SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED JUNE 30, 1995

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-7667
-------------------
SANTA FE ENERGY RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 36-2722169
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

1616 SOUTH VOSS, SUITE 1000
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 507-5000
-------------------
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 [ ]

Shares of Common Stock outstanding at August 1, 1995 - 90,285,000

PART I - FINANCIAL STATEMENTS

PAGE
----
Consolidated Statement of Operations
Three Months and Six Months Ended
June 30, 1995 and 1994 ................................................... 2
Consolidated Balance Sheet
June 30, 1995 and December 31,
1994 ..................................................................... 3
Consolidated Statement of Cash Flows
Three Months and Six Months Ended
June 30, 1995 and 1994 ................................................... 4
Consolidated Statement of
Shareholders' Equity
Three Months and Six Months Ended
June 30, 1995 and 1994 ................................................... 5
Notes to Consolidated Financial
Statements ............................................................... 6
Management's Discussion and Analysis
of Financial Condition
and Results of Operations ................................................ 10

SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------- ---------------
1995 1994 1995 1994
------ ------ ------ ------
Revenues
Crude oil and liquids .................. $ 88.1 $ 74.8 $167.1 $133.4
Natural gas ............................ 18.7 21.2 33.7 49.3
Crude oil marketing and trading ........ 3.2 3.0 6.1 5.7
Other .................................. (0.3) 0.7 1.4 1.6
------ ------ ------ ------
109.7 99.7 208.3 190.0
------ ------ ------ ------
Costs and Expenses
Production and operating ............... 37.6 37.7 76.2 78.3
Exploration, including dry hole
costs ................................ 5.1 4.9 11.1 9.9
Depletion, depreciation and
amortization ......................... 31.8 30.5 63.1 62.6
General and administrative ............. 6.9 6.9 12.8 14.5
Taxes (other than income) .............. 5.8 6.3 10.1 13.7
Restructuring charges .................. -- -- -- 7.0
Loss (gain) on disposition of oil
and gas properties ................... -- 0.6 -- (8.8)
------ ------ ------ ------
87.2 86.9 173.3 177.2
------ ------ ------ ------
Income (Loss) from Operations .............. 22.5 12.8 35.0 12.8
Interest income ........................ 0.7 0.7 1.5 0.9
Interest expense ....................... (9.8) (10.1) (19.9) (20.4)
Interest capitalized ................... 1.2 0.9 2.1 1.8
Other income (expense) ................. (0.8) 3.2 1.4 4.1
------ ------ ------ ------
Income (Loss) Before Income Taxes .......... 13.8 7.5 20.1 (0.8)
Income tax benefit (expense) ........... (6.2) (3.4) (8.9) 2.4
------ ------ ------ ------
Net Income (Loss) .......................... 7.6 4.1 11.2 1.6
Preferred dividend requirement ......... (3.7) (2.5) (7.4) (4.3)
------ ------ ------ ------
Earnings (Loss) Attributable to
Common Shares ............................ $ 3.9 $ 1.6 $ 3.8 $ (2.7)
====== ====== ====== ======
Earnings (Loss) Attributable to
Common Shares
Per Share ................................ $ 0.04 $ 0.02 $ 0.04 $ 0.03)
====== ====== ====== ======
Weighted Average Number of Shares
Outstanding
(in millions) ............................ 90.3 90.0 90.2 89.9
====== ====== ====== ======

The accompanying notes are an integral part of these financial statements.

SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF DOLLARS)

JUNE 30, DECEMBER 31,
1995 1994
--------- ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents........ $ 40.6 $ 53.7
Accounts receivable.............. 66.8 76.2
Inventories...................... 12.4 9.2
Other current assets............. 19.9 18.1
--------- ---------
139.7 157.2
--------- ---------
Investment in Hadson Corporation..... -- 57.0
--------- ---------
Properties and Equipment, at cost
Oil and gas (on the basis of
successful efforts
accounting).................... 2,260.7 2,145.9
Other............................ 32.7 32.7
--------- ---------
2,293.4 2,178.6
Accumulated depletion,
depreciation, amortization and
impairment..................... (1,387.8) (1,335.6)
--------- ---------
905.6 843.0
--------- ---------
Other Assets
Receivable under gas balancing
arrangements................... 4.5 4.6
Other............................ 8.5 9.6
--------- ---------
13.0 14.2
--------- ---------
$ 1,058.3 $ 1,071.4
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable................. $ 76.2 $ 84.1
Interest payable................. 7.9 8.5
Current portion of long-term
debt........................... -- 3.9
Other current liabilities........ 28.0 29.5
--------- ---------
112.1 126.0
--------- ---------
Long-Term Debt....................... 344.3 350.4
--------- ---------
Deferred Revenues.................... 3.8 7.4
--------- ---------
Other Long-Term Obligations.......... 25.7 28.0
--------- ---------
Deferred Income Taxes................ 63.1 56.3
--------- ---------
Commitments and Contingencies (Note
4)................................. -- --
--------- ---------
Convertible Preferred Stock.......... 80.0 80.0
--------- ---------
Shareholders' Equity
Preferred stock.................. -- --
$.732 Series A preferred stock... 91.4 91.4
Common stock..................... 0.9 0.9
Paid-in capital.................. 501.0 498.9
Accumulated deficit.............. (163.7) (167.5)
Foreign currency translation
adjustment..................... (0.3) (0.4)
--------- ---------
429.3 423.3
--------- ---------
$ 1,058.3 $ 1,071.4
========= =========

