U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT

For the transition period from ______ to _______

Commission File No. 001-14745

3TEC ENERGY CORPORATION
(Exact name of small business issuer as specified in its charter)

DELAWARE 63-1081013
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

777 WALKER STREET
TWO SHELL PLAZA, SUITE 2400
HOUSTON, TX 77002
(Address of principal executive offices)

(713) 821-7100
(Issuer's telephone number)

N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of Exchange Act 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 [ ]

Number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date:

Common stock, $0.02 par value
14,698,296 shares as of April 26, 2001

Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]

3TEC ENERGY CORPORATION AND SUBSIDIARIES

INDEX

PAGE
NO.
----

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets-
March 31, 2001 (Unaudited) and December 31, 2000 (Audited)... 1
Consolidated Statements of Operations (Unaudited)-
Three months ended March 31, 2001 and 2000................... 2
Consolidated Statements of Cash Flows (Unaudited)-
Three months ended March 31, 2001 and 2000................... 3
Notes to Consolidated Financial Statements (Unaudited)........ 4

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 8

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K....................... 10

PART I. CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

3TEC ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
ASSETS (UNAUDITED) (AUDITED)

CURRENT ASSETS
Cash and cash equivalents.......................... $ 6,002,629 $ 4,436,497
Accounts receivable................................ 29,729,502 26,137,738
Other current assets............................... 2,724,613 5,389,848
------------ ------------
Total current assets........................... 38,456,744 35,964,083

PROPERTY (AT COST)
Oil and gas-successful efforts method.............. 372,948,127 270,277,796
Other.............................................. 2,412,577 2,030,310
------------ ------------
375,360,704 272,308,106
Accumulated depreciation, depletion and amortization. (62,999,144) (56,170,333)
------------ ------------
Net Properties and Equipment......................... 312,361,560 216,137,773
OTHER ASSETS......................................... 2,867,202 2,662,201
------------ ------------
TOTAL ASSETS......................................... $353,685,506 $254,764,057
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................... $ 15,866,330 $ 10,746,140
Accrued liabilities................................ 6,242,636 2,191,826
Series C Preferred stock redemption payable........ 2,726,616 2,855,521
Income taxes payable............................... 5,211,522 4,461,928
Other current liabilities.......................... 1,493,046 467,152
------------ ------------
Total current liabilities............................ 31,540,150 20,722,567

LONG-TERM DEBT....................................... 99,000,000 63,000,000
SENIOR SUBORDINATED CONVERTIBLE NOTES................ 13,223,844 13,223,844
DEFERRED INCOME TAXES................................ 40,440,767 6,770,981
OTHER LIABILITIES.................................... 5,445 58,424
MINORITY INTEREST.................................... 1,575,926 1,393,578

STOCKHOLDERS' EQUITY

Preferred stock, $0.02 par, 20,000,000 shares
authorized, 266,667 designated Series B,
2,300,000 shares designated Series C and
725,167 shares designated Series D, none other
designated......................................... -- --

Convertible preferred stock Series B, $7.50 stated
value, 266,667 shares issued and outstanding.
$2,000,000 aggregate liquidation preference......... 3,627,000 3,627,000

Convertible preferred stock Series D, $24.00 stated
value, 621,372 and 621,930 shares issued and
outstanding at March 31, 2001 and December 31,
2000, respectively. $14,912,928 aggregate
liquidation preference............................... 7,564,812 7,571,553

Common stock, $.02 par value, 60,000,000 shares
authorized, 14,696,796 and 14,687,906 shares issued
at March 31, 2001 and December 31, 2000,
respectively......................................... 293,936 293,758

Additional paid-in capital......................... 136,436,833 136,382,775
Retained earnings.................................. 21,025,633 2,768,417
Treasury stock; 69,807 and 69,807 shares at March
31, 2001 and December 31, 2000, respectively...... (1,048,840) (1,048,840)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY........................... 167,899,374 149,594,663
------------ ------------

COMMITMENTS AND CONTINGENCIES........................ - -
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $353,685,506 $254,764,057
============ ============

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3TEC ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED
MARCH 31
--------------------------
(Unaudited) (Unaudited)
2001 2000
----------- -----------

REVENUES
Oil, natural gas and plant income.............. $48,863,830 $17,292,024
Gain on sale of properties..................... 87,210 8,893
Other.......................................... 125,110 308,284
----------- -----------
TOTAL REVENUES................................... 49,076,150 17,609,201
----------- -----------

