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

                                   -----------


                                    FORM 10-Q


       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                       For the Quarter Ended June 30, 1998


                                   -----------

                         Commission File Number 0-20872

                       ST. MARY LAND & EXPLORATION COMPANY
             (Exact name of Registrant as specified in its charter)


              Delaware                                  41-0518430
    (State or other Jurisdiction           (I.R.S. Employer Identification No.)
                                             of incorporation or organization)

             1776 Lincoln Street, Suite 1100, Denver, Colorado 80203
               (Address of principal executive offices) (Zip Code)

                                 (303) 861-8140
              (Registrant's telephone number, including area code)




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 [ ]


Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date.


As of August 10, 1998, the  registrant  had  10,992,447  shares of Common Stock,
$.01 par value, outstanding.







                       ST. MARY LAND & EXPLORATION COMPANY


                                      INDEX


Part I.   FINANCIAL INFORMATION                                            PAGE

          Item 1.   Financial Statements (Unaudited)

                    Consolidated Balance
                    Sheets - June 30, 1998 and
                    December 31, 1997 ....................................... 3

                    Consolidated Statements of
                    Income - Three Months Ended
                    June 30, 1998 and 1997: Six Months
                    Ended June 30, 1998 and 1997 ............................ 4

                    Consolidated Statements of
                    Cash Flows - Six Months Ended
                    June 30, 1998 and 1997 .................................. 5

                    Notes to Consolidated Financial
                    Statements - June 30, 1998 .............................. 7


          Item 2.   Management's Discussion and Analysis
                    of Financial Condition and Results
                    of Operations .......................................... 11


Part II.  OTHER INFORMATION

          Item 4.   Submission of Matters to a Vote of Security Holders .... 22


          Item 6.   Exhibits and Reports on Form 8-K ....................... 22

                    Exhibits
                    --------

                    Exhibit 3.3       Certificate of Amendment to Certificate
                                         of Incorporation
                    Exhibit 27.6      Financial Data Schedule
                    Exhibit 10.52     Credit Agreement dated June 30, 1998



                                       2


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

              ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                      (In thousands, except share amounts)

                                     ASSETS

                                                                            June 30,          December 31,
                                                                         --------------      --------------
                                                                              1998                1997
                                                                         --------------      --------------

                                                                                       
Current assets:
   Cash and cash equivalents                                              $      4,537        $      7,112
   Accounts receivable                                                          17,315              24,320
   Prepaid expenses and other                                                      532                 480
                                                                         --------------      --------------
      Total current assets                                                      22,384              31,912
                                                                         --------------      --------------

Property and equipment (successful efforts method), at cost:
   Proved oil and gas properties                                               269,638             246,468
   Unproved oil and gas properties, net of impairment
      allowance of $3,184 in 1998 and $3,032 in 1997                            30,737              28,615
   Other                                                                         3,531               3,386
                                                                         --------------      --------------
                                                                               303,906             278,469
   Less accumulated depletion, depreciation, amortization and impairment      (132,919)           (120,988)
                                                                         --------------      --------------
                                                                               170,987             157,481
                                                                         --------------      --------------
Other assets:
   Khanty Mansiysk Oil Corporation receivable and stock                         12,003              12,003
   Summo Minerals Corporation  investment and receivable                         6,686               6,691
   Other assets                                                                  3,789               2,943
                                                                         --------------      --------------
                                                                                22,478              21,637
                                                                         --------------      --------------
                                                                          $    215,849        $    211,030
                                                                         ==============      ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                                  $     18,434        $     21,943
   Current portion of stock appreciation rights                                    358                 351
                                                                         --------------      --------------
      Total current liabilities                                                 18,792              22,294
                                                                         --------------      --------------

Long-term liabilities:
   Long-term debt                                                               26,615              22,607
   Deferred income taxes                                                        17,999              16,589
   Stock appreciation rights                                                       691                 989
   Other noncurrent liabilities                                                  1,083                 619
                                                                         --------------      --------------
                                                                                46,388              40,804
                                                                         --------------      --------------
Commitments and contingencies

Stockholders' equity:
   Common stock, $.01 par value: authorized  - 50,000,000 shares in 1998 and
      15,000,000 shares in 1997; issued and outstanding - 10,984,023
      shares in 1998 and 10,980,423 shares in 1997                                 110                 110
   Additional paid-in capital                                                   67,589              67,494
   Retained earnings                                                            82,970              80,328
                                                                         --------------      --------------
      Total stockholders' equity                                               150,669             147,932
                                                                         --------------      --------------
                                                                          $    215,849        $    211,030
                                                                         ==============      ==============



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




                                       3


              ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                    (In thousands, except per share amounts)


                                                       For the Three Months Ended        For the Six Months Ended
                                                                June 30,                         June 30,
                                                      ----------------------------     ----------------------------
                                                          1998            1997             1998            1997
                                                      ------------    ------------     ------------    ------------
                                                                                           
Operating revenues:
   Oil and gas production                              $   20,233      $   15,302       $   39,258      $   36,332
   Gain on sale of Russian joint venture                      -               -                -             9,691
   Gain (loss) on sale of proved properties                   (14)          4,182              (14)          4,214
   Other revenues                                              88             353              202             461
                                                      ------------    ------------     ------------    ------------
      Total operating revenues                             20,307          19,837           39,446          50,698
                                                      ------------    ------------     ------------    ------------

Operating expenses:
   Oil and gas production                                   4,173           3,123            8,116           7,101
   Depletion, depreciation and amortization                 6,503           4,021           11,880           8,018
   Impairment of proved properties                          1,077             516            1,445             516
   Exploration                                              3,052           1,630            6,473           3,019
   Abandonment and impairment of unproved properties          312             332              615             482
   General and administrative                               1,477           1,547            4,424           4,568
   Loss in equity investees                                   510             109              571              22
   Other                                                       57              71               92              36
                                                      ------------    ------------     ------------    ------------
      Total operating expenses                             17,161          11,349           33,616          23,762
                                                      ------------    ------------     ------------    ------------

Income from operations                                      3,146           8,488            5,830          26,936

Nonoperating income and (expense):
   Interest income                                            371             289              526             467
   Interest expense                                          (360)           (143)            (754)           (725)
                                                      ------------    ------------     ------------    ------------

Income before income taxes                                  3,157           8,634            5,602          26,678
Income tax expense                                          1,121           3,041            1,896           9,490
                                                      ------------    ------------     ------------    ------------

Income from continuing operations                           2,036           5,593            3,706          17,188
Gain on sale of discontinued operations, net of taxes          34             296               34             296
                                                      ------------    ------------     ------------    ------------

Net income                                             $    2,070      $    5,889       $    3,740      $   17,484
                                                      ============    ============     ============    ============

Basic earnings per common share:
   Income from continuing operations                   $      .19      $      .51       $      .34      $     1.68
   Gain on sale of discontinued operations                     -              .03               -              .03
                                                      ============    ============     ============    ============
Basic net income per common share                      $      .19      $      .54       $      .34      $     1.71
                                                      ============    ============     ============    ============

Diluted earnings per common share:
   Income from continuing operations                   $      .18      $      .51       $      .33      $     1.66
   Gain on sale of discontinued operations                     -              .03               -              .03
                                                      ============    ============     ============    ============
Diluted net income per common share                    $      .18      $      .54       $      .33      $     1.69
                                                      ============    ============     ============    ============

Basic weighted average common shares outstanding           10,984          10,945           10,984          10,255
                                                      ============    ============     ============    ============
Diluted weighted average common shares outstanding         11,079          11,054           11,102          10,352
                                                      ============    ============     ============    ============

Cash dividend declared per share                       $     0.05      $     0.05       $     0.10      $     0.10
                                                      ============    ============     ============    ============




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




                                       4


              ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In thousands)



                                                                                For the Six Months Ended
                                                                                        June 30,
                                                                            --------------------------------
                                                                                1998                1997
                                                                            ------------        ------------
Reconciliation of net income to net cash provided by operating activities:
                                                                                                  
