As filed with the Securities and Exchange Commission on __________, 2005

                                                    Registration No. 333 _______
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____ TO ____.
                         COMMISSION FILE NUMBER 1-12108.

                              GULFWEST ENERGY INC.
             (Exact Name of Registrant as Specified in Its Charter)

           TEXAS                                         87-0444770
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

480 N. SAM HOUSTON PARKWAY EAST, SUITE 300
           HOUSTON, TEXAS 77060
(Address of Principal Executive Offices)     (Name, Address, Including Zip Code,
                                               and Telephone Number, Including
                                               Area Code, of Agent for Service)

       Registrant's telephone number, including area code: (281) 820-1919.

           Securities registered pursuant to Section 12(b) of the Act:

                               Title of Each Class
                               -------------------
 
               Class A Common Stock, par value of $.001 per share
          Securities registered pursuant to Section 12(g) of the Act:

                               Title of Each Class
                               -------------------
 
               Class A Common Stock, par value of $.001 per share

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes __X__  No ___

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or informational statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. [ ]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b2 of the Act).

                                Yes ___    No __X__

     The aggregate market value of voting stock of the Registrant held by
non-affiliates, computed by reference to the closing price of such stock on
March 29, 2005, was approximately $16,267,423. For purposes of this computation,
all executive officers, directors and ten percent (10%) beneficial owners of the
Registrant are deemed to be affiliates. Such determination should not be deemed
an admission that such executive officers, directors and ten percent (10%)
beneficial owners are affiliates.

     Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock: Class A Common Stock $.001 par value: 24,897,893 shares
on March 29, 2005.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     The registrant's definitive Proxy Statement pertaining to the 2005 Annual
Meeting of Shareholders (the "Proxy Statement") and filed or to be filed not
later than 120 days after the end of the fiscal year pursuant to Regulation 14A
is incorporated herein by reference into Part III.


                                    PART I

     This summary highlights  selected  information  contained elsewhere in this
Annual  Report.  The following  summary does not contain all of the  information
that may be  important.  You  should  read the  detailed  information  appearing
elsewhere in this Annual Report before  making an investment  decision.  Certain
terms that we use in our industry are italicized and defined in the "Glossary of
Industry Terms and Abbreviations". Unless otherwise indicated, all references to
"GulfWest",  the "Company",  "we",  "us" and "our" refer to GulfWest Energy Inc.
and our subsidiaries.

     We make forward-looking  statements throughout this Annual Report. Whenever
you read a statement that is not simply a statement of historical  fact (such as
when we describe what we "believe,"  "expect" or  "anticipate"  will occur,  and
other similar  statements),  you must remember that our  expectations may not be
correct,  even though we believe they are  reasonable.  We do not guarantee that
the  transactions  and events  described  in this  Annual  Report will happen as
described  (or that they will happen at all).  The  forward-looking  information
contained in this Annual  Report is generally  located in the material set forth
under the headings  "Summary,"  "Risk  Factors,"  "Management's  Discussion  and
Analysis of Financial  Condition and Results of  Operations"  and "Business" but
may be found in  other  locations  as  well.  These  forward-looking  statements
generally relate to our plans and objectives for future operations and are based
upon our management's reasonable estimates of future results and trends.

ITEM 1. Business.

Our Business.

     We are primarily engaged in the acquisition,  development, exploitation and
production  of crude oil and natural  gas,  primarily  in the onshore  producing
regions of the United  States.  Our focus is on increasing  production  from our
existing properties through further  exploitation,  development and exploration,
and on acquiring  additional  interests in undeveloped and underdeveloped  crude
oil and natural gas properties.

