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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K


[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended June 30, 2002.

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from .

Commission File No. 0-16203

DELTA PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)

Colorado 84-1060803
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

475 17th Street, Suite 1400
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (303) 293-9133

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, $.01 par value

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

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value as of September 18, 2002 of voting stock held by
non-affiliates of the registrant was $45,562,000.

As of September 18, 2002, 22,659,000 shares of registrant's Common Stock $.01
par value were issued and outstanding.

Documents incorporated by reference: The information required by Part III of
this Form 10-K is incorporated by reference to the Company's Definitive Proxy
Statement for the Company's 2002 Annual Meeting of Shareholders.



TABLE OF CONTENTS


PART I

PAGE


ITEM 1. DESCRIPTION OF BUSINESS ....................................
ITEM 2. DESCRIPTION OF PROPERTY ....................................
ITEM 3. LEGAL PROCEEDINGS ..........................................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........
ITEM 4A. DIRECTORS AND EXECUTIVE OFFICERS ...........................


PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ...
ITEM 6. SELECTED FINANCIAL DATA ....................................
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ..
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..
ITEM 8. FINANCIAL STATEMENTS .......................................
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE .....................


PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ..........
ITEM 11. EXECUTIVE COMPENSATION .....................................
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT .............................................
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .............

PART IV

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




The terms "Delta," "Company," "we," "our," and "us" refer to Delta
Petroleum Corporation and its subsidiaries unless the context suggests
otherwise.









1


CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS

GENERAL. We are including the following discussion to inform our existing
and potential security holders generally of some of the risks and
uncertainties that can affect us and to take advantage of the "safe harbor"
protection for forward-looking statements afforded under federal securities
laws. From time to time, our management or persons acting on our behalf make
forward-looking statements to inform existing and potential security holders
about us. These statements may include projections and estimates concerning
the timing and success of specific projects and our future (1) income, (2) oil
and gas production, (3) oil and gas reserves and reserve replacement and (4)
capital spending. Forward-looking statements are generally accompanied by
words such as "estimate," "project," "predict," "believe," "expect,"
"anticipate," "plan," "goal" or other words that convey the uncertainty of
future events or outcomes. Sometimes we will specifically describe a
statement as being a forward-looking statement. In addition, except for the
historical information contained in this report, the matters discussed in this
report are forward-looking statements. These statements by their nature are
subject to certain risks, uncertainties and assumptions and will be influenced
by various factors. Should any of the assumptions underlying a forward-
looking statement prove incorrect, actual results could vary materially.

We believe the factors discussed below are important factors that could
cause actual results to differ materially from those expressed in a forward-
looking statement made herein or elsewhere by us or on our behalf. The factors
listed below are not necessarily all of the important factors. Unpredictable
or unknown factors not discussed herein could also have material adverse
effects on actual results of matters that are the subject of forward-looking
statements. We do not intend to update our description of important factors
each time a potential important factor arises. We advise our shareholders
that they should (1) be aware that important factors not described below could
affect the accuracy of our forward-looking statements and (2) use caution and
common sense when analyzing our forward-looking statements in this document or
elsewhere, and all of such forward-looking statements are qualified by this
cautionary statement.

- Historically, natural gas and crude oil prices have been volatile.
These prices rise and fall based on changes in market demand and
changes in the political, regulatory and economic climate and
other factors that affect commodities markets generally and are
outside of our control.

- Projecting future rates of oil and gas production is inherently
imprecise. Producing oil and gas reservoirs generally have
declining production rates.

- All of our reserve information is based on estimates. Reservoir
engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be measured in
an exact way. There are numerous uncertainties inherent in
estimating quantities of proved natural gas and oil reserves.



2


- Changes in the legal, political and/or regulatory environment
could have a material adverse effect on our future results of
operations and financial condition. Our ability to economically
produce and sell our oil and gas production is affected and could
possibly be restrained by a number of legal, political and
regulatory factors, particularly with respect to our offshore
California properties which are the subject of significant
political controversy due to environmental concerns.

- Our drilling operations are subject to various risks common in
the industry, including cratering, explosions, fires and
uncontrollable flows of oil, gas or well fluids.











































3


PART I

ITEM 1. DESCRIPTION OF BUSINESS

(a) Business Development.

Delta Petroleum Corporation ("Delta," "we," "us") is a Colorado
corporation organized on December 21, 1984. We maintain our principal
executive offices at Suite 1400, 475 Seventeenth Street, Denver, Colorado
80202, and our telephone number is (303) 293-9133. Our common stock is listed
on NASDAQ under the symbol DPTR.

We are engaged in the acquisition, exploration, development and
production of oil and gas properties. As of June 30, 2002, we had varying
interests in approximately 466 gross (215 net) productive wells located in
fifteen (15) states and offshore California. These do not include varying
small interests in approximately 700 gross (4.6 net) wells located primarily
in Texas which are owned by our subsidiary Piper Petroleum Company. We also
had interests in five federal units and one lease offshore California near
Santa Barbara along with a financial interest in a nearby producing offshore
federal unit (see Item 2 "Description of Property"). We operated
approximately 270 of the wells and the remaining wells were operated by
independent operators. We believe all of these wells are operated under
contracts that are standard in the industry. At June 30, 2002, we estimated
onshore proved reserves to be approximately 3,919,000 Bbls of oil and 43.95
Bcf of gas, of which approximately 1,651,000 Bbls of oil and 25.1 Bcf of gas
were proved developed reserves. At June 30, 2002, we estimated offshore
proved reserves to be approximately 902,000 Bbls of oil, of which
approximately 849,000 Bbls were proved developed reserves. (See "Description
of Property, Item 2 herein.)

We have an authorized capital of 3,000,000 shares of $.10 par value
preferred stock, of which no shares were issued, and 300,000,000 shares of
$.01 par value common stock, of which 22,618,000 shares were issued and
outstanding as of June 30, 2002. We have outstanding warrants and options to
non-employees to purchase 1,854,000 shares of common stock at prices ranging
from $2.50 per share to $6.00 per share at September 10, 2002. Additionally,
as of June 30, 2002 we had outstanding options which were granted to our
officers, employees and directors under our incentive plans, to purchase up to
3,503,487 shares of common stock at prices ranging from $0.05 to $9.75 per
share at June 30, 2002.

At June 30, 2002, we owned 4,277,977 shares of common stock of Amber
Resources Company ("Amber"), representing 91.68% of the outstanding common
stock of Amber. Amber is a public company (registered under the Securities
Exchange Act of 1934) whose activities include oil and gas exploration,
development, and production operations. Until July 1, 2001, Amber owned
interests in a portion of our producing oil and gas properties in Oklahoma.
At June 30, 2002, Amber still owned a portion of the interest referenced above
in our non-producing oil and gas properties offshore California near Santa
Barbara. The Company and Amber entered into an agreement effective October 1,
1998 which provides, in part, for the sharing of the management between the
two companies and allocation of expenses related thereto.


4


On May 31, 2002, Delta acquired all of the domestic oil and gas
properties of Castle Energy Corporation ("Castle"). The properties acquired
from Castle consist of interests in approximately 525 producing wells located
in fourteen (14) states, plus associated undeveloped acreage. Delta issued
9,566,000 shares of Common Stock to Castle as part of the purchase price.
Although all of these shares have been registered for sale, none has yet been
sold. Delta is entitled to repurchase up to 3,188,667 of its shares from
Castle for $4.50 per share for a period of one year after closing. Delta's
agreement with Castle was effective as of October 1, 2001 and the net
operating revenues from the properties between the effective date and the May
31, 2002 closing date were recorded as an adjustment to the purchase price.

Also on May 31, 2002 Delta obtained a new $20 million credit
facility with the Bank of Oklahoma and Local Oklahoma Bank, part of which was
used to pay the remainder of the Castle purchase price. Approximately $19
million of the credit facility was utilized to close the Castle transaction
and to pay off our existing loan with US Bank. Our total debt now approximates
$25 million. A substantial portion of oil and gas properties is pledged as
collateral for our new loan and the terms of the Credit Agreement limit our
flexibility to engage in many types of business activities without obtaining
the consent of our lenders in advance. As a part of the acquisition, upon
closing, Delta granted an option to acquire a 4% working interest in the
properties acquired for a cost of $878,000 to BWAB Limited Liability Company
("BWAB"), a less than 10% shareholder of Delta. The difference between the
$878,000 paid by BWAB which is less than fair value, and 4% of the cost of the
Castle properties was treated as an additional acquisition cost by Delta for
its consultation and assistance related to the transaction.

On March 1, 2002 we completed the sale of 21 producing wells and
acreage located primarily in the Eland and Stadium fields of Stark County,
North Dakota, to Sovereign Holdings, LLC, a privately-held Colorado limited
liability company, for cash consideration of $2,750,000 pursuant to a purchase
and sale agreement dated February 1, 2002 and effective January 1, 2002. As a
result of the sale, we recorded a loss on sale of oil and gas properties of
$1,000. These properties accounted for approximately 9.45% of our total
assets as of June 30, 2001 and also accounted for approximately 22.6% of our
total revenues and approximately 11.9% of our total operating expenses during
our past fiscal year. Approximately $1,300,000 of the proceeds from the sale
were used to pay existing debt. On May 24, 2002 we completed the sale of our
undivided interests in an Authority to Prospect (ATP) covering lands in
Queensland, Australia, to Tipperary Corporation, in exchange for Tipperary's
producing properties in the West Buna Field (Hardin and Jasper counties,
Texas),$700,000 in cash, and 250,000 unregistered shares of Tipperary common
stock. Net daily production from the West Buna Field approximates 900,000
cubic feet of natural gas equivalent.

On March 1, 2002, we sold the properties acquired on November 15,
2001, to Whiting Petroleum Corporation for $648,000. As a result of the sale,
we recorded a loss on sale of oil and gas properties of $106,000. Proceeds
from the sale were used to pay existing debt.

On February 19, 2002, we completed the acquisition of Piper
Petroleum Company ("Piper"), a privately owned oil and gas company
headquartered in Fort Worth, Texas. We issued 1,377,240 shares of our
restricted common stock for 100% of the shares of Piper. The 1,377,240 shares

5


of restricted common stock were valued at approximately $5,234,000 based on
the five-day average market closing price of Delta's common stock surrounding
the announcement of the merger. In addition, we issued 51,000 shares for the
cancellation of certain debt of Piper. As a result of the acquisition, we
acquired Piper's working and royalty interests in over 700 gross (4.6 net)
wells which are primarily located in Texas, Oklahoma and Louisiana along with
a 5% working interest in the Comet Ridge coal bed methane gas project in
Queensland, Australia. On May 24, 2002 we completed the sale of our undivided
interests in Australia, to Tipperary Corporation, in exchange for Tipperary's
producing properties in the West Buna Field (Hardin and Jasper counties,
Texas)which had a fair market value of approximately $4,100,000, $700,000 in
cash, and 250,000 unregistered shares of Tipperary common stock. No gain or
loss was recorded on this transaction. Net daily production from the West
Buna Field approximates 900,000 cubic feet equivalent. In addition, on May
28, 2002, we sold a commercial office building obtained in the merger with
Piper located in Fort Worth, Texas to a non-affiliate for its fair value of
$417,000. No gain or loss was recorded on this transaction. Piper was merged
into a subsidiary wholly owned by Delta and the subsidiary was then renamed
"Piper Petroleum Company".

On November 15, 2001, we acquired producing oil and gas interests in
Texas from three unrelated parties. The acquisition had a purchase price of
approximately $788,000 consisting of $413,000 in cash and 137,000 shares of
our restricted common stock with a fair value of $375,000 based on the market
closing price of Delta's common stock on the date of closing.

On July 1, 2001, we purchased all the producing properties of Amber,
our 91.68% owned subsidiary, for $107,000. The purchase price was based on an
evaluation performed by an unrelated engineering firm. The effects of this
transaction are eliminated in the consolidated financial statements.

(b) Business of Issuer.

During the year ended June 30, 2002, we were engaged in only one
industry, namely the acquisition, exploration, development, and production of
oil and gas properties and related business activities. Our oil and gas
operations have been comprised primarily of production of oil and gas,
drilling exploratory and development wells and related operations and
acquiring and selling oil and gas properties. Directly or through wholly owned
subsidiaries and through Amber, we currently own producing and non-producing
oil and gas interests, undeveloped leasehold interests and related assets in
fifteen (15) states; interests in a producing Federal unit offshore California
and undeveloped offshore Federal leases near Santa Barbara, California. We
intend to continue our emphasis on the drilling of exploratory and development
wells primarily in New Mexico, Texas, Alabama, and offshore California.

We intend to drill on some of our leases (presently owned or
subsequently acquired); may farm out or sell all or part of some of the leases
to others; and/or we may participate in joint venture arrangements to develop
certain other leases. Such transactions may be structured in any number of
different manners which are in use in the oil and gas industry. Each such
transaction is likely to be individually negotiated and no standard terms may
be predicted.


6


(1) Principal Products or Services and Their Markets. The principal
products produced by us are crude oil and natural gas. The products are
generally sold at the wellhead to purchasers in the immediate area where the
product is produced. The principal markets for oil and gas are refineries and
transmission companies which have facilities near our producing properties.

(2) Distribution Methods of the Products or Services. Oil and
natural gas produced from our wells are normally sold to purchasers as
referenced in (6) below. Oil is picked up and transported by the purchaser
from the wellhead. In some instances we are charged a fee for the cost of
transporting the oil, which fee is deducted from or accounted for in the price
paid for the oil. Natural gas wells are connected to pipelines generally
owned by the natural gas purchasers. A variety of pipeline transportation
charges are usually included in the calculation of the price paid for the
natural gas.

(3) Status of Any Publicly Announced New Product or Service. We
have not made a public announcement of, and no information has otherwise
become public about, a new product or industry segment requiring the
investment of a material amount of our total assets.

(4) Competitive Business Conditions. Oil and gas exploration and
acquisition of undeveloped properties is a highly competitive and speculative
business. We compete with a number of other companies, including major oil
companies and other independent operators which are more experienced and which
have greater financial resources. We do not hold a significant competitive
position in the oil and gas industry.

(5) Sources and Availability of Raw Materials and Names of
Principal Suppliers. Oil and gas may be considered raw materials essential to
our business. The acquisition, exploration, development, production, and sale
of oil and gas are subject to many factors which are outside of our control.
These factors include national and international economic conditions,
availability of drilling rigs, casing, pipe, and other equipment and supplies,
proximity to pipelines, the supply and price of other fuels, and the
regulation of prices, production, transportation, and marketing by the
Department of Energy and other federal and state governmental authorities.

(6) Dependence on One or a Few Major Customers. During our fiscal
year ended June 30, 2002, we sold our oil and gas production to the following
companies: Dynegy, Texla, Cinergy, Gulfmark, BP and Plains Marketing. We do
not depend upon one or a few major customers for the sale of oil and gas as of
the date of this report. The loss of any one or several customers would not
have a material adverse effect on our business.

(7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts. We do not own any patents, trademarks,
licenses, franchises, concessions, or royalty agreements except oil and gas
interests acquired from industry participants, private landowners and state
and federal governments. We are not a party to any labor contracts.

(8) Need for Any Governmental Approval of Principal Products or
Services. Except that we must obtain certain permits and other approvals from
various governmental agencies prior to drilling wells and producing oil and/or


7


natural gas, we do not need to obtain governmental approval of our principal
products or services.

(9) Government Regulation of the Oil and Gas Industry.

General.
-------

Our business is affected by numerous governmental laws and
regulations, including energy, environmental, conservation, tax and other laws
and regulations relating to the energy industry. Changes in any of these laws
and regulations could have a material adverse effect on our business. In view
of the many uncertainties with respect to current and future laws and
regulations, including their applicability to us, we cannot predict the
overall effect of such laws and regulations on our future operations.

We believe that our operations comply in all material respects with
all applicable laws and regulations and that the existence and enforcement of
such laws and regulations have no more restrictive effect on our method of
operations than on other similar companies in the energy industry.

The following discussion contains summaries of certain laws and
regulations and is qualified in its entirety by the foregoing.

Environmental Regulation.
------------------------

Together with other companies in the industries in which we operate,
our operations are subject to numerous federal, state, and local environmental
laws and regulations concerning our oil and gas operations, products and other
activities. In particular, these laws and regulations require the acquisition
of permits, restrict the type, quantities, and concentration of various
substances that can be released into the environment, limit or prohibit
activities on certain lands lying within wilderness, wetlands and other
protected areas, regulate the generation, handling, storage, transportation,
disposal and treatment of waste materials and impose criminal or civil
liabilities for pollution resulting from oil, natural gas and petrochemical
operations.

Governmental approvals and permits are currently, and may in the
future be, required in connection with our operations. The duration and
success of obtaining such approvals are contingent upon a significant number
of variables, many of which are not within our control. To the extent such
approvals are required and not obtained, operations may be delayed or
curtailed, or we may be prohibited from proceeding with planned exploration or
operation of facilities.

Environmental laws and regulations are expected to have an
increasing impact on our operations, although it is impossible to predict
accurately the effect of future developments in such laws and regulations on
our future earnings and operations. Some risk of environmental costs and
liabilities is inherent in our operations and products, as it is with other
companies engaged in similar businesses, and there can be no assurance that
material costs and liabilities will not be incurred. However, we do not





currently expect any material adverse effect upon our results of operations or
financial position as a result of compliance with such laws and regulations.

Although future environmental obligations are not expected to have a
material adverse effect on our results of operations or financial condition,
there can be no assurance that future developments, such as increasingly
stringent environmental laws or enforcement thereof, will not cause us to
incur substantial environmental liabilities or costs.

Hazardous Substances and Waste Disposal.
---------------------------------------

We currently own or lease interests in numerous properties that have
been used for many years for natural gas and crude oil production. Although
the operator of such properties may have utilized operating and disposal
practices that were standard in the industry at the time, hydrocarbons or
other wastes may have been disposed of or released on or under the properties
owned or leased by us. In addition, some of these properties have been
operated by third parties over whom we had no control. The U.S. Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") and
comparable state statutes impose strict, joint and several liability on owners
and operators of sites and on persons who disposed of or arranged for the
disposal of "hazardous substances" found at such sites. The Resource
Conservation and Recovery Act ("RCRA") and comparable state statutes govern
the management and disposal of wastes. Although CERCLA currently excludes
petroleum from cleanup liability, many state laws affecting our operations
impose clean-up liability regarding petroleum and petroleum related products.

In addition, although RCRA currently classifies certain exploration
and production wastes as "non-hazardous," such wastes could be reclassified as
hazardous wastes thereby making such wastes subject to more stringent handling
and disposal requirements. If such a change in legislation were to be
enacted, it could have a significant impact on our operating costs, as well as
the gas and oil industry in general.

Oil Spills.
----------

Under the Federal Oil Pollution Act of 1990, as amended ("OPA"), (i)
owners and operators of onshore facilities and pipelines, (ii) lessees or
permittees of an area in which an offshore facility is located and (iii)
owners and operators of tank vessels ("Responsible Parties") are strictly
liable on a joint and several basis for removal costs and damages that result
from a discharge of oil into the navigable waters of the United States. These
damages include, for example, natural resource damages, real and personal
property damages and economic losses. OPA limits the strict liability of
Responsible Parties for removal costs and damages that result from a discharge
of oil to $350 million in the case of onshore facilities, $75 million plus
removal costs in the case of offshore facilities, and in the case of tank
vessels, an amount based on gross tonnage of the vessel. However, these limits
do not apply if the discharge was caused by gross negligence or willful
misconduct, or by the violation of an applicable Federal safety, construction
or operating regulation by the Responsible Party, its agent or subcontractor
or in certain other circumstances.


9


In addition, with respect to certain offshore facilities, OPA
requires evidence of financial responsibility in an amount of up to $150
million. Tank vessels must provide such evidence in an amount based on the
gross tonnage of the vessel. Failure to comply with these requirements or
failure to cooperate during a spill event may subject a Responsible Party to
civil or criminal enforcement actions and penalties.

Under our various agreements, we have primary liability for oil
spills that occur on properties for which we act as operator. With respect to
properties for which we do not act as operator, we are generally liable for
oil spills as a non-operating working interest owner. We do not act as
operator for any of our offshore California properties. The operators of our
offshore California properties are primarily liable for oil spills and are
required by the Minerals Management Service of the United States Department of
the Interior ("MMS") to carry certain types of insurance and to post bonds in
that regard. In addition, we also carry insurance as a non-operator in the
amount of $5 million onshore and $10 million offshore. There is no assurance
that our insurance coverage is adequate to protect us.

Offshore Production.
-------------------

Offshore oil and gas operations in U.S. waters are subject to
regulations of the United States Department of the Interior which currently
impose strict liability upon the lessee under a Federal lease for the cost of
clean-up of pollution resulting from the lessee's operations, and such lessee
could be subject to possible liability for pollution damages. In the event of
a serious incident of pollution, the Department of the Interior may require a
lessee under Federal leases to suspend or cease operations in the affected
areas.

(10) Research and Development. We do not engage in any research
and development activities. Since our inception, we have not had any customer
or government-sponsored material research activities relating to the
development of any new products, services or techniques, or the improvement of
existing products.

(11) Environmental Protection. Because we are engaged in
acquiring, operating, exploring for and developing natural resources, we are
subject to various state and local provisions regarding environmental and
ecological matters. Therefore, compliance with environmental laws may
necessitate significant capital outlays, may materially affect our earnings
potential, and could cause material changes in our proposed business. At the
present time, however, these laws do not materially hinder nor adversely
affect our business. Capital expenditures relating to environmental control
facilities have not been material to our operation since our inception. In
addition, we do not anticipate that such expenditures will be material during
the fiscal year ending June 30, 2003.

(12) Employees. We have twenty-two full time employees.
Additionally, certain operators, engineers, geologists, geophysicists,
landmen, pumpers, draftsmen, title attorneys and others necessary for our
operations are retained on a contract or fee basis as their services are
required.


10


ITEM 2. DESCRIPTION OF PROPERTY

(a) Office Facilities.

Our offices are located at 475 Seventeenth Street, Suite 1400,
Denver, Colorado 80202. We lease approximately 9,500 square feet of office
space for approximately $15,500 per month and the lease will expire in
September, 2008.

(b) Oil and Gas Properties.

We own interests in producing oil and gas properties located
primarily in fifteen (15) states plus off-shore Santa Barbara California.
Most wells from which we receive revenues are owned only partially by us. For
information concerning our oil and gas production, average prices and costs,
estimated oil and gas reserves and estimated future cash flows, see the tables
set forth below in this section and "Notes to Financial Statements" included
in this report. We did not file oil and gas reserve estimates with any federal
authority or agency other than the Securities and Exchange Commission during
the past two years.

Principal Properties.
--------------------

The following is a brief description of our principal properties:

Onshore:
-------

We own interests in approximately 464 gross (215 net) producing
wells in fifteen (15) states, not including interests in those wells owned by
our subsidiary, Piper Petroleum Company ("Piper"). Piper owns varying very
small interests in approximately 700 gross (4.6 net) wells located primarily
in Texas. Piper's wells produce approximately 30 bbls per day and 200 mcf per
day net to Piper's interests.

Our principal onshore producing properties are in the following
states:

Alabama
-------

We own and operate a 94.5% working interest in 50 coal bed
methane gas wells at depths of about 2,500 feet in Tuscaloosa County. These
wells produce approximately 1650 mcf per day net to our interests.

We also own a .6455% working interest in the Hatter's Pond Unit
in Mobil County which is operated by Four Star Oil and Gas. This unit
produces approximately 18 barrels per day and 207 mcf per day net to our
interest.




11


Texas
-----

We own interests in 149 gross (52.7 net) wells in Texas located
primarily in South Texas, East Texas and the Permian Basin with approximately
one third of the production coming from each area. We operate 42 of these
wells. These wells are scattered throughout 32 counties and are drilled to
various depths and reservoirs with varying working interests. In aggregate
these wells produce approximately 370 barrels of oil and 4,000 mcf of gas per
day.

This includes our interest in the West Buna field located in
Jasper and Hardin Counties which we recently acquired from Tipperary
Corporation. The West Buna field contains 20 wells producing approximately 53
barrels of oil and 418 mcf of gas per day. We own an average working interest
of approximately 8.5% plus additional royalty interests which give us an
average net revenue interest of approximately 12.4%. We do not operate any of
the West Buna Field wells.

Pennsylvania
------------

We own 143 wells with an average working interest of
approximately 75% in six counties in Pennsylvania. We operate 104 of these
wells. The wells are drilled to an average depth of 3,500 feet and produce
approximately 1058 mcf per day net to our interests.

Louisiana
---------

In Louisiana we own interests in 15 wells with an average
working interest of 56.4% located in Acadia, Catahoula, Plaquemines and Pointe
Coupee parishes. We produce primarily from the Wilcox formation at a depth of
10,000 to 11,000 feet. We operate 11 of these wells. Daily production is
approximately 225 barrels of oil per day net to our interests.

New Mexico
----------

We own interests in 32 wells in New Mexico, including our East
Carlsbad field in Eddy County where 10 of the wells are located. These wells
produce approximately 30 barrels of oil and 970 mcf of gas per day net to our
interests. We operate 9 of these wells.

Other States:
------------
We also own varying interests in producing wells in the following
states: California (Sacramento Basin), Colorado (D-J and Piceance Basins),
Oklahoma, Illinois, Mississippi, Michigan, Kansas, Montana, Wyoming and
Nebraska.




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Offshore:
--------

Offshore Federal Waters: Santa Barbara, California Area
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Unproved Undeveloped Properties:
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We own interests in five undeveloped federal units (plus one
additional lease) located in federal waters offshore California near Santa
Barbara.

The Santa Barbara Channel and the offshore Santa Maria Basin
are the seaward portions of geologically well-known onshore basins with over
90 years of production history. These offshore areas were first explored in
the Santa Barbara Channel along the near shore three mile strip controlled by
the state. New field discoveries in Pliocene and Miocene age reservoir sands
led to exploration into the federally controlled waters of the Pacific Outer
Continental Shelf ("POCS"). Although significant quantities of oil and gas
have been produced and sold from drilling conducted on POCS leases between
1966 and 1989, we do not own any interest in any offshore California
production except for our small interest in the Point Arguello Unit discussed
below, and there is no assurance that any of our undeveloped properties will
ever achieve production.

Most of the early offshore production was from Pliocene age
sandstone reservoirs. The more recent developments are from the highly
fractured zones of the Miocene age Monterey Formation. The Monterey is
productive in both the Santa Barbara Channel and the offshore Santa Maria
Basin. It is the principal producing horizon in the Point Arguello field, the
Point Pedernales field, and the Hondo and Pescado fields in the Santa Ynez
Unit. Because the Monterey is capable of relatively high productive rates,
the Hondo field, which has been on production since late 1981, has already
surpassed 224 million Bbls of oil production and 411 Bcf of gas production.
All told, offshore fields producing from the Monterey as of the end of
calendar 2000 have produced 526 million Bbls of oil and 544 Bcf of gas.

California's active tectonic history over the last few million
years has formed the large linear anticlinal features which trap the oil and
gas. Marine seismic surveys have been used to locate and define these
structures offshore.

Recent seismic surveying utilizing modern 3-D seismic
technology, coupled with exploratory well data, has greatly improved knowledge
of the size of reserves in fields under development and in fields for which
development is planned. Currently, 11 fields are producing from 18 platforms
in the Santa Barbara Channel and offshore Santa Maria Basin. Implementation
of extended high-angle to horizontal drilling methods is reducing the number
of platforms and wells needed to develop reserves in the area. Use of these
new drilling methods and seismic technologies is expected to continue to
improve development economics.

Leasing, lease administration, development and production
within the Federal POCS all fall under the Code of Federal Regulations

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administered by the MMS. The EPA controls disposal of effluents, such as
drilling fluids and produced waters. Other Federal agencies, including the
Coast Guard and the Army Corps of Engineers, also have oversight of offshore
construction and operations.

The first three miles seaward of the coastline are administered
by each state and are known as "State Tidelands" in California. Within the
State Tidelands off Santa Barbara County, the State of California, through the
State Lands Commission, regulates oil and gas leases and the installation of
permanent and temporary producing facilities. Because the four units in which
we own interests are located in the POCS seaward of the three mile limit,
leasing, drilling, and development of these units are not directly regulated
by the State of California. However, to the extent that any production is
transported to an on-shore facility through the state waters, our pipelines
(or other transportation facilities) would be subject to California state
regulations. Construction and operation of any such pipelines would require
permits from the state. Additionally, all development plans must be
consistent with the Federal Coastal Zone Management Act ("CZMA"). In
California the decision of CZMA consistency is made by the California Coastal
Commission.

The Santa Barbara County Energy Division and the Board of
Supervisors will have a significant impact on the method and timing of any
offshore field development through its permitting and regulatory authority
over the construction and operation of on-shore facilities. In addition, the
Santa Barbara County Air Pollution Control District has authority in the
federal waters off Santa Barbara County through the Federal Clean Air Act as
amended in 1990.

Each working interest owner will be required to pay its
proportionate share of these costs based upon the amount of the interest that
it owns. The size of our working interest in the units, other than the Rocky
Point Unit, varies from 2.492% to 15.60%. We also own a working interest of
approximately 75% in the Rocky Point Unit. This interest is expected to be
reduced if the Rocky Point Unit is included in the Point Arguello Unit and
developed from existing Point Arguello platforms. We may be required to farm
out all or a portion of our interests in these properties to a third party if
we cannot fund our share of the development costs. There can be no assurance
that we can farm out our interests on acceptable terms.

