U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

/X/ Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2001

or

/ / Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From __________ to ___________

______________________

Commission File Number 0-7406

______________________

PrimeEnergy Corporation

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

84-0637348

(IRS employer identification number)

One Landmark Square, Stamford, Connecticut 06901

(Address of principal executive offices)

(203) 358-5700

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 such filing requirements for the past 90 days. Yes /X/   No  / /    

The number of shares outstanding of each class of the Registrant's Common Stock as of August 7, 2001 was: Common Stock, $0.10 par value, 3,872,545 shares.

	PrimeEnergy Corporation
	Index to Form 10-Q
	June 30, 2001
Part I - Financial Information
Item 1. Financial Statements
	Consolidated Balance Sheets June 30, 2001 and
	December 31, 2000	3 - 4
	Consolidated Statements of Operations for the six months
	ended June 30, 2001 and 2000	5
	Consolidated Statements of Operations for the three months
	ended June 30, 2001 and 2000	6
	Consolidated Statement of Stockholders' Equity for the
	six months ended June 30, 2001	7
	Consolidated Statements of Cash Flows for the six months
	ended June 30, 2001 and 2000	8
	Notes to Consolidated Financial Statements	9 - 16
Item 2. Management's Discussion and Analysis of Financial
	Condition and Results of Operations	17 20
Item 3. Quantitative and Qualitative Disclosures About
	Market Risk	20
Part II - Other Information
Item 1. Legal Proceedings		21
Item 2. Changes in Securities and Use of Proceeds		21
Item 3. Defaults Upon Senior Securities		21
Item 4. Submission of Matters to a Vote of Security Holders		21
Item 5. Other Information		22
Item 6. Exhibits And Reports On Form 8-K		22
Signatures		23

2

PrimeEnergy Corporation Consolidated Balance Sheets June 30, 2001 and December 31, 2000
	June 30, 2001 (Unaudited)		December 31 2000 (Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	614,000	$	684,000
Restricted cash and cash equivalents (Note 2)		1,156,000		1,128,000
Accounts Receivable (Note 3)		5,566,000		5,663,000
Due from related parties (Note 9)		5,131,000		4,346,000
Prepaid Expenses		36,000		112,000
Other current assets		134,000		134,000
Deferred income taxes (Note 1)		155,000		155,000
		-----------------		-----------------
Total current assets		12,792,000		12,222,000
		-----------------		-----------------
Property and equipment, at cost (Notes 1 and 4):
Oil and gas properties (successful efforts method):
Proved		59,339,000		57,439,000
Unproved		177,000		159,000
Furniture, fixtures and equipment
including leasehold improvements		7,926,000		7,433,000
		-----------------		-----------------
		67,442,000		65,031,000
Accumulated depreciation and depletion		(44,901,000)		(42,361,000)
		-----------------		-----------------
Net property and equipment		22,541,000		22,670,000
		-----------------		-----------------
Other assets		207,000		202,000
		-----------------		-----------------
Total assets	$	35,540,000	$	35,094,000
		============		============

See accompanying notes to the consolidated financial statements.

3

PrimeEnergy Corporation Consolidated Balance Sheets June 30, 2001 and December 31, 2000
	June 30, 2001 (Unaudited)		December 31 2000 (Audited)
LIABILITIES and STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	6,760,000	$	6,828,000
Current portion of other long-term
obligations (Notes 6 and 7)		1,169,000		854,000
Accrued liabilities:
Payroll, benefits and related items		1,708,000		934,000
Taxes		369,000		455,000
Interest and other		581,000		1,058,000
Due to related parties (Note 9)		1,426,000		1,265,000
		----------------		-----------------
Total current liabilities		12,013,000		11,394,000
Long-term bank debt (Note 5)		15,000,000		17,200,000
Other long-term obligations (Notes 6 and 7)		276,000		1,013,000
Deferred income taxes (Note 1)		1,069,000		511,000
		----------------		-----------------
Total liabilities		28,358,000		30,118,000
		----------------		-----------------
Stockholders' equity:
Preferred stock, $.10 par value,
authorized 5,000,000 shares, none issued
Common stock, $.10 par value, authorized
10,000,000 shares; issued 7,607,970
in 2001 and 2000		761,000		761,000
Paid in capital		10,902,000		10,902,000
Retained earnings		7,082,000		2,506,000
		----------------		-----------------
		18,745,000		14,169,000
Treasury stock, at cost, 3,812,096 common shares
in 2001 and 3,488,942 common shares in 2000		(11,563,000)		(9,193,000)
		----------------		-----------------
Total stockholders' equity		7,182,000		4,976,000
		----------------		-----------------
Total liabilities and equity	$	35,540,000	$	35,094,000
		===========		============

See accompanying notes to the consolidated financial statements.

