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<SEC-DOCUMENT>0000788965-05-000006.txt : 20050415
<SEC-HEADER>0000788965-05-000006.hdr.sgml : 20050415
<ACCEPTANCE-DATETIME>20050415143614
ACCESSION NUMBER:		0000788965-05-000006
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20041231
FILED AS OF DATE:		20050415
DATE AS OF CHANGE:		20050415

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HALLADOR PETROLEUM CO
		CENTRAL INDEX KEY:			0000788965
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				841014610
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14731
		FILM NUMBER:		05753297

	BUSINESS ADDRESS:	
		STREET 1:		1660 LINCOLN ST STE 2700
		CITY:			DENVER
		STATE:			CO
		ZIP:			80264
		BUSINESS PHONE:		3038395505

	MAIL ADDRESS:	
		STREET 1:		1660 LINCOLN STREET
		STREET 2:		SUITE 2700
		CITY:			DENVER
		STATE:			CO
		ZIP:			80264

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIMBARK OIL & GAS CO /CO/
		DATE OF NAME CHANGE:	19900102

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIMBARK INC
		DATE OF NAME CHANGE:	19860624
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>sdec2004k.txt
<DESCRIPTION>DECEMBER 31, 2004
<TEXT>
                                 UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                                Washington, D. C.  20549

                                   FORM 10-KSB


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

                  For the fiscal year ended December 31, 2004

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

                       Commission file number: 0-14731

                          HALLADOR PETROLEUM COMPANY
                         --------------------------
         COLORADO                                      84-1014610
- -------------------------                    --------------------------------
 (State of incorporation)                   (IRS Employer Identification No.)

    1660 Lincoln Street, Suite 2700, Denver, Colorado           80264-2701
    -------------------------------------------------------------------------
        (Address of principal executive offices)               (Zip Code)

Issuer's telephone number:     303.839.5504               Fax:  303.832.3013
                               ------------               ------------------

Securities registered under Section 12(b) of the Exchange Act:  NONE

Securities registered under Section 12(g) of the Exchange Act:  Common Stock,
$.01 par value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to the filing requirements for the past 90 days.
Yes    X   No____

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]

Our revenue from continuing operations for the year ended December 31, 2004
was about $1 million.

At April 12, 2005, we had 7,093,150 shares outstanding and the aggregate
market value of such shares held by non-affiliates was about $2.9 million
based on a price of $2.30, which was the last reported trade on that date.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

ITEM 1.  DESCRIPTION OF BUSINESS

General Development of Business
- -------------------------------

Hallador Petroleum Company, a Colorado corporation, was organized by our
predecessor in 1949.

About eight years ago, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership, (the "Partnership".)  We are the general
partner and received a 70% interest in the partnership in return for
contributing our net assets and Yorktown representing the limited partners,
received a 30% interest for its $5,025,000 cash contribution.  As general
partner, we consolidate the activity of the Partnership and present the 30%
limited partners' interest as a minority interest.

On August 10, 2004, we entered into an agreement with E&B Natural Resources
Management Corporation (a private company) to sell all of our interest in the
South Cuyama field and adjacent exploration areas, all located in Santa
Barbara County, California, for $23 million; consisting of $19.5 million in
cash and an interest bearing (3.5%) note of $3.5 million due on September 30,
2005.  Closing occurred on September 30, 2004 and we recorded a pre-tax gain
of about $14 million.

Due to the sale, the joint board of directors of Hallador Petroleum Company
and the Executive Committee of the Partnership, voted to discontinue new
partnership operations effective October 1, 2004.  Currently, the
Partnership's assets consist of cash, the $3.5 million note receivable, oil
and gas properties in New Mexico and Texas, and other miscellaneous assets.
On October 1, 2004, the joint board of directors of Hallador Petroleum
Company, and the Executive Committee of the Partnership, valued the oil and
gas properties in New Mexico and Texas and the other miscellaneous assets at
$4 million. During April 2005, we plan to make a cash distribution of about $5
million to the limited partners.  During the second quarter 2005, we will
purchase the limited partners interest in the Partnership for about $1.2
million.  This does not include their interest in the $3.5 million note
receivable which is due September 30, 2005.  Upon collection of the note a
final distribution will be made to the limited partners.

We are engaged in the exploration, development and production of oil and
natural gas in the Rocky Mountain region.  In late March 2005, we invested
$325,000 in a newly formed entity to pursue coal opportunities in the United
States.  Our office is located at 1660 Lincoln Street, Suite 2700, Denver,
Colorado 80264, phone 303.839.5504, fax 303.832.3013.  We have no website.

We operate oil and natural gas properties for our own account and for the
account of others.  We also review and evaluate producing oil and natural gas
properties, companies, or other entities, which meet certain guidelines for
acquisition purposes.  Occasionally, we engage in the trading and acquisition
of non-producing oil and gas mineral leases and fee-simple minerals.

Markets
- -------

Our products are sold to various purchasers in the geographic area of the
properties.  Natural gas, after processing, is distributed through pipelines.
Oil and natural gas liquids (NGLs) are distributed through pipelines or
hauled by trucks.  The principal uses for oil and natural gas are heating,
manufacturing, power, and transportation.

Competition
- -----------

The oil and gas industry is highly competitive.  We encounter competition from
major and independent oil companies in acquiring economically desirable
producing properties, drilling prospects, and even the equipment and labor
needed to drill, operate and maintain our properties.  Competition is intense
with respect to the acquisition of producing and partially developed
properties.  We compete with companies having financial resources and
technical staffs significantly larger than our own. We do not own any refining
or retail outlets and have minimal control over the prices of our products.
Generally, higher costs, fees and taxes assessed at the producer level cannot
be passed on to our customers.

We also face competition from imported products as well as alternative sources
of energy such as coal, nuclear, hydro-electric power, and a growing trend
toward solar. We could incur delays or curtailments of the purchase of our
available production.  We may also encounter increasing costs of production
and transportation while sale prices remain stable or decline.  Any of these
competitive factors could have an adverse effect on our operating results.

Environmental and Other Regulations
- -----------------------------------

Our operations are affected in varying degrees by federal, state, regional and
local laws and regulations, including, but not limited to, laws governing
allowable rates of production, well spacing, air emissions, water discharges,
endangered species, marketing, prices and taxes.  We are further affected by
changes in such laws and by constantly changing administrative regulations.

Most natural gas pricing is presently deregulated and the remaining regulation
has no material impact on our prices.  We cannot predict the long-term impact
of future natural gas price regulation or deregulation.

We are subject to various federal, state, regional and local laws and
regulations relating to discharge of materials into, and protection of, the
environment.  These laws and regulations may, among other things, impose
liability on the owner or the lessee for the cost of pollution clean-up
resulting from operations, subject the owner or lessee to liability for
pollution damages, require suspension or cessation of operations in affected
areas or impose restrictions on injection into subsurface aquifers that may
contaminate groundwater.  Such regulation has increased the resources required
in, and costs associated with, planning, designing, drilling, installing,
operating and abandoning our oil and natural gas wells and other facilities.
We spend a significant amount of technical and managerial time to comply with
environmental regulations and permitting requirements.