     Since  we  made  our  first  significant   acquisition  in  1993,  we  have
substantially  increased our ownership in producing properties and our crude oil
and natural gas reserves  through a combination of acquisitions  and the further
exploitation  and development of our properties.  At December 31, 2004, our part
of the estimated  proved reserves these properties  contained was  approximately
3.0 million  barrels  (MBbl) of oil and 29.1 billion cubic feet (Bcf) of natural
gas with an  estimated  Net Present  Value  discounted  at 10% (PV-10) of $114.1
million.  At  present,  all of our  properties  are  located  on land in  Texas,
Colorado,  Louisiana  and  Mississippi,  except for the  property in the shallow
inland boundaries of Grand Lake, Louisiana.  In the future, we plan to expand by
acquiring  additional  properties  in those  areas,  and in  similar  properties
located in other producing  regions of the United States,  including the shallow
waters of the Gulf of Mexico.

     Our gross revenues are derived from the following sources:

     1.   Oil and gas  sales  that are  proceeds  from the sale of crude oil and
          natural gas production to midstream purchasers;

     2.   Operating  overhead and other income that  consists of  administrative
          fees received for operating  crude oil and natural gas  properties for
          other working  interest  owners,  and for  marketing and  transporting
          natural gas for those owners.  This also includes  earnings from other
          miscellaneous activities.

     3.   Well  servicing  revenues that are earnings from the operation of well
          servicing  equipment under contract to other  operators.  During 2004,
          our well servicing equipment was used only for our own account.

     Our  operations are  considered to fall within a single  industry  segment,
which is the acquisition, development, production and servicing of crude oil and
natural gas  properties.  See Item 7. " Management's  Discussion and Analysis of
Financial Condition and Results of Operations."

                                        1



     Our Common  Stock,  designated  Class A Common  Stock  ("Common  Stock") is
traded over-the-counter (OTC) under the symbol "GULF.OB".

Our Company.

     We were formed as a corporation under the laws of the State of Utah in 1987
as  Gallup  Acquisitions,  Inc.,  and  subsequently  changed  our  name to First
Preference Fund, Inc in 1992. We became a Texas corporation by a merger effected
in July 1992,  through  which our name became  GulfWest Oil Company.  On May 21,
2001, we changed our name to GulfWest Energy Inc.

     Our  principal  office is located at 480 North Sam  Houston  Parkway  East,
Suite 300, Houston, Texas 77060 and our telephone number is (281) 820-1919.

     GulfWest Energy Inc. has six active and three inactive, direct or indirect,
wholly owned subsidiaries. The active subsidiaries are:

     1.   GulfWest  Oil and Gas  Company,  a Texas  corporation,  was  organized
          February  18, 1999 and is the owner of record of  interests in certain
          crude oil and natural gas properties located in Colorado and Texas. It
          has  one  wholly  owned  subsidiary,  GulfWest  Oil  and  Gas  Company
          (Louisiana) LLC.

     2.   GulfWest Oil and Gas Company (Louisiana) LLC, a Louisiana company, was
          formed  July 31,  2001 and is the  owner of  record  of  interests  in
          certain crude oil and natural gas properties in Louisiana.

     3.   SETEX Oil and Gas Company, a Texas  corporation,  was organized August
          11, 1998 and is the  operator of crude oil and natural gas  properties
          in which we own a majority working interest.

     4.   RigWest  Well  Service,  Inc.,  a  Texas  corporation,  was  organized
          September 5, 1996 and operates  well  servicing  equipment for our own
          account and for others when not being utilized for our own account..

     5.   DutchWest Oil Company,  a Texas  corporation,  was organized  July 28,
          1997 and is the owner of record of interests in certain  crude oil and
          natural gas properties located along the Gulf Coast of Texas.

     6.   GulfWest  Development  Company,  a Texas  corporation,  was  organized
          November  9, 2000 and is the owner of record of  interests  in certain
          crude oil and natural gas properties located in Texas and Mississippi.

     Balance. At December 31, 2004, our proved reserves were comprised of 38%
crude oil and 62% natural gas. We will continue to expand our role in the
domestic natural energy industry by (i) acquiring additional interests in crude
oil and natural gas properties, (ii) increasing the production and reserve base
of our existing producing properties, and (iii) acquiring ownership of more
natural gas gathering systems and pipelines. Our goal is to have greater control
of our natural gas transportation and marketing, and an expanded role in the
transportation of natural gas produced by other parties in our area of
operations. We are presently focusing our workover and development efforts on
both crude oil and natural gas reserves to take advantage of the higher prices
of both commodities.