4

PrimeEnergy Corporation Consolidated Statements of Operations Six Months Ended June 30, 2001 and 2000 (Unaudited)
		2001			2000
Revenue:
Oil and gas sales	$		13,760,000	$		9,079,000
District operating income			8,486,000			6,335,000
Administrative revenue (Note 9)			788,000			783,000
Reporting and management fees (Note 9)			158,000			165,000
Interest and other income			233,000			156,000
			----------------			--------------
Total revenue			23,425,000			16,518,000
			----------------			--------------
Costs and expenses:
Lease operating expense			5,370,000			3,891,000
District operating expense			6,394,000			5,325,000
Depreciation and depletion of oil and gas properties			2,482,000			2,314,000
General and administrative expense			2,323,000			2,000,000
Exploration costs			297,000			124,000
Interest expense (Note 5)			526,000			773,000
			----------------			--------------
Total costs and expenses			17,392,000			14,427,000
			----------------			--------------
Income from operations			6,033,000			2,091,000
Gain on sale and exchange of assets			37,000			11,000
			----------------			--------------
Net income before income taxes			6,070,000			2,102,000
Provision for income taxes			1,494,000			252,000
			----------------			--------------
Net income	$		4,576,000	$		1,850,000
			==========			=========
Basic income per common share (Notes 1 and 10)			$1.17			$0.43
Diluted income per common share (Notes 1 and 10)			$0.99			$0.37

See accompanying notes to the consolidated financial statements.

5

PrimeEnergy Corporation Consolidated Statements of Operations Three Months Ended June 30, 2001 and 2000 (Unaudited)
	2001			2000
Revenue:
Oil and gas sales		$	6,105,000	$	4,899,000
District operating income			4,386,000		3,335,000
Administrative revenue (Note 9)			404,000		408,000
Reporting and management fees (Note 9)			80,000		86,000
Interest and other income			138,000		81,000
			--------------		------------
Total revenue			11,113,000		8,809,000
			--------------		------------
Costs and expenses:
Lease operating expense			2,771,000		1,997,000
District operating expense			3,172,000		2,859,000
Depreciation and depletion of oil and gas properties			1,418,000		1,241,000
General and administrative expense			1,223,000		814,000
Exploration costs			18,000		2,000
Interest expense (Note 5)			234,000		395,000
			--------------		------------
Total costs and expenses			8,836,000		7,308,000
			--------------		------------
Income from operations			2,277,000		1,501,000
Gain on sale and exchange of assets			37,000		13,000
			--------------		------------
Net income before income taxes			2,314,000		1,514,000
Provision for income taxes			743,000		182,000
			--------------		------------
Net income		$	1,571,000	$	1,332,000
			=========		========
Basic income per common share (Notes 1 and 10)			$0.41		$0.31
Diluted income per common share (Notes 1 and 10)			$0.34		$0.27

See accompanying notes to the consolidated financial statements.

6

PrimeEnergy Corporation

Consolidated Statement of Stockholders' Equity

Six Months Ended June 30, 2001

	Common Stock		Paid In	Retained	Treasury
	Shares	Amount	Capital	Earnings	Stock	Total
Balance at December 31, 2000	7,607,970	$761,000	$10,902,000	$2,506,000	($9,193,000)	$4,976,000
Purchased 323,154 shares of
common stock					(2,370,000)	(2,370,000)
Net income				4,576,000		4,576,000
	-----------	----------	-------------	--------------	----------------	----------------
Balance at June 30, 2001	7,607,970	$761,000	$10,902,000	$7,082,000	($11,563,000)	$7,182,000
	========	=======	=========	=========	===========	===========

See accompanying notes to the consolidated financial statements.