These units have been formally approved and are regulated by
the MMS. While the Federal Government has recently attempted to expedite the
process of obtaining permits and authorizations necessary to develop the
properties, there can be no assurance that it will be successful in doing so.

We do not act as operator of any offshore California properties
and consequently will not generally control the timing of either the
development of the properties or the expenditures for development unless we
choose to unilaterally propose the drilling of wells under the relevant
operating agreements.

The MMS initiated the California Offshore Oil and Gas Energy
Resources (COOGER) Study at the request of the local regulatory agencies of
the three counties (Ventura, Santa Barbara and San Luis Obispo) affected by
offshore oil and gas development. A private consulting firm completed the


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study under a contract with the MMS. The COOGER Study presents a long-term
regional perspective of potential onshore constraints that should be
considered when developing existing undeveloped offshore leases. The COOGER
Study projects the economically recoverable oil and gas production from
offshore leases which have not yet been developed. These projections are
utilized to assist in identifying a potential range of scenarios for
developing these leases. These scenarios are compared to the projected
infrastructural, environmental and socioeconomic baselines between 1995 and
2015.

No specific decisions regarding levels of offshore oil and gas
development or individual projects will occur in connection with the COOGER
Study. Information presented in the study is intended to be utilized as a
reference document to provide the public, decision makers and industry with a
broad overview of cumulative industry activities and key issues associated
with a range of development scenarios. We have attempted to evaluate the
scenarios that were studied with respect to properties located in the eastern
and central subregions (which include the Sword Unit and the Gato Canyon Unit)
and the results of such evaluation are set forth below:

Scenario 1 - No new development of existing offshore leases. If
this scenario were ultimately to be adopted by governmental
decision makers as the proper course of action for development,
our offshore California properties would in all likelihood have
little or no value. In this scenario we would seek to cause the
Federal government to reimburse us for all money spent by us and
our predecessors for leasing and other costs and for the value of
the oil and gas reserves found on the leases through our
exploration activities and those of our predecessors.

Scenario 2 - Development of existing leases, using existing
onshore facilities as currently permitted, constructed and
operated (whichever is less) without additional capacity. This
scenario includes modifications to allow processing and
transportation of oil and natural gas with different qualities.
It is likely that the adoption of this scenario by the industry as
the proper course of action for development would result in lower
than anticipated costs, but would cause the subject properties to
be developed over a significantly extended period of time.

Scenario 3 - Development of existing leases, using existing
onshore facilities by constructing additional capacity at existing
sites to handle expanded production. This scenario is currently
anticipated by our management to be the most reasonable course of
action although there is no assurance that this scenario will be
adopted.

Scenario 4 - Development of existing leases after
decommissioning and removal of some or all existing onshore
facilities. This scenario includes new facilities, and perhaps
new sites, to handle anticipated future production. Under this
scenario we would incur increased costs but revenues would be
received more quickly.



15


We have also evaluated our position with regard to the scenarios
with respect to properties located in the northern sub-region (which includes
the Lion Rock Unit and the Point Sal Unit), the results of which are as
follows:
Scenario 1 - No new development of existing offshore leases.
If this scenario were ultimately to be adopted by governmental
decision makers as the proper course of action for development,
our offshore California properties would in all likelihood have
little or no value. In this scenario we would seek to cause the
Federal government to reimburse us for all money spent by us and
our predecessors for leasing and other costs and for the value of
the oil and gas reserves found on the leases through our
exploration activities and those of our predecessors.

Scenario 2 - Development of existing leases, using existing
onshore facilities as currently permitted, constructed and
operated (whichever is less) without additional capacity. This
scenario includes modifications to allow processing and
transportation of oil and natural gas with different qualities.
It is likely that the adoption of this scenario by the industry
as the proper course of action for development would result in
lower than anticipated costs, but would cause the subject
properties to be developed over a significantly extended period
of time.

Scenario 3 - Development of existing leases, using existing
onshore facilities by constructing additional capacity at existing
sites to handle expanded production. This scenario is currently
anticipated by our management to be the most reasonable course of
action although there is no assurance that this scenario will be
adopted.

Scenario 4 - Development of existing offshore leases, using
existing onshore facilities with additional capacity or adding new
facilities to handle a relatively low rate of expanded
development. This scenario is similar to #3 above, but would
entail increased costs for any new facilities.

Scenario 5 - Development of existing offshore leases, using
existing onshore facilities with additional capacity or adding new
facilities to handle a relatively higher rate of expanded
development. Under this scenario we would incur increased costs
but revenues would be received more quickly.

The development plans for the various units (which have been
submitted to the MMS for review) currently provide for 22 wells from one
platform set in a water depth of approximately 300 feet for the Gato Canyon
Unit; 63 wells from one platform set in a water depth of approximately 1,100
feet for the Sword Unit; 60 wells from one platform set in a water depth of
approximately 336 feet for the Point Sal Unit; and 183 wells from two
platforms for the Lion Rock Unit.

On the Lion Rock Unit, Platform A would be set in a water depth of
approximately 507 feet, and Platform B would be set in a water depth of
approximately 484 feet. The reach of the deviated wells from each platform


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required to drain each unit falls within the reach limits now considered to be
"state-of-the-art." The development plans for the Rocky Point Unit provide
for the inclusion of the Rocky Point leases in the Point Arguello Unit upon
which the Rocky Point leases would be drilled from existing Point Arguello
platforms with extended reach drilling technology. The approximate distances
required to drain the Rocky Point leases range from 2,276 feet to 13,999 feet
at proposed total vertical depths ranging from 6,620 feet to 7,360 feet.

Current Status. On October 15, 1992 the MMS directed a Suspension
of Operations (SOO), effective January 1, 1993, for the POCS undeveloped
leases and units. The SOO was directed for the purpose of preparing what
became known as the COOGER Study. Two-thirds of the cost of the Study was
funded by the participating companies in lieu of the payment of rentals on the
leases. Additionally, all operations were suspended on the leases during this
period. On November 12, 1999, as the COOGER Study drew to a conclusion, the
MMS approved requests made by the operating companies for a Suspension of
Production (SOP) status for the POCS leases and units. During the period of
an SOP, the lease rentals resume and each operator is generally required to
perform exploration and development activities in order to meet certain
milestones set out by the MMS. The milestones that were established by the
MMS for the properties in which we own an interest were established through
negotiations by the MMS on behalf of the United States government and the
operators on behalf of the working interest owners. We did not directly
participate in these negotiations. Until recently, progress toward the
milestones was monitored by the operator in quarterly reports submitted to the
MMS. In February 2000 all operators completed and timely submitted to the MMS
a preliminary "Description of the Proposed Project". This was the first
milestone required under the SOP. Quarterly reports were also prepared and
submitted for all subsequent quarters.

On June 22, 2001, however, a Federal Court in the case of California
v. Norton, et al. (discussed below - see "Management's Discussion and Analysis
or Plan of Operation-Offshore Undeveloped Properties") ordered the MMS to set
aside its approval of the suspensions of our offshore leases and to direct
suspensions, including all milestone activities, for a time sufficient for the
MMS to provide the State of California with a consistency determination under
federal law. As a result of this order, on July 2, 2001 the MMS directed
suspensions of operations for all of our offshore California leases for an
indefinite period of time and suspended all of the related milestones. The
ultimate outcome and effects of this litigation are not certain at the present
time. In order to continue to carry out the requirements of the MMS, all
operators of the units in which we own non-operating interests are prepared to
meet the next milestone leading to development of the leases, but the status
of the milestones is presently uncertain in light of the Norton ruling. The
United States government has filed a notice of its intent to appeal the
court's order in the Norton case.

On January 9, 2002, we and several other plaintiffs filed a lawsuit
in the United States Court of Federal Claims in Washington, D.C. alleging that
the U.S. Government has materially breached the terms of forty undeveloped
federal leases, some of which are part of our Offshore California properties.
The Complaint is based on allegations by the collective plaintiffs that the
United States has materially breached the terms of certain of their Offshore
California leases by attempting to deviate significantly from the procedures
and standards that were in effect when the leases were entered into, and by


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failing to carry out its own obligations relating to those leases in a timely
and fair manner. More specifically, the plaintiffs have alleged that the
judicial determination in the California v. Norton case that a 1990 amendment
to the Coastal Zone Management Act required the Government to make a
consistency determination prior to granting lease suspension requests in 1999
constitutes a material change in the procedures and standards that were in
effect when the leases were issued. The plaintiffs have also alleged that the
United States has failed to afford them the timely and fair review of their
lease suspension requests which has resulted in significant, continuing and
material delays to their exploratory and development operations.

The forty undeveloped leases are located in the Offshore Santa Maria
Basin off the coast of Santa Barbara and San Luis Obispo counties, and in the
Santa Barbara Channel off Santa Barbara and Ventura counties. None of these
leases is currently impaired, but in the event that there is some future
adverse ruling by the California Coastal Commission under the Coastal Zone
Management Act and we decide not to appeal such ruling to the Secretary of
Commerce, or the Secretary of Commerce either refuses to hear our appeal of
any such ruling or ultimately makes a determination adverse to us, it is
likely that some or all of these leases would become impaired and written off
at that time.

In addition, it should be noted that our pending litigation against
the United States is predicated on the ruling of the lower court in California
v. Norton. The United States has appealed the decision of the lower court to
the 9th Circuit Court of Appeals. In the event that the United States is not
successful in its appeal(s) of the lower court's decision in the Norton case
and the pending litigation with us is not settled, it would be necessary for
us to reevaluate whether the leases should be considered impaired at that
time.

As the ruling in the Norton case currently stands, the United States
has been ordered to make a consistency determination under the Coastal Zone
Management Act, but the leases are still valid. If through the appellate
process the leases are found not to be valid for some reason, or if the United
States is finally ordered to make a consistency determination and either does
not do so or finds that development is inconsistent with the Coastal Zone
Management Act, it would appear that the leases would become impaired even
though we would undoubtedly proceed with our litigation. It is also possible
that other events could occur during the appellate process that would cause
the leases to become impaired, and we will continuously evaluate those factors
as they occur.

The suit seeks compensation for the lease bonuses and rentals paid
to the Federal Government, exploration costs and related expenses. The total
amount claimed by all lessees for bonuses and rentals exceeds $1.2 billion,
with additional amounts for exploration costs and related expenses. our claim
for lease bonuses and rentals paid by us and our predecessors is in excess of
$152,000,000. In addition, our claim for exploration costs and related
expenses will also be substantial.

On May 18, 2001 (prior to the Norton decision), a revised
Development and Production Plan for the Point Arguello Unit was submitted to
the MMS and the California Coastal Commission ("CCC") for approval. If
approved by the CCC, this plan would enable development of the Rocky Point
Unit from the Point Arguello platforms that are already in existence.

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Under law, the CCC is typically required to make a determination as
to whether or not the Plan is "consistent" with California's Coastal Plan
within three months of submission, with a maximum of three months' extension
(a total of six months). By correspondence dated August 7, 2001, however, the
Unit operator requested that the CCC suspend the consistency review for the
revised Development and Production Plan since the MMS had temporarily stopped
work on the processing of the plan as the result of the Norton decision.

Although it currently appears likely that the CCC may require some
additional supplemental information to be provided with respect to some
aspects of air and water quality when its review continues, we believe that
the Rocky Point Development and Production Plan that was submitted meets the
requirements established by applicable federal regulations. In accordance
with these regulations, the Plan includes very specific information regarding
the planned activities, including a description of and schedule for the
development and production activities to be performed, including plan
commencement date, date of first production, total time to complete all
development and production activities, and dates and sequences for drilling
wells and installing facilities and equipment, and a description of the
drilling vessels, platforms, pipelines and other facilities and operations
located offshore which are proposed or known by the lessee (whether or not
owned or operated by the lessee) to be directly related to the proposed
development, including the location, size, design, and important safety,
pollution prevention, and environmental monitoring features of the facilities
and operations. The current Development and Production Plan calls for
drilling activities to be conducted from the existing Point Arguello platforms
using extended reach drilling techniques with oil and gas production to be
transported through existing pipelines to existing onshore production
facilities. The plan does not require the construction of new platforms,
pipelines or production facilities.

In accordance with applicable federal regulations, the following
supporting information accompanies the Development and Production Plan: (1)
geological and geophysical data and information, including: (i) a plat showing
the surface location of any proposed fixed structure or well; (ii) a plat
showing the surface and bottomhole locations and giving the measured and true
vertical depths for each proposed well; (iii) current interpretations of
relevant geological and geophysical data; (iv) current structure maps showing
the surface and bottomhole location of each proposed well and the depths of
expected productive formations; (v) interpreted structure sections showing the
depths of expected productive formations; (vi) a bathymetric map showing
surface locations of fixed structures and wells or a table of water depths at
each proposed site; and (vii) a discussion of seafloor conditions including a
shallow hazards analysis for proposed drilling and platform sites and pipeline
routes.

As required by federal regulations, the information contained in the
Plan contains proposed precautionary measures, including a classification of
the lease area, a contingency plan, a description of the environmental
safeguards to be implemented, including an updated oil-spill response plan;
and a discussion of the steps that have been or will be taken to satisfy the
conditions of lease stipulations, a description of technology and reservoir


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engineering practices intended to increase the ultimate recovery of oil and
gas, i.e., secondary, tertiary, or other enhanced recovery practices; a
description of technology and recovery practices and procedures intended to
assure optimum recovery of oil and gas; a discussion of the proposed drilling
and completion programs; a detailed description of new or unusual technology
to be employed; and a brief description of the location, description, and size
of any offshore and land-based operations to be conducted or contracted for as
a result of the proposed activity; including the acreage required in
California for facilities, rights-of-way, and easements, the means proposed
for transportation of oil and gas to shore; the routes to be followed by each
mode of transportation; and the estimated quantities of oil and gas to be
moved along such routes; an estimate of the frequency of boat and aircraft
departures and arrivals, the onshore location of terminals, and the normal
routes for each mode of transportation.

As required, the Plan also provides a list of the proposed drilling
fluids, including components and their chemical compositions, information on
the projected amounts and rates of drilling fluid and cuttings discharges, and
methods of disposal, and specifies the quantities, types, and plans for
disposal of other solid and liquid wastes and pollutants likely to be
generated by offshore, onshore, and transport operations and, regarding any
wastes which may require onshore disposal, the means of transportation to be
used to bring the wastes to shore, disposal methods to be utilized, and the
location of onshore waste disposal or treatment facilities.

In order to comply with federal regulations, the Plan also addresses
the approximate number of people and families to be added to the population of
local nearshore areas as a result of the planned development, provides an
estimate of significant quantities of energy and resources to be used or
consumed including electricity, water, oil and gas, diesel fuel, aggregate, or
other supplies which may be purchased within California, and specifies the
types of contractors or vendors which will be needed, although not
specifically identified, and which may place a demand on local goods and
services.

The Plan also identifies the source, composition, frequency, and
duration of emissions of air pollutants and provides a narrative description
of the existing environment with an emphasis placed on those environmental
values that may be affected by the proposed action. This section of the Plan
contains a description of the physical environment of the area covered by the
Plan and includes data and information obtained or developed by the lessee
together with other pertinent information and data available to the lessee
from other sources. The environmental information and data includes a
description of the aquatic biota, including fishery and marine mammal use of
the lease, the significance of the lease and identifies the threatened and
endangered species and their critical habitat.

The Plan also addresses environmentally sensitive areas (e.g.,
refuges, preserves, sanctuaries, rookeries, calving grounds, coastal habitats,
beaches, and areas of particular environmental concern) which may be affected
by the proposed activities, the predevelopment, ambient water-column quality
and temperature data for incremental depths for the areas encompassed by the
plan, the physical oceanography, including ocean currents described as to
prevailing direction, seasonal variations, and variations at different water
depths in the lease, and describes historic weather patterns and other

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meteorological conditions, including storm frequency and magnitude, wave
height and direction, wind direction and velocity, air temperature,
visibility, freezing and icing conditions, and ambient air quality listing,
where possible, the means and extremes of each.

The Plan further identifies other uses of the area, including
military use for national security or defense, subsistence hunting and
fishing, commercial fishing, recreation, shipping, and other mineral
exploration or development and describes the existing and planned monitoring
systems that are measuring or will measure impacts of activities on the
environment in the planning area. As required, the Plan provides an
assessment of the effects on the environment expected to occur as a result of
implementation of the Plan, and identifies specific and cumulative impacts
that may occur both onshore and offshore, and describes the measures proposed
to mitigate these impacts. These impacts are quantified to the fullest extent
possible including magnitude and duration and are accumulated for all
activities for each of the major elements of the environment (e.g., water and
biota). The Plan also provides a discussion of alternatives to the activities
proposed that were considered during the development of the Plan, including a
comparison of the environmental effects.

As required, the Plan provides certain supporting information with
respect to the projected emissions from each proposed or modified facility for
each year of operation and the bases for all calculations, including, for each
source, the amount of the emission by air pollutant expressed in tons per year
and frequency and duration of emissions; for each proposed facility, the total
amount of emissions by air pollutant expressed in tons per year, the frequency
distribution of total emissions by air pollutant expressed in pounds per day
and, in addition for a modified facility only, the incremental amount of total
emissions by air pollutant resulting from the new or modified source(s); and a
detailed description of all processes, processing equipment and storage units,
including information on fuels to be burned; and a schematic drawing which
identifies the location and elevation of each source.

In order to continue to carry out the requirements of the MMS when
they resume, all operators of the units in which we own non-operating
interests are prepared to complete any studies and project planning necessary
to commence development of the leases. Where additional drilling is needed,
the operators will bring a mobile drilling unit to the POCS to further
delineate the undeveloped oil and gas fields.

Cost to Develop Offshore California Properties. The cost to develop
four of the five undeveloped units (plus one lease) located offshore
California, including delineation wells, environmental mitigation,
development wells, fixed platforms, fixed platform facilities, pipelines and
power cables, onshore facilities and platform removal over the life of the
properties (assumed to be 38 years), is estimated by the partners to be in
excess of $3 billion. Our share based on our current working interest of such
costs over the life of the properties is estimated to be over $200 million.
There will be additional costs of a currently undetermined amount to develop
the Rocky Point Unit which is the fifth undeveloped unit in which we own an
interest.

To the extent that we do not have sufficient cash available to pay
our share of expenses when they become payable under the respective operating

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agreements, it will be necessary for us to seek funding from outside sources.
Likely potential sources for such funding are currently anticipated to include
(a) public and private sales of our common stock (which may result in
substantial ownership dilution to existing shareholders), (b) bank debt from
one or more commercial oil and gas lenders, (c) the sale of debt instruments
to investors, (d) entering into farm-out arrangements with respect to one or
more of our interests in the properties whereby the recipient of the farm-out
would pay the full amount of our share of expenses and we would retain a
carried ownership interest (which would result in a substantial diminution of
our ownership interest in the farmed-out properties), (e) entering into one or
more joint venture relationships with industry partners, (f) entering into
financing relationships with one or more industry partners, and (g) the sale
of some or all of our interests in the properties.


It is unlikely that any one potential source of funding would be
utilized exclusively. Rather, it is more likely that we will pursue a
combination of different funding sources when the need arises. Regardless of
the type of financing techniques that are ultimately utilized, however, it
currently appears likely that because of our small size in relation to the
magnitude of the capital requirements that will be associated with the
development of the subject properties, we will be forced in the future to
issue significant amounts of additional shares, pay significant amounts of
interest on debt that presumably would be collateralized by all of our assets
(including our offshore California properties), reduce our ownership interest
in the properties through sales of interests in the properties or as the
result of farmouts, industry financing arrangements or other partnership or
joint venture relationships, or to enter into various transactions which will
result in some combination of the foregoing. In the event that we are not
able to pay our share of expenses as a working interest owner as required by
the respective operating agreements, it is possible that we might lose some
portion of our ownership interest in the properties under some circumstances,
or that we might be subject to penalties which would result in the forfeiture
of substantial revenues from the properties.

While the costs to develop the offshore California properties in
which we own an interest are anticipated to be substantial in relation to our
small size, management believes that the opportunities for us to increase our
asset base and ultimately improve our cash flow are also substantial in
relation to our size. Although there are several factors to be considered in
connection with our plans to obtain funding from outside sources as necessary
to pay our proportionate share of the costs associated with developing our
offshore properties (not the least of which is the possibility that prices for
petroleum products could decline in the future to a point at which development
of the properties is no longer economically feasible), we believe that the
timing and rate of development in the future will in large part be motivated
by the prices paid for petroleum products.

To the extent that prices for petroleum products were to decline
below their recent levels, it is likely that development efforts will proceed
at a slower pace such that costs will be incurred over a more extended period
of time. If petroleum prices remain at current levels, however, we believe
that development efforts will intensify. Our ability to successfully
negotiate financing to pay our share of development costs on favorable terms
will be inextricably linked to the prices that are paid for petroleum products

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during the time period in which development is actually occurring on each of
the subject properties.

Gato Canyon Unit. We hold a 15.60% working interest in the Gato
Canyon Unit. This 10,100 acre unit is operated by Samedan Oil Corporation.
Seven test wells have been drilled on the Gato Canyon structure. Five of
these were drilled within the boundaries of the Unit and two were drilled
outside the Unit boundaries in the adjacent State Tidelands. The test wells
were drilled as follows: within the boundaries of the Unit, three wells were
drilled by Exxon, two in 1968 and one in 1969; one well was drilled by Arco
in 1985 and one well was drilled by Samedan in 1989. Outside the boundaries
of the Unit, in the State Tidelands but still on the Gato Canyon Structure,
one well was drilled by Mobil in 1966 and one well was drilled by Union Oil in
1967. In April 1989, Samedan tested the P-0460 #2 which yielded a combined
test flow rate of 5,160 Bbls of oil per day from six intervals in the Monterey
Formation between 5,880 and 6,700 feet of drilled depth. The Monterey
Formation is a highly fractured shale formation. The Monterey (which ranges
from 500 feet to 2,900 feet in thickness) is the main productive and target
zone in many offshore California oil fields (including our federal leases
and/or units).

The Gato Canyon field is located in the Santa Barbara Channel
approximately three to five miles offshore (see Map). Water depths range from
280 feet to 600 feet in the area of the field. Oil and gas produced from the
field is anticipated to be processed onshore at the existing Las Flores Canyon
facility (see Map). Las Flores Canyon has been designated a "consolidated
site" by Santa Barbara County and is available for use by offshore operators.
Any processed oil is expected to be transported out of Santa Barbara County in
the All American Pipeline (see Map). Offshore pipeline distance to access the
Las Flores site is approximately six miles. Our share of the estimated
capital costs to develop the Gato Canyon field is approximately $45 million.

As a result of the Norton case, the Gato Canyon Unit leases are held
under directed suspensions of operations with no specified end date. An
updated Exploration Plan is expected to include plans to drill an additional
delineation well when activities are resumed. This well will be used to
determine the final location of the development platform. Following the
platform decision, a Development Plan will be prepared for submittal to the
MMS and the other involved agencies. Two to three years will likely be
required to process the Development Plan and receive the necessary approvals.

Point Sal Unit. We hold a 6.83% working interest in the Point Sal
Unit. This 22,772 acre unit is operated by Aera Energy LLC, a limited
liability company jointly owned by Shell Oil Company and ExxonMobil Company.
Four test wells were drilled within this unit. These test wells were drilled
as follows: two wells were drilled by Sun Oil (now Oryx Energy), one in 1984
and one in 1985; and the other two wells were drilled by Reading & Bates, both
in 1984. All four wells drilled on this unit have indicated the presence of
oil and gas in the Monterey Formation. The largest of these, the Sun P-0422
#1, yielded a combined test flow rate of 3,750 Bbls of oil per day from the
Monterey. The oil in the upper block has an average estimated gravity of 10E
API and the oil in the subthrust block has an average estimated gravity of 15E
API.


23


The Point Sal field is located in the Offshore Santa Maria Basin
approximately six miles seaward of the coastline. Water depths range from 300
feet to 500 feet in the area of the field. It is anticipated that oil and gas
produced from the field will be processed in a new facility at an onshore site
or in the existing Lompoc facility. Any processed oil would then be
transported out of Santa Barbara County in either the All American Pipeline or
the Tosco-Unocal Pipeline. Offshore pipeline distance is approximately six to
eight miles depending on the final choice of the point of landfall. Our share
of the estimated capital costs to develop the Point Sal Unit is approximately
$38 million.

As a result of the Norton case, the Point Sal Unit leases are held
under directed suspensions of operations with no specified end date. An
updated Exploration Plan is expected to include plans to drill an additional
delineation well when activities are resumed prior to preparing the
Development Plan.

Lion Rock Unit and Federal OCS Lease P-0409. We hold a 1% net
profits interest in the Lion Rock Unit and a 24.21692% working interest in
5,693 acres in Federal OCS Lease P-0409 which is immediately adjacent to the
Lion Rock Unit and contains a portion of the San Miguel Field reservoir. The
Lion Rock Unit is operated by Aera Energy LLC. An aggregate of 13 test wells
have been drilled on the Lion Rock Unit and OCS Lease P-0409. Nine of these
wells were completed and tested and indicated the presence of oil and gas in
the Monterey Formation. The test wells were drilled as follows: one well was
drilled by Socal (now Chevron) in 1965; six wells were drilled by Phillips
Petroleum, one in 1982, two in 1983, two in 1984 and one in 1985; and six
wells were drilled by Occidental Petroleum in Lease P-0409, three in 1983 and
three in 1984. The oil has an average estimated gravity of 10.7E API.

The Lion Rock Unit and Lease P-0409 are located in the Offshore
Santa Maria Basin eight to ten miles from the coastline. Water depths range
from 300 feet to 600 feet in the area of the field. It is anticipated that any
oil and gas produced at Lion Rock and P-0409 would be processed at a new
facility in the onshore Santa Maria Basin or at the existing Lompoc facility,
and would be transported out of Santa Barbara County in the All American
Pipeline or the Tosco-Unocal Pipeline. Offshore pipeline distance will be
eight to ten miles, depending on the point of landfall. Our share of the
estimated capital costs to develop the Lion Rock/San Miguel field is
approximately $113 million.

As a result of the Norton case, the Lion Rock Unit and Lease P-0409
are held under directed suspensions of operations with no specified end date.
It is anticipated that upon the resumption of activities there will be an
interpretation of the 3D seismic survey and the preparation of an updated Plan
of Development leading to production. Additional delineation wells may or may
not be drilled depending on the outcome of the interpretation of the 3D
survey.

Sword Unit. We hold a 2.492% working interest in the Sword Unit.
This 12,240 acre unit is operated by Conoco, Inc. In aggregate, three wells
have been drilled on this unit, of which two wells were completed and tested
in the Monterey formation with calculated flow rates of from 4,000 to 5,000
Bbls per day with an estimated average gravity of 10.6E API. The two


24


completed test wells were drilled by Conoco, one in 1982 and the second in
1985.

The Sword field is located in the western Santa Barbara Channel ten
miles west of Point Conception and five miles south of Point Arguello's field
Platform Hermosa. Water depths range from 1000 feet to 1800 feet in the area
of the field. It is anticipated that the oil and gas produced from the Sword
Field will likely be processed at the existing Gaviota consolidated facility
and the oil would then be transported out of Santa Barbara County in the All
American Pipeline. Access to the Gaviota plant is through Platform Hermosa
and the existing Point Arguello Pipeline system. A pipeline proposed to be
laid from a platform located in the northern area of the Sword field to
Platform Hermosa would be approximately five miles in length. Our share of
the estimated capital costs to develop the Sword field is approximately $19
million.

As a result of the Norton case, the Sword Unit leases are held under
directed suspensions of operations with no specified end date. An updated
Exploration Plan is expected to include plans to drill an additional
delineation well when activities are resumed.

Rocky Point Unit. Delta, owns an 11.11% interest in OCS Block 451
(E/2) and 100% interest in OCS Block 452 and 453, which leases comprise the
undeveloped Rocky Point Unit. On November 2, 2000 we entered into an
agreement with all of the interest owners of Point Arguello for the
development of Rocky Point and agreed, among other things, that Arguello,
Inc. would become the operator of Rocky Point. Six test wells have been
drilled on these leases from mobile drilling units. Five were successful and
one was a dry hole. OCS-P 0451 #1, drilled in 1982, was the discovery well
for the Rocky Point Field. Five delineation wells were drilled on the Unit
between 1982 and 1984. Rates up to 1,500 Bbls of oil per day were tested from
the Monterey formation. Rates up to 3,500 Bbls of oil per day were tested
from the lower Sisquoc formation which overlies the Monterey. Oil gravities
at Rocky Point range from 24 degrees to 31 degrees API.

Development of the Rocky Point Unit will be accomplished through
extended-reach drilling from the platforms located within the adjacent Point
Arguello Unit (see below). In 1987 an extended-reach well was successfully
drilled to the southwestern edge of the Rocky Point field from Platform
Hermosa located in the Point Arguello Unit. Since that time the technology of
extended-reach drilling has dramatically advanced. The entire Rocky Point
field is now within drilling distance from the Point Arguello Unit platforms.