EXPENSES
Production -
Lease operations............................. 4,356,813 3,483,897
Severance, production and ad valorem taxes... 3,176,160 1,409,467
Gathering, transportation and other.......... 858,199 377,451
Geological and geophysical..................... 215,113 173,121
Dry hole....................................... - 12,243
General and administrative..................... 1,541,737 1,383,846
Interest....................................... 2,181,131 2,084,499
Depreciation, depletion and amortization....... 6,801,239 3,920,436
----------- -----------
TOTAL EXPENSES................................... 19,130,392 12,844,960

INCOME BEFORE INCOME TAX EXPENSE,
MINORITY INTEREST AND DIVIDENDS
TO PREFERRED STOCKHOLDERS...................... 29,945,758 4,764,241
Minority Interest................................ 182,348 42,400
Income tax expense............................... 11,315,424 1,605,424
----------- -----------
NET INCOME....................................... 18,447,986 3,116,417
Dividends to preferred stockholders.............. 190,769 260,090
----------- -----------
NET INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS............................ $18,257,217 $ 2,856,327
=========== ===========
NET INCOME PER COMMON SHARE
BASIC.......................................... $1.25 $0.48
=========== ===========
DILUTED........................................ $0.98 $0.35
=========== ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC.......................................... 14,597,465 6,013,109
========== ===========
DILUTED........................................ 19,049,503 9,342,722
========== ===========

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3TEC ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED
MARCH 31
---------------------------
(Unaudited) (Unaudited)
2001 2000
------------ -----------

OPERATING ACTIVITIES

Net income.......................................................................... $ 18,447,986 $ 3,116,417

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization.......................................... 6,638,908 3,920,436
Amortization of debt issue costs.................................................. 162,331 -
Dry hole costs.................................................................... - 12,243
Gain on sale of properties........................................................ (87,210) (8,893)
Deferred income taxes............................................................. 6,103,902 1,605,424
Minority interest................................................................. 182,348 42,400
Changes in current assets and liabilities net of acquisition effects:
Accounts receivable and other current assets..................................... 38,426 (278,269)
Accounts payable, accrued liabilities and other current liabilities.............. 6,858,761 (1,384,253)
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................... 38,345,452 7,025,505

INVESTING ACTIVITIES
Proceeds from sales of properties................................................. - 148,519
Acquisition of Magellan Exploration LLC, net of cash acquired..................... - (269,937)
Acquisition of Classic Resources, Inc., net of cash acquired...................... (57,199,127) -
Acquisition of oil and gas properties............................................. (383,189) (4,165,381)
Development of oil and gas properties............................................. (14,657,229) -
Additions to other assets......................................................... (587,268) (486,532)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES............................................... (72,826,813) (4,773,331)

FINANCING ACTIVITIES
Proceeds from long term debt...................................................... 62,000,000 -
Principal payments on long term debt.............................................. (26,000,000) (4,000,000)
Proceeds from issuance of common stock............................................ - 12,000
Proceeds from exercise of stock options and warrants.............................. 47,493 -
Preferred stock dividends......................................................... - (219,313)
Debt, common stock and preferred stock issue and registration costs............... - (269,134)
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................................. 36,047,493 (4,476,447)

DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS.................................... 1,566,132 (2,224,273)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................... 4,436,497 6,141,153
------------ -----------
CASH AND CASH EQUIVALENTS AT ENDING OF PERIOD....................................... $ 6,002,629 $ 3,916,880
============ ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.......................................................................... $ 1,189,849 $ 2,054,620
============ ===========
Income taxes...................................................................... $ 4,408,200 $ -
============ ===========
Non-cash investing and financing activities:
Preferred dividends incurred but not paid......................................... $ 190,769 $ 150,434
============ ===========
Common stock and warrants issued in acquisition of Magellan Exploration LLC....... $ - $10,572,935
============ ===========
Preferred stock issued in acquisition of Magellan Exploration LLC................. $ - $ 7,453,457
============ ===========
Deferred taxes recorded in acquisition of Classic................................. $ 27,565,844 $ -
============ ===========

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3TEC ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) INTERIM FINANCIAL STATEMENTS

In management's opinion, the accompanying consolidated financial statements
contain all adjustments (consisting primarily of normal recurring adjustments)
necessary to present fairly the consolidated financial position of the Company
as of March 31, 2001 and the consolidated results of operations and consolidated
cash flows for the periods ended March 31, 2001 and 2000.

These consolidated financial statements should be read in conjunction with the
Company's financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000. The results
of operations for the three months ended March 31, 2001, are not necessarily
indicative of the results which may be expected for any other interim period or
for the entire fiscal year ending December 31, 2001.

(2) RECLASSIFICATIONS

Certain reclassifications of prior period amounts have been made to conform to
the current presentation.