7

PrimeEnergy Corporation Consolidated Statements of Cash Flows Six Months Ended June 30, 2001 and 2000 (Unaudited)
		2001			2000
Cash flows from operating activities:
Net income	$		4,576,000	$		1,850,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization			2,985,000			2,797,000
Dry hole and abandonment costs			287,000			121,000
Gain on sale of properties			(37,000)			(11,000)
Provision for deferred income taxes			558,000			--
Changes in assets and liabilities:
(Increase) decrease in accounts receivable			97,000			(473,000)
(Increase) decrease in due from related parties			(785,000)			(758,000)
(Increase) decrease in other assets			(5,000)			(36,000)
(Increase) decrease in prepaid expenses			76,000			25,000
Increase (decrease) in accounts payable			(96,000)			(1,262,000)
Increase (decrease) in accrued liabilities			343,000			642,000
Increase (decrease) in due to related parties			161,000			590,000
			----------------			-----------------
Net cash provided by operating activities:			8,160,000			3,485,000
			----------------			-----------------
Cash flows from investing activities:
Capital expenditures, including dry hole costs			(3,418,000)			(3,622,000)
Proceeds from sale of property and equipment			180,000			23,000
			----------------			-----------------
Net cash used in investing activities			(3,238,000)
			----------------			-----------------
Cash flows from financing activities:
Purchase of treasury stock			(2,370,000)			(161,000)
Increase in long-term bank debt and
other long-term obligations			16,355,000			12,350,000
Repayment of long-term bank debt and
other long-term obligations			(18,977,000)			(13,052,000)
			----------------			-----------------
Net cash used in financing activities			(4,992,000)			(863,000)
			----------------			-----------------
Net decrease in cash and cash equivalents			(70,000)			(977,000)
Cash and cash equivalents at the beginning of the period			684,000			1,771,000
			----------------			-----------------
Cash and cash equivalents at the end of the period	$		614,000	$		794,000
			===========			==========

See accompanying notes to the consolidated financial statements.

8

PrimeEnergy Corporation

Notes to Consolidated Financial Statements

June 30, 2001

(1) Description of Operations and Significant Accounting Policies:

Nature of Operations-

PrimeEnergy Corporation ("PEC"), a Delaware corporation, was organized in March 1973. PrimeEnergy Management Corporation ("PEMC"), a wholly-owned subsidiary, acts as the managing general partner, providing administration, accounting and tax preparation services for 47 private and publicly-held limited partnerships and 2 trusts (collectively, the "Partnerships"). PEC owns Eastern Oil Well Service Company, EOWS Midland Company, and Southwest Oilfield Construction Company, all of which perform oil and gas field services. PEC also owns Prime Operating Company, which serves as operator for most of the producing oil and gas properties owned by the Company and affiliated entities. Field service revenues and the administrative overhead fees earned as operator are reported as district operating income on the consolidated statement of operations. PrimeEnergy Corporation and its wholly-owned subsidiaries are herein referred to as the "Company".

The Company is engaged in the development, acquisition and production of oil and natural gas properties. The Company owns leasehold, mineral and royalty interests in producing and non-producing oil and gas properties across the continental United States, including Colorado, Kansas, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Texas, Utah, West Virginia and Wyoming. The Company operates approximately 1,600 wells and owns non-operating interests in over 800 additional wells. Additionally, the Company provides well-servicing support operations, site-preparation and construction services for oil and gas drilling and re-working operations, both in connection with the Company's activities and providing contract services for third parties. The Company is publicly traded on the NASDAQ under the symbol "PNRG."

The markets for the Company's products and services are highly competitive, as oil and gas are commodity products and prices depend upon numerous factors beyond the control of the Company, such as economic, political and regulatory developments and competition from alternative energy sources.

Principles of Consolidation-

The consolidated financial statements include the accounts of PrimeEnergy Corporation and its wholly-owned subsidiaries. All material inter-company accounts and transactions between these entities have been eliminated. Oil and gas properties include ownership interests in the Partnerships. The statement of operations includes the Company's proportionate share of revenue and expenses related to oil and gas interests owned by the Partnerships.

9

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.

Estimates of oil and gas reserves, as determined by independent petroleum engineers, are continually subject to revision based on price, production history and other factors. Depletion expense, which is computed based on the units of production method, could be significantly impacted by changes in such estimates. Additionally, SFAS No. 121 requires that, if the expected future cash flow from an asset is less than its carrying cost, that asset must be written down to its fair market value. As the fair market value of a property is generally substantially less than the total future cash flow expected from the asset, small changes in the estimated future net revenue from an asset could lead to the necessity of recording a significant impairment of that asset.

Property and Equipment-

The Company follows the "successful efforts" method of accounting for its oil and gas properties. Under the successful efforts method, costs of acquiring undeveloped oil and gas leasehold acreage, including lease bonuses, brokers' fees and other related costs are capitalized. Provisions for impairment of undeveloped oil and gas leases are based on periodic evaluations. Annual lease rentals and exploration expenses, including geological and geophysical expenses and exploratory dry hole costs, are charged against income as incurred. Costs of drilling and equipping productive wells, including development dry holes and related production facilities, are capitalized. Costs incurred by the Company related to the exploration, development and acquisition of oil and gas properties on behalf of the Partnerships or joint ventures are deferred and charged to the related entity upon the completion of the acquisition. To the extent that the Company acquires an interest in the property, an appropriate allocation of internal costs are capitalized as part of the depletable base of the property.

