aberdeen, he held a number of
positions in the energy industry in the areas of procurement, operations and
management of oil and gas assets. Mr. Gathright is also Corporate Secretary and
a Director of Lion Oil Company. He received undergraduate and J.D. degrees from
the University of Arkansas.

Harold R. Logan, Jr. has been Executive Vice President/Finance and a Director of
the Company since the Merger. Mr. Logan was Executive Vice President/Finance
and a Director of Old TransMontaigne Oil Company since April 1995. Previously,
from 1985 to 1994, Mr. Logan was Senior Vice President/Finance and a Director of
Associated Natural Gas Corporation. Prior to joining Associated Natural Gas
Corporation, Mr. Logan was with Dillon, Read & Co. Inc. and Rothschild, Inc. In
addition, Mr. Logan is a Director of Suburban Propane Partners, L.P. He is a
graduate of Oklahoma State University with a B.S. in Economics and Columbia
University Graduate School of Business with an M.B.A. in Finance.

Frederick W. Boutin has been the Senior Vice President of the Company since the
Merger. Mr. Boutin was the Senior Vice President of Old TransMontaigne since
April 1995. Prior to his employment with Old TransMontaigne, Mr. Boutin was a
Vice President of Associated Natural Gas Corporation. Prior to joining
Associated Natural Gas Corporation in 1985, Mr. Boutin was with KPMG Peat
Marwick LLP for five years. Mr. Boutin graduated from Colorado State University
with a Masters Degree in Accountancy and a Bachelors Degree in Electrical
Engineering.

John A. Hill has been a Director of the Company since the Merger. Mr. Hill was
appointed a director of Old TransMontaigne in April 1995. Mr. Hill has been
Chairman of the Board of First Reserve Corporation since 1983. Mr. Hill is a
trustee of the Putnam Funds and is a director of Weatherford Enterra, Inc.,
Snyder Oil Corporation, Maverick Tube Corporation and PetroCorp, Incorporated.

Bryan H. Lawrence has been a Director of the Company since the Merger. Mr.
Lawrence was appointed a director of Old TransMontaigne in April 1991. He has
been employed by Dillon, Read & Co. Inc., a New York-based investment banking
firm, since January 1966 and is a Managing Director. Mr. Lawrence also serves
as a Director of Vintage Petroleum, Inc., D&K Wholesale Drug, Inc., Benson
Petroleum Ltd. (a Canadian public company), Hallador Petroleum Company, and
certain non-public companies in which affiliates of Dillon Read hold equity
interests including Meenan Oil Co., L.P., Fintube Limited Partnership,
Interenergy Corporation, Willbros Group, Inc., Cavell Energy Corporation,
PetroSantander Inc., and Strega Energy Inc. Mr. Lawrence is a graduate of
Hamilton College and also has an M.B.A. from Columbia University.

William E. Macaulay has been a Director of the Company since the Merger. Mr.
Macaulay was appointed a director of Old TransMontaigne in April 1995. Mr.
Macaulay has been President and Chief Executive Officer of First Reserve
Corporation since 1983. Mr. Macaulay is a director of Weatherford Enterra,
Inc., Maverick Tube Corporation and Hugoton Energy Corporation.

26

Edwin H. Morgens was appointed a director of the Company in June 1996
effective with the consummation of the Merger of Old TransMontaigne and Old
Sheffield. Mr. Morgens has been a director of Old Sheffield since 1981 and
served as President of Old Sheffield from 1986 to September 1990. He has been
Chairman of Morgens, Waterfall, Vintiadis & Co., Inc., a financial services
firm, since 1970. Mr. Morgens is also a general partner of Morgens Waterfall
Income Partners, L.P., a New York investment limited partnership, and serves as
president of Prime, Inc., the corporate general partner of a Delaware investment
partnership, and as managing member of MW Management, L.L.C., a Delaware
investment limited liability corporation.

