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

FORM 10-Q

Commission file number 1-14344

Registrant’s telephone number, including area code (303) 389-3600

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

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

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

There were 27,543,310 shares of common stock outstanding on August 1, 2002.

PART I.  FINANCIAL INFORMATION

          The financial statements included herein have been prepared in conformity with generally accepted accounting principles. The statements are unaudited but reflect all adjustments, which, in the opinion of management, are necessary to fairly present the Company’s financial position and results of operations. On May 23, 2002, the Company’s Board of Directors approved a 5-for-4 stock split to be effected in the form of a stock dividend to common stockholders of record as of June 10, 2002 with a payment date of June 20, 2002. All share and per share amounts for all periods have been restated to reflect the 5-for-4 stock split.

          On July 16, 2002, the Board of Directors of the Company approved the Audit Committee’s recommendation to hire Deloitte & Touche, LLP (“Deloitte”) as the Company’s independent auditors to replace Arthur Anderson LLP (“Arthur Anderson”), who was dismissed immediately. Deloitte’s appointment was announced on July 29, 2002. As part of the auditor selection process, Deloitte performed its normal client acceptance procedures with respect to the Company.

          While it was not required, the Company engaged Deloitte to re-audit the three years ended December 31, 2001. The re-audits are expected to be completed by September 30, 2002. Upon completion of the re-audits, there could be adjustments for the years being re-audited.

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PATINA OIL & GAS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME
(In thousands)

The accompanying notes are an integral part of these statements.

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PATINA OIL & GAS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

The accompanying notes are an integral part of these statements.

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PATINA OIL & GAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)     ORGANIZATION AND NATURE OF BUSINESS

          Patina Oil & Gas Corporation (the “Company” or “Patina”), a Delaware corporation, was formed in 1996 to hold the assets of Snyder Oil Corporation (“SOCO”) in the Wattenberg Field and to facilitate the acquisition of Gerrity Oil & Gas Corporation (“Gerrity”). In the transaction, SOCO received 17.5 million common shares of Patina. In 1997, a series of transactions eliminated SOCO’s ownership in the Company.

          In November 2000, Patina acquired various property interests out of bankruptcy through Elysium Energy, L.L.C. (“Elysium”), a New York limited liability company, in which Patina holds a 50% interest. Patina invested $21.0 million and provided a $60.0 million credit facility to Elysium, which was subsequently refinanced. See Note (9). The accompanying consolidated financial statements were prepared on a proportionate consolidation basis, including Patina’s 50% interest in Elysium’s assets, liabilities, revenues and expenses. All significant intercompany balances and transactions have been eliminated in consolidation.

          The Company’s operations consist of the acquisition, development, exploitation and production of oil and gas properties. Historically, Patina’s properties had been located almost exclusively in the Wattenberg Field of Colorado’s D-J Basin. Over the past 18 months, the Company accumulated significant acreage positions in three Rocky Mountain basins and a leasehold position with production in West Texas (“grassroots projects”) in an effort to expand and diversify its asset base. Through Elysium and these recently initiated exploration and development projects, the Company now has oil and gas properties in central Kansas, the Illinois Basin, Utah, Wyoming, Texas and the San Joaquin Basin in California.

(2)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Producing Activities

          The Company utilizes the successful efforts method of accounting for its oil and gas properties. Leasehold costs are capitalized when incurred. Unproved properties are assessed periodically within specific geographic areas and impairments in value are charged to expense. Exploratory expenses, including geological and geophysical expenses and delay rentals, are charged to expense as incurred. Exploratory drilling costs are capitalized, but charged to expense if the well is determined to be unsuccessful. Costs of productive wells, unsuccessful developmental wells and productive leases are capitalized and amortized on a unit-of-production basis over the life of the associated oil and gas reserves. Oil is converted to natural gas equivalents (Mcfe) at the rate of one barrel to six thousand cubic feet of natural gas (“Mcf”). Amortization of capitalized costs has generally been provided on a field-by-field basis. An accrual of approximately $1.0 million has been provided for estimated future abandonment costs on certain Elysium properties as of June 30, 2002. No accrual has been provided for the Wattenberg properties, as management believes that salvage value will approximate abandonment costs.

          The Company follows the provisions of Statement of Financial Accounting Standards No. 121 (“SFAS 121”), “Accounting for the Impairment of Long-Lived Assets,” which requires the Company to assess the need for an impairment of capitalized costs of oil and gas properties on a field-by-field basis (see Recent Accounting Pronouncements). When the net book value of properties exceeds their undiscounted future cash flows, the cost of the property is written down to “fair value,” which is determined using discounted future cash flows on a field-by field basis. In 1997, the Company recorded an impairment of $26.0 million to oil and gas properties, primarily due to low oil and gas prices at that time. While no impairments have been necessary since 1997, changes in oil and gas prices, underlying assumptions or amortization units could result in impairments in the future.