All other property and equipment are carried at cost. Depreciation and depletion of oil and gas production equipment and properties are determined under the unit-of-production method based on estimated proved recoverable oil and gas reserves. Depreciation of all other equipment is determined under the straight-line method using various rates based on useful lives. The cost of assets and related accumulated depreciation is removed from the accounts when such assets are disposed of, and any related gains or losses are reflected in current earnings.

Income Taxes-

The Company records income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS No. 109 is an asset and liability approach to accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future consequences of

10

events that have been recognized in the Company's financial statements or tax returns.

Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in the rates expected to be in effect when the temporary differences reverse. A valuation allowance is established for any deferred tax asset for which realization is not likely.

General and Administrative Expenses-

General and administrative expenses represent costs and expenses associated with the operation of the Company. Certain of the Partnerships and joint ventures sponsored by the Company reimburse general and administrative expenses incurred on their behalf.

Income per share-

Income per share of common stock has been computed based on the weighted average number of common shares and common stock equivalents outstanding during the respective periods in accordance with SFAS No. 128, "Earnings per Share".

Statements of cash flows-

For purposes of the consolidated statements of cash flows, the Company considers short-term, highly liquid investments with original maturities of less than ninety days to be cash equivalents.

Concentration of Credit Risk-

The Company maintains significant banking relationships with financial institutions in the State of Texas. The Company limits its risk by periodically evaluating the relative credit standing of these financial institutions. The Company's oil and gas production purchasers consist primarily of independent marketers and major gas pipeline companies.

Hedging-

From time to time, the Company may enter into futures contracts in order to reduce its exposure related to changes in oil and gas prices. In accordance with Statement of Financial Accounting Standards No. 133, any gain or loss on such contracts is treated as an adjustment to oil and gas revenue. Cash activity related to hedging transactions is treated as operating activity on the Statements of Cash Flows.

Recently Issued Accounting Standards-

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities". The statement requires the recognition of all derivatives as either assets or liabilities in the balance sheet and the measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the planned use of the derivative and the resulting designation.

11

The adoption of SFAS No. 133 in 2000 did not have a significant impact on the

Company's financial position, results of operations or cash flows.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No.101, Revenue Recognition in Financial Statements ("SAB No. 101"). SAB No. 101 provides guidance for revenue recognition under certain circumstances. The adoption of SAB 101 in 2000 did not have a significant impact on the Company's financial position, results of operations or cash flows.

(2) Restricted Cash and Cash Equivalents:

Restricted cash and cash equivalents includes $1,156,000 and $1,128,000 at June 30, 2001 and December 31, 2000, respectively, of cash primarily pertaining to undistributed royalty payments. There were corresponding accounts payable recorded at June 30, 2001 and December 31, 2000 for these liabilities.

(3) Accounts Receivable:

Accounts receivable at June 30, 2001 and December 31, 2000 consisted of the following:

	June 30,		December 31,
	2001		2000
Joint Interest Billing	$	1,209,000	$	1,352,000
Trade Receivables		1,497,000		967,000
Oil and Gas Sales		2,846,000		3,310,000
Other		156,000		180,000
		---------------		------------------
		5,708,000		5,809,000
Less, Allowance for doubtful
accounts		(142,000)		(146,000)
		---------------		------------------
	$	5,566,000	$	5,663,000
		==========		============

12

(4) Property and equipment:

Property and equipment at June 30, 2001 and December 31, 2000 consisted of the following:

	June 30,		December 31,
	2001		2000
Proved oil and gas properties at cost	$	59,339,000		$	57,439,000
Unproved oil and gas properties at cost		177,000			159,000
Less, accumulated depletion
and depreciation		(40,168,000)			(37,686,000)
		----------------			----------------
		19,348,000			19,912,000
Furniture, fixtures and equipment		7,926,000			7,433,000
Less, accumulated depreciation		(4,733,000)			(4,675,000)
		----------------			----------------
		3,193,000			2,758,000
		----------------			----------------
Total net property and equipment	$	22,541,000		$	22,670,000
		==========			===========

(5) Long-Term Bank Debt:

The Company has been party to a series of credit agreements with its primary lender or its predecessors since 1983. The current agreement, entered into in April 1995, provides for borrowings under a Master Note. Advances under the agreement, as amended, are limited to the borrowing base as defined in the agreement. The borrowing base is re-determined by the lender on a semi-annual basis. Since the beginning of 1999, the borrowing base has ranged from $18.95 million to $23.7 million. The credit agreement provides for interest on outstanding borrowings at the bank's base rate, as defined, payable monthly, or at rates ranging from 1.5% to 2% over the London Inter-Bank Offered Rate (LIBO rate) depending upon the Company's utilization of the available line of credit, payable at the end of the applicable interest period.