The By-laws of the Company provide that the number of directors shall be fixed
by the Board of Directors. The number of directors is presently fixed at seven,
and there are no vacancies. First Reserve Corporation has the right to appoint
two directors to the Board of Directors pursuant to an agreement between
affiliates of First Reserve Corporation and the Company dated April 17, 1996.
Mr. Hill and Mr. Macaulay are the directors appointed by First Reserve.

27

ITEM 11. EXECUTIVE COMPENSATION

The Company

The Chief Executive Officer and the other executive officers of Old
TransMontaigne Oil Company became the Chief Executive Officer and the other
executive officers of the Company upon completion of the Merger. The Company
adopted Old TransMontaigne's benefit plans and compensation arrangements,
including its option plans. The following table sets forth certain information
regarding the annual and long-term compensation for services in all capacities
to Old TransMontaigne for the prior fiscal years ended April 30, 1996 and 1995
and the seven months ended April 30, 1994 for Old TransMontaigne's Chief
Executive Officer and other executive officers (collectively, the "Named
Executive Officers"):

Summary Compensation Table
Long-Term
Annual Compensation Compensation
-------------------------- ------------------------
Other
Annual Restricted Securities All Other
Compen- Stock Underlying Compen-
Salary Bonus sation Awards Options sation
Name and Principal Position Year ($)(1) ($) ($) ($) (#) ($)
- --------------------------- ------- -------- ----- ------- ---------- ----------- -----------

Cortlandt S. Dietler (2) 1996 62,500 - - - 100,000 -
President & Chief Executive Officer 1995 - - - - - -
1994(6) - - - - - -

Harold R. Logan, Jr. (3) 1996 116,667 - - - 65,000 -
Executive Vice President/Finance & 1995 - - - - - -
Chief Financial Officer 1994(6) - - - - - -

Richard E. Gathright 1996 215,000 - - - - -
Executive Vice President 1995 192,000 - - - 250,000 -
1994(6) 66,000(4) - - - - -

Frederick W. Boutin (5) 1996 95,833 - - - 45,000 -
Senior Vice President 1995 - - - - - -
1994(6) - - - - - -

(1) Includes salaries deferred under the Retirement Savings Plan pursuant to
Section 401(k) of the Internal Revenue Code ("401(k) Plan").
(2) Mr. Dietler became an officer of Old TransMontaigne in April 1995.
(3) Mr. Logan became an officer of Old TransMontaigne in April 1995.
(4) Mr. Gathright became an officer of Old TransMontaigne on December 1, 1993.
(5) Mr. Boutin became an officer of Old TransMontaigne in April 1995.
(6) The seven months ended April 30, 1994.

28

Option/SAR Grants in Last Fiscal Year

% of Total
Number of Options
Securities Granted to Potential Realizable Value
Underlying Employees in Exercise at Assumed Annual Rates of
Options Fiscal Year Price Expiration Stock Price Appreciation for
Name Granted # (1) (2) ($/Share) Date Option Term (3)
- -------------------------- -------------- --------------- ----------- ------------ ----------------------------
5%($) 10%($)
-------------- -------------

Cortlandt S. Dietler 100,000 23.7% 5.50 3/14/03 223,905 521,794

Harold R. Logan, Jr. 65,000 15.4% 5.50 3/14/03 145,538 339,166

Frederick W. Boutin 45,000 10.7% 5.50 3/14/03 100,757 234,807

(1) All options granted are incentive options within the meaning of Internal
Revenue Code Section 422. 50% of the options granted vested immediately
and 50% vest one year from the date of grant. All options were granted for
a term of seven years, subject to earlier termination in certain events.
The exercise price is equal to the fair market value of Old TransMontaigne
Common Stock on the date of grant.
(2) Based on 421,746 total options granted in the fiscal year ended April 30,
1996.
(3) The amounts shown are for illustrative purposes only. Potential gains are
net of the exercise price, but before taxes associated with the exercise.
These amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock appreciation are provided in accordance with the
rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent upon the future financial performance
of the Company, overall market conditions and the option holders' continued
employment through the vesting period.