The accompanying notes are an integral part of these financial statements.

SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------

Operating Activities:
Net income (loss)................ $ 7.6 $ 4.1 $ 11.2 $ 1.6
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depletion, depreciation and
amortization............... 31.8 30.5 63.1 62.6
Restructuring charges........ -- -- -- 1.0
Deferred income taxes........ 5.0 2.0 6.8 (1.4)
Net loss (gain) on
disposition of
properties................. -- 0.6 -- (8.8)
Exploratory dry hole costs... 1.4 1.7 4.2 2.3
Other........................ 0.5 0.4 (1.0) 0.3
Changes in operating assets and
liabilities:
Decrease (increase) in
accounts receivable........ 2.4 (11.3) 9.4 (2.3)
Decrease (increase) in
inventories................ (2.3) 1.1 (3.2) 0.1
Increase (decrease) in
accounts payable........... 10.8 (12.7) (3.5) (9.9)
Increase (decrease) in
interest payable........... 3.6 7.6 (0.6) (1.8)
Increase (decrease) in income
taxes payable.............. 0.9 1.3 1.1 1.2
Net change in other assets
and liabilities............ (2.3) 7.9 (7.9) 2.6
---------- ---------- ---------- ----------
Net Cash Provided by Operating
Activities......................... 59.4 33.2 79.6 47.5
---------- ---------- ---------- ----------
Investing Activities:
Capital expenditures, including
exploratory dry hole costs..... (60.6) (29.1) (106.2) (59.6)
Acquisitions of producing
properties..................... (27.6) (0.6) (27.8) (1.2)
Net proceeds from sales of
properties..................... 54.6 57.2 58.7 77.5
---------- ---------- ---------- ----------
Net Cash Provided by (Used in)
Investing Activities............... (33.6) 27.5 (75.3) 16.7
---------- ---------- ---------- ----------
Financing Activities:
Net proceeds from issuance of:
11% senior subordinated
debentures due 2004........ -- 96.1 -- 96.1
$.732 Series A convertible
preferred stock............ -- 91.4 -- 91.4
Principal payments on long-term
borrowings..................... -- (107.3) (10.0) (139.6)
Net change in revolving credit
agreement...................... -- (79.0) -- (50.0)
Cash dividends paid.............. (3.7) (1.7) (7.4) (3.5)
---------- ---------- ---------- ----------
Net Cash Used in Financing
Activities......................... (3.7) (0.5) (17.4) (5.6)
---------- ---------- ---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents................... 22.1 60.2 (13.1) 58.6
Cash and Cash Equivalents at
Beginning of Period................ 18.5 3.2 53.7 4.8
---------- ---------- ---------- ----------
Cash and Cash Equivalents at End of
Period............................. $ 40.6 $ 63.4 $ 40.6 $ 63.4
========== ========== ========== ==========

The accompanying notes are an integral part of these financial statements.

SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
(SHARES AND DOLLARS IN MILLIONS)

$.732
SERIES A FOREIGN
CONVERTIBLE UNAMORTIZED CURRENCY
PREFERRED STOCK COMMON STOCK RESTRICTED TRANSLA-
--------------- --------------- PAID-IN STOCK ACCUMULATED TION
SHARES AMOUNT SHARES AMOUNT CAPITAL AWARDS DEFICIT ADJUSTMENT
------ ------ ------ ------ ------- ----------- ----------- ----------