The combined average interest rates paid on outstanding borrowings subject to interest at the bank's base rate and on outstanding borrowings bearing interest based upon the LIBO rate were 7.13% during the first half of 2001 as compared to 8.23% during the same period of 2000. As of June 30, 2001 and December 31, 2000, the total outstanding borrowings were $15 million and $17.2 million, respectively, with an additional $8.7 million and $1.75 million available, and $10.5 million and $13.5 million of the amounts outstanding accruing interest at the LIBO rate option.

The Company's oil and gas properties as well as certain receivables and equipment are

13

pledged as security under the loan agreement. The agreement requires the Company to maintain, as defined, a minimum current ratio, tangible net worth, debt coverage ratio and interest coverage ratio, and restrictions are placed on the payment of dividends and the amount of treasury stock the Company may purchase.

(6) Other Long-Term Obligations:

Other long-term obligations at June 30, 2001 and December 31, 2000 consisted of the following:

	June 30,		December 31,
	2001		2000
Due under oil and gas property
purchase (Note 7)	$	1,430,000	$	1,850,000
Capital lease obligations		15,000		17,000
Less, current portion		(1,169,000)		(854,000)
		--------------		-------------
	$	276,000	$	1,013,000
		=========		=========

(7) Contingent Liabilities:

In connection with the purchase of oil and gas properties located in various counties in Oklahoma in November of 1999, the Company is committed to pay contingent consideration to the seller based upon the performance of the properties purchased. The total estimated amount of contingent consideration which will be paid under the agreement is $1,850,000, of which $420,000 was paid in the first six months of 2001, leaving a net estimated amount due at June 30, 2001 of $1,430,000. As of June 30, 2001 and December 31, 2000, respectively, $265,000 and $1,000,000 of this obligation are included in Other long-term obligations', and $1,165,000 and $850,000 are included in 'Current portion of other long-term obligations'.

PEMC, as managing general partner of the affiliated Partnerships is responsible for all Partnership activities, including the review and analysis of oil and gas properties for acquisition, the drilling of development wells and the production and sale of oil and gas from productive wells. PEMC also provides the administration, accounting and tax preparation work for the Partnerships and is liable for all debts and liabilities of the affiliated Partnerships, to the extent that the assets of a given limited Partnership are not sufficient to satisfy its obligations.

As a general partner, PEMC is committed to offer to purchase the limited partners' interests in certain of its managed Partnerships at various annual intervals. Under the terms of a partnership agreement, PEMC is not obligated to purchase an amount greater than 10% of the total partnership interest outstanding. In addition, PEMC will be obligated to purchase interests tendered by the limited partners only to the extent of one hundred fifty (150) percent of the revenues received by it from such partnership in the

14

previous year. Purchase prices are based upon annual reserve reports of independent petroleum engineering firms discounted by a risk factor. Based upon historical production rates and prices, management estimates that if all such offers were to be accepted, the maximum annual future purchase commitment would be approximately $500,000.

The Company is subject to environmental laws and regulations. Management believes that future expenses, before recoveries from third parties, if any, will not have a material effect on the Company's financial condition. This opinion is based on expenses incurred to date for remediation and compliance with laws and regulations which have not been material to the Company's results of operations.

(8) Stock Options and Other Compensation:

In May 1989, non-statutory stock options were granted by the Company to four key executive officers for the purchase of shares of common stock. At June 30, 2001 and 2000, options on 767,500 were outstanding and exercisable at prices ranging from $1.00 to $1.25.

On January 27, 1983, the Company adopted the 1983 Incentive Stock Option Plan. At June 30, 2001 and 2000, options on 87,000 shares were exercisable at $1.50 per share and no additional shares were available for granting. During July 2001, all outstanding options under this plan were exercised.

PEMC has a marketing agreement with its current President to provide assistance and advice to PEMC in connection with the organization and marketing of oil and gas partnerships and joint ventures and other investment vehicles of which PEMC is to serve as general or managing partner. The Company had a similar agreement with its former Chairman. Although that agreement has expired, the former Chairman is still entitled to receive certain payments relating to partnerships formed during the time the agreement was in effect. The President is entitled to a percentage of the Company's carried interest depending on total capital raised and annual performance of the Partnerships and joint ventures.

(9) Related Party Transactions:

PEMC is a general partner in several oil and gas Partnerships in which certain directors have limited and general partnership interests. As the managing general partner in each of the Partnerships, PEMC receives approximately 5% to 12% of the net revenues of each Partnership as a carried interest in the Partnerships' properties.

