SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarter ended March 31, 1998

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

For the transaction period from ______ to ________
COMMISSION FILE NUMBER 0-9592

LOMAK PETROLEUM, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 34-1312571
(State of incorporation) (I.R.S. Employer
Identification No.)

500 THROCKMORTON STREET, FT. WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (817) 870-2601

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

22,120,075 Common Shares were outstanding on May 11, 1998.

PART I. FINANCIAL INFORMATION

The financial statements included herein have been prepared in
conformity with generally accepted accounting principles and should be read in
conjunction with the December 31, 1997 Form 10-K filing. The statements are
unaudited but reflect all adjustments which, in the opinion of management, are
necessary to fairly present the Company's financial position and results of
operations.

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LOMAK PETROLEUM, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

December 31, March 31,
1997 1998
---------------- ----------------
(unaudited)

ASSETS

Current assets
Cash and equivalents........................................ $ 9,725 $ 7,257
Accounts receivable......................................... 29,200 23,103
Marketable securities....................................... 8,041 8,393
Inventory and other......................................... 2,779 1,975
------------------- ------------------
49,745 40,728
------------------- ------------------

Oil and gas properties, successful efforts method............. 785,223 844,542
Accumulated depletion and impairment...................... (161,416) (169,129)
------------------- ------------------
623,807 675,413
------------------- ------------------

Transportation, processing and field assets................... 85,904 86,199
Accumulated depreciation.................................. (9,730) (10,917)
------------------- ------------------
76,174 75,282
------------------- ------------------

Other......................................................... 9,107 8,829
------------------ ------------------
$ 758,833 $ 800,252
=================== ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable............................................ $ 26,878 $ 19,645
Accrued liabilities......................................... 19,046 15,979
Accrued payroll and benefit costs ........................ 3,195 3,446
Current portion of debt (Note 4)............................ 413 28
------------------- ------------------
49,532 39,098
------------------- ------------------

Senior debt (Note 4).......................................... 186,712 234,905
Senior subordinated notes (Note 4)............................ 125,000 125,000
Convertible subordinated debentures (Note 4).................. 55,000 55,000

Deferred taxes (Note 10)...................................... 25,639 27,191
Company-obligated preferred securities of subsidiary trust (Note 7) 120,000 120,000
Commitments and contingencies (Note 6)........................

Stockholders' equity (Notes 7 and 8)
Preferred stock, $1 par, 10,000,000 shares authorized,

$2.03 convertible preferred, 1,149,840 issued and outstanding

(liquidation preference $28,746,000).................... 1,150 1,150
Common stock, $.01 par, 50,000,000 shares authorized,
21,058,442 and 21,105,111 issued and outstanding........ 211 211
Capital in excess of par value.............................. 217,631 217,988
Retained earnings (deficit)................................ (22,412) (20,857)
Unrealized gain on marketable securities................... 370 566
------------------- ------------------
196,950 199,058
------------------- ------------------
$ 758,833 $ 800,252
=================== ==================

SEE ACCOMPANYING NOTES.

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LOMAK PETROLEUM, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended March 31,
---------------------------------------
1997 1998
---------------- -----------------
(unaudited)

Revenues
Oil and gas sales..................................... $ 34,338 $ 32,540
Transportation, processing and marketing.............. 2,774 2,791
Interest and other.................................... 638 1,741
---------------- -----------------
37,750 37,072
---------------- -----------------

Expenses
Direct operating...................................... 7,772 8,396
Transportation, processing and marketing.............. 869 1,062
Exploration........................................... 1,002 413
General and administrative............................ 1,082 1,840
Interest.............................................. 3,959 8,734
Depletion, depreciation and amortization.............. 12,651 12,198
---------------- -----------------
27,335 32,643
---------------- -----------------

Income before taxes...................................... 10,415 4,429

Income taxes

Current............................................... 937 109
Deferred.............................................. 2,916 1,551
---------------- -----------------
3,853 1,660
---------------- -----------------

Net income............................................... $ 6,562 $ 2,769
================ =================

Comprehensive income (Note 2)............................ $ 5,135 $ 2,889
================ =================

Earnings per common share

Basic................................................. $ 0.35 $ 0.10
================ =================
Dilutive.............................................. $ 0.34 $ 0.10
================ =================

SEE ACCOMPANYING NOTES.

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LOMAK PETROLEUM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

Three Months Ended March 31,
---------------------------------------
1997 1998
---------------- -----------------
(unaudited)

Cash flows from operations:
Net income................................................ $ 6,562 $ 2,769
Adjustments to reconcile net income to
net cash provided by operations:
Depletion, depreciation and amortization............. 12,651 12,198
Amortization of debt issuance costs.................. 83 345
Deferred income taxes................................ 2,916 1,551
Changes in working capital net of
effects of purchases of businesses:
Accounts receivable......................... (7,912) 5,815
Marketable securities....................... (1,189) 108
Inventory and other......................... (599) 737
Accounts payable............................ 3,652 (7,233)
Accrued liabilities and payroll and
benefits costs.............................. 3,842 (2,816)
Gain on sale of assets and other..................... (761) (1,751)
---------------- -----------------
Net cash provided by operations........................... 19,245 11,723

Cash flows from investing:

Oil and gas properties............................... (313,478) (77,022)
Additions to property and equipment.................. (49,416) (472)
Proceeds on sale of assets........................... 9,094 16,352
---------------- -----------------
Net cash used in investing................................ (353,800) (61,142)

Cash flows from financing:

Proceeds from indebtedness........................... 403,727 48,200
Repayments of indebtedness........................... (134,002) (392)
Preferred stock dividends............................ (584) (584)
Common stock dividends............................... (403) (630)
Proceeds from common stock issuance, net............. 65,620 380
Repurchase of common stock........................... (13) (23)
---------------- -----------------
Net cash provided by financing............................ 334,345 46,951
---------------- -----------------

Change in cash............................................ (210) (2,468)
Cash and equivalents at beginning of period............... 8,625 9,725
---------------- -----------------
Cash and equivalents at end of period..................... $ 8,415 $ 7,257
================ =================

Supplemental disclosures of non-cash investing and
financing activities:
Purchase of property and equipment financed with

common stock.......................................... $ 30,000 $ -

SEE ACCOMPANYING NOTES.