As a result of the Norton case, the Rocky Point Unit leases are held
under directed suspensions of operations with no specified end date. The Unit
operator has prepared and timely submitted a Project Description for the
development program to the MMS as the first milestone in the Schedule of
Activities for the Unit. The operator, under the auspices of the MMS, has
also made a presentation of the Project to the affected Federal, state and
local agencies. On May 18, 2001 a revised Development and Production Plan and
supporting information was submitted to the MMS and distributed to the CCC and
the Office of the California Governor. The revised Development and Production
Plan calls for development of the Rocky Point Unit using extended reach
drilling from the existing Point Arguello platforms, and is deemed to be in
final form as the MMS has acknowledged that all regulatory requirements

25


necessary for such a Plan have been addressed. Under law, the CCC is
typically required to make a determination as to whether or not the Plan is
"consistent" with California's Coastal Plan within three months of submission,
with a maximum of three months' extension (a total of six months). By
correspondence dated August 7, 2001, however, the Unit operator requested that
the CCC suspend the consistency review for the revised Development and
Production Plan since the MMS had temporarily stopped work on the processing
of the plan as the result of the court decision in the Norton. See
"Management's Discussion and Analysis or Plan of Operation-Offshore
Undeveloped Properties".

On January 9, 2002, we filed a lawsuit against the U.S. government
along with several other companies alleging that the government breached the
terms of some of our undeveloped, offshore California properties. See "Legal
Proceedings."

Offshore Producing Properties:
-----------------------------

Point Arugello Unit. Whiting holds, as our nominee, the equivalent
of a 6.07% working interest in the form of a financial arrangement termed a
"net operating interest" in the Point Arguello Unit and related facilities.
In layman's terms, the term "net operating interest" is defined in our
agreement with Whiting as being the positive or negative cash flow resulting
to the interest from a seven step calculation which in summary subtracts
royalties, operating expenses, severance taxes, production taxes and ad
valorem taxes, capital expenditures, Unit fees and certain other expenses from
the oil and gas sales and certain other revenues that are attributable to the
interest. Within this unit are three producing platforms (Hidalgo, Harvest
and Hermosa) which are operated by Arguello, Inc., a subsidiary of Plains
Petroleum. In an agreement between Whiting and us (see Form 8-K dated June 9,
1999) Whiting agreed to retain all of the abandonment costs associated with
our interest in the Point Arguello Unit and the related facilities.

We anticipate that we will drill one to four developmental wells on
the Point Arguello Unit during fiscal 2003. Each well will cost
approximately $2.8 million ($170,000 to our interest). We anticipate the
costs to be paid through current operations or additional financing.
















26










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map page

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27


(c) Production.

During the years ended June 30, 2002 and 2001 we have not had, nor
do we now have, any long-term supply or similar agreements with governments or
authorities under which we acted as producer.

Impairment of Long Lived Assets
-------------------------------

Unproved Undeveloped Offshore California Properties
---------------------------------------------------

We acquired many of our offshore properties (including our
interest in Amber) in a series of transactions from 1992 to the present.
These properties are carried at our cost bases and have been subject to an
impairment review on an annual basis.

These properties will be expensive to develop and produce and
have been subject to significant regulatory restrictions and delays.
Substantial quantities of hydrocarbons are believed to exist based on
estimates reported to us by the operator of the properties and the U.S.
government's Mineral Management Services. The classification of these
properties depends on many assumptions relating to commodity prices,
development costs and timetables. We annually consider impairment of
properties assuming that properties will be developed. Based on the range of
possible development and production scenarios using current prices and costs,
we have concluded that the cost bases of our offshore properties are not
impaired at this time. There are no assurances, however, that when and if
development occurs, we will recover the value of our investment in such
properties.

Other Undeveloped Properties
----------------------------

Other undeveloped properties are carried at historical cost and
consist of the several onshore properties. These properties are carried at
our cost bases and have been subject to an impairment review on an annual
basis. There are no proven reserves associated with these properties. Based
on our continued interest in these properties and the possibility for future
development, we have concluded that the cost bases of these other undeveloped
properties are not impaired at this time. There are no assurances, however,
that when and if development occurs, we will recover the value of our
investments in such properties.

Onshore Producing Properties
----------------------------

We annually compare our historical cost basis of each
developed oil and gas property to its expected future undiscounted cash flow
from each property (on a field by field basis). Estimates of expected future
cash flows represent management's best estimate based on reasonable and
supportable assumptions and projections. If the expected future cash flows
exceed the carrying value of the property, no impairment is recognized. If
the carrying value of the property exceeds the expected future cash flows, an


28


impairment exists and is measured by the excess of the carrying value over
the estimated fair value of the asset.

We had an impairment provision attributed to producing
properties during the year ended June 30, 2002, of $878,000 and during the
year ended June 30, 2001 of $174,000.

Any impairment provisions recognized for developed and
undeveloped properties are permanent and may not be restored in the future.

The following table sets forth our average sales prices and
average production costs during the periods indicated:



Year Ended Year Ended Year Ended
June 30, June 30, June 30,
2002 2001 2000
---- ---- ----
Onshore Offshore Onshore Offshore Onshore Offshore
------- -------- ------- -------- ------- --------

Average sales price:

Net of forward contract sales
Oil (per barrel) $22.22 $14.36 $27.10 $18.49 $25.95 $11.54
Natural Gas (per Mcf) $ 2.75 $ - $ 6.27 - $ 2.62 -

Gross of forward contract sales
Oil (per barrel) $22.32 $14.45 $27.30 $22.53 $25.95 $21.14
Natural Gas (per Mcf) $ 2.75 $ - $ 6.27 - $ 2.62 -

Production costs
(per Bbl equivalent) $ 5.68 $11.64 $ 3.88 $12.65 $ 4.94 $11.02



(d) Productive Wells and Acreage.

The table below shows, as of June 30, 2002, the approximate number
of gross and net producing oil and gas wells by state and their related
developed acres owned by us. Calculations include 100% of wells and acreage
owned by us and by Amber. Productive wells are producing wells capable of
production, including shut-in wells. Developed acreage consists of acres
spaced or assignable to productive wells.

Oil (1) Gas Developed Acres
Gross (2) Net (3) Gross (2) Net (3) Gross (2) Net (3)
--------- ------- --------- ------- --------- -------

North Dakota 0 0 0 0 5,120 1,344
New Mexico 8 1.2 24 7.2 6,000 2,115
Texas 37 21.48 113 31.4 880 656
Colorado 6 4.2 5 4.00 4,480 1,600
Oklahoma 3 .93 4 1.57
California:
Onshore 10 .558 8 .664 720 49
Offshore 38 2.30 0 0 11,042 669
Wyoming 0 0 2 .634 1,280 811


29


Nebraska 2 .0625 0 0 160 10
Michigan 1 .0096 0 0 80 1
Mississippi 5 .413 5 1.01 400 57
Illinois 12 1.8 0 0 480 72
Alabama 0 0 51 49.2 4,080 3,916
Pennsylvania 0 0 143 89.29 5,720 3,577
Louisiana 12 7.14 3 1.32 600 388
Montana 12 3.7 0 0 480 148
Kansas 1 .048 0 0 40 2
--- ----- --- ------ ------ ------
108 27.26 358 186.27 41,562 15,360

______________

(1) All of the wells classified as "oil" wells also produce various
amounts of natural gas.

(2) A "gross well" or "gross acre" is a well or acre in which a working
interest is held. The number of gross wells or acres is the total
number of wells or acres in which a working interest is owned.

(3) A "net well" or "net acre" is deemed to exist when the sum of
fractional ownership interests in gross wells or acres equals
one. The number of net wells or net acres is the sum of the
fractional working interests owned in gross wells or gross acres
expressed as whole numbers and fractions thereof.

(4) This does not include varying very small interests in approximately
700 gross wells (4.6 net) located primarily in Texas which are owned
by our subsidiary, Piper Petroleum Company.

(e) Undeveloped Acreage.

At June 30, 2002, we held undeveloped acreage by state as set forth
below:
Undeveloped Acres (1) (2)
-------------------------
Location Gross Net
- -------- ----- ---
South Dakota 58,400 29,200
California, offshore(3) 64,905 15,837
California, onshore 640 96
Colorado 6,060 4,554
Wyoming 960 768
Alabama 420 406
Texas 8,923 3,265
------- ------
Total 140,308 54,126
_______________

(1) Undeveloped acreage is considered to be those lease acres on which
wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil and gas,
regardless of whether such acreage contains proved reserves.


30


(2) Includes acreage owned by Amber.

(3) Consists of Federal leases offshore California near Santa Barbara.

(f) Drilling Activity.

During the years indicated, we drilled or participated in the
drilling of the following productive and nonproductive exploratory and
development wells:

Year Ended Year Ended Year Ended
June 30,2002 June 30, 2001 June 30, 2000
Gross Net Gross Net Gross Net
------------ ------------- -------------
Exploratory Wells(1):
Productive:
Oil 0 .00 0 .00 0 .00
Gas 0 .00 0 .00 0 .00
Nonproductive 5 2.70 6 2.24 0 .00
- ---- - ---- - ---
Total 5 2.70 6 2.24 0 .00

Development Wells(1):
Productive:
Oil 4 .242 3 .18 3 .18
Gas 6 .491 7 .37 2 .25
Nonproductive 0 .00 0 .00 0 .00
-- ---- -- ---- - ---
Total 10 .733 10 .55 5 .43
Total Wells(1):
Productive:
Oil 4 .242 3 .18 3 .18
Gas 6 2.700 7 .37 2 .25
Nonproductive 5 .491 6 2.24 0 .00
-- ----- -- ---- - ---
Total Wells 15 3.433 16 2.79 5 .43
________________

(1) Does not include wells in which the Company had only a royalty
interest.

(g) Present Drilling Activity.

We plan to participate in the drilling of approximately 20 new wells
before the end of fiscal 2003.

Certain Risks

Prospective investors should consider carefully, in addition to the
other information in this Annual Report, the following:




31


1. We have substantial debt obligations and shortages of funding could hurt
our future operations.

As the result of debt obligations that we have incurred in connection
with purchases of oil and gas properties, we are obligated to make substantial
monthly payments to our lenders on loans which encumber our oil and gas
properties and our production revenue. At the present time we are almost
totally dependent upon the revenues that we receive from our oil and gas
properties to service the debt. In the event that oil and gas prices and/or
production rates drop to a level that we are unable to pay the minimum
principal and interest payments that are required by our debt agreements, it
is likely that we would lose our interest in some or all of our properties.
In addition, our level of oil and gas activities, including exploration and
development of existing properties, and additional property acquisitions, will
be significantly dependent on our ability to successfully conclude funding
transactions.

2. A default under our credit agreement could cause us to lose our
properties.

In connection with our acquisition of Castle's properties on May 31,
2002, we entered into a credit facility with Bank of Oklahoma and Local
Oklahoma Bank which allows us to borrow, repay and reborrow amounts. In order
to obtain this facility, we granted a first and prior lien to the lending
banks on most of our oil and gas properties, certain related equipment, oil
and gas inventory, certain bank accounts and proceeds. Under the terms of our
credit agreement, the oil and gas properties mortgaged must represent not less
than 80% of the engineered value of our oil and gas properties as determined
by the Bank of Oklahoma using its own pricing parameters, exclusive of the
properties that are mortgaged to Kaiser-Francis under a separate lending
arrangement. Our borrowing base, which determines the amounts that we are
allowed to borrow or have outstanding under our credit facility, was initially
determined to be $20 million at the time we entered into our credit agreement.
Subsequent determinations of our borrowing base will be made by the lending
banks at least semi-annually on October 1 and April 1 of each year beginning
October 1, 2002 or as unscheduled redeterminations. In connection with each
determination of our borrowing base, the banks will also redetermine the
amount of our monthly commitment reduction. The monthly commitment reduction
was $260,000.00 beginning as of July 1, 2002 and will continue at that amount
until the amount of the monthly commitment reduction is redetermined.

Our borrowing base and the revolving commitment of the banks to lend
money under the credit agreement must be reduced as of the first day of each
month by an amount determined by the banks under our credit agreement. The
amount of the borrowing base must also be reduced from time to time by the
amount of any prepayment that results from our sale of oil and gas properties.
If as a result of any such monthly commitment reduction or reduction in the
amount of our borrowing base, the total amount of our outstanding debt ever
exceeds the amount of the revolving commitment then in effect, then within 30
days after we are notified by the Bank of Oklahoma, we must make a mandatory
prepayment of principal that is sufficient to cause our total outstanding
indebtedness to not exceed our borrowing base.



32


If for any reason we were unable to pay the full amount of the mandatory
prepayment within the 30 requisite day period, we would be in default of our
obligations under our credit agreement.

For so long as the revolving commitment is in existence or any amount is
owed under any of the loan documents, we will also be required to comply with
a substantial number of loan covenants that will limit our flexibility in
conducting our business and which could cause us significant problems in the
event of a downturn in the oil and gas market.

Upon occurrence of an event of default and after the expiration of any
cure period that is provided in our credit agreement, the entire principal
amount due under the notes, all accrued interest and any other liabilities
that we might have to the lending banks under the loan documents will all
become immediately due and payable, all without notice and without
presentment, demand, protest, notice of protest or dishonor or any other
notice of default of any kind, and we will not be permitted to service our
obligations under our loan agreement with Kaiser-Francis Oil Company from
proceeds of the collateral securing the loan under our credit agreement
including, but not limited to, oil and gas properties or any related operating
fees.

The foregoing information is provided to alert investors that there is
risk associated with our existing debt obligations. It is not intended to
provide a summary of the terms of our agreements with our lenders. Complete
copies of our credit agreement and other loan documents are filed as an
exhibit to our Report on Form 8-K dated May 24, 2002.

3. We have a history of losses and we may not achieve profitability.

We have incurred substantial losses from our operations over the past
several years except fiscal 2001, and at June 30, 2002 we had an accumulated
deficit of $28,853,000. During the fiscal year ended June 30, 2002, we had
total revenue of $8,210,000, operating expenses of $13,251,000 and a net loss
for the year of $6,253,000. During fiscal 2001 we had total revenue of
$12,877,000, operating expenses of $11,199,000 and had net income of $345,000.
During the year ended June 30, 2000, we had total revenue of $3,576,000,
operating expenses of $5,655,000 and a net loss for fiscal 2000 of $3,367,000.


4. The substantial cost to develop certain of our offshore California
properties could result in a reduction in our interest in these
properties or penalize us.

Certain of our offshore California undeveloped properties, in which we
have ownership interests ranging from 2.49% to 75%, are attributable to our
interests in four of our five federal units (plus one additional lease)
located offshore California near Santa Barbara. The cost to develop these
properties will be very substantial. The cost to develop all of these
offshore California properties in which we own an interest, including
delineation wells, environmental mitigation, development wells, fixed
platforms, fixed platform facilities, pipelines and power cables, onshore
facilities and platform removal over the life of the properties (assumed to be
38 years), is estimated to be in excess of $3 billion. Our share of such


33


costs, based on our current ownership interest, is estimated to be over $200
million.

Operating expenses for the same properties over the same period of time,
including platform operating costs, well maintenance and repair costs, oil,
gas and water treating costs, lifting costs and pipeline transportation costs,
are estimated to be approximately $3.5 billion, with our share, based on our
current ownership interest, estimated to be approximately $300 million. There
will be additional costs of a currently undetermined amount to develop the
Rocky Point Unit. Each working interest owner will be required to pay its
proportionate share of these costs based upon the amount of the interest that
it owns. If we are unable to fund our share of these costs or otherwise cover
them through farmouts or other arrangements, then we could either forfeit our
interest in certain wells or properties or suffer other penalties in the form
of delayed or reduced revenues under our various unit operating agreements.

5. The development of the offshore units could be delayed or halted.

The California offshore federal units have been formally approved and are
regulated by the Minerals Management Service of the federal government
("MMS"). The MMS initiated the California Offshore Oil and Gas Energy
Resources(COOGER) study at the request of the local regulatory agencies of the
affected Tri-Counties. The COOGER study was completed in January of 2000 and
is intended to present a long-term regional perspective of potential onshore
constraints that should be considered when developing existing undeveloped
offshore leases. The "worst" case scenario under the COOGER study is that no
new development of existing offshore leases would occur. If this scenario
were ultimately to be adopted by governmental decision makers and the industry
as the proper course of action for development, our offshore California
properties would in all likelihood have little or no value. Under those
circumstances we would seek to cause the Federal government to reimburse us
for all money spent by us and our predecessors for leasing and other costs
and/or for the value of the oil and gas reserves found on the leases through
our exploration activities and those of our predecessors. On June 22, 2001,
in litigation relating to the development of these properties brought by the
State of California, a Federal Court ordered the MMS to set aside its approval
of the suspensions of our offshore leases that were granted while the COOGER
Study was being completed, and to direct suspensions, including all milestone
activities, for a time sufficient for the MMS to provide the State of
California with a consistency determination under federal law. On July 2,
2001 these milestones were suspended by the MMS.

In a separate action, on January 9, 2002 we and several other plaintiffs
filed a lawsuit in the United States Court of Federal Claims in Washington,
D.C. alleging that the U.S. Government materially breached the terms of the
leases for our offshore California properties. Our suit seeks compensation
for the lease bonuses and rentals paid to the Federal Government, exploration
costs, and related expenses. The ultimate outcome and effects of the
litigation pertaining to our Offshore California properties are not certain at
the present time.




34


6. We will have to incur substantial costs in order to develop our
reserves and we may not be able to secure funding.

Relative to our financial resources, we have significant undeveloped
properties in addition to those in offshore California discussed above that
will require substantial costs to develop. During the year ended June 30,
2001, we participated in the drilling and completion or recompletion of seven
gas wells and six non-productive wells. During the year ended June 30, 2002,
we participated in the drilling of four offshore wells at a cost to us of
approximately $680,000, and 11 (6 successful and 5 unsuccessful) onshore wells
at a cost to us of approximately $1,140,000. The cost of these wells either
has been or will be paid out of our cash flow.

We drilled 6 successful and 5 unsuccessful wells onshore and drilled 4
successful offshore wells in fiscal 2002. Our level of future oil and gas
activity, including exploration and development and property acquisitions,
will be to a significant extent dependent upon our ability to successfully
conclude funding transactions.

We expect to continue incurring costs to acquire, explore and develop oil
and gas properties, and management predicts that these costs (together with
general and administrative expenses) will be in excess of funds available from
revenues from properties owned by us and existing cash on hand. It is
anticipated that the source of funds to carry out such exploration and
development will come from a combination of our sale of working interests in
oil and gas leases, production revenues, sales of our securities, and funds
from any funding transactions in which we might engage.

7. Current and future governmental regulations will affect our operations.

Our activities are subject to extensive federal, state, and local laws
and regulations controlling not only the exploration for and sale of oil, but
also the possible effects of such activities on the environment. Present as
well as future legislation and regulations could cause additional
expenditures, restrictions and delays in our business, the extent of which
cannot be predicted, and may require us to cease operations in some
circumstances. In addition, the production and sale of oil and gas are
subject to various governmental controls. Because federal energy policies are
still uncertain and are subject to constant revisions, no prediction can be
made as to the ultimate effect on us of such governmental policies and
controls.

8. We hold only a minority interest in certain properties and, therefore,
generally will not control the timing of development.

We currently do not operate approximately 42% of the wells in which we
own an interest and we are dependent upon the operators of the wells that we
do not operate to make most decisions concerning such things as whether or not
to drill additional wells, how much production to take from such wells, or
whether or not to cease operation of certain wells. Further, we do not act as
operator of and, with the exception of Rocky Point, we do not own a
controlling interest in any of our offshore California properties. While we,
as a working interest owner, may have some voice in the decisions concerning
the wells, we are not the primary decision maker concerning them. As a
result, we will generally not control the timing of either the development of


35


most of these non-operated properties or the expenditures for their
development. Because we are not in control of the non-operated wells, we may
not be able to cause wells to be drilled even though we may have the funds
with which to pay our proportionate share of the expenses of such drilling,
or, alternatively, we may incur development expenses at a time when funds are
not available to us. We hold only a minority interest in and do not operate
many of our properties and, therefore, generally will not control the timing
of development on these properties.

9. We are subject to the general risks inherent in oil and gas exploration
and operations.

Our business is subject to risks inherent in the exploration, development
and operation of oil and gas properties, including but not limited to
environmental damage, personal injury, and other occurrences that could result
in our incurring substantial losses and liabilities to third parties. In our
own activities, we purchase insurance against risks customarily insured
against by others conducting similar activities. Nevertheless, we are not
insured against all losses or liabilities which may arise from all hazards
because such insurance is not available at economic rates, because the
operator has not purchased such insurance, or because of other factors. Any
uninsured loss could have a material adverse effect on us.

10. We have no long-term contracts to sell oil and gas.

We do not have any long-term supply or similar agreements with
governments or authorities for which we act as a producer. We are therefore
dependent upon our ability to sell oil and gas at the prevailing well head
market price. There can be no assurance that purchasers will be available or
that the prices they are willing to pay will remain stable.

11. Our business is not diversified.

Since all of our resources are devoted to one industry, purchasers of our
common stock will be risking essentially their entire investment in a company
that is focused only on oil and gas activities.

12. Our shareholders do not have cumulative voting rights.

Holders of our common stock are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the present
shareholders will be able to elect all of our directors, and holders of the
common stock offered by this prospectus will not be able to elect a
representative to our Board of Directors. See "DESCRIPTION OF COMMON STOCK."

13. We do not expect to pay dividends.

There can be no assurance that our proposed operations will result in
sufficient revenues to enable us to operate at profitable levels or to
generate a positive cash flow, and our current loan documents prevent us from
paying dividends. For the foreseeable future, it is anticipated that any
earnings which may be generated from our operations will be used to finance
our growth and that dividends will not be paid to holders of common stock.
See "DESCRIPTION OF COMMON STOCK."


36


14. We depend on key personnel.

We currently have only three employees that serve in management roles,
and the loss of any one of them could severely harm our business. In
particular, Roger A. Parker is responsible for the operation of our oil and
gas business, Aleron H. Larson, Jr. is responsible for other business and
corporate matters, and Kevin K. Nanke is our chief financial officer. We do
not have key man insurance on the lives of any of these individuals.

15. We allow our key personnel to purchase working interests on the same
terms as us.

In the past we have occasionally allowed our key employees to purchase
working interests in our oil and gas properties on the same terms as us in
order to provide a meaningful incentive to the employees and to align their
own personal financial interests with ours in making decisions affecting the
properties in which they own an interest.

Specifically, on February 12, 2001, our Board of Directors permitted
Aleron H. Larson, Jr., our Chairman, Roger A. Parker, our President, and
Kevin K. Nanke, our CFO, to purchase working interests of 5% each for Messrs.
Larson and Parker and 2-1/2% for Mr. Nanke in our Cedar State gas property
located in Eddy County, New Mexico and in our Ponderosa Prospect consisting of
approximately 52,000 gross acres in Harding and Butte Counties, South Dakota
held for exploration. These officers were authorized to purchase these
interests on or before March 1, 2001 at a purchase price equivalent to the
amounts paid by us for each property as reflected upon our books by delivering
to us shares of Delta common stock at the February 12, 2001 closing price of
$5.125 per share. Messrs. Larson and Parker each delivered 31,310 shares and
Mr. Nanke delivered 15,655 shares in exchange for their interests in these
properties.

Also on February 12, 2001, we granted to Messrs. Larson and Parker and
Mr. Nanke the right to participate in the drilling of the Austin State #1 well
in Eddy County, New Mexico by having them commit to us on February 12, 2001
(prior to any bore hole knowledge or information relating to the objective
zone or zones)to pay 5% each by Messrs. Larson and Parker and 2-1/2% by Mr.
Nanke of our working interest costs of drilling and completion or abandonment
costs, which costs may be paid in either cash or in Delta common stock at
$5.125 per share. All of these officers committed to participate in the well
under the condition that they would be assigned their respective working
interests in the well and associated spacing unit after they had been billed
and had paid for the interests as required.

To the extent that key employees are permitted to purchase working
interests in wells that are successful, they will receive benefits of
ownership that might otherwise have been available to us. Conversely, to the
extent that key employees purchase working interests in wells that are
ultimately not successful, such purchases may result in personal financial
losses for our key employees that could potentially divert their attention
from our business.




37


16. The exercise of our Put Rights may dilute the interests of other
security holders.

We have entered into an arrangement with Swartz Private Equity, LLC under
which we may sell shares of our common stock to Swartz at a discount from the
then prevailing market price. The exercise of these rights may substantially
dilute the interests of other security holders.

Under the terms of our relationship with Swartz, we will issue shares to
Swartz upon exercise of our Put Rights at a price equal to the lesser of: the
market price for each share of our common stock minus $.25; or 91% of the
market price for each share of our common stock.

17. The sale of material amounts of our common stock could reduce the price
of our common stock and encourage short sales.

If and when we exercise our Put Rights and sell shares of our common
stock to Swartz, if and to the extent that Swartz sells the common stock, our
common stock price may decrease due to the additional shares in the market. If
the price of our common stock decreases, and if we decide to exercise our
right to put shares to Swartz, we must issue more shares of our common stock
for any given dollar amount invested by Swartz, subject to a designated
minimum Put price that we specify. This may encourage short sales, which could
place further downward pressure on the price of our common stock. Under the
terms of the Investment Agreement with Swartz, however, we are not obligated
to sell any of our shares to Swartz nor do we intend to sell shares to Swartz
unless it is beneficial to us.

ITEM 3. LEGAL PROCEEDINGS

On January 9, 2002, we and several other plaintiffs filed a lawsuit in
the United States Court of Federal Claims in Washington, D.C. alleging that
the U.S. Government has materially breached the terms of forty undeveloped
federal leases, some of which are part of our Offshore California properties.
The Complaint is based on allegations by the collective plaintiffs that the
United States has materially breached the terms of certain of their Offshore
California leases by attempting to deviate significantly from the procedures
and standards that were in effect when the leases were entered into, and by
failing to carry out its own obligations relating to those leases in a timely
and fair manner. More specifically, the plaintiffs have alleged that the
judicial determination in the California v. Norton case that a 1990 amendment
to the Coastal Zone Management Act required the Government to make a
consistency determination prior to granting lease suspension requests in 1999
constitutes a material change in the procedures and standards that were in
effect when the leases were issued. The plaintiffs have also alleged that the
United States has failed to afford them the timely and fair review of their
lease suspension requests which has resulted in significant, continuing and
material delays to their exploratory and development operations.

The forty undeveloped leases are located in the Offshore Santa Maria
Basin off the coast of Santa Barbara and San Luis Obispo counties, and in the
Santa Barbara Channel off Santa Barbara and Ventura counties. None of these
leases is currently impaired, but in the event that there is some future
adverse ruling by the California Coastal Commission under the Coastal Zone
Management Act and we decide not to appeal such ruling to the Secretary of

38


Commerce, or the Secretary of Commerce either refuses to hear our appeal of
any such ruling or ultimately makes a determination adverse to us, it is
likely that some or all of these leases would become impaired and written off
at that time.

In addition, it should be noted that our pending litigation against the
United States is predicated on the ruling of the lower court in California v.
Norton. The United States has appealed the decision of the lower court to the
9th Circuit Court of Appeals. In the event that the United States is not
successful in its appeal(s) of the lower court's decision in the Norton case
and the pending litigation with us is not settled, it would be necessary for
us to reevaluate whether the leases should be considered impaired at that
time.

As the ruling in the Norton case currently stands, the United States has
been ordered to make a consistency determination under the Coastal Zone
Management Act, but the leases are still valid. If through the appellate
process the leases are found not to be valid for some reason, or if the United
States is finally ordered to make a consistency determination and either does
not do so or finds that development is inconsistent with the Coastal Zone
Management Act, it would appear that the leases would become impaired even
though we would undoubtedly proceed with our litigation. It is also possible
that other events could occur during the appellate process that would cause
the leases to become impaired, and we will continuously evaluate those factors
as they occur.

The suit seeks compensation for the lease bonuses and rentals paid to the
Federal Government, exploration costs and related expenses. The total amount
claimed by all lessees for bonuses and rentals exceeds $1.2 billion, with
additional amounts for exploration costs and related expenses. Our claim for
lease bonuses and rentals paid by us and our predecessors is in excess of
$152,000,000. In addition, our claim for exploration costs and related
expenses will also be substantial.

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

The 2001 Annual Meeting of our shareholders was held on May 30, 2002.

At the Annual Meeting the following persons, constituting the entire board
of directors, were elected as directors of the Company to serve until the next
annual meeting:


Name Affirmative Votes* Against Abstain
---- ----------------- ------- -------

Aleron H. Larson, Jr. 9,172,152 1,161 56,543
Roger A. Parker 9,171,952 1,361 56,543
Jerrie F. Eckelberger 9,169,652 1,661 58,543
James B. Wallace 9,169,552 1,761 58,543

*Includes 2,823,000 broker non-votes


Our shareholders also ratified, approved, and adopted our 2002 Incentive
Plan with 5,664,239 affirmative votes, 255,347 negative votes and 16,459

39


abstentions. Approval of this proposal required and received the affirmative
vote of a majority of those voting upon this proposal at the meeting.
However, we will not issue Incentive Stock Options pursuant to Section 422 of
the Internal Revenue Code of 1986 because the plan did not receive the
affirmative vote of a majority of all of the outstanding shares as required
for issuance of this type of option.