Field equipment and other

          Depreciation of field equipment and other is provided using the straight-line method generally ranging from three to five years.

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Section 29 Tax Credits

          Between 1996 and 2000, the Company entered into various arrangements to monetize its Section 29 tax credits. These arrangements resulted in revenue increases of approximately $0.40 per Mcf on production volumes from qualified properties. The Company recorded additional gas revenues of $602,000 for the six months ended June 30, 2001. As the Company’s profitability allowed it to utilize its tax credits, they were reacquired in March 2001.

Gas Imbalances

          The Company uses the sales method to account for gas imbalances. Under this method, revenue is recognized based on cash received rather than the Company’s proportionate share of gas produced. Gas imbalances at December 31, 2001 and June 30, 2002 were insignificant.

Comprehensive Income

          The Company follows the provisions of SFAS No. 130, “Reporting Comprehensive Income.” In addition to net income, comprehensive income includes all changes in equity during a period, except those resulting from investments and distributions to the owners of the Company. The Company had no such changes prior to 2001. The components of other comprehensive income and related tax effects for the six months ended June 30, 2002 were as follows (in thousands):

          The reversal of impairment related to a fourth quarter 2001 non-cash provision of $6.4 million ($4.1 million net of taxes) to write-off of all outstanding oil and gas hedges with Enron North America (“Enron”). The write-off reduced earnings per share in the quarter and year by $0.14 (fully diluted). In accordance with generally accepted accounting principles, the Company recorded non-cash revenues of $3.7 million in the first six months of 2002. An additional $2.7 million will be recorded in the course of 2002, as the Enron hedges would have expired.

          The Company has received verbal offers to sell its Enron claims to various third parties for a fraction of the face amount. While the Company has no immediate plans to accept any offer, should management determine that acceptance of an offer provides the Company with the best opportunity to monetize its Enron bankruptcy claims, the Company will recognize additional earnings at that time or upon any other resolution of the claims.

          The following table schedules out the reversal of the impairment related to the Enron hedges recorded in other comprehensive income at June 30, 2002 and how it will impact earnings for the remainder of 2002 (in thousands):

The write-off of the Enron hedges in the fourth quarter of 2001 and the subsequent reversal into income in 2002 have no ultimate economic impact on the financial statements or the Company’s financial position.

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Financial Instruments

          The book value and estimated fair value of cash and equivalents was $250,000 and $628,000 at December 31, 2001 and June 30, 2002, respectively. The book value and estimated fair value of the senior debt was $77.0 million and $52.0 million at December 31, 2001 and June 30, 2002, respectively. The book value of these assets and liabilities approximates fair value due to their short maturity or floating rate structure.

Derivative Instruments and Hedging Activities

          The Company regularly enters into commodity derivative contracts and fixed-price physical contracts to manage its exposure to oil and gas price volatility. The contracts, which are generally placed with major financial institutions or counter parties which management believes to be of high credit quality, may take the form of futures contracts, swaps or options. The oil and gas reference prices of these contracts are based upon oil and natural gas futures, which have a high degree of historical correlation with actual prices received by the Company. Currently, the Company’s oil and gas swap contracts are designated as cash flow hedges and the remaining discussion will relate exclusively to this type of derivative instrument.

          The Company entered into various swap contracts for oil based on NYMEX prices for the first six months of 2001 and 2002, recognizing a loss of $537,000 and a gain of $1.0 million, respectively, related to these contracts. The Company entered into various swap contracts for natural gas based on the Colorado Interstate Gas (“CIG”) index during the first six months of 2001 and 2002, recognizing a loss of $15.4 million and a gain of $12.5 million, respectively, related to these contracts.

          At June 30, 2002, the Company was a party to swap contracts for oil based on NYMEX prices covering approximately 5,500 barrels of oil per day for the remainder of 2002 at fixed prices ranging from $21.50 to $27.21 per barrel and 2,250 barrels of oil per day for 2003 at fixed prices ranging from $22.31 to $25.21 per barrel. These swaps are summarized in the table below. The overall weighted average hedged price for the swap contracts is $23.40 per barrel for the remainder of 2002 and $23.24 per barrel for 2003. The unrecognized losses on these contracts totaled $4.0 million based on NYMEX futures prices at June 30, 2002.

          At June 30, 2002, the Company was a party to swap contracts for natural gas based on CIG index prices covering approximately 70,000 MMBtu’s per day for the remainder of 2002 at fixed prices ranging from $2.00 to $4.43 per MMBtu. The overall weighted average hedged price for the swap contracts is $2.76 per MMBtu for the remainder 2002. The Company also entered into natural gas swap contracts for 2003, 2004 and 2005 as of June 30, 2002, which are summarized in the table below. The unrecognized gains on these contracts totaled $22.2 million based on CIG futures prices at June 30, 2002.