We have and will continue to make expenditures to comply with these
requirements, which we believe are necessary business costs.  Although
environmental requirements do have a substantial impact upon the energy
industry, generally these requirements do not appear to affect us any
differently or to any greater or lesser extent than other companies.

Although we are not fully insured against all environmental and other risks,
we maintain insurance coverage, which we believe, is customary in the
industry.

During 2004, the cost to comply with these recurring environmental regulations
were not significant to our continuing operations and are not expected to be
in the foreseeable future.

To the extent these environmental expenditures reduce funds available for
increasing our reserves of oil and natural gas, future operations could be
adversely impacted.  Despite the fact that all of our competitors have to
comply with similar regulations, many are much larger and have greater
resources with which to deal with these regulations.

Other
- ------

We have no significant patents, trademarks, licenses, franchises or
concessions.

The oil business is not generally seasonal in nature; although unusual weather
extremes for extended periods may increase or decrease demand.  Natural gas
prices tend to increase in the fall and winter months and to decrease in the
spring and summer.

We have four full time employees and two part-time employees.  When needed we
also engage consulting petroleum engineers, environmental professionals,
geologists, geophysicists, landmen, accountants and attorneys on a fee basis.

ITEM 2.  DESCRIPTION OF PROPERTY

Location and General Character
- ------------------------------

Our primary operating property is in the San Juan Basin, located in the
northwest corner of New Mexico.

We hold our working interests in oil and natural gas properties either through
recordable assignments, leases, or contractual arrangements such as operating
agreements.  Consistent with industry practices, we do not make a detailed
examination of title when we acquire undeveloped acreage.  Title to such
properties is examined by legal counsel prior to commencement of drilling
operations.  This method of title examination is consistent with industry
practices.

In the acquisition and operation of oil and natural gas properties, burdens
such as royalty, overriding royalty, liens incident to operating agreements,
liens by taxing authorities, as well as other burdens and minor encumbrances
are customarily created. We believe that no such burdens materially affect the
value or use of our properties.


Proved Oil and Gas Reserves
- ---------------------------

Information concerning our reserve estimates is set forth in Note 5 to the
consolidated financial statements.  The reserve estimates were prepared by a
sole-proprietor consulting petroleum engineer.  All of our oil and gas
reserves are located onshore.

Sales and Price Data
- --------------------

See Item 6 - MD&A

Producing Wells
- ---------------

As of April 12, 2005, we had a working interest in 30 gross (3 net) gas wells.

Leasehold Interests
- -------------------

The following table sets forth our gross and net acres of undeveloped oil
and gas leases as of April 12, 2005:

                                             Gross       Net
                                            -------    ------
          Montana                            10,268     4,488
          North Dakota                        2,905       906
          Wyoming                            63,920    53,109
          Other                                 843       128
                                             ------    ------
              Total                          77,936    58,631
                                             ======    ======

Drilling Activity - Continuing Operations
- -----------------------------------------

From January 1, 2005 through April 12, 2005, there has been no drilling
activity.

During 2004, there was no drilling activity.

During 2003, we drilled six successful development gas wells in the San Juan
Basin. Our WI in these wells is between 6% - 13% with NRIs between 5% - 11%.

ITEM 3.  LEGAL PROCEEDINGS: None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None


                                PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the OTC Bulletin Board under the symbol "HPCO".
The following table sets forth the high and low sales price for the periods
indicated:

                                                  High         Low
                                                  ----         ----
     2005
       (January 1 through April 12, 2005)        $3.40       $2.10

     2004
       First quarter                              1.55        1.15
       Second quarter                             5.15        1.35
       Third quarter                              3.00        2.10
       Fourth quarter                             3.05        2.10

     2003
       First quarter                              1.05        0.70
       Second quarter                             1.25        0.70
       Third quarter                              1.03        1.01
       Fourth quarter                             2.00        0.70

During the last two years no dividends were paid.  We have no present
intention to pay any dividends in the foreseeable future.

At April 12, 2005 there were 398 holders of record of our common stock and the
last recorded sales price was $2.30.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview
- --------

Our consolidated financial statements should be read in conjunction with this
discussion.  Our primary operating property is in the San Juan Basin, located
in the northwest corner of New Mexico.  Due to the sale of the South Cuyama
field as discussed below, we are engaged in the exploration, development and
production of oil and natural gas in the Rocky Mountain region.  In late March
2005, we invested $325,000 in a newly formed entity to pursue coal
opportunities in the United States.

About eight years ago, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership, (the "Partnership".)  We are the general partner
and received a 70% interest in the partnership in return for contributing our
net assets and Yorktown representing the limited partners, received a 30%
interest for its $5,025,000 cash contribution.  As general partner, we
consolidate the activity of the Partnership and present the 30% limited
partners' interest as a minority interest.

On August 10, 2004, we entered into an agreement with E&B Natural Resources
Management Corporation (a private company) to sell all of our interest in the
South Cuyama field and adjacent exploration areas, all located in Santa
Barbara County, California, for $23 million; consisting of $19.5 million in
cash and an interest bearing (3.5%) note of $3.5 million due on September 30,
2005.  Closing occurred on September 30, 2004 and we recorded a pre-tax gain
of about $14 million.

Due to the sale, the joint board of directors of Hallador Petroleum Company
and the Executive Committee of the Partnership, voted to discontinue new
partnership operations effective October 1, 2004.  Currently, the
Partnership's assets consist of cash, the $3.5 million note receivable, oil
and gas properties in New Mexico and Texas, and other miscellaneous assets.
On October 1, 2004, the joint board of directors of Hallador Petroleum
Company, and the Executive Committee of the Partnership, valued the oil and
gas properties in New Mexico and Texas and the other miscellaneous assets at
$4 million.  During April 2005, we plan to make a cash distribution of about
$5 million to the limited partners.  During the second quarter 2005, we will
purchase the limited partners interest in the Partnership for about $1.2
million.  This does not include their interest in the $3.5 million note
receivable which is due September 30, 2005.  Upon collection of the note a
final distribution will be made to the limited partners.

Our profitability in any particular accounting period will be directly related
to:  (i) prices, (ii) production, (iii) lifting costs, and (iv) exploration
activities.  Accordingly, operating results will fluctuate from period to
period based on these factors, among others.

What follows is a discussion of our primary operating area.


San Juan Basin
- --------------

This gas field is located in the northwest corner of New Mexico in San Juan
County.  We have an interest in 26 wells and are the operator. These wells
have long-lived reserves. Our WI in this field ranges from 5%-15% with NRIs
between 5%-13%.  At December 31, 2004, our net book value in this prospect was
about $397,000.  We assigned proved gas reserves to this field of about 1.3
BCF to our interest.  Our net revenue interest in these wells is about 7%.
Two more development wells are planned for the fall of 2005.

Catalytic Solutions Investment
- ------------------------------

During 1998, we invested $62,000 for a small ownership in Catalytic Solutions,
Inc. (CSI), a private company, located in Oxnard, California (a Los Angeles
suburb).  CSI manufactures catalytic converters that reduce toxic emissions
from internal combustion engines.  During 2000, we invested another $113,000
in CSI.  During 2004 and 2003, we gave shares of CSI to certain employees
valued at $25,000.  Our current ownership is less than 1%.  Our average per
share cost is about $8.20.  During 2004, CSI completed a private stock
offering for $12 million at $13.65 per share.