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LOMAK PETROLEUM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION:

Lomak Petroleum, Inc. ("Lomak" or the "Company") is an independent oil
and gas company engaged in development, exploration and acquisition primarily in
four core areas: Permian, Midcontinent, Gulf Coast and Appalachia. Historically,
the Company has increased its reserves and production through acquisitions,
development and exploration of its properties. At December 31, 1997, proved
reserves totaled 753 Bcfe, having a pre-tax present value at constant prices on
that date of $632 million and a reserve life index of 15.3 years.

Lomak's objective is to maximize shareholder value through growth in
its reserves, production, cashflow and earnings through a balanced program of
exploration and development drilling and strategic acquisitions. In order to
effectively pursue its operating strategy, the Company has concentrated its
activities in selected geographic areas. In each core area, the Company has
established separate acquisition, engineering, geological, operating and other
technical expertise. The Company believes that this geographic focus provides it
with a competitive advantage in sourcing and evaluating new business
opportunities within these areas, as well as providing economies of scale in
developing and operating its properties.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The accompanying financial statements include the accounts of the
Company, all majority owned subsidiaries and its pro rata share of the assets,
liabilities, income and expenses of certain oil and gas partnerships and joint
ventures. Highly liquid temporary investments with an initial maturity of ninety
days or less are considered cash equivalents.

MARKETABLE SECURITIES

The Company has adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." Under
Statement No. 115, debt and marketable equity securities are required to be
classified in one of three categories: trading, available-for-sale, or held to
maturity. The Company's equity securities qualify under the provisions of
Statement No. 115 as available-for-sale. Such securities are recorded at fair
value, and unrealized holding gains and losses, net of the related tax effect,
are reflected as a separate component of stockholders' equity. A decline in the
market value of an available-for-sale security below cost that is deemed other
than temporary is charged to earnings and results in the establishment of a new
cost basis for the security. Realized gains and losses are determined on the
specific identification method and are reflected in income.

OIL AND GAS PROPERTIES

The Company follows the successful efforts method of accounting for oil
and gas properties. Exploratory costs which result in the discovery of reserves
and the cost of development wells are capitalized. Geological and geophysical
costs, delay rentals and costs to drill unsuccessful exploratory wells are
expensed. Depletion is provided on the unit-of-production method. Oil is
converted to Mcfe at the rate of 6 Mcf per barrel. The depletion rates per Mcfe
were $0.99 and $0.83 in the first quarters of 1997 and 1998, respectively.
Approximately $111.2 million and $112.2 million of oil and gas properties were
not subject to depletion as of December 31, 1997 and March 31, 1998,
respectively

The Company has adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which

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establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. SFAS No. 121 requires a review
for impairment whenever circumstances indicate that the carrying amount of an
asset may not be recoverable. Impairment is recognized only if the carrying
amount of an asset is greater than its expected future cash flows. The amount of
the impairment is based on the estimated fair value of the asset.

TRANSPORTATION, PROCESSING AND FIELD ASSETS

The Company owns and operates over 3,000 miles of gas gathering systems
and gas processing plants in proximity to its principal gas properties.
Depreciation is calculated on the straight-line method based on estimated useful
lives ranging from four to twenty years.

The Company receives fees for providing field related services. These
fees are recognized as earned. Depreciation is calculated on the straight-line
method based on estimated useful lives ranging from one to five years, except
buildings which are being depreciated over ten to twenty-five year periods.

DEBT ISSUANCE COSTS

Expenses associated with the issuance of the 6% Convertible
Subordinated Debentures due 2007 and the 8.75% Senior Subordinated Notes due
2007 are included in Other Assets on the accompanying balance sheet and are
being amortized on the interest method over the term of the indebtedness.

GAS IMBALANCES

The Company uses the sales method to account for gas imbalances. Under
the sales method, revenue is recognized based on cash received rather than the
proportionate share of gas produced. Gas imbalances at December 31, 1997 and
March 31, 1998 were not material.

EARNINGS PER COMMON SHARE

In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128 "Earnings per Share." Statement 128 replaced the calculation of primary
and fully diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to Statement 128 requirements.

COMPREHENSIVE INCOME

Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income" which
requires disclosure of comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined as changes
in stockholders' equity from nonowner sources and, for the Company, includes net
income, changes the fair value of marketable securities. The following is a
calculation of the Company's comprehensive income for the quarters ended March
31, 1997 and 1998.

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For the quarters ended March 31,
----------------------------------
1997 1998
--------------- ---------------

Net income $ 6,562 2,769
Add: Unrealized gain/(loss)
Gross (565) 196
Tax effect 209 (73)
Less: Realized gains
Gross (1,700) -
Tax effect 629 -
--------------- ---------------

Comprehensive income $ 5,135 $ 2,889
=============== ===============

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NATURE OF BUSINESS

The Company operates in an environment with many financial and
operating risks, including, but not limited to, the ability to acquire
additional economically recoverable oil and gas reserves, the inherent risks of
the search for, development of and production of oil and gas, the ability to
sell oil and gas at prices which will provide attractive rates of return, and
the highly competitive nature of the industry and worldwide economic conditions.
The Company's ability to expand its reserve base and diversify its operations is
also dependent upon the Company's ability to obtain the necessary capital
through operating cash flow, borrowings or the issuance of additional equity.