Balance at December 31, 1994......... 10.7 $91.4 90.0 $0.9 $ 498.9 $-- $ (167.5) $ (0.4)
Issuance of common stock........... -- -- 0.3 -- 2.1 -- -- --
Foreign currency translation
adjustment........................ -- -- -- -- -- -- -- 0.1
Net income......................... -- -- -- -- -- -- 11.2 --
Dividends declared................. -- -- -- -- -- -- (7.4) --
---- ----- ---- ---- ------- ------- --------- ------
Balance June 30, 1995................ 10.7 $91.4 90.3 $0.9 $ 501.0 $-- $ (163.7) $ (0.3)
==== ===== ==== ==== ======= ======= ========= ======
Balance at December 31, 1993......... -- $-- 89.8 $0.9 $ 496.9 $ (0.1) $ (173.8) $ (0.3)
Issuance of common stock........... -- -- 0.2 -- 1.7 -- -- --
Issuance of preferred stock........ 10.7 91.4 -- -- -- -- -- --
Amortization of restricted stock
awards............................ -- -- -- -- -- 0.1 -- --
Net income......................... -- -- -- -- -- -- 1.6 --
Dividends declared................. -- -- -- -- -- -- (4.3) --
---- ----- ---- ---- ------- ------- --------- ------
Balance at June 30, 1994............. 10.7 $91.4 90.0 $0.9 $ 498.6 $-- $ (176.5) $ (0.3)
==== ===== ==== ==== ======= ======= ========= ======

TOTAL
SHAREHOLDERS'
EQUITY
-------------
Balance at December 31, 1994.. $ 423.3
Issuance of common stock........... 2.1
Foreign currency translation
adjustment........................ 0.1
Net income......................... 11.2
Dividends declared................. (7.4)
-------
Balance June 30, 1995................ $ 429.3
=======
Balance at December 31, 1993.. $ 323.6
Issuance of common stock.. 1.7
Issuance of preferred stock........ 91.4
Amortization of restricted stock
awards............................ 0.1
Net income......................... 1.6
Dividends declared................. (4.3)
-------
Balance at June 30, 1994............. $ 414.1
=======

The accompanying notes are an integral part of these financial statements.

SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) ACCOUNTING POLICIES

The unaudited consolidated financial statements of Santa Fe Energy
Resources, Inc. ("Santa Fe" or the "Company") reflect, in the opinion of
management, all adjustments, consisting only of normal and recurring
adjustments, necessary to present fairly the Company's financial position at
June 30, 1995 and the Company's results of operations and cash flows for the
three-month and six-month periods ended June 30, 1995 and 1994. Interim period
results are not necessarily indicative of results of operations or cash flows
for a full-year period.

These financial statements and the notes thereto should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 1994.

(2) STATEMENT OF CASH FLOWS

The Company made interest and income tax payments as follows (in millions
of dollars):

THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
Interest payments................ 5.5 7.3(a) 19.2 28.5(a)
Income tax payments.............. 0.3 0.1 0.8 0.9
- ---------

(a) Includes $6.5 million in prepayment penalties and accrued interest paid
upon the retirement of certain long-term debt.

In addition, during the six months ended June 30, 1995 the Company received a
$1.0 million income tax refund.

(3) INVESTMENT IN HADSON CORPORATION

The sale resulted in no gain or loss to the Company. At June 30, 1995
Other Current Assets included $1.8 million, the estimated net realizable value
of the renegotiated gas sales contract. Realization of such amount is
dependent upon the successful completion of negotiations with respect to the
contract.

(4) COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL REGULATION

Federal, state and local laws and regulations relating to environmental
quality control affect the Company in all of its oil and gas operations. The
Company has been identified as one of over 250 potentially responsible parties
("PRPs") at a superfund site in Los Angeles County, California. The site was
operated by a third party as a waste disposal facility from 1948 until 1983.
The Environmental Protection Agency ("EPA") is requiring the PRPs to undertake
remediation of the site in several phases, which include site monitoring and
leachate control, gas control and final remediation.

In 1989 the EPA and a group of PRPs that includes the Company entered into a
consent decree covering the site monitoring and leachate control phases of
remediation. The Company is a member of the group Coalition Undertaking
Remediation Efforts ("CURE") which is responsible for constructing and operating
the leachate treatment plant. Treatment tests will begin shortly. Site
monitoring and maintenance will continue throughout the life of the facility.
The Company's share of costs with respect to this phase are expected to total
approximately $2.4 million ($1.3 million after recoveries from working interest
participants in the unit in which the wastes were generated).

Another consent decree provides for the predesign, design and construction
of a gas plant to harness and market methane gas emissions. The Company is a
member of the New CURE group which is responsible for the gas plant
construction and operation and landfill cover. Currently, New CURE is in the
design stage of the gas plant. The Company's share of costs of this phase is
expected to be of approximately the same magnitude as that of the first phase
and such costs have been provided for in the financial statements.