Investments Made In 2005
- ------------------------

     North Dakota
     ------------

In February 2005, we invested $1.3 million in a 2,000 acre oil development
prospect in McKenzie County, North Dakota, located on the mid-western Montana
border.  We have a 37.5% WI (.328 NRI), Kodiak Oil and Gas, the operator also
has a 37.5% WI, the remaining 25% is owned by others. Kodiak is headquartered
in Denver and its stock trades on the TSX Venture Exchange under the symbol
KOG.  We hope to drill the first oil well in late 2005, at a cost of about
$2.5 million to the 100%.  This is a horizontal play so a vertical well is
drilled to 8,000 feet and then two horizontal laterals are drilled at distance
of 4,000 - 6,000 feet in opposite directions.  Headington Oil Company is a
major operator in this area on the Montana side and Burlington Resources is a
major operator on the North Dakota side.  Depending on the success of the
first well, our total commitment could be an additional $2 million.

     Coal
     ----

In late March 2005, we invested $325,000 for a 29% interest in a newly formed
entity called Coalition Energy, LLC (CELLC).  CELLC was formed to pursue coal
investments.  Mr. Stabio, Mr. Dietler, Mr. David Hardie and Mr. Steven Hardie,
of our board of directors, also invested in CELLC on the same terms as we did,
and collectively they own about 14%.   Kestrel Energy Partners, which Yorktown
Energy Partners, LLC, has invested in, has a 20% interest in CELLC.  We will
provide offices and administrative services for CELLC during the startup
phase.  Gerald Schissler, CEO, age 60 and Jerry Vaninetti, COO, age 55, both
of which have extensive experience in the coal industry are the only employees
of CELLC.  At payout, these two individuals, will each earn a 10% interest in
CELLC.


Liquidity and Capital Resources
- -------------------------------

Cash and cash to be provided from operations are expected to enable us to meet
our obligations as they become due during the next several years.

We have no bank debt, no special purpose entities and no off-balance sheet
arrangements nor did we enter into any related party transactions during the
two years ended December 31, 2004.

Results Of Continuing Operations
- --------------------------------

     Year-To-Date Comparison
     -----------------------

The table below provides sales data and average prices for the period.


<table>
<caption>
                                 2004                       2003
                       ------------------------    ----------------------
                        Sales   Average            Sales  Average
                        Volume   Price  Revenue    Volume  Price  Revenue
                       -------  -------  ------    ------  -----  -------
<s>                     <c>     <c>      <c>       <c>    <c>      <c>
Gas - mcf
  San Juan              68,500  $ 5.27   $361,000  66,161  $ 4.43  $293,000
  Other                 48,480    6.09    295,000  82,545    5.59   461,000

NGLs - barrels
  San Juan               6,624   24.76    164,000   6,900   17.98   124,000
  Other                     71   28.17      2,000      80   25.00     2,000

Oil - barrels
  San Juan                 105   28.58      3,000      58   17.25     1,000
  Other                  2,030   39.41     80,000   2,077   29.86    62,000

</table>



Gas revenue decreased due to lower production offset by slightly higher
prices.  Oil and NGL revenue increased primarily due to higher prices.

DD&A decreased due to higher reserve estimates for certain wells during 2004
compared to 2003.

Risk Factors
- ------------

The issues that cause us worry are:

     1.  OPEC deciding to significantly increase production, which would
         result in a free-fall of oil prices.

     2.  We have no succession plan for our CEO, Victor Stabio.  The loss of
         his services would have an adverse affect on us.

     3.  The success of our 2005 year-to-date investments.


Critical Accounting Policies and Estimates
- ------------------------------------------

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our
financial statements.

Successful Efforts Method of Accounting
- ---------------------------------------

We account for our exploration and development activities utilizing the
successful efforts method of accounting. Under this method, costs of
productive exploratory wells, development dry holes and productive wells and
undeveloped leases are capitalized. Oil and gas lease acquisition costs are
also capitalized. Exploration costs, including personnel costs, certain
geological and geophysical expenses and delay rentals for oil and gas leases,
are charged to expense as incurred. Exploratory drilling costs are initially
capitalized, but charged to expense if and when the well is determined not to
have found reserves in commercial quantities. The sale of a partial interest
in a proved property is accounted for as a cost recovery and no gain or loss
is recognized as long as this treatment does not significantly affect the
unit-of-production amortization rate. A gain or loss is recognized for all
other sales of producing properties.

The application of the successful efforts method of accounting requires
managerial judgment to determine the proper classification of wells designated
as developmental or exploratory which will ultimately determine the proper
accounting treatment of the costs incurred. The results from a drilling
operation can take considerable time to analyze and the determination that
commercial reserves have been discovered requires both judgment and industry
experience. Wells may be completed that are assumed to be productive and
actually deliver oil and gas in quantities insufficient to be economic, which
may result in the abandonment of the wells at a later date. Wells are drilled
that have targeted geologic structures that are both developmental and
exploratory in nature and an allocation of costs is required to properly
account for the results.  The evaluation of oil and gas leasehold acquisition
costs requires managerial judgment to estimate the fair value of these costs
with reference to drilling activity in a given area. Drilling activities in an
area by other companies may also effectively condemn leasehold positions.

The successful efforts method of accounting can have a significant impact on
the operational results reported when we enter a new exploratory area in hopes
of finding an oil and gas field that will be the focus of future development
drilling activity. The initial exploratory wells may be unsuccessful and will
be expensed. Seismic costs can be substantial which will result in additional
exploration expenses when incurred.

Reserve Estimates
- -----------------

Our estimates of oil and gas reserves, by necessity, are projections based on
geologic and engineering data, and there are uncertainties inherent in the
interpretation of such data as well as the projection of future rates of
production and the timing of development expenditures. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and gas that are difficult to measure. The accuracy of any reserve
estimate is a function of the quality of available data, engineering and
geological interpretation and judgment. Estimates of economically recoverable
oil and gas reserves and future net cash flows necessarily depend upon a
number of variable factors and assumptions, such as historical production from
the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions governing
future oil and gas prices, future operating costs, severance taxes,
development costs and workover costs, all of which may in fact vary
considerably from actual results. The future drilling costs associated with
reserves assigned to proved undeveloped locations may ultimately increase to
an extent that these reserves may be later determined to be uneconomic. For
these reasons, estimates of the economically recoverable quantities of oil and
gas attributable to any particular group of properties, classifications of
such reserves based on risk of recovery, and estimates of the future net cash
flows expected therefrom may vary substantially. Any significant variance in
the assumptions could materially affect the estimated quantity and value of
the reserves, which could affect the carrying value of our oil and gas
properties and/or the rate of depletion of the oil and gas properties. Actual
production, revenues and expenditures with respect to our reserves will likely
vary from estimates, and such variances may be material.