RECLASSIFICATIONS

Certain reclassifications have been made to prior periods presentation
to conform with current period classifications.

(3) ACQUISITION AND DEVELOPMENT:

All of the Company's acquisitions have been accounted for as purchases.
The purchase prices were allocated to the assets acquired based on the fair
value of such assets and liabilities at the respective acquisition dates. The
acquisitions were funded by working capital, advances under a revolving credit
facility and the issuance of equity.

In the first quarter of 1997, the Company acquired oil and gas
properties located in West Texas, South Texas and the Gulf of Mexico (the
"Cometra Properties") from American Cometra, Inc. ("Cometra") for a purchase
price of $385 million. The Cometra Properties, located primarily in the
Company's core operating areas, include 515 producing wells and additional
development and exploration potential on approximately 150,000 gross acres
(90,000 net acres). In addition, the Cometra Properties included gas pipelines,
a 25,000 Mcf/d gas processing plant and an above-market gas contract with a
major gas utility. In addition, the Company acquired other interests totaling
$2.3 million during the three month period ended March 31, 1997.

In September 1997, the Company acquired properties in Appalachia ( the
"Meadville Properties") for a purchase price of $92.5 million. The Appalachia
properties are located in certain of the Company's core operating areas and
include 912 producing wells, 800 miles of gas gathering lines and leasehold
acreage

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covering 153,000 gross acres (146,000 net acres). The acquired reserves were 80%
developed and 95% operated on a pre-tax present value basis as of December 31,
1996. The properties have access to a number of major interstate pipelines and
industrial end-users. In December 1997, the Company sold a net profits interest
in the properties for $36.3 million.

In December 1997, the Company completed the acquisition of certain oil
properties located in the Fuhrman-Mascho field in West Texas (the
"Fuhrman-Mascho Properties") for a purchase price of $40 million, with an
economic effective date of October 1, 1997. The Fuhrman-Mascho Properties
included 160 producing wells and leasehold acreage covering approximately 13,600
gross acres. On a Present Value basis, the acquired reserves were 40% developed
and greater than 95% operated.

In March 1998, the Company completed the acquisition of oil and gas
properties in the Powell Ranch Field in West Texas (the "Powell Ranch
Properties") for a purchase price of $57 million, including $42 million in cash
and $15 million of future consideration. At the Company's election, the future
consideration is payable in cash or Lomak Common Stock in eight equal monthly
installments beginning June 1, 1998. At March 31, 1998 the future consideration
is included in senior indebtedness. The acquired properties encompass 14,200
gross acres, include 32 producing wells, 28 drilling locations, and significant
exploration potential. On a BOE basis, the reserves are 85% oil and 15% natural
gas.

In addition to the above mentioned purchases, the Company acquired
other properties for an aggregate consideration of $26.1 million and $5.1
million during the year ended December 31, 1997 and the quarter ended March 31,
1998, respectively.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following table presents unaudited pro forma operating results as
if certain transactions had occurred at the beginning of each period presented.
The pro forma operating results include the following transactions: (i) the sale
of approximately 4 million shares of Common Stock and the application of the net
proceeds therefrom, (ii) the sale of $125 million of 8.75% Senior Subordinated
Notes and the application of the net proceeds therefrom, (iii) the sale of $120
million of 5 3/4% Trust Convertible Preferred Securities and the application of
the net proceeds therefrom, (iv) the purchase by the Company of the Meadville
Properties and (v) the purchase by the Company of the Powell Ranch Properties.
All acquisitions were accounted for as purchase transactions.

Three months ended March 31,
--------------------------------------
1997 1998
----------------- -----------------
(in thousands except per share data)

Revenues....................... $ 45,347 $ 38,878
Net income..................... 6,744 1,994
Earnings per share............. 0.30 0.07
Earnings per share - dilutive.. 0.29 0.06
Total assets................... 820,622 800,252
Stockholders' equity........... 218,146 199,058

The pro forma operating results have been prepared for comparative
purposes only. They do not purport to present actual operating results that
would have been achieved had the acquisitions and financings been made at the
beginning of each period presented or to necessarily be indicative of future
results of operations.

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(4) INDEBTEDNESS:

The Company had the following debt outstanding as of the dates shown.
Interest rates at March 31, 1998 are shown parenthetically (in thousands):

December 31, March 31,
1997 1998
------------------- ------------------

Bank Facility (6.6%)................................. $ 186,700 $ 219,900
Other ( 5.9%)........................................ 425 15,033
------------------- ------------------
187,125 234,933
Less amounts due within one year..................... 413 28
------------------- ------------------

Senior debt, net..................................... $ 186,712 $ 234,905
=================== ==================

8.75% Senior Subordinated Notes due 2007............ $ 125,000 $ 125,000
6% Convertible Subordinated Debentures due 2007..... 55,000 55,000
------------------- ------------------

Subordinated debt, net............................... $ 180,000 $ 180,000
=================== ==================

The Company maintains a $400 million revolving bank facility (the "Bank
Facility"). The Bank Facility provides for a borrowing base which is subject to
semi-annual redeterminations. At April 30, 1998, the borrowing base on the Bank
Facility was $325 million of which $105 million was available to be drawn. The
Bank Facility bears interest at prime rate or LIBOR plus 0.625% to 1.125%
depending upon the percentage of the borrowing base drawn. Interest is payable
quarterly and the loan matures in February 2003. A commitment fee is paid
quarterly on the undrawn balance at a rate of .25% to .375% depending upon the
percentage of the borrowing base not drawn. It is the Company's policy to extend
the term period of the Bank Facility annually. The weighted average interest
rates on these borrowings were 6.8% and 6.6% for the three months ended March
31, 1997 and 1998, respectively.