The appointment of KPMG, LLP as our auditors for the year ended June 30,
2002 was ratified with 9,201,336 affirmative votes including 2,823,000 broker
non-votes, 12,680 negative votes and 15,840 abstentions.

The proposal to authorize the issuance of shares and warrants pursuant to
an investment agreement with Swartz Private Equity, LLC was approved with
5,721,030 affirmative votes, 187,579 negative votes and 27,436 abstensions.

The proposal to issue shares pursuant to a Purchase and Sale Agreement
with Castle Energy Corporation ("Castle") was approved with 5,753,856
affirmative votes, 138,679 negative votes and 43,513 abstensions.

The proposal to approve an amendment to Delta's Articles of Incorporation
to reduce quorum and voting requirements for meetings of shareholders was not
approved with 5,753,856 affirmative votes, 138,676 negative votes and 45,513
abstensions. This proposal required the affirmative vote of a majority of all
outstanding shares for approval rather than a simple majority of those
shareholders voting at the meeting and therefore would have required the
affirmative vote of 6,418,401 shares to have passed.

ITEM 4A. DIRECTORS AND EXECUTIVE OFFICERS.

The following information with respect to Directors and Executive
Officers is furnished pursuant to Item 401(a) of Regulation S-K.

Name Age Positions Period of Service
- --------------------- --- ------------------------ -------------------

Aleron H. Larson, Jr. 57 Chairman of the Board, May 1987 to Present
Secretary, and a Director

Roger A. Parker 40 President, Chief May 1987 to Present
Executive Officer and
a Director

Jerrie F. Eckelberger 58 Director September 1996
to Present

James B. Wallace 73 Director November 2001 to
Present

Joseph L. Castle II 70 Director June 2002 to Present


Russell S. Lewis 47 Director June 2002 to Present


John P. Keller 63 Director June 2002 to Present


40


Kevin K. Nanke 37 Treasurer and Chief December 1999
Financial Officer to Present

The following is biographical information as to the business experience
of each of our current officers and directors.

Aleron H. Larson, Jr., age 57, has operated as an independent in the oil
and gas industry individually and through public and private ventures since
1978. Mr. Larson served as the Chairman, Secretary, CEO and a Director of
Chippewa Resources Corporation, a public company then listed on the American
Stock Exchange from July 1990 through March 1993 when he resigned after a
change of control. Mr. Larson serves as Chairman of the Board, Secretary and
Director of Amber Resources Company ("Amber"), a public oil and gas company
which is our majority-owned subsidiary. Mr. Larson practiced law in
Breckenridge, Colorado from 1971 until 1974. During this time he was a member
of a law firm, Larson & Batchellor, engaged primarily in real estate law, land
use litigation, land planning and municipal law. In 1974, he formed Larson &
Larson, P.C., and was engaged primarily in areas of law relating to
securities, real estate, and oil and gas until 1978. Mr. Larson received a
Bachelor of Arts degree in Business Administration from the University of
Texas at El Paso in 1967 and a Juris Doctor degree from the University of
Colorado in 1970.

Roger A. Parker, age 40, served as the President, a Director and Chief
Operating Officer of Chippewa Resources Corporation from July of 1990 through
March 1993 when he resigned after a change of control. Mr. Parker also serves
as President, Chief Executive Officer and Director of Amber. He also serves
as a Director and Executive Vice President of P & G Exploration, Inc., a
private oil and gas company (formerly Texco Exploration, Inc.). Mr. Parker
has also been the President, a Director and sole shareholder of Apex Operating
Company, Inc. since its inception in 1987. He has operated as an independent
in the oil and gas industry individually and through public and private
ventures since 1982. He was at various times, from 1982 to 1989, a Director,
Executive Vice President, President and shareholder of Ampet, Inc. He
received a Bachelor of Science in Mineral Land Management from the University
of Colorado in 1983. He is a member of the Rocky Mountain Oil and Gas
Association and the Independent Producers Association of the Mountain States
(IPAMS).

Jerrie F. Eckelberger, age 58, is an investor, real estate developer and
attorney who has practiced law in the State of Colorado since 1971. He
graduated from Northwestern University with a Bachelor of Arts degree in 1966
and received his Juris Doctor degree in 1971 from the University of Colorado
School of Law. From 1972 to 1975, Mr. Eckelberger was a staff attorney with
the eighteenth Judicial District Attorney's Office in Colorado. From 1975 to
present, Mr. Eckelberger has practiced law in Colorado and is presently a
member of the law firm of Eckelberger & Jackson, LLC. Mr. Eckelberger
previously served as an officer, director and corporate counsel for Roxborough
Development Corporation. Since March 1996, Mr. Eckelberger has acted as
President and Chief Executive Officer of 1998, Ltd., a Colorado corporation
actively engaged in the development of real estate in Colorado. He is the
Managing Member of The Francis Companies, L.L.C., a Colorado limited liability
company, which actively invests in real estate and has been since June, 1996.
Additionally, since November, 1997, Mr. Eckelberger has served as the Managing

41


Member of the Woods at Pole Creek, a Colorado limited liability company,
specializing in real estate development.

James B. Wallace, age 73, has been involved in the oil and gas business
for over 40 years and has been a partner of Brownlie, Wallace, Armstrong and
Bander Exploration in Denver, Colorado since 1992. From 1980 to 1992 he was
Chairman of the Board and Chief Executive Officer of BWAB Incorporated. Mr.
Wallace currently serves as a member of the Board of Directors and formerly
served as the Chairman of Tom Brown, Inc., an oil and gas exploration company
listed on the New York Stock Exchange. He received a B.S. Degree in Business
Administration from the University of Southern California in 1951.

Joseph L. Castle II, age 70 has been a Director of Castle Energy
Corporation ("Castle") since 1985. Mr. Castle is the Chairman of the Board of
Directors and Chief Executive Officer of Castle, having served as Chairman
from December 1985 through May 1992 and since December 20, 1993. Mr. Castle
also served as President of Castle from December 1985 through December 20,
1993, when he reassumed his position as Chairman of the Board. Previously,
Mr. Castle was Vice President of Philadelphia National Bank, a corporate
finance partner at Butcher and Sherrerd, an investment banking firm, and a
Trustee of The Reading Company. Mr. Castle has worked in the energy industry
in various capacities since 1971. Mr. Castle is also a director of Comcast
Corporation and Charming Shoppes, Inc. Since May of 2000, Mr. Castle has
served as the Chairman of the Board of Trustees of the Diet Drug Products
Liability ("Phen-Fen") Settlement Trust.

Russell S. Lewis (age 47) has been a director of Castle since April 2000.
From 1994 to 1999, Mr. Lewis was the Chief Executive Officer of TransCore,
Inc., a company which sells and installs electronic toll collection systems.
Since 1999, Mr. Lewis has been the owner and President of Lewis Capital Group,
a company investing in and providing consulting services to growth-oriented
companies. Since March 2000, Mr. Lewis has also been Senior Vice President of
Corporate Development at VeriSign, Inc. In February of 2002, Mr. Lewis joined
VeriSign full-time as Executive Vice President and General Manager of
VeriSign's Global Registry Services Group, which maintains the authoritative
database for all ".com", ".net" and ".org" domain names in the Internet.

John P. Keller (age 63) has been a director of Castle since April 1997.
Since 1972, Mr. Keller has served as the President of Keller Group, Inc., a
privately-held corporation with subsidiaries in Ohio, Pennsylvania and
Virginia. In 1993 and 1994, Mr. Keller also served as the Chairman of
American Appraisal Associates, an appraisal company. Mr. Keller is also a
director of A.M. Castle & Co.

Kevin K. Nanke, (age 37) Treasurer and Chief Financial Officer, joined
Delta in April 1995. Since 1989, he has been involved in public and private
accounting with the oil and gas industry. Mr. Nanke received a Bachelor of
Arts in Accounting from the University of Northern Iowa in 1989. Prior to
working with us, he was employed by KPMG LLP. He is a member of the Colorado
Society of CPA's and the Council of Petroleum Accounting Society. Mr. Nanke
is not a nominee for election as a director.

There is no family relationship among or between any of our Officers
and/or Directors.

42


Messrs. Castle, Lewis and Keller were proposed for appointment to the
board by Castle Energy Corporation pursuant to the Purchase and Sale Agreement
between Delta and Castle Energy Corporation effective October 1, 2001. Messrs
Castle, Lewis and Keller are also directors of Castle Energy Corporation.

Messrs. Castle, Wallace and Eckelberger serve as the Incentive Plan
Committee and as the Compensation Committee

Messrs. Lewis, Keller, Eckelberger and Wallace serve as the Audit
Committee and the Nominating Committee.

All directors will hold office until the next annual meeting of
shareholders.

All of our officers will hold office until the next annual directors'
meeting. There is no arrangement or understanding among or between any such
officers or any persons pursuant to which such officer is to be selected as
one of our officers.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) Market Information.

Delta's common stock currently trades under the symbol "DPTR" on
NASDAQ. The following quotations reflect inter-dealer high and low sales
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.

Quarter Ended High Low
------------- ---- ----
September 30, 1999 3.50 2.63
December 31, 1999 2.94 1.78
March 31, 2000 3.88 2.19
June 30, 2000 4.06 3.00
September 30, 2000 6.25 3.75
December 31, 2000 5.13 3.13
March 31, 2001 5.22 3.31
June 30, 2001 5.75 4.19
September 30, 2001 4.50 2.54
December 31, 2001 3.90 2.38
March 31, 2002 4.53 3.35
June 30, 2002 4.73 3.52

On September 18, 2002 the closing price of the Common Stock was
$3.70.

(b) Approximate Number of Holders of Common Stock.

The number of holders of record of our Common Stock at September 18,
2002 was approximately 1,000 which does not include an estimated 2,600
additional holders whose stock is held in "street name".


43


(c) Dividends.

We have not paid dividends on our stock and we do not expect to do
so in the foreseeable future.

(d) Recent Sales of Unregistered Securities.

This transaction was exempt from registration under Section 4(2) of
the Securities Act of 1933. We had a prior relationship with the purchaser,
both through business operations and personal contacts with our officers and
directors. We reasonably believe that the purchaser of these shares was an
"Accredited Investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933 at the time the transaction
occurred.

On May 31, 2002, we acquired all of the domestic oil and gas
properties of Castle Energy Corporation. The properties acquired from Castle
consist of interests in approximately 525 producing wells located in fourteen
(14) states, plus associated undeveloped acreage. We issued 9,566,000 shares
of Common Stock to Castle Energy Corporation as part of the purchase price.
We are entitled to repurchase up to 3,188,667 of our shares from Castle for
$4.50 per share for a period of one year after closing. This transaction was
exempt from registration under Section 4(2) of the Securities Act of 1933.

Options
-------

We received the proceeds from the exercise of options to purchase
shares of our common stock of $407,000, $1,480,000 and $1,378,000 during the
years ended June 30, 2002, 2001 and 2000, respectively.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial information should be read in
conjunction with our financial statements and the accompanying notes.



Fiscal Years Ended June 30,
-----------------------------------------------------------------
2002 2001 2000 1999 1998

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


Total Revenues $ 8,121,000 12,877,000 3,576,000 1,695,000 2,164,000
Income/(Loss) from
Operations $(5,041,000) 1,678,000 (2,079,000) (2,905,000) (1,010,000)
Income/(Loss)
Per Share $ (.49) .03 (0.46) (0.51) (0.18)

Total Assets $74,077,000 29,832,000 21,057,000 11,377,000 10,350,000
Total Liabilities $29,161,000 11,551,000 10,094,000 1,531,000 845,000
Stockholders' Equity $44,916,000 18,281,000 10,963,000 9,846,000 9,505,000
Total Long Term Debt $24,939,000 9,434,000 8,245,000 1,000,000 -0-





44

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources
-------------------------------

Liquidity is a measure of a company's ability to access cash. We have
historically addressed our long-term liquidity requirements through the
issuance of debt and equity securities, when market conditions permit, and
most recently through the use of a new bank credit facility and cash provided
by operating activities. The prices we receive for future oil and natural gas
production and the level of production have significant impacts on operating
cash flows. We are unable to predict with any degree of certainty the prices
we will receive for our future oil and gas production.

We continue to examine alternative sources of long-term capital,
including bank borrowings, the issuance of debt instruments, the sale of
common stock, the sales of non-strategic assets, and joint venture financing.
Availability of these sources of capital and, therefore, our ability to
execute our operating strategy will depend upon a number of factors, some of
which are beyond our control.

Working Capital
---------------

At June 30, 2002, we had a working capital deficit of $271,000 compared
to a working capital deficit of $1,560,000 at June 30, 2001. Our current
assets include an increase in trade accounts receivable from June 30, 2001 of
approximately $2,768,000. This increase is primarily due to the accrued
revenue from the Castle and Piper acquisitions completed during the year. Our
current liabilities include the current portion of long-term debt of
$3,498,000 at June 30, 2002. The increase in the current portion of long-term
debt from June 30, 2001 is primarily attributed to the borrowing related to
the Castle acquisition offset by a reduction in debt from the proceeds on the
sale of the Eland and Stadium fields in Stark County, North Dakota in third
quarter fiscal 2002.

Cash Provided by (Used in) Operating Activities
-----------------------------------------------

During the year ended June 30, 2002, we had cash used in operating
activities of $1,870,000 compared to cash provided by operating activities of
$2,779,000 during the same period ended June 30, 2001. This decrease in
operating activities is a result of a substantial decrease in oil and gas
prices that adversely affected net income, our decrease in production through
the sale of certain properties which enabled us to reduce debt prior to
acquiring Castle and Piper and an increase in trade receivables primarily
relating to June production for Castle and Piper not collected at June 30,
2002.

Offshore Undeveloped Properties
-------------------------------

On January 9, 2002, we and several other plaintiffs filed a lawsuit
in the United States Court of Federal Claims in Washington, D.C. alleging that
the U.S. Government has materially breached the terms of forty undeveloped
federal leases, some of which are part of our Offshore California properties.

45


The suit seeks compensation for the lease bonuses and rentals paid to the
Federal Government, exploration costs and related expenses. The total amount
claimed by all lessees for bonuses and rentals exceeds $1.2 billion, with
additional amounts for exploration costs and related expenses. Our claim
(including the claim of our subsidiary Amber Resources Company) for lease
bonuses and rentals paid by us and our predecessors is in excess of
$152,000,000. In addition, our claim for exploration costs and related
expenses will also be substantial. The Complaint is based on allegations by
the collective plaintiffs that the United States has materially breached the
terms of certain of their Offshore California leases by attempting to deviate
significantly from the procedures and standards that were in effect when the
leases were entered into, and by failing to carry out its own obligations
relating to those leases in a timely and fair manner. More specifically, the
plaintiffs have alleged that the judicial determination in the California v.
Norton case that a 1990 amendment to the Coastal Zone Management Act required
the Government to make a consistency determination prior to granting lease
suspension requests in 1999 constitutes a material change in the procedures
and standards that were in effect when the leases were issued. The plaintiffs
have also alleged that the United States has failed to afford them the timely
and fair review of their lease suspension requests which has resulted in
significant, continuing and material delays to their exploratory and
development operations. The forty undeveloped leases are located in the
Offshore Santa Maria Basin off the coast of Santa Barbara and San Luis Obispo
counties, and in the Santa Barbara Channel off Santa Barbara and Ventura
counties. None of these leases are currently impaired, but in the event that
there is some future adverse ruling by the California Coastal Commission under
the Coastal Zone Management Act and we decide not to appeal such ruling to the
Secretary of Commerce, or the Secretary of Commerce either refuses to hear our
appeal of any such ruling or ultimately makes a determination adverse to us,
it is likely that some or all of these leases would become impaired and
written off at that time. In addition, it should be noted that our pending
litigation against the United States is predicated on the ruling of the lower
court in California v. Norton. The United States has appealed the decision of
the lower court to the 9th Circuit Court of Appeals. In the event that the
United States is not successful in its appeal(s) of the lower court's decision
in the Norton case and the pending litigation with us is not settled, it would
be necessary for us to reevaluate whether the leases should be considered
impaired at that time. As the ruling in the Norton case currently stands, the
United States has been ordered to make a consistency determination under the
Coastal Zone Management Act, but the leases are still valid. If through the
appellate process the leases are found not to be valid for some reason, or if
the United States is finally ordered to make a consistency determination and
either does not do so or finds that development is inconsistent with the
Coastal Zone Management Act, it would appear that the leases would become
impaired even though Delta would undoubtedly proceed with its litigation. It
is also possible that other events could occur during the appellate process
that would cause the leases to become impaired, and we will continuously
evaluate those factors as they occur.

Offshore Producing Properties
-----------------------------

Point Arguello Unit. Pursuant to a financial arrangement between Whiting
and us, we hold what is essentially the economic equivalent of a 6.07% working
interest, which we call a "net operating interest", in the Point Arguello Unit

46


and related facilities. In layman's terms, the term "net operating interest"
is defined in our agreement with Whiting as being the positive or negative
cash flow resulting to the interest from a seven step calculation which in
summary subtracts royalties, operating expenses, severance taxes, production
taxes and ad valorem taxes, capital expenditures, Unit fees and certain other
expenses from the oil and gas sales and certain other revenues that are
attributable to the interest. Within this unit are three producing platforms
(Hidalgo, Harvest and Hermosa) which are operated by Arguello, Inc., a
subsidiary of Plains Resources, Inc. In an agreement between Whiting and
Delta, Whiting agreed to retain all of the abandonment costs associated with
our interest in the Point Arguello Unit and the related facilities.

We have already participated in the drilling of three wells and
anticipate that we will participate in the drilling of four wells in fiscal
2002. Each well will cost approximately $2.8 million ($170,000 to our
interest). We anticipate the drilling costs to be paid through current
operations or additional financing.

Onshore Producing Properties and Material Equity Transactions
-------------------------------------------------------------
During Fiscal 2002
------------------

On February 1, 2002, we sold interests in 20 producing wells, 5 injection
wells and acreage located in the Eland and Stadium fields in Stark County,
North Dakota for $2,750,000 to Sovereign Holdings, LLC, an unrelated entity.
As a result of the sale, the Company recognized at December 31, 2001 an
impairment of $102,000.

On February 19, 2002, we completed the acquisition of Piper
Petroleum Company ("Piper"), a privately owned oil and gas company
headquartered in Fort Worth, Texas. We issued 1,377,240 shares of our
restricted common stock for 100% of the shares of Piper. The 1,377,240 shares
of restricted common stock were valued at approximately $5,234,000 based on
the five-day average market closing price of Delta's common stock surrounding
the announcement of the merger. In addition, we issued 51,000 shares for the
cancellation of certain debt of Piper. As a result of the acquisition, we
acquired Piper's working and royalty interests in over 700 gross (4.6 net)
wells which are primarily located in Texas, Oklahoma and Louisiana along with
a 5% working interest in the Comet Ridge coal bed methane gas project in
Queensland, Australia. On May 24, 2002 we completed the sale of our undivided
interests in Australia, to Tipperary Corporation, in exchange for Tipperary's
producing properties in the West Buna Field (Hardin and Jasper counties,
Texas)which had a fair market value of approximately $4,100,000, $700,000 in
cash, and 250,000 unregistered shares of Tipperary common stock. No gain or
loss was recorded on this transaction. Net daily production from the West
Buna Field approximates 900,000 cubic feet equivalent. In addition, on May
28, 2002, we sold a commercial office building obtained in the merger with
Piper located in Fort Worth, Texas to a non-affiliate for its fair value of
$417,000. No gain or loss was recorded on this transaction. Piper was merged
into a subsidiary wholly owned by Delta and the subsidiary was then renamed
"Piper Petroleum Company". (See detailed disclosure of the Piper acquisition
in note 2 to the financial statements).


47


On May 31, 2002, we issued 9,566,000 shares of Common Stock to Castle
Energy Corporation as part of the purchase price for our purchase of all of
Castle's domestic oil and gas properties. We are entitled to repurchase up to
3,188,667 of our shares from Castle for $4.50 per share for a period of one
year after closing. (See detailed disclosure of te Castle acquisition in note
2 to the financial statements).

We estimate our capital expenditures for onshore properties to be
approximately $6,000,000 for the year ending June 30, 2003. However, we are
not obligated to participate in future drilling programs and will not enter
into future commitments to do so unless management believes we have the
ability to fund such projects.

Agreement with Swartz
---------------------

On July 21, 2000, we entered into an investment agreement with Swartz
Private Equity, LLC ("Swartz") and issued Swartz a warrant to purchase 500,000
shares of common stock exercisable at $3.00 per share until May 31, 2005. A
warrant to purchase 150,000 shares of the Company's common stock at $3.00 per
share for five years was also issued to another unrelated company as
consideration for its efforts in this transaction and has been recorded as an
adjustment to equity. In the aggregate, we issued options to Swartz and the
other unrelated company valued at $1,436,000 as consideration for the firm
underwriting commitment of Swartz and related services to be rendered and
recorded in additional paid in capital. The options were valued at market
based on the quoted market price at the time of issuance.

The investment agreement entitles us to issue and sell ("Put") up to $20
million of our common stock to Swartz, subject to a formula based on our stock
price and trading volume over a three year period following the effective date
of a registration statement covering the resale of the shares to the public.
Pursuant to the terms of this investment agreement the Company is not
obligated to sell to Swartz all of the common stock referenced in the
agreement nor does the Company intend to sell shares to the entity unless it
is beneficial to the Company.

To exercise a Put, we must have an effective registration statement on
file with the Securities and Exchange Commission covering the resale to the
public by Swartz of any shares that it acquires under the investment
agreement. The Company has filed a registration statement covering the Swartz
transaction with the SEC. Swartz will pay us the lesser of the market price
for each share minus $0.25, or 91% of the market price for each share of
common stock under the Put. The market price of the shares of common stock
during the 20 business days immediately following the date we exercise a Put
is used to determine the purchase price Swartz will pay and the number of
shares we will issue in return.

If we do not Put at least $2,000,000 worth of common stock to Swartz
during each one year period following the effective date of the Investment
Agreement, we must pay Swartz an annual non-usage fee. This fee equals the
difference between $200,000 and 10% of the value of the shares of common stock
we Put to Swartz during the one year period. The fee is due and payable on the
last business day of each one year period. Each annual non-usage fee is
payable to Swartz, in cash, within five (5) business days of the date it

48


accrued. We are not required to pay the annual non-usage fee to Swartz in
years we have met the Put requirements. We are also not required to deliver
the non-usage fee payment until Swartz has paid us for all Puts that are due.
If the investment agreement is terminated, we must pay Swartz the greater of
(i) the non-usage fee described above, or (ii) the difference between $200,000
and 10% of the value of the shares of common stock Put to Swartz during all
Puts to date. We may terminate our right to initiate further Puts or
terminate the investment agreement at any time by providing Swartz with
written notice of our intention to terminate. However, any termination will
not affect any other rights or obligations we have concerning the investment
agreement or any related agreement.

We cannot determine the exact number of shares of our common stock
issuable under the investment agreement and the resulting dilution to our
existing shareholders, which will vary with the extent to which we utilize the
investment agreement and the market price of our common stock.

Options
-------

We received the proceeds from the exercise of options to purchase shares
of our common stock of $407,000, $1,480,000 and $1,378,000 during the years
ended June 30, 2002, 2001 and 2000, respectively.

Credit Facility
---------------

Our credit facility allows us to borrow, repay and reborrow amounts
subject to the terms and conditions of the Credit Agreement. At the time we
entered into our Credit Agreement with Bank of Oklahoma and Local Oklahoma
Bank and related promissory notes on May 31, 2002, we granted a first and
prior lien to the lending banks on most of our oil and gas properties, certain
related equipment, oil and gas inventory, certain bank accounts and proceeds.
Under the terms of the Credit Agreement, the oil and gas properties mortgaged
must represent not less than 80% of the engineered value of our oil and gas
properties, exclusive of the properties that are mortgaged to Kaiser-Francis
under a separate lending arrangement. "Engineered value" for this purpose
means our future net revenues discounted at the discount rate being used by
the Bank of Oklahoma as of the date that the determination is made using the
pricing parameters used in the engineering report that is furnished to the
Bank of Oklahoma. In addition, any obligations arising from transactions
between us and one or more of the banks providing for the hedging, forward
sale or swap of crude oil or natural gas or interest rate protection will also
be required to be secured by a mortgage on our properties and will
consequently reduce our borrowing base. These hedging obligations will be
required to be secured and repaid on the same basis as our indebtedness and
obligations under the loan documents.

Our borrowing base, which determines the amounts that we are allowed to
borrow or have outstanding under our credit facility, was initially determined
to be $20 million at the time we entered into the Credit Agreement.
Subsequent determinations of our borrowing base will be made by the lending
banks at least semi-annually on October 1 and April 1 of each year beginning
October 1, 2002 or as unscheduled redeterminations. In connection with each
determination of our borrowing base, the banks will also redetermine the

49


amount of our monthly commitment reduction. The monthly commitment reduction
was $260,000.00 beginning as of July 1, 2002 and will continue at that amount
until the amount of the monthly commitment reduction is redetermined.

If an unscheduled redetermination of our borrowing base is made by the
banks, we will be notified of the new borrowing base and monthly commitment
reduction, and this new borrowing base and monthly commitment reduction will
then continue until the next determination date. All determinations
(scheduled or unscheduled) of the borrowing base and the monthly commitment
reduction require the approval of a majority of the lending banks, but the
amount of the borrowing base cannot be increased, and the amount of the
monthly commitment reduction cannot be reduced, without the approval of all of
the lending banks. If at any time any of the oil and gas properties are sold,
the borrowing base then in effect will automatically be reduced by a sum equal
to the amount of prepayment that is required to be made.

In addition, our borrowing base and the revolving commitment of the banks
to lend money under the Credit Agreement will be reduced as of the first day
of each month by an amount determined by the banks under the Credit Agreement.
The amount of the borrowing base will also be reduced from time to time by the
amount of any prepayment that results from our sale of oil and gas Properties.
If as a result of any such monthly commitment reduction or reduction in the
amount of our borrowing base, the total amount of our outstanding debt ever
exceeds the amount of the revolving commitment then in effect, then within 30
days after we are notified by the Bank of Oklahoma, we must make a mandatory
prepayment of principal that is sufficient to cause our total outstanding
indebtedness to not exceed our borrowing base. If for any reason we were
unable to pay the full amount of the mandatory prepayment within the 30
requisite day period, we would be in default of our obligations under the
Credit Agreement.

In general, we will be required to immediately make a prepayment of
principal on our revolving notes in an amount equal to 100% of the release
price that we receive from the sale of any of our oil and gas properties. Any
such sale would be required to be approved in advance by a majority of the
lending banks. The amount of the release price will be determined by a
majority of the lending banks in their discretion based upon the loan
collateral value which such banks in their discretion (using such methodology,
assumptions and discounts rates as the banks customarily use in assigning
collateral value to oil and gas properties, oil and gas gathering systems, gas
processing and plant operations) assign to such oil and gas properties at the
time in question. Any such prepayment of principal on our revolving notes
will not be in lieu of, but will be in addition to, any monthly commitment
reduction or any mandatory prepayment of principal required to be paid under
the Credit Agreement.

We are also required to establish and maintain our operating accounts
with the Bank of Oklahoma as agent for the lending banks. These operating
accounts are required to be our primary oil and gas operating bank accounts
for the purpose of depositing proceeds from oil and gas sales received from
the collateral for the credit facility and these accounts are to be maintained
with the Bank of Oklahoma until all amounts due have been paid in full. We
granted a security interest to the lending banks in and to these operating
accounts and all checks, drafts and other items ever received by any Bank for
deposit therein. If any event of default occurs under the loan documents, the

50


Bank of Oklahoma will have the immediate right, without prior notice or
demand, to take and apply against our obligations any and all funds legally
and beneficially owned by us then or thereafter on deposit in the operating
accounts. We are not permitted to redirect the payment of such proceeds of
production without the consent of the Bank of Oklahoma.

Within five days after receiving a written request from the Bank of
Oklahoma, as agent for the lending banks, we are obligated to deliver such
additional mortgages, deeds of trust, instruments, security agreements,
assignments, financing statements, and other documents, as may be reasonably
necessary in the opinion of Bank of Oklahoma and its counsel, to grant valid
first mortgage liens and first, prior and perfected security interests in and
to additional oil and gas properties of such value as the banks deem necessary
to provide additional security for full and prompt payment of all amounts
owed.

For so long as the revolving commitment is in existence or any amount is
owed under any of the loan documents, without the prior written consent of a
majority of the lending banks:

(a) We will not be permitted to create, incur, assume or permit to
exist any lien, security interest or other encumbrance on any of our assets or
properties except for certain permitted liens.

(b) We will not be permitted to sell, lease, transfer or otherwise
dispose of, in any fiscal year, any of our oil and gas assets except for sales
of production from our oil and gas properties made in the ordinary course of
our oil and gas businesses, sales made with the consent of a majority of the
lending banks and sales, leases or transfers or other dispositions of oil and
gas properties made by us during any fiscal year, in one or any series of
transactions, the aggregate value of which does not exceed $100,000.00 if, and
only if, such sale, lease, transfer or other disposition does not result in
the occurrence of a default or event of default under our loan documents.
Further, neither we nor any of our subsidiaries can, without the prior written
consent of a majority of the lending banks, sell, lease, transfer or otherwise
dispose of any oil and gas assets unless such disposition is specifically
permitted by the Credit Agreement.