Impairment of Developed Oil and Gas Properties
- ----------------------------------------------

We review our oil and gas properties for impairment whenever events and
circumstances indicate a decline in the recoverability of their carrying
value. We estimate the expected future cash flows of our oil and gas
properties and compare such future cash flows to the carrying amount of our
oil and gas properties to determine if the carrying amount is recoverable.  If
the carrying amount exceeds the estimated undiscounted future cash flows, we
will adjust the carrying amount of the oil and gas properties to their fair
value. The factors used to determine fair value include, but are not limited
to, estimates of proved reserves, future commodity pricing, future production
estimates, anticipated capital expenditures, and a discount rate commensurate
with the risk associated with realizing the expected cash flows projected.

Impairment of Unproved Oil and Gas Properties.
- ----------------------------------------------

We periodically assess individually significant unproved oil and gas
properties for impairment, on a project-by-project basis.  Our assessment of
the results of exploration activities, commodity price outlooks, planned
future sales or expiration of all or a portion of such projects impact the
amount and timing of impairment provisions.

New Accounting Pronouncements
- -----------------------------

In December 2004 the FASB issued SFAS 123(R) that requires that the
compensation cost relating to share-based payment transactions be recognized
in financial statements.  That cost will be measured based on the fair value
of the equity or liability instrument issued.  SFAS 123(R) covers a wide range
of share-based awards, stock appreciation rights, and employee stock purchase
plans. SFAS 123(R) replaces SFAS 123, "Accounting for Stock-Based
Compensation," and supersedes APB Opinion  25, "Accounting for Stock Issued to
Employees."   We will be required to apply SFAS 123(R) in the first quarter
2006.  We are in the process of determining how the new method of valuing
stock-based compensation as prescribed in SFAS 123(R) will be applied to
valuing stock-based awards and the impact the recognition of compensation
expense related to such awards will have on our consolidated financial
statements.  See Note 1 of our Consolidated Financial Statements.

None of the other FASB pronouncements issued during the last two years had, or
will have, any effect on us.


ITEM 7.  FINANCIAL STATEMENTS

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





Report of Independent Registered Public Accounting Firm                     13

Consolidated Balance Sheet, December 31, 2004                               14

Consolidated Statement of Operations, Years ended
   December 31, 2004 and 2003                                               15

Consolidated Statement of Cash Flows, Years ended
   December 31, 2004 and 2003                                               16

Notes to Consolidated Financial Statements                                  17

                       REPORT OF INDEPENDENT REGISTERED
                          PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Hallador Petroleum Company
Denver, Colorado

We have audited the consolidated balance sheet of Hallador Petroleum Company
and Subsidiaries as of December 31, 2004 and the consolidated statements of
operations and cash flows for the years ended December 31, 2004 and 2003.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial condition of Hallador
Petroleum Company and Subsidiaries, as of December 31, 2004 and the results of
their operations and their cash flows for the years ended December 31, 2004
and 2003, in conformity with accounting principles generally accepted in the
United States of America.



                                   /s/ Ehrhardt Keefe Steiner & Hottman PC

April 5, 2005
Denver, Colorado

                         Consolidated Balance Sheet
                             December 31, 2004
                                (in thousands)
<table>
<caption>

<s>                                                                <c>
ASSETS
Current assets:
  Cash and cash equivalents                                         $ 19,927
  Oil and gas operator bonds                                             252
  Accounts receivable-
    Oil and gas sales                                                    573
    Well operations                                                      117
    E&B account receivable                                               230
    E& B - note receivable                                             3,569
                                                                     -------
       Total current assets                                           24,668
                                                                     -------
Oil and gas properties, at cost (successful efforts):
  Unproved properties                                                    220
  Proved properties                                                    2,155
  Less - accumulated depreciation,
    depletion, amortization and impairment                            (1,740)
                                                                     -------
                                                                         635
                                                                     -------
Investment in Catalytic Solutions                                        150
Other assets                                                              67
                                                                     -------
                                                                    $ 25,520
                                                                     =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities                          $    642
  Oil and gas sales payable                                              922
  Income tax payable                                                     300
  Partnership options payable (Note 3)                                   407
                                                                     -------
       Total current liabilities                                       2,271
                                                                     -------
Minority interest                                                      9,742
                                                                     -------
Stockholders' equity:
  Preferred stock, $.10 par value;
    10,000,000 shares authorized; none issued
  Common stock, $ .01 par value; 100,000,000
    shares authorized, 7,093,150 shares issued                            71
Additional paid-in capital                                            18,061
Accumulated deficit*                                                  (4,625)
                                                                     -------
                                                                      13,507
                                                                     -------
                                                                    $ 25,520
                                                                     =======

</table>

*Net income has been the only change in stockholders' equity during the
past two years.


                                See accompanying notes.

                          Consolidated Statement of Operations
                                    (in thousands)

<table>
<caption>

                                                        Years ended December 31,
                                                           2004         2003
                                                          ------       ------
<s>                                                       <c>        <c>
Revenue:
   Gas                                                   $   656      $   754
   Natural gas liquids                                       166          126
   Oil                                                        83           63
   Interest                                                  167           20
   Other                                                                   50
                                                          ------       ------
                                                           1,072        1,013
                                                          ------       ------
Costs and expenses:
   Lease operating                                           149          226
   Exploration costs
     Plug and abandonment                                                 107
     Delay rentals                                           102           87
   Impairment - unproved properties                          144           51
   Depreciation, depletion and amortization                   42          187
   General and administrative                                852          801
                                                          ------       ------
                                                           1,289        1,459
                                                          ------       ------
Loss from continuing operations before minority interest    (217)        (446)
Minority interest                                             65          134
                                                          ------       ------
Loss from continuing operations                             (152)        (312)

Income from discontinued operations net of minority
  interest of $592 and $419                                1,380          977

Gain on sale of discontinued operations, net of taxes
  of $1,085 and net of minority interest of $4,168         8,642
                                                          ------       ------
Net income                                               $ 9,870      $   665
                                                          ======       ======
Income (loss) per share - basic
  Continuing operations                                  $  (.02)     $  (.04)
  Discontinued operations                                    .19          .13
  Gain on sale of discontinued operations                   1.22
                                                          ------       ------
Net earnings per share                                   $  1.39      $   .09
                                                          ======       ======
Weighted average shares outstanding-basic                  7,093        7,093
                                                          ======       ======
</table>

                              See accompanying notes.


                         Consolidated Statement of Cash Flows
                                     (in thousands)

<table>
<caption>

                                                        Years ended December 31,
                                                           2004         2003
                                                          ------       ------
<s>                                                       <c>        <c>
Cash flows from operating activities:
  Net income                                              $ 9,870      $  665
  Depreciation, depletion, and amortization                   721       1,160
  Minority interest                                         4,695         285
  Impairment of undeveloped properties                        144          67
  Change in accounts receivable	                              812        (741)
  Gain on sale of discontinued operations exclusive
    of $1,705 bonueses paid in connection with sale       (15,600)
  Change in payables and accrued liabilities                 (623)        845
  Income taxes payable                                        300
  Key employee bonus plan                                    (253)
  Other                                                        90         231
                                                           ------      ------
    Net cash provided by operating activities                 156       2,512
                                                           ------      ------
Cash flows from investing activities:
  Proceeds from property sale (Cuyama)**                   18,110
  Properties*                                                (253)       (816)
  Other assets                                               (100)        (91)
                                                           ------      ------
    Net cash provided by (used in) investing activities    17,757        (907)
                                                           ------      ------

Cash flows from financing activities:
  Repurchase of employee stock options                     (1,305)
  Debt retirement                                                        (251)
  Cash calls from joint interest owners                                   318
                                                           ------      ------
    Net cash provided by (used in) financing activities    (1,305)         67
                                                           ------      ------
Net increase in cash and cash equivalents                  16,608       1,672

Cash and cash equivalents, beginning of year                3,319       1,647
                                                           ------      ------
Cash and cash equivalents, end of year                    $19,927     $ 3,319
                                                           ======      ======

Taxes paid                                                $   785

</table>

* In 2003, Net non-cash additions to oil and gas properties were $386,000 due
to the adoption of SFAS 143.
** In 2004, we received a $3,500,000 note receivable in connection with the
sale of Cuyama, which was a non-cash investing activity.