      Net income                                                             $    3,740          $   17,484
      Adjustments to reconcile net income to net
            cash provided by operating activities:
         Gain on sale of Russian joint venture                                      -                (9,691)
         Loss (gain) on sale of proved properties                                    14              (4,214)
         Depletion, depreciation and amortization                                11,880               8,018
         Impairment of proved properties                                          1,445                 516
         Exploration                                                              2,945                (341)
         Abandonment and impairment of unproved properties                          615                 482
         Loss in equity investees                                                   571                  22
         Deferred income taxes                                                    1,410               8,435
         Other                                                                      239                 256
                                                                            ------------        ------------
                                                                                 22,859              20,967
      Changes in current assets and liabilities:
         Accounts receivable                                                      7,081               1,453
         Prepaid expenses and other                                                (986)                253
         Accounts payable and accrued expenses                                   (1,600)              2,552
         Stock appreciation rights                                                    7              (1,567)
                                                                            ------------        ------------
      Net cash provided by operating activities                                  27,361              23,658
                                                                            ------------        ------------
      Cash flows from investing activities:
         Proceeds from sale of oil and gas properties                                59               7,144
         Capital expenditures                                                   (29,391)            (23,688)
         Acquisition of oil and gas properties                                   (2,026)             (7,386)
         Sale of Russian joint venture                                              -                 5,608
         Investment in and loans to Summo Minerals Corporation                     (566)               (251)
         Receipts from restricted cash                                              -                 7,854
         Deposits to restricted cash                                                -                (6,551)
         Other                                                                     (922)               (164)
                                                                            ------------        ------------
      Net cash used in investing activities                                     (32,846)            (17,434)
                                                                            ------------        ------------
      Cash flows from financing activities:
         Proceeds from long-term debt                                            24,395               4,975
         Repayment of long-term debt                                            (20,387)            (41,149)
         Proceeds from sale of common stock, net of offering costs                  -                51,190
         Dividends paid                                                          (1,098)               (985)
         Other                                                                      -                    (9)
                                                                            ------------        ------------
      Net cash provided by financing activities                                   2,910              14,022
                                                                            ------------        ------------

      Net (decrease) increase in cash and cash equivalents                       (2,575)             20,246
      Cash and cash equivalents at beginning of period                            7,112               3,338
                                                                            ------------        ------------
      Cash and cash equivalents at end of period                             $    4,537          $   23,584
                                                                            ============        ============




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



                                       5


              ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                   (Continued)


Supplemental   schedule  of  additional   cash  flow   information  and  noncash
activities:

                                                   For the Six Months Ended
                                                           June 30,
                                                   1998                1997
                                               ------------        ------------
                                                         (In thousands)

Cash paid for interest                               $ 771               $ 936

Cash paid for income taxes                             444                 809

Cash paid for exploration expenses                   6,425               2,541

Interest income included in restricted cash              -                  32






In February 1997, the Company sold its interest in the Russian joint venture for
$17,609,000,  receiving  $5,608,000 of cash,  $1,869,000 of Khanty  Mansiysk Oil
Corporation common stock, and a $10,134,000 receivable in a form equivalent to a
retained production payment.



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




                                       6


              ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


                                  June 30, 1998


Note 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. They do not include all information and notes required by
generally  accepted  accounting  principles for complete  financial  statements.
However,  except as disclosed  herein,  there has been no material change in the
information disclosed in the notes to consolidated financial statements included
in the Annual  Report on Form 10-K of St.  Mary Land &  Exploration  Company and
Subsidiaries  (the  "Company")  for the year ended  December  31,  1997.  In the
opinion of Management, all adjustments (consisting of normal recurring accruals)
considered  necessary  for a fair  presentation  have been  included.  Operating
results for the periods presented are not necessarily  indicative of the results
that may be expected for the full year.

The accounting  policies  followed by the Company are set forth in Note 1 to the
Company's  financial  statements  in Form 10-K for the year ended  December  31,
1997. It is suggested  that these  financial  statements be read in  conjunction
with the financial statements and notes included in the Form 10-K.

Certain  amounts  in  the  1997  consolidated  financial  statements  have  been
reclassified to correspond to the 1998 presentation.

Note 2 - Investments

The Company,  through  subsidiaries,  owned an 18% interest in a venture that is
developing the  Chernogorskoye  oil field in western Siberia (the "Russian joint
venture"). The Company accounted for its investment in the Russian joint venture
under the equity method of  accounting.  In February  1997, the Company sold its
interest  in the  Russian  joint  venture  to Khanty  Mansiysk  Oil  Corporation
("KMOC"),  formerly known as Ural Petroleum Corporation.  In accordance with the
Acquisition  Agreement,  the Company  received cash  consideration of $5,608,000
before  transaction  costs,  KMOC  common  stock  valued  at  $1,869,000,  and a
receivable in a form equivalent to a retained  production payment of $10,134,000
plus interest at 10% per annum from the limited liability company formed to hold
the Russian joint venture interest.  The Company's  receivable is collateralized
by the partnership  interest sold. The Company has the right, subject to certain
conditions,  to require KMOC to purchase the Company's  receivable  from the net
proceeds of an initial  public  offering of KMOC common stock or  alternatively,
the Company may elect to convert  all or a portion of its  receivable  into KMOC
common  stock  immediately  prior to an initial  public  offering of KMOC common
stock.  The  Company  recorded a gain on the sale of the Russian  joint  venture
interest of  $9,671,000.  The  Company's  equity in income for the Russian joint
venture for 1997 through the date of sale was $203,000.

The  Company  accounts  for  its  37%  ownership   interest  in  Summo  Minerals
Corporation ("Summo") under the equity method of accounting.  For the six months
ended June 30,  1998,  the Company  recorded a loss of $571,000 as its equity in
the losses of Summo.  In May 1997,  the Company  entered  into an  agreement  to
receive a 55% interest in Summo's Lisbon Valley Copper  Project (the  "Project")
in  return  for  the  Company  contributing  $4,000,000  in  cash,  all  of  its
outstanding  stock in Summo,  and  $8,600,000  in  letters of credit to a single
purpose company, Lisbon Valley Mining Company LLC, formed to own and operate the
Project.  Summo will contribute the property, all project permits and contracts,


                                       7


$3,200,000 in cash, and a commitment for $45,000,000 of senior debt financing in
return  for a 45%  interest  in the new  company.  The  agreement  is subject to
certain  conditions,  including  final  resolution of  regulatory  approvals and
project  financing.  Summo has  completed  tests of the ground water  quality to
address concerns raised on appeal during the permitting process.  The results of
these tests support the original  conclusions  and  recommendations  made by the
Bureau of Land  Management when the Project was initially  approved.  A decision
from the Interior Board of Land Appeals is expected  before the end of 1998. The
Company has agreed to provide  interim  financing  of up to  $2,950,000  for the
Project in the form of a loan to Summo due in June 1999. Interest accrues on the
amounts  outstanding at the prime rate plus 1%. As of June 30, 1998,  $2,647,000
was outstanding under this loan.  Additional  amounts totaling $48,000 have been
advanced to Summo under this loan since June 30, 1998. At the Company's  option,
any principal and interest  amounts  outstanding are convertible  into shares of
Summo common stock anytime after December 31, 1998, at a conversion  price equal
to the weighted  average  trading price of Summo's  common shares for the twenty
trading days leading up to and including December 31, 1998. Upon  capitalization
of the new company the  outstanding  loan principal  shall  constitute a capital
contribution in partial  satisfaction of the Company's  capital  commitments set
out in the May 1997  agreement,  and any  accrued  interest on the loan shall be
forgiven.   Although  current  copper  prices  are  not  sufficient  to  warrant
development  of the  Project at this time,  management  believes  the  long-term
outlook for copper prices is favorable and plans to continue  providing  interim
financing during 1998 until Summo receives regulatory approval and copper prices
recover adequately to justify construction using permanent financing.  There can
be no  assurance  that the Company will  realize a return on its  investment  in
Summo or the Project.