No outstanding options held by the Company's Named Executive Officers were
exercised in the fiscal year ended April 30, 1996. The following table sets
forth certain information with respect to unexercised options held by the Named
Executive Officers as of April 30, 1996:

Aggregated Options Outstanding at Prior Fiscal Year End
and Fiscal Year End Option Values

Number of Securities Aggregate Value of
Underlying Unexercised Unexercised, In-the-Money
Options Options (1)
------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ----------- ------------- ----------- --------------

Cortlandt S. Dietler 50,000 50,000 - -

Harold R. Logan, Jr. 32,500 32,500 - -

Richard E. Gathright 250,000 0 $700,000 -

Frederick W. Boutin 22,500 22,500 - -

(1) Value was computed as the difference between the individual option price
and the value of the Old TransMontaigne Common Stock on April 30, 1996,
$5.50 per share. The Old TransMontaigne Common Stock was not publicly
traded April 30, 1996. Only options with fair market value in excess of
xercise price are reflected in this column.

29

Old Sheffield

During September 1990, Old Sheffield signed an agreement with Trinity Petroleum
Management, Inc. ("Trinity") providing for Trinity to furnish management
services to Old Sheffield. In conjunction with the agreement, some of Old
Sheffield's officers transferred to Trinity, maintaining their status as
officers of Old Sheffield, but being compensated by Trinity. Accordingly, Old
Sheffield paid no compensation other than grants of stock options to any officer
or employee during the 1993 and 1994 fiscal years and through the second quarter
of fiscal 1995. On December 31, 1994, however, Old Sheffield purchased all of
the outstanding stock of Trinity and, therefore, the management services
agreement with Trinity was discontinued and Old Sheffield officers began
receiving compensation directly from Old Sheffield. None of the officers of Old
Sheffield became officers of the Company after the June 4, 1996 Merger.
However, Old Sheffield's 401(k) Plan will survive until no later than December
31, 1996, and Old Sheffield's existing options will stay in effect for 90 days
after the Merger, adjusted to account for the reverse stock split accomplished
by the Merger.

The following tables sets forth the compensation of Old Sheffield's Chief
Executive Officer and Old Sheffield's other executive officers whose total
annual salary and bonus exceeded $100,000 for the ten months ended April 30,
1996:

Summary Compensation Table

Annual Compensation Long-Term Compensation
------------------------------ ------------------------
Other
Annual Restricted Securities All Other
Compen- Stock Underlying Compen-
Salary Bonus sation Awards Options sation
Name and Principal Position Year ($)(1) ($) ($) ($) (#)(5) ($)(7)
- -------------------------------------- ------ --------- ---------- ------- ---------- ---------- --------

J. Samuel Butler 1996(2) 108,330 65,000(3) - - 41,108 7,800
President & Chief Executive Officer 1995 65,000(4) 65,000(3) - - - -
1994(4) (4) (4) (4) (4) 20,554(6) (4)

Jerry D. Smothermon 1996(2) 83,330 25,000 - - 14,388 6,000
Vice President of Operations 1995 50,000(4) 15,000(3) (4) (4) - (4)
1994 (4) (4) (4) (4) 10,277(6) (4)

(1) Includes salaries deferred under 401(k) Plan.
(2) 10 Months ended April 30, 1996
(3) In December, 1995 Mr. Butler received a bonus paid in 33,333 shares of Old
Sheffield Common Stock and received a $15,000 cash bonus. The market price
of the stock at the date of grant was $1.50 per share. In January 1995,
Mr. Butler was granted a cash bonus of $65,000 for the purpose of
exercising options to purchase 43,333 shares of Old Sheffield Common Stock
at $1.50 per share. Mr. Butler's bonus was granted in conjunction with Old
Sheffield's acquisition of Trinity. In January 1995 Mr. Smothermon was
issued 10,000 shares of Old Sheffield Common Stock. The market price of the
stock at the date of grant was $1.50 per share.
(4) Compensation was paid by Old Sheffield for the quarters ended March 31,
1995 and June 30, 1995. Compensation for the quarters ended September 30,
1994 and December 31, 1994 was paid by Management, Inc. Trinity Petroleum
(5) After conversion to New Common Stock with each 2.432599 options to purchase
Old Sheffield Common Stock converted to one option to purchase New Common
Stock. The options granted on January 15, 1996 replaced previously
granted options which had a higher exercise price. The number of shares
granted pursuant to the January 15, 1996 grant was exactly equal to the
number of shares underlying the canceled options granted in fiscal years
ended June 30, 1995 and 1994.