                               See accompanying notes.


                           Notes to Financial Statements

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

Basis of Presentation and Consolidation
- ---------------------------------------

The accompanying consolidated financial statements include the accounts of
Hallador Petroleum Company and its wholly owned subsidiaries.  All
significant intercompany accounts and transactions have been eliminated.  We
are engaged in the exploration, development, and production of oil and natural
gas in the Rocky Mountain region.

On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership (the "Partnership.")  We are the general partner
and received a 70% interest in the partnership in return for contributing our
net assets, and Yorktown, representing the limited partners, received a 30%
interest for its $5,025,000 cash contribution.  As general partner, we
consolidate the activity of the Partnership and present the 30% limited
partners' interest as a minority interest.

On August 10, 2004, we entered into an agreement with E&B Natural Resources
Management Corporation (a private company) to sell all of our interest in the
South Cuyama field and adjacent exploration areas, all located in Santa
Barbara County, California, for $23 million; consisting of $19.5 million in
cash and an interest bearing (3.5%) note of $3.5 million due on September 30,
2005.  Closing occurred on September 30, 2004 and we recorded a pre-tax gain
of about $14 million.   Results from the South Cuyama field have been
presented as discontinued operations in the accompanying Consolidated
Statement of Operations.  Revenue and expenses before the minority interest
were about $7 million and $5 million, respectively for 2004 and $8.6 million
and $7.2 million for 2003.

Due to the sale, the joint board of directors of Hallador Petroleum Company
and the Executive Committee of the Partnership, voted to discontinue new
partnership operations effective October 1, 2004.  Currently, the
Partnership's assets consist of cash, the $3.5 million note receivable, oil
and gas properties in New Mexico and Texas, and other miscellaneous assets.
On October 1, 2004, the joint board of directors of Hallador  Petroleum
Company, and the Executive Committee of the Partnership, valued the oil and
gas properties in New Mexico and Texas and the other miscellaneous assets at
$4 million.  During April 2005, we plan to make a cash distribution of about
$5 million to the limited partners.  During the second quarter 2005, we will
purchase the limited partners interest in the Partnership for about $1.2
million.  This does not include their interest in the $3.5 million note
receivable which is due September 30, 2005.  Upon collection of the note a
final distribution will be made to the limited partners.

Oil and Gas Properties
- ----------------------

We account for our oil and gas activities using the successful efforts method
of accounting.  Under the successful efforts method, the costs of successful
wells, development dry holes and productive leases are capitalized and
amortized on a units-of-production basis over the remaining life of the
related reserves.  Exploratory dry hole costs and other exploratory costs,
including geological and geophysical costs, and delay rentals are expensed as
incurred.  Cost centers for amortization purposes are determined on a field-
by-field basis.  Unproved properties with significant acquisition costs are
periodically assessed for impairment in value, with any impairment charged to
expense.

Prior to 2003, the estimated costs of plugging and abandoning wells were
accrued using the units-of-production method and were considered in
determining DD&A expense.  However, in 2003 we adopted SFAS 143, Accounting
for Asset Retirement Obligations.  Under this standard, we record the fair
value of the future abandonment as capitalized abandonment costs in Oil and
Gas properties with an offsetting abandonment liability.  The adoption of this
method was not significant to our continuing operations.  The capitalized
abandonment costs are amortized with other property costs using the units-of-
production method.

The carrying value of each field is assessed for impairment on a quarterly
basis.  If estimated future undiscounted net revenues are less than the
recorded amounts, an impairment charge is recorded based on the estimated fair
value of the field.

Statement of Cash Flows
- -----------------------

Cash equivalents include investments, which includes mutual funds, with
maturities when purchased of three months or less.

Income Taxes
- ------------

Income taxes are provided based on the liability method of accounting pursuant
to SFAS 109, Accounting for Income Taxes.  The provision for income taxes is
based on pretax financial taxable income.  Deferred tax assets and liabilities
are recognized for the future expected tax consequences of temporary
differences between income tax and financial reporting and principally relate
to differences in the tax basis of assets and liabilities and their reported
amounts, using enacted tax rates in effect for the year in which differences
are expected to reverse.  If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized.

Earnings per Share
- ------------------

We follow the provisions of SFAS 128, Earnings Per Share.  Basic earnings
per share are computed based on the weighted average number of common shares
outstanding.  Diluted earnings per share are computed based on the weighted
average number of common shares outstanding adjusted for the incremental
shares attributed to outstanding stock options.

Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires us 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 revenue and expenses during the reporting period.
Actual amounts could differ from those estimates.

Revenue Recognition
- -------------------

We recognize oil and natural gas revenue from our interest in producing wells
as natural gas and oil is produced and sold from those wells using the
entitlement method.

Concentration of Credit Risk
- ----------------------------

Our revenues are derived principally from uncollateralized sales to two
customers in the oil and gas industry.  The concentration of credit risk in a
single industry affects our overall exposure to credit risk because customers
may be similarly affected by changes in economic and other conditions.

Catalytic Solutions Investment
- ------------------------------

During 1998, we invested $62,000 in Catalytic Solutions, Inc. (CSI), a private
company, located in Oxnard, California (a Los Angeles suburb).  CSI
manufactures catalytic converters that reduce toxic emissions from internal
combustion engines.  During 2000, we invested another $113,000 in CSI.  During
2004 and 2003, we gave shares of CSI to certain employees valued at $25,000.
Our current ownership is less than 1%.  This investment is accounted for under
the cost method.

Stock Based Compensation
- ------------------------

As allowed in SFAS 123, Accounting for Stock-Based Compensation, we continue
to apply APB 25, Accounting for Stock Issued to Employees, and related
interpretations in recording compensation related to our plan.  The pro forma
effect on our net income was not material for any of the periods presented.
No grants were issued during the 2004 and 2003 periods.

On October 8, 2004 we purchased back 749,723 outstanding employee stock
options at a price equal to $2.80 per share minus the exercise price of each
option for a total amount of $1,305,000.

New Accounting Pronouncements
- -----------------------------

In December 2004 the FASB issued SFAS 123(R) that requires that the
compensation cost relating to share-based payment transactions be recognized
in financial statements.  That cost will be measured based on the fair value
of the equity or liability instrument issued.  SFAS 123(R) covers a wide range
of share-based awards, stock appreciation rights, and employee stock purchase
plans. SFAS 123(R) replaces SFAS 123, "Accounting for Stock-Based
Compensation," and supersedes APB Opinion 25, "Accounting for Stock Issued to
Employees."  We will be required to apply SFAS 123(R) in the first quarter
2006.  We are in the process of determining how the new method of valuing
stock-based compensation as prescribed in SFAS 123(R) will be applied to
valuing stock-based awards and the impact the recognition of compensation
expense related to such awards will have on our consolidated financial
statements.