Note 3 - Capital Stock

On February 26, 1997, the Company closed the sale of 2,000,000  shares of common
stock at $25.00 per share.  On March 12, 1997, the Company closed the sale of an
additional  180,000  shares  pursuant  to  the  underwriters'  exercise  of  the
over-allotment  option. These transactions resulted in aggregate net proceeds of
$51,200,000.   The  proceeds  were  used  to  fund  the  Company's  exploration,
development and acquisition  programs and to repay  borrowings  under its credit
facility.

In June 1998, the Company's  shareholders approved an amendment to the Company's
Certificate  of  Incorporation  to increase the number of  authorized  shares of
Common Stock from 15,000,000 to 50,000,000.

Note 4 - Recently Issued Accounting Standards

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 130,  "Reporting  Comprehensive
Income,"  effective for financial  statements for fiscal years  beginning  after
December 15, 1997. The Statement establishes standards for reporting and display
of comprehensive income and its components in financial statements. The adoption
of this  statement  will not have a material  impact on the Company's  financial
statements.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise  and Related  Information,"  effective for financial  statements  for
fiscal years beginning after December 15, 1997. The Statement requires companies
to report  certain  information  about  operating  segments  in their  financial
statements  and certain  information  about their  products  and  services,  the
geographic areas in which they operate and their major customers. The Company is
currently reviewing the effects of the disclosure requirements of the Statement.



                                       8


In February 1998, the FASB issued SFAS No. 132,  "Employer's  Disclosures  about
Pensions  and  Other  Postretirement   Benefits,"  effective  for  fiscal  years
beginning  after  December 15, 1997. The Statement  standardizes  the disclosure
requirements  for  pensions  and  other   postretirement   benefits  to  provide
information  that is more  comparable  and  concise.  The  Company is  currently
reviewing the effects of the disclosure requirements of the Statement.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years  beginning after June 15, 1999. The Statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts, and for hedging activities. The Company
is currently  reviewing  the effects this  Statement  will have on the financial
statements in relation to the Company's hedging activities.

Note 5 - Earnings per Share

In February  1997,  the FASB issued SFAS No. 128,  "Earnings  Per Share,"  which
requires a dual  presentation  of basic and  diluted  earnings  per  share.  The
Company  adopted SFAS No. 128  effective  December 31, 1997.  Under SFAS No. 128
basic net income per share of common stock is  calculated by dividing net income
by the weighted  average of common shares  outstanding  during each period,  and
diluted  net income per common  share of stock is  calculated  by  dividing  net
income by the weighted  average of outstanding  common shares and other dilutive
securities.  Dilutive  securities of the Company consist entirely of outstanding
options to  purchase  the  Company's  common  stock.  The  outstanding  dilutive
securities for the three-month  periods ended June 30, 1998 and 1997 were 95,255
and 108,421,  respectively,  and the  outstanding  dilutive  securities  for the
six-month  periods  ended  June 30,  1998  and 1997  were  118,861  and  97,361,
respectively. All net income of the Company is available to common stockholders.
The  adoption  of SFAS No.  128 had no effect on  diluted  net  income per share
compared to fully  diluted  net income per share as reported  for the six months
ended June 30, 1997.  Restated diluted net income per share for the three months
ended June 30, 1997 was $0.54  compared to fully diluted net income per share of
$0.53 as reported.  Restated basic net income per share for the six months ended
June 30,  1997 was $1.71  compared  to primary  net income per share of $1.69 as
reported.  Restated  basic net income per share for the three  months ended June
30,  1997 was  $0.54  compared  to  primary  net  income  per  share of $0.53 as
reported.

Note 6 - Income Taxes

Federal  income tax expense for 1998 and 1997 differs from the amount that would
be provided by applying the  statutory  U.S.  Federal  income tax rate to income
before income taxes primarily due to Section 29 credits and percentage depletion
in 1998 and the effect of state income taxes partially  offset by Section 29 tax
credits and percentage depletion in 1997.

Note 7 - Long-Term Debt and Notes Payable

On June 30, 1998,  the Company  entered into a new  long-term  revolving  credit
agreement  that replaced the agreement  dated March 1, 1993 and amended in April
1996. The new credit  agreement  specifies a maximum loan amount of $200,000,000
and has an initial  aggregate  borrowing  base of  $115,000,000.  The lender may
periodically  re-determine  the aggregate  borrowing base. The initial  accepted
borrowing  base is  $40,000,000.  The credit  agreement  has a maturity  date of
December 31, 2005, and includes a revolving  period that matures on December 31,
2000.  The Company can elect to allocate up to 50% of available  borrowings to a
short-term  tranche  due in 364 days.  The  Company  must  comply  with  certain
covenants including maintenance of stockholders' equity at a specified level and
limitations  on additional  indebtedness.  As of June 30, 1998  $19,200,000  was
outstanding under this credit agreement.



                                       9


Effective June 30, 1998,  interest on borrowings during the revolving period and
commitment  fees on the  unused  portion  of the  accepted  borrowing  base  are
calculated as follows:


INTEREST RATES:

Debt to Capitalization Ratio                       Interest Rate
- ----------------------------                       -------------

Less than 0.3 to 1.0                 The Company's option of (a) LIBOR + 0.50%
                                        or (b) the higher of the Federal Funds
                                        Rate + 0.5% or the Prime Rate
Greater than or equal to 0.3 to      The Company's option of (a) LIBOR + 0.75%
   1.0 but less than 0.4 to 1.0         or (b) the higher of the Federal Funds
                                        Rate + 0.5% or the Prime Rate
Greater than or equal to 0.4 to      The Company's option of (a) LIBOR + 1.00%
   1.0 but less than 0.5 to 1.0         or (b) the higher of the Federal Funds
                                        Rate + 0.5% or the Prime Rate
Greater than or equal to             The Company's option of (a) LIBOR + 1.25%
   0.5 to 1.0                           or (b) the higher of the Federal Funds
                                        Rate + 0.625% or the Prime Rate + 0.125%

COMMITMENT FEES:

  Debt to Capitalization Ratio         Short-Term Tranche    Long-Term Tranche
  ----------------------------         ------------------    -----------------
  Less than 0.5 to 1.0                       0.125%                0.25%
  Greater than or equal to 0.5 to 1.0        0.375%                0.50%

At June 30, 1998,  the Company's debt to  capitalization  ratio as defined under
the credit agreement was 0.18 to 1.0.

Panterra, in which the Company has a 74% general partnership ownership interest,
has a separate credit  facility with a $25,000,000  borrowing base as of July 1,
1998,  and  $10,000,000  and  $11,000,000  outstanding  as of June 30,  1998 and
December 31, 1997,  respectively.  In June 1997,  Panterra entered into a credit
agreement replacing a previous agreement,  which was due March 31, 1999. The new
credit agreement  includes a two-year revolving period converting to a five-year
amortizing loan on June 30, 1999.  During the revolving period of the loan, loan
balances accrue interest at Panterra's option of either the bank's prime rate or
LIBOR plus 3/4% when the  Partnership's  debt to partners' capital ratio is less
than 30%,  up to a maximum of either the bank's  prime rate or LIBOR plus 1-1/4%
when the Partnership's debt to partners' capital ratio is greater than 100%.



                                       10


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

St. Mary Land & Exploration Company ("St. Mary" or the "Company") was founded in
1908 and  incorporated  in  Delaware  in 1915.  The  Company  is  engaged in the
exploration,  development,  acquisition  and production of crude oil and natural
gas with  operations  focused in five core operating areas in the United States:
The Mid-Continent  region; the ArkLaTex region;  south Louisiana;  the Williston
Basin; and the Permian Basin.

Internal  exploration,  drilling and production  personnel conduct the Company's
activities in the  Mid-Continent  and ArkLaTex  regions and in south  Louisiana.
Activities  in the  Williston  Basin are conducted  through  Panterra  Petroleum
("Panterra") in which the Company owns a 74% general partnership  interest.  The
Company proportionally consolidates its interest in Panterra.  Activities in the
Permian  Basin  are  primarily  contracted  through  an  oil  and  gas  property
management company with extensive experience in the basin.