(c) We cannot allow our ratio of consolidated current assets to
consolidated current liabilities to be less than 1.0 to 1.0 as of the end of
any fiscal quarter. At June 30, 2002, we did not meet this covenant primarily
due to a current foreign tax payable of $703,000 relating to the sale of our
Australian property prior to establishing the Credit Agreement. We have
obtained a waiver for this requirement from the lending banks and we are not
in default of the Credit Agreement at June 30, 2002.

(d) We cannot allow our consolidated debt service coverage ratio to
ever be less than 1.20 to 1.0 for any quarterly fiscal period.

(e) Except under very limited circumstances, we will not be
permitted to consolidate or merge with or into any other person.

(f) We will not be permitted to incur, create, assume or in any
manner become or be liable in respect of any indebtedness (including letters
of credit other than those letters of credit permitted in the Credit


51


Agreement) in excess of $100,000.00 in the aggregate, nor may we guarantee or
otherwise in any manner become or be liable in respect of any indebtedness,
liabilities or other obligations of any other person or entity, whether by
agreement to purchase the indebtedness of any other person or entity or
agreement for the furnishing of funds to any other person or entity through
the purchase or lease of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging the indebtedness of any other person or entity, or otherwise,
except that the foregoing restrictions shall not apply to:

(i) the promissory notes issued under the Credit Agreement
and any renewal or increase thereof, or our other
indebtedness that was disclosed in our Financial
Statements or on a schedule to the Credit Agreement; or

(ii) taxes, assessments or other government charges which
are not yet due or are being contested in good faith
by appropriate action promptly initiated and
diligently conducted, if such reserve as shall be
required by generally accepted accounting principles
shall have been made therefor and levy and execution
thereon have been stayed and continue to be stayed; or

(iii) indebtedness (other than in connection with a loan or
lending transaction) incurred in the ordinary course
of business, including, but not limited to
indebtedness for drilling, completing, leasing and
reworking oil and gas wells or the treatment,
distribution, transportation of sale of production
therefrom;

(iv) any renewals or extensions of (but not increases in)
any of the foregoing; or

(v) indebtedness to the other borrowers under the Credit
Agreement.

(g) We will not be permitted to declare, pay or make, whether in
cash or property, or set aside or apply any money or assets to pay or make any
dividend or distribution during any fiscal year.

(h) We will not be permitted to make or permit to remain
outstanding any loans or advances made by us to or in any person or entity,
except that the foregoing restriction shall not apply to:

(i) loans or advances to any person, the material details of
which have been set forth in our Financial Statements that
were furnished to the banks; or

(ii) advances made in the ordinary course of our oil and gas
business; or

(iii) loans or advances among the borrowers under the Credit
Agreement.


52


(i) We will not be permitted to discount or sell with recourse, or
sell for less than the greater of the face or market value thereof, any of our
notes receivable or accounts receivable.

(j) We cannot allow any material change to be made in the character
of our business as carried on as of May 31, 2002.

(k) We will not be permitted to enter into any transaction with any
of our affiliates, except transactions upon terms that are no less favorable
to us than would be obtained in a transaction negotiated at arm's length with
an unrelated third party.

(l) We will not be permitted to enter into any transaction
providing (i) for the hedging, forward sale, swap or any derivative thereof of
crude oil or natural gas or other commodities, or (ii) for a swap, collar,
floor, cap, option, corridor, or other contract which is intended to reduce or
eliminate the risk of fluctuation in interest rates, as such terms are
referred to in the capital markets, except the foregoing prohibitions shall
not apply to (x) transactions consented to in writing by a majority of the
lending banks which are on terms acceptable to them, or (y) pre-approved
contracts (i) to hedge, forward sell or swap crude oil or natural gas or
otherwise sell up to 75% of our monthly production forecast for all of our (A)
proved and producing oil properties for the period covered by the proposed
hedging transaction, and (B) proved and producing gas properties for the
period covered by the proposed hedging transaction, (ii) with a term of
eighteen (18) months or less, (iii) with "strike prices" per barrel or MCF as
applicable greater than the Bank of Oklahoma's forecasted price in the most
recent engineering evaluation, and (iv) with counter-parties approved by the
Bank of Oklahoma.

(m) We will not be permitted to make any investments in any person
or entity, except such restriction shall not apply to:

(i) investments and direct obligations of the United States of
America or any agency thereof;

(ii) investments in certificates of deposit issued by the
lending banks or certificates of deposit with maturities
of less than one year, issued by other commercial banks in
the United States having capital and surplus in excess of
$500,000,000 and which have a senior unsecured debt rating
of A+ by Standard & Poor's Ratings Group or A1 by Moody's
Investors Service, Inc.; or

(iii) investments in insured money market funds or such
investment with maturities of less than ninety (90) days
at other commercial banks having capital and surplus in
excess of $500,000,000 and which have a senior unsecured
debt rating of A+ by Standard & Poor's Ratings Group or A1
by Moody's Investors Service, Inc.; or

(iv) investments in oil and gas properties; or

(v) investments in other borrowers under the Credit Agreement;
provided such investments may not require a transfer of
assets other than cash.

53


(n) We cannot permit any amendment to, or any alteration of, our
Articles of Incorporation or Bylaws, which amendment or alteration could
reasonably be expected to have a material adverse effect under the Credit
Agreement.

(o) We will not be permitted to enter into or agree to enter into,
any rental or lease agreement resulting or which would result in aggregate
rental or lease payments by us exceeding $100,000.00 in the aggregate in any
fiscal year under all rental or lease agreements under which we are a lessee
of the property or assets covered thereby; provided, however, that the
foregoing restriction shall not apply to oil, gas and mineral leases or
permits or similar agreements entered into in the ordinary course of business
or orders of any governmental authority adjudicating the rights or pooling the
interests of the owners of oil and gas properties or lease agreements in
effect as of May 31, 2002.

(p) We may not allow our accounts payable to become in excess of
120 days past due from the date of invoice, except such accounts payable as
are being contested by us in good faith.

(q) We may not issue any preferred stock without the consent of a
majority of the lending banks.

(r) We cannot permit or suffer to exist any change in a majority of
our current board of director membership or a change or amendment to our
current corporate structure except as set forth in the Credit Agreement.

(s) Except as may be otherwise permitted the Credit Agreement, we
may not directly or indirectly make any payments upon any debt other than
regularly scheduled installments of principal and interest.

(t) We may not repurchase or set aside any funds to repurchase any
stock or partnership interests.

(u) We cannot make, permit or suffer to exist a change in
management.

(v) We may not amend, modify or otherwise alter our loan agreement
and related documents with Kaiser-Francis Oil Company dated December 1, 1999
without the lending banks' prior written consent which such consent shall not
be unreasonably withheld.

Any one or more of the following events are considered an event of
default under the Credit Agreement:

(a) If we should fail to pay when due or declared due the principal
of, and/or the interest on, the notes, or any fee or any of our other
indebtedness incurred under our Credit Agreement or any related loan document
and such failure to pay is not cured within three days after written notice of
such failure is sent to us; or





54


(b) If any representation or warranty made by us under the Credit
Agreement, or in any certificate or statement furnished or made to the banks
pursuant thereto or in connection therewith, or in connection with any
document furnished thereunder, shall prove to be untrue in any material
respect as of the date on which such representation or warranty is made (or
deemed made), or any representation, statement (including financial
statements), certificate, report or other data furnished or to be furnished or
made by us under any loan document proves to have been untrue in any material
respect, as of the date as of which the facts therein set forth were stated or
certified; or

(c) If default is made in the due observance or performance of any
of our covenants or agreements contained in the Credit Agreement or other loan
documents and such default continues for more than thirty days after notice is
received by us; or

(d) If default is made in the due observance or performance of our
negative covenants listed above; or

(e) If default is made in respect of any obligation for borrowed
money in excess of $100,000.00, other than the promissory notes issued under
the Credit Agreement, for which we are liable (directly, by assumption, as
guarantor or otherwise), or any obligations secured by any mortgage, pledge or
other security interest, lien, charge or encumbrance with respect thereto, on
any of our assets or property in respect of any agreement relating to any such
obligations unless we are not liable for same (i.e., unless remedies or
recourse for failure to pay such obligations is limited to foreclosure of the
collateral security therefor), and if such default shall continue for more
than thirty days after notice is received by us; or

(f) If we commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to us or our debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking an appointment of a trustee, receiver, liquidator, custodian
or other similar official of us or any substantial part of our property, or if
we consent to any such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding commenced against
us, or if we make a general assignment for the benefit of our creditors, or
fail generally to pay our debts as they become due, or take any corporate
action authorizing the foregoing; or

(g) If an involuntary case or other proceeding is commenced against
us seeking liquidation, reorganization or other relief with respect to us or
our debts under any bankruptcy, insolvency or similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of us or any substantial part of our
property, and such involuntary case or other proceeding should remain
undismissed and unstayed for a period of sixty (60) days; or an order for
relief shall be entered against us under the federal bankruptcy laws; or

(h) A final judgment or judgments or order for the payment of money
in excess of $100,000 during any one (1) fiscal year in the aggregate shall be
rendered against us and such judgments or orders shall continue unsatisfied
and unstayed for a period of thirty days; or


55


(i) In the event our total outstanding indebtedness should at any
time exceed the borrowing base established for the revolving notes, and if we
should fail to comply with the provisions of the Credit Agreement that require
us to immediately prepay an amount sufficient to cause our total outstanding
indebtedness to not exceed our borrowing base; or

(j) A change of management occurs; or

(k) Any security instrument for the indebtedness under the Credit
Agreement for any reason does not, or ceases to, create a valid and perfected
first-priority lien against all of the collateral purportedly covered thereby
and such occurrence would have a material adverse effect.

Upon occurrence of any event of default specified above and after the
expiration of any cure period provided in the Credit Agreement, the entire
principal amount due under the notes and all interest then accrued thereon,
and any other liabilities that we might have to the lending banks under the
loan documents, will become immediately due and payable all without notice and
without presentment, demand, protest, notice of protest or dishonor or any
other notice of default of any kind. In any other event of default, the Bank
of Oklahoma, upon request of a majority of the lending banks, may by notice to
us declare the principal of, and all interest then accrued on, the notes and
any other liabilities hereunder to be forthwith due and payable, whereupon the
same shall forthwith become due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other
notice of any kind.

Upon the occurrence and during the continuance of any event of default
beyond any cure period provided in the Credit Agreement, the lending banks are
authorized at any time and from time to time, without notice to us, to set-off
and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by any of the banks to or for our credit or our account against any and
all of our indebtedness under the notes and related loan documents,
irrespective of whether or not the banks shall have made any demand under the
loan documents and although such indebtedness may be unmatured. Any amount
set-off by any of the banks is to be applied against the indebtedness owed by
us to the banks. The banks have agreed to promptly notify us after any such
set-off and application, provided that the failure to give such notice shall
not affect the validity of such set-off and application. These rights are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the banks might have.

Upon the occurrence of and during the continuance of any event of
default, we will not be permitted to service our obligations under our loan
agreement with Kaiser-Francis Oil Company from proceeds of the collateral
securing the loan under our Credit Agreement including, but not limited to,
oil and gas properties or any related operating fees.

The foregoing does not purport to be a complete summary of the Credit
Agreement and other loan documents. Complete copies of these documents are
filed as exhibits to our Report on Form 8-K dated May 24, 2002.



56


Results of Operations Fiscal 2002 Compared to Fiscal 2001
---------------------------------------------------------

Net Earnings (Loss). Our net loss for the year ended June 30, 2002 was
$6,253,000 compared to net income of $345,000 for the year ended June 30,
2001. The results for the years ended June 30, 2002 and 2001 were effected by
the items described in detail below.

Revenue. Total revenue for the year ended June 30, 2002 was $8,210,000
compared to $12,877,000 for the year ended June 30, 2001. Oil and gas sales
for the year ended June 30, 2002 were $8,121,000 compared to $12,254,000 for
the year ended June 30, 2001. The decrease in oil and gas sales during the
year ended June 30, 2002 resulted from the sale of twenty producing wells,
five injection wells located in Eland and Stadium fields in Stark County,
North Dakota. Oil and gas sales were also impacted by the decrease in oil and
gas prices.

Gain (loss) on sale of oil and gas properties. During the years ended
June 30, 2002 and 2001, we disposed of certain oil and gas properties and
related equipment to unaffiliated entities. We have received proceeds from
the sales of $4,417,000 and $3,700,000 which resulted in a loss on sale of oil
and gas properties of $88,000 for the year ended June 30, 2002 and a gain on
sale of $458,000 for the year ended June 30, 2001.

Other Revenue. Other revenue for the year ended June 30, 2001,
represents amounts recognized from the production of gas previously deferred
pending determination of our interests in the properties.

Production volumes and average prices received for the years ended June
30, 2002 and 2001 are as follows:

2002 2001
Onshore Offshore Onshore Offshore
-------- -------- ------- --------
Production:
Oil (barrels) 89,000 262,000 117,000 308,000
Gas (Mcf) 871,000 - 539,000 -

Average Price:
Net of forward contract sales
Oil (per barrel) $22.22 $14.36 $27.10 $18.49
Gas (per Mcf) $ 2.75 - $ 6.27 -
Gross of forward contract sales*
Oil (per barrel) $22.32 $14.45 $27.30 $22.53
Gas (per Mcf) $ 2.75 - $ 6.27 -

We sold 25,000 barrels of our offshore production per month from June
2000 to December 2000 at $14.65 per barrel under fixed price contracts with
production purchases. We sold 6,000 barrels per month from March 1, 2001
through June 30, 2001 at $27.31 per barrel under fixed price contracts with
production purchases. If we would not have sold our proportionate shares of
offshore California barrels at $14.65 per barrel under fixed price contracts
with production purchases, we would have realized an increase in income of
$1,242,000 in 2001.


57


Lease Operating Expenses. Lease operating expenses for the year ended
June 30, 2002 were $4,372,000 compared to $4,698,000 for the year ended June
30, 2001. Lease operating expense decreased slightly compared to 2001 as a
result of less workover costs incurred during fiscal 2002 compared to fiscal
2001. On a per Bbl equivalent basis, production expenses and taxes were $5.68
for onshore properties and $11.64 for offshore properties during the year
ended June 30, 2002 compared to $3.88 for onshore properties and $12.62 for
offshore properties for the year ended June 30, 2001.

Depreciation and Depletion Expense. Depreciation and depletion expense
for the year ended June 30, 2002 was $3,347,000 compared to $2,533,000 for the
year ended June 30, 2001. On a per Bbl equivalent basis, the depletion rate
was $9.57 for onshore properties and $4.20 for offshore properties during the
year ended June 30, 2002 compared to $8.16 for onshore properties and $2.71
for offshore properties for the year ended June 30, 2001.

Exploration Expenses. Exploration expenses consist of geological and
geophysical costs and lease rentals. Exploration expenses were $155,000 for
the year ended June 30, 2002 compared to $89,000 for the year ended June 30,
2001.

Abandonment and Impairment of Oil and Gas Properties. We recorded an
expense for the abandonment and impairment of oil and gas properties for the
year ended June 30, 2002 of $1,480,000. Our proved properties were assessed
for impairment on an individual field basis and we recorded impairment
provisions attributable to certain producing properties of $878,000 and
$174,000 for the years ended June 30, 2002 and 2001, respectively. Also
during fiscal 2002, we recorded an impairment of $602,000 attributable to our
undeveloped properties as future development of these properties are unlikely.
The expense in 2001 also included a provision for impairment of the costs
associated with the Kazakhstan licenses of $624,000. We made a determination
based on the political risk and lack of expertise in the area that it may not
be economical to develop this prospect and as such we may not proceed with
this prospect. See "Impairment of Long-Lived Assets" in "Description of
Properties."

Professional Fees. Professional fees for the year ended June 30, 2002
were $1,322,000 compared to $1,108,000 for the year ended June 30, 2001. The
increase in professional fees compared to fiscal 2001 can be primarily
attributed to legal fees for representation in negotiations and discussions
with various state and federal governmental agencies relating to the Company's
undeveloped offshore California leases.

General and Administrative Expenses. General and administrative expenses
for year ended June 30, 2002 were $2,036,000 compared to $1,470,000 for the
year ended June 30, 2001. The increase in general and administrative expenses
is primarily attributed to increased costs in anticipation of the acquisitions
completed in fiscal 2002 including office relocation and additional staff.

Stock Option Expense. Stock option expense has been recorded for the
years ended June 30, 2002 and 2001 of $143,000 and $409,000, respectively, for
options granted to certain directors and consultants at option prices below
the market price at the date of grant. The stock option expense for fiscal
2002 and 2001 can primarily be attributed to options to certain consultants
that provide us with shareholder relations services and options to our
directors.

58


Interest and Financing Costs. Interest and financing costs for the year
ended June 30, 2002 were $1,325,000 compared to $1,861,000 for the year ended
June 30, 2001. The decrease in interest and financing costs can be attributed
to the reduction in debt prior to the Castle acquisition which closed on May
31, 2002 in addition to lower interest rates compared to fiscal 2001.

Other Income. Other income of $528,000 for the year ended June 30, 2001
includes the sale of our unsecured claim in bankruptcy against our former
parent, Underwriters Financial Group, in the amount of $350,000.

Results of Operations Fiscal 2001 Compared to Fiscal 2000
---------------------------------------------------------

Net Earnings (Loss). Our net income for the year ended June 30, 2001 was
$345,000 compared to a net loss of $3,367,000 for the year ended June 30,
2000. The results for the years ended June 30, 2001 and 2000 were effected by
the items described in detail below.

Revenue. Total revenue for the year ended June 30, 2001 was $12,877,000
compared to $3,576,000 for the year ended June 30, 2000. Oil and gas sales
for the year ended June 30, 2001 were $12,254,000 compared to $3,356,000 for
the year ended June 30, 2000. The increase in oil and gas sales during the
year ended June 30, 2001 resulted from the acquisitions of twenty producing
wells, five injection wells located in Eland and Stadium fields in Stark
County, North Dakota and the Cedar State gas property in Eddy County, New
Mexico during fiscal 2001 and eleven producing wells in New Mexico and Texas
and the acquisition of an interest in the offshore California Point Arguello
Unit during fiscal 2000. The increase in oil and gas sales were also impacted
by the increase in oil and gas prices. If we would not have sold our
proportionate shares of offshore California barrels at $8.25 and $14.65 per
barrel under fixed price contracts with production purchases, we would have
realized an increase in income of $1,242,000 in 2001 and $2,033,000 in 2000.

Gain on sale of oil and gas properties. During the years ended June 30,
2001 and 2000, we disposed of certain oil and gas properties and related
equipment to unaffiliated entities. We have received proceeds from the sales
of $3,700,000 and $75,000 which resulted in a gain on sale of oil and gas
properties of $458,000 and $76,000 for the years ended June 30, 2001 and 2000,
respectively.

Other Revenue. Other revenue represents amounts recognized from the
production of gas previously deferred pending determination of our interests
in the properties.

Production volumes and average prices received for the years ended June
30, 2001 and 2000 are as follows:









59


2001 2000
Onshore Offshore Onshore Offshore
------- -------- ------- --------
Production:
Oil (barrels) 117,000 308,000 10,000 187,000
Gas (Mcf) 539,000 - 362,000 -

Average Price:
Net of forward contract sales
Oil (per barrel) $27.10 $18.49 $25.95 $11.54
Gas (per Mcf) $ 6.27 - $ 2.62 -
Gross of forward contract sales*
Oil (per barrel) $27.30 $22.53 $25.95 $21.14
Gas (per Mcf) $ 6.27 - $ 2.62 -
_________________

*We sold 25,000 barrels per month from December 1999 to May 2000 at $8.25 per
barrel and we sold 25,000 barrels of our offshore production per month from
June 2000 to December 2000 at $14.65 per barrel under fixed price contracts
with production purchases. We sold 6,000 barrels per month from March 1, 2001
through June 30, 2001 at $27.31 per barrel under fixed price contracts with
production purchases. If we would not have sold our proportionate shares of
offshore California barrels at $8.25 and $14.65 per barrel under fixed price
contracts with production purchases, we would have realized an increase in
income of $1,242,000 in 2001 and $2,033,000 in 2000.

Lease Operating Expenses. Lease operating expenses for the year ended
June 30, 2001 were $4,698,000 compared to $2,405,000 for the year ended June
30, 2000. The increase in lease operating expense compared to 2000 resulted
from the acquisitions of twenty producing wells and five injection wells in
Stark County, North Dakota and the Cedar State gas property in Eddy County,
New Mexico during fiscal 2001 and the acquisition of an interest in eleven new
properties onshore and an interest in the offshore Point Arguello Unit near
Santa Barbara, California during fiscal 2000. On a per Bbl equivalent basis,
production expenses and taxes were $3.88 for onshore properties and $12.65 for
offshore properties during the year ended June 30, 2001 compared to $4.94 for
onshore properties and $11.02 for offshore properties for the year ended June
30, 2000.

Depreciation and Depletion Expense. Depreciation and depletion expense
for the year ended June 30, 2001 was $2,533,000 compared to $888,000 for the
year ended June 30, 2000. On a per Bbl equivalent basis, the depletion rate
was $8.16 for onshore properties and $2.71 for offshore properties during the
year ended June 30, 2001 compared to $4.64 for onshore properties and $3.00
for offshore properties for the year ended June 30, 2000.

Exploration Expenses. Exploration expenses consist of geological and
geophysical costs and lease rentals. Exploration expenses were $89,000 for
the year ended June 30, 2001 compared to $47,000 for the year ended June 30,
2000.

Abandonment and Impairment of Oil and Gas Properties. We recorded an
expense for the abandonment and impairment of oil and gas properties for the
year ended June 30, 2001 of $798,000. Our proved properties were assessed for
impairment on an individual field basis and we recorded impairment provisions

60


attributable to certain producing properties of $174,000 for the year ended
June 30, 2001. The expense in 2001 also includes a provision for impairment
of the costs associated with the Kazakhstan licenses of $624,000. We made a
determination based on the political risk and lack of expertise in the area
that it may not be economical to develop this prospect and as such we may not
proceed with this prospect. Based on an assessment of all properties as of
June 30, 2000, there was no impairment for oil and gas properties in fiscal
2000. See impairment of Long-Lived Assets in "Description of Properties."

Professional Fees. Professional fees for the year ended June 30, 2001
were $1,108,000 compared to $519,000 for the year ended June 30, 2000. The
increase in professional fees compared to fiscal 2000 can be primarily
attributed to legal fees for representation in negotiations and discussions
with various state and federal governmental agencies relating to the Company's
undeveloped offshore California leases.

General and Administrative Expenses. General and administrative expenses
for year ended June 30, 2001 were $1,470,000 compared to $1,258,000 for the
year ended June 30, 2000. The increase in general and administrative expenses
is primarily attributed to the increase in travel, corporate filings, salaries
and contract labor.

Stock Option Expense. Stock option expense has been recorded for the
years ended June 30, 2001 and 2000 of $409,000 and $538,000, respectively.
The stock option expense for fiscal 2001 and 2000 can primarily be attributed
to options to certain consultants that provide us with shareholder relations
services and options to our directors.

Interest and Financing Costs. Interest and financing costs for the year
ended June 30, 2001 were $1,861,000 compared to $1,265,000 for the year ended
June 30, 2000. The increase in interest and financing costs can be attributed
to the increase in the amortization of the deferred financing costs relating
to the additional debt for the new acquisitions during fiscal 2001 primarily
relating to the overriding royalties earned by Kaiser-Francis Oil Company
pursuant to the loan agreement.

Other Income. Other income of $528,000 for the year ended June 30, 2001
includes the sale of our unsecured claim in bankruptcy against our former
parent, Underwriters Financial Group, in the amount of $350,000.

Critical Accounting Policies and Estimates
------------------------------------------

The discussion and analysis of the Company's financial condition and
results of operations were based upon the consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses. Our significant accounting
policies are described in Note 1 to our consolidated financial statements. In
response to SEC Release No. 33-8040, "Cautionary Advise Regarding Disclosure
About Critical Accounting Policies," we have identified certain of these
policies as being of particular importance to the portrayal of our financial
position and results of operations and which require the application of
significant judgment by management. We analyze our estimates, including those

61


related to oil and gas reserves, bad debts, oil and gas properties, marketable
securities, income taxes, derivatives, contingencies and litigation, and base
our estimates on historical experience and various other assumptions that we
believe reasonable under the circumstances. Actual results may differ from
these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect our more significant judgments
and estimates used in the preparation of the Company's financial statements.

Successful Efforts Method of Accounting
---------------------------------------

We account for its natural gas and crude oil exploration and
development activities utilizing the successful efforts method of accounting.
Under this method, costs of productive exploratory wells, development dry
holes and productive wells and undeveloped leases are capitalized. Gas and
oil lease acquisition costs are also capitalized. Exploration costs,
including personnel costs, certain geological and geophysical expenses and
delay rentals for gas and oil leases, are charged to expense as incurred.
Exploratory drilling costs are initially capitalized, but charged to expense
if and when the well is determined not to have found reserves in commercial
quantities. The sale of a partial interest in a proved property is accounted
for as a cost recovery and no gain or loss is recognized as long as this
treatment does not significantly affect the unit-of-production amortization
rate. A gain or loss is recognized for all other sales of producing
properties.

The application of the successful efforts method of accounting
requires managerial judgment to determine that proper classification of wells
designated as developmental or exploratory which will ultimately determine the
proper accounting treatment of the costs incurred. The results from a
drilling operation can take considerable time to analyze and the determination
that commercial reserves have been discovered requires both judgment and
industry experience. Wells may be completed that are assumed to be productive
and actually deliver gas and oil in quantities insufficient to be economic,
which may result in the abandonment of the wells at a later date. Wells are
drilled that have targeted geologic structures that are both developmental and
exploratory in nature and an allocation of costs is required to properly
account for the results. Delineation seismic incurred to select development
locations within an oil and gas field is typically considered a development
costs and capitalized but often these seismic programs extend beyond the
reserve area considered proved and management must estimate the portion of the
seismic costs to expense. The evaluation of gas and oil leasehold acquisition
costs requires managerial judgment to estimate the fair value of these costs
with reference to drilling activity in a given area. Drilling activities in
an area by other companies may also effectively condemn leasehold positions.

The successful efforts method of accounting can have a significant
impact on the operational results reported when the Company is entering a new
exploratory area in hopes of finding a gas and oil field that will be the
focus of future development drilling activity. The initial exploratory wells
may be unsuccessful and will be expensed. Seismic costs can be substantial
which will result in additional exploration expenses when incurred.


62


Reserve Estimates
-----------------

We estimate of gas and oil reserves, by necessity, are projections
based on geologic and engineering data, and there are uncertainties inherent
in the interpretation of such data as well as the projection of future rates
of production and the timing of development expenditures. Reserve engineering
is a subjective process of estimating underground accumulations of gas and oil
that are difficult to measure. The accuracy of any reserve estimate is a
function of the quality of available data, engineering and geological
interpretation and judgment. Estimates of economically recoverable gas and
oil reserves and future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions governing future gas and
oil prices, future operating costs, severance taxes, development costs and
workover gas costs, all of which may in fact very considerable from actual
results. The future drilling costs associated with reserves assigned to
proved undeveloped location may ultimately increase to an extent that these
reserves may be later determined to be uneconomic. For these reasons,
estimates of the economically recoverable quantities of gas and oil
attributable to any particular group of properties, classifications of such
reserves based on risk of recovery, and estimates of the future net cash flows
expected therefrom may vary substantially. Any significant variance in the
assumptions could materially affect the estimated quantity and value of the
reserves, which could affect the carrying value of the our gas and oil
properties and/or the rate of depletion of the gas and oil properties. Actual
production, revenues and expenditures with respect to the Company's reserves
will likely vary from estimates, and such variances may be material.

Impairment of Gas and Oil Properties
------------------------------------

We review its gas and oil properties for impairment whenever events
and circumstances indicate a decline in the recoverability of their carrying
value. We estimate the expected future cash flows of its gas and oil
properties and compares such future cash flows to the carrying amount of the
gas and oil properties to determine if the carrying amount is recoverable. If
the carrying amount exceeds the estimated undiscounted future cash flows, we
will adjust the carrying amount of the gas and oil properties to their fair
value. The factors used to determine fair value include, but are not limited
to, estimates of proved reserves, future commodity pricing, future production
estimates, anticipated capital expenditures, and a discount rate commensurate
with the risk associated with realizing the expected cash flows projected.

Given the complexities associated with gas and oil reserve estimates
and the history of price volatility in the gas and oil markers, events may
arise that would require the Company to recorded an impairment of the recorded
book values associated with gas and oil properties. As a result of its
review, the Company recognized an impairment of $1,480,000 and $798,000 for
the years ended June 30, 2002 and 2001, respectively. The Company did not
record an impairment during the year ended June 30, 2000.



63

Recently Issued or Proposed Accounting Standards and Pronouncements
-------------------------------------------------------------------

In July 2001, the Financial Accounting Standards Board issued and
approved for issuance SFAS No. 143, "Accounting for Asset Retirement
Allocations." SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and a corresponding increase in the carrying amount of the related
long-lived asset and is effective for fiscal years beginning after June 15,
2002. Management is currently assessing the impact SFAS No. 143 will have on
our financial condition and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, that superseded SFAS No. 121 and
APB Opinion No. 30. SFAS 144 provides guidance on differentiating between
assets held and used, held for sale, and held for disposal other than by sale,
and the required valuation of such assets. SFAS 144 is effective for fiscal
years beginning after December 15, 2001. Management is currently assessing
the impact SFAS No. 144 will have on our financial condition and results of
operations.