The 8.75% Senior Subordinated Notes due 2007 (the "8.75% Notes") are
not redeemable prior to January 15, 2002. Thereafter, the 8.75% Notes will be
subject to redemption at the option of the Company, in whole or in part, at
redemption prices beginning at 104.375% of the principal amount and declining to
100% in 2005. The 8.75% Notes are unsecured general obligations of the Company
and are subordinated to all senior debt (as defined) of the Company which
includes borrowings under the Bank Facility. The 8.75% Notes are guaranteed on a
senior subordinated basis by all of the subsidiaries of the Company and each
guarantor is a wholly owned subsidiary of the Company. The guarantees are full,
unconditional and joint and several. Separate financial statements of each
guarantor are not presented because they are included in the consolidated
financial statements of the Company and management has concluded that their
disclosure provides no additional benefits.

The 6% Convertible Subordinated Debentures Due 2007 (the "Debentures")
are convertible into shares of the Company's Common Stock at the option of the
holder at any time prior to maturity. The Debentures are convertible at a
conversion price of $19.25 per share, subject to adjustment in certain events.
Interest is payable semi-annually. The Debentures will mature in 2007 and are
not redeemable prior to February 1, 2000. The Debentures are unsecured general
obligations of the Company subordinated to all senior indebtedness (as defined)
of the Company, which includes the 8.75% Notes and the Bank Facility.

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The debt agreements contain various covenants relating to net worth,
working capital maintenance and financial ratio requirements. The Company is in
compliance with these various covenants as of March 31, 1998. Interest paid
during the three month periods ended March 31, 1997 and 1998 totaled, $2.8
million and $12.6 million, respectively.

(5) FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:

The Company's financial instruments include cash and equivalents,
accounts receivable, accounts payable, debt obligations, commodity and interest
rate futures, options, and swaps. The book value of cash and equivalents,
accounts receivable and payable and short term debt are considered to be
representative of fair value because of the short maturity of these instruments.
The Company believes that the carrying value of its borrowings under its bank
credit facility approximates their fair value as they bear interest at rates
indexed to LIBOR. The Company's accounts receivable are concentrated in the oil
and gas industry. The Company does not view such a concentration as an unusual
credit risk. The Company has recorded an allowance for doubtful accounts of
$539,000 and $599,000 at December 31, 1997 and March 31, 1998, respectively.

A portion of the Company's crude oil and natural gas sales are
periodically hedged against price risks through the use of futures, option or
swap contracts. The gains and losses on these instruments are included in the
valuation of the production being hedged in the contract month and are included
as an adjustment to oil and gas revenue. The Company also manages interest rate
risk on its credit facility through the use of interest rate swap agreements.
Gains and losses on swap agreements are included as an adjustment to interest
expense.

The following table sets forth the book value and estimated fair values
of the Company's financial instruments:

December 31, March 31,
1997 1998
------------------------------- -------------------------------
(In thousands)

Book Fair Book Fair
Value Value Value Value
-------------- -------------- ------------- --------------

Cash and equivalents.................... $ 9,725 $ 9,725 $ 7,257 $ 7,257
Marketable securities................... 7,671 8,041 7,827 8,393
Long-term debt.......................... (367,125) (367,125) (414,933) (414,933)
Commodity swaps......................... - 1,071 - (380)
Interest rate swaps..................... - 73 - 150

At March 31, 1998, the Company had open contracts for gas price swaps
of 3.1 Bcf. The swap contracts are designed to set average prices ranging from
$2.20 to $2.57 per Mcf. While these transactions have no carrying value, their
fair value, represented by the estimated amount that would be required to
terminate the contracts, was a net loss of approximately $380,000 at March 31,
1998. These contracts expire monthly through August 1998. The gains or losses on
the Company's hedging transactions is determined as the difference between the
contract price and the reference price, generally closing prices on the New York
Mercantile Exchange. The resulting transaction gains and losses are determined
monthly and are included in net income in the period the hedged production or
inventory is sold. Net gains or (losses) relating to these derivatives for the
three months ended March 31, 1997 and 1998 approximated $(417,000) and $1.2
million, respectively.

Interest rate swap agreements, which are used by the Company in the
management of interest rate exposure, is accounted for on the accrual basis.
Income and expense resulting from these agreements are recorded in the same
category as expense arising from the related liability. Amounts to be paid or
received under interest rate swap agreements are recognized as an adjustment to
expense in the periods in which

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they accrue. At March 31, 1998, the Company had $80 million of borrowings
subject to four interest rate swap agreements at rates of 5.64%, 5.71%, 5.59%
and 5.35% through October 1998, September 1999, October 1999 and January 2000,
respectively. The interest rate swaps may be extended at the counterparties'
option for two years. The agreements require that the Company pay the
counterparty interest at the above fixed swap rates and requires the
counterparty to pay the Company interest at the 30-day LIBOR rate. The closing
30-day LIBOR rate on March 31, 1998 was 5.69%. The fair value of the interest
rate swap agreements at March 31, 1998 is based upon current quotes for
equivalent agreements.

These hedging activities are conducted with major financial or
commodities trading institutions which management believes entail acceptable
levels of market and credit risks. At times such risks may be concentrated with
certain counterparties or groups of counterparties. The credit worthiness of
counterparties is subject to continuing review and full performance is
anticipated.

(6) COMMITMENTS AND CONTINGENCIES:

The Company is involved in various legal actions and claims arising in
the ordinary course of business. In the opinion of management, such litigation
and claims are likely to be resolved without material adverse effect on the
Company's financial position.