St.  Mary has two  principal  equity  investments,  Summo  Minerals  Corporation
("Summo"), a North American copper mining company of which the Company owns 37%,
and until early 1997, the Company's Russian joint venture.  The Company accounts
for its  investments  in Summo and the Russian  joint  venture  under the equity
method and includes  its share of the income or loss from these  entities in its
consolidated  results of  operations.  Effective  February 12, 1997, the Company
sold its Russian joint venture.

The Company  receives  significant  royalty income from its south  Louisiana fee
lands.  Management  believes the Company's  royalty  income may increase in 1998
with the  completion  of the St.  Mary  Land &  Exploration  No. 3 well at South
Horseshoe  Bayou in January 1998 which  followed the completion of the discovery
well in the prospect in February 1997 and its subsequent  recompletion  in April
1998.  The Company  owns a 25% working  interest and royalty  interests  between
approximately  19% and 22% in this field for combined  net revenue  interests of
between  approximately  37% and 40%,  depending on the depth of production.  The
Company and the lessees have identified several geologic  objectives for testing
in future years.

During 1995,  1996 and 1997 the Company  acquired  proved oil and gas properties
for  a  total  of  $56.4  million.  The  results  of  operations  include  these
acquisitions and the subsequent development of the properties. In December 1995,
the Company  acquired  two  different  interests  in the Box Church Field in its
ArkLaTex  region for $2.2 million and several  additional  interests in 1996 for
$580,000. Development of the field has occurred with the drilling and completion
of three wells in 1996 and eleven  wells in 1997.  In the first half of 1998 the
Company  completed two of the three wells in progress at year-end  1997.  Two of
the five wells  anticipated to be drilled in 1998 to complete the development of
the field were in progress  as of June 30,  1998.  The  Company  purchased a 90%
interest in the producing  properties of Siete Oil & Gas  Corporation  for $10.0
million in June 1996 and completed a series of follow-on acquisitions of smaller
interests in these  properties  totaling $5.8 million during 1996,  1997 and the
first two quarters of 1998. These properties are located in the Permian Basin of
New Mexico and west Texas. The successful implementation of a secondary recovery
plan during the first half of 1998 was completed as part of the  Company's  plan
to further develop these properties.  Management  expects to acquire  additional
interests in the Siete  properties as they become  available.  In May 1997,  the
Company  acquired an 85% working  interest in certain  Louisiana  properties  of
Henry  Production  Company  for $3.8  million.  In  November  1997,  the Company
acquired  the  interests  of Conoco,  Inc.  in the  Southwest  Mayfield  area in
Oklahoma for $20.3 million.  Management  anticipates  drilling  several wells in
1998 to test the geologic  ideas  identified at the time of  acquisition of this
field, one such well was in progress at June 30, 1998. During the second quarter
of 1998, the Company entered into an exploration  and development  joint venture
in  east  Texas,  which  included  the  acquisition  of  interests  in  existing
properties for $521,000. Several smaller acquisitions were also completed during
1997 and 1996 totaling $560,000 and $2.8 million, respectively.



                                       11


In February  1997, the Company sold its interest in the Russian joint venture to
Khanty  Mansiysk Oil  Corporation  ("KMOC"),  formerly  known as Ural  Petroleum
Corporation, for $17.6 million. The Company received $5.6 million in cash before
transaction  costs,  $1.9  million  of  KMOC  common  stock  and  a  convertible
receivable  in a form  equivalent  to a  retained  production  payment  of $10.1
million plus interest at 10% per annum from the limited liability company formed
to hold the Russian joint venture interest.

In February  1997,  the Company  closed the sale of  2,000,000  shares of common
stock at $25.00 per share and closed the sale of an additional 180,000 shares in
March 1997, pursuant to the underwriters' exercise of the over-allotment option.
These transactions resulted in aggregate net proceeds of $51.2 million.

In May 1997, the Company sold its non-operated interests in south Texas for $5.4
million  as part  of its  continuing  strategy  to  focus  and  rationalize  its
operations.

The Company  seeks to protect its rate of return on  acquisitions  of  producing
properties by hedging up to the first 24 months of an  acquisition's  production
at  prices  approximately  equal  to  those  used in the  Company's  acquisition
evaluation  and  pricing  model.  The Company  also  periodically  uses  hedging
contracts  to  hedge  or  otherwise  reduce  the  impact  of oil and  gas  price
fluctuations on production.  The Company's strategy is to ensure certain minimum
levels of  operating  cash flow and to take  advantage  of windows of  favorable
commodity  prices.  The Company generally limits its aggregate hedge position to
no more than 50% of its total  production.  The Company seeks to minimize  basis
risk and indexes the majority of its oil hedges to NYMEX prices and the majority
of its gas hedges to various regional index prices  associated with pipelines in
proximity  to the  Company's  areas of gas  production.  The  Company has hedged
approximately  3.2 million  MMBtu of its  remaining  1998 gas  production  at an
average fixed price of $2.20 per MMBtu.  The Company has also purchased  options
resulting in price  collars and price floors on 840,000  MMBtu of the  Company's
remaining  1998 gas production  with price ceilings  between $2.65 and $2.80 per
MMBtu and price floors  between $1.95 and $2.00 per MMBtu.  All of the Company's
existing oil hedges  matured  during the second quarter of 1998. The company has
not hedged any of its remaining 1998 oil production as of June 30, 1998.

This  Quarterly  Report on Form 10-Q  includes  certain  statements  that may be
deemed to be  "forward-looking  statements" within the meaning of Section 27A of
the  Securities  Act of 1933,  as amended,  and  Section  21E of the  Securities
Exchange Act of 1934,  as amended.  All  statements,  other than  statements  of
historical facts, included in this Form 10-Q that address activities,  events or
developments that the Company expects, believes or anticipates will or may occur
in the  future,  including  such  matters  as future  capital,  development  and
exploration expenditures (including the amount and nature thereof),  drilling of
wells,  reserve estimates (including estimates of future net revenues associated
with such  reserves and the present value of such future net  revenues),  future
production of oil and gas, repayment of debt, business strategies, expansion and
growth of the Company's  operations  and other such matters are  forward-looking
statements.  These statements are based on certain assumptions and analyses made
by the  Company in light of its  experience  and its  perception  of  historical
trends,  current  conditions,  expected future developments and other factors it
believes are appropriate in the circumstances.  Such statements are subject to a
number of assumptions,  risks and  uncertainties,  general economic and business
conditions,  the business  opportunities (or lack thereof) that may be presented
to and  pursued  by the  Company,  changes  in laws or  regulations,  and  other
factors,  many of which are  beyond  the  control of the  Company.  Readers  are
cautioned that any such statements are not guarantees of future  performance and
that actual results or developments  may differ  materially from those projected
in the forward-looking statements.



                                       12


Results of Operations

The following table sets forth selected operating and financial  information for
the Company:


                                                     Three Months                        Six Months
                                                    Ended June 30,                     Ended June 30,
                                             ----------------------------       ----------------------------
                                                 1998            1997               1998            1997
                                             ------------    ------------       ------------    ------------
                                                             (In thousands, except BOE data)
                                                                                    
Oil and gas production
 Revenues:
    Working interests                         $   17,862      $   13,323         $   34,872      $   31,834
    Louisiana royalties                            2,371           1,979              4,386           4,498
                                             ============    ============       ============    ============
        Total                                 $   20,233      $   15,302         $   39,258      $   36,332
                                             ============    ============       ============    ============

Net production:
   Oil (MBbls)                                       370             276                692             572
   Gas (MMcf)                                      7,255           5,529             13,614          10,999
                                             ============    ============       ============    ============
   MBOE                                            1,579           1,197              2,961           2,405
                                             ============    ============       ============    ============

Average sales price (1):
   Oil (per Bbl)                              $    13.55      $    18.91         $    14.18      $    19.67
   Gas (per Mcf)                                    2.10            1.82               2.16            2.28

Oil and gas production costs:
   Lease operating expense                    $    3,118      $    2,339         $    5,959      $    4,762
   Production taxes                                1,055             784              2,157           2,339
                                             ============    ============       ============    ============
      Total                                   $    4,173      $    3,123         $    8,116      $    7,101
                                             ============    ============       ============    ============

Additional per BOE data:
   Sales price                                $    12.81      $    12.78         $    13.26      $    15.10
   Lease operating expense                          1.97            1.95               2.01            1.98
   Production taxes                                  .67             .65                .73             .97
                                             ------------    ------------       ------------    ------------
      Operating margin                        $    10.17      $    10.18         $    10.52      $    12.15
   Depreciation, depletion and
      amortization                            $     4.12      $     3.36         $     4.01      $     3.33
   Impairment of proved
      properties                                     .68             .43                .49             .21
   General and administrative                        .94            1.29               1.49            1.90

- ----------
(1)      Includes the effects of the Company's hedging activities.