The Partnership agreements allow PEMC to receive management fees for various services provided to the Partnerships as well as reimbursement for certain costs incurred on behalf of the Partnerships, including property acquisition and development costs. Reimbursement of general and administrative overhead is reported in the statements of operations as administrative revenue.

Due to related parties at June 30, 2001 and December 31, 2000 primarily represent

15

receipts collected by the Company, as agent, from oil and gas sales net of expenses. Receivables from affiliates consist of reimbursable general and administrative costs, lease operating expenses and reimbursements for property acquisitions, development and related costs.

In the first six months of 2001, the Company purchased, in a number of separate transactions, 163,598 shares of treasury stock from related parties for total consideration of $1,151,186.

(10) Income per share:

Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock. The following reconciles amounts reported in the financial statements:

	Six Months Ended					Six Months Ended
	June 30, 2001					June 30, 2000
	Net Income		Number of	Per Share		Net		Number of	Per Share
			Shares	Amount		Income		Shares	Amount
Net income per
common share	$	4,576,000	3,920,011	$	1.17	$	1,850,000	4,327,079	$	0.43
Effect of dilutive
securities:
Options			723,731					652,158
		---------------	----------------		--------		-----------	----------------		---------
Diluted net income
per common share	$	4,576,000	4,643,742	$	0.99	$	1,850,000	4,979,237	$	0.37
		=========	=========		=====		=======	=========		=====

	Three Months Ended					Three Months Ended
	June 30, 2001					June 30, 2000
	Net Income		Number of	Per Share		Net		Number of	Per Share
			Shares	Amount		Income		Shares	Amount
Net income per
common share	$	1,571,000	3,868,852	$	0.41	$	1,332,000	4,315,399	$	0.31
Effect of dilutive
securities:
Options			735,204					643,353
		---------------	----------------		--------		----------------	---------------		---------
Diluted net income
per common share	$	1,571,000	4,604,056	$	0.34	$	1,332,000	4,958,752	$	0.27
		=========	=========		=====		=========	=========		=====

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

This discussion should be read in conjunction with the financial statements of the Company and notes thereto. The Company's subsidiaries are defined in Note 1 of the financial statements. PEMC is the managing general partner or managing trustee in numerous Limited Partnerships and Trusts (collectively, the "Partnerships").

LIQUIDITY AND CAPITAL RESOURCES

The Company feels that it has the ability to generate sufficient amounts of cash to meet long-term liquidity needs, as well as debt service. The Company's goal is to generate increased cash flows by increasing its reserve base through continued acquisition, exploration and development. By increasing its reserve base, the Company's borrowing ability is increased due to additional properties available as collateral. Capital expenditures during 2001 were financed by internally generated funds coupled with cash balances available at the prior year-end.

The Company has been party to a series of credit agreements with its primary lender or its predecessors since 1983. The current agreement, entered into in April 1995, provides for borrowings under a Master Note. Advances under the agreement, as amended, are limited to the borrowing base as defined in the agreement. The borrowing base is re-determined by the lender on a semi-annual basis. Since the beginning of 1999, the borrowing base has ranged from $18.95 million to $23.7 million. The credit agreement provides for interest on outstanding borrowings at the bank's base rate, as defined, payable monthly, or at rates ranging from 1.5% to 2% over the London Inter-Bank Offered Rate (LIBO rate) depending upon the Company's utilization of the available line of credit, payable at the end of the applicable interest period.

The combined average interest rates paid on outstanding borrowings subject to interest at the bank's base rate and on outstanding borrowings bearing interest based upon the LIBO rate were 7.13% during the first half of 2001 as compared to 8.23% during the same period of 2000. As of June 30, 2001 and December 31, 2000, the total outstanding borrowings were $15 million and $17.2 million, respectively, with an additional $8.7 million and $1.75 million available, and $10.5 million and $13.5 million of the amounts outstanding accruing interest at the LIBO rate option.

Advances pursuant to the agreement are limited to the borrowing base as defined in the agreement. Most of the Company's oil and gas properties as well as certain receivables and equipment are pledged as security under this agreement. Under the Company's credit agreement, the Company is required to maintain, as defined, minimum current, tangible net worth, debt coverage and interest coverage ratios.

The Company spent approximately $2,213,000 on the acquisition, exploration and development of oil and gas properties in the first half of 2001, including $156,000 spent to repurchase limited partner interests from investors in the oil and gas partnerships.

The Company also spent approximately $1,000,000 on field service equipment, and $81,000 on computer hardware and software in the first half of 2001.

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The Company spent $2,370,000 in the first half of 2001 to acquire treasury stock.