30

(6) These options were canceled and replaced by options granted during the ten
months ended April 30, 1996. See Note 5 above.
(7) The other compensation paid relates to the cash value of Old Sheffield's
contributions to 401(k) plans during the ten months ended April 30, 1996.
Old Sheffield contributed 5,200 shares of Old Sheffield Common Stock and
4,000 shares of Old Sheffield Common Stock to Mr. Butler's and Mr.
Smothermon's 401(k) plans, respectively, when the fair market value of the
Old Sheffield Common Stock was $1.50 per share.

Option/SAR Grants in the 10 Months Ended April 30, 1996 (Last Fiscal Year)

% of Total
Options
Granted to
Number of Employees
Securities during the 10 Exercise Potential Realizable Value at
Underlying months ended Price Assumed Annual Rates of
Options Granted April 30, ($/Share) Expiration Stock Price Appreciation for
Name #(1) 1996 (2) (3) Date Option Term (4)
- ------------------------------- ---------------- --------------- ---------- ------------ -----------------------------
5%($) 10%($)
-----------------------------

J. Samuel Butler 41,108 58.1% 3.65 09/02/96 4,933 10,003

Jerry D. Smothermon 14,388 20.3% 3.65 09/02/96 1,727 3,501

(1) After conversion to options to purchase New Common Stock with each 2.432599
options to purchase Old Sheffield Common Stock converted to one option to
purchase New Common Stock. All outstanding options vested March 14, 1996.
All options were originally granted for a term of five years. However, due
to the Merger, the options expire 90 days after the June 4, 1996 effective
date of the Merger, September 2, 1996. The exercise price, before the
conversion to New Common Stock, was equal to the fair market value of Old
Sheffield Common Stock on the date of grant. All options granted are
incentive options within the meaning of Internal Revenue Code Section 422.

(2) Based on 70,706 total options granted in the ten months ended April 30,
1996, as converted to New Common Stock with each 2.432599 options to
purchase Old Sheffield Common Stock converted to one option to purchase New
Common Stock.

(3) The exercise price to purchase shares of the New Common Stock. See Notes 1
and 2 above.

(4) The amounts shown are for illustrative purposes only. Potential gains are
net of the exercise price, but before taxes associated with the exercise.
Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term, The assumed
5% and 10% rates of stock appreciation are provided in accordance with the
rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent upon the future financial performance
of the Company, overall market conditions and the option holders' continued
employment through the vesting period.

31

No outstanding options held by the Old Sheffield Chief Executive Officer and Old
Sheffield's other executive officers whose total annual salary and bonus
exceeded $100,000 for the ten months ended April 30, 1996 were exercised in the
ten months ended April 30,1996. The following table sets forth certain
information with respect to unexercised options held by these executive officers
as of April 30, 1996:

Aggregated Options Outstanding at Prior Fiscal Year End and Fiscal Year End Option Values

Number of Securities Aggregate Value of
Underlying Unexercised Unexercised, In-the-Money
Options Options (1)
---------------------------- --------------------------
Name Exercisable(2) Unexercisable Exercisable Unexercisable
- --------------------------- ------------- ------------- ----------- --------------

J. Samuel Butler 41,108 - $425,057 -
Jerry D. Smothermon 14,388 - 148,772 -

(1) Value was computed as the difference between the individual option price as
converted to an equivalent exercise price of New Common Stock and the
closing sales price of the Old Sheffield Common Stock on April 30, 1996,
$5.75, converted to an equivalent price of New Common Stock ($13.99 a
share), with each 2.432599 options to purchase Old Sheffield Common Stock
converted to one option to purchase New Common Stock. The fair market value
of all the outstanding options of these executive officers was in excess of
the exercise price.