                                       13


Oil and Gas Production Revenues.  Oil and gas production revenues increased $4.9
million,  or 32% to $20.2 million for the second  quarter 1998 compared to $15.3
million for the second quarter 1997. Oil  production  volumes  increased 34% and
gas  production  volumes  increased 31% for the second  quarter 1998 compared to
1997.  Average net daily production reached 17.4 MBOE in the second quarter 1998
compared  to 13.2  MBOE in the  comparable  quarter  of  1997.  This  production
increase resulted from new properties acquired and drilled during the past year.
Major  acquisitions  included the Southwest Mayfield  properties  purchased from
Conoco, the acquisition of Louisiana  properties from Henry Production  Company,
and the  additional  interests  purchased  in the Siete  properties.  Successful
drilling  results in the Box Church  Field in Texas,  the  Haynesville  Field in
Louisiana and in the Company's Oklahoma drilling program also contributed to the
second quarter 1998 production increase. Also contributing to the second quarter
1998 production increase were gas balancing  adjustments and other non-recurring
adjustments which increased average daily production for the quarter by 1.1MBOE.
The average  realized  oil price for the second  quarter 1998  decreased  28% to
$13.55 per Bbl, while  realized gas prices  increased 15% to $2.10 per Mcf, from
their respective 1997 levels.

Oil and gas production  revenue  increased $2.9 million,  or 8% to $39.2 million
for the six months ended June 30, 1998  compared to $36.3  million in 1997.  Oil
production  volumes  increased 21% and gas production  volumes increased 24% for
the first six months of 1998 compared with the comparable  1997 period.  Average
net  daily  production  was 16.4 MBOE for the six  months  ended  June 30,  1998
compared  to 13.3  MBOE in 1997.  This  production  increase  resulted  from new
properties acquired and drilled during the past year,  including the acquisition
of the Southwest  Mayfield  properties in Oklahoma and the Louisiana  properties
purchased from Henry Production Company.  Successful drilling results in the Box
Church  Field in Texas,  the South  Horseshoe  Bayou and  Haynesville  fields in
Louisiana and the Company's  Oklahoma drilling program  contributed to the first
half of 1998  production  increases.  The  average  oil price for the six months
ended June 30, 1998 decreased 28% to $14.18 per barrel, and gas prices decreased
5% to $2.16 per Mcf, from their respective 1997 levels.

The Company hedged 30,000 Bbls of its oil  production  during the second quarter
1998 at an average NYMEX price of $17.95 per Bbl. The Company  purchased options
resulting in price collars and price floors on 22,000 Bbls of its second quarter
1998 oil production  with a price ceiling of $24.00 per Bbl and a price floor of
$20.00 per Bbl. The Company realized a $313,000  increase in oil revenue or $.45
per Bbl for 1998 on these contracts  compared to a $219,000 decrease or $.38 per
Bbl in 1997.  The Company  also hedged 2.0 million  MMBtu of its second  quarter
1998 gas production at an average indexed price of $2.21 per MMBtu and purchased
options  resulting in price collars and price floors on 1.1 million MMBtu of its
second quarter 1998 gas production  with price ceilings  between $2.55 and $3.00
per MMBtu and price  floors  between  $1.95  and $2.00 per  MMBtu.  The  Company
realized a $324,000 increase in gas revenues or $.02 per Mcf for 1998 from hedge
contracts compared to a $1.0 million or $.10 per Mcf decrease in 1997.

Oil and Gas  Production  Costs.  Oil and gas  production  costs consist of lease
operating  expense and production  taxes.  Total production costs increased $1.1
million or 34% for the second quarter 1998 from comparable  1997 levels.  Higher
lease  operating  expenses were partially  offset by lower  production  taxes on
wells drilled in 1998 qualifying for reduced production tax rates. Total oil and
gas production costs per BOE increased 1% to $2.64 in 1998 compared to $2.60 per
BOE in the second quarter 1997.

Total  production  costs  increased $1.0 million or 14% for the six months ended
June 30, 1998 to $8.1 million as a result of new properties acquired and drilled
during the past year.  However,  total  production  costs per BOE declined 7% to
$2.74 for the six  months  ended  June 30,  1998  compared  to $2.95 for the six
months ended June 30, 1997,  primarily due to lower lease operating expenses per
BOE from high volume properties such as South Horseshoe Bayou.

Depreciation,  Depletion, Amortization and Impairment.  Depreciation,  depletion
and amortization expense ("DD&A") increased $2.5 million, or 62% to $6.5 million
in the second  quarter 1998  compared  with $4.0  million in 1997.  DD&A per BOE
increased  23% to $4.12 in the second  quarter  1998  compared to $3.36 in 1997.
This  increase  resulted from  increased  production  volumes of new  properties
acquired  and drilled in the last half of 1997 and the first half of 1998 with a
higher cost basis,  and from increased water production at South Horseshoe Bayou
and the adverse  impact of low oil prices in the  Williston  Basin.  The Company
recorded  impairments  of proved oil and gas  properties  of $1.1 million in the
second quarter 1998 compared with $516,000 in the comparable 1997 period.  These
second quarter 1998 charges  resulted from a high cost marginal well in Oklahoma
and another in Louisiana, as well as $580,000 of impairments associated with the
Company's properties in the Williston Basin due to low oil prices.



                                       14


DD&A  increased  48% to $11.9  million  for the six months  ended June 30,  1998
compared with $8.0 million in 1997 because of increased  production  and reserve
declines from low oil prices and water  production at South Horseshoe Bayou, and
due to higher cost properties in four fields in Oklahoma. DD&A per BOE increased
to $4.01  in the six  months  ended  June 30,  1998  compared  to $3.33 in 1997.
Impairment  of  producing  oil and gas  properties  was $1.4 million for the six
months  ended June 30, 1998  compared to $516,000  for the six months ended June
30,  1997,  due to marginal  wells  drilled in Oklahoma  and  Louisiana  and the
adverse affects of low oil prices in the Williston Basin.

Abandonment and impairment of unproved properties  decreased $20,000 to $312,000
in the second quarter 1998 compared to $332,000 in 1997.

Abandonment and impairment of unproved properties increased $133,000 to $615,000
in the six months  ended June 30, 1998  compared  to $482,000 in the  comparable
period in 1997 due to  additional  lease  expirations  during  the first half of
1998.

Exploration.  Exploration  expense increased $1.4 million or 87% to $3.1 million
for the second  quarter 1998 compared  with $1.6 million in 1997  primarily as a
result of three unsuccessful exploratory wells in south Louisiana and Oklahoma.

Exploration  expense  increased $3.5 million or 114% to $6.5 million for the six
months  ended  June  30,  1998  compared  to $3.0  million  in  1997  due to six
unsuccessful  exploratory  tests in south Louisiana and Oklahoma and the payment
of $795,000 for delay rentals in the Company's  Atchafalaya prospect area in the
six months ended June 30, 1998 compared with 1997.

General and Administrative. General and administrative expenses declined $70,000
or 5% to $1.5 million for the second quarter 1998 as compared to 1997. Increased
compensation   and  rent   expenses   were  offset  by  declines  in  charitable
contributions, insurance and general corporate expenses.