As previously discussed, the Company has provided for its share of costs
with respect to the site monitoring, leachate control and gas control phases;
however, it cannot currently estimate the cost of any subsequent phases of
work or final remediation which may be required by the EPA.

Another consent decree is currently being executed by the PRPs and will be
logged with the court for approval. This consent decree allows for the
settlement of the pending lawsuits against the municipalities and transporters
not named by the EPA. The settlement totals approximately $70.0 million of
which approximately $55.0 million will be credited against future expenses.

The Company has entered into a Joint Defense Agreement with the other PRPs
to defend against a lawsuit filed September 7, 1994 by ninety-five homeowners
alleging, among other things, nuisance, trespass, strict liability and
infliction of emotional distress. At this stage of the lawsuit the Company is
not able to estimate costs or potential liability but the defendants intend to
aggressively pursue the defense and discovery once all defendants have been
served and answers have been filed.

On April 4, 1994, the Company received a request from the EPA for
information pursuant to Section 104(e) of CERCLA and a letter ordering the
Company and seven other PRPs to negotiate with the EPA regarding
implementation of a remedial plan for a site located in Santa Fe Springs,
California. The Company owned the property on which the site is located from
1921 to 1932. During that time the property was leased to another company and
in 1932 the property was sold to that company. During the time the other
company leased or owned the property, hazardous wastes were allegedly disposed
at the site. The EPA estimates that the total past and future costs for
remediation will approximate $9.4 million. The Company filed its response to
the Section 104(e) order setting forth its position and defenses based on the
fact that the other company was the lessee and operator of the site during the
time the Company was the owner of the property. However, the Company has also
given its Notice of Intent to comply with the EPA's order to prepare a
remediation design plan. Six of the other PRPs have also notified the EPA of
their intent to comply. The cost of such a remediation design plan is
estimated to be approximately $1.0 million. To date there has been no
agreement on how to allocate costs among the PRPs.

On March 23, 1995 the Company and twelve other companies received notice
that they have been identified as PRPs by the California Department of Toxic
Substances Control (the "DTSC") as having generated and/or transported
hazardous waste to the Environmental Protection Corporation ("EPC") Eastside
Landfill during its fourteen-year operation from 1971 to 1985. EPC has since
liquidated all assets and placed the proceeds in trust for closure and
post-closure activities. However, these monies will not be sufficient to close
the site. The DTSC is seeking additional PRPs for participation in the
forthcoming order for the cleanup of this site. The order will require the
characterization of contamination at the site through a remedial investigation
and feasibility study,

preparation of a remedial action plan, remediation of the site and closure and
post-closure activities. The Company is not able to estimate its exposure with
respect to this site at this time.

There are certain other environmental matters pending, with respect to
which the Company is unable to estimate its exposure at this time.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with certain key
employees. The initial term of each agreement expired on December 31, 1990. On
January 1, 1991 and beginning on each January 1 thereafter, each agreement is
automatically extended for one-year periods, unless by September 30 of any
year the Company gives notice that the agreement will not be extended. The
term of the agreements is automatically extended for a minimum of 24 months
following a change of control. The consummation of the Company's transaction
with Adobe in 1992 constituted a change of control as defined in the
agreements.

In the event that following a change of control employment is terminated
for reasons specified in the agreements, the employee would receive: (i) a
lump sum payment equal to two years' base salary; (ii) the maximum possible
bonus under the terms of the Company's incentive compensation plan; (iii) a
lapse of restrictions on any outstanding restricted stock grants and full
payout of any outstanding Phantom Units; (iv) cash payment for each
outstanding stock option equal to the amount by which the fair market value of
the common stock exceeds the exercise price of the option; and, (v) life,
disability and health benefits for a period of up to two years. In addition,
payments and benefits under certain employment agreements are subject to
further limitations based on certain provisions of the Internal Revenue Code.

OTHER MATTERS

The Company has certain long-term contracts ranging up to twelve years for
the supply and transportation of approximately 20 million cubic feet per day
of natural gas to the Company's operations in Kern County, California. In the
aggregate, these contracts involve a minimum commitment on the part of the
Company of approximately $9.5 million per year (based on prices and
transportation charges in effect for June 1995).

There are other claims and actions, including certain other environmental
matters, pending against the Company. In the opinion of management, the
amounts, if any, which may be awarded in connection with any of these claims
and actions could be significant to the results of operations of any period
but would not be material to the Company's consolidated financial position.