(3) EARNINGS PER SHARE

Basic earnings and loss per common share are based on the weighted average
shares outstanding without any dilutive effects considered. Diluted earnings
and loss per share reflect dilution from all potential common shares, including
options, warrants and convertible preferred stock and convertible notes. Diluted
loss per share does not include the effect of any potential common shares if the
effect would be anti-dilutive.

Basic and diluted earnings per share for the three month period ended March
31, 2001 and 2000 determined as follows (in thousands):

THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2001 MARCH 31, 2000
--------------- --------------

Basic net income attributable to common stockholders................... $18,257 $2,856
Plus preferred stock dividends......................................... 191 260
Plus interest expense (net of tax) on subordinated convertible notes... 182 196
------- ------
Fully diluted net income attributable to common stockholders........... $18,630 $3,312
======= ======

OUTSTANDING OUTSTANDING
SHARES SHARES
--------------- --------------
Basic shares outstanding (weighted average shares)..................... 14,597 6,013
Plus potentially dilutive securities:
Dilutive options and warrants applying treasury stock method........... 2,230 1,004
Shares from conversion of subordinated convertible notes............... 1,469 1,469
Shares from conversion of Series B preferred stock..................... 132 91
Shares from conversion of Series C preferred stock..................... - 379
Shares from conversion of Series D preferred stock..................... 622 387
------- ------
Fully diluted shares outstanding (weighted average shares)............. 19,050 9,343
======= ======

3TEC ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

(4) ACQUISITIONS

On January 30, 2001, the Company acquired 100% of the issued and outstanding
stock of Classic Resources Inc. ("Classic") for cash consideration of
approximately $53.5 million (the "Classic Acquisition") plus other acquisition
costs. The purchase price is subject to certain post-closing adjustments
customary in transactions of this type. Classic is a privately-held exploration
and production company with properties located in East Texas. The Company
estimates these properties to have unaudited total net proved reserves of 47
Bcfe and net daily production of approximately 11 Mmcfe, as of January 31, 2001.
The Classic Acquisition was financed under the Company's existing Credit
Facility.

On May 31, 2000, we completed the acquisition of the CWR Properties (the "CWR
Acquisition") located in East Texas for cash consideration of approximately
$51.9 million. The effective date of the acquisition was January 1, 2000 and the
operations are included in the Company's consolidated financial statements
beginning June 1, 2000. The CWR Properties acquisition was financed under our
existing credit facility, which we amended prior to closing the CWR Acquisition.
The purchase price was allocated principally to oil and natural gas properties.

On February 3, 2000, we completed the acquisition of Magellan Exploration LLC
(the "Magellan Acquisition"), from certain affiliates of EnCap Investments
L.L.C., a Delaware limited liability company and an investor in W/E Energy
Company, LLC ("EnCap Investments"), and other third parties for consideration
consisting of (a) 1,085,934 shares of common stock, (b) four year warrants to
purchase up to 333,333 shares of common stock at $30.00 per share, (c) 617,009
shares of 5% Series D Convertible Preferred Stock with a redemption value of
$24.00 per share and (d) the assignment of a performance based "back-in" working
interest of 5% of Magellan's interest in 12 exploration prospects. The purchase
price of approximately $19 million was allocated principally to proved
undeveloped oil and natural gas properties.

The following pro forma data presents the results of the Company for the three
months ended March 31, 2000, as if the Classic Acquisition and the CWR
Acquisition had occurred on January 1, 2000, and the results of the Company for
the three months ended March 31, 2001 as if the Classic Acquisition had occurred
on January 1, 2001. The pro forma data assumes the acquisition of the respective
properties and the debt financing transactions related to these acquisitions.
The pro forma results are presented for comparative purposes only and are not
necessarily indicative of the results which would have been obtained had the
acquisitions been consummated as presented. The pro forma financial data does
not include the financial information for the Magellan Acquisition, which is not
significant with respect to the operations of the Company for the period
presented (in thousands, except per share amounts):

PRO FORMA PRO FORMA
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
(UNAUDITED) (UNAUDITED)
------------------- -------------------

Total revenues................................................... $51,146 $22,846
Net income attributable to common stockholders................... 16,068 2,564
Net income per basic share attributable to common stockholders... 1.10 0.43

The results of Classic's operations have been included in the Company's
consolidated financial statements beginning on January 30, 2001 using the
purchase method of accounting. The total purchase price was allocated
principally to oil and natural gas assets as adjusted for deferred tax
liabilities of $27 million.

3TEC ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

(5) STOCKHOLDERS' EQUITY

Common Stock

On June 30, 2000, the Company completed its public offering of 8.05 million
shares of the Company's common stock (priced at $9.00 per share). The net
proceeds, approximately $66.6 million, were used primarily to repay a portion of
the outstanding debt under the amended credit facility.