Statement 145, Recission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13, and Technical Corrections (SFAS No. 145) was issued
in April 2002. This statement rescinds SFAS No. 4, Reporting Gains and Losses
from Extinguishment of Debt, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of income taxes. As a result, the criteria in APB 30
will now be used to classify those gains and losses. Any gain or loss on the
extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in APB 30 for classification
as an extraordinary item shall be reclassified. The provisions of this
Statement are effective for fiscal years beginning after January 1, 2003. We
do not believe the Company will be materially impacted by this statement.

Statement 146, Accounting for Exit or Disposal Activities (SFAS No. 146),
was issued in June 2002. SFAS No. 146 addresses significant issues regarding
the recognition, measurement and reporting of disposal activities, including
restructuring activities that are currently accounted in EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Activity." SFAS No.
146 will be effective in January 2003. We are currently assessing the impact
of SFAS No. 146.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest rates and
commodity prices. We do not use financial instruments to any degree to manage
foreign currency exchange and interest rate risks and do not hold or issue
financial instruments to any degree for trading purposes. All of our revenue
and related receivables are payable in U.S. dollars.






64


Market Rate and Price Risk
--------------------------

Beginning in fiscal 2003, we began to hedge a portion of our oil and gas
production using swap and collar agreements. The purpose of these hedge
agreements is to provide a measure of stability to our cash flow in an
environment of volital oil and gas prices and to manage the exposure to
commodity price risk.

Interest Rate Risk
------------------

We were subject to interest rate risk on $24,939,000 of variable rate
debt obligations at June 30, 2002. The annual effect of a one percent change
in interest rates would be approximately $250,000. The interest rate on these
variable rate debt obligations approximates current market rates as of June
30, 2002.

ITEM 8. FINANCIAL STATEMENTS

Financial Statements are included and begin on page F-1.

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

Not applicable.

PART III

The information required by Part III, Item 10 "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act", 11 "Executive Compensation", 12 "Security Ownership of Certain
Beneficial Owners and Management", and 13 "Certain Relationships and Related
Transactions", is incorporated by reference to Registrant's definitive Proxy
Statement which will be filed with the Securities and Exchange Commission in
connection with the Annual Meeting of Shareholders. For information
concerning Item 10 "Directors and Executive Officers"; see Part I; Item 4A.

















65


PART IV

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

(a) Financial Statements.
Page No.

Independent Auditors' Report ......................... F-1

Consolidated Balance Sheets for the years ended
June 30, 2002 and 2001 ............................... F-2

Consolidated Statements of Operations for the years
ended June 30, 2002, 2001 and 2000 ................... F-3

Consolidated Statement of Stockholders' Equity
and Comprehensive Income (Loss) for the years
ended June 30, 2002, 2001 and 2000 ................... F-4

Consolidated Statement of Stockholders' Equity
and Comprehensive Income (Loss) for the years
ended June 30, 2002, 2001 and 2000 ................... F-5

Consolidated Statements of Cash Flows for the
years ended June 30, 2002, 2001 and 2000 ............. F-6

Notes to Consolidated Financial Statements ........... F-7

Financial Statement Schedules. None.

(b) Reports on Form 8-K. During the quarter ended June 30, 2002, the
Registrant filed Reports on Form 8-K as follows:

1. Form 8-K; March 1, 2002; Items 2, 5 and 7.
2. Form 8-K; April 30, 2002; Items 5 and 7.
3. Form 8-K; May 24, 2002; Items 2, 5 and 7.

(c) Exhibits. The Exhibits listed in the Index to Exhibits appearing at
page 67 filed as part of this report.















66


INDEX TO EXHIBITS


2. Plans of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession. Not applicable.

3. Articles of Incorporation and By-laws. The Articles of Incorporation and
Articles of Amendment to Articles of Incorporation and By-laws of the
Registrant were filed as Exhibits 3.1, 3.2, and 3.3, respectively, to
the Registrant's Form 10 Registration Statement under the Securities
Exchange Act of 1934, filed September 9, 1987 with the Securities and
Exchange Commission and are incorporated herein by reference.

4. Instruments Defining the Rights of Security Holders. Statement of
Designation and Determination of Preferences of Series A Convertible
Preferred Stock of Delta Petroleum Corporation is incorporated by
Reference to Exhibit 28.3 of the Current Report on Form 8-K dated June
15, 1988. Statement of Designation and Determination of Preferences of
Series B Convertible Preferred Stock of Delta Petroleum Corporation is
incorporated by reference to Exhibit 28.1 of the Current Report on Form
8-K dated August 9, 1989. Statement of Designation and Determination of
Preferences of Series C Convertible Preferred Stock of Delta Petroleum
Corporation is incorporated by reference to Exhibit 4.1 of the current
report on Form 8-K dated June 27, 1996.

9. Voting Trust Agreement. Not applicable.

10. Material Contracts.

10.1 Burdette A. Ogle "Assignment, Conveyance and Bill of Sale of Federal Oil
and Gas Leases Reserving a Production Payment", "Lease Interests
Purchase Option Agreement" and "Purchase and Sale Agreement."
Incorporated by reference from Exhibit 28.1 to the Company's Form 8-K
dated January 3, 1995.

10.2 Delta Petroleum Corporation 1993 Incentive Plan, as amended.
Incorporated by reference from Exhibit 99.1 to the Company's Form 8-K
dated November 1, 1996.

10.3 Delta Petroleum Corporation 1993 Incentive Plan, as amended June 30,
1999. Incorporated by reference to the Company's Notice of Annual
Meeting and Proxy Statement dated June 1, 1999.

10.4 Agreement between Burdette A. Ogle and Delta Petroleum Corporation
effective December 17, 1998. Incorporated by reference from
Exhibit 99.2 to the Company's Form 10-QSB for the quarterly period ended
December 31, 1998.

10.5 Agreement between Whiting Petroleum Corporation and Delta Petroleum
Corporation (including amendment) dated June 8, 1999. Incorporated by
reference from Exhibit 99.1 to the Company's Form 8-K dated June 9,
1999.




67


10.6 Purchase and Sale Agreement dated October 13, 1999 between Whiting
Petroleum Corporation and Delta Petroleum Corporation. Incorporated by
reference from Exhibit 99.1 to the Company's Form 8-K dated November 1,
1999.

10.7 Agreement between Delta Petroleum Corporation, Roger A. Parker and
Aleron H. Larson, Jr. dated November 1, 1999. Incorporated by
reference from Exhibit 99.3 to the Company's Form 8-K dated November 1,
1999.

10.8 Conveyance and Assignment from Whiting Petroleum Corporation dated
December 1, 1999. Incorporated by reference from Exhibit 10.1 to the
Company's Form 8-K dated December 1, 1999.

10.9 Loan Agreement (without exhibits) between Kaiser-Francis Oil Company and
Delta Petroleum Corporation dated December 1, 1999. Incorporated by
reference from Exhibit 10.2 to the Company's Form 8-K dated December 1,
1999.

10.10 Promissory Note dated December 1, 1999. Incorporated by reference from
Exhibit 10.3 to the Company's Form 8-K dated December 1, 1999.

10.11 July 29, 1999 Agreement between GlobeMedia AG and Delta Petroleum
Corporation with November 23, 1999 amendment. Incorporated by reference
from Exhibit 99.1 to the Company's Form 8-K dated January 4, 2000.

10.12 Letter Agreement between GlobeMedia AG and Delta Petroleum Corporation
dated November 23, 1999. Incorporated by reference from Exhibit 99.3
to the Company's Form 8-K dated January 4, 2000.

10.13 Agreement dated December 30, 1999 between Burdette A. Ogle and Delta
Petroleum Corporation. Incorporated by reference from Exhibit 99.4 to
the Company's Form 8-K dated January 4, 2000.

10.14 Purchase and Sale Agreement dated June 1, 2000 between Whiting Petroleum
Corporation and Delta Petroleum Corporation. Incorporated by reference
from Exhibit 10.1 to the Company's Form 8-K dated July 10, 2000.

10.15 Investment Agreement dated July 21, 2000 between Delta Petroleum
Corporation and Swartz Private Equity, LLC and related agreements.
Incorporated by reference from Exhibit 99.2 to the Company's Form 8-K
dated July 10, 2000.

10.16 Purchase and Sale Agreement between Delta Petroleum Corporation and
Castle Offshore LLC and BWAB Limited Liability Company dated August 4,
2000. Incorporated by reference from Exhibit 10.1 to the Company's Form
8-K dated September 29, 2000.

10.17 Documents evidencing financing arrangements between Hexagon Investments
and Delta Petroleum Corporation dated September 28, 2000. Incorporated
by reference from Exhibit 10.2 to the Company's Form 8-K dated September
29, 2000.



68


10.18 Delta Petroleum Corporation 2001 Incentive Plan. Incorporated by
reference to the Company's Notice of Annual Meeting and Proxy Statement
dated July 26, 2001 for fiscal year 2000 ended June 30, 2000.

10.19 Agreements between Evergreen Resources, Inc., and Delta Petroleum
Corporation dated January 3, 2001. Incorporated by reference from
Exhibit 10.1 to the Company's Form 8-K dated January 22, 2001.

10.20 Purchase and Sale Agreement (without exhibits) dated March 29, 2001
between Delta Petroleum Corporation and Panaco, Inc. Incorporated by
reference from Exhibit 10.1 to the Company's Form 8-K dated April 13,
2001.

10.21 Employment Agreements with Aleron H. Larson, Jr., Roger A. Parker and
Kevin K. Nanke, from Exhibit 10.4 a, b, and c to the Company's Form 8-K
dated October 25, 2001.

10.22 Delta Petroleum Corporation 2002 Incentive Plan incorporated by
reference from Exhibit A to the Company's definitive proxy statement
filed May 1, 2002.

10.23 Agreement between Delta Petroleum Corporation and Amber Resources
Company dated July 1, 2001, incorporated by reference Exhibit 10.3 to
the Company's Form 8-K dated October 25, 2001.

10.24 Letter agreement dated December 3, 2001 between Delta Petroleum
Corporation and Ogle Properties LLC, incorporated by reference from
Exhibit 10.4 to the Company's Form 8-K dated October 25, 2001.

10.25 Purchase and Sale Agreement between Castle Energy Company and Delta
Petroleum Corporation dated December 31, 2001 incorporated by reference
from Exhibit 2.1 to the Company's Form 8-K dated January 15, 2002.

10.26 Purchase and Sale Agreement between Delta Petroleum Corporation and
Sovereign Holdings, LLC, incorporated by reference from Exhibit 10.1 to
the Company's Form 8-K dated March 1, 2002.

10.27 Purchase and Sale Agreement between Delta Petroleum Corporation and
Tipperary Oil & Gas Corporation dated May 8, 2002 incorporated by
reference from Exhibit 10.1 to the Company's Form 8-K dated April 30,
2002.

10.28 Credit Agreement dated May 31, 2002 by and among Delta Petroleum
Corporation, Delta Exploration Company, Inc., Piper Petroleum Company
and Bank of Oklahoma, N.A. Incorporation by reference from Exhibit 10.1
to the Company's Form 8-K dated May 24, 2002.

10.29 Agreement and Plan of Merger among Delta Petroleum Corporation, Delta
Acquisition Company, Inc., Piper Petroleum Company and John H. Wilson,
II executed February 2002.

11. Statement Regarding Computation of Per Share Earnings. Not applicable.

12. Statement Regarding Computation of Ratios. Not applicable.


69


13. Annual Report to Security Holders, Form 10-Q or Quarterly Report to
Security Holders. Not applicable.

16. Letter re: Change in Certifying Accountants. Not applicable.

17. Letter Regarding Change in Accounting Principles. Not applicable.

18. Subsidiaries of the Registrant. Not applicable.

19. Published Report Regarding Matters Submitted to Vote of Security
Holders. Not applicable.

20. Consent of Experts and Counsel.

23.1 KPMG LLP. Filed herewith electronically.

21. Power of Attorney. Not applicable.

99. Additional Exhibits. Not applicable.




































70


Independent Auditors' Report



The Board of Directors and Stockholders
Delta Petroleum Corporation:


We have audited the accompanying consolidated balance sheets of Delta
Petroleum Corporation (the Company) and subsidiary as of June 30, 2002 and
2001 and the related consolidated statements of operations, stockholders'
equity and comprehensive income (loss), and cash flows for each of the years
in the three year period ended June 30, 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 statements 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 Delta
Petroleum Corporation and subsidiaries as of June 30, 2002 and 2001 and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.



/s/ KPMG LLP
KPMG LLP





Denver, Colorado
September 12, 2002








F-1


DELTA PETROLEUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

June 30, June 30,
2002 2001
----------- -----------

ASSETS
Current Assets:
Cash and cash equivalents $ 1,024,000 $ 518,000
Marketable securities available for sale 485,000 -
Trade accounts receivable and other 4,713,000 1,945,000
Prepaid assets 785,000 594,000
Other current assets 442,000 538,000
----------- -----------
Total current assets 7,449,000 3,595,000
----------- -----------
Property and Equipment:
Oil and gas properties, at cost (using
the successful efforts method
of accounting): 73,002,000 29,955,000
Less accumulated depreciation and depletion (7,018,000) (5,024,000)
----------- -----------
Net property and equipment 65,984,000 24,931,000
----------- -----------
Long term assets:
Deferred financing costs 260,000 241,000
Marketable securities available for sale - 221,000
Partnership net assets 384,000 844,000
----------- -----------
Total long term assets 644,000 1,306,000
----------- -----------
$74,077,000 $29,832,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Current portion of long-term debt $ 3,498,000 $ 3,038,000
Accounts payable 3,488,000 2,071,000
Current foreign tax payable 703,000 -
Other accrued liabilities 31,000 46,000
----------- -----------
Total current liabilities 7,720,000 5,155,000
----------- -----------

Long-term debt, net of current portion 21,441,000 6,396,000
----------- -----------
Stockholders' Equity:
Preferred stock, $.10 par value;
authorized 3,000,000 shares, none issued - -
Common stock, $.01 par value;
authorized 300,000,000 shares, issued
22,618,000 shares at June 30, 2002
and 11,161,000 at June 30, 2001 226,000 112,000
Additional paid-in capital 76,514,000 40,700,000
Put option on Delta stock (2,886,000) -
Accumulated other comprehensive income (85,000) 69,000
Accumulated deficit (28,853,000) (22,600,000)
----------- -----------
Total stockholders' equity 44,916,000 18,281,000
----------- -----------
Commitments $74,077,000 $29,832,000
=========== ===========


See accompanying notes to consolidated financial statements.


F-2


DELTA PETROLEUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS



Year Ended June 30,
2002 2001 2000
----------- ----------- -----------

Revenue:
Oil and gas sales $ 8,121,000 $12,254,000 $ 3,356,000
Operating fee income 177,000 106,000 75,000
Gain (loss) on sale of oil and gas properties (88,000) 458,000 76,000
Other revenue - 59,000 69,000
----------- ----------- -----------
Total revenue 8,210,000 12,877,000 3,576,000

Operating expenses:
Lease operating expenses 4,372,000 4,698,000 2,405,000
Depreciation and depletion 3,347,000 2,533,000 888,000
Exploration expenses 155,000 89,000 47,000
Dry hole costs 396,000 94,000 -
Abandoned and impaired properties 1,480,000 798,000 -
Professional fees 1,322,000 1,108,000 519,000
General and administrative 2,036,000 1,470,000 1,258,000
Stock option expense 143,000 409,000 538,000
---------- ---------- ----------
Total operating expenses 13,251,000 11,199,000 5,655,000
---------- ---------- ----------

Income (loss) from operations (5,041,000) 1,678,000 (2,079,000)

Other income and expenses:
Other income 113,000 528,000 90,000
Interest and financing costs (1,325,000) (1,861,000) (1,265,000)
Loss on sale of securities available for sale - - (113,000)
---------- ---------- ----------
Total other income and expenses (1,212,000) (1,333,000) (1,288,000)
---------- ----------- -----------
Net income (loss) $(6,253,000) $ 345,000 $(3,367,000)
=========== =========== ===========
Net income (loss) per common share:
Basic $ (0.49) $ 0.03 $ (0.46)
=========== =========== ===========

Diluted $ (0.49)* $ 0.03 $ (0.46)*
=========== =========== ===========


* Potentially dilutive securities outstanding were anti-dilutive



See accompanying notes to consolidated financial statements.



F-3


DELTA PETROLEUM CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
and Comprehensive Income (Loss)
Years Ended June 30, 2002, 2001 and 2000


Accumulated
other
Compre-
Common Stock Additional Put Option hensive
-------------------- paid-in on income Comprehensive Accumulated
Shares Amount capital Delta stock (loss) income (loss) deficit Total
---------- -------- ----------- ------------ --------- ------------- ----------- ----------


Balance, July 1, 2000 6,390,000 $ 64,000 29,476,000 - (115,000) (19,578,000) 9,847,000

Comprehensive loss:
Net loss - - - - (3,367,000) (3,367,000) (3,367,000)
----------
Other comprehensive
loss, net of tax
Unrealized gain on
equity securities - - - - 79,000 -
Less: Reclassification
adjustment for
losses included
in net loss - - - - 13,000 192,000 192,000
----------
Comprehensive loss - - - - - (3,175,000)
==========
Stock options granted
as compensation - - 500,000 - - - 500,000
Shares issued for cash,
net of commissions 603,000 6,000 1,018,000 - - - 1,024,000
Shares issued for cash
upon exercise of options 1,049,000 10,000 1,368,000 - - - 1,378,000
Shares and options issued
with financing 75,000 1,000 565,000 - - - 566,000
Shares issued for oil and
gas properties 215,000 2,000 548,000 - - - 550,000
Shares issued for deposit
on oil and gas properties 90,000 1,000 272,000 - - - 273,000
---------- -------- ---------- --------- -------- ----------- ----------
Balance, July 1, 2000 8,422,000 $ 84,000 33,747,000 - 77,000 (22,945,000) 10,963,000

Comprehensive loss:
Net loss - - - - - 345,000 345,000 345,000
----------
Other comprehensive
loss, net of tax

Unrealized gain on
equity securities - - - - (8,000) (8,000) (8,000)
----------
Comprehensive loss - - - - - 337,000
==========
Stock options granted
as compensation - - 520,000 - - - 520,000
Fair value of warrants
issued for common stock
investment agreement - - 1,436,000 - - - 1,436,000
Warrant issued in exchange
for common stock
investment agreement - - (1,436,000) - - - (1,436,000)
Shares issued for cash,
net of commissions 1,004,000 10,000 2,412,000 - - - 2,422,000
Shares issued for cash
upon exercise of options 922,000 9,000 1,471,000 - - - 1,480,000
Conversion of note
payable and accrued
interest to common stock 200,000 2,000 509,000 - - - 511,000
Shares issued for oil and
gas properties 851,000 9,000 2,945,000 - - - 2,954,000

Shares reacquired and
retired (239,000) (2,000) (904,000) - - - (906,000)
---------- -------- ---------- --------- -------- ----------- ----------
Balance, June 30, 2001 11,160,000 112,000 40,700,000 - 69,000 (22,600,000) 18,281,000



F-4


DELTA PETROLEUM CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
and Comprehensive Income (Loss)
Years Ended June 30, 2002, 2001 and 2000




Accumulated
other
Compre-
Common Stock Additional Put Option hensive
-------------------- paid-in on income Comprehensive Accumulated
Shares Amount capital Delta stock (loss) income (loss) deficit Total
---------- -------- ----------- ------------ --------- ------------- ----------- ----------

Comprehensive loss:
Net loss - - - - - (6,253,000) (6,253,000) (6,253,000)
----------
Other comprehensive
loss, net of tax
Unrealized loss on
equity securities - - - - (154,000) (154,000) (154,000)
----------
Comprehensive income - - - - - (6,407,000)
==========
Stock options granted
as compensation - - 143,000 - - - 143,000
Shares issued for cash,
net of commissions 72,000 1,000 224,000 - - - 225,000
Shares issued for cash
upon exercise of options 266,000 2,000 405,000 - - - 407,000
Shares issued for
services 14,000 - 48,000 - - - 48,000
Shares issued for oil
and gas properties 9,703,000 97,000 26,862,000 - - - 26,959,000
Put option on Delta
stock - - 2,886,000 (2,886,000) - -
Shares issued for all
outstanding shares of
Piper Petroleum Company 1,377,000 14,000 5,220,000 - - - 5,234,000
Shares issued for debt 51,000 - 157,000 - - - 157,000
Shares reacquired and
retired (25,000) - (131,000) - - - (131,000)
---------- -------- ----------- ---------- -------- ----------- -----------
Balance, June 30, 2002 22,618,000 $226,000 76,514,000 (2,886,000) (85,000) (28,853,000) 44,916,000
========== ======== ========== ========== ======== =========== ===========













See accompanying notes to consolidated financial statements.




F-5


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS


Year Ended June 30,
2002 2001 2000
------------ ------------ -----------

Cash flows operating activities:
Net income (loss) $ (6,253,000) $ 345,000 $(3,367,000)
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Depreciation and depletion 3,347,000 2,533,000 888,000
Stock option expense 143,000 520,000 500,000
Amortization of financing costs 582,000 506,000 467,000
Abandoned and impaired properties 1,480,000 798,000 -
(Gain) loss on sale of oil and gas properties 88,000 (458,000) (75,000)
Loss on sale of securities available for sale - - 113,000
Shares issued for services 48,000 - -
Net changes in operating assets and operating
liabilities:
(Increase) decrease in trade accounts receivable (1,265,000) (1,204,000) (553,000)
Increase in prepaid assets (191,000) (221,000) (373,000)
(Increase) decrease in other current assets (6,000) 66,000 (63,000)
Decrease in accounts payable trade 172,000 222,000 1,243,000
(Increase) decrease in other accrued liabilities (15,000) (269,000) 144,000
Deferred revenue - (59,000) (69,000)
------------ ------------ -----------
Net cash provided by (used in) operating activities $ (1,870,000) $ 2,779,000 $(1,145,000)
------------ ------------ -----------
Cash flows from investing activities:
Additions to property and equipment, net (17,959,000) (11,613,000) (7,760,000)
Deposit on purchase of oil and gas properties - - (6,000)
Proceeds from sale of oil and gas properties 4,313,000 3,700,000 75,000
Proceeds from sale of securities available for sale - - 135,000
Merger with Piper Petroleum 74,000 - -
(Increase) decrease in long term assets 460,000 (169,000) (675,000)
------------ ------------ -----------
Net cash used in investing activities (13,112,000) (8,082,000) (8,231,000)
------------ ------------ -----------
Cash flows from financing activities:
Stock issued for cash upon exercise of options 407,000 1,480,000 1,378,000
Issuance of common stock for cash 225,000 2,422,000 1,024,000
Proceeds from borrowings 21,778,000 14,394,000 12,817,000
Repayment of borrowings and financing costs (6,922,000) (12,777,000) (5,640,000)
------------ ------------ -----------
Net cash provided by financing activities 15,488,000 5,519,000 9,579,000
------------ ------------ -----------
Net increase in cash 506,000 216,000 203,000
------------ ------------ -----------
Cash at beginning of period 518,000 302,000 99,000
------------ ------------ -----------
Cash at end of period $ 1,024,000 $ 518,000 $ 302,000
------------ ------------ -----------
Supplemental cash flow information -
Cash paid for interest and financing costs $ 779,000 $ 1,677,000 $ 741,000
============ ============ ===========
Non-cash financing activities:
Shares issued for all outstanding shares of
Piper Petroleum Company $ 5,234,000 $ - $ -
============ ============ ===========
Common stock issued for the purchase
of oil and gas properties, net of return of
deposited shares $ 26,959,000 $ 2,954,000 $ 823,000
============ ============ ===========
Shares reacquired and retired for
oil and gas properties and option exercise $ 131,000 $ 906,000 $ -
============ ============ ===========
Common stock issued for note payable
and accrued interest or accounts payable $ 157,000 $ 511,000 $ -
============ ============ ===========
Common stock, options and overriding royalties
issued for services relating to debt financing $ - $ 330,000 $ 891,000
============ ============ ===========

See accompanying notes to consolidated financial statements.


F-6


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies

Organization and Principles of Consolidation

Delta Petroleum Corporation ("Delta") was organized December 21,
1984 and is principally engaged in acquiring, exploring, developing and
producing oil and gas properties. The Company owns interests in developed and
undeveloped oil and gas properties in federal units offshore California, near
Santa Barbara, and developed and undeveloped oil and gas properties in the
continental United States.

At June 30, 2002 the Company owned 4,277,977 shares of the common
stock of Amber Resources Company ("Amber"), representing 91.68% of the
outstanding common stock of Amber. Amber is a public company also engaged in
acquiring, exploring, developing and producing oil and gas properties.

On February 19, 2002, the Company acquired 100% of the outstanding
shares of Piper Petroleum Company ("Piper"), a privately owned oil and gas
company headquartered in Fort Worth, Texas. Piper was merged into a
subsidiary wholly owned by Delta.

The consolidated financial statements include the accounts of Delta,
Amber and Piper (collectively, the Company). All intercompany balances and
transactions have been eliminated in consolidation. As Amber is in a net
shareholders' deficit position for the periods presented, the Company has
recognized 100% of Amber's earnings/losses for all periods.

Liquidity

The Company has incurred losses from operations over the past
several years coupled with significant deficiencies in cash flow from
operations, with the exception of fiscal 2001. As of June 30, 2002, the
Company had a working capital deficit of $271,000.

During fiscal 2002, the Company has taken steps to reduce losses and
generate cash flow from operations through the acquisition of Piper and all of
the domestic oil and gas properties of Castle Energy Corporation ("Castle").
(See acquisition discussions in Note 3.) The Company believes these
acquisitions will provide sufficient cash flow to meet its obligations in a
timely manner.









F-7


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies, Continued

Cash Equivalents

Cash equivalents consist of money market funds. For purposes of the
statements of cash flows, the Company considers all highly liquid investments
with maturities at date of acquisition of three months or less to be cash
equivalents.

Marketable Securities

The Company classifies its investment securities as available-for-
sale securities. Pursuant to Statement of Financial Accounting Standards No.
115 (SFAS 115), such securities are measured at fair market value in the
financial statements with unrealized gains or losses recorded in other
comprehensive income. At the time securities are sold or otherwise disposed
of, gains or losses are included in earnings.


Unrealized Estimated
Cost Gain (loss) Market Value
---- ----------- ------------

June 30, 2002
Bion Environmental Technologies, Inc. $153,000 $(93,000) $ 60,000
Tipperary Oil & Gas Company $417,000 $ 8,000 $425,000
-------- -------- --------
$570,000 $(85,000) $485,000
======== ======== ========
June 30, 2001
Bion Environmental Technologies, Inc. $152,000 $ 69,000 $221,000
======== ======== ========
June 30, 2000
Bion Environmental Technologies, Inc. $152,000 $ 77,000 $229,000
======== ======== ========

Property and Equipment

The Company follows the successful efforts method of accounting for
its oil and gas activities. Accordingly, costs associated with the
acquisition, drilling, and equipping of successful exploratory wells are
capitalized.

Geological and geophysical costs, delay and surface rentals and
drilling costs of unsuccessful exploratory wells are charged to expense as
incurred. Costs of drilling development wells, both successful and
unsuccessful, are capitalized.

Upon the sale or retirement of oil and gas properties, the cost
thereof and the accumulated depreciation and depletion are removed from the
accounts and any gain or loss is credited or charged to operations.


F-8


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies, Continued

Depreciation and depletion of capitalized acquisition, exploration
and development costs is computed on the units-of-production method by
individual fields as the related proved reserves are produced. Capitalized
costs of undeveloped properties are assessed periodically on an individual
field basis and a provision for impairment is recorded, if necessary, through
a charge to operations.

Furniture and equipment are depreciated using the straight-line
method over estimated lives ranging from three to five years.

Certain of the Company's oil and gas activities are conducted
through partnerships and joint ventures. The Company includes its
proportionate share of assets, liabilities, revenues and expenses from these
entities in its consolidated financial statements. Partnership net assets
represent the Company's share of net working capital in such entities.

Impairment of Long-Lived Assets

Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" (SFAS No. 121) requires that long-lived assets be reviewed for impairment
when events or changes in circumstances indicate that the carrying value of
such assets may not be recoverable.

Estimates of expected future cash flows represent management's best
estimate based on reasonable and supportable assumptions and projections. If
the expected future cash flows exceed the carrying value of the asset, no
impairment is recognized. If the carrying value of the asset exceeds the
expected future cash flows, an impairment exists and is measured by the excess
of the carrying value over the estimated fair value of the asset. Any
impairment provisions recognized in accordance with SFAS No. 121 are permanent
and may not be restored in the future.

The Company assesses developed properties on an individual field
basis for impairment on at least an annual basis. For developed properties,
the review consists of a comparison of the carrying value of the asset with
the asset's expected future undiscounted cash flows without interest costs. As
a result of such assessment, the Company has recorded an $878,000 impairment
provision attributable to certain producing properties for the year ended June
30, 2002, $6,000 for the year ended June 30, 2001 and no impairment provision
for the year ended June 30, 2000.

