UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12

Castle Energy Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by the Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: _______________________________________________
2) Form, Schedule of Registration Statement No.: _________________________
3) Filing Party: _________________________________________________________
4) Date Filed: ___________________________________________________________

January 20, 2004

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Castle Energy Corporation (the "Company") to be held on
Thursday, February 26, 2004, at 10:00 A.M., Eastern Standard Time, at the
offices of the Company at 512 Township Line Road, Three Valley Square, Suite
100, Blue Bell, Pennsylvania 19422.

At the Annual Meeting, you will be asked to consider and vote upon two
matters: a proposal to elect the nominees named in the accompanying Proxy
Statement as Directors to serve for the period indicated and a proposal to
reappoint KPMG LLP as the Company's independent auditors for the fiscal year
ending September 30, 2004.

Whether or not you are personally able to attend the Annual Meeting, please
complete, sign, date and return the enclosed proxy as soon as possible. This
action will not limit your rights to vote in person if you wish to attend the
Annual Meeting.

A copy of the Company's annual report on Form 10-K for the year ended
September 30, 2003 accompanies this invitation.

I look forward to seeing you at the Annual Meeting.

Sincerely,

/s/JOSEPH L. CASTLE II

Joseph L. Castle II
Chairman and Chief Executive Officer

CASTLE ENERGY CORPORATION

Notice of Annual Meeting of Stockholders
to be held on February 26, 2004

January 20, 2004
To The Stockholders:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Castle Energy Corporation, a Delaware corporation (the "Company"),
will be held at the offices of the Company at 512 Township Line Road, Three
Valley Square, Suite 100, Blue Bell, Pennsylvania 19422, on Thursday, February
26, 2004 at 10:00 A.M., Eastern Standard Time, for the following purposes:

1. To elect the nominees named in the Proxy Statement as Directors to serve
for the period indicated and until their successors have been elected.

2. To consider and take action upon a proposal to reappoint KPMG LLP as the
Company's independent accountants for the fiscal year ending September 30, 2004.

3. To transact any other business as may properly come before the Annual
Meeting.

Stockholders of record at the close of business on January 2, 2004, will be
entitled to notice of and to vote at the Annual Meeting.

The Company's Annual Report to Stockholders for the fiscal year ended
September 30, 2003 accompanies this notice.

A complete list of stockholders entitled to vote at the Annual Meeting will
be kept at the new offices of the Company at 357 South Gulph Road, Suite 260,
King of Prussia, Pennsylvania 19406 for examination by any stockholder, during
ordinary business hours, for a period of not less than ten days prior to the
Annual Meeting.

By Order of the Board of Directors

/s/JOSEPH L. CASTLE II

Joseph L. Castle II
Chairman and Chief Executive Officer

IMPORTANT: PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
SELF-ADDRESSED RETURN ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY
AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO
SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.

PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
FEBRUARY 26, 2004

INTRODUCTION

The accompanying proxy is solicited by the Board of Directors of Castle
Energy Corporation, a Delaware corporation (the "Company"), to be voted at the
Annual Meeting of Stockholders to be held on Thursday, February 26, 2004, and
any adjournment or adjournments thereof (the "Annual Meeting"). When such proxy
is properly executed and returned, the shares of the Company's Common Stock, par
value $.50 per share ("Common Stock"), it represents will be voted at the Annual
Meeting as directed. If no specification is indicated, the shares will be voted
"FOR" the election of the nominees to serve as Director for the term designated
and "FOR" the reappointment of KPMG LLP ("KPMG"), as the Company's independent
accountants for the fiscal year ending September 30, 2004. Any stockholder
granting a proxy has the power to revoke it at any time prior to its exercise by
notice of revocation to the Company in writing, by voting in person at the
Annual Meeting or by execution of a later dated proxy; provided, however, that
such action is taken in sufficient time to permit the necessary examination and
tabulation of the subsequent proxy or revocation before the vote is taken.

The shares entitled to vote at the Annual Meeting consist of shares of
Common Stock, with each holder of record as of the close of business on January
2, 2004 (the "Record Date") entitled to one vote for each such share held. As of
the Record Date hereof there were 6,592,884 shares of Common Stock outstanding
and entitled to vote at the Annual Meeting. This Proxy Statement and
accompanying proxy are being sent to stockholders of the Company on or about
February 4, 2004.

The new address of the Company's principal executive offices is 357 South
Gulph Road, Suite 260, King of Prussia, Pennsylvania 19406, and the telephone
number is (610) 992-9900.

-1-

TABLE OF CONTENTS

Page
----

INTRODUCTION............................................................. 1

PRINCIPAL HOLDERS OF VOTING SECURITIES................................... 3

SECURITY OWNERSHIP OF MANAGEMENT......................................... 4

DIRECTORS AND EXECUTIVE OFFICERS......................................... 6

EXECUTIVE COMPENSATION................................................... 8

Summary Compensation................................................. 8
Option Grants in Last Fiscal Year (Year Ended September 30, 2003).... 8
Fiscal Year End Option Values........................................ 9
Severance/Retention Agreements....................................... 9
Section 16(a) Beneficial Ownership Reporting Compliance.............. 9
Compensation Committee Interlocks and Insider Participation.......... 9
Board Compensation Committee Report on Executive Compensation........ 9
Board Audit Committee Report......................................... 11
Disclosure of Audit Committee Financial Expert....................... 11
Code of Ethics for Senior Financial Officers......................... 11
Fees Billed by the Independent Auditors to the Company............... 11
Performance Graph.................................................... 12

BOARD OF DIRECTORS AND BOARD COMMITTEES.................................. 13

Fiscal 2003 Board Meetings........................................... 13
Board Committees..................................................... 13
Compensation of Directors............................................ 13

PROPOSAL TO ELECT DIRECTORS.............................................. 13

PROPOSAL TO REAPPOINT INDEPENDENT ACCOUNTANTS............................ 15

OTHER MATTERS............................................................ 15

VOTE REQUIRED............................................................ 16

STOCKHOLDER PROPOSALS AND COMMUNICATIONS................................. 16

EXPENSES OF SOLICITATION................................................. 16

APPENDIX "A" - - AUDIT COMMITTEE CHARTER................................. 17

APPENDIX "B" - - NOMINATING COMMITTEE CHARTER............................ 24

-2-

PRINCIPAL HOLDERS OF VOTING SECURITIES

The following table sets forth, as of January 2, 2004, the names of all
persons who were known by the Company to be the beneficial owners (as defined in
the rules of the Securities and Exchange Commission (the "Commission")), of more
than five percent of the shares of Common Stock of the Company:

Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership(1) Class(1)
- ------------------------------------ ----------------------- ----------

Joseph L. Castle II and Sally W. Castle 1,546,524(2) 23.46%
One Radnor Corporate Center, Suite 250
100 Matsonford Road
Radnor, Pennsylvania 19087

FMR Corp. 1,167,000(3) 17.70%
82 Devonshire Street
Boston, Massachusetts 02109

Kestrel Investment Management 798,600(4) 12.11%
411 Borel Avenue, Suite 403
San Mateo, California 94402

Dimension Fund Advisors, Inc. 462,750(5) 7.02%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401-1038

_______________

(1) Based on a total of 6,592,884 shares of Common Stock issued and outstanding
as of January 2, 2004. In calculating each respective holder's percentage
ownership and beneficial ownership in the table above, shares of Common
Stock which the holder has the right to acquire within 60 days are
included. Information in the above table and footnotes is based upon the
most recent respective Statement on Schedule 13D or 13G or amendment
thereto filed by such persons with the SEC, except as otherwise known to
the Company.

(2) Joseph L. Castle II and Sally W. Castle are husband and wife. As such, each
is deemed to beneficially own 1,546,524 shares of Common Stock which
consists of 1,434,699 shares of Common Stock owned by Mr. Castle, and
111,825 shares of Common Stock owned by Mrs. Castle.