Series C Preferred Stock Redemption

On August 31, 2000, the Company sent notices to the holders of its Series C
Preferred Stock (the "Series C") advising that the Series C would be redeemed on
September 30, 2000. The Series C had a redemption price of $5.00 per share and
the holders had the right to convert their Series C shares into Company common
stock at a ratio of one share of common for three shares of Series C prior to
September 30, 2000. A total of 2,101,827 shares of the Series C were outstanding
on August 31, 2000, with 1,293,521 shares (62%) held by the Company's 80% owned
subsidiary, Enex Resources Corporation. Approximately 109,580 Series C shares
were converted into 36,527 shares of common stock and approximately 1,992,247
Series C shares were redeemed. At March 31, 2001, the Company's liability for
the Series C redemption is approximately $2.7 million.

Series D Preferred Stock

In connection with the Magellan Acquisition, the Company issued 617,009 shares
of Series D Preferred Stock, par value $0.02 per share (the "Series D"), with a
redemption value of $24.00 per share. While the per share redemption and
dividend amounts of all of our different series of preferred stock vary, the
rights as to dividends and liquidation payments are equal. Shares of Series D
earn cumulative dividends at 5% per annum, payable semi-annually on March 31 and
September 30 of each year, when, as and if authorized and declared by the board
of directors. For a period of three years from the closing date of the Magellan
Acquisition, the Company may pay the dividends at its option in cash or in
additional shares of Series D. Dividends were paid on the outstanding shares of
Series D as of March 31, 2000 in the form of additional shares of Series D
Preferred Stock, and as of September 30, 2000 and March 31, 2001 in a cash
payment.

Holders of Series D have the right to convert one share of Series D into one
share of common stock. Upon thirty days written notice, the Company has the
right to redeem any or all shares of Series D for $24.00 per share plus any
accrued but unpaid dividends. Holders of the Series D have no right to require
the Company to redeem the Series D. During the three month period ended March
31, 2001, 558 shares of the Series D Preferred Stock were converted to common
stock.

In the event of liquidation, dissolution, winding-up or merger of the Company,
the holders of Series D Preferred Stock are entitled to receive distributions of
$24.00 per share of Series D plus any accrued but unpaid dividends before any
holders of common stock or junior preferred stock receive any distributions.

A majority of the holders of Series D must consent to certain actions by the
Company, that might adversely affect any holder's rights and preferences.

(6) COMMITMENTS AND CONTINGENCIES

On November 18, 1999, the Company's shareholders approved a reincorporation of
the Company from Alabama to Delaware (See Note 1). The Alabama Code has a
shareholder dissent provision that allows a shareholder to dissent from the
reincorporation and demand cash payment equal to the fair value of the common
stock owned at the date of the reincorporation. Before the November 18, 1999
shareholders meeting, the Company received shareholder dissents representing
ownership of 99,438 shares of common stock. Over the period December 15, 1999 to
January 25, 2000, the Company received formal demands for payment from the
dissenting shareholders (the

3TEC ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

"dissenters"). The Company made an offer to the dissenters on March 14, 2000 and
the dissenters made a counteroffer in late March. On May 26, 2000, the Company
agreed to a settlement with the dissenters to purchase 62,549 shares of common
stock for a total of $980,800, including interest. The settlement closed on June
30, 2000 and the shares are held by the Company as treasury stock. A shareholder
holding 36,889 shares of common stock agreed to withdraw his dissent.

(7) HEDGING ACTIVITIES

In February 2000, the Company entered into fixed price swap agreements
covering 2,000 barrels of oil per day for the period March through October 2000
at a weighted average NYMEX West Texas Intermediate price of $25.96 per barrel.
During the three month period ending March 31, 2000, the Company's oil revenues
were reduced by the effect of our hedging activities by $101,000. The fair
market value of the open position at March 31, 2000 was approximately ($47,480).

As of December 31, 2000 and the period ended March 31, 2001, the Company did
not have any open derivative instruments or hedging activities. However, the
Company cannot assure that such instruments or activities will not be put into
place in the future.

(8) ACCOUNTING PRONOUNCEMENTS

In September 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended, standardizes the
accounting for and disclosures of derivative instruments, including certain
derivative instruments embedded in other contracts. The statement is effective
for the Company's financial statements on January 1, 2001. As of December 31,
2000 and the period ended March 31, 2001, the Company did not have any open
derivative instruments or hedging activities. However, the Company cannot assure
that such instruments or activities will not be put into place in the future.

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

This quarterly report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such forward-looking statements involve
risks and uncertainties and other factors beyond the control of the Company.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in the forward-looking statements.