General and administrative expenses decreased $144,000 or 3% to $4.4 million for
the six months ended June 30, 1998  compared to $4.6 million in 1997.  Increased
compensation   and  rent   expenses   were  offset  by  declines  in  charitable
contributions,  insurance  and  general  corporate  expenses  and  increases  in
overhead  reimbursements  from outside interest owners in properties operated by
the Company.

Other  operating  expenses  consist of legal expenses in connection with ongoing
oil and gas activities and oversight of the Company's mining  investments.  This
expense  decreased  $13,000 to $58,000 in the second  quarter 1998 compared with
the second quarter 1997.

Other operating  expenses increased $56,000 to $92,000 in the first half of 1998
compared to the comparable 1997 period,  primarily due to legal expenses in 1998
associated  with the pending  litigation  that seeks to recover damages from the
drilling  contractor  for the St.  Mary Land &  Exploration  No. 1 well at South
Horseshoe Bayou, and due to the benefit of a non-recurring insurance recovery of
$68,000 in 1997.

Equity in  Income of  Russian  Joint  Venture.  The  Company  accounted  for its
investment in the Russian joint venture under the equity method and included its
share of income from the venture in its results of operations up to the point of
sale.  Therefore  no equity in the net income of the Russian  joint  venture was
recorded in 1998  compared to $203,000  recorded  in 1997.  As  discussed  under
Outlook,  the Company  sold this  investment  in February  1997  resulting  in a
partial year of equity income recorded in 1997.



                                       15


Equity in Loss of Summo  Minerals  Corporation.  The  Company  accounts  for its
investment  in Summo under the equity  method and  includes its share of Summo's
income or loss in its results of  operations.  The  Company's  equity in the net
loss of Summo was $509,000 in the second quarter 1998 and $110,000 in 1997. This
increase  is  primarily  due to the  $447,000  impact  of  Summo's  decision  to
write-off its investment in its Cashin and Champion properties.

The  Company's  equity in the net loss of Summo was  $571,000 for the six months
ended June 30,  1998  compared to  $209,000  in 1997,  primarily  due to Summo's
decision to write-off its  investment  in its Cashin and Champion  properties in
the second quarter 1998.

Non-Operating  Income and Expense.  Interest income increased  $83,000 or 29% to
$372,000 for the second  quarter 1998 from $289,000 for the second  quarter 1997
due to $312,000 of interest  income  resulting  from a favorable  gas  balancing
decision by the Oklahoma Supreme Court.  Interest expense increased  $218,000 or
152% to $361,000 for the second  quarter  1998  compared to $143,000 in the 1997
period due to increased  borrowings  under the Company's and  Panterra's  credit
facilities in 1998. Debt under the Company's  credit facility had been repaid in
the first quarter 1997 with the proceeds  from the sale of the Company's  common
stock in February 1997.

Interest  income  increased  $59,000 or 13% to $526,000 in the six month  period
ended June 30, 1998 compared to $467,000 for the  comparable  1997 period due to
$312,000 of interest  income from the favorable gas balancing  decision in 1998.
Interest  was  earned  in the  six-month  period  ended  June 30,  1997 on funds
available from the sale of the Company's common stock.  Interest expense for the
six months ended June 30, 1998 increased  $29,000 or 4% to $754,000  compared to
$725,000 for 1997 due to borrowings  under  Panterra's and the Company's  credit
facilities.

Income Taxes. Income tax expense was $1.1 million in the second quarter 1998 and
$3.0  million  in 1997,  resulting  in  effective  tax rates of 35.5% and 35.2%,
respectively.  This reduced  expense  reflects lower net income from  operations
before income taxes for 1998 due to lower oil prices,  increased exploration and
DD&A expenses and a $4.2 million pre-tax gain on the sale of non-core properties
in south Texas in the second quarter 1997.

Income tax expense  decreased  $7.6  million to $1.9  million for the six months
ended  June  30,  1998,  primarily  resulting  from  lower  oil and gas  prices,
increased  exploration  expense and DD&A expenses in 1998,  and the $9.7 million
and $4.2 million gains on the sales of the  Company's  Russian joint venture and
non-core properties,  respectively,  in 1997. The effective tax rate for the six
months  ended June 30,  1998  decreased  to 33.8%  compared to 35.6% in the 1997
period.

Net Income. Net income for the second quarter 1998 decreased $3.8 million or 65%
to $2.1 million  compared to $5.9  million in 1997.  Increases of 31% and 34% in
gas and oil  volumes,  respectively,  partially  offset by a 28% decrease in oil
prices  resulted in a $4.9 million  increase in oil and gas production  revenues
for the  second  quarter  1998.  A $4.2  million  gain on the  sale of  non-core
properties in the second  quarter 1997,  increases in  exploration  expenses and
DD&A associated with increased  production  volumes and impairments of producing
properties in the second quarter 1998, contributed to a $3.6 million decrease in
income from continuing operations.

Net income for the six months  ended June 30, 1998  decreased  $13.7  million to
$3.7 million  compared to $17.5  million in 1997.  This  decrease  resulted from
increased  oil and gas  production,  offset  by  lower  oil and gas  prices  and
increases in exploration  expense,  DD&A and impairments of producing properties
in 1998, and from the $9.7 million gain on the sale of the Company's interest in
the Russian joint venture and the $4.2 million gain on the sale of the Company's
non-core south Texas properties in 1997.



                                       16


Liquidity and Capital Resources

The  Company's  primary  sources of liquidity are the cash provided by operating
activities, debt financing and access to the capital markets. The Company's cash
needs  are for  the  acquisition,  exploration  and  development  of oil and gas
properties and for the payment of debt obligations,  trade payables, stockholder
dividends  and for the  repurchase of the  Company's  common stock.  The company
generally  finances its  exploration  and  development  programs from internally
generated  cash  flow,  bank  debt and cash and cash  equivalents  on hand.  The
Company  continually  reviews its capital expenditure budget based on changes in
cash flow and other factors.

Cash Flow.  The Company's net cash  provided by operating  activities  increased
$3.7  million  or 16% to $27.4  million in the six  months  ended June 30,  1998
compared to $23.7 million in 1997.  Increased  receipts for oil and gas revenues
due to higher  production  volumes,  despite  reduced oil and gas  prices,  were
offset by increased  payments  for lease  operating  expenses and  significantly
higher payments related to exploration expenses. Also, in the first half of 1997
the Company made a cash payment of approximately $1.6 million in satisfaction of
liabilities  previously  accrued by the Company under its SAR plan compared to a
corresponding payment of $351,000 in the first half 1998.

Net cash used in  investing  activities  in the six months  ended June 30,  1998
increased  $15.4  million or 88% to $32.8  million  compared to $17.4 million in
1997.  This  increase was  primarily  due to a $5.7 million  increase in capital
expenditures  for the  Company's  drilling  programs  in  1998,  a $5.4  million
decrease in  acquisition  expenditures  in 1998, $ 5.6 million in cash  received
from the sale of the  Company's  Russian joint venture in the first quarter 1997
and $7.1 million received in 1997 from the sale of oil and gas properties. Total
first half 1998  capital  expenditures,  including  acquisitions  of oil and gas
properties, were $31.4 million compared to $31.1 million in 1997.

The Company was able to apply the majority of the proceeds from the sales of oil
and gas  properties in 1997 to  acquisitions  of oil and gas  properties in 1997
allowing  tax-free  exchanges of these properties for income tax purposes.  In a
tax-free  exchange of properties the tax basis of the sold property carries over
to the new  property.  Gains  or  losses  for tax  purposes  are  recognized  by
amortization of the tax basis of the new property  throughout its remaining life
or when the new property is sold or abandoned.