(3) According to the Schedule 13G filed February 14, 2001 by FMR Corp.,
Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. and an investment adviser registered under Section
203 of the Investment Advisers Act of 1940, is the beneficial owner of
1,167,000 shares of the common stock outstanding of the Company as a result
of acting as investment adviser to various investment companies registered
under Section 8 of the Investment Company Act of 1940. The ownership of one
investment company, Fidelity Low Priced Stock Fund, amounted to 1,167,000
shares of the common stock outstanding. Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity, and the funds each has sole power to
dispose of the 1,167,000 shares owned by the Funds. Neither FMR Corp. nor
Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or
direct the voting of the shares owned directly by the Fidelity Funds, which
power resides with the Funds' Boards of Trustees. Members of the Edward C.
Johnson 3d family are the predominant owners of Class B shares of common
stock of FMR Corp., representing approximately 49% of the voting power of
FMR Corp. Mr. Johnson 3d owns 12.0% and Abigail Johnson owns 24.5% of the
aggregate outstanding voting stock of FMR Corp. Mr. Johnson 3d is Chairman
of FMR Corp. and Abigail P. Johnson is a Director of FMR Corp. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be voted
in accordance with the majority vote of Class B shares. Accordingly,
through their ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family

-3-

may be deemed, under the Investment Company Act of 1940, to form a
controlling group with respect to FMR Corp.

(4) According to the Schedule 13G filed February 13, 2003 by Kestrel Investment
Management, Kestrel is deemed to be the beneficial owner of the shares of
the common stock of the Company pursuant to separate arrangements whereby
it acts as investment adviser to certain persons in which it also holds an
ownership interest. Each person for whom Kestrel acts as investment adviser
has the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the common stock purchased or held
pursuant to such arrangements. David J. Steirman and Abbott J. Keller are
deemed to be the beneficial owners of the shares of the common stock of the
Company pursuant to their ownership interests in Kestrel Investment
Management Corporation.

(5) According to the Schedule 13G filed February 3, 2003 by Dimensional Fund
Advisors Inc., Dimensional is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, which furnishes
investment advice to four investment companies registered under the
Investment Company Act of 1940, and serves as investment manager to certain
other commingled group trusts and separate accounts. These investment
companies, trusts and accounts are the "Funds". In its role as investment
advisor or manager, Dimensional possesses voting and/or investment power
over the shares of the common stock of the Company, all of which are owned
by the Funds, no one advisory client of which, to the knowledge of
Dimensional, owns more than 5% of the class. Dimensional disclaims
beneficial ownership of such securities.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of January 2, 2004, the shares of Common
Stock beneficially owned by each executive officer named in the Summary of
Compensation Table below (the "Named Executives"), by each director of the
Company and by the directors and executive officers of the Company as a group,
with sole voting and investment power unless otherwise indicated:

Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
------------------------ ------------------------ ------------

Joseph L. Castle II.......................................... 1,546,524(3) 23.46%

Richard E. Staedtler......................................... 152,150(4) 2.26%

Martin R. Hoffmann........................................... 126,000(5) 1.88%

Sidney F. Wentz.............................................. 120,000(6) 1.79%

John P. Keller............................................... 111,000(7) 1.66%

Russell S. Lewis............................................. 62,000(8) -

William C. Liedtke, III...................................... 45,000(9) -

All directors and executive officers
as a group (7 persons)....................................... 2,162,674 30.12%

_____________

(2) Percentages of less than one percent are omitted.

-4-

(3) Joseph L. Castle II and Sally W. Castle are husband and wife. As such, each
is deemed to beneficially own 1,546,524 shares of Common Stock. Represents
1,434,699 shares of Common Stock owned by Mr. Castle and 111,825 shares of
Common Stock owned by Mrs. Castle.

(4) Represents 2,150 shares of Common Stock owned by Mr. Staedtler and 150,000
shares of Common Stock issuable upon exercise of options which are
exercisable within 60 days at $4.38 per share.

(5) Represents 6,000 shares of Common Stock owned by an individual retirement
account for the benefit of Mr. Hoffmann, 15,000 shares of Common Stock
issuable upon exercise of options which are exercisable within 60 days at
$3.75 per share, 15,000 shares of Common Stock issuable upon exercise of
options which are exercisable within 60 days at $3.71 per share, 15,000
shares of Common Stock issuable upon exercise of options which are
exercisable within 60 days at $3.79 per share, 15,000 shares of Common
Stock issuable upon exercise of options, which are exercisable within 60
days at $4.50 per share, 15,000 shares of Common Stock issuable upon
exercise of options, which are exercisable within 60 days at $5.75 per
share, 15,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $8.58 per share, 15,000 shares of
Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $7.00 per share, and 15,000 shares of Common Stock
issuable upon exercise of options which are exercisable in 60 days at $5.93
per share.

(6) Represents 15,000 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days at $3.75 per share, 15,000 shares of
Common Stock issuable upon exercise of options which are exercisable within
60 days at $3.71 per share, 15,000 shares of Common Stock issuable upon
exercise of options which are exercisable within 60 days at $3.79 per
share, 15,000 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days at $4.50 per share, 15,000 shares of
Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $5.75 per share, 15,000 shares of Common Stock issuable
upon exercise of options, which are exercisable within 60 days at $8.58 per
share, 15,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $7.00 per share, and 15,000 shares
of Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $5.93 per share.

(7) Represents 6,000 shares of Common Stock owned by Mr. Keller and 30,000
shares of Common Stock issuable upon exercise of options which are
exercisable within 60 days at $3.79 per share, 15,000 shares of Common
Stock issuable upon exercise of options, which are exercisable within 60
days at $4.50 per share, 15,000 shares of Common Stock issuable upon
exercise of options, which are exercisable within 60 days at $5.75 per
share, 15,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $8.58 per share, 15,000 shares of
Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $7.00 per share, and 15,000 shares of Common Stock
issuable upon exercise of options, which are exercisable within 60 days at
$5.93 per share.

(8) Represents 17,000 shares of Common Stock owned by Mr. Lewis, 15,000 shares
of Common Stock issuable upon exercise of options which are exercisable
within 60 days at $5.25 per share, 15,000 shares of Common Stock issuable
upon exercise of options, which are exercisable within 60 days at $7.00 per
share, and 15,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $5.93 per share.

(9) Represents 45,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $8.08 per share.

-5-

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information concerning the directors and
executive officers of the Company as of January 2, 2004:

Named Directors and Executive
- -----------------------------
Officers of the Company Age Position(s)
----------------------- --- -----------

Joseph L. Castle II ............... 71 Chairman of the Board and Chief Executive Officer of the
Company

Sidney F. Wentz.................... 71 Director

Martin R. Hoffmann................. 72 Director

John P. Keller..................... 64 Director

Richard E. Staedtler............... 59 Director, Chief Financial Officer and Chief Accounting
Officer

Russell S. Lewis................... 49 Director

William C. Liedtke III............. 52 Vice President and General Counsel

A description of the business experience of each of the directors and
executive officers of the Company is as follows:

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

Sidney F. Wentz has been a director of the Company since June 1995. Mr.
Wentz was Chairman of the Board of The Robert Wood Johnson Foundation, the
nation's largest health care philanthropy from June 1989 until his retirement in
1999. Commencing in 1967, he held several positions with Crum and Forster, an
insurance holding company, retiring as Chairman and Chief Executive Officer in
1988. Previously, he was an attorney with the law firm of White & Case and then
Corporate Attorney for Western Electric Company/AT&T. Mr. Wentz is a director of
Somerset Hills Bancorp and a trustee of Drew University.

Martin R. Hoffmann has been a director of the Company since June 1995. Mr.
Hoffmann was previously of counsel to the Washington, D.C. office of the law
firm of Skadden, Arps, Slate, Meagher & Flom LLP. He was a Senior Visiting
Fellow at the Center for Technology, Policy and Industrial Development of the
Massachusetts Institute of Technology from May 1993 to May 1995 and a private
business consultant since 1993. From 1989 to 1993, Mr. Hoffmann served as Vice
President and General Counsel of Digital Equipment Corporation. Mr. Hoffmann
also served in various capacities at the United States Department of Defense,
including General Counsel from 1974 to 1975 and Secretary of the Army from 1975
to 1977. He is currently a Director of Seachange International, Inc. of Maynard,
Massachusetts as well as Chairman of Mitretek Systems Corporation and a trustee
of CIME Endeavor Foundation.