OVERVIEW

We are engaged in the acquisition, development, production and exploration of
oil and natural gas reserves. Our properties are concentrated in East Texas and
the Gulf Coast region, both onshore and in the shallow waters of the Gulf of
Mexico. We also own significant properties in the Permian and San Juan basins
and in the Mid-continent region. Our management and technical staff have
substantial experience in each of these areas. As of December 31, 2000, on a pro
forma basis including the subsequent acquisition of Classic, we had at that date
estimated total net proved reserves of 354 Bcfe, of which approximately 81% were
natural gas and approximately 74% were proved developed, with an estimated PV-10
value of $1.23 billion (using SEC pricing parameters at December 31, 2000.)

LIQUIDITY AND CAPITAL RESOURCES

We believe that our cash flows from operations are adequate to meet the
requirements of operating our business. However, future cash flows are subject
to a number of variables, including our level of production and prices, and we
cannot assure that operations and other capital resources will provide cash in
sufficient amounts to maintain planned levels of capital expenditures. Our
principal operating sources of cash include sales of natural gas and oil
production.

For the year 2001, we have budgeted approximately $63 million for development
and exploration capital expenditures. Through March 31, 2001, the Company has
expended approximately $15 million of its capital budget.

We are obligated to pay dividends of approximately $740,000 per year on the
Series D Preferred Stock, which we may pay in either cash or in additional
shares of Series D Preferred Stock during the three years ending February 1,
2003. We are obligated to pay interest on the convertible subordinated notes of
approximately $1.2 million per year.

Our primary source of financing for acquisitions has been borrowings under our
credit facility (the "Facility"), discussed below. We believe we will have
sufficient cash flow from operations and borrowings under our credit facility to
meet our obligations and operating needs for the current year. We also believe
that we have the ability to raise additional equity or debt financing and
otherwise access the capital markets should those sources of capital prove
insufficient to execute our strategic objectives. However, future cash flows are
subject to a number of variables, including our level of production and prices,
and we cannot assure you that operations and other capital resources will
provide cash of sufficient amounts to maintain planned levels of capital
expenditures.

The Facility provides for a borrowing base which is redetermined on a semi-
annual basis, and as of March 31, 2001, was set at $175 million. Interest under
the Facility is based upon either the bank's prime rate plus a low of zero to a
high of 50 basis points or LIBOR plus basis points increasing from a low of 150
to a high of 212.5 as amounts outstanding increase as a percentage of the
borrowing base. At March 31, 2001, we were paying an average of approximately
7.44% per annum interest on the entire principal balance of the Facility of $99
million. The Facility matures on May 31, 2003. The borrowings under the Facility
are secured by substantially all of our properties.

In connection with this Facility, we are required to adhere to certain
affirmative and negative covenants. The loan agreement contains a number of
dividend restrictions and restrictive covenants which, among other things,
require the maintenance of a minimum current ratio and interest coverage ratio.
At March 31, 2001, the Company was in compliance with the terms of the
Facility.

We generally sell our oil at local field prices paid by the principal
purchasers of oil. The majority of our natural gas production is sold at spot
prices. Accordingly, we are generally subject to the commodity prices for these
resources as they vary from time to time. As of March 31, 2001, the Company does
not have any derivative instruments or hedging activities that will impact 2001
operations and therefore does not expect any income statement or balance sheet
impact for 2001. However, the Company cannot assure that such instruments or
activities will not be put into place in the future.

Due to our significant property and corporate acquisitions in 2000 and 2001,
and our current capital structure, comparisons of our results of operations for
interim periods in 2001 can be difficult. You should read the following
discussion and analysis together with our audited consolidated financial
statements and the related notes for the fiscal year ended December 31, 2000,
filed in our 2000 Form 10-KSB.

The following table reflects certain summary operating data for the periods
presented:

THREE MONTHS ENDED
MARCH 31
------------------

2001 2000
------ ------
Net Production Data:
- --------------------
Oil and Liquids (MBbls)................ 300 308
Natural Gas (MMcf)..................... 5,623 3,578
Equivalent Production (MMcfe).......... 7,423 5,426

Average Sales Price: (1)
- ------------------------
Oil and Liquids (per Bbl).............. $27.21 $24.94
Natural Gas (per Mcf).................. 7.14 2.56
Equivalent price (per Mcfe)............ 6.51 3.11

Expenses ($ per Mcfe):
- ----------------------
Lease operations....................... $ 0.59 $ 0.64
Production, severance and ad valorem... 0.43 0.26
Gathering, transportation and other.... 0.12 0.07
General and administrative............. 0.21 0.26
Depreciation and depletion (2)......... 0.92 0.72

(1) Includes effect of our hedging activities.
(2) Represents depreciation, depletion and amortization, excluding impairments.