In July 1997, a gas utility filed an action in the state district court
in Tarrant County, Texas. In the lawsuit, the gas utility asserted a breach of
contract claim arising out of a gas purchase contract, in which it is buyer and
the Company is seller. Under the gas utility's interpretation of the contract it
is seeking, as damages, the reimbursement of the difference between the
above-market contract price it paid and market price on a portion of the gas it
has taken beginning in July 1997. As of January 1998, the utility, alleged that
it was entitled to receive approximately $2 million plus attorneys' fees, and
that this amount will increase by the time the proceedings are completed. Based
on its interpretation of the contract, the Company counterclaimed seeking
damages for breach of contract and for repudiation of the contract. In April
1998, the court gave notice of its intention to grant a partial summary
judgement on the liability issue in favor of the gas utility's interpretation of
the contract. The case is currently scheduled for trial on June 1, 1998 to
determine the amount of damages, if any. The Company intends to defend the
damage claim and appeal the entire decision if the court enters its final
judgement in favor of the utility. Accordingly, no damage amounts have been
included in the Company's financial statements.

(7) EQUITY SECURITIES:

On October 16, 1997, Lomak, through a newly-formed affiliate Lomak
Financing Trust (the "Trust"), completed the issuance of $120 million of 5 3/4%
trust convertible preferred securities (the "Convertible Preferred Securities").
The Trust issued 2,400,000 shares of the Convertible Preferred Securities at $50
per share. Each Convertible Preferred Security is convertible at the holder's
option into 2.1277 shares of Common Stock, representing a conversion price of
$23.50 per share.

The Trust invested the $120 million of proceeds in 5 3/4% convertible
junior subordinated debentures issued by Lomak (the " Junior Debentures"). In
turn, Lomak used the net proceeds from the issuance of the Junior Convertible
Debentures to repay a portion of its credit facility. The sole assets of the
Trust are the Junior Debentures. The Junior Debentures and the related
Convertible Preferred Securities mature on November 1, 2027. Lomak and Lomak
Financing Trust may redeem the Junior Debentures and the Convertible Preferred
Securities, respectively, in whole or in part, on or after November 4, 2000. For
the first twelve months thereafter, redemptions may be made at 104.025% of the
principal amount. This premium declines proportionally every twelve months until
November 1, 2007, when the redemption price becomes fixed at 100% of the
principal amount. If Lomak redeems any Junior Debentures prior to the scheduled
maturity date, the Trust must redeem Convertible Preferred Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Junior Debentures so redeemed.

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Lomak has guaranteed the payments of distributions and other payments
on the Convertible Preferred Securities only if and to the extent that the Trust
has funds available. Such guarantee, when taken together with Lomak's
obligations under the Junior Debentures and related indenture and declaration of
trust, provide a full and unconditional guarantee of amounts due on the
Convertible Preferred Securities.

Lomak owns all the common securities of the Trust. As such, the
accounts of the Trust have been included in Lomak's consolidated financial
statements after appropriate eliminations of intercompany balances. The
distributions on the Convertible Preferred Securities have been recorded as a
charge to interest expense on Lomak's consolidated statements of income, and
such distributions are deductible by Lomak for income tax purposes.

In March 1997, the Company sold 4 million shares of common stock in a
public offering for $69 million.

In November 1995, the Company issued 1,150,000 shares of $2.03
convertible exchangeable preferred stock (the "$2.03 Preferred Stock") for $28.8
million. The $2.03 Preferred Stock is convertible into the Company's common
stock at a conversion price of $9.50 per share, subject to adjustment in certain
events. The $2.03 Preferred Stock is redeemable, at the option of the Company,
at any time on or after November 1, 1998, at redemption prices beginning at
105%. At the option of the Company, the $2.03 Preferred Stock is exchangeable
for the Company's 8-1/8% Convertible Subordinated Notes due 2005. The notes
would be subject to the same redemption and conversion terms as the $2.03
Preferred Stock.

(8) STOCK OPTION AND PURCHASE PLAN:

The Company maintains a Stock Option Plan which authorizes the grant of
options of up to 3.0 million shares of Common Stock. However, no new options may
be granted which would result in their being outstanding aggregate options
exceeding 10% of common shares outstanding plus those shares issuable under
convertible securities. Under the plan, incentive and non-qualified options may
be issued to officers, key employees and consultants. The plan is administered
by the Compensation Committee of the Board. All options issued under the plan
vest 30% after one year, 60% after two years and 100% after three years. During
the three months ended March 31, 1998, options covering 53,330 shares were
exercised at prices ranging from $5.12 to $10.50 per share. At March 31, 1998,
options covering a total of 1.4 million shares were outstanding under the plan,
of which 972,000 options were exercisable. The exercise prices of the
outstanding options range from $3.38 to $18.06.

In 1994, the stockholders approved the 1994 Outside Directors Stock
Option Plan (the "Directors Plan"). Only Directors who are not employees of the
Company are eligible under the Directors Plan. The Directors Plan covers a
maximum of 200,000 shares. At March 31, 1998, 108,000 options were outstanding
under the Directors Plan of which 40,800 were exercisable as of that date. The
exercise price of the options ranges from $7.75 to $16.88 per share.

In June 1997, the stockholders approved the 1997 Stock Purchase Plan
(the "1997 Plan") which authorizes the sale of up to 500,000 shares of common
stock to officers, directors, key employees and consultants. Under the Plan, the
right to purchase shares at prices ranging from 50% to 85% of market value may
be granted. The Company previously had stock purchase plans which covered
833,333 shares. The previous stock plans have been terminated. The plans are
administered by the Compensation Committee of the Board. During the three months
ended March 31, 1998, the Company sold 15,400 common shares to officers, key
employees and outside directors for total consideration of $167,400. From
inception through March 31, 1998, a total of 474,000 unregistered shares had
been sold, for a total consideration of approximately $3.9 million.

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14

(9) BENEFIT PLAN:

The Company maintains a 401(K) Plan for the benefit of its employees.
The Plan permits employees to make contributions on a pre-tax salary reduction
basis. The Company makes discretionary contributions to the Plan. Company
contributions for 1997 totaled $701,000. The Company has no other employment
benefit plans.