None of the other FASB pronouncements issued during the last two years had, or
will have, any effect on us.


(2)  INCOME TAXES
     ------------

The provision for income taxes, all of which is reflected in discontinued
operations, is comprised of the following:


       Current:
         Federal                  $ 265
         State                      361
                                  -----
                                    626
                                  -----

       Deferred:
         Federal                    297
         State                      162
                                  -----
                                    459
                                  -----
                                 $1,085
                                  =====

Commensurate with the installment sale of the South Cuyama property, the
Company reflected current income taxes for the portion of the sale that was
received in cash.  Deferred income taxes represent the amounts that will be
due upon collection of the note receivable.

The net deferred tax asset at December 31, 2004 (in thousands) is comprised of
the following:

       Deferred tax assets:
         Oil and gas properties  $  672

       Valuation allowance         (672)
                                  -----
                                 $    0
                                  =====

With our history of losses, we believe that sufficient uncertainty exists
regarding the realizability of our net deferred tax asset. We therefore
recorded a valuation allowance to offset the entire deferred tax asset at
December 31, 2004.  We will continue to evaluate our net deferred tax asset
and to the extent we may determine that it is more likely than not that an
asset will be realized, the valuation allowance will be reduced accordingly.


Our income tax is different than the expected amount computed using the
applicable federal statutory income tax rate of 35% and a California state tax
rate of 8.84%. The reasons for and effects of such differences (in thousands)
are as follows:

<table>
<caption>
                                                           2004         2003
                                                          ------       ------
<s>                                                       <c>        <c>

Expected amount                                          $ 4,864      $   290
Utilization of tax net operating losses                   (2,174)
Utilization of statutory depletion carry forwards           (974)
State income taxes, net of federal benefit                  (340)         (38)
Change in valuation allowance and other                     (291)        (252)
                                                         -------       ------
                                                         $ 1,085      $     0
                                                          ======       ======

</table>

At December 31, 2004, we had no federal or state net operating loss,
alternative minimum tax or statutory depletion carry forwards as all amounts
were utilized during the current fiscal year.  The change in the valuation
allowance including changes for the utilization of net operating losses, and
utilization of statutory depletion carry forwards totaled $3,168.

(3)  STOCK OPTIONS AND BONUS PLANS
     -----------------------------

Stock Option Plan
- -----------------

In December 1995, we granted to our CEO 620,000 options and another 62,000
options to other employees at an exercise price of $1.00.  These options
became fully vested.  No options were granted during 1996-1998.  During 1999
there were 3,000 options that expired and became available for reissuance.
Later in 1999 we issued 71,000 options with an exercise price of $1.00, which
also became fully vested.  No options were granted during 2000, 2001 and 2003.
In January 2001, we purchased from certain employees 177,777 options.  In
August 2002, the Company issued 177,500 incentive stock options to certain
employees at an exercise price of $1.25 per share.  These options, which
expire August 31, 2012, vested one-third at date of grant and the remaining
over two years.  On October 8, 2004 we purchased back 749,723 outstanding
employee stock options at a price equal to $2.80 per share minus the exercise
price of each option for a total amount of $1,305,000.  The options were
cancelled and are available for reissuance.  The $1,305,000 was accrued for as
of September 30, 2004.  At December 31, 2004 there were no issued and
outstanding options.  All options were granted at fair value.

In April 2005, we issued 750,000 options at an exercise price of $2.25 based
on a March 2005 private transaction between one of our shareholders and a
third party.  These options vest at 1/3 per year for the next three years.
There are no more options available for issuance.

Options to purchase up to 3% of the partnership interest in Hallador
Petroleum, LLP were issued in 1997 and 1998.  As of December 31, 2004, 2.692%
were outstanding and exercisable.  The exercise price for these options was
based on the fair market value on the date of grant.  On January 8, 2005 we
purchased back all of these outstanding options for a total of $407,000, which
was accrued for as of December 31, 2004.


Key Employee Bonus Plan
- -----------------------

Mr. Stabio, CEO, was the only participant in the key employee bonus plan.  Mr.
Stabio received $816,000 due to the sale of the South Cuyama field.  Upon
approval of the Board of Directors, this liability was paid to Mr. Stabio in
October 2004.  As of December 31, 2004, there was no further liability to Mr.
Stabio.

(4)  MAJOR CUSTOMERS
     ---------------

During 2004 and 2003, the San Juan Basin's gas and NGL production was
purchased by Coral Energy Resources, LP and Williams Energy Services.

(5)  OIL AND GAS RESERVE DATA (UNAUDITED)
     ------------------------------------

The following reserve estimates for the years ended December 31, 2004 and 2003
were prepared by a sole-proprietor consulting petroleum engineer based on data
we supplied.  Be cautious that there are many uncertainties inherent in
estimating proved reserve quantities and in projecting future production
rates.

Proved oil and gas reserves are the estimated quantities of crude oil and
natural gas which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under
existing economic and operating conditions.  Proved developed oil and gas
reserves are those reserves expected to be recovered through existing wells
with existing equipment and operating methods.  NGLs are included with oil
quantities.

There were no significant proved undeveloped reserves at December 31, 2004 or
2003.


                        Analysis of Changes in Proved Reserves
                        --------------------------------------
                                   (in thousands)
<table>
<caption>
                                                     Oil           Gas
                                                    (BBLs)        (MCF)
                                                   -------       -------
<s>                                                 <c>          <c>
Balance at December 31, 2002                         1,878        2,650
  Revisions of previous estimates                       39         (429)
  Discoveries                                                       500
  Production                                          (268)        (337)
                                                    ------       ------
Balance at December 31, 2003                         1,649        2,384
  Revisions of previous estimates                      (22)        (266)
  Discoveries                                                       141
  Cuyama sale                                       (1,392)        (546)
  Production                                          (169)        (280)
                                                    ------       ------
Balance at December 31, 2004                            66        1,433
                                                    ======       ======
Net of 30% minority interest                            46        1,003
                                                    ======       ======
</table>


The following table (in thousands) sets forth a standardized measure of the
discounted future net cash flows attributable to our proved developed oil
and gas reserves (hereinafter referred to as "SMOG"). Future cash inflows
were computed using December 31, 2004 and 2003 product prices of $42.38 and
$30.33 for oil, and $4.18 and $5.73 for gas, respectively.  Future production
costs represent the estimated future expenditures to be incurred in producing
the reserves, assuming continuation of economic conditions existing at
year-end.  Discounting the annual net cash inflows at 10% illustrates the
impact of timing on these future cash inflows.