-6-

In 1993 and 1994, Mr. Keller also served as the Chairman of American Appraisal
Associates, an appraisal company. Mr. Keller is also a director of A.M. Castle &
Co. and Delta Petroleum Corporation.

Richard E. Staedtler has been a director of the Company since May 1997 and
has been Senior Vice President and Chief Financial Officer of the Company since
November 1994. Mr. Staedtler served as a director of the Company from 1986
through September 1992, and as Chief Financial Officer of the Company from 1984
through June 1993. Mr. Staedtler is a certified public accountant.

Russell S. Lewis has been a director of the Company since April 2000. From
1994 to 1999, Mr. Lewis was the Chief Executive Officer of TransCore, Inc., a
company which sells and installs electronic toll collection systems. Since 1999,
Mr. Lewis has been the owner and President of Lewis Capital Group, a company
investing in and providing consulting services to growth-oriented companies. Mr.
Lewis served as Senior Vice President of Corporate Development at VeriSign, Inc.
from March 2000 until February 2002, following which he began his current
position of Executive Vice President and General Manager of Verisign's Global
Registry Services. Mr. Lewis is also a director of Delta Petroleum Corporation.

William C. Liedtke III has been Vice President and General Counsel of the
Company since February 2000. Prior to becoming an officer and employee of the
Company, from April 1999 to January 2000, Mr. Liedtke was President of WCL III,
Inc., a corporation wholly owned by Mr. Liedtke, in which capacity he provided
services on a consulting basis to the Company with respect to the Company's
investment in the concessions in Romania, as well as miscellaneous matters
regarding domestic oil and gas properties of the Company. Upon the employment of
Mr. Liedtke by the Company in February 2000, WCL III, Inc. ceased doing business
with the Company and has been inactive thereafter. He served as Chief Executive
Officer of Redeco Energy Inc. from October 1997 to March 1999, having previously
served as its Vice President and Chief Operating Officer since February 1995.
Mr. Liedtke served as an Independent General Partner of Merrill Lynch Oklahoma
Venture Partners LP from August 1999 to December 2000, when the partnership
wound up.

-7-

EXECUTIVE COMPENSATION

Summary Compensation

The following table summarizes all compensation earned by the Company's
Chief Executive Officer and each of the other executive officers (collectively
with the Chief Executive Officer, the "Named Executive Officers") whose total
annual salary and bonus exceeded $100,000 for the fiscal year ended September
30, 2003.

SUMMARY COMPENSATION TABLE

Long-Term
Compensation
Awards
------------
Securities
Fiscal Year Annual Compensation Underlying All Other
Ended ------------------- Options/ Compensation
Name and Principal Position September 30, Salary($) Bonus($) SARs(#) Severance ($) (1)
- --------------------------- ------------- --------- -------- ------------ --------- ------------

Joseph L. Castle II.................... 2003 $125,000 $50,000 $2,877
Chairman of the Board, 2002 $375,000 $3,084
Chief Executive Officer 2001 $375,000 $4,024
and Director of the
Company

Richard E. Staedtler................... 2003 $100,000 $25,000 $5,983
Director of the Company 2002 $260,000 $ 6,667 $273,334 $7,800
Chief Financial Officer 2001 $260,000 $17,500 $7,150
Chief Accounting Officer

William C. Liedtke, III................ 2003 $156,000 $10,000 $4,980
Vice President and 2002 $156,000 $ 5,000 $4,680
General Counsel 2001 $151,000 $10,000 45,000 $4,545

_____________________
(1) Represents Company matching contributions under the Company's 401(k) Plan.

Option Grants in Last Fiscal Year

No options were granted to the Named Executive Officers during the fiscal
year ended September 30, 2003.

Fiscal Year End Option Values

The following table shows certain information regarding the total number of
unexercised options held at September 30, 2003 by the Named Executive Officers
and the values for unexercised "in-the-money" options, which represent the
positive spread between the exercise price of such stock options and the fair
market value of the shares of Common Stock as of September 30, 2003, the last
trading day in the fiscal year ended September 30, 2003, which was $5.37 per
share. No options were exercised during the fiscal year ended September 30, 2003
by any of the Named Executive Officers.

-8-

FISCAL YEAR END OPTION VALUES

Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options at Options at
Fiscal Year-End Fiscal Year-End
(#) ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ------------------------------- --------------- ----------------

Richard E. Staedtler........... 150,000/- $148,500/-----
William C. Liedtke, III........ 45,000/- ----/-----

Severance/Retention Agreements

The Company entered into a severance agreement with Mr. Staedtler in June
1999. This severance agreement provides for a year's severance compensation in
the event substantially all of the Company's assets are sold and Mr. Staedtler
is terminated or his compensation reduced at least 30% as a result of such sale.
In May 2002, the Company sold all of its domestic oil and gas assets to Delta
Petroleum Corporation. Subsequently Mr. Staedtler's compensation was reduced 62%
and he became entitled to and was paid severance compensation under the
agreement. Mr. Staedtler is still an employee of the Company.

Upon his employment by the Company, Mr. Liedtke became covered by the
Company's severance plan which provides for one month of severance compensation
for each full year of employment by the Company, with a minimum compensation of
three months' base salary in the event substantially all of the Company's assets
are sold and Mr. Liedtke is terminated as a result of such sale.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and owners of more
than 10% of any class of the Company's securities registered pursuant to Section
12 of the Exchange Act to file reports of ownership and changes in ownership
with the Commission. The Commission's rules also require such persons to furnish
the Company with a copy of all Section 16(a) reports that they file. Based
solely upon a review of the copies of the reports and written representations
furnished to the Company, all such reporting persons complied with such
reporting obligations during the fiscal year ended September 30, 2003.

Compensation Committee Interlocks and Insider Participation

For the fiscal year ended September 30, 2003, the Compensation Committee
consisted of Sidney F. Wentz, Chairman, Martin R. Hoffmann, John P. Keller and
Russell S. Lewis. All four members are outside directors of the Company.

Board Compensation Committee Report on Executive Compensation

Overall Policy. This report is provided by the Compensation Committee to
assist stockholders in understanding the Compensation Committee's objectives and
procedures in establishing the compensation of the Company's Chief Executive
Officer and other executive officers.

-9-

The Company's executive compensation programs are designed to retain and
reward executives who are successful in helping the Company achieve its business
objectives. The key components of the executive compensation program are base
salary, annual bonus and equity participation. These components are administered
with the goal of providing total compensation that is competitive with
compensation levels in the external marketplace. The program also recognized
meaningful differences in individual performance. Each year the Compensation
Committee reviews the elements of executive compensation to insure that the
total compensation program, and each of its elements, meet the overall
objectives discussed above.

Base Salary. Executive officers' salaries (and salary increases, which are
reviewed annually) are determined on a subjective basis with consideration given
to the level of job responsibility, the competitiveness of the executives'
salaries to the external marketplace and the degree to which the executive's
individual objectives have been achieved. Individual objectives vary by business
unit and strategic business goals. These factors are not considered on any
formula basis.

Bonus Program. Bonus payments are subjectively determined and are designed
to reward and encourage individual excellence. In determining whether to award a
discretionary bonus, the Compensation Committee considers the individual's
special achievements, such as his contribution to actions taken during the past
year that contribute to the strategic growth, profitability and competitiveness
of the Company. In addition, special bonuses are considered for exceptional
efforts made during the year in connection with a particular transaction or
business situation.

Equity Participation. The Compensation Committee has determined at previous
times that it is in the Company's best interests to grant stock options to
executive officers in order to align the interests of those executive officers
with the stockholders and to maximize long-term stockholder value through the
Incentive Plan, approved by the stockholders of the Company in May 1993. Actual
individual awards are subjectively determined based on marketplace competitive
practices and on such factors as the recipient's position, annual salary and
individual and Company performance as well as historical equity grants and
ownership positions. The policy of granting stock options and encouraging stock
ownership has played a strong part in retaining an excellent team of executives
and managers.