(10) INCOME TAXES:

The Company follows FASB Statement No. 109, "Accounting for Income
Taxes". Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

The Company has entered into several business combinations accounted
for as purchases. In connection with these transactions, deferred tax assets and
liabilities of $7.7 million and $23.8 million respectively, were recorded. In
1996 the Company acquired Eastern Petroleum Company in a taxable business
combination accounted for as a purchase. A net deferred tax liability of $2.1
million was recorded in the transaction. In 1997 the Company acquired Arrow
Operating Company in a tax free business combination accounted for as a
purchase. Accordingly, a deferred tax liability of $12 million was recorded.

As a result of the Company's issuance of equity and convertible debt
securities, it experienced a change in control during 1988 as defined by Section
382 of the Internal Revenue Code. The change in control placed limitations to
the utilization of net operating loss carryovers. At March 31, 1998, the Company
had available for federal income tax reporting purposes net operating loss
carryovers of approximately $26 million which are subject to annual limitations
as to their utilization and otherwise expire between 1998 and 2012, if unused.
The Company has alternative minimum tax net operating loss carryovers of $21
million which are subject to annual limitations as to their utilization and
otherwise expire from 1998 to 2012 if unused. The Company has statutory
depletion carryover of approximately $3.8 million and an alternative minimum tax
credit carryover of approximately $800,000. The statutory depletion carryover
and alternative minimum tax credit carryover are not subject to limitation or
expiration.

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15

(11) EARNINGS PER COMMON SHARE

The following table sets forth the computation of earnings per common
share and earnings per common share - assuming dilution (in thousands):

MARCH 31,
------------------------------
1997 1998
------------- -------------

Numerator:
Net Income ................................. $ 6,562 $ 2,769
Preferred stock dividends................... (584) (584)
------------- -------------
Numerator for earnings per common share..... 5,978 2,185

Effect of dilutive securities:
Preferred stock dividends................. - -
------------- -------------

Numerator for earnings per common
share - assuming dilution................. $ 5,978 $ 2,185
============= =============

Denominator:
Denominator for earnings per common
share - weighted average shares........... 16,973 21,073

Effect of dilutive securities:
Employee stock options.................... 451 518
Warrants.................................. 258 -
------------- -------------

Dilutive potential common shares 709 518
------------- -------------
Denominator for diluted earnings per share
adjusted weighted-average shares and
assumed conversions....................... 17,682 21,591
============= =============

Earnings per common share....................... $ 0.35 $ 0.10
============= =============

Earnings per common
share - assuming dilution................. $ 0.34 $ 0.10
============= =============

For additional disclosure regarding the Company's Debentures, the 7
1/2% Preferred Stock and the $2.03 Preferred Stock, see Notes 4, 7 and 8
respectively. The Debentures were outstanding during 1997 and 1998 but were not
included in the computation of diluted earnings per share because the conversion
price was greater than the average market price of common shares and, therefore,
the effect would be antidilutive. The $2.03 Preferred Stock was outstanding
during 1997 and 1998 and was convertible into 3,026,316 of additional shares of
common stock. The 3,026,316 additional shares were not included in the
computation of diluted earnings per share because the conversion price was
greater than the average market price of common shares and, therefore, the
effect would be antidilutive. There were employee stock options outstanding
during 1997 and 1998 which were exercisable, resulting in 451,728 and 1,018,052
additional shares, respectively, under the treasury method of accounting for
common stock equivalents. These additional shares were not included in the 1997
and 1998 computations of diluted earnings per share because the effect was
antidilutive.

(12) MAJOR CUSTOMERS:

The Company markets its oil and gas production on a competitive basis.
The type of contract under which gas production is sold varies but can generally
be grouped into three categories: (a) life-of-

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the-well; (b) long-term (1 year or longer); and (c) short-term contracts which
may have a primary term of one year, but which are cancelable at either party's
discretion in 30-120 days. Approximately 48% of the Company's gas production is
currently sold under market sensitive contracts which do not contain floor price
provisions. For the three months ended March 31, 1998, one customer accounted
for 19% of the Company's total oil and gas revenues. Management believes that
the loss of any one customer would not have a material adverse effect on the
operations of the Company. Oil is sold on a basis such that the purchaser can be
changed on 30 days notice. The price received is generally equal to a posted
price set by the major purchasers in the area. Oil is sold on a basis of price
and service.

(13) OIL AND GAS ACTIVITIES:

The following summarizes selected information with respect to oil and
gas activities (in thousands):

December 31, March 31,
1997 1998
---------------- ----------------
(unaudited)

Oil and gas properties:
Subject to depletion............................... $ 674,067 $ 732,302
Not subject to depletion........................... 111,156 112,240
---------------- ----------------
Total.......................................... 785,223 844,542
Accumulated depletion.............................. (161,416) (169,129)
---------------- ----------------

Net oil and gas properties..................... $ 623,807 $ 675,413
================ ================

Three Months
Year Ended Ended
December 31, March 31,
1997 1998
---------------- ----------------
(unaudited)

Costs incurred:
Acquisition........................................ $ 448,822 $ 62,076
Development........................................ 56,430 14,946
Exploration........................................ 2,375 142
---------------- ----------------

Total costs incurred........................... $ 507,627 $ 77,164
================ ================

(14) SUBSEQUENT EVENTS

On May 12, 1998 the Company entered into a definitive agreement to merge
with Domain Energy Corporation ("Domain"). Pursuant, to the merger agreement,
Domain's shareholders will receive $14.50 worth of Lomak common stock for each
Domain share. The final exchange ratio will be based on the market price of
Lomak's shares during the 15 trading days prior to the consummation of the
merger. The exchange ratio is subject to a maximum and minimum of 1.2083 and
0.8529 Lomak shares, respectively. As a condition to the merger, an affiliate of
First Reserve Corporation ("First Reserve") has agreed to sell to Lomak
3,250,000 Domain shares (22% of the total outstanding) for $43,875,000 in cash
($13.50 per share). As required by the merger agreements, First Reserve has
voted all of its shares (52% of the total outstanding) in favor of the merger.
As a result, no further Domain shareholder approval is necessary. Completion of
the transaction is subject to approval by Lomak's shareholders and to customary
regulatory approvals. Under the terms of the merger agreement, a newly formed
subsidiary of Lomak will merge into Domain, with Domain surviving as a
subsidiary of Lomak, which is expected to be renamed "Range Resources
Corporation" in connection with the merger.