For undeveloped properties, the need for an impairment reserve is
based on the Company's plans for future development and other activities
impacting the life of the property and the ability of the Company to recover
its investment. When the Company believes the costs of the undeveloped


F-9


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies, Continued

property are no longer recoverable, an impairment charge is recorded based on
the estimated fair value of the property. As a result of such assessment, the
Company recorded an impairment provision attributable to certain undeveloped
properties of $602,000 for the year ended June 30, 2002, $168,000 for the year
ended June 30, 2001, and had no impairment for the year ended June 30, 2000.

In addition, the Company recorded an impairment provision attributed
to certain undeveloped foreign properties of $624,000 for the year ended June
30, 2001 and had no impairment for the other periods presented.

Gas Balancing

The Company uses the sales method of accounting for gas balancing of
gas production. Under this method, all proceeds from production when
delivered to a third party pipeline which are credited to the Company are
recorded as revenue until such time as the Company has produced its share of
the total estimated reserves of the property. Thereafter, additional amounts
received are recorded as a liability. At June 30, 2002, the Company had no
oil and gas properties out of balance.

Derivative Financial Instruments

The Company may, from time to time in the ordinary course of
business, enter into non-speculative hedge arrangements, commodity swap
agreements, forward sale contracts, commodity futures, options and other
similar agreements relating to natural gas and crude oil.

In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded on the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows
that the effective portion of the gain or loss on a derivative instrument
designated and qualifying as a cash flow hedging instrument be reported as a
component of Other Comprehensive Income and be reclassified into earnings in
the same period or periods during which the hedged forecasted transaction
affects earnings. SFAS 133 requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.





F-10


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies, Continued

Stock Option Plans

The Company accounts for its stock option plans in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense was recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. The
Company adopted the disclosure requirement of SFAS No. 123, Accounting for
Stock-Based Compensation, and provides pro forma net income (loss) and pro
forma earnings (loss) per share disclosures for employee stock option grants
made as if the fair-value based method defined in SFAS No. 123 had been
applied.

Income Taxes

The Company uses the asset and liability method of accounting for
income taxes as set forth in Statement of Financial Accounting Standards No.
109 (SFAS No. 109), Accounting for Income Taxes. Under the asset and
liability 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 and net operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted income tax
rates expected to apply to taxable income in the years in which those
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in income tax rates
is recognized in the results of operations in the period that includes the
enactment date.

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net earnings
(loss) attributed to common stock by the weighted average number of common
shares outstanding during each period, excluding treasury shares. Diluted
earnings (loss) per share is computed by adjusting the average number of
common shares outstanding for the dilutive effect, if any, of convertible
preferred stock, stock options and warrants. The effect of potentially
dilutive securities outstanding was antidilutive during years ended June 30,
2002 and 2000.




F-11


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies, Continued

Use of Estimates

The preparation 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. Significant estimates include oil and gas reserves, bad
debts, oil and gas properties, marketable securities, income taxes,
derivatives, contingencies and litigation. Actual results could differ from
these estimates.

Recently Issued Accounting Standards and Pronouncements

In July 2001, the Financial Accounting Standards Board approved for
issuance SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS
No. 143 requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived asset
and is effective for fiscal years beginning after June 15, 2002. The Company
is currently assessing the impact SFAS No. 143 will have on its financial
condition and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, that superseded SFAS No. 121 and
APB Opinion No. 30. SFAS 144 provides guidance on differentiating between
assets held and used, held for sale, and held for disposal other than by sale,
and the required valuation of such assets. SFAS 144 is effective for fiscal
years beginning after December 15, 2001. The Company is currently assessing
the impact SFAS No. 144 will have on its financial condition and results of
operations.

Statement 145, Recission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145)
was issued in April 2002. This statement rescinds SFAS No. 4, Reporting Gains
and Losses from Extinguishment of Debt, which required all gains and losses
from extinguishment of debt to be aggregated and, if material, classified as
an extraordinary item, net of income taxes. As a result, the criteria in APB
30 will now be used to classify those gains and losses. Any gain or loss on
the extinguishment of debt that was classified as an extraordinary item in
prior periods presented that does not meet the criteria in APB 30 for
classification as an extraordinary item shall be reclassified. The provisions
of this Statement are effective for fiscal years beginning after January 1,
2003. The Company does not believe this statement will have a material impact
to the Financial Statements.


F-12


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(1) Summary of Significant Accounting Policies, Continued

Statement 146, Accounting for Exit or Disposal Activities (SFAS No.
146), was issued in June 2002. SFAS No. 146 addresses significant issues
regarding the recognition, measurement and reporting of disposal activities,
including restructuring activities that are currently accounted in EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Activity."
SFAS No. 146 will be effective in January 2003. The Company is currently
assessing the impact of SFAS No. 146.

Reclassification

Certain amounts in the 2001 and 2000 financial statements have been
reclassified to conform to the 2002 financial statement presentation.

(2) Oil and Gas Properties

Unproved Undeveloped Offshore California Properties

The Company has ownership interests ranging from 2.49% to 75% in
five unproved undeveloped offshore California oil and gas properties with
aggregate carrying values of $9,722,000 and $9,359,000, June 30, 2002 and
2001, respectively. These property interests are located in proximity to
existing producing federal offshore units near Santa Barbara, California and
represent the right to explore for, develop and produce oil and gas from
offshore federal lease units. Preliminary exploration efforts on these
properties have occurred and the existence of substantial quantities of
hydrocarbons has been indicated. The recovery of the Company's investment in
these properties will require extensive exploration and development activities
(and costs) that cannot proceed without certain regulatory approvals that have
been delayed and is subject to other substantial risks and uncertainties as
discussed herein.

The Company is not the designated operator of any of these
properties but is an active participant in the ongoing activities of each
property along with the designated operator and other interest owners. If the
designated operator elected not to or was unable to continue as the operator,
the other property interest owners would have the right to designate a new
operator as well as share in additional property returns prior to the replaced
operator being able to receive returns. Based on the Company's size, it would
be difficult for the Company to proceed with exploration and development plans
should other substantial interest owners elect not to proceed. However, to
the best of its knowledge, the Company believes the designated operators and
other major property interest owners intend to proceed with exploration and
development plans under the terms and conditions of the operating agreement.
The ownership rights in each of these properties have been retained under
various suspension notices issued by the Mineral Management Service of the


F-13


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(2) Oil and Gas Properties, Continued

U.S. Federal Government (MMS) whereby as long as the owners of each property
were progressing toward defined milestone objectives, the owners' rights with
respect to the properties continue to be maintained. The issuance of the
suspension notices has been necessitated by the numerous delays in the
exploration and development process resulting from regulatory requirements
imposed on the property owners by federal, state and local agencies.

The delays have prevented the property owners from submitting for
approval an exploration plan on four of the properties. If and when plans are
submitted for approval, they are subject to review for consistency with the
California Coastal Zone Management Planning (CZMP) and by the MMS for other
technical requirements.

Even though the Company is not the designated operator of the
properties and regulatory approvals have not been obtained, the Company
believes exploration and development activities on these properties will occur
and is committed to expend funds attributable to its interests in order to
proceed with obtaining the approvals for the exploration and development
activities.

Based on the preliminary indicated levels of hydrocarbons present
from drilling operations conducted in the past, the Company believes the fair
value of its property interests are in excess of their carrying value at June
30, 2002 and June 30, 2001 and that no impairment in the carrying value has
occurred. Should the required regulatory approvals not be obtained or plans
for exploration and development of the properties not continue, the carrying
value of the properties would likely be impaired and written off.

On January 9, 2002, Delta and several other plaintiffs filed a
lawsuit in the United States Court of Federal Claims in Washington, D.C.
alleging that the U.S. Government has materially breached the terms of forty
undeveloped federal leases, some of which are part of Delta's Offshore
California properties. The suit seeks compensation for the lease bonuses and
rentals paid to the Federal Government, exploration costs and related
expenses. The total amount claimed by all lessees for bonuses and rentals
exceeds $1.2 billion, with additional amounts for exploration costs and
related expenses. Delta's claim (including the claim of its subsidiary Amber
Resources Company) for lease bonuses and rentals paid by Delta and its
predecessors is in excess of $152,000,000. In addition, its claim for
exploration costs and related expenses will also be substantial. The
Complaint is based on allegations by the collective plaintiffs that the United
States has materially breached the terms of certain of their Offshore
California leases by attempting to deviate significantly from the procedures
and standards that were in effect when the leases were entered into, and by
failing to carry out its own obligations relating to those leases in a timely
and fair manner. More specifically, the plaintiffs have alleged that the
judicial determination in the California v. Norton case that a 1990 amendment

F-14


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(2) Oil and Gas Properties, Continued

to the Coastal Zone Management Act required the Government to make a
consistency determination prior to granting lease suspension requests in 1999
constitutes a material change in the procedures and standards that were in
effect when the leases were issued. The plaintiffs have also alleged that the
United States has failed to afford them the timely and fair review of their
lease suspension requests which has resulted in significant, continuing and
material delays to their exploratory and development operations. The forty
undeveloped leases are located in the Offshore Santa Maria Basin off the coast
of Santa Barbara and San Luis Obispo counties, and in the Santa Barbara
Channel off Santa Barbara and Ventura counties. None of these leases are
currently impaired, but in the event that there is some future adverse ruling
by the California Coastal Commission under the Coastal Zone Management Act and
Delta decides not to appeal such ruling to the Secretary of Commerce, or the
Secretary of Commerce either refuses to hear Delta's appeal of any such ruling
or ultimately makes a determination adverse to Delta, it is likely that some
or all of these leases would become impaired and written off at that time. In
addition, it should be noted that Delta's pending litigation against the
United States is predicated on the ruling of the lower court in California v.
Norton. The United States has appealed the decision of the lower court to the
9th Circuit Court of Appeals. In the event that the United States is not
successful in its appeal(s) of the lower court's decision in the Norton case
and the pending litigation with Delta is not settled, it would be necessary
for Delta to reevaluate whether the leases should be considered impaired at
that time. As the ruling in the Norton case currently stands, the United
States has been ordered to make a consistency determination under the Coastal
Zone Management Act, but the leases are still valid. If through the appellate
process the leases are found not to be valid for some reason, or if the United
States is finally ordered to make a consistency determination and either does
not do so or finds that development is inconsistent with the Coastal Zone
Management Act, it would appear that the leases would become impaired even
though Delta would undoubtedly proceed with its litigation. It is also
possible that other events could occur during the appellate process that would
cause the leases to become impaired, and Delta will continuously evaluate
those factors as they occur.

Acquisitions - 2002

On February 19, 2002, Delta completed the acquisition of Piper
Petroleum Company ("Piper"), a privately owned oil and gas company
headquartered in Fort Worth, Texas. Delta issued 1,377,240 shares of
restricted common stock for 100% of the shares of Piper. The 1,377,240 shares
of restricted common stock was valued at approximately $5,234,000 based on the
five-day average closing price surrounding the announcement of the merger. In
addition, Delta issued 51,000 shares for the cancellation of certain debt of
Piper. As a result of the acquisition, the Company acquired Piper's working

F-15


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(2) Oil and Gas Properties, Continued

and royalty interests in over 700 gross (4.6 net) wells which are primarily
located in Texas, Oklahoma and Louisiana along with a 5% working interest in
the Comet Ridge coal bed methane gas project in Queensland, Australia. On May
24, 2002 the Company completed the sale of our undivided interests in
Australia, to Tipperary Corporation, in exchange for Tipperary's producing
properties in the West Buna Field (Hardin and Jasper counties, Texas)which had
a fair market value of approximately $4,100,000, $700,000 in cash, and 250,000
unregistered shares of Tipperary common stock. No gain or loss was recorded
on this transaction. In addition, on May 28, 2002, the Company sold a
commercial office building obtained in the merger with Piper located in Fort
Worth, Texas to a non-affiliate for its fair value of $417,000. No gain or
loss was recorded on this transaction. The total acquisition cost, net of
purchase price adjustments, of approximately $4,803,000 was allocated between
proved developed producing of $3,882,000, proved developed non-producing of
$336,000, and proved undeveloped of $585,000. No gain or loss was recorded on
this transaction. Net daily production from the West Buna Field approximates
900,000 cubic feet equivalent.

On May 31, 2002, the Company acquired all of the domestic oil and
gas properties of Castle Energy Corporation. The properties acquired from
Castle consist of interests in approximately 525 producing wells located in
fourteen (14) states, plus associated undeveloped acreage. The Company issued
9,566,000 shares of Common Stock to Castle Energy Corporation as part of the
purchase price. The shares issued were recorded at a stock price of $3.97,
the closing stock price at May 31, 2002, discounted by 30% according to a fair
market appraisal of Delta's stock obtained from Snyder & Company, an
independent evaluation expert. The Company is entitled to repurchase up to
3,188,667 of our shares from Castle for $4.50 per share for a period of one
year after closing. This right is reflected in stockholders' equity at its
fair value as a put option on Delta stock. The Company's agreement with
Castle was effective as of October 1, 2001 and the net operating revenues from
the properties between the effective date and the May 31, 2002 closing date
were recorded as an adjustment to the purchase price. As a part of the
acquisition, upon closing, Delta granted an option to acquire a 4% working
interest in the properties acquired for a cost of $878,000 to BWAB Limited
Liability Company ("BWAB"), a less than 10% shareholder of Delta. The
difference between the $878,000 paid by BWAB which was less than fair value,
and 4% of the cost of the Castle properties was treated as an additional
acquisition cost by Delta for its consultation and assistance related to the
transaction. The Company recorded a purchase price adjustment of
approximately $5,817,000 which reflects the net revenues after operating costs
and acquisition related costs from the effective date of October 1, 2001
through the closing date of May 31, 2002. The total acquisition cost of
approximately $40,767,000 was allocated between proved developed producing of
$32,614,000, proved developed non-producing of $3,396,000, and proved
undeveloped of $4,757,000. The Company recorded oil and gas revenues of
$1,148,000 and operating expenses of $485,000 for the month of June relating
to these properties.

F-16


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(2) Oil and Gas Properties, Continued

In addition to the acquisitions described above, the Company
acquired additional oil and gas properties in Colorado, Oklahoma and Texas
during fiscal 2002. The consideration for these acquisitions was $667,000 and
137,476 shares of the Company's restricted common stock with a fair value of
$375,000 based on the closing price on the date of closing.

Acquisitions 2001

On July 10, 2000, the Company paid $3,745,000, during fiscal 2000,
issued 90,000 shares of the Company's common stock valued at approximately
$273,000 previously recorded as a deposit on oil and gas properties and on
September 28, 2000, the Company paid $1,845,000 to acquire interests in 20
producing wells, 5 injection wells and acreage located in the Eland and
Stadium fields in Stark County, North Dakota ("North Dakota"). The July 10,
2000 and September 28, 2000 payments resulted in the acquisition by the
Company of 67% and 33%, respectively, of the ownership interest in each
property acquired. The $3,745,000 payment on July 10, 2000 was financed
through borrowings from an unrelated entity and personally guaranteed by two
of the Company's officers, while the payment on September 28, 2000 was
primarily paid out of the Company's net revenues from the effective date of
the acquisitions through closing. Delta also issued 100,000 shares of its
restricted common stock, valued at $450,000, to an unaffiliated party for its
consultation and assistance related to the transaction. The common stock
issued was recorded at a 10% discount to market, which was based on the quoted
market price of the stock at the time the commission was earned and is
recorded in oil and gas properties.

In addition to the North Dakota acquisition, the Company acquired
additional oil and gas properties during fiscal 2001 in New Mexico and South
Dakota. The consideration for these acquisitions, which include stock
commissions relating to the acquisitions, were $2,567,000 and 751,238 shares
of the Company's common stock valued at $2,504,000.

Acquisitions - 2000

On November 1, 1999, the Company acquired interests in 10 operated
wells in New Mexico and 1 non-operated well in Texas ("New Mexico") for a cost
of $2,880,000. The acquisition was financed through borrowings from an
unrelated entity at an interest rate of 18% per annum.

On December 1, 1999, the Company completed the acquisition of the
equivalent of a 6.07% working interest in the form of a financial arrangement
termed a "net operating interest" in the Point Arguello Unit, and its three
platforms (Hidalgo, Harvest and Hermosa) ("Point Arguello"), along with a 100%
interest in two and an 11.11% interest in one of the three leases within the
adjacent unproved undeveloped Rocky Point Unit from Whiting Petroleum
Corporation ("Whiting"), a shareholder. Whiting retained its proportionate
share of future abandonment liability associated with both the onshore and
offshore facilities of the Point Arguello Unit. The acquisition had a

F-17


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(2) Oil and Gas Properties, Continued

purchase price of approximately $6,759,000 consisting of $5,625,000 in cash
and 500,000 shares (which included the 300,000 shares issued during fiscal
1999) of the Company's restricted common stock with a fair market value of
$1,134,000. The total acquisition cost of $5,059,000 was allocated between
proved developed producing of $1,970,000, proved undeveloped of $1,700,000 and
unproved undeveloped of $1,389,000. The Company assigned to BWAB a 3%
overriding royalty interest in the Point Arguello properties as consideration
for arranging the transaction.

The Company committed to sell 25,000 barrels per month from December
1999 to May 2000 at $8.25 per barrel and from June 2000 to December 2000 at
$14.65. If the Company would not have committed to sell its proportionate
shares of its barrels at $8.25 and $14.65 per barrel, the Company would have
realized an increase in income of $1,242,000 for the year ended June 30, 2001
and $2,033,000 for the year ended June 30, 2000.

In addition to the New Mexico and Point Arguello acquisitions, the
Company acquired additional oil and gas properties in New Mexico and South
Dakota. The consideration for these acquisitions, which include stock
commissions relating to the acquisitions, were $2,567,000 and 15,000 shares of
the Company's common stock valued at $32,000.

Dispositions

On March 1, 2002, Delta completed the sale of 21 producing wells and
acreage located primarily in the Eland and Stadium fields of Stark County,
North Dakota, to Sovereign Holdings, LLC, a privately-held Colorado limited
liability company, for cash consideration of $2,750,000 pursuant to a purchase
and sale agreement dated February 1, 2002 and effective January 1, 2002. The
Company recorded an impairment on these properties of $102,000 prior to the
sale. As a result of the sale, the Company recorded a loss on the sale of
these oil and gas properties of $1,000. See unaudited proforma consolidated
statements of operations above. Approximately $1,300,000 of the proceeds from
the sale were used to pay existing debt.

During the years ended June 30, 2002, 2001 and 2000, the Company has
disposed of certain oil and gas properties and related equipment to
unaffiliated entities in addition to the North Dakota disposition described
above. The Company has received proceeds from these sales of $1,667,000
$3,700,000 and $75,000 and resulted in a net gain (loss) on sale of oil and
gas properties of $(87,000), $458,000 and $76,000 for the years ended June 30,
2002, 2001 and 2000, respectively.





F-18


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(2) Oil and Gas Properties, Continued

The following unaudited pro forma consolidated statements of
operations information assumes that the acquisition of Castle's properties and
the sale of the North Dakota properties discussed above occurred as of July 1,
2000:

Year Ended
June 30,
2002 2001
----------- -----------

Oil and gas sales $19,775,000 $30,259,000
=========== ===========
Net income (loss) $(6,493,000) $ 467,000
=========== ===========
Net income (loss) per common share:
Basic $ (.51) $ .02
=========== ===========
Diluted $ (.51) $ .02
=========== ===========

The above unaudited adjusted Pro Forma Consolidated Statements of
Operations are based on the historical results of Castle and Delta and are not
necessarily indicative of the results of operations that would have actually
occurred had Delta owned these properties for the periods presented.

(3) Long Term Debt
June 30,
----------------------------
2002 2001
---- ----
A $18,918,000 -
B 6,021,000 7,337,000
C - 2,097,000
----------- ----------
$24,969,000 $9,434,000

Current Portion 3,498,000 3,038,000
----------- ----------
Long-Term Portion $21,441,000 $6,396,000
=========== ==========








F-19


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(3) Long Term Debt, Continued

A. On May 31, 2002, the Company obtained a new $20 million credit
facility with Bank of Oklahoma and Local Oklahoma Bank (the "Banks). The
facility has a variable interest rate component of prime + 1.5%/-.5% based on
the total debt outstanding and a monthly commitment reduction of $260,000.
The proceeds from this facility were used for the acquisition of Castle and to
pay off the remaining US Bank debt. The Company paid a 1% commitment fee in
aggregate to the banks. This fee was recorded as a deferred financing fee and
will be amortized over the life of the loan which matures on May 31, 2005 and
is collateralized by substantially all of Delta's oil and gas properties
excluding the oil and gas properties collateralized under the Kaiser-Francis
Oil Company ("KFOC") note discussed below. The Company's borrowing base and
monthly commitment amount will be redetermined at least semi-annually. If as
a result of any such monthly commitment reduction or reduction in the amount
of our borrowing base, the total amount of our outstanding debt ever exceeds
the amount of the revolving commitment then in effect, then within 30 days
after we are notified by the Bank of Oklahoma, we must make a mandatory
prepayment of principal that is sufficient to cause our total outstanding
indebtedness to not exceed our borrowing base. The Company is required to
meet quarterly debt covenants and restrictions. At June 30, 2002, the Company
did not meet its current ratio covenant of 1.0 to 1.0. This was primarily due
to a current foreign tax payable of $703,000 relating to the sale of its
Australian property prior to establishing the loan agreement. The Company has
obtained a waiver for this requirement from the Banks and is not in default of
the loan agreement at June 30, 2002.

B. On December 1, 1999, the Company borrowed $8,000,000 at prime plus
1-1/2% from KFOC). In addition, the Company will be required to pay a fee of
$250,000 on June 1, 2003 if the loan has not been retired prior to this date.
The proceeds from this loan were used to pay off existing debt and the balance
of the Point Arguello Unit and New Mexico acquisitions. The Company is
required to make minimum monthly payments of principal and interest equal to
the greater of $150,000 or 75% of net cash flows from the acquisitions
completed on November 1, 1999 and December 1, 1999. The loan is
collateralized by the Company's oil and gas properties acquired with the loan
proceeds.

C. On October 25, 2000, the Company borrowed $3,000,000 at prime plus
3%, secured by the acquired interests in the Eland and Stadium fields in Stark
County, North Dakota, from US Bank National Association (US Bank). At June
30, 2002, the loan was paid in full.

(4) Stockholders' Equity

Preferred Stock

The Company has 3,000,000 shares of preferred stock authorized,
par value $.10 per share, issuable from time to time in one or more series. As
of June 30, 2002, 2001 and 2000, no preferred stock was issued.

F-20


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(4) Stockholders' Equity, Continued

Common Stock

In addition to the common stock transactions described earlier in
Note (2), the Company raised additional capital through the sale of its common
stock, net of commissions, of $225,000, $2,422,000 and $1,024,000 during the
years ended June 30, 2002, 2001 and 2000, respectively. Commissions consisted
of cash and/or warrants to purchase shares of the Company's common stock and
were accounted for as an adjustment to stockholders' equity. The warrants
were issued with exercise prices at market or at a discount of 10% or less.

Swartz Agreement

On July 21, 2000, the Company entered into an investment agreement
with Swartz Private Equity, LLC ("Swartz") and issued Swartz a warrant to
purchase 500,000 shares of common stock exercisable at $3.00 per share until
May 31, 2005. A warrant to purchase 150,000 shares of the Company's common
stock at $3.00 per share for five years was also issued to another unrelated
company as consideration for its efforts in this transaction and have been
recorded as an adjustment to equity. In the aggregate, the Company issued
options to Swartz and the other unrelated company valued at $1,436,000 as
consideration for the firm underwriting commitment of Swartz and related
services to be rendered are recorded in additional paid in capital. The
options were valued at market based on the quoted market price at the time of
issuance.

The investment agreement entitles the Company to issue and sell
("Put") up to $20 million of its common stock to Swartz, subject to a formula
based on the Company's stock price and trading volume over a three year period
following the effective date of a registration statement covering the resale
of the shares to the public. Pursuant to the terms of this investment
agreement the Company is not obligated to sell to Swartz all of the common
stock and additional warrants referenced in the agreement nor does the Company
intend to sell shares and warrants to the entity unless it is beneficial to
the Company. Each time the Company sells shares to Swartz, the Company is
required to also issue five (5) year warrants to Swartz in an amount
corresponding to 15% of the Put amount. Each of these additional warrants
will be exercisable at 110% of the market price for the applicable Put.

To exercise a Put, the Company must have an effective registration
statement on file with the Securities and Exchange Commission covering the
resale to the public by Swartz of any shares that it acquires under the
investment agreement. Swartz will pay the Company the lesser of the market
price for each share minus $0.25, or 91% of the market price for each share of
common stock under the Put. The market price of the shares of common stock
during the 20 business days immediately following the date the Company
exercises a Put is used to determine the purchase price Swartz will pay and
the number of shares the Company will issue in return.

F-21


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(4) Stockholders' Equity, Continued

If the Company does not Put at least $2,000,000 worth of its common
stock to Swartz during each one year period following the effective date of
the Investment Agreement, it must pay Swartz an annual non-usage fee. This fee
equals the difference between $200,000 and 10% of the value of the shares of
common stock it Put to Swartz during the one year period. The fee is due and
payable on the last business day of each one year period. Each annual non-
usage fee is payable to Swartz, in cash, within five (5) business days of the
date it accrued. The Company is not required to pay the annual non-usage fee
to Swartz in years it has met the Put requirements. The Company is also not
required to deliver the non-usage fee payment until Swartz has paid for all
Puts that are due. If the investment agreement is terminated, the Company must
pay Swartz the greater of (i) the non-usage fee described above, or (ii) the
difference between $200,000 and 10% of the value of the shares of common stock
Put to Swartz during all Puts to date. The Company may terminate its right to
initiate further Puts or terminate the investment agreement at any time by
providing Swartz with written notice of its intention to terminate. However,
any termination will not affect any other rights or obligations the Company
has concerning the investment agreement or any related agreement.

The Company cannot determine the exact number of shares of its
common stock issuable under the investment agreement and the resulting
dilution to its existing shareholders, which will vary with the extent to
which the Company utilizes the investment agreement and the market price of
its common stock.

Non-Qualified Stock Options-Directors and Employees

On May 31, 2002 at the annual meeting of the shareholders, the
shareholders ratified the Company's 2002 Incentive Plan (the "Incentive Plan")
under which it reserved up to an additional 2,000,000 shares of common stock.
This plan supercedes the Company's 1993 and 2001 Incentive Plans.

Incentive awards under the Incentive Plan may include non-qualified
or incentive stock options, limited appreciation rights, tandem stock
appreciation rights, phantom stock, stock bonuses or cash bonuses. Options
issued to date under our various incentive plans have been non-qualified stock
options as defined in such plans. Options are generally issued at market
price at the date of grant with various vesting and expiration terms based on
the discretion of the Incentive Plan Committee.

A summary of the stock option activity under the Company's various
plans and related information for the years ended June 30, 2002, 2001 and 2000
follows:





F-22


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(4) Stockholders' Equity, Continued



2002 2001 2000
Weighted-Average Weighted-Average Weighted-Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- ------ ---------- ----- ---------- -----


Outstanding-beginning of year 2,956,215 $ 3.14 1,635,886 $ 1.36 1,640,163 $ 1.05
Granted 547,500 $ 2.32 1,882,500 $ 4.00 387,500 $ 1.60
Exercised (95,228) $(0.62) (562,171) $(0.81) (391,777) $(0.29)
Expired (30,000) $(4.56) - - - -
---------- ------- --------- ------- --------- ------
Outstanding-end of year 3,378,487 $ 3.07 2,956,215 $ 3.14 1,635,886 $ 1.36
========= ====== ========= ======= ========== ======

Exercisable at end of year 3,358,487 $ 3.06 2,896,215 $ 3.12 1,635,886 $ 1.36
======== ====== ======== ====== ======== ======

The Company issued options to its Non-employee Directors.
Accordingly, the Company recorded stock option expense in the amount of
$113,000, $110,000 and $92,000, to its Directors for the years ended June 30,
2002, 2001 and 2000, respectively, for options issued below market.

Exercise prices for options outstanding under our various plans as
of June 30, 2002 ranged from $0.05 to $9.75 per share. All but 20,000 options
are fully vested at June 30, 2002. The weighted-average remaining contractual
life of those options is 7.96 years. A summary of the outstanding and
exercisable options at June 30, 2002, segregated by exercise price ranges, is
as follows:



Weighted
Average
Weighted Remaining Weighted
Exercise Average Contractual Average
Price Options Exercise Life Exercisable Exercise
Range Outstanding Price (in years) Options Price
- -------- ----------- --------- ----------- ----------- ---------

$0.05-$1.12 365,590 $0.05 6.25 365,590 $0.05
$1.13-$3.25 1,002,897 2.05 8.45 1,002,897 2.05
$3.26-$9.75 2,010,000 4.13 8.04 1,990,000 4.13
--------- ----- ---- --------- -----
3,378,487 $3.07 7.96 3,358,487 $3.06
========= ===== ==== ========= =====



F-23


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(4) Stockholders' Equity, Continued

Proforma information regarding net income (loss) and earnings (loss)
per share is required by Statement of Financial Accounting Standards 123 which
requires that the information be determined as if the Company has accounted
for its employee stock options granted under the fair value method of that
statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following Weighted-
average assumptions for the years ended June 30, 2002, 2001 and 2000,
respectively, risk-free interest rate of 4.73%, 5.1% and 5.5%, dividend yields
of 0%, 0% and 0%, volatility factors of the expected market price of the
Company's common stock of 65.68%, 64.03% and 56.07% and a weighted-average
expected life of the options of 6.37, 6.15 and 6.6 years.