Financial Recapitalization

     On April 27, 2004, we completed an $18,000,000  financing  package with new
energy lenders. We used $15,700,000 in net proceeds from the financing to retire
existing debt of  $27,584,145,  resulting in forgiveness of debt of $12,475,612,
the elimination of a hedging liability and the return to the Company of Series F
Preferred Stock,  par value $.01 per share and liquidation  value $500 per share
(the "Series F Preferred Stock"),  with an aggregate  liquidation  preference of
$1,000,000 (this preferred stock, at our request was transferred by the previous
lender to a financial  advisor of ours and to two companies  affiliated with two
of our  directors in  satisfaction  of our  obligation  to them.  (See  "Certain
Relationships and Related  Transactions.") The taxable gain resulting from these
transactions   will  be  completely  offset  by  available  net  operating  loss
carryforwards.  The term of the note was eighteen months and it bore interest at
the prime rate plus 11%.  This rate  increased  by .75% per month  beginning  in
month ten. We paid the new lenders  $1,180,000 in cash fees and also issued them
warrants to purchase  2,035,621  shares of our Common Stock at an exercise price
of $.01  per  share,  expiring  in five  years.  The  warrants  are  subject  to
anti-dilution  provisions.  In connection  with the February  2005  transactions
described below, the anti-dilution  provisions were amended such that additional
issuances  of stock (other than  issuances to all holders)  would not trigger an
adjustment to the number of shares issuable upon exercise of the warrants.

                                        2



     Simultaneously,  our  wholly-owned  subsidiary,  GulfWest Oil & Gas Company
("GOGC"),  completed  the  initial  phase of a private  offering of its Series A
Preferred  Stock,  par value  $.01 and  liquidation  value  $500 per share  (the
"Series A Preferred  Stock")  for  $4,000,000.  The Series A Preferred  Stock is
exchangeable  into our Common  Stock  based on a  liquidation  value of $500 per
share of Series A Preferred Stock divided by $.35 per share of our Common Stock,
or  11,428,571  shares.  As part of an advisory  fee, we issued  $500,000 of the
Series A Preferred Stock to a financial  advisor.  One of our directors acquired
$1,500,000 of the Series A Preferred Stock.

     On January 7, 2005,  we amended our April 2004 credit  agreement  to extend
the target date for repayment to February 28, 2005. We exercised  this option on
January 26, 2005. We issued 29,100 shares of our common stock in connection with
this amendment.

     In a  subsequent  event,  on  February  28,  2005,  we  sold  in a  private
placement,  81,000 shares of our Series G Preferred  Stock,  par value $0.01 per
share and liquidation  value $500 per share, (the "Series G Preferred Stock") to
OCM GW Holdings,  LLC ("OCMGW" or  "Holdings"),  an affiliate of Oaktree Capital
Management,  LLC for an aggregate offering price of $40.5 million.  In addition,
GOGC  issued,  in a private  placement,  2,000  shares of its Series A Preferred
Stock, having an aggregate liquidation  preference of $1.0 million, to OCMGW for
$1.5 million.  Net proceeds of the offerings of approximately  $38 million after
expenses  are being used for the  repayment  of  substantially  all of our debt,
other past due liabilities and for general corporate purposes.

     The  Series  G  Preferred  Stock  bears a  coupon  of 8% per  year,  has an
aggregate liquidation  preference of $40.5 million, is convertible to the Common
Stock at $0.90 per share of Common Stock and is senior to all of our outstanding
capital stock. For the first four years after issuance, we may defer the payment
of dividends on the Series G Preferred  Stock and these deferred  dividends will
also be convertible  into our Common Stock at $0.90 per share. In addition,  the
Series G Preferred  Stock is  entitled  to nominate  and elect a majority of the
members of our Board of Directors.