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

FACTORS EFFECTING FINANCIAL CONDITION AND LIQUIDITY

LIQUIDITY AND CAPITAL RESOURCES

General

Working capital at March 31, 1998 was $1.6 million. The Company at that
date had $15.7 million in cash and marketable securities and total assets of
$800 million. During the first quarter of 1998, long-term debt rose from $367
million to $415 million.

At March 31, 1998, long-term debt to book capitalization was 56.5%.
Approximately $220 million of the long-term debt at that date was comprised of
borrowings under the Credit Agreement, $125 million of 8.75% Senior Subordinated
Notes, $55 million of 6% Convertible Subordinated Debentures and $15 million of
other indebtedness. The Credit Agreement currently provides for quarterly
payments of interest with principal due in February 2002.

Common Stock and Notes Offerings

In March 1997, the Company completed the offerings of 4,060,000 shares
of Common Stock (the "Common Offering") and $125 million of 8.75% Senior
Subordinated Notes due 2007 (the "Notes Offering") (collectively the
"Offerings"). The Notes are unconditionally guaranteed on an unsecured, senior
subordinated basis, by each of the Company's Restricted Subsidiaries (as defined
in the Indenture for the Notes), provided that such guarantees will terminate
under certain circumstances. The Indenture for the Notes contains certain
covenants, including, but not limited to, covenants with respect to the
following matters: (i) limitation on restricted payments; (ii) limitation on the
incurrence of indebtedness and issuance of Disqualified Stock (as defined in the
Indenture for the Notes); (iii) limitation on liens; (iv) limitation on
disposition of proceeds of asset sales; (v) limitation on transactions with
affiliates; (vi) limitation on dividends and other payment restrictions
affecting restricted subsidiaries; (vii) restrictions on mergers, consolidations
and transfers of assets; and (viii) limitation on "layering" indebtedness.

Cash Flow

The Company's principal operating sources of cash include sales of oil
and gas and revenues from gas transportation and marketing. The Company's cash
flow is highly dependent upon oil and gas prices. Decreases in the market price
of oil or gas could result in reductions of both cash flow and the borrowing
base under the Credit Agreement which would result in decreased funds available,
including funds intended for planned capital expenditures.

The Company has three principal operating sources of cash: (i) sales of
oil; (ii) sales of natural gas and (iii) revenues from transportation,
processing and marketing. The increases in the Company's cash flow from
operations can be attributed to its growth primarily through acquisitions and
development.

The Company's net cash used in investing for the three months ended
March 31, 1997 and 1998 was $354 million and $61 million, respectively.
Investing activities for these periods are comprised primarily of additions to
oil and gas properties through acquisitions and development and, to a lesser
extent, exploitation and additions of field assets. These uses of cash have
historically been partially offset through the Company's policy of divesting
those properties that it deems to be marginal or outside of its core areas of
operation. The Company's acquisition and development activities have been
financed through a combination of operating cash flow, bank borrowings and
capital raised through equity and debt offerings.

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18

The Company's net cash provided by financing for the three months ended
March 31, 1997 and 1998 was $334 million and $47 million, respectively. Sources
of financing used by the Company have been primarily borrowings under its Credit
Agreement and capital raised through the Offerings.

Capital Requirements

During the first three months of 1998, $15 million of costs were
incurred for development and exploration activities. Although these expenditures
are principally discretionary, the Company is currently projecting that it will
spend approximately $300 million over the next three years on development,
exploitation and exploration activities. The development and exploration
expenditures are currently expected to consume a large portion of internally
generated cashflow. The remaining funds will be available for debt repayment ,
acquisitions or other capital expenditures.

Bank Facility

The Bank Facility permits the Company to obtain revolving credit loans
and to issue letters of credit for the account of the Company from time to time
in an aggregate amount not to exceed $400 million. The borrowing base is
currently $325 million and is subject to semi-annual determination and certain
other redeterminations based upon a variety of factors, including the discounted
present value of estimated future net cash flow from oil and gas production. At
March 31, 1998, the Company had $105 million of availability under the Bank
Facility. At the Company's option, loans may be prepaid, and revolving credit
commitments may be reduced, in whole or in part at any time in certain minimum
amounts. At the Company's option, the applicable interest rate per annum is the
LIBOR plus a margin ranging from 0.625% to 1.125%. The facility contains other
alternative rate options which have never been utilized by the Company. Based on
levels of debt outstanding as of March 31, 1998, the margin was 0.875%.

Hedging Activities

Periodically, the Company enters into futures, option and swap
contracts to reduce the effects of fluctuations in crude oil and natural gas
prices. At March 31, 1998, the Company had open contracts for gas swaps of 3.1
Bcf. The swap contracts are designed to set average prices ranging from $2.20 to
$2.57 per Mcf. While these transactions have no carrying value, the Company's
mark-to-market exposure under these contracts at March 31, 1998 was a net loss
of $380,000. The gains or losses on the Company's hedging transactions is
determined as the difference between the contract price and a reference price,
generally closing prices on the NYMEX. The resulting transaction gains and
losses are determined monthly and are included in the period the hedged
production or inventory is sold. Net gains or losses relating to these
derivatives for the three months ended March 31, 1997 and 1998 approximated a
loss of $417,000 and a gain of $1.2 million, respectively.