<table>
<caption>
                                                     2004         2003
                                                    ------       ------
<s>                                                  <c>          <c>
Future Revenue
  Oil                                              $ 1,800      $49,200
  Gas                                                6,400       10,700
                                                    ------       ------
Future cash inflows                                  8,200       59,900
Future cash outflows -
  production and abandonment costs                  (2,800)     (46,000)
Future income taxes                                 (2,100)
                                                    ------       ------
Future net cash flows                                3,300       13,900
10% discount factor                                 (1,500)      (2,400)
                                                    ------       ------
SMOG                                               $ 1,800      $11,500
                                                    ======       ======
Net of 30% minority interest                       $ 1,260      $ 8,050
                                                    ======       ======
</table>

The following table (in thousands) summarizes the principal factors
comprising the changes in SMOG:

<table>
<caption>
                                                     2004         2003
                                                    ------       ------
 <s>                                                  <c>          <c>
 SMOG, beginning of year                          $11,500      $16,500
   Sales of oil and gas, net of production costs   (3,600)      (4,000)
   Net changes in prices and production costs        (350)      (4,100)
   Revisions                                         (300)      (1,000)
   Discoveries                                        100          800
   Change in income taxes                          (1,200)       1,500
   Accretion of discount                            1,150        1,800
   Cuyama sale                                     (5,500)
                                                   ------       ------
SMOG, end of year                                 $ 1,800      $11,500
                                                   ======       ======

</table>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 8A.  CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures that are designed
for the purposes of ensuring that information required to be disclosed in our
SEC reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our CEO as appropriate to allow timely
decisions regarding required disclosure.

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our CEO of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, our CEO, who is also our CFO,
concluded that our disclosure controls and procedures are effective for the
purposes discussed above. There have been no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation.

ITEM 8B.  OTHER INFORMATION

None.

                                   PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT


CORTLANDT S. DIETLER, 84, has been one of our directors since November 1995.
From April 1995 to October 1999 he was CEO of TransMontaigne Inc. and is
currently Chairman of the Board.  He also serves as a director of Forest Oil
Corporation, Cimarex Energy Company and Nytis Exploration Company.

DAVID HARDIE, 54 is the Chairman of the Board and has served as a director
since July 1989.  He is the President of Hallador Investment Advisors Inc.,
which manages Hallador Equity Fund, Hallador Muni Fund, Hallador Alternative
Assets Fund and Harco Investors; he also is a General Partner of Hallador
Venture Partners LLC, the General Partner of Hallador Venture Fund II & III.
Mr. Hardie serves as a director and partner of other private entities
that are owned by members of his family. Mr. Hardie is a graduate of
California Polytechnic University, San Luis Obispo and Harvard Business
School, OPM.

STEVEN HARDIE, 50 has been a director since 1994.  He and David Hardie are
brothers.  For the last 21 years he has been an investor in common stock and
private equity.  He is the Vice-President of Hallador Investment Advisors,
which manages Hallador Equity Fund, Hallador Muni Fund, Hallador Alternative
Assets Fund and Harco Investors.  He also serves as a director and partner of
other private entities that are owned by members of his family.

BRYAN H. LAWRENCE, 62, has been one of our directors since November 1995.  He
is a founder and senior manager of Yorktown Partners LLC that manages
investment partnerships formerly affiliated with Dillon, Read & Co. Inc., an
investment-banking firm (Dillon Read.)  He had been employed with Dillon, Read
since 1966, serving most recently as a Managing Director until the merger of
Dillon Read with SBC Warburg in September 1997.  He also serves as a Director
of D&K Healthcare Resources, Inc., TransMontaigne, Inc., Vintage Petroleum,
Inc., Crosstex Energy, Inc. and Crosstex Energy, L.P. (each a United States
public company), and certain non-public companies in the energy industry in
which Yorktown partnership holds equity interests including, PetroSantander
Inc., Savoy Energy, L.P., Athanor B.V., Camden Resources, Inc., ESI Energy
Services Inc., Ellora Energy Inc., Dernick Resources Inc., Cinco Natural
Resources Corp., Approach Resources Inc., Peak Energy Resources Inc., Nytis
Exploration Company, and Compass Petroleum, Ltd.   Mr. Lawrence is a graduate
of Hamilton College and has a MBA from Columbia University.

VICTOR P. STABIO, 57 is our President, CEO, CFO and a director.  He joined us
in March 1991 as our President and CEO and has been active in the oil and gas
business for the past 30 years.

We do not have an audit committee financial expert serving on our audit
committee.  We believe that the additional costs to recruit a financial expert
exceed the benefits, if any.

Our Code of Ethics is filed as Exhibit 14 to this Form 10-KSB.


ITEM 10.   EXECUTIVE COMPENSATION

<table>
<caption>

                        SUMMARY COMPENSATION TABLE
                        ---------------------------

                                           Annual Compensation
                                          --------------------
                                                              Other Annual
Name and Principal Position   Year    Salary     Bonus (1)    Compensation
- ---------------------------   -----   ------    ----------  ------------------
<s>                           <c>    <c>        <c>            <c>
Victor P. Stabio, CEO         2004   $137,000   $632,000       $1,251,900  (3)
                              2003    146,000     73,500            6,000  (2)
                              2002    132,300     24,000            6,000  (2)


</table>

(1)  Relates to the Key Employee Bonus Plan.

(2)  Our contribution to the 401(k) Plan.

(3)  Includes the purchase of 545,000 stock options at a cost of $1.80 per
option or $981,000 in October 2004 and $265,000 for the options to purchase
1.75% of Hallador Petroleum, LLP paid in January 2005.

No options were exercised, nor granted, to Mr. Stabio during the last three
years.

At December 31, 2004 Mr. Stabio had no options.


Equity Compensation Plan Information
- ------------------------------------

At December 31, 2004, there were no options outstanding.  In April 2005, we
granted 750,000 options at an exercise price of $2.25 per share to our
employees of which 400,000 were issued to Mr. Stabio.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS

The following table is as of April 12, 2005.


<table>
<caption>

      Name                            No. Shares (1)    % of Class (1)
- - ------------------------------------  ---------------   -------------
<s>                                     <c>                  <c>
David Hardie and Steven Hardie as       3,346,069             47
Nominee for Hardie Family Members (2)

Victor P. Stabio                           64,937              *

Cortlandt S. Dietler (3)                  100,000              1

Bryan H. Lawrence (4)                   2,328,500             33

SBC Warburg Dillion Read Inc. (5)         421,500              6

Aspen Private Fund (6)                    445,190              6

All directors and executive officer
 as a group                             5,839,506             82

</table>

(1)  Based on total outstanding shares of 7,093,150.  Beneficial ownership of
     certain shares has been, or is being, specifically disclaimed by certain
     directors in ownership reports filed with the SEC.
(2)  The Hardie family business address is 3000 S Street, Suite 200, Sacramento,
     California, 95816.
(3)  Mr. Dietler's address is P. O. Box 5660, Denver, Colorado 80217.
     All shares are held by Pinnacle Engine Company LLC, wholly owned by
     Mr. Dietler.
(4)  Mr. Lawrence's address is  410 Park Avenue, 19th Floor, New York,
     NY 10022.  Mr. Lawrence owns 50,000 shares directly, and the remainder is
     held by Yorktown Energy Partners II, L.P., an affiliate.
(5)  SBC Warburg Dillon Read Inc.'s address is 680 Washington Boulevard,
     7th Floor, Stamford, CT 06901.
(6)  Aspen Private Fund's address is 700 North Water Street, Suite 1200,
     Milwaukee, WI 53202.