(5) DEBT EXTINGUISHMENT

In April 1995 the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 94, "Recognition of a Gain or Loss on Early
Extinguishment of Debt" ("SAB 94") which changes in some respects the
accounting which has evolved in practice for gains or losses on anticipated
debt extinguishments. Among other things, SAB 94 precludes the recognition of
a gain or loss from debt extinguishment in a period other than the period in
which the debt is considered extinguished, including circumstances in which a
company announces prior to a period end the intention to retire debt in a
subsequent period.

In the fourth quarter of 1993 the Company adopted a corporate
restructuring program which included, among other things, retiring certain of
the Company's long-term debt. In accordance with this plan, in 1994 the
Company retired $132.3 million of outstanding Senior Notes and bank debt. The
Company's results of operations for 1993 included $8.6 million in debt
repayment penalties and interest associated with the debt to be retired. Had
SAB 94 been in effect in 1993, such penalties and interest would have been
included in the Company's 1994 results of operations. The following table
reflects, on a proforma basis, the Company's results of operations assuming
SAB 94 was in effect in 1993 (in millions of dollars, except per share data):

1994 1993
------------------------ ------------------------
HISTORICAL PROFORMA HISTORICAL PROFORMA
----------- --------- ----------- ---------

Income (Loss) from Operations........ 48.2 48.2 (113.0) (104.4)
Income (Loss) Before Extraordinary
Item............................... 17.1 15.1 (77.1) (71.8)
Extraordinary Item -- Loss on
Extinguishment of Debt............. -- (3.3) -- --
Net Income (Loss).................... 17.1 11.8 (77.1) (71.8)
Earnings (Loss) Attributable to
Common Shares...................... 5.4 0.1 (84.1) (78.8)
Earnings (Loss) Per Share
Extraordinary Item............... -- (0.04) -- --
Attributable to Common Shares.... 0.06 -- (0.94) (0.88)

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

GENERAL

As an independent oil and gas producer, the Company's results of
operations are dependent upon the difference between the prices received for
oil and gas and the costs of finding and producing such resources. A
substantial portion of the Company's crude oil production is from long-lived
fields where EOR methods are being utilized. The market price of the heavy
(i.e., low gravity, high viscosity) and sour (i.e., high sulfur content) crude
oils produced in these fields is lower than sweeter, light (i.e., low sulfur
and low viscosity) crude oils, reflecting higher transportation and refining
costs. In addition, the lifting costs of heavy crude oils are generally higher
than the lifting costs of light crude oils. As a result of these narrower
margins, even relatively modest changes in crude oil prices may significantly
affect the Company's revenues, results of operations, cash flows and proved
reserves. In addition, prolonged periods of high or low oil prices may have a
material effect on the Company's financial position.

The lower price received for the Company's domestic heavy and sour crude
oil is reflected in the average sales price of the Company's domestic crude
oil and liquids for the first six months of 1995 of $14.15 per barrel,
compared to $17.22 per barrel for West Texas Intermediate ("WTI") crude oil
(an industry posted price generally indicative of spot prices for sweeter
light crude oil). In the first six months of 1995 the Company's average sales
price for California heavy crude oil was $13.59 per barrel, approximately 79%
of the average posted price for WTI. This ratio is considered positive since
historically heavy crude oil has sold for an average of approximately 66% of
WTI.

Crude oil prices are subject to significant changes in response to
fluctuations in the domestic and world supply and demand and other market
conditions as well as the world political situation as it affects OPEC, the
Middle East and other producing countries. During the first six months of 1995
the actual average sales price (unhedged) received by the Company averaged
$14.42 per barrel compared to $11.33 per barrel in the first six months of
1994. Based on operating results for the first six months of 1995, the Company
estimates that, on an annualized basis, a $1.00 per barrel increase or
decrease in its average domestic crude oil sales prices would result in a
corresponding $20.2 million change in income from operations and a $15.1
million change in cash flow from operating activities. The foregoing estimates
do not give effect to changes in any other factors, such as the effect on
depreciation and depletion, that would result from a change in oil prices.

In June 1995 the Company initiated a hedging program designed to provide a
certain minimum level of cash flow from its sales of crude oil. The Company
has used several instruments whereby monthly settlements are based on the
difference between the price specified in the instruments and the monthly
average of the daily settlement prices of certain WTI futures contracts. In
instances where the actual average of the daily settlement price is less than
the price specifed in the contract, the Company receives a settlement based on
the difference; in instances where the actual average of the daily settlement
price is higher than the specified price, the Company pays an amount based on
the difference. The instruments utilized by the Company differ from futures
contracts in that there is no contractual obligation which requires or allows
for the future delivery of the product. Settlements are included in oil
revenues in the period in which the oil is sold. In June 1995 hedges on 0.5
million barrels resulted in a $0.4 million increase in oil revenues.