(2) The total number of options listed have been converted to options to
purchase to New Common Stock with each 2.432599 options to purchase Old
Sheffield Common Stock converted to one option to purchase New Common
Stock.

Compensation Commitee Interlocks and Insider Participation

During the 10 months ended April 30, 1996, the Old Shefffield Board of Directors
Compensation Committee ("the Committee") was comprised of McLain J. Forman,
Randall E. King, David A. Melman and Edwin H. Morgens. None of the members of
the Committee were, during the fiscal year, an officer or employee of Old
Sheffield or any of its subsidiaries. Randall E. King is a principal in the
investment banking firm of Petrie Parkman. Petrie Parkman received cash
payments totaling $100,000 plus 30,000 shares of Old Sheffield Common Stock for
the financial advisory services it provided to Old Sheffield related to the
Merger.

Compensation of Directors

Directors of the Company are paid their expenses for attending each meeting of
the Board of Directors that they attend. Directors who are employees or paid
officers of the Company do not receive additional cash compensation for serving
on the Board of Directors or any committee thereof. Non-employee directors are
paid an annual fee of $12,000, payable quarterly in arrears, beginning with the
fiscal year ending April 30, 1997.

Directors of Old Sheffield were paid a director's fee of $250 for each meeting
of the Board of Directors that they attended.

32

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates the beneficial ownership of the New Common Stock
as of July 12, 1996, by each director of the Company, by each person who was
known to the Company to own more than 5% of the outstanding shares of the New
Common Stock, by the Company's Chief Executive Officer and the Company's other
executive officers, Old Sheffield's Chief Executive Officer and Old Sheffield's
other executive officers whose total annual salary and bonus exceeds $100,000.
Except as otherwise indicated below, the ownership reflects sole voting and
investment power by the beneficial owner. The information set forth below is
based solely upon information furnished by such individuals or contained in
filings made by such beneficial owners with the Securities and Exchange
Commission.

Percent of
Name and Address Amount and Nature New
of Beneficial Owner Beneficial Owner (1)(2) Common Stock
- -----------------------------------------------------------------------------------------

Cortlandt S. Dietler 1,900,540 9.1%
Richard E. Gathright (3) 533,000 2.5%
Harold R. Logan, Jr. 343,056 1.6%
Frederick W. Boutin 237,500 1.1%
TransMontaigne Oil Company
370 Seventeenth Street, Suite 900
Denver, Colorado 80202

First Reserve Fund VI, 6,582,830 31.6%
Limited Partnership and other
partnerships managed by
First Reserve Corporation (4)
475 Steamboat Road
Greenwich, Connecticut 06830

Yorktown Energy Partners, L.P. 3,154,961 15.2%
and other venture capital funds managed
by, and shares owned by officers of
Dillon, Read & Co. Inc. (5)
535 Madison Avenue
New York, New York 10022

Waterwagon & Co.(6) 3,117,000 15.0%
c/o Merrill Lynch Growth Fund
800 Scudders Mill Road
Plainsborough, New Jersey 08536

Massachusetts Mutual Life 1,296,277 6.2%
Insurance Company and
funds managed by Massachusetts Mutual
Life Insurance Co.
1295 State Street
Springfield, Massachusetts 01111

33

John A. Hill (4) 6,582,830 31.6%
475 Steamboat Road
Greenwich, Connecticut 06830

Bryan H. Lawrence (5) 3,154,961 15.2%
535 Madison Avenue
New York, New York 10022

William E. Macaulay (4) 6,582,830 31.6%
475 Steamboat Road
Greenwich, Connecticut 06830

Edwin H. Morgens 46,144 *
10 East 50th Street
New York, New York 10022

J. Samuel Butler (7) 126,342 *
1801 Broadway, Suite 600
Denver, Colorado 80202

Jerry D. Smothermon 20,142 *
1801 Broadway, Suite 600
Denver, Colorado 80202

All Directors and Executive
Officers as a Group ( 8 Persons) (8) 12,798,031 60.5%

_____________________
* Less than one percent.

(1) All shares are owned both of record and beneficially unless otherwise
specified by footnote to this table. Based solely upon information
furnished by such individuals or contained in filing made by such
beneficial owners with the Securities and Exchange Commission.