Net cash  provided by  financing  activities  was $2.9  million in the six month
period ended June 30, 1998  resulting  from net borrowing of long-term  debt and
payments of dividends to shareholders compared to net cash provided by financing
activities of $14.0 million in the comparable 1997 period.  The Company received
$51.2  million  from  the  sale  of  common  stock  and had a net  reduction  of
borrowings of $35.7 million in the first quarter of 1997. The Company  increased
its  quarterly  dividend  25% to $.05 per  share  effective  with the  quarterly
dividend declared in January 1997 and paid in February 1997.

The Company had $4.5 million in cash and cash equivalents and working capital of
$3.6  million  as of June 30,  1998  compared  to $7.1  million of cash and cash
equivalents  and working  capital of $9.6  million at  December  31,  1997.  The
reduction in cash and cash  equivalents  is primarily the result of payments for
capital expenditures,  property  acquisitions and exploration  expenses,  and to
reduce debt levels.  Working capital  decreased due to the reduction in cash and
cash equivalents and decreased  accounts  receivable,  primarily for oil and gas
sales due to price declines,  offset by a smaller  decrease in accounts  payable
and accrued expenses resulting from drilling activity.



                                       17


Credit  Facility.  On June 30, 1998,  the Company  entered into a new  long-term
revolving credit agreement replacing its credit facility dated March 1, 1993 and
amended April 1, 1996. The new credit facility provides a maximum loan amount of
$200.0  million.  The amount that may be borrowed  from time to time will depend
upon the value of the Company's  oil and gas  properties  and other assets.  The
Company's  borrowing base,  which is redetermined  annually,  was increased from
$40.0  million to $60.0  million in February  1997 and further  increased in May
1998 to $115.0 million based on increases in the Company's  estimated net proved
reserves in 1996 and 1997. The initial accepted borrowing base is $40.0 million.
The  maturity  date of the new credit  agreement  is December  31,  2005,  which
includes a revolving period maturing on December 31, 2000. The Company may elect
to allocate up to 50% of the available borrowings to a short-term tranche due in
364  days.  Outstanding  revolving  loan  balances  under the  Company's  credit
facility,  which  were $19.2  million  and $14.5  million  at June 30,  1998 and
December 31, 1997,  respectively,  accrue  interest at rates  determined  by the
Company's debt to total capitalization ratio. During the revolving period of the
loan, loan balances  accrue  interest at the Company's  option of either (a) the
higher of the banks' prime rate or the Federal Funds Rate plus 1/2% or (b) LIBOR
plus 1/2% when the Company's debt to total  capitalization  is less than 30%, up
to a maximum  of the  Company's  option of either  (a) the  higher of the banks'
prime  rate  plus 1/8% or the  Federal  Funds  Rate plus 5/8% or (b) LIBOR  plus
1-1/4%  when the  Company's  debt to total  capitalization  ratio is equal to or
exceeds 50%. The credit  facility  provides for,  among other things,  covenants
requiring maintenance of stockholders' equity at a specified level and limits on
additional indebtedness of the Company.

Panterra, in which the Company has a 74% general partnership ownership interest,
has a separate credit facility with a $25.0 million borrowing base as of July 1,
1998,  and $10.0 million and $11.0 million  outstanding  as of June 30, 1998 and
December 31, 1997,  respectively.  In June 1997,  Panterra entered into a credit
agreement replacing a previous agreement,  which was due March 31, 1999. The new
credit agreement  includes a two-year revolving period converting to a five-year
amortizing loan on June 30, 1999.  During the revolving period of the loan, loan
balances accrue interest at Panterra's option of either the bank's prime rate or
LIBOR plus 3/4% when the  Partnership's  debt to partners' capital ratio is less
than 30%,  up to a maximum of either the bank's  prime rate or LIBOR plus 1-1/4%
when the Partnership's debt to partners' capital ratio is greater than 100%. The
Company  intends to use the available  credit under the Panterra credit facility
to fund a portion of its 1998 capital expenditures in the Williston Basin.

Common Stock. In February 1997, the Company closed the sale of 2,000,000  shares
of common stock at $25.00 per share and closed the sale of an additional 180,000
shares  in  March  1997,   pursuant  to  the   underwriters'   exercise  of  the
over-allotment  option. These transactions resulted in aggregate net proceeds of
$51.2  million.  The  proceeds  of these  sales were used to fund the  Company's
exploration,  development  and acquisition  programs,  and pending such use were
used to repay borrowings under its credit facility.

In June 1998, the Company's  shareholders  approved an increase in the number of
authorized  shares of the  Company's  common stock from 15 million to 50 million
shares.

In August 1998, the Company's Board of Directors  authorized a stock  repurchase
program  whereby the  Company may  purchase  from  time-to-time,  in open market
purchases or  negotiated  sales,  up to one million  shares of its common stock.
Management anticipates that such purchases of shares by the Company may commence
at any time and will be funded with internal cash flow and borrowings  under the
Company's credit facility.

Outlook.  The Company  believes that its existing capital  resources,  cash flow
from operations and available  borrowings are sufficient to meet its anticipated
capital and operating requirements for 1998.



                                       18


The Company has reduced its 1998 capital budget by  approximately  $11.0 million
to a revised total of  approximately  $83.0  million.  The reduction  reflects a
reallocation of capital to the Company's stock  repurchase  program as well as a
response to lower oil prices and drilling  results.  Reductions  of $3.0 million
arise from postponement of new drilling activities in the Williston Basin due to
low oil prices; $4.0 million due to suspension, pending further evaluation, of a
previously scheduled second deep test at the Company's Atchafalaya prospect; and
$4.0 million from  re-balancing of the drilling program in the Anadarko Basin to
emphasize less costly and lower risk prospects.

The amount and allocation of future capital and  exploration  expenditures  will
depend upon a number of factors  including  the number of available  acquisition
opportunities, the Company's ability to assimilate such acquisitions, the impact
of oil and gas prices on investment  opportunities,  the availability of capital
and the success of its development and exploratory  activity which could lead to
funding requirements for further development.

The Company continuously evaluates  opportunities in the marketplace for oil and
gas  properties  and,  accordingly,  may be a buyer or a seller of properties at
various times.

The Company has added  several new  prospects  to its  pipeline of large  target
exploration  ideas and expects to  commence  the  drilling of three  significant
tests  by the  first  quarter  of  1999 at its  Patterson,  Stallion  and  South
Horseshoe Bayou projects in South Louisiana.

Volatile industry  conditions and several exploration  disappointments  early in
the year are  combining  to make 1998 a  particularly  challenging  year for the
Company as it consolidates the rapid growth in reserves and production  achieved
during the past several years.  Modest continued growth in production volumes is
expected during the balance of the year as the Company's  Atchafalaya  discovery
is  brought  online in August  and  additional  wells in the  Mid-Continent  and
ArkLaTex regions are completed

The St. Mary Land & Exploration No. 3 (40 percent net revenue interest) at South
Horseshoe  Bayou was completed in January 1998 in the  17,300-foot  sand and has
experienced  increasing  water  production  since early June.  Cumulative  gross
production  to date totals  approximately  6.6 BCF of gas and 47,000  barrels of
condensate (approximately 2.6 BCF of gas and 18,800 barrels of condensate net to
the  Company).  Through  early  August  1998 the well has  continued  to produce
approximately  34 MMCF of gas and 200 barrels of  condensate  per day.  However,
water production has continued to increase and presently exceeds 900 barrels per
day.  The cause of this water  production  is unknown and the well's  production
trends are being closely monitored.

The net proved reserves  assigned to the  17,300-foot  sand in the No. 3 well at
year-end 1997 were 33.1 BCF of gas and 177,000  barrels of condensate.  Although
to date the water  production has not adversely  affected the well's  productive
capacity,  the ultimate impact on the Company's production and reserves at South
Horseshoe  Bayou can not be  determined  at this time.  Should water  production
continue to  increase  substantially,  the No. 3 well's  future  production  and
recoverable reserves could be materially impaired.

The Company's depreciation,  depletion and amortization rate per BOE is expected
to be somewhat  higher than  historical  amounts as the  Atchafalaya  production
comes online beginning in August 1998.