The Incentive Plan is administered by the Compensation Committee. Since
January 2000, the Compensation Committee has not awarded any equity compensation
(stock, options or other equity participation) based on the belief that given
current equity participation of the executive officers, their interests are
fully aligned and in partnership with the those of the stockholders.

Compensation of the Chief Executive Officer. The Compensation Committee
considers the same factors described above in determining the salary of Mr.
Castle, the Chairman and Chief Executive Officer of the Company. Mr. Castle's
salary earned in fiscal 2001 and 2002 was $375,000. Effective September 1, 2002,
the Compensation Committee reduced Mr. Castle's annual salary to $125,000 as the
Company had sold all of its direct operating assets at that time.

Mr. Castle was not granted any stock options in fiscal 2003.

Tax Deductibility of Executive Compensation. The Omnibus Budget
Reconciliation Act (OBRA) of 1993 added Section 162(m) to the Internal Revenue
Code. This section eliminates a company's tax deduction for any compensation
over one million dollars paid to any one of the Named Executive Officers,
subject to several statutory exceptions. The Company desires to preserve the tax
deductibility of all compensation paid to its executive officers and other
members of management. The Company and its subsidiaries did not pay any of the
Named Executive Officers over one million dollars in fiscal 2003.

Compensation Committee:

Martin R. Hoffmann
John P. Keller
Russell S. Lewis
Sidney F. Wentz (Chairman)

-10-

Board Audit Committee Report

In connection with the September 30, 2003 financial statements, the Audit
Committee: (1) reviewed and discussed the audited financial statements of the
Company with management of the Company; (2) discussed with KPMG, the independent
accountants for the Company, the written disclosures and letter required to be
discussed by Statement on Accounting Standards No. 61; and (3) received from
KPMG the matters required by Independence Standards Board Standard No. 1, and
discussed with KPMG the independence of KPMG. Based upon these reviews and
discussions, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended September 30, 2003 filed with the Securities and Exchange
Commission.

The Audit Committee considered the compatibility of the provision of
non-audit services by KPMG with the maintenance of KPMG's independence.

The Audit Committee initially adopted a written charter on April 11, 2000.
It has reviewed and reassessed the adequacy of the charter annually. A copy of
the charter, as amended, is attached to this proxy as Appendix "A".

Audit Committee:

Martin R. Hoffmann (Chairman)
John P. Keller
Russell S. Lewis
Sidney F. Wentz

Disclosure of Audit Committee Financial Expert

The Board of Directors of the Company has determined that Mr. Russell Lewis
is an audit committee financial expert. Mr. Lewis is independent of management.

Code of Ethics for Senor Financial Officers

In August 2003, the Company's Board of Directors adopted a Code of Ethics
that applies to all of the Company's officers and directors, including its chief
executive officer, chief financial officer, general counsel and controller. The
requirements of that code provide for honest and ethical conduct; avoidance or
ethical handling of conflicts of interest; full, fair and accurate and timely
and transparent public disclosure; compliance with applicable governmental and
self regulatory laws and rules; prompt internal reporting of code violations and
accountability for compliance with the Code of Ethics. The Company is committed
to and without charge will provide a copy of its Code of Ethics to any person
upon written request addressed to the Secretary of the Company at its offices.

Fees Billed by the Independent Auditors to the Company

Audit Fees - Aggregate fees billed to the Company by KPMG, the independent
auditors for the Company, in connection with (1) the audit of the Company's
financial statements for the fiscal year ended September 30, 2003 were $75,000
and for the fiscal year ended September 30, 2002 were $88,000 and (2) the review
of the Company's financial statements included in the Company's Form 10-Q
quarterly reports during the fiscal year ended September 30, 2003 were $21,000
and during the fiscal year ended September 30, 2002 were $27,000.

Audit Related Fees - KPMG billed no audit related fees during the fiscal
years ended September 30, 2003 or September 30, 2002.

Tax Related Fees - No tax related fees were billed by KPMG during the
fiscal year ended September 30, 2003. $7,285 in tax related fees were billed by
KPMG during the fiscal year ended September 30, 2002 in connection with income
tax reporting services rendered by KPMG.

-11-

All Other Fees - KPMG billed no other fees during the fiscal years ended
September 30, 2003 or September 30, 2002 other than as described above.

All fees billed to the Company by KPMG were pre-approved by the Audit
Committee pursuant to the procedures and policies set forth in the Audit
Committee charter.

Performance Graph

During the fiscal year ended September 30, 2003, the business of the
Company was conducted indirectly through its ownership interest in Delta
Petroleum Corporation, a public company engaged in the exploration and
production segment of the petroleum industry and headquartered in Denver,
Colorado. As of September 30, 2003, the Company owned approximately 41% of Delta
Petroleum Corporation. The following performance graph for this segment
(Comparison of Five Year-Cumulative Total Returns(1)) sets forth a comparison of
cumulative total return since September 30, 1998 among the Company, the NASDAQ
stock market (Market Index for U.S. Companies only) and public crude petroleum
and natural gas companies (SIC 1310-1319).

Comparison of 5 Year Cumulative Return Among
Castle Energy Corporation, The NASDAQ
Stock Market (US) and a Peer Group comprised of
all Public Crude Petroleum and Natural Gas Companies

Castle NASDAQ Peer Group
Energy Stock
Corporation Market
(U.S.)
Sep-98 100.00 100.00 100.00
Oct-98 108.42 104.40 96.86
Nov-98 109.14 115.01 87.56
Dec-98 100.52 129.94 82.67
Jan-99 94.20 148.79 75.30
Feb-99 93.48 135.47 72.54
Mar-99 92.76 145.70 88.52
Apr-99 89.63 150.32 102.40
May-99 106.09 146.10 100.77
Jun-99 105.36 159.22 104.52
Jul-99 101.82 156.34 107.77
Aug-99 99.24 162.93 109.35
Sep-99 100.34 163.12 107.28
Oct-99 101.98 176.18 103.66
Nov-99 101.24 197.53 99.84
Dec-99 151.11 240.95 102.53
Jan-00 154.24 232.10 101.44
Feb-00 106.14 276.35 96.33
Mar-00 93.24 270.71 122.45
Apr-00 89.59 227.68 124.81
May-00 110.56 200.22 145.21
Jun-00 113.95 235.37 137.79
Jul-00 129.06 223.08 125.56
Aug-00 133.04 249.44 154.58
Sep-00 135.91 217.03 161.50
Oct-00 146.58 199.19 147.03
Nov-00 120.72 153.47 144.43
Dec-00 125.32 145.32 175.73
Jan-01 129.71 162.92 156.18
Feb-01 111.18 126.12 160.68
Mar-01 120.44 108.45 163.32
Apr-01 129.80 124.62 176.55
May-01 118.60 124.49 173.11
Jun-01 110.56 127.89 153.55
Jul-01 120.53 119.76 157.25
Aug-01 102.45 106.72 146.03
Sep-01 97.93 88.74 128.47
Oct-01 109.27 100.13 143.57
Nov-01 111.65 114.38 132.68
Dec-01 112.98 115.34 138.28
Jan-02 118.83 114.47 130.77
Feb-02 103.77 102.56 140.62
Mar-02 108.38 109.29 153.33
Apr-02 109.32 100.21 151.22
May-02 121.89 95.79 144.22
Jun-02 128.47 87.12 140.14
Jul-02 111.06 79.16 124.42
Aug-02 77.39 78.32 131.78
Sep-02 73.52 69.90 130.34
Oct-02 84.93 79.45 130.15
Nov-02 83.95 88.31 128.89
Dec-02 75.82 79.74 134.55
Jan-03 73.41 78.88 134.22
Feb-03 65.67 79.99 138.77
Mar-03 71.43 80.22 137.96
Apr-03 87.93 87.51 139.49
May-03 95.47 95.20 156.92
Jun-03 97.48 96.73 158.39
Jul-03 94.27 103.39 148.77
Aug-03 111.31 107.90 177.31
Sep-03 109.10 106.49 176.30

- --------
(1)Assumes $100 invested on September 30, 1998 in the Company's Common
Stock, the NASDAQ Stock Market (Market Index for U.S. Companies only) and Peer
Group Comprised of all Public Crude Petroleum and Natural Gas Companies (SIC
Codes 1310-1319).