(2) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934, as amended. Under Rule 13d-3(d), shares not outstanding that are
subject to options, warrants, rights, or conversion privileges exercisable
within sixty days are deemed outstanding for the purpose of calculating the
number and percentage owned by such person, but not deemed outstanding for
the purpose of calculating the percentage owned by any other person.

(3) Includes 18,300 shares held by The Richard E. Gathright IRA Rollover
Account.

(4) First Reserve Corporation is an affiliate of John A. Hill and William E.
Macaulay, directors of the Company. Messrs. Hill and Macaulay disclaim
beneficial ownership of these shares.

(5) Yorktown Energy Partners, L.P. and Dillon, Read & Co. Inc. are affiliates
of Bryan H. Lawrence, a director of the Company. Mr. Lawrence owns 44,923
shares individually and disclaims beneficial ownership of the remaining
shares.

34

(6) The Company has granted to Waterwagon & Co. the right to maintain its 15%
ownership of New Common Stock if the Company issues stock in the future.

(7) Includes 4,932 shares held in trust for Mr. Butler's grandchildren for
which Mr. Butler serves as Trustee, and 10,071 shares held in Mr. Butler's
401(k) profit sharing plan, for which Mr. Butler serves as Trustee. Mr.
Butler disclaims beneficial ownership of such 15,003 shares.

(8) Includes 9,692,868 shares held by affiliates, beneficial ownership of which
are disclaimed by the officers and directors.

35

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Old Sheffield adopted the Key Employee Retention Plan which covered all of the
then current employees of Old Sheffield. In connection with the Merger officers
and directors of Old Sheffield received consideration pursuant to the Key
Employee Retention Plan as set forth in the following table: (i) unvested
options to purchase shares of Old Sheffield Common Stock became vested on March
14, 1996, and (ii) cash payments were received from Old Sheffield.

Options Vested
------------------------------ Cash
Name Old Sheffield Shares Price Payments
- ------------------------------------------ ----- --------

J. Samuel Butler 100,000 $1.50 $78,125

David A. Melman 14,000 $1.50 None

McLain J. Forman 14,000 $1.50 None

David L. Milanesi 30,000 $1.50 $39,996

Jerry D. Smothermon 35,000 $1.50 $59,712

The number of shares subject to options and the exercise prices were adjusted
upon completion of the Merger to reflect the reverse stock split accomplished by
the Merger.

Bryan H. Lawrence, a director of the Company, is a director of Interenergy
Corporation ("Interenergy") and also a director and an affiliate of the majority
shareholder of Interenergy which participates in a partnership formed with Old
Sheffield in 1991 for the purpose of purchasing certain gas gathering and
processing assets near Lignite, North Dakota. Day-to-day management of the
partnership is provided by Interenergy for a management fee of $15,000 per
month, while major decisions are made by a management committee consisting of
two members each from the Company and Interenergy. Interenergy purchased
$995,276 of gas from the partnership during the twelve month period ending June
30, 1996. The Company believes that the prices received by the partnership were
no less than the prices that would have been received from an independent third
party.

Certain relationships between Randall E. King, formerly a director of Old
Sheffield, the investment banking firm of Petrie Parkman and Old Sheffield are
described under "Compensation Committee Interlocks and Insider Participation" in
Item 11 above.

Cortlandt S. Dietler, the Chairman, Chief Executive Officer and President of Old
TransMontaigne and the Company, owned 14,623 shares of Old Sheffield Common
Stock before the Merger.