     In connection with these transactions,  the terms of the Series A Preferred
Stock have been amended such that by March 15, 2005, all such stock would either
convert  into a newly  created  Series H  Preferred  Stock,  par value  $.01 and
liquidation  value $500 per share (the "Series H Preferred  Stock") on a one for
one  basis or into  Common  Stock at a  conversion  price of $0.35  per share of
Common Stock.  The Series H Preferred Stock is required to be paid a dividend of
40 shares of Common  Stock per share of Series H  Preferred  Stock per year.  In
addition,  the Series H Preferred  Stock is  convertible  into Common Stock at a
conversion price of $0.35 per share. At March 15, 2005,  holders of 6,700 shares
of Series A Preferred Stock converted to Series H Preferred Stock and holders of
3,250 shares of Series A Preferred  Stock  converted  to an aggregate  4,642,859
shares  of Common  Stock.  One  holder  of the  Series H  Preferred  Stock  also
converted its shares to 285,715 shares of Common Stock. The outstanding Series H
Preferred Stock has an aggregate  liquidation  preference of $3.25 million.  The
Series H  Preferred  Stock is senior  to all of our  outstanding  capital  stock
except Series G Preferred Stock.

     In addition, we amended the terms of our 9,000 shares of Series E Preferred
Stock,  par value  $.01 and  liquidation  value  $500 per share  (the  "Series E
Preferred Stock"), such that the coupon of 6% per year they bear may be deferred
for the next four years and these deferred  dividends  will be convertible  into
Common Stock at  conversion  price of $0.90 per share.  The initial  liquidation
preference of the Series E Preferred Stock of $500 per share remains convertible
into  Common  Stock at $2.00 per  share.  The  Series E  Preferred  Stock has an
aggregate liquidation preference of $4.5 million, is senior to our Common Stock,
of equal  preference  with  respect to  liquidation  with our Series D Preferred
Stock,  par value  $.01 and  liquidation  value  $500 per share  (the  "Series D
Preferred  Stock")  and  junior to our  Series G  Preferred  Stock and  Series H
Preferred Stock.

                                        3



Our Business Strategy

     We have pursued a business strategy of acquiring interests in crude oil and
natural gas producing  properties where production and reserves can be increased
through exploitation activities. Such activities include workovers,  development
drilling, recompletions,  replacement or addition of equipment and waterflood or
other  secondary  recovery  techniques.  Key elements of our  business  strategy
include:

     Development  and  Exploitation of Existing  Properties.  Our strategy is to
increase  crude oil and  natural gas  production  and  reserves of our  existing
assets through relatively low-risk  development  activities,  such as performing
workovers,  recompletions  and  horizontal  drilling  from  existing  wellbores,
infield drilling and more efficiently using production facilities.

     Continued Acquisition Program. We acquired properties in four crude oil and
natural  gas  fields in Texas and  Louisiana  in the year 2001.  Though  capital
constrained  since 2001, to the extent  financial  resources are  available,  we
intend to  continue  to pursue the  acquisition  of  interests  in crude oil and
natural gas properties (i) held by small,  under-capitalized  operators and (ii)
being divested by larger independent and major oil and gas companies.

     Significant  Operating Control.  Currently,  we are the operator of all but
two of the  wells in which we own  working  interests.  This  operating  control
enables us to better  manage the  nature,  timing  and costs of  developing  and
servicing such wells, and the timing and marketing of the resulting production.

     Ownership of Workover Rigs. We currently own two workover  service rigs and
one swabbing  unit that we operate for our own account.  By owning and operating
this equipment,  we are better able to control costs,  quality of operations and
availability of equipment and services.

     Expanded  Exploration  and  Exploitation  Role.  Historically,  we have not
drilled  exploratory  wells due to the cost and risk  associated  with  drilling
prospective  locations.  However,  since  the  end of  1998,  we  have  acquired
producing  properties that have included significant acreage for prospective oil
and gas  exploration.  These  include  producing  wells and  acreage  in Grimes,
Hardin, Jim Wells, Madison, Palo Pinto, Refugio,  Wharton and Zavala,  Counties,
Texas;  Adams,  Arapaho,  Elbert and Weld Counties,  Colorado;  Cameron  Parish,
Louisiana; and Jones County, Mississippi. These acquisitions have added existing
natural gas and crude oil production to our asset base and, as importantly, have
provided  us  with  immediate  geological  databases  for  development  drilling
opportunities as well as the potential for generating exploratory  opportunities
on the acquired acreage. We have expanded our evaluation efforts in these fields
and intend to increase our development of reserves through workovers of existing
wells and by drilling additional wells. As we develop exploration  opportunities
on these  properties  or see  high-quality  prospects  generated  by others,  as
capital resources are available,  we will complement our development  activities
with capital for exploratory or exploitation projects.