-12-

BOARD OF DIRECTORS AND BOARD COMMITTEES

Fiscal 2003 Board Meetings

The Board of Directors of the Company held 3 meetings during the fiscal
year ended September 30, 2003. During such fiscal year, each of the incumbent
directors attended at least 75% of the total number of meetings of the Board of
Directors and of the Committees of the Board of Directors on which such director
served, with the exception of Mr. Lewis, who attended 50%.

All of the Company's directors are encouraged to attend the Annual Meeting
of Stockholders of the Company. Four of the Company's six directors attended the
2003 Annual Meeting of Stockholders of the Company.

Board Committees

The Company has established an Audit Committee in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. The Company has also
established standing nominating and compensation committees.

The Audit Committee consists of Mr. Hoffmann (Chairman), Mr. Wentz, Mr.
Keller and Mr. Lewis. All four Audit Committee members are outside directors.
The functions of the Audit Committee are to: (a) appoint the Company's
independent public accountants; (b) review the financial reports of the Company;
(c) monitor the effectiveness of the independent audit; (d) assure that the
scope and implementation of the independent audit is not restricted or the
independence of the independent accountants compromised; (e) review the
independent accountants' reports to management on internal controls and
recommend such actions as may be appropriate; (f) review and approve any related
party transactions and (g) review and approve any proposed engagement of all
services performed by the Company's independent accountants. The Audit Committee
held two meetings during the fiscal year ended September 30, 2003. The Audit
Committees has and will continue to have at least three members, all of whom
are, and will continue to be, independent pursuant to Rule 4350(d)(2)(A) of the
National Association of Security Dealers' listing standards. The Audit Committee
has amended its charter to provide for meetings to be held at least quarterly.

On January 6, 2004, the Company established a Nominating Committee and
adopted a written charter, a copy of which is attached to this proxy as Appendix
"B". By action of the Board of Directors, the Nominating Committee consists of
Mr. Keller (Chairman), Mr. Wentz, Mr. Hoffmann and Mr. Lewis. All four
Nominating Committee members are outside directors. The Nominating Committee
will at least annually assess the appropriate skills and characteristics
required of Board members in the context of the current make-up of the Board of
Directors and the needs of the Company, and will consider principles to be
applied in filling vacancies and planning for Board succession. It will assist
the Board in the identification of individuals qualified to become Board
members, consider and recommend director nominees to the Board of Directors
prior to each annual meeting of stockholders as well as recommend nominees for
committees of the Board. Procedures for stockholder recommendation of director
candidates for consideration by the Nominating Committee are described below in
"Stockholder Proposals and Communications."

The Compensation Committee consists of Mr. Wentz (Chairman), Mr. Hoffmann,
Mr. Keller and Mr. Lewis. All four Compensation Committee members are outside
directors. The Compensation Committee establishes overall compensation programs
and policies for the Company. The Compensation Committee monitors the selection
and performance as well as reviews and approves the compensation of key
executives, and administers the Incentive Plan. The Compensation Committee held
one meeting during the fiscal year ended September 30, 2003.

All members of the Audit, Nominating and Compensation Committees are
independent pursuant to Rule 4200(a)(15) of the National Association of Security
Dealers' listing standards.

-13-

Compensation of Directors

Previously, all of the outside directors were paid director's fees of
$32,000 per year, but effective October 1, 2002, the board of directors reduced
the annual director fee to $20,000. In addition, all outside directors receive
fees for attending meetings of the board of directors. The fee per meeting is
$1,500. Committee members also receive a $500 fee for attending each committee
meeting.

Previously, each outside director was granted an option to purchase 15,000
shares of Common Stock on the first day of each calendar year under the
Company's 1992 Executive Equity Incentive Plan. The exercise price for such
options was the closing price of the Company's stock on the date of grant and
the option was exercisable six months after it was granted. Effective October 1,
2002, the board of directors discontinued this grant of options.

PROPOSAL TO ELECT DIRECTORS

At the Annual Meeting, the stockholders will be asked to elect two
directors, constituting one class of directors, to serve for the term indicated
and until such director's successor is elected and qualified. In the
unanticipated event that one or both of the nominees for director becomes
unavailable, it is intended that proxies will be voted for such substitute
nominees as may be designated by the Board of Directors.

The Company's Bylaws, as amended, provide that the number of directors of
the Company shall be not less than four, nor more than nine, as shall be
determined by the Board of Directors. Both the Bylaws and the Company's
Certificate of Incorporation also provide that the directors shall be divided
into three classes, each class to consist of, as nearly as possible, one third
of the number of directors who constitute the entire Board. At each annual
meeting of stockholders of the Company, successors to the class of directors
whose term expires at such meeting shall then be elected for a three-year term.
The Bylaws further provide that if the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible.

The shares represented by the enclosed Proxy will be voted as directed. If
no choice is specified in the Proxy, the shares represented by the enclosed
Proxy will be voted "For" the nominees set forth below. The Board of Directors
recommends voting "FOR" the nominees to serve in the class indicated.

Information concerning the nominees for the class of directors to be
elected, as well as those continuing directors not standing for election at the
Annual Meeting, is set forth below.

The following individuals are nominated to serve as directors whose terms
will expire at the 2007 Annual Meeting:

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

Sidney F. Wentz has been a director of the Company since June 1995. Mr.
Wentz was Chairman of the Board of The Robert Wood Johnson Foundation, the
nation's largest health care philanthropy from June 1989 until his retirement in
June 1999. Commencing in 1967, he held several positions with Crum and Forster,
an insurance holding company, retiring as Chairman and Chief Executive Officer
in 1988. Previously, he was an attorney with the law firm of White & Case and
then Corporate Attorney for Western Electric Company/AT&T. Mr. Wentz is a
director of Somerset Hills Bancorp and a trustee of Drew University.

-14-

The following individuals are directors in the class whose term will expire
at the 2005 Annual Meeting:

The following individuals are directors in the class whose term will expire
at the 2006 Annual Meeting:

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

PROPOSAL TO REAPPOINT INDEPENDENT ACCOUNTANTS

The Audit Committee of the Board of Directors has selected the accounting
firm of KPMG LLP ("KPMG") to be the Company's independent accountants to audit
the books and records of the Company and its subsidiaries for the fiscal year
ending September 30, 2004. The firm has no material relationship with the
Company and is considered well qualified. Should the stockholders of the Company
not ratify the selection of KPMG or should the fees proposed by KPMG become
excessive or the services provided by KPMG become unsatisfactory, the selection
of another firm of independent certified public accountants will be undertaken
by the Audit Committee of the Board of Directors. Representatives of KPMG are
expected to be present at the Annual Meeting, and will have an opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.

The shares represented by the enclosed Proxy will be voted as directed. If
no choice is specified in the Proxy, the shares represented by the enclosed
Proxy will be voted "FOR" the selection of KPMG as the Company's independent
accountants. The Board of Directors recommends a vote "FOR" the proposal to
ratify the selection of KPMG as the Company's independent accountants.

OTHER MATTERS

The Board of Directors knows of no other matters to be brought before the
Annual Meeting. Should any other matter be properly raised at the Annual
Meeting, however, it is the intention of each of the persons named in the Proxy
to vote in accordance with his judgment as to each such matter raised.

-15-

VOTE REQUIRED

The two nominees within the class of directors for election to the Board of
Directors at the Annual Meeting who receive the greatest number of votes for
director, a quorum being present, shall become the directors for such class. The
affirmative vote of the holders of a majority of the Common Stock present in
person or by proxy and entitled to vote at the Annual Meeting is required to
ratify the selection of KPMG as the independent accountants of the Company.
Abstentions and non-votes will not be tabulated as negative votes with respect
to any matter presented at the Annual Meeting, but will be included in computing
the number of shares of Common Stock present for purposes of determining the
presence of a quorum for the Annual Meeting.