Most of the Company's capital spending is discretionary and the ultimate level of spending will be dependent on the Company's assessment of the oil and gas business, the availability of capital, the number of oil and gas prospects, and oil and gas business opportunities in general.

RESULTS OF OPERATIONS

The Company had net income of $4,576,000 for the six months ended June 30, 2001 as compared to net income of $1,850,000 in the first half of 2000. The Company had net income of $1,571,000 in the second quarter of 2001 as compared to net income of $1,332,000 in the second quarter of 2000. The improvement in results for both periods is attributable to a combination of sharply gas prices, and increased revenues and profitably from the Company's field service operations.

Oil and gas sales of $13,760,000 for the first half of 2001 represented a 52% increase over sales in the first half of 2000. Second quarter 2001 oil and gas sales of $6,105,000 represented a 25% increase over sales in the same period in 2000. The tables below summarize production, prices and revenue in the periods under discussion.

	Six Months Ended			Three Months Ended
	June 30,			June 30,
	------------------------------------------------------			-------------------------------------------------------
			Increase /			Increase /
	2001	2000	(Decrease)	2001	2000	(Decrease)
Barrels of Oil Produced	144,104	143,498	606	72,188	73,098	(910)
Average Price Received	$26.9041	$26.9723	$(0.0682)	$27.3873	$27.0555	$(0.3318)
	---------------	---------------	--------------	---------------	---------------	--------------
Oil Revenue	$3,877,000	$3,870,000	$7,000	$1,977,000	$1,978,000	$(1,000)
	---------------	---------------	--------------	---------------	---------------	--------------
Mcf of Gas Produced	1,790,267	1,749,782	40,485	887,394	909,831	(22,437)
Average Price Received	$5.5202	$2.9769	$2.5433	$4.6512	$3.2101	$1.4411
	---------------	---------------	--------------	---------------	---------------	--------------
Gas Revenue	$9,883,000	$5,209,000	$4,674,000	$4,128,000	$2,921,000	$1,207,000
	---------------	---------------	--------------	---------------	---------------	--------------
Total Oil & Gas Revenue	$13,760,000	$9,079,000	$4,681,000	$6,105,000	$4,899,000	$1,206,000
	=========	=========	=========	=========	=========	=========

The increases in production in the first six months of 2001 are due to several significant discoveries and acquisitions between the two periods, largely offset by the normal decline curve of existing properties. Properties contributing most significantly to increased production are summarized below.

• The Cadiz prospect contributed 156,000 Mcf of gas and 1,300 barrels of oil in 2001 as compared to 3,800 Mcf and no oil in the first six months of 2000. In 2000, the Company drilled two successful wells on this property, the Brooks Trust #1 and the Brooks Trust #2. A third well, the Brooks Trust # 3, came on line in July of 2001, and is currently producing approximately 630 Mcf per day net to the Company's interest. Further development of this property, which is located in Bee County, Texas, is planned in the future.

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• The East Wakita prospect contributed 110,000 Mcf of gas and 100 barrels of oil in the first six months of 2001. During the second half of 2000, the Company completed a successful reentry of the Gott #1 well located in Grant County, Oklahoma.
• Seven wells located in Upton County, Texas, which were purchased during the second half of 2000, contributed27,000 Mcf of gas and 5,600 barrels of oil in the first six months of 2001.
• Six wells located in Garvin County, Oklahoma, which were purchased in the second half of 2000, contributed 4,700 barrels of oil in the first six months of 2001.

District operating income increased by $2,151,000 or 34% between the first half of 2001 and the first half of 2000, and by $1,051,000, or 32% in the second quarter of 2001 as compared to the same period in 2000. Both increases reflect the Company's efforts to increase the amount of field service work it performs on wells not operated by the Company, particularly through expanding its operations in the Midland, Texas area. Revenues from field service operation in the Midland area increased to $917,000 in the first six months of 2001 as compared to $331,000 in the same period in 2001, and to $497,000 in the second quarter of 2001 as compared to $237,000 in the same period in 2000.

Administrative revenue for the first half of 2001 was $788,000 as compared to $783,000 in 2000. Amounts received in both years from certain Partnerships are substantially less than the amounts allocable to those Partnerships under the Partnership agreements. The lower amounts reflect PEMC's efforts to limit costs incurred and the amounts allocated to the Partnerships.

Lease operating expense for the first half of 2001 increased by 38% or $1,479,000 compared to the first half of 2000, primarily due to increased repair and fix up work performed in 2001.