INFLATION AND CHANGES IN PRICES

The Company's revenues and the value of its oil and gas properties have
been and will be affected by changes in oil and gas prices. The Company's
ability to maintain current borrowing capacity and to obtain additional capital
on attractive terms is also substantially dependent on oil and gas prices. Oil
and gas prices are subject to significant seasonal and other fluctuations that
are beyond the Company's ability to control or predict. During the first three
months of 1998, the Company received an average of $13.50 per barrel of oil and
$2.62 per Mcf of gas. Although certain of the Company's costs and expenses are
affected by the level of inflation, inflation did not have a significant effect
during the first three months of in 1998. Should conditions in the industry
improve, inflationary cost pressures may resume.

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RESULTS OF OPERATIONS

Comparison of 1998 to 1997

The Company reported net income for the three months ended March 31,
1998 of $2.8 million, a $3.8 million decrease over the first quarter of 1997.
The decrease is the result of (i) lower product prices received on oil and gas
production and (ii) increased interest expense in connection with the financing
of acquisitions and capital expenditures. During the periods presented, oil and
gas production volumes increased 12% to 13.1 Bcfe, an average of 145,124 Mcfe
per day. The increased revenues recognized from production volumes were impacted
by a 16% decrease in the average price received per Mcfe of production to $2.49.
The average oil price decreased 35% to $13.50 per barrel while average gas
prices decreased 9% to $2.62 per Mcf. As a result of the Company's larger base
of producing properties and production, oil and gas production expenses
increased 8% to $8.4 million in 1998 versus $7.8 million in 1997. The average
operating cost per Mcfe produced decreased 4% from $0.67 in 1997 to $0.64 in
1998.

Although production volumes increased between quarters, the Company's
transportation, processing and marketing revenues increased only marginally due
to lower amounts of gas being processed during 1998. In addition, early in the
first quarter of 1998, the Company sold its San Juan Basin properties. In
connection with this sale, certain of the Company's gas processing assets were
sold. Transportation, processing and marketing expenses increased 22% to $1.1
million versus $0.9 million in 1997. The increase in expenses was due to
production growth, as well as increased transportation, processing and marketing
costs and higher personnel administrative expenses associated with the growth in
gas marketing activities.

Exploration expense decreased 59% to $0.4 million due to the timing of
exploration activities.

General and administrative expenses increased 70% from $1.1 million in
1997 to $1.8 million in 1998. As a percentage of revenues, general and
administrative expenses were 5% in 1998 as compared to 3% in 1997. This increase
is principally attributable to technical personnel added to manage the Company's
expanding exploration efforts.

Interest and other income increased from $0.6 million in 1997 to $1.7
million in 1998 primarily due to gains from the sale of non-strategic assets. In
1998 interest expense increased 121% to $8.7 million as compared to $4.0 million
in 1997. This was primarily as a result of the higher average outstanding debt
balance during the year due to the financing of acquisitions and capital
expenditures and a higher average cost of borrowings during the period. The
average outstanding balances on the Credit Agreement were $154 million and $181
million the first quarter of 1997 and 1998, respectively. The weighted average
interest rate on these borrowings were 6.8% and 6.6% for the three months ended
March 31, 1997 and 1998, respectively.

Depletion, depreciation and amortization decreased 4% compared to 1997
due to lower depletion rates in the 1998 period. The depletion rates are lower
in 1998 as a result of the Company's provision for impairment recorded in the
fourth quarter of 1997. The Company-wide depletion rate was $0.99 per Mcfe in
the first quarter of 1997 and $0.83 per Mcfe in the first quarter of 1998.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various other legal actions and claims
arising in the ordinary course of business. In the opinion of management, such
litigation and claims are likely to be resolved without material adverse effect
on the Company's financial position.

Items 2 - 5. Not applicable

Item 6. Exhibits and Report on Form 8-K

(a) Exhibits

2.1 Agreement and Plan of Merger by and among Lomak
Petroleum, Inc., DEC Acquisition, Inc. and Domain
Energy Corporation dated May 12, 1998.

2.2 First Amendment to Agreement and Plan of Merger
by and among Lomak Petroleum, Inc., DEC
Acquisition, Inc. and Domain Energy Corporation
dated May 12, 1998

2.3 Stock Purchase Agreement between Lomak Petroleum,
Inc. and First Reserve Fund VII, Limited
Partnership dated May 12, 1998.

2.4 Voting and Standstill Agreement between Lomak
Petroleum, Inc., and First Reserve Fund VII,
Limited Partnership dated May 12, 1998.

27 Financial data schedule

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21

SIGNATURES

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

LOMAK PETROLEUM, INC.

By: (Thomas W. Stoelk)
--------------------------------
Thomas W. Stoelk
Senior Vice President - Finance
and Administration
and Chief Financial Officer

May 15, 1998

EXHIBIT INDEX

Sequentially
Exhibit Number Description of Exhibit Numbered Page
- --------------------- --------------------------------------------------- --------------------

2.1 Agreement and Plan of Merger by and among Lomak 23
Petroleum, Inc., DEC Acquisition, Inc. and Domain
Energy Corporation dated May 12, 1998.

2.2 First Amendment to Agreement and Plan of Merger 80
by and among Lomak Petroleum, Inc., DEC
Acquisition, Inc. and Domain Energy Corporation
dated May 12, 1998

2.3 Stock Purchase Agreement between Lomak Petroleum, 91
Inc. and First Reserve Fund VII, Limited
Partnership dated May 12, 1998.

2.4 Voting and Standstill Agreement between Lomak 97
Petroleum, Inc., and First Reserve Fund VII,
Limited Partnership dated May 12, 1998.

27 Financial Data Schedule 115