STOCKHOLDER PROPOSALS AND COMMUNICATIONS

Proposals and Recommendation of Director Candidates. Any proposals of
stockholders, including recommendations of director candidates for consideration
by the Nominating Committee, which are intended to be presented at the 2005
Annual Meeting of Stockholders must be received by the Secretary of the Company
by September 22, 2004, for consideration for inclusion in the Proxy Statement.
In addition, the persons named as proxies on the form of proxy mailed in
connection with the solicitation of proxies on behalf of the Company's Board of
Directors for use at the 2005 Annual Meeting of Stockholders will be authorized
to vote in their own discretion on any stockholder proposal not included in the
Company's Proxy Statement if the Company does not receive written notice of such
proposal by December 6, 2004. Such proxy holders' authority to vote in their
discretion on stockholder proposals as to which the Company does receive notice
by December 6, 2004 will be determined in accordance with the rules of the
Securities and Exchange Commission. Recommendations of candidates for
consideration as director must include the proposed nominee's name, age,
business and residence addresses, and principal occupation, the number of shares
of common stock of the Company he or she beneficially owns, and a signed consent
of the proposed nominee to serve as a director of the Company if elected.

Communications to the Board of Directors. The Board of Directors has
adopted a process to facilitate written communications by stockholders to the
Board. Stockholders wishing to write to the Board of Directors of the Company or
a specified director or committee of the Board should send correspondence to
Castle Energy Corporation Board of Directors, c/o CEC Inc., 300 Delaware Avenue,
Suite 900, Wilmington, DE 19801.

All communications so received from stockholders of the Company will be
forwarded to the members of the Board of Directors, or to a specific Board
member or committee if so designated by the stockholder. A stockholder who
wishes to communicate with a specific Board member or committee should send
instructions asking that the material be forwarded to the director or to the
appropriate committee chairman. All stockholders are also encouraged to
communicate directly with both officers and directors regarding issues affecting
the Company at the Annual Meeting of Stockholders.

EXPENSES OF SOLICITATION

The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made initially by mail. The directors and officers and
other employees of the Company may, without compensation other than their usual
compensation, solicit proxies by mail, telephone, telegraph or personal
interview. The Company will also reimburse brokerage firms, banks, voting
trustees, nominees and other recordholders for their reasonable out-of-pocket
expenses in forwarding proxy materials to the beneficial owners of Common Stock.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ JOSEPH L. CASTLE II

King of Prussia, Pennsylvania JOSEPH L. CASTLE II
January 20, 2004 Chairman and Chief Executive Officer

-16-

APPENDIX "A"

CASTLE ENERGY CORPORATION

REVISED AUDIT COMMITTEE CHARTER

The Board of Directors of Castle Energy Corporation ("Company") has adopted
this Charter for its Audit Committee ("Committee"):

I. COMPOSITION

1.1 Members. The Committee shall be comprised of three or more directors
who are recommended by the Nominating Committee of the Board and appointed
annually to one year terms by a majority vote of the Board. Each member of the
Committee shall be qualified to serve on the Committee pursuant to, and the
composition of the Committee shall comply with, the requirements of The Nasdaq
Stock Market, Inc. ("Nasdaq"), the Sarbanes Oxley Act of 2002 (the "Act") and
the applicable rules and regulations of the SEC. Each member of the Committee
shall be able to read and understand fundamental financial statements, including
the Company's balance sheet, income statement and cash flow statement. At least
one member of the Committee must have past employment experience in finance or
accounting, requisite professional certification in accounting, or any other
comparable experience which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.

1.2 Chairperson. The chairperson of the Committee shall be designated by
the Board upon the recommendation of the Nominating Committee. Vacancies on the
Committee shall be filled by a majority vote of the Board, upon the
recommendation of the Nominating Committee, at the next meeting of the Board
following the occurrence of the vacancy. No member of the Committee shall be
removed except by majority vote of the independent Directors then in office.

1.3 Fees. Director's fees (including any additional amounts paid to the
committee chair and to members of other committees of the Board) are the only
compensation a member of the Committee may receive from the Company.

II. AUTHORITY

The Committee is authorized to carry out the responsibilities set forth in
this Charter and any other assignments requested by the Board of Directors. The
Committee shall have access to the Company's outside counsel for advice and
information. The Committee may also secure independent expert advice to the
extent the Committee determines it to be appropriate, including retaining, with
or without Board approval, independent counsel, accountants, consultants or
others, to assist the Committee in fulfilling its duties and responsibilities;
the cost of such independent expert advisors to be borne by the Company. In
connection therewith, the Committee may request that any director, officer or
employee of the Company or the Company's outside counsel, auditors, advisors or
consultants or others meet separately with any members of or advisors or
consultants to the Committee for any matters within the scope of the Committee's
duties and responsibilities.

III. PURPOSE

The Committee is to serve as a focal point for communication among the
Board of Directors, the Company's independent accountants and the Company's
management, as the respective duties of such groups, or their constituent
members, relate to the Company's financial accounting and reporting and to its
internal controls. The Committee is a standing committee of the Board appointed
by the Board to oversee the accounting and financial reporting processes of the
Company and the audits of the financial statements of the Company, including the
adequacy and effectiveness of the Company's accounting and internal control
policies and procedures; the integrity of the Company's financial statements;
the Company's compliance with legal and regulatory requirements; the Company's
independent auditors' qualifications and independence; the performance of the

-17-

Company's independent auditors and the Company's internal audit function. In
addition, the Committee will undertake those specific duties and
responsibilities listed herein and such other duties consistent with its purpose
as the Board may from time to time prescribe or as the Committee deems
advisable.

IV. MEETINGS

4.1 Number and Manner. The Committee shall meet once every fiscal quarter
or more frequently as it shall determine is necessary to carry out its duties
and responsibilities. Subject to the preceding sentence, the Committee may
establish its own schedule, which it will provide to the Board in advance. The
Chairperson of the Committee or a majority of its members also may call a
special meeting of the Committee. A majority of the members of the Committee,
present in person or by means of a conference telephone or other communications
equipment by means of which all person participating in the meeting can hear
each other, shall constitute a quorum.

4.2 Attendance. The Committee or the Chairman of the Committee may request
that member(s) of management, representatives of the independent accountants, or
any of them, be present at meetings of the Committee. The Committee's outside
counsel should be made available to attend all meetings of the Committee. The
Committee may meet on a periodic basis, or as necessary in its discretion, with
any members of management or other person immediately responsible for the
internal audit function, the Company's independent auditors and others in its
discretion, in each case, to discuss any matters that the Committee or any of
the above persons or firms believe should be discussed privately. The Committee
shall meet with the independent auditors and management on a quarterly basis to
review the Company's quarterly or annual financials, as applicable, and the
Company's financial results and disclosures for the quarter or year, as
applicable.

4.3 Minutes. The Committee shall maintain written minutes of its meetings
and records relating to those meetings and provide copies of such minutes to
Committee members and to the Board. Committee minutes shall be maintained with
the books and records of the Company.

V. SPECIFIC DUTIES

The Audit Committee is to perform the following duties:

5.1 Communication.

5.1.1 Access to Committee. Inform the independent accountants and
management that any of them may communicate with the Committee, directly or
through its Chairman, at any time with respect to any matters which he or she
reasonably believes are related to the Committee's responsibilities.

5.1.2 Chief Financial Officer. The Chief Financial Officer shall be
specifically advised by the Committee that, in addition to the expectation that
he is to communicate with the Committee as provided in 5.1.1, above, he is
expected to be prepared to report to the Committee at formal meetings upon
request of the Committee or its Chairman.

5.1.3 Complaints. The Committee shall establish procedures for:

(a) the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal controls, or auditing matters; and

(b) the confidential, anonymous submission by all employees of the
Company of concerns to the Committee regarding questionable accounting or
auditing matters.