Effective April 17, 1996, Old TransMontaigne completed the private placement of
4,545,456 shares of Old TransMontaigne Common Stock at $5.50 a share for a total
consideration of

36

$25,000,008. The following table indicates the acquisition of shares in the
private placement by executive officers and directors of Old TransMontaigne and
by each person known by the Company to own more than 5% of the outstanding
shares of New Common Stock.

Name Shares Purchased
- -------------------------------------------------------------------

Cortlandt S. Dietler 187,862
Richard E. Gathright 30,000
Harold R. Logan, Jr. 50,000
Frederick W. Boutin 10,000
First Reserve Fund VI,
Limited Partnership and other
partnerships managed by
First Reserve Corporation (1) 727,274
Waterwagon & Co. 3,117,000
John A. Hill (1) 727,274
William E. Macaulay (1) 727,274

(1) First Reserve Corporation is an affiliate of John A. Hill and William E.
Macaulay, directors of the Company. Messrs. Hill and Macaulay disclaim
beneficial ownership of these shares.

Pursuant to agreements entered into in connection with the private placement,
(i) Waterwagon & Co., nominee for Merrill Lynch Growth Fund for Investment and
Retirement, has the right to maintain its 15% ownership of New Common Stock if
the Company issues stock in the future; (ii) First Reserve Fund VI, Limited
Partnership and other partnerships managed by First Reserve Corporation,
Yorktown Energy Partners, L.P. and other venture capital funds managed by, and
shares owned by, officers of Dillon, Read & Co. Inc., and Waterwagon & Co.,
nominee for Merrill Lynch Growth Fund for Investment and Retirement, have the
right to require the Company to register their shares under the Securities Act
of 1933; and (iii) the Company agreed to take all action necessary to cause two
directors designated by affiliates of First Reserve Corporation from time to
time to be elected to the Company's board of directors so long as their
collective ownership in the Company is at least 10%. The affiliates of First
Reserve Corporation have designated John A. Hill and William E. Macaulay as
their initial nominees for directors.

Richard Gathright, an Executive Vice President and a director of the Company and
the President and Chief Executive Officer of COZ, is Corporate Secretary and a
director of Lion. 27.75% of the stock of Lion is owned by a 65% owned
subsidiary of COZ. COZ had purchases of refined petroleum products of
$33,879,000 from Lion and sales of refined petroleum products to Lion of
$3,380,000 in the year ended April 30, 1996. All of the product purchases and
sales were made at market prices negotiated between COZ and Lion or through
independent brokers. The Company believes the prices COZ paid to Lion and
received from Lion were comparable to prices that would have been paid to or
received from independent third parties.

37

PART IV

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

(a) The following documents are filed as a part of this report.

(1) Consolidated Financial Statements:

TransMontaigne Oil Company -

Independent Auditors' Report

Consolidated Balance Sheets as of April 30, 1996 and 1995

Consolidated Statements of Operations for the years ended
April 30, 1996 and 1995, the seven months ended April
30, 1994 and the year ended September 30, 1993

Consolidated Statements of Stockholders' Equity for the years
ended April 30, 1996 and 1995, the seven months ended
April 30, 1994 and the year ended September 30, 1993

Consolidated Statements of Cash Flows for the years ended April
30, 1996 and 1995, the seven months ended April 30, 1994
and the year ended September 30, 1993

Notes to Consolidated Financial Statements

Lion Oil Company -

Independent Auditors' Report

Consolidated Balance Sheets as of April 30, 1996 and 1995

Consolidated Statements of Earnings for the years ended
April 30, 1996, 1995 and 1994

Consolidated Statements Stockholders' Equity for the years ended
April 30, 1996, 1995 and 1994

Consolidated Statements of Cash Flows for the years ended
April 30, 1996, 1995 and 1994

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules: Not Applicable

(3) Exhibits:

A list of the exhibits required by Item 601 of Regulation S-K to be
filed as part of this report :

Exhibit No. Description
----------- -----------
3.1 Restated Articles of Incorporation and Certificate of
Merger. FILED HEREWITH

38

3.2 By-Laws. Incorporated by reference to Sheffield
Exploration Company, Inc.

10.1 The Sheffield Exploration Company, Inc. Amended and
Restated 1990 Stock Option Plan. Incorporated by
reference to Sheffield Exploration Company, Inc.
(Securities and Exchange Commission File No. 0-13201)
Form 10-K dated September 27, 1994.