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

Oil and Gas Revenues. Revenues from oil and gas operations increased by 183%
to $48.9 million for the three months ended March 31, 2001, compared to $17.3
million for the same period during 2000. The increase is attributable to the
Company's significant revenue growth via acquisitions and drilling as well as
higher commodity prices received by the Company during the period.

Production Expense. Production expense for the three months ended March 31,
2001, increased by 58% to $8.4 million compared to $5.3 million during the same
period of 2000. Lease operating expenses on an $/MCFE basis decreased to
$0.59/MCFE from $0.64/MCFE, while production, severance and ad valorem taxes
increased to $0.43/MCFE from $0.26/MCFE. Lower per unit operating costs
associated with the Company's acquired properties and higher per unit operating
costs of properties sold by the Company in July of 2000 are attributed to the
current period decrease. Higher realized commodity prices during the three
months ended March 31, 2001 of $6.51/MCFE vs. $3.11/MCFE in 2000 is the
principal reason for the increase in taxes.

General and Administrative Expense. General and administrative expense for
the three months ended March 31, 2001 increased by $0.2 million compared to the
same period in 2000. The increase is attributable to increased staffing levels
as a result of the Company's significant growth from acquisitions.

Depreciation, Depletion and Amortization Expense. Depreciation, depletion and
amortization expense ("DD&A") for the three months ended March 31, 2001 was $6.8
million compared to $3.9 million for the same period of 2000. The additional
DD&A recorded is again attributed to the Company's significant production growth
from acquisitions.

Income Taxes. For the three months ended March 31, 2001, the Company recorded
a tax provision of $11.3 million compared to a tax provision of $1.6 million
during the same period in 2000. The provision recorded in 2001 represents the
Company's net income for the three months ended at its expected effective tax
rate for 2001 of approximately 38%.

Dividends to Preferred Stockholders. Dividends to preferred stockholders of
approximately $0.2 million in the three months ended March 31, 2001 decreased
from $0.3 million for the three months ended March 31, 2000. The decrease in
dividends was due to the redemption of the Series C Preferred Stock at September
30, 2000.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits: The following documents are filed as exhibits to this report:

2.1 Agreement and Plan of Merger, dated December 21, 1999, by and between 3TEC
Energy Corporation, 3TM Acquisition L.L.C., Magellan Exploration, LLC and ECIC
Corporation, EnCap Energy Capital Fund III, L.P., EnCap Energy Acquisition
III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex Partners, L.L.C.
(Incorporated by reference to Exhibit C to Form DEF14A, filed January 11, 2000.)

2.2 Agreement and Plan of Merger, dated November 24, 1999, by and between 3TEC
Energy Corporation, a Delaware corporation, and Middle Bay Oil Company, Inc., an
Alabama corporation. (Incorporated by reference to Exhibit A to Form DEF14A,
filed October 25, 1999.)

2.3 Form of Purchase Agreement between and among Middle Bay Oil Company, Inc.
and private sellers of the properties managed by Floyd Oil Company.
(Incorporated by reference to Exhibit 2.1 to Form 8-K filed December 7, 1999.)

2.4 Real Estate Exchange Agreement by and between Middle Bay Oil Company, Inc.
and Floyd Oil Company. (Incorporated by reference to Exhibit 2.1 to Form 8-K/A
filed December 17, 1999.)

2.5 First Amendment to Agreement and Plan of Merger, effective as of January
14, 2000, by and among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan
Exploration, LLC, ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap
Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex
Partners, L.L.C. (Incorporated by reference to Exhibit 2.1 to Form 8-K filed
February 4, 2000.)

2.6 Second Amendment to Agreement and Plan of Merger, effective as of February
2, 2000, by and among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan
Exploration, LLC, ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap
Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex
Partners, L.L.C. (Incorporated by reference to Exhibit 2.2 to Form 8-K filed
February 4, 2000.)

2.7 Form of Agreement of Sale and Purchase by and between C.W. Resources, Inc.,
Westerman Royalty, Inc., and Carl A. Westerman and 3TEC Energy Corporation.
(Incorporated by Reference to Exhibit 10.32 to Form S-2 filed April 28, 2000.)

2.8 Form of Stock Purchase Agreement by and between 3TEC Energy Corporation and
Classic Resources, Inc., Natural Gas Partners IV, L.P., Natural Gas Partners V,
L.P., and certain individual signatories. (Incorporated by reference to Exhibit
2.1 to Form 8-K filed February 13, 2001.)