In May 1997, the Company  entered into an agreement to receive a 55% interest in
Summo's Lisbon Valley Copper  Project (the  "Project") in return for the Company
contributing  $4.0 million in cash, all of its outstanding  stock in Summo,  and
$8.6 million in letters of credit for  development  of the Project.  The Company
has agreed to provide  interim  financing of up to $2.95 million for the Project
in the form of a loan to Summo  due in June  1999.  As of June 30,  1998,  $2.65
million was outstanding  under this loan.  Additional  amounts  totaling $48,000
have been  advanced to Summo under this loan since June 30, 1998.  Any principal
and interest  amounts  outstanding are  convertible  into shares of Summo common
stock  anytime  after  December  31,  1998 at the  option of the  Company.  Upon
capitalization of the Project, the outstanding loan principal shall constitute a


                                       19


capital   contribution  in  partial   satisfaction  of  the  Company's   capital
commitments set out in the May 1997 agreement.  Future development and financial
success of the  Project  are largely  dependent  on the market  price of copper,
which is determined in world markets and is subject to significant fluctuations.
Although current copper prices are not sufficient to warrant  development of the
Project at this time,  management  believes  the  long-term  outlook  for copper
prices is favorable and plans to continue  providing  interim  financing  during
1998 until Summo  receives final  regulatory  approval and copper prices recover
adequately to justify  construction using permanent  financing.  There can be no
assurance  that the Company will realize a return on its  investment in Summo or
the Project.

In February  1997,  the  Company  sold its Russian  joint  venture to KMOC.  The
Company  received  approximately  $5.6  million  in  cash  consideration  before
transaction costs, KMOC common stock valued at approximately $1.9 million, and a
receivable  in  a  form   equivalent  to  a  retained   production   payment  of
approximately  $10.1  million  plus  interest  at 10% per annum from the limited
liability  company  formed  to hold the  Russian  joint  venture  interest.  The
Company's  receivable is  collateralized  by the partnership  interest sold. The
Company  has the  right,  subject  to certain  conditions,  to  require  KMOC to
purchase the  Company's  receivable  from the net proceeds of an initial  public
offering of KMOC common stock or alternatively, the Company may elect to convert
all or a portion of its receivable into KMOC common stock  immediately  prior to
an initial public offering of KMOC common stock.

Impact of the Year 2000  Issue.  The Year 2000 Issue is the  result of  computer
programs being written using two digits rather than four, or other  methods,  to
define the applicable year. Computer programs that have date-sensitive  software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could  result in a system  failure or  miscalculations  causing  disruptions  of
operations,  including,  among other  things,  a temporary  inability to process
transactions, send invoices or engage in similar normal business activities.

The Company has  conducted a review of its computer  systems and has  determined
that the computer  system used by Panterra  will need to be replaced in order to
properly  utilize dates beyond  December 31, 1999.  Panterra,  after a review of
available replacement systems, is in contract negotiations to license a suitable
Year 2000 compliant system, and believes conversion can be completed, tested and
operational  before  December  31, 1999 at a cost that is not expected to have a
material  effect on the Company's  results of operations.  If replacement of the
Panterra  system is not  completed  timely,  the Year 2000  Issue  could  have a
significant impact on the operations of Panterra. The Company presently believes
that other less  significant  systems can be upgraded to mitigate  the Year 2000
Issue with  modifications  to existing  software or conversions to new software.
Modifications or conversions to new software for the less  significant  systems,
if not completed timely,  would have neither a material impact on the operations
of the Company nor on its results of operations.

The Company has initiated formal  communications with its significant  suppliers
and purchasers and  transporters  of oil and natural gas to determine the extent
to which the Company is vulnerable to those third parties'  failure to remediate
their own Year 2000 Issues.  There can be no guarantee that the systems of these
third parties will be converted  timely, or that a failure to convert by another
company would not have a material adverse effect on the Company.

Accounting Matters

In February  1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  Per
Share," which  requires a dual  presentation  of basic and diluted  earnings per
share. The Company adopted SFAS No. 128 effective  December 31, 1997. Under SFAS
No. 128 basic net income per share of common stock is calculated by dividing net
income by the weighted  average of common shares  outstanding  during each year,
and  diluted  net income  per  common  share of common  stock is  calculated  by
dividing net income by the weighted  average of common shares and other dilutive
securities.



                                       20


In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income,"
effective for financial statements for fiscal years beginning after December 15,
1997.  The  Statement   establishes  standards  for  reporting  and  display  of
comprehensive income and its components in financial statements. The adoption of
this  statement  will not have a  material  impact  on the  Company's  financial
statements.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise  and Related  Information,"  effective for financial  statements  for
fiscal years beginning after December 15, 1997. The Statement requires companies
to report  certain  information  about  operating  segments  in their  financial
statements  and certain  information  about their  products  and  services,  the
geographic areas in which they operate and their major customers. The Company is
currently reviewing the effects of the disclosure requirements of the Statement.

In February 1998, The FASB issued SFAS No. 132,  "Employer's  Disclosures  about
Pensions  and  Other  Postretirement   Benefits,"  effective  for  fiscal  years
beginning  after  December 15, 1997. The Statement  standardizes  the disclosure
requirements  for  pensions  and  other   postretirement   benefits  to  provide
information  that is more  comparable  and  concise.  The  Company is  currently
reviewing the effects of the disclosure requirements of the Statement.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years  beginning after June 15, 1999. The Statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts, and for hedging activities. The Company
is currently  reviewing  the effects this  Statement  will have on the financial
statements in relation to the Company's hedging activities.

Effects of Inflation and Changing Prices

The Company's  results of operations  and cash flow are affected by changing oil
and gas prices.  Within the United States  inflation has had a minimal effect on
the Company.  The Company cannot  predict the extent of any such effect.  If oil
and gas prices increase,  there could be a corresponding increase in the cost to
the Company for drilling and related services, although offset by an increase in
revenues.  Should  oil and gas  prices  increase,  the cost of  acquisitions  of
producing  properties will increase,  which could limit the Company's ability to
acquire properties that meet the Company's criteria.

During the first half of 1998 the Company experienced an increase in the cost to
the Company for  drilling  and related  services  resulting  from  shortages  in
available  drilling  rigs,  drilling  and  technical  personnel,   supplies  and
services.  However,  since mid-year  service costs appear to have  stabilized or
begun to decline.  If shortages persist,  there could be continued  increases in
the cost to the Company of exploration, drilling and production of oil and gas.




                                       21


PART II.  OTHER INFORMATION

Item 4.   Submission of Matters to a Vote of Security Holders

          At the Company's  annual  stockholders'  meeting on June 3, 1998,  the
          shareholders   approved   management's  current  slate  of  directors,
          approved  the St.  Mary  Land &  Exploration  Company  Employee  Stock
          Purchase Plan (adopted September 18, 1997 and previously  submitted as
          Exhibit 10.50), and approved an amendment to the Company's Certificate
          of Incorporation to increase the number of authorized shares of Common
          Stock from 15,000,000 to 50,000,000.

Item 6.   Exhibits and Reports on Form 8-K

              (a)     Exhibits

                      Exhibit           Description
                      -------           -----------

                       3.3              Certificate of Amendment to Certificate
                                           of Incorporation
                       27.6             Financial Data Schedule
                       10.52            Credit Agreement dated June 30, 1998

              (b)     There were no reports on Form 8-K filed during the quarter
                      ended June 30, 1998.




                                       22


                                   SIGNATURES


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

                                   St. Mary Land & Exploration Company



August 12, 1998                    By  /s/ MARK A. HELLERSTEIN
                                       ---------------------------
                                       Mark A. Hellerstein
                                       President and Chief Executive Officer


August 12, 1998                    By /s/ DAVID L. HENRY
                                      ----------------------------
                                      David L. Henry
                                      Vice President - Finance and
                                      Chief Financial Officer


August 12, 1998                    By  /s/ RICHARD C. NORRIS
                                       ---------------------------
                                       Richard C. Norris
                                       Vice President - Accounting and
                                       Administration and Chief Accounting
                                       Officer