At June 30, 1995 the Company had open contracts on 2.5 million barrels for
the remainder of 1995. The "approximate break-even price" (the average of the
daily settlement prices of WTI futures contracts which would result in no
settlement being due to or from the Company) with respect to such contracts is
approximately $19.17 per barrel.

The price of natural gas fluctuates due to weather conditions, the level
of natural gas in storage, the relative balance between supply and demand and
other economic factors. The actual average sales

price received by the Company in the second quarter of 1995 for its natural gas
averaged $1.41 per Mcf compared to $1.31 per Mcf in the first quarter of 1995.
The $1.31 per Mcf average for the first quarter of 1995 is lower than any
quarter since 1990. Based on operating results for the first six months of 1995,
the Company estimates that, on an annualized basis, a $0.10 per Mcf increase or
decrease in its average domestic natural gas sales price would result in a
corresponding $4.7 million change in income from operations and a $3.5 million
change in cash flow from operating activities. The foregoing estimates do not
give effect to changes in any other factors, such as the effect on depletion and
depreciation, that would result from a change in natural gas prices.

RESULTS OF OPERATIONS

REVENUES

The following table reflects the components of the Company's crude oil and
liquids and natural gas revenues:

THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------

Crude Oil and Liquids
Revenues ($/Millions)
Sales
Domestic
California Heavy............. 49.8 39.6 93.4 68.8
Other........................ 26.9 24.4 51.7 45.5
--------- --------- --------- ---------
76.7 64.0 145.1 114.3
Argentina.................... 3.7 3.1 7.1 5.4
Indonesia.................... 8.4 8.7 16.7 15.5
Hedging........................ 0.4 -- 0.4 --
Net Profits Payments........... (1.1) (1.0) (2.2) (1.8)
--------- --------- --------- ---------
88.1 74.8 167.1 133.4
========= ========= ========= =========
Volumes (MBbls/day)
Domestic
California Heavy............... 38.1 38.7 38.0 38.2
Other.......................... 19.0 18.6 18.7 19.4
--------- --------- --------- ---------
57.1 57.3 56.7 57.6
Argentina........................ 2.6 2.5 2.5 2.5
Indonesia........................ 5.5 6.2 5.5 5.9
--------- --------- --------- ---------
65.2 66.0 64.7 66.0
========= ========= ========= =========
Sales Prices ($/Bbl)
Unhedged
Domestic
California Heavy............. 14.36 11.26 13.59 9.95
Other........................ 15.55 14.39 15.29 12.94
Total........................ 14.76 12.28 14.15 10.96
Argentina...................... 15.82 13.80 15.44 12.02
Indonesia...................... 16.72 15.42 16.68 14.64
Total.......................... 14.97 12.63 14.42 11.33
Hedged........................... 15.04 12.63 14.45 11.33
Natural Gas
Revenues ($/Millions)
Sales............................ 19.0 22.9 34.4 52.2
Hedging.......................... -- (0.6) -- (0.9)
Net Profits Payments............. (0.3) (1.1) (0.7) (2.0)
--------- --------- --------- ---------
18.7 21.2 33.7 49.3
========= ========= ========= =========
Volumes (MMcf/day)................. 148.4 138.4 139.5 146.9
Sales Prices ($/Mcf)
Unhedged......................... 1.41 1.82 1.36 1.96
Hedged........................... 1.41 1.77 1.36 1.93

Total revenues increased approximately 10% from $190.0 million in the
first half of 1994 to $208.3 million in the first half of 1995. Crude oil and
liquids revenues increased $33.7 million, primarily reflecting improved market
conditions which resulted in an increase in the Company's average sales price
(hedged) from $11.33 per barrel in 1994 to $14.45 per barrel in 1995. In June
1995 the Company initiated a cash oil hedging program which contributed $0.4
million to 1995 revenues

(see - General). Natural gas revenues decreased $15.6 million as the
Company's average sales price (hedged) dropped from $1.93 per Mcf in 1994 to
$1.36 per Mcf in 1995 and sales volumes declined from 146.9 MMcf per day in
1994 to 139.5 MMcf per day in 1995. The decline in sales volumes primarily
reflects lower production from certain domestic offshore properties
principally due to the loss of a well and certain mechanical problems,
partially offset by new production from the Company's Sierra Chata field in
Argentina.