Our Employees.

     At December 31, 2004, we had 26 full time employees,  of whom 13 were field
personnel.   None  of  our  employees  are  covered  by  collective   bargaining
agreements.

Our Executive Officers.

     See Item 10 of this report,  which  information is  incorporated  herein by
reference.

ITEM 2. Our Properties.

     At December  31, 2004,  we owned a total of 250 gross  wells,  of which 137
were producing,  95 were shut-in or temporarily  abandoned and 18 were injection
or saltwater  wells.  We owned an average 89% working  interest in the 137 gross
(120 net)  producing  wells.  Gross  wells are the total wells in which we own a
working interest.  Net wells are the sum of the fractional  working interests we
own in gross wells.  Our part of the estimated  proved reserves these properties
contain was approximately 3 million barrels (MMBL) of oil and 29.1 billion cubic
feet  (Bcf) of  natural  gas at  December  31,  2004.  Substantially  all of our
properties are located  onshore or shallow inland waters in Texas,  Colorado and
Louisiana.

                                        4



Proved Reserves.

     The following  table reflects our estimated  proved reserves at December 31
for each of the preceding three years.

                                       2004             2003             2002
                                     --------         --------         --------
           Crude Oil (MBBL)
                  Developed            2,575            3,773            4,026
                Undeveloped              388            1,265            1,496
                                     --------         --------         --------
                      Total            2,963            5,038            5,552
                                     ========         ========         ========

         Natural Gas (MMCF)
                  Developed           20,966           24,642           25,374
                Undeveloped            8,125            8,018            8,785
                                     --------         --------         --------
                      Total           29,091           32,660           34,159
                                     ========         ========         ========
               Total (MBOE)            7,812           10,481           11,215
                                     ========         ========         ========

     (a)  Approximately  78% of our total PROVED  RESERVES  were  classified  as
          proved developed at December 31, 2004.

     (b)  Barrel of Oil Equivalent (BOE) is based on a ratio of 6,000 cubic feet
          of natural gas for each barrel of oil.

Standardized Measure of Discounted Future Net Cash Flows.

     The following  table sets forth as of December 31 for each of the preceding
three years, the estimated future net cash flow from and standardized measure of
discounted future net cash flows of our proved reserves,  which were prepared in
accordance  with  the  rules  and  regulations  of the  SEC  and  the  Financial
Accounting  Standard Board.  Future net cash flow  represents  future gross cash
flow  from the  production  and sale of  proved  reserves,  net of crude oil and
natural gas production costs (including  production  taxes, ad valorem taxes and
operating  expenses) and future  development  costs.  The  calculations  used to
produce the figures in this table are based on current cost and price factors at
December 31 for each year.  We cannot  assure you that the proved  reserves will
all be developed  within the periods used in the calculations or that prices and
costs will remain constant.


                                                                    
                                                2004             2003             2002
                                           --------------   --------------   --------------

Future cash inflows                        $ 290,998,312    $ 336,795,385    $ 308,381,837

Future production and development costs-
  Production                                  80,880,330      109,468,727      105,629,872
  Development                                 24,141,982       21,460,459       23,350,811
                                           --------------   --------------   --------------

Future net cash flows before income taxes    185,976,000      205,866,199      179,401,154
Future income taxes                          (49,871,272)     (46,885,360)     (38,611,577)
                                           --------------   --------------   --------------

Future net cash flows after income taxes     136,104,728      158,980,839      140,789,577
10% annual discount for estimated timing
 