5.2 Adequacy of Internal Controls and Financial Reporting.

5.2.1 Internal Controls

-18-

(a) Policies and Procedures Manual. At least annually, meet with
management, the Chief Financial Officer and the independent accountants
regarding the Company's Policies and Procedures Manual ("Manual") to review the
adequacy of internal controls and financial reporting, including, but not
limited to: matters involving compliance with the Foreign Corrupt Practices Act
of 1977; questionable payments or lapses of internal controls; adequacy and
effectiveness of controls over computer-processed financial information;
management's expenses and perquisites, including any use of corporate assets;
the likely impact on the Company's Policies and Procedures Manual of changes in
accounting positions proposed by the FASB or other regulatory bodies, and the
methods employed in, and the status of, monitoring compliance with the Manual.

5.2.2 Financial Reporting

(a) Annual Report. Upon or near completion of the annual audit, review
with management and the independent accountants, the audited financial results
for the year, prior to their release to the public.

This review is to encompass, among other things:

(i) The latest drafts of the Company's Form 10-K, including the
financial statements, notes to the financial statements and management's
discussion and analysis ("MD&A"), as well as any other material financial
statement and supplemental disclosures required by GAAP or the Securities and
Exchange Commission ("SEC").

(ii) Whether the independent accountants reviewed the MD&A
section.

(iii) Whether management or the independent accountants are aware
of any material inconsistency or know of any misstatement, or omission, of
material fact in the audited financial statements or Form 10-K.

(iv) Significant transactions encountered in such audit which are
not a normal part of the Company's operations.

(v) Changes in accounting standards or rules promulgated by the
Financial Accounting Standards Board ("FASB"), the SEC or other regulatory
bodies, that had a material effect on the audited financial statements; and
changes, if any, during the year in the significant accounting standards used by
the Company.

(vi) Significant adjustments proposed by the independent
accountants with respect to such audit.

(vii) Management's judgments and accounting estimates of
significance with respect to matters relevant to the audit such as: asset
valuations; contingencies; allowance for doubtful receivables; depreciable lives
for plant and equipment; amortization periods for intangible assets; accrued
taxes; accrued programming costs; accrued copyright charges; self-insurance
reserves; accruals for income taxes associated with certain items; estimates of
net operating loss carryforwards.

(viii) Disagreements with management which, if not satisfactorily
resolved, would have caused the independent accountants to modify their report
on the Company's audited financial statements.

(ix) Management's consultation with other accountants about
auditing and accounting matters.

(x) Accounting and auditing issues of significance discussed with
management.

(xi) Difficulties of significance encountered in performing the
audit.

(xii) Significant variances in the financial statements from year
to year or period to period.

-19-

(xiii) The substance of any significant issues relevant to the
audit raised by counsel concerning litigation, contingencies, claims or
assessments.

(xiv) Open years on federal income tax returns; whether there are
any significant items that have been or might be disputed by the Internal
Revenue Service, and the status of the related tax reserves.

(xv) Significant concerns of the independent accountants and
whether they believe anything else should be discussed with the Committee that
has not yet been raised or covered elsewhere.

(b) Interim Reports. Upon or near completion of the review by the
independent accountants, review with management and the independent accountants,
the financial results for the period covered by a report on either of Forms 10-Q
or Form 8-K ("Interim Report"), prior to their release to the public.

This review is to encompass, among other things:

(i) The latest drafts of the Company's Interim Report, including
the financial statements, notes to the financial statements and any discussion
and analysis by management ("MD&A"), as well as any other material financial
statement and supplemental disclosures required by GAAP or the Securities and
Exchange Commission ("SEC").

(ii) Whether the independent accountants reviewed the MD&A
section.

(iii) Whether management or the independent accountants are aware
of any material inconsistency or know of any misstatement, or omission, of
material fact in their review of the financial statements or the Interim Report.

(iv) Significant transactions encountered in such review by the
independent accountnts which are not a normal part of the Company's operations.

(v) Changes in accounting standards or rules promulgated by the
Financial Accounting Standards Board ("FASB"), the SEC or other regulatory
bodies, that had a material effect on the reviewed financial statements; and
changes, if any, during the year in the significant accounting standards used by
the Company.

(vi) Significant adjustments proposed by the independent
accountants with respect to such review.

(viii) Disagreements with management.

(ix) Management's consultation with other accountants about
auditing or accounting matters.

(x) Accounting and auditing issues of significance discussed with
management.

(xi) Difficulties of significance encountered in performing the
review.

(xii) Significant variances in the financial statements from
period to period.

(xiii) The substance of any significant issues relevant to the
review raised by counsel concerning litigation, contingencies, claims or
assessments.

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(xiv) Significant concerns of the independent accountants and
whether they believe anything else should be discussed with the Committee that
has not yet been raised or covered elsewhere.

(c) Earnings releases and guidance. Review the type and presentation of
information to be included in the Company's earnings press releases (especially
the use of "pro forma" or "adjusted" information not prepared in compliance with
generally accepted accounting principles), as well as financial information and
earnings guidance provided by the Company to analysts and rating agencies.

5.2.3 Annual Audit Process: Audit Scope; Post-Audit Review; Evaluation
of Audit Process.

(a) Scope of Audit. Discuss with the independent accountants and
approve, before the independent accountants perform a significant portion of the
annual audit, the scope and general extent of the independent accountants' audit
examination, including their engagement letter. The Committee should be provided
by the independent accountants with an explanation of the factors considered by
the accountants in determining the audit scope, including, among other things,
(i) the quality of the internal control structure; (ii) the extent of
involvement of the internal audit group in the audit examination; (iii) other
areas to be covered during the audit engagement, and (iv) the extent to which
the planned audit scope can be relied upon to detect fraud or weaknesses in
internal controls.

(b) Post-Audit Review. Subsequent to the completion of the audit for
the last calendar year, the Committee should conduct a post-audit review which
shall include the following:

(1) Review of the independent accountants' report to the
Committee, and management's response thereto, on internal control structure in
connection with the audit concerning material weakness conditions, reportable
conditions and other comments and recommendations.

(2) Review with management and the independent accountants any
matters relating to the audit that may be of interest to the Committee in
fulfilling its obligation to oversee the financial reporting process for which
management is responsible, which review may include, among others:

A. The independent accountants' responsibilities under
generally accepted accounting standards described in the engagement letter.

B. Any matters set forth under 5.2.2(a), above, entitled
"Financial Reporting."

C. Inquiry of the independent accountants as to whether
information contained in the Annual Report to Shareholders containing financial
statements for the last calendar year is consistent with the information
reflected in the financial statements contained in the Form 10-K for such year,
and whether the independent accountants are aware of any material inconsistency
or know of any misstatement, or omission, of material fact in either document.

D. Review of all services provided the Company by the
independent accountants during the last calendar year, and fees related thereto.

E. Review letter(s) of management representations, if any,
given to the independent accountants in connection with the audit and inquire
whether the independent accountants encountered any difficulties in obtaining
such letter(s) or any specific representations therein.

(1) Independent Accountants. Elicit from the independent
accountants (a) an evaluation of the cooperation received by the independent
accountants from management and the internal audit group during the audit
examination for the last calendar year, including the independent accountants'
access to all requested records, data and information, and (b) an evaluation of
the quality of (i) management's financial and accounting staff and (ii) the
internal audit group and the adequacy of its staffing.

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(2) Management. Elicit from management an evaluation of the
competence of the independent accountants.

5.2.4 Reports to Board. The Chairman of the Committee shall provide an
oral report at each Board of Directors meeting on the deliberations, conclusions
and recommendations of, and the actions taken by, the Committee since the last
Board meeting.

VI. INDEPENDENT ACCOUNTANTS

6.1 Retention or Replacement of Independent Auditors. Retain or replace
the independent auditors, and submit the independent auditors to the
Stockholders of the Company for approval at the Annual Meeting of Stockholders.

6.2 Search. Conduct the search process in the event the independent
accountants are to be replaced.

6.3 Fees. Negotiate and set fees for the services of the independent
accountants.

6.4 Independence of Auditors. Assure receipt from the independent
auditors of a formal written statement delineating all relationships between the
auditor and the Company consistent with Independent Standards Board Standard
#1and actively engage in dialogue with the independent auditors with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the independent auditor and take, or recommend that the full
Board take, appropriate action to oversee the independence of the outside
auditor.