* Less than one percent.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

ITEM 13.   EXHIBITS

a)  Exhibits

     3.1  Restated Articles of Incorporation of Kimbark Oil and Gas Company,
          effective September 24, 1987  (1)
     3.2  Articles of Amendment to Restated Articles of Incorporation of
          Kimbark Oil & Gas Company, effective December 14, 1989, to effect
          change of name to Hallador Petroleum Company and to change the par
          value and number of authorized shares of common stock (1)
     3.3  Amendment to Articles of Incorporation dated December 31, 1990 to
          effect the one-for-ten reverse stock split (2)
     3.4  By-laws of Hallador Petroleum Company, effective November 9, 1993 (4)
    10.1  Composite Agreement and Plan of Merger dated as of July 17, 1989, as
          amended as of August 24, 1989, among Kimbark Oil & Gas Company, KOG
          Acquisition, Inc., Hallador Exploration Company and Harco Investors,
          with Exhibits A, B, C and D (1)
    10.2  Hallador Petroleum Company 1993 Stock Option Plan *(3)
    10.3  Hallador Petroleum Company Key Employee Bonus Compensation Plan *(3)
    10.4  First Amendment to the 1993 Stock Option Plan *(6)
    10.5  First Amendment to Key Employee Bonus Compensation Plan *(6)
    10.6  Stock Purchase Agreement with Yorktown dated November 15, 1995 (6)
    10.7  Second Amendment to Key Employee Bonus Compensation Plan *(7)
    10.8  Hallador Petroleum, LLP Agreement (9)
    10.9  Hallador Petroleum, LLP Stock Option Agreement *(9)
    10.10 Purchase And Sale Agreement Among Hallador Petroleum Company, Hallador
          Production Company, Hallador Petroleum, LLP, Santa Barbara Partners,
          Trio Petroleum Inc., Cuyama Drilling and Production Company And South
          Cuyama Limited Partnership ("Sellers") And E&B Natural Resources
          Management Corporation and WRBD II, LP ("Buyers") (11)
    14.   Code of Ethics (12)
    21.1  List of Subsidiaries (2)
    31    SOX 302 Certification (12)
    32    SOX 906 Certification (12)

- -------------------------------------

 (1) Incorporated by reference (IBR)     (8) Not used.
       to the 1989 Form 10-K.            (9) IBR to the 1997 Form 10-KSB.
 (2) IBR to the 1990 Form 10-K.         (10) Not used.
 (3) IBR to the 1992 Form 10-KSB.       (11) IBR to June 30, 2004 Form 10-QSB.
 (4) IBR to the 1993 Form 10-KSB.       (12) Filed herewith.
 (5) Not used.
 (6) IBR to the 1995 Form 10-KSB.
 (7) IBR to the September 30, 1996 Form 10-QSB.

* Management contracts or compensatory plans.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The fees incurred for 2004 and 2003 were:

<table>
<caption>
                                                         2004          2003
                                                       --------     --------
       <s>                                            <c>          <c>
       Audit Fees                                     $  56,000    $  46,000
       Audit-related fees
       Tax fees                                          31,000       11,500
       All other fees
                                                       --------     --------
         Total fees                                   $  87,000    $  57,500
                                                       ========     ========

</table>

Pre-approval Policy
- -------------------

In 2003 the Audit Committee adopted a formal policy concerning approval of
audit and non-audit services to be provided by Ehrhardt Keefe Steiner &
Hottman PC (EKSH).  The policy requires that all services EKSH provides to us
be pre-approved by the Committee.  The Committee approved all services provided
by EKSH during 2004 and 2003.


                               SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
                            HALLADOR PETROLEUM COMPANY
                             BY:/S/VICTOR P. STABIO
                                   VICTOR P. STABIO, CEO

Dated:  April 12, 2005

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


/S/ DAVID HARDIE          Chairman                       April 12, 2005
    DAVID HARDIE

/S/ VICTOR P. STABIO      CEO, CFO, CAO and Director     April 12, 2005
    VICTOR P. STABIO

/S/ BRYAN LAWRENCE        Director                       April 12, 2005
    BRYAN LAWRENCE



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14
<SEQUENCE>2
<FILENAME>exh14.txt
<DESCRIPTION>EXHIBIT 14 - CODE OF ETHICS
<TEXT>
EXHIBIT 14

CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

I.     Introduction

This Code of Ethics for Senior Financial Officers (the "Code") has been
adopted by the Board of Directors (the "Board") of Hallador Petroleum Company
(the "Company") to promote honest and ethical conduct, proper disclosure of
financial information in the Company's periodic reports, and compliance with
applicable laws, rules, and regulations by the Company's senior officers who
have financial responsibilities.

II.    Applicability

As used in this Code, the term Senior Financial Officer means the Company's
Chief Executive Officer, who is also the Chief Financial Officer (CFO).

III.   Principles and Practices

In performing his duties, the CFO must:

      A.  maintain high standards of honest and ethical conduct and avoid any
actual or apparent conflict of interest between one's personal and
professional relationships;

      B.  report to the Audit Committee of the Board any conflict of interest
that may arise and any material transaction or relationship that reasonably
could be expected to give rise to a conflict;

      C.  provide, or cause to be provided, full, fair, accurate, timely, and
understandable disclosure in reports and documents that the Company files with
or submits to the Securities and Exchange Commission and in other public
communications;

      D.  comply and take all reasonable actions to cause others to comply
with applicable governmental laws, rules, and regulations; and

      E.  promptly report violations of this Code to the Audit Committee.

The CFO must also comply with the code of ethics and standards of conduct
applicable to the Company's directors, officers, and employees generally as
adopted from time to time and/or revised.

IV.    Waiver

Any request for a waiver of any provision of this Code must be in writing and
addressed to the Audit Committee. Any waiver of this Code will be disclosed
promptly on Form 8-K or any other means approved by the Securities and
Exchange Commission.

V.    Compliance and Accountability

The Audit Committee will assess compliance with this Code, report material
violations to the Board of Directors, and recommend to the Board appropriate
action.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>exh31.txt
<DESCRIPTION>EXHIBIT 31 - SOX 302 CERTIFICATION
<TEXT>
EXHIBIT 31

CERTIFICATION

I, Victor P. Stabio, certify that:

1.  I have reviewed this report on Form 10-KSB of Hallador Petroleum
Company;

2.  Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4.  I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the registrant and I have:

    a)  designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this report is being
prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report my conclusion about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

     c)  disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5.  I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee
of registrant's board of directors;

     a)  all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

     b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.

Date:  April 12, 2005

/S/ VICTOR P STABIO
CEO and CFO


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>exh32.txt
<DESCRIPTION>EXHIBIT 32 - SOX 906 CERTIFICATION
<TEXT>
EXHIBIT 32

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Hallador Petroleum Company (the
"Company"), on Form 10-KSB for the period ended December 31, 2004, as filed
with the Securities  and Exchange  Commission on the date hereof (the
"Report"), the undersigned, in the capacities and dates indicated below,
hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities  Exchange Act  of 1934; and (2) The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.


Dated: April 12, 2005



By: /S/ VICTOR P. STABIO
CEO and CFO
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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