3.1 Certificate of Incorporation of 3TEC Energy Corporation. (Incorporated by
reference to Exhibit 3.1 Form 8-K/A filed December 6, 1999.)

3.2 Certificate of Amendment to the Certificate of Incorporation of 3TEC Energy
Corporation. (Incorporated by reference to Form 3.3 10-KSB filed March 30,
2000.)

3.3 Certificate of Merger of Middle Bay Oil Company, Inc. into 3TEC Energy
Corporation. (Incorporated by reference to Exhibit 3.3 Form 8-K/A filed December
16, 1999.)

3.4 Bylaws of the Company. (Incorporated by reference to Exhibit C of the
Company's definitive proxy statement filed October 25, 1999.)

4.1 Certificate of Designation of Series B Preferred Stock of 3TEC Energy
Corporation. (Incorporated by reference to Exhibit 3.1 to Form 8-K/A filed
December 16, 1999.)

4.2 Certificate of Designation of Series D Preferred Stock of 3TEC Energy
Corporation. (Incorporated by reference to Exhibit 4.3 to Form 10-QSB filed May
15, 2000.)

10.1 Securities Purchase Agreement, dated July 1, 1999 by and between the
Company and 3TEC Energy Corporation. (Incorporated by reference to Exhibit C to
the definitive Proxy Statement filed July 19, 1999.)

10.2 Securities Purchase Agreement, dated August 27, 1999 by and between the
Company and Shoemaker Family Partners, LP. (Incorporated by reference to Exhibit
10.2 to Form 10-QSB filed November 15, 1999.)

10.3 Securities Purchase Agreement, dated August 27, 1999 by and between the
Company and Shoeinvest II, LP. (Incorporated by reference to Exhibits to Exhibit
10.3 to Form 10-QSB filed November 15, 1999.)

10.4 Securities Purchase Agreement, dated October 19, 1999 between The
Prudential Insurance Company of America and the Company. (Incorporated by
reference to Exhibit 10.1 to Form 8-K filed November 2, 1999.)

10.5 Shareholders Agreement, dated August 27, 1999 by and among the Company,
3TEC Energy Corporation and the Major Shareholders. (Incorporated by reference
to Exhibit 10.5 to Form 10-QSB filed November 15, 1999.)

10.6 Registration Rights Agreement, dated August 27, 1999 by and among the
Company, 3TEC Energy Corporation, the Major Shareholders, Shoemaker Family
Partners, LP and Shoeinvest II, LP. (Incorporated by reference to Exhibit 10.6
to Form 10-QSB filed November 15, 1999.)

10.7 Amendment to Registration Rights Agreement, dated October 19, 1999 by and
among the Company, W/E Energy Company, L.L.C. f/k/a 3TEC Energy Company L.L.C.,
f/k/a 3TEC Energy Corporation, Shoemaker Family Partners, LP, Shoeinvest II, LP,
and The Prudential Insurance Company of America. (Incorporated by reference to
Exhibit 10.2 to Form 8-K filed November 2, 1999.)

10.8 Participation Rights Agreement, dated October 19, 1999 by and among the
Company, The Prudential Insurance Company of America and W/E Energy Company
L.L.C. (Incorporated by reference to Exhibit 10.3 to Form 8-K filed November 2,
1999.)

10.9 Employment Agreement, dated April 15, 2000 by and between Floyd C. Wilson
and the Company. (Incorporated by reference to Exhibit 10.9 to Form S-2 filed
April 28, 2000.)

10.10 Employment Agreement, dated May 1, 2000, by and between R.A. Walker and
the Company. (Incorporated by reference to Exhibit 10.9 to Form S-2 filed April
28, 2000.)

10.11 Restated Credit Agreement by and among Middle Bay Oil Company, Inc., Enex
Resources Corporation and Middle Bay Production Company, Inc. as borrowers, and
Bank One, Texas, N.A. and other institutions as lenders. (Incorporated by
reference to Exhibit 10.1 to Form 8-K/A filed December 17, 1999.)

10.12 Subordination Agreement, dated August 27, 1999 by and among Shoemaker
Family Partners, LP, Compass Bank, and Bank of Oklahoma, National Association.
(Incorporated by reference to Exhibit 10.15 to Form 10-QSB filed November 15,
1999.)

10.13 Subordination Agreement, dated August 27, 1999 by and among Shoeinvest
II, LP, Compass Bank, and Bank of Oklahoma, National Association. (Incorporated
by reference to Exhibit 10.16 to Form 10-QSB filed November 15, 1999.)