10.2 The TransMontaigne Oil Company Amended and Restated 1991
Stock Option Plan. FILED HEREWITH

10.3 The TransMontaigne Oil Company Amended and Restated 1995
Stock Option Plan. FILED HEREWITH

10.4 Partnership agreement between the Company's wholly-owned
subsidiary, Sheffield Gas Processors, Inc., and
Interenergy. Incorporated by reference to Sheffield
Exploration Company, Inc. (Securities and Exchange
Commission File No. 0-13201) Form 8-K dated September
26, 1991.

10.5 Bear Paw LLC Operating Agreement dated January 1, 1996
between Sheffield Exploration Company, Inc.,
TransMontaigne Oil Company and BP Energy Operating LLC.
Incorporated by reference to Sheffield Exploration
Company, Inc. (Securities and Exchange Commission File
No. 333-03195) Form S-4 filed May 10, 1996.

10.6 Stock Purchase Agreement effective April 17, 1996
between TransMontaigne Oil Company and the investors
named therein. FILED HEREWITH

10.7 Anti-dilution Rights Agreement dated as of April 17,
1996 between TransMontaigne Oil Company and Waterwagon &
Co., nominee for Merrill Lynch Growth Fund for
Investment and Retirement. FILED HEREWITH

10.8 Agreement to Elect Directors dated as of April 17,
1996 between TransMontaigne Oil Company and the First
Reserve Investors named therein. FILED HEREWITH

10.9 Registration Rights Agreement dated as of April 17,
1996 between TransMontaigne Oil Company and the entities
named therein. FILED HEREWITH

21 Schedule of the Company's Subsidiaries. FILED HEREWITH

23.1 Consent of KPMG Peat Marwick LLP. FILED HEREWITH

24 Powers of Attorney. FILED HEREWITH

27 Financial Data Schedule. FILED HEREWITH

(b) Reports on Form 8-K

A Form 8-K dated June 4, 1996 was filed on June 6, 1996 reporting
change of control and completion of the Merger under Items 1 and 2,
respectively, and change in Registrant's fiscal year end to April 30
under Item 8.

A Form 8-K dated July 16, 1996 was filed on July 23, 1996 reporting a
change in Registrant's Certifying Accountant under Item 4.

39

SIGNATURES

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

TRANSMONTAIGNE OIL COMPANY

By /s/ CORTLANDT S. DIETLER
----------------------------
Cortlandt S. Dietler
Chairman, President and Chief Executive Officer

Date: August 12, 1996

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities indicated on August 12, 1996.

Name and Signature Title
------------------ -----
(i) Principal executive officer:

/s/CORTLANDT S. DIETLER Chairman, President and
- ----------------------------------- Chief Executive Officer
Cortlandt S. Dietler

(ii) Principal financial officer:

/s/HAROLD R. LOGAN, JR. Executive Vice President/Finance
- ----------------------------------- and Treasurer
Harold R. Logan, Jr.

(iii) Principal accounting officer:

/s/FREDERICK W. BOUTIN Senior Vice President
- -----------------------------------
Frederick W. Boutin

(iv) Directors: *

CORTLANDT S. DIETLER

RICHARD E. GATHRIGHT

JOHN A. HILL

HAROLD R. LOGAN, JR.

BRYAN H. LAWRENCE

WILLIAM E. MACAULAY

EDWIN H. MORGENS

* Signed on behalf of each of these persons:

By /s/ CORTLANDT S. DIETLER
---------------------------------------
(Cortlandt S. Dietler, Attorney-in-Fact)

40