Total revenues increased approximately 10% from $99.7 million in the
second quarter of 1994 to $109.7 million in the second quarter of 1995. Crude
oil and liquids revenues increased $13.3 million primarily reflecting an
increase in average sales prices (hedged) from $12.63 per barrel in 1994 to
$15.04 per barrel in 1995. Natural gas revenues decreased $2.5 million with
the effect of lower prices being partially offset by increased volumes. The
higher volumes reflect the effect of new production from the Company's Sierra
Chata field in Argentina and certain domestic properties acquired in the
second quarter of 1995, partially offset by the previously discussed lower
production from certain domestic offshore properties.

COSTS AND EXPENSES

The following table sets forth, on the basis of the barrel of oil
equivalent ("BOE") produced by the Company during the applicable period,
certain of the Company's costs and expenses (in dollars):

THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------

Production and operating costs per
BOE (a).............................. 4.59 4.65 4.78 4.78
Exploration, including dry hole costs
per BOE............................ 0.62 0.60 0.70 0.61
Depletion, depreciation and
amortization per BOE............... 3.88 3.76 3.96 3.82
General and administrative costs per
BOE................................ 0.85 0.86 0.80 0.89
Taxes other than income per BOE
(b)................................ 0.71 0.78 0.64 0.84
Interest, net per BOE (c)............ 0.98 1.06 1.02 1.22(d)

- ---------

(a) Excluding related production, severance and ad valorem taxes.

(b) Includes production, severance and ad valorem taxes.

(d) Excludes effect of benefit of adjustment to provisions made in prior
periods with respect to interest on certain federal income tax audit
adjustments of $0.14 per BOE.

Total costs and expenses for the first half of 1995 totalled $173.3
million compared to $177.2 million in the first half of 1994. Exploration
expenses were up $1.2 million primarily due to higher dry hole costs (up $1.9
million) partially offset by lower geological and geophysical costs. Taxes
other than income in the first half of 1995 also includes benefits of $1.0
million related to an adjustment to ad valorem taxes recorded in prior periods
and $0.7 million related to the settlement of certain disputed sales and use
taxes (both of which were recorded in the first quarter). Costs and expenses
for the first half of 1994 include $7.0 million in restructuring charges and
an $8.8 million gain on the sale of certain oil and gas properties (both of
which were recorded in the first quarter).

Interest expense for the first half of 1994 includes a $2.4 million first
quarter benefit related to an adjustment to provisions made in prior periods
with respect to interest on certain federal income tax audit adjustments.

Other income (expense) for the first half of 1995 includes a $2.5 million
gain on the sale in the first quarter of the Company's interest in Cherokee
Resources Incorporated, a privately-held oil and gas company. Such amount for
1994 includes a $2.1 million second quarter gain on the sale of the Company's
interest in a publishing company which was acquired in the Adobe merger in
1992, $3.0 million in dividend income on Hadson Corporation ("Hadson")
preferred stock (paid in-kind, $1.6

million of which relates to the second quarter) and a $0.9 million loss on the
Company's equity in Hadson common stock ($0.3 million of which relates to the
second quarter).

Income taxes for the first half of 1994 includes a $3.0 million first
quarter credit reflecting the benefit related to an adjustment to provisions
made in prior periods with respect to certain federal income tax audit
adjustments.

In March 1995 the Financial Accounting Standards Board adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of",
effective for financial statements for fiscal years beginning after December
15, 1995. SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company expects to adopt the
provisions of SFAS No. 121 effective January 1, 1996. Had SFAS No. 121 been
adopted by the Company effective January 1, 1995, the adoption would have had
no effect on the Company's results of operations or financial position.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flow from operating activities is a function of the
volumes of oil and gas produced from the Company's properties and the sales
prices received therefor. Since crude oil and natural gas are depleting
assets, unless the Company replaces the oil and gas produced from its
properties, the Company's assets will be depleted over time and its ability to
incur debt at constant or declining prices will be reduced. The Company
increased its proved reserves (net of production and sales) by approximately
19% over the five years ended December 31, 1994; however, no assurances can be
given that such increase will occur in the future. Historically, the Company
has generally funded development and exploration expenditures and working
capital requirements from cash provided by operating activities. Depending
upon the future levels of operating cash flows, which are significantly
affected by oil and gas prices, the restrictions on additional borrowings
included in certain of the Company's debt agreements, together with debt
service requirements and dividends, may limit the cash available for future
exploration, development and acquisition activities. During the first six
months of 1995 net cash provided by operating activities and net proceeds from
sales of properties totalled $138.3 million; during such period capital
expenditures and acquisitions of producing properties totalled $134.0 million.