The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost is recognized for
options granted at a price equal or greater to the fair market value of the
common stock. Had compensation cost for the Company's stock-based
compensation plan been determined using the fair value of the options at the
grant date, the Company's net income (loss) for the years ended June 30, 2002,
2001 and 2000 would have been as follows:



June 30,
-----------------------------------------------------
2002 2001 2000
---- ---- ----

Net Income (loss) $(6,253,000) $ 345,000 $(3,367,000)
FAS 123 compensation effect (790,000) (3,235,000) (133,000)
----------- ----------- -----------
Net loss after FAS 123
compensation effect $(7,043,000) $(2,890,000) $(3,500,000)
============ =========== ===========

Income per common share: $ (0.55) $ (0.28) $ (0.45)
============ =========== ============


Non-Qualified Stock Options (Non-Employee)

The Company has also issued options to non-employees. Accordingly,
the Company recorded stock option expense in the amount of $30,000, $299,000
and $446,000 to non-employees for the years ended June 30, 2002, 2001 and
2000, respectively.

A summary of the stock option and warrant activity and related
information for the years ended June 30, 2002, 2001 and 2000 is as follows:

F-24


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(4) Stockholders' Equity, Continued



2002 2001 2000

Weighted-Average Weighted-Average Weighted-Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- -------- ----- ------- -----

Outstanding-beginning of year
2,140,000 $ 3.56 1,562,500 $ 3.33 1,194,500 $ 4.09
Granted 35,000 $ 3.25 1,250,000 $ 3.46 1,090,000 $ 2.99
Exercised (171,000) $(2.04) (360,000)$ (2.85) (657,000) $(1.92)
Re-priced - - - - 350,000 $ 1.93
Returned for re-pricing - - - - (350,000) $(3.48)

Purchased from Kaiser-Francis
Oil Co - - (250,000)$ (2.00) - -

Expired (50,000) $(6.00) (62,500)$(6.125) (65,000) $(2.00)
--------- ------ --------- ------- --------- ------
Outstanding end of year 1,954,000 $ 3.62 2,140,000 $ 3.56 1,562,500 $ 3.33
========= ====== ========= ======= ========= ======
Exercisable at end of
year 1,954,000 $ 3.62 2,140,000 $ 3.56 1,562,500 $ 3.33
========= ====== ========= ======= ========= ======


Exercise prices for options outstanding under the plans as of June
30, 2002 ranged from $2.00 to $6.00 per share. All options are fully vested
at June 30, 2002. The weighted-average remaining contractual life of those
options is 1.71 years. A summary of the outstanding and exercisable options
at June 30, 2002, segregated by exercise price ranges, is as follows:

Weighted
Average
Weighted Remaining Weighted
Exercise Average Contractual Average
Price Options Exercise Life Exercisable Exercise
Range Outstanding Price (in years) Options Price
- -------- ----------- ---------- ----------- ----------- ----------

$2.00-$3.25 1,084,000 $2.97 2.47 1,084,000 $2.97
$3.26-$6.00 870,000 4.43 0.94 870,000 4.43
--------- ------ ---- --------- -----
1,954,000 $3.62 1.71 1,954,000 $3.62
========= ===== ==== ========= =====



F-25



DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(5) Employee Benefits

The Company adopted a profit sharing plan on January 1, 2002. All
employees are eligible to participate in and contributions to the profit
sharing plan are voluntary and must be approved by the Board of Directors.
Amounts contributed to the Plan will vest over a six year service period.

Prior to the adoption of a profit sharing plan, the Company sponsored a
qualified tax deferred savings plan in the form of a Savings Incentive Match
Plan for Employees ("SIMPLE") IRA plan available to companies with fewer than
100 employees. Under the profit sharing plan, the Company's employees made
annual salary reduction contributions of up to 3% of an employee's base salary
up to a maximum of $6,000 (adjusted for inflation) on a pre-tax basis. The
Company matched contributions on behalf of employees who met certain
eligibility requirements.

For the years ended June 30, 2002, 2001 and 2000 the Company contributed
$68,000, $18,000 and $18,000, respectively under the plans.

(6) Income Taxes

At June 30, 2002, 2001 and 2000, the Company's significant deferred tax
assets and liabilities are summarized as follows:



2002 2001 2000
---- ---- ----

Deferred tax assets:
Net operating loss/foreign
Carryforwards 11,534,000 $ 9,378,000 $ 9,591,000
Other 87,000 19,000 19,000
Oil and gas properties,
principally due to
differences in basis and
depreciation and depletion - - 555,000
---------- ------------ ------------
Gross deferred tax assets 11,621,000 9,397,000 10,165,000
Less valuation allowance (10,549,000) (8,144,000) (10,165,000)

Deferred tax liability:

Oil and gas properties,
principally due to
differences in basis and
depreciation and depletion (1,072,000) (1,253,000) -
----------- ------------ ------------
Net deferred tax asset: $ - $ - $ -
=========== ============ ============
Current Liability
Other $ 703,000 - -
=========== ============ ============


F-26


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(6) Income Taxes, Continued

The current income tax liability of $703,000 is due to estimate
foreign taxes due as a result of the sale of Australian property acquired in
the Piper Petroleum Company acquisition.

No income tax benefit has been recorded for the years ended June 30,
2002, 2001 or 2000 since the benefit of the net operating loss carryforward
and other net deferred tax assets arising in those periods has been offset by
the change in the valuation allowance for such net deferred tax assets.

At June 30, 2002, the Company had net operating loss carryforwards
for regular and alternative minimum tax purposes of approximately $28,700,000
and $28,000,000. If not utilized, the tax net operating loss carryforwards
will expire during the period from 2002 through 2022. If not utilized,
approximately $1.8 million of net operating losses will expire over the next
five years. Net operating loss carryforwards attributable to Amber prior to
1993 of approximately $1,162,000, included in the above amounts are available
only to offset future taxable income of Amber.

In addition, Delta Petroleum and their Subsidiaries experienced a change
in ownership in May 2002 with the acquisition of Castle and as a result, its
annual net operating loss carry-forward usage is limited. The Company
believes it has a substantial unapplied built-in gain at June 30, 2002. In
addition, the limitation is increased by the Company's net built-in gain at
the time of change in ownership to the extent the related assets are sold in
the subsequent five year period. The annual limitation due to the ownership
change is estimated to be $2,922,000.

(7) Related Party Transactions

Transactions with Officers

The Company's Board of Directors has granted each of our officers
the right to participate in the drilling on the same terms as the Company in
up to a five percent (5%) working interest in any well drilled, re-entered,
completed or recompleted by us on our acreage (provided that any well to be
re-entered or recompleted is not then producing economic quantities of
hydrocarbons).

On February 12, 2001, the Company's Board of Directors permitted
Aleron H. Larson, Jr., Chairman, Roger A. Parker, President, and Kevin Nanke,
CFO, to purchase working interests of 5% each for Messrs. Larson and Parker
and 2-1/2% for Mr. Nanke in the Company's Cedar State gas property located in




F-27


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(7) Related Party Transactions, Continued

Eddy County, New Mexico and in the Company's Ponderosa Prospect consisting of
approximately 52,000 gross acres in Harding and Butte Counties, South Dakota
held for exploration. These officers were authorized to purchase these
interests on or before March 1, 2001 at a purchase price equivalent to the
amounts paid by Delta for each property as reflected upon our books by
delivering to us shares of Delta common stock at the February 12, 2001 closing
price of $5.125 per share, the market closing price on this date. Messrs.
Larson and Parker each delivered 10,256 shares in fiscal 2002 and 31,310
shares in fiscal 2001 and Mr. Nanke delivered 5,128 shares in fiscal 2002 and
15,655 shares in fiscal 2001 in exchange for their interests in these
properties. Also on February 12, 2001, the Company granted Messrs. Larson and
Parker and Mr. Nanke the right to participate in the drilling of the Austin
State #1 well in Eddy County, New Mexico by committing on February 12, 2001
(prior to any bore hole knowledge or information relating to the objective
zone or zones) to pay 5% each for Messrs. Larson and Parker and 2-1/2% for Mr.
Nanke of Delta's working interest costs of drilling and completion or
abandonment costs which costs were paid in Delta common stock at $5.125 per
share, the market closing price on this date. All of these officers committed
to participate in the well.

Effective June 1, 2002, Mr. Parker exchanged properties with a fair
market value of approximately $150,000 in exchange for a reduction in joint
interest billing owed to the Company. The fair market value was initially
determined by the Company's engineer and verified by our independent engineer.

On January 3, 2000, the Company's Compensation Committee authorized
the officers of the Company to purchase some of the Company's securities
available for sale at the market closing price on that date. The Company's
officers purchased 47,250 shares of the Company's marketable securities
available for sale for a cost of $238,000. Because the market price per share
was below the Company's cost basis the Company recorded a loss on this
transaction of $108,000.

On December 30, 1999, the Company's Incentive Plan Committee granted
the Chief Financial Officer 25,000 options to purchase the Company's common
stock at $.01 per share. Stock option expense of $62,000 has been recorded
based on the difference between the option price and the quoted market price
on the date of grant.

During fiscal 2001 and 2000, Mr. Larson and Mr. Parker guaranteed
certain borrowings which have subsequently been paid in full. As
consideration for the guarantee of the Company's indebtedness, each officer
was assigned a 1% overriding royalty interest ("ORRI") in the properties
acquired with the proceeds of the borrowings. Each officer earned
approximately $71,000, $83,000 and $35,000 for their respective 1% ORRI during
fiscal 2002, 2001 and 2000, respectively.


F-28


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(7) Related Party Transactions, Continued

Accounts Receivable Related Parties

At June 30, 2002, the Company had $264,000 of receivables from
related parties. These amounts include drilling costs, and lease operating
expense on wells owned by the related parties and operated by the Company and
advances. The amounts are due on open account and are non-interest bearing.
Subsequent to year end, advanced amounts of $203,000 were paid in full.

Transactions with Other Stockholders

BWAB Limited Liability Company

On January 18, 2001 and April 13, 2001, Franklin Energy LLC, an
affiliate of BWAB earned 20,250 and 10,000 shares of the Company's common
stock, respectively for their assistance in the purchase and sale of the
certain oil and gas properties. The shares issued were valued at $121,000
which was a 10% discount to market, based on the quoted market price of our
stock at the date of the acquisition. The shares were accounted for as an
adjustment to the purchase price and capitalized to oil and gas properties.

On September 29, 2000, the Company borrowed $500,000 with and
interest rate of 10% from BWAB. On December 18, 2000, the note and accrued
interest of $11,000 was converted into 200,000 shares of the Company's
restricted common stock.

Burdette A. Ogle

The Company has a month to month consulting agreement with Messrs.
Burdette A. Ogle and Ronald Heck (collectively "Ogle"), a less than 10%
shareholder, which provides for a monthly fee of $10,000.

The Company annually pays Ogle a $350,000 minimum production payment
as payment for interests in certain undeveloped Federal Units offshore Santa
Barbara which were assigned to the Company by Ogle. This payment is recorded
as an addition to undeveloped offshore California properties. As of June 30,
2002, the Company has paid a total of $2,600,000 in minimum royalty payments
and is to pay a minimum of $350,000 annually until the earlier of: 1) when
production payments accumulate to $8,000,000; 2) when 80% of the ultimate
reserves of any lease under the agreement have been produced; or 3) 30 years
from the date of purchase, January 3, 1995.

Evergreen Resources, Inc.

On January 3, 2001, the Company granted an option to acquire 50% of
the properties acquired under the Ogle transaction discussed above to
Evergreen Resources, Inc. ("Evergreen"), a less than 10% shareholder, until
September 30, 2001. The option expired September 30, 2001.


F-29


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(8) Earnings Per Share

The following table sets forth the computation of basic and diluted
earnings per share:

Year Ended June 30,
----------------------------------------------------
2002 2001 2000

Numerator:
Numerator for basic and diluted
earnings per share - income available
to common stockholders $(6,253,000) $ 345,000 $(3,367,000)
----------- ------------- -----------
Denominator:
Denominator for basic earnings
per share-weighted average shares
outstanding 12,682,000 10,289,000 7,271,000

Effect of dilutive securities-
stock options and warrants * 1,464,000 *
----------- ------------- -----------
Denominator for diluted
earnings per common shares $12,682,000 11,753,000 7,271,000
=========== ============= ===========

Basic earnings per common share $ (.49) $ .03 $ (.46)
=========== ============= ===========

Diluted earnings per common share $ (.49) $ .03 $ (.46)
=========== ============= ===========

*Potentially dilutive securities outstanding 5,332,487 in 2002 and 3,198,386 in 2000 were anti-
dilutive.


(9) Commitments

The Company rents an office in Denver under an operating lease which
expires in September 2008. Rent expense, net of sublease rental income, for
the years ended June 30, 2002, 2001 and 2000 was approximately $108,700,
$82,000 and $60,000, respectively. Future minimum payments under non-
cancelable operating leases are as follows:

2003 $ 213,500
2004 $ 211,900
2005 $ 205,300
2006 $ 210,000
2007 $ 210,000
Thereafter $ 259,000



F-30


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(9) Commitments, Continued

Beginning in fiscal 2003, we began to hedge a portion of our oil and gas
production using swap and collar agreements. The purpose of these hedge
agreements, whereby the Company generally receives a fixed price for its
production, is to provide a measure of stability to our cash flow in an
environment of volatile oil and gas prices and to manage the exposure to
commodity price risk. The Company entered into agreements to hedge
approximately 40% of its offshore oil production for production months July
2002 through March 2003. In addition, the Company has entered into agreements
to hedge approximately 40% of its onshore oil production and 30% of its
onshore gas production for production months August 2002 through September
2003.

(10) Selected Quarterly Financial Data (Unaudited)




Fiscal 2002 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ----------- ----------- ----------- ----------- -----------

Revenue $2,443,000 $1,789,000 $1,058,000 $2,920,000

Earnings (loss) from operations 105,000 (1,342,000) (1,322,000) (2,482,000)

Net Income (loss) (244,000) (1,662,000) (1,587,000) (2,760,000)

Basic Earnings (loss) per share $ (.02) $ (.15) $ (.13) $ (.17)

Diluted earnings (loss) per
share $ (.02) $ (.15)* $ (.13)* $ (.17)*

*Potentially dilutive securities outstanding were anti-dilutive

Fiscal 2001 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ----------- ----------- ----------- ----------- -----------

Revenue $2,401,000 $3,367,000 $3,702,000 $3,356,000

Earnings (loss) from operations 247,000 936,000 805,000 (321,000)

Net Income (loss) 270,000 310,000 331,000 (548,000)

Basic Earnings (loss) per share $ .03 $ .03 $ .03 $ (.05)

Diluted earnings (loss) per
share $ .03 $ .02 $ .02 $ (.05)*

*Potentially dilutive securities outstanding were anti-dilutive




F-31


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(11) Disclosures About Capitalized Costs, Cost Incurred and Major Customers

Capitalized costs related to oil and gas producing activities are as
follows:
June 30,
2002 2001
----- ----
Unproved undeveloped offshore
California properties* $9,722,000 $ 9,359,000
Proved undeveloped offshore
California properties 843,000 1,149,000
Undeveloped onshore
domestic properties 10,114,000 1,616,000
Developed Offshore California
properties 6,204,000 4,699,000
Developed onshore domestic
properties 45,893,000 13,038,000
---------- ----------
72,776,000 29,861,000
Accumulated depreciation
and depletion (6,925,000) (4,940,000)
---------- -----------
$65,851,000 $24,921,000
=========== ===========

* The unproved undeveloped offshore California properties have no proved
reserves.

Costs incurred in oil and gas producing activities are as follows:


June 30,
---------------------------------------------------------------------
2002 2001 2000
Onshore Offshore Onshore Offshore Onshore Offshore
------- -------- ------- -------- -------- --------

Unproved property
acquisition costs $ 9,115,000 $ 363,000 $1,332,000 $ 350,000 $ - $1,739,000
Proved property
acquisition costs $38,290,000 - $7,480,000 $2,931,000 $2,756,000 $4,308,000
Development cost
incurred on
undeveloped
reserves $ 418,000 $ 678,000 $ 686,000 $ 39,000 $ 328,000 $ -
Development costs-
other $ 569,000 $ 521,000 $ 592,000 $ 375,000 $ 73,000 $ 351,000
Exploration costs $ 108,000 $ 47,000 $ 32,000 $ 57,000 $ 33,000 $ 14,000
----------- ---------- ---------- ---------- ---------- ----------
$48,500,000 $1,609,000 $9,636,000 $4,399,000 $2,901,000 $6,740,000
Transferred amounts =========== ========== ========== ========== ========== ==========
from undeveloped
to developed
properties $ - $ 306,000 $ - $ 510,000 $ - $ 55,000
Transferred from oil
and gas properties
to deferred
financing costs $ - $ - $ - $ 330,000 $ - $ -


F-32


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(11) Disclosures About Capitalized Costs, Cost Incurred and Major Customers,
Continued

A summary of the results of operations for oil and gas producing
activities, excluding general and administrative cost, is as follows:



June 30,
--------------------------------------------------------------------------
2002 2001 2000
Onshore Offshore Onshore Offshore Onshore Offshore
------- -------- ------- -------- ------- --------

Revenue:
Oil and gas
revenues $4,365,000 $3,756,000 $6,564,000 $5,690,000 $1,199,000 $2,157,000
Operating Income $ 177,000 $ - $ 106,000 $ - $ 76,000 $ -
Gain (loss) on
sale of oil and
gas properties $ (88,000) $ - $ (1,000) $ 459,000 $ 75,000 $ -

Expenses:
Lease operating $1,328,000 $3,044,000 $ 805,000 $3,893,000 $ 345,000 $2,060,000
Depletion $2,237,000 $1,099,000 $1,691,000 $ 839,000 $ 325,000 $ 561,000
Exploration $ 108,000 $ 47,000 $ 32,000 $ 57,000 $ 33,000 $ 14,000

Abandonment and
impaired
properties $1,480,000 $ - $ 798,000 $ - $ - $ -
Dry hole costs $ 396,000 $ - $ 94,000 $ - $ - $ -
---------- ---------- ---------- ---------- ---------- ----------
Results of
operations of
oil and gas
producing
activities $(1,095,000) $ (434,000) $3,249,000 $2,360,000 $ 647,000 $ (478,000)
=========== ========== ========== ========== ========== ==========



Statement of Financial Accounting Standards 131 "Disclosures about
segments of an enterprises and Related Information" (SFAS 131) establishes
standards for reporting information about operating segments in annual and
interim financial statements. SFAS 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The Company manages its business through one operating segment.




F-33


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(11) Disclosures About Capitalized Costs, Cost Incurred and Major Customers,
Continued

The Company's sales of oil and gas to individual customers which exceeded
10% of the Company's total oil and gas sales for the years ended June 30,
2002, 2001 and 2000 were:

2002 2001 2000
---- ---- ----
A 73% 59% 71%
B 10% 19% -
C 3% 5% 13%

(12) Information Regarding Proved Oil and Gas Reserves (Unaudited)

Proved Oil and Gas Reserves. Proved oil and gas reserves are the
estimated quantities of crude oil, natural gas, and natural gas liquids which
geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and
operating conditions, i.e., prices and costs as of the date the estimate is
made. Prices include consideration of changes in existing prices provided only
by contractual arrangements, but not on escalations based upon future
conditions.

(i) Reservoirs are considered proved if economic producability is
supported by either actual production or conclusive formation test. The area
of a reservoir considered proved includes (A) that portion delineated by
drilling and defined by gas-oil and/or oil-water contacts, if any; and (B) the
immediately adjoining portions not yet drilled, but which can be reasonably
judged as economically productive on the basis of available geological and
engineering data. In the absence of information on fluid contacts, the lowest
known structural occurrence of hydrocarbons controls the lower proved limit of
the reservoir.

(ii) Reserves which can be produced economically through application
of improved recovery techniques (such as fluid injection) are included in the
"proved" classification when successful testing by a pilot project, or the
operation of an installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.

(iii) Estimates of proved reserves do not include the following: (A)
oil that may become available from known reservoirs but is classified
separately as "indicated additional reserves"; (B) crude oil, natural gas, and
natural gas liquids, the recovery of which is subject to reasonable doubt
because of uncertainty as to geology, reservoir characteristics, or economic
factors; (C) crude oil, natural gas, and natural gas liquids, that may occur
in underlaid prospects; and (D) crude oil, natural gas, and natural gas
liquids, that may be recovered from oil shales, coal, gilsonite and other such
sources.

F-34


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(12) Information Regarding Proved Oil and Gas Reserves (Unaudited)

Proved developed oil and gas reserves are reserves that can be expected
to be recovered through existing wells with existing equipment and operating
methods. Additional oil and gas expected to be obtained through the
application of fluid injection or other improved recovery techniques for
supplementing the natural forces and mechanisms of primary recovery should be
included as "proved developed reserves" only after testing by a pilot project
or after the operation of an installed program has confirmed through
production response that increased recovery will be achieved.

Proved undeveloped oil and gas reserves are reserves that are expected to
be recovered from new wells on undrilled acreage, or from existing wells where
a relatively major expenditure is required for recompletion. Reserves on
undrilled acreage shall be limited to those drilling units offsetting
productive units that are reasonably certain of production when drilled.
Proved reserves for other undrilled units can be claimed only where it can be
demonstrated with certainty that there is continuity of production from the
existing productive formation. Under no circumstances should estimates for
proved undeveloped reserves be attributable to any acreage for which an
application of fluid injection or other improved recovery technique is
contemplated, unless such techniques have been proved effective by actual
tests in the area and in the same reservoir.


























F-35


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(12) Information Regarding Proved Oil and Gas Reserves (Unaudited), Continued

A summary of changes in estimated quantities of proved reserves for the
years ended June 30, 2002, 2001 and 2000 are as follows:

Onshore Offshore
GAS OIL GAS OIL
(MCF) (BBLS) (MCF) (BBLS)
----- ------ ----- ------
Balance at July 1, 1999 3,827,000 143,000 - -
Revisions of quantity
estimate 449,000 10,000 - -
Purchase of properties 3,166,000 107,000 - 1,771,000
Production (362,000) (10,000) - (187,000)
--------- -------- ------ ---------
Balance at June 30, 2000 7,080,000 250,000 - 1,584,000

Revisions of quantity
estimate (3,743,000) (25,000) - (90,000)
Extensions and discoveries 102,000 3,000 - -
Purchase of properties 1,782,000 233,000 - 747,000

Sales of properties - - - (720,000)
Production (539,000) (117,000) - (308,000)
---------- -------- ------- ---------

Balance at June 30, 2001 4,682,000 344,000 - 1,213,000
Revisions of quantity
estimate (269,000) 71,000 - (49,000)
Extensions and discoveries 42,000 2,000 - -
Purchase of properties 43,680,000 3,845,000 - -
Sales of properties (3,311,000) (256,000) - -
Production (871,000) (87,000) - (262,000)
---------- --------- -------- ---------
43,953,000 3,919,000 - 902,000
========== ========= ======== =========

Proved developed reserves:

June 30, 2000 5,672,000 120,000 - 908,000
June 30, 2001 4,474,000 342,000 - 906,000
June 30, 2002 25,100,000 1,651,000 - 849,000







F-36


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(12) Information Regarding Proved Oil and Gas Reserves (Unaudited), Continued

Future net cash flows presented below are computed using year-end prices
and costs and are net of all overriding royalty revenue interests.

Future corporate overhead expenses and interest expense have not been
included.

Onshore Offshore Combined
------- -------- --------

June 30, 2000

Future cash inflows $ 30,760,000 36,820,000 $ 67,580,000
Future costs:
Production 7,713,000 12,027,000 19,740,000
Development 1,584,000 3,309,000 4,893,000
Income taxes - - -
------------ ---------- ------------
Future net cash flows 21,463,000 21,485,000 42,948,000

10% discount factor 10,427,000 5,394,000 15,821,000
------------ ---------- ------------
Standardized measure of discounted
future net cash flows $ 11,036,000 $16,091,000 $ 27,127,000
============ =========== ============
June 30, 2001

Future cash inflows $ 24,570,000 22,098,000 $ 46,668,000
Future costs:
Production 7,971,000 11,969,000 19,940,000
Development 382,000 2,010,000 2,392,000
Income taxes - - -
------------ ---------- ------------
Future net cash flows 16,217,000 8,119,000 24,336,000
10% discount factor 6,267,000 2,095,000 8,362,000
------------ ---------- ------------
Standardized measure of discounted
future net cash flows $ 9,950,000 $6,024,000 $ 15,974,000
============ ========== ============
June 30, 2002

Future cash inflows
Future costs: $247,611,000 16,600,000 $264,211,000

Production 84,109,000 10,067,000 94,176,000
Development 15,056,000 1,089,000 16,145,000
Income taxes 28,078,000 - 28,078,000
------------ ---------- ------------
Future net cash flows $120,668,000 5,444,000 $125,812,000
10% discount factor 62,217,000 1,211,000 63,428,000
------------ ---------- ------------
Standardized measure of discounted
future net cash flows $ 58,151,000 4,233,000 $ 62,384,000
============ ========== ============
Standardized measure of discounted
future net cash flows before tax $ 72,073,000 $4,233,000 $ 76,306,000
============ ========== ============
Estimated future development cost
anticipated for fiscal
2003 and 2004 on existing
properties $ 12,394,000 $ 476,000 $ 12,870,000
============ ========== ============




F-37


DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2002, 2001 and 2000

(12) Information Regarding Proved Oil and Gas Reserves (Unaudited), Continued

The principal sources of changes in the standardized measure of
discounted net cash flows during the years ended June 30, 2002, 2001 and 2000
are as follows:


2002 2001 2000
------ ------- ------

Beginning of year $15,974,000 $27,127,000 $3,352,000

Sales of oil and gas produced during the
period, net of production costs (3,838,000) (7,556,000) (950,000)

Purchase of reserves in place 70,097,000 9,082,000 21,678,000

Net change in prices and production costs (1,879,000) (2,634,000) 2,080,000

Changes in estimated future development
costs (233,000) (371,000) 218,000

Extensions, discoveries and improved
recovery 96,000 242,000 -

Revisions of previous quantity estimates,
estimated timing of development and
other (367,000) (9,739,000) 336,000

Previously estimated development costs
incurred during the period 1,869,000 686,000 78,000

Sales of reserves in place (7,011,000) (3,576,000) -

Change in future income tax (13,921,000) - -

Accretion of discount 1,597,000 2,713,000 335,000
----------- ---------- ----------

End of year $62,384,000 $15,974,000 $27,127,000
=========== =========== ===========







F-38


SIGNATURES

Pursuant to the requirements of the Section 13 or 15 (d) or the
Securities Exchange of Act of 1934, we have caused this Form 10-K to be signed
on our behalf by the undersigned, thereunto duly authorized, in the City of
Denver and State of Colorado on the 20th day of September 2002.

DELTA PETROLEUM CORPORATION


By: /s/ Roger A. Parker
---------------------------------
Roger A. Parker, President and
Chief Executive Officer

By: /s/ Kevin K. Nanke
---------------------------------
Kevin K. Nanke, Treasurer and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on our behalf and in
the capacities and on the dates indicated.

Signature and Title Date
- ------------------- ----

Aleron H. Larson, Jr., Director September 20, 2002
- ----------------------------------
Aleron H. Larson, Jr., Director

/s/ Roger A. Parker September 20, 2002
- ----------------------------------
Roger A. Parker, Director

September __, 2002
- ----------------------------------
James B. Wallace, Director

/s/ Jerrie F. Eckelberger September 20, 2002
- ----------------------------------
Jerrie F. Eckelberger, Director

September __, 2002
- ----------------------------------
John P. Keller

/s/ Joseph L. Castle II
- ---------------------------------- September 20, 2002
Joseph L. Castle II

September __, 2002
- ----------------------------------
Russell S. Lewis



CERTIFICATIONS


I, Roger A. Parker, certify that:

1. I have reviewed this annual report on Form 10-K of Delta Petroleum
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Dated: September 20, 2002


/s/ Roger A. Parker
-----------------------------------
Roger A. Parker
Chief Executive Officer
(Principal Executive Officer)

I, Kevin K. Nanke, certify that:

1. I have reviewed this annual report on Form 10-K of Delta Petroleum
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Dated: September 20, 2002


/s/ Kevin K. Nanke
-----------------------------------
Kevin K. Nanke
Chief Financial Officer
(Principal Financial Officer)





CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER OF
DELTA PETROLEUM CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350


We certify that, to the best of our knowledge, the Quarterly Report on
Form 10-K of Delta Petroleum Corporation, for the period ending June 30, 2002:

(1) complies with the requirements of Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of Delta
Petroleum Corporation.



/s/ Roger A. Parker /s/ Kevin K. Nanke
- ---------------------------- ------------------------------
Roger A. Parker Kevin K. Nanke
Chief Executive Officer Chief Financial Officer


September 20, 2002 September 20, 2002