10.14 Letter Amendment No. 1 to Middle Bay Oil Company, Inc. Securities
Purchase Agreement, dated November 23, 1999, by and between Middle Bay Oil
Company, Inc. (n/k/a 3TEC Energy Corporation) and The Prudential Insurance
Company of America (Incorporated by reference to Exhibit 10.21 to Form S-2 filed
April 28, 2000 and replacing the unexecuted Exhibit 10.17 of Form 10-QSB filed
November 15, 1999.)

10.15 Intercreditor Agreement, dated as of November 23, 1999, among Middle Bay
Oil Company, Inc., Bank One Texas, N.A. and 3TEC Energy Company L.L.C.
(Incorporated by reference to Exhibit 10.18 to Form S-2 filed April 28, 2000.)

10.16 Intercreditor Agreement, dated as of November 23, 1999, among Middle Bay
Oil Company, Inc., Bank One Texas, N.A. and Shoemaker Family Partners, LP.
(Incorporated by reference to Exhibit 10.18 to Form S-2 filed April 28, 2000.)

10.17 Intercreditor Agreement, dated as of November 23, 1999, among Middle Bay
Oil Company, Inc., Bank One Texas, N.A. and Shoeinvest II, LP. (Incorporated by
reference to Exhibit 10.20 to Form S-2 filed April 28, 2000.)

10.18 Amendment to Securities Purchase Agreement, dated as of November 23,
1999, among Middle Bay Oil Company, Inc. and 3TEC Energy Company L.L.C.
(Incorporated by reference to Exhibit 10.22 to Form S-2 filed April 28, 2000.)

10.19 Amendment to Securities Purchase Agreement, dated as of November 23,
1999, among Middle Bay Oil Company, Inc. and Shoemaker Family Partners, LP.
(Incorporated by reference to Exhibit 10.23 to Form S-2 filed April 28, 2000.)

10.20 Amendment to Securities Purchase Agreement, dated as of November 23,
1999, among Middle Bay Oil Company, Inc. and Shoeinvest II, LP. (Incorporated by
reference to Exhibit 10.24 to Form S-2 filed April 28, 2000.)

10.21 Amended and Restated 1995 Stock Option and Stock Appreciation Rights
Plan. (Incorporated by reference to Exhibit B to Form DEF 14A filed May 5,
1997.)

10.22 Amendment No. 1 to the Amended and Restated 1995 Stock Option and Stock
Appreciation Rights Plan. (Incorporated by reference to Exhibit B to Form DEF
14A filed May 5, 1998.)

10.23 1999 Stock Option Plan. (Incorporated by reference to Exhibit E to Form
DEF 14A filed October 25, 1999.)

10.24 2000 Stock Option Plan (Incorporated by reference to Exhibit A to Form
DEF 14A filed on May 1, 2000.)

10.25 Second Restated Credit Agreement among 3TEC Energy Corporation, Enex
Resources Corporation, Middle Bay Production Company, Inc., and Magellan
Exploration, LLC, as Borrowers, and Bank One, Texas, N.A. and the Institutions
named therein, as Lenders, Bank One, Texas, N.A., as Administrative Agent, Bank
of Montreal as Syndication Agent and Banc One Capital Markets, Inc., as
Arranger, dated May 31, 2000. (Incorporated by reference to Exhibit 10.28 to
Form S-2/A filed September 6, 2000.)

10.26 First Amendment to Shareholders' Agreement by and among 3TEC Energy
Corporation, the W/E Shareholders and the Major Shareholders, dated May 30,
2000. (Incorporated by reference to Exhibit 10.29 to Form S-2/A filed September
6, 2000.)

10.27 Third Restated Credit Agreement among 3TEC Energy Corporation, Enex
Resources Corporation and 3TEC/CRI Corporation, as Borrowers, and Bank One, N.A.
and the Institutions named therein, as Lenders, Bank One, N.A., as
Administrative Agent, Bank of Montreal as Syndication Agent and Banc One Capital
Markets, Inc., as Arranger, dated March 12, 2001.*

* Filed herewith

(b) The following reports were filed on Form 8-K during the first quarter of
2001:

On January 8, 2001, the Company filed a Form 8-K under Items 5 and 7 describing
the agreement entered to acquire the stock of Classic Resources, Inc.

On February 13, 2001, the Company filed a Form 8-K under Items 2 and 7
describing the acquisition of Classic Resources, Inc.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized, as of May 14, 2001.

3TEC ENERGY CORPORATION
(Registrant)

By: /s/ Floyd C. Wilson
-------------------
Floyd C. Wilson
Chairman and Chief Executive Officer

By: /s/ R.A. Walker
---------------
R.A. Walker
President, Chief Financial Officer, Director

By: /s/ Shane M. Bayless
--------------------
Shane M. Bayless
Vice President-Controller, Treasurer and
Principal Accounting Officer