At June 30, 2002, the Company was a party to the fixed price swaps summarized below:

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          The Company follows SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which 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 derivatives’ fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company adopted SFAS No. 133 on January 1, 2001.

The balance sheet impact of adopting of SFAS No. 133 on January 1, 2001 was as follows (in millions):

          During the first six months of 2002 (excluding the impairment related to the Enron hedges), net hedging gains of $13.3 million ($8.5 million after tax) were transferred from other comprehensive income to earnings and the change in the fair value of outstanding derivative net assets decreased by $20.4 million ($13.1 million after tax). As the underlying prices in the Company’s hedge contracts were consistent with the indices used to sell their oil and gas, no ineffectiveness was recognized related to its hedge contracts in the first six months of 2002. As of June 30, 2002 (excluding the impaired Enron hedges), the Company had net unrealized hedging gains of $18.3 million ($11.7 million after tax), comprised of $13.4 million of current assets, $12.2 million of non-current assets, $4.4 million of current liabilities and $2.9 million of non-current liabilities. Based on futures prices as of June 30, 2002, the Company would reclassify $9.0 million ($5.8 million after tax) of net unrealized hedging gains as an increase to earnings and other comprehensive income in the next twelve months.

Stock Options and Awards

          The Company accounts for its stock-based compensation plans under the principles prescribed by the Accounting Principles Board’s Opinion No. 25 (“APB No. 25”), “Accounting for Stock Issued to Employees.” Accordingly, stock options awarded under the Employee Plan and the non-employee Directors Plan are considered to be “noncompensatory” and do not result in recognition of compensation expense.

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Per Share Data

          On May 23, 2002, the Company’s Board of Directors approved a 5-for-4 stock split to be effected in the form of a 25% stock dividend to common stockholders of record as of June 10, 2002 with a payment date of June 20, 2002. All share and per share amounts for all periods have been restated to reflect the 5-for-4 stock split.

          The Company uses weighted average shares outstanding to calculate earnings per share. When dilutive, options, warrants and common stock issuable on conversion of convertible securities are included as share equivalents using the treasury stock method and included in the calculation of diluted earnings per share. See Note (5).

Risks and Uncertainties

          Historically, oil and gas prices have experienced significant fluctuations and have been particularly volatile in recent years. Price fluctuations can result from variations in weather, levels of regional or national production and demand, availability of transportation capacity to other regions of the country and various other factors. Increases or decreases in oil and gas prices received could have a significant impact on future results.

Other

          All liquid investments with a maturity of three months or less are considered to be cash equivalents. Certain amounts in prior period consolidated financial statements have been reclassified to conform with the current classifications. The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and 50% of the Elysium accounts. All significant intercompany balances and transactions have been eliminated in consolidation. 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. Actual results could differ from those estimates.

          In the opinion of management, those adjustments to the financial statements (all of which are of a normal and recurring nature) necessary to present fairly the Company’s financial position and results of operations have been made. These interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

Recent Accounting Pronouncements

          In July 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations, ” which requires that the fair value of a liability for asset retirement obligations be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The asset retirement liability will be allocated to operating expense by using a systematic and rational method. The statement is effective for the Company in 2003. The Company has not yet determined the impact of adoption of this statement. Given the Company’s large number of wells and that the salvage value has historically been assumed to offset the plugging liability, adoption could lead to a material increase in the Company’s assets and liabilities.

          In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which provides a single accounting model for long-lived assets to be disposed of and changes the criteria that would have to be met to classify an asset as held-for-sale. The statement also requires expected future operating losses from discontinued operations to be recognized in the periods in which the losses are incurred, which is a change from the current requirement of recognizing such operating losses as of the measurement date. The statement is effective for the Company in 2002. The adoption of SFAS No. 144 did not have material effect on the Company’s financial position or results of operations.

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(3)     OIL AND GAS PROPERTIES

          The cost of oil and gas properties at December 31, 2001 and June 30, 2002 included approximately $4.8 million and $4.7 million, respectively, in net unevaluated leasehold costs for acreage that is generally held for exploration or development to which proved reserves have not been assigned. These amounts have been excluded from amortization during the respective period. The following table sets forth costs incurred related to oil and gas properties and the depletion rates for the respective periods:

The disposition of properties for the year ended December 31, 2001 related primarily to the sale of Elysium properties in the Lake Washington Field in Louisiana for $30.5 million in March 2001 ($15.25 million net to the Company).