VII. OTHER FUNCTIONS OF COMMITTEE

7.1 Code of Conduct. Obtain management's report on compliance with the
Company's Code of Conduct.

7.2 Investigations. Where appropriate in the Committee's discretion,
request the independent accountants, counsel or others to perform special or
supplementary investigations or reviews of any control areas not required for
audit purposes, and any areas of possible improprieties.

7.3 Charter. Review and reassess the adequacy of this Charter on an
annual basis and recommend to the Board of Directors any appropriate
modification or amendment to this Charter.

VII. GENERAL PROVISIONS

8.1 While the Committee has the duties and responsibilities set forth
in this charter, the Committee is not responsible for planning or conducting the
audit or for determining whether the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. The Company's management, and not the Committee or the independent
accountants, is responsible for producing the Company's financial statements and
reports and for instituting and maintaining internal controls. The independent
accountants are responsible for attesting to the fair presentation of the
financial statements in accordance with generally accepted accounting principles
("GAAP") and for becoming familiar with and commenting upon the adequacy of the
Company's internal controls. It is the Committee's task, in all instances within
its own limitations, to review these functions of management and the independent
accountants and to report to the Board of Directors with respect thereto.

8.2 The Committee is not intended to be part of the Company's
operational or managerial decision making process. In fulfilling their
responsibilities hereunder, it is recognized that members of the Committee are
not full-time employees of the Company, it is not the duty or responsibility of
the Committee or its members to conduct "field work" or other types of auditing
or accounting reviews or procedures or to set auditor independence standards,

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and each member of the Committee shall be entitled to rely on (i) the integrity
of those persons and organizations within and outside the Company from which it
receives information, (ii) the accuracy of the financial and other information
provided to the Committee absent actual knowledge to the contrary (which shall
be promptly reported to the Board) and (iii) statements made by management or
third parties as to any information technology, internal audit and other
non-audit services provided by the auditors to the Company.

8.3 Nothing contained in this charter is intended to create, or should
be construed as creating, any responsibility or liability of the members of the
Committee, except to the extent otherwise provided under applicable federal or
state laws.

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APPENDIX "B"

CASTLE ENERGY CORPORATION

NOMINATING COMMITTEE CHARTER

(As adopted by the Board of Directors on January 6, 2004)

The Board of Directors (the "Board") of Castle Energy Corporation (the
"Company") has constituted and established a Nominating Committee (the
"Committee") with the authority, responsibility and specific duties as described
herein. This Charter and the composition of the Committee are intended to comply
with applicable law and the rules of The Nasdaq Stock Market, Inc. ("Nasdaq").

I. Purpose

The primary purpose of the Committee is to assist the Board in fulfilling
its responsibilities relating to (i) identification of individuals qualified to
become Board members and recommendation of director nominees to the Board of
Directors prior to each annual meeting of stockholders, and (ii) recommendation
of nominees for committees of the Board. In discharging its oversight role, the
Committee shall have the power to obtain, as deemed necessary or appropriate,
advice and assistance from legal, executive search, accounting or other
advisors. The Committee shall have the sole authority to select any such
advisors and approve the fees paid to such advisors and other retention terms.

II. Composition

The Committee shall be comprised of not less than three members of the
Board as determined by the Board, and the Committee's composition will meet the
requirements of the listing standards of Nasdaq (the "Listing Standards").
Accordingly, all of the members of the Committee will be Independent Directors
within the meaning of the Listing Standards and free from any relationship that
would interfere with the exercise of his or her independent judgment as a member
of the Committee in the opinion of the Board. The Board shall affirmatively
conclude that the members of the Committee are independent, as required.

Each member of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until his or her successor
shall be duly elected and qualified, unless otherwise removed by the Board of
Directors. Any vacancies on the Committee occurring prior to the annual
organizational meeting shall be filled by the Board. Unless a Chairperson is
elected by the full Board, the members of the Committee may designate a
Chairperson by majority vote of the full Committee membership.

III. Meetings

The Committee shall meet at least annually and shall hold such meetings as may
be called by the Chairperson of the Committee or at the request of the Board of
Directors and may take action by unanimous written consent. The Committee shall
maintain minutes or other records of its meetings and activities.

IV. Responsibilities and Duties

The Board of Directors has authorized and directed the Committee to assume each
of the following responsibilities, and any other responsibilities the Board of
Directors specifically delegates to the Committee, in each case subject to the
limitations on the Board of Directors or any committee thereof contained in the

-24-

Company's Certificate of Incorporation or Bylaws or the Delaware General
Corporation Law, as each is in effect from time to time. Except as expressly
provided in this Charter or the Company's Bylaws, the Nominating Committee shall
fix its own rules of procedure.

A. Nominating

1. Retain, as deemed necessary, and terminate any search
firm to be used to identify director candidates. The
Committee shall have sole authority to select such
search firm and approve its fees and other retention
terms.

2. Determine desired board skills and attributes. The
Committee shall consider personal and professional
integrity, ability and judgment and such other
factors deemed appropriate.

3. Actively seek individuals whose skills and attributes
reflect those desired and evaluate and propose
nominees for election to the Board of Directors.

4. Review the slate of directors who are to be
re-nominated to determine whether they are meeting
the Board's expectations of them.

5. Annually review committee chairs and membership and
recommend any changes to the full Board.

B. General

1. Report periodically to the Board of Directors.

2. Annually review the adequacy of this Charter and
recommend any proposed changes to the Board of
Directors for approval.

3. Evaluate and recommend to the Board the resignation
of individual directors for appropriate reasons, as
determined by the Committee in its discretion.

4. Review any questions regarding the independence of
Directors.

5. Develop and recommend to the Board a self-evaluation
process for the Board and its committees and oversee
such evaluation process.

6. Review potential or actual conflicts of interest
between Board members and between the Company and
other companies on which a Board member of the
Company may serve.

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CASTLE ENERGY CORPORATION

ANNUAL MEETING OF STOCKHOLDERS - February 26, 2004
PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Castle Energy Corporation, a Delaware
corporation, (the "Company") hereby appoints Joseph L. Castle and Richard E.
Staedtler, and each of them, attorneys and proxies, with full power of
substitution, to vote all of the shares of Common Stock of the Company that
the undersigned may be entitled to vote at the Annual Meeting of the
Stockholders of Castle Energy Corporation to be held on Thursday, February
26, 2004 at 10:00 a.m., Eastern Standard Time, at the offices of the
Company, 512 Township Line Road, Three Valley Square, Suite 100, Blue Bell,
Pennsylvania 19422, and at any adjournment or postponement thereof.

(Continued and to be signed on reverse side)

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Please mark your
A [X] votes as in this
example using
dark ink only.

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WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES
FOR AUTHORITY AND THE PROPOSAL LISTED BELOW.
all nominees to vote for all nominees
listed at right listed at right NOMINEES: Joseph L. Castle II
1. ELECTION OF [ ] [ ] Sidney F. Wentz FOR AGAINST ABSTAIN
DIRECTORS [ ] [ ] [ ]
2. PROPOSAL TO APPOINT KPMG LLP
AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2004.
(INSTRUCTION: To withhold authority to vote for
any individual nominee, check the box to vote 3. In their discretion either proxy
"FOR" all nominees and strike a line through is authorized to vote upon such other
the nominee's name in the list at the right.) business as may properly come before
the meeting. This proxy when properly
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directed herein by the undersigned
stockholder. If no direction is made,
this proxy will be voted FOR the
nominees for election as directors
and FOR Proposal 2.

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_____________________________________ DATE:_________________, 2004_____________________________________ DATE:_________________, 2004
SIGNATURE SIGNATURE IF HELD JOINTLY

Please sign exactly as name appears on the certificate or certificates representing shares to be voted by the proxy, as shown on the
label above. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If a
corporation, please sign full corporation name by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person(s).
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