The Company expects to expend approximately $190 million on its 1995
capital program; however, the actual amount expended by the Company in 1995
will be based upon numerous factors, the majority of which are outside its
control, including, without limitation, prevailing oil and natural gas prices
and the outlook therefor and the availability of funds.

In February 1995 the Company entered into a Securities Purchase Agreement
under the terms of which the Company agreed to sell its holdings in Hadson
Corporation ("Hadson") for $55.3 million. In addition, the Company agreed to
negotiate with the purchaser certain amendments to its existing gas sales
contract with Hadson which if consummated will result in additional
consideration to the Company. The sale closed in May 1995, however,
negotiations with respect to the gas sales contract have not been completed.
The sale resulted in no gain or loss to the Company. At June 30, 1995 Other
Current Assets included $1.8 million, the estimated net realizable value of
the renegotiated gas sales contract. Realization of such amount is dependent
upon the successful completion of negotiations with respect to the contract.

Effective April 1, 1995 the Company entered into the Second Amended and
Restated Revolving Credit Agreement (the "Credit Agreement"), an unsecured
revolving credit agreement which matures December 31, 1998. The maximum
borrowing limits under the Credit Agreement are initially $125.0 million,
$105.0 million beginning February 28, 1996, $65.0 million beginning February
28, 1997 and $30.0 million beginning February 28, 1998. Interest rates under
the Credit Agreement are tied to LIBOR or the bank's prime rate with the
actual interest rate based upon certain ratios and the value

and projected timing of production of the Company's oil and gas reserves.
These and other similar ratios will also affect the Company's ability to
borrow under the Credit Agreement and the timing and amount of any required
repayments and corresponding commitment reductions. At June 30, 1995, $6.3
million in letters of credit were outstanding under the terms of the Credit
Agreement.

In the first quarter of 1995 the Company retired the $10.0 million balance
of a loan from an Argentine bank. The loan, which related to the Company's
purchase of an interest in a producing oil field in Argentina in 1991, bore
interest at 13% at the time it was retired.

The Company has three short-term uncommitted lines of credit totalling
$50.0 million which are used to meet short-term cash needs. Interest rates on
borrowings under these lines of credit are typically lower than rates paid
under the Bank Facility. At June 30, 1995 no amounts were outstanding under
these lines of credit.

Certain of the Company's credit agreements and the indenture for the
Debentures restrict the Company's ability to take certain actions, including
covenants that restrict the Company's ability to incur additional indebtedness
and to pay dividends on its capital stock. Under the most restrictive of these
covenants, at June 30, 1995 the Company could incur up to $194.0 million of
additional indebtedness and pay dividends of up to $110.5 million on its
aggregate capital stock (including its common stock, 7% Convertible Preferred
Stock and Series A Preferred) with the amount payable on its common stock
limited to $51.0 million.

ENVIRONMENTAL MATTERS

Almost all phases of the Company's oil and gas operations are subject to
stringent environmental regulation by governmental authorities. Such
regulation has increased the costs of planning, designing, drilling,
installing, operating and abandoning oil and gas wells and other facilities.
The Company has expended significant financial and managerial resources to
comply with such regulations. Although the Company believes its operations and
facilities are in general compliance with applicable environmental
regulations, risks of substantial costs and liabilities are inherent in oil
and gas operations. It is possible that other developments, such as
increasingly strict environmental laws, regulations and enforcement policies
or claims for damages to property, employees, other persons and the
environment resulting from the Company's operations, could result in
significant costs and liabilities in the future. As it has done in the past,
the Company intends to fund its cost of environmental compliance from
operating cash flows. See Note 4 to the Consolidated Financial Statements.

DIVIDENDS

Dividends on the Company's 7% Convertible Preferred Stock and Series A
Preferred are cumulative at an annual rate of $1.40 per share and $0.732 per
share, respectively. No dividends may be declared or paid with respect to the
Company's common stock if any dividends with respect to the convertible
preferred stock or Series A Preferred are in arrears. As part of the 1993
restructuring program, the Company eliminated the payment of its $0.04 per
share quarterly dividend on its common stock. The determination of the amount
of future cash dividends, if any, to be declared and paid on the Company's
common stock is in the sole discretion of the Company's Board of Directors and
will depend on dividend requirements with respect to the preferred stock, the
Company's financial condition, earnings and funds from operations, the level
of capital and exploration expenditures, dividend restrictions in financing
agreements, future business prospects and other matters the Board of Directors
deems relevant.

PART II
OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

None

(b) Reports on Form 8-K

None
16

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

SANTA FE ENERGY RESOURCES, INC.
(Registrant)

By /s/ R. GRAHAM WHALING
R. Graham Whaling
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Houston, Texas
August 11, 1995