The Company receives reimbursement for costs incurred related to the evaluation, acquisition and development of properties in which interests are owned by its joint venture partners, related partnerships, and trusts. To the extent that these costs are expended at the district level, the reimbursements reduce total district operating expenses. To the extent such expenses are incurred by PEMC, such reimbursements reduce total general and administrative expenses. Such reimbursement totaled approximately $175,000 in the first half of 2001 as compared to $500,000 for the same period in 2000.

District operating expense increased by $1,069,000 or 20%, in the first half of 2001 as compared to the same period in 2000, and by $313,000 or 11% in second quarter of 2001 as compared to the second quarter of 2000. These increases reflect the labor and fuel costs associated with the increase in District operating income discussed above. On a percentage basis, the increases in district operating expense between the two years is significantly less than the increases in district operating income, partially due to the fact that year 2000 costs include startup costs incurred in connection with the expansion of the Company's operations in the Midland, Texas area.

General and administrative expenses increased 16%, or $323,000 in the first half of 2001 as compared to the same period in 2000, and by $409,000 or 50% in the second quarter of 2001 as

compared to the same period in 2000. These increases are primarily due to the reduced property

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acquisition cost reimbursement discussed above, as well as an increase in the Company's share of G & A incurred by the partnerships due to the purchase of additional interests in these entities, and increased compensation costs.

Exploration costs were $297,000 in the first six months of 2001 as compared to $124,000 during the same period in 2000. The 2001 costs consist primarily of two dry holes, one in Calhoun County, Texas, and the other in Grant County, Oklahoma.

Interest expense during the first half of 2001 decreased approximately 32% to $526,000 due to lower interest rates and lower average balances.

This Report contains forward-looking statements that are based on management's current expectations, estimates and projections. Words such as "expects," "anticipates," "intends," "plans," "believes," "projects" and "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and are subject to the safe harbors created thereby. These statements are not guarantees of future performance and involve risks and uncertainties and are based on a number of assumptions that could ultimately prove inaccurate and, therefore, there can be no assurance that they will prove to be accurate. Actual results and outcomes may vary materially from what is expressed or forecast in such statements due to various risks and uncertainties. These risks and uncertainties include, among other things, the possibility of drilling cost overruns and technical difficulties, volatility of oil and gas prices, competition, risks inherent in the Company's oil and gas operations, the inexact nature of interpretation of seismic and other geological and geophysical data, imprecision of reserve estimates, and the Company's ability to replace and expand oil and gas reserves. Accordingly, stockholders and potential investors are cautioned that certain events or circumstances could cause actual results to differ materially from those projected.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk sensitive instrument at June 30, 2001 is a revolving line of credit from a bank. The interest rate on this debt is sensitive to market fluctuations; however, we do not believe that significant fluctuations in the market rate of interest have a material effect on our consolidated financial position, results of operations, or cash flow from operations.

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PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, the Company is party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Stockholders of the company was held on June 7, 2001. One matter submitted to the stockholders was the election of thirteen Directors (named below), nominated by management, all of whom were currently serving as Directors. Proxies were solicited pursuant to Regulation 14A under the Securities Act of 1934, definitive copies of which were filed with the Commission. There was no solicitation in opposition to management's nominees, and all of the Directors nominated for the re-election were elected. The number of shares of the Company's common stock outstanding and entitled to vote at the Annual Meeting was 3,886,511. Those persons nominated and elected as Directors, and the number of shares voting for or withheld and broker non-votes for each, is shown below. There were no abstentions.

			Broker
	For	Withheld	Non-votes
Samuel R. Campbell	2,941,856	806	-
James E. Clark	2,936,696	5,966	5,160
Beverly A. Cummings	2,941,706	956	150
Charles E. Drimal, Jr.	2,941,706	956	150
Matthias Eckenstein	2,941,856	806	-
H. Gifford Fong	2,941,856	806	-
Thomas S. T. Gimbel	2,941,856	806	-
Clint Hurt	2,941,856	806	-
Robert de Rothschild	2,936,856	5,806	5,000
Jarvis J. Slade	2,941,856	806	-
Jan K. Smeets	2,941,856	806	-
Gaines Wehrle	2,936,696	5,966	5,160
Michael H. Wehrle	2,941,846	816	10

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Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS AND REPORTS ON FORM 8K

No reports on form 8K were filed by the Company during the six months ended June 30, 2001.

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SIGNATURES

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

	PrimeEnergy Corporation
	(Registrant)
August 9, 2001	/s/ Charles E. Drimal, Jr.
(Date)	------------------------------
	Charles E. Drimal, Jr.
	President
	Principal Executive Officer
August 9, 2001	/s/ Beverly A. Cummings
(Date)	-------------------------------
	Beverly A. Cummings
	Executive Vice President
	Principal Financial and Accounting Officer

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