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(4)     INDEBTEDNESS

          The following indebtedness was outstanding on the respective dates:

          In July 1999, the Company entered into an Amended Bank Credit Agreement (the “Credit Agreement”) providing for a $200.0 million revolving credit facility. The amount available under the facility is re-determined each May 1 and November 1, and equaled $125.0 million at June 30, 2002. Patina had $77.5 million available under the Credit Agreement at June 30, 2002.

          The Company may elect that all or a portion of the credit facility bear interest at a rate equal to: (i) the Eurodollar rate for one, two, three or six months plus a margin which fluctuates from 1.00% to 1.50%, or (ii) the prime rate plus a margin which fluctuates from 0.00% to 0.50%. The margins are determined by a debt to EBITDA ratio. The weighted average interest rate under the facility was 3.0% during the first six months of 2002 and 3.1% at June 30, 2002.

          The Credit Agreement contains financial covenants, including but not limited to a maximum total debt to EBITDA ratio and a minimum current ratio. It also contains negative covenants, including but not limited to restrictions on indebtedness; certain liens; guaranties, speculative derivatives and other similar obligations; asset dispositions; dividends, loans and advances; creation of subsidiaries; investments; leases; acquisitions; mergers; changes in fiscal year; transactions with affiliates; changes in business conducted; sale and leaseback and operating lease transactions; sale of receivables; prepayment of other indebtedness; amendments to principal documents; negative pledge causes; issuance of securities; and non-speculative commodity hedging. Borrowings under the Credit Agreement mature in July 2003, but may be prepaid at anytime. The Company has periodically extended the Credit Agreement; however, there is no assurance it will be able to do so in the future. The Company had a restricted payment basket under the Credit Agreement of $59.4 million as of June 30, 2002, which may be used to repurchase equity securities, pay dividends or make other restricted payments.

          The Company loaned Elysium $53.0 million in November 2000. In May 2001, Elysium refinanced this loan with outside banks and entered into a Bank Credit Agreement (the “Elysium Credit Agreement”) providing for a $60.0 million revolving credit facility. The amount available under the facility is re-determined each May 1 and November 1, and equaled $20.0 million ($10.0 million net to Patina) at June 30, 2002. Elysium had $11.0 million ($5.5 million net to Patina) available under the Elysium Credit Agreement at June 30, 2002.

          The Elysium facility is non-recourse to Patina and contains financial covenants, including but not limited to a maximum total debt to EBITDA ratio, a minimum current ratio and minimum tangible net worth. Borrowings under the Elysium Credit Agreement mature in May 2004, but may be prepaid at anytime. Elysium may elect that all or a portion of the credit facility bear interest at a rate equal to: (i) the Eurodollar rate for one, two, three or six months plus a margin which fluctuates from 1.50% to 2.00%, or (ii) the prime rate plus a margin which fluctuates from 0.25% to 0.75%. The margin is determined by a utilization of borrowing base percentage. The weighted average interest rate under the facility was 3.8% during the first six months of 2002 and 3.7% at June 30, 2002.

          Scheduled maturities of indebtedness for the next five years are zero in 2002, $47.5 million in 2003 and $4.5 million in 2004. Management intends to extend the maturity of its credit facility on a regular basis; however, there can be no assurance it will be able to do so. Cash payments for interest totaled $4.7 million and $1.1 million during the first six months of 2001 and 2002, respectively.

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(5)     STOCKHOLDERS’ EQUITY

          A total of 125.0 million common shares, $0.01 par value, are authorized of which 27.5 million were issued and outstanding at June 30, 2002. The common stock is listed on the New York Stock Exchange. On May 23, 2002, the Company’s Board of Directors approved a 5-for-4 stock split to be effected in the form of a 25% stock dividend to common stockholders of record as of June 10, 2002 with a payment date of June 20, 2002. All share and per share amounts for all periods have been restated to reflect the 5-for-4 stock split. Adjusted for the stock dividend, a quarterly cash dividend of $0.008 per common share was initiated in December 1997, increased to $0.016 per share in the fourth quarter of 1999, to $0.032 per share in the fourth quarter of 2000, to $0.04 per share in the fourth quarter of 2001 and to $0.05 per share in the second quarter of 2002. The Company has a stockholders’ rights plan designed to insure that stockholders receive fair value for their shares in the event of certain takeover attempts. The following is a schedule of the changes in the Company’s shares of common stock since January 1, 2001:

          During 2001, the Company repurchased and retired shares of its common stock for $51.5 million and 3,597,500 $10.00 warrants were converted into common stock with the Company receiving cash proceeds of $36.0 million. The remaining warrants expired on May 2, 2001.

          A total of 5,000,000 preferred shares, $0.01 par value, are authorized with no shares issued and outstanding at June 30, 2002.

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The following is the calculation of basic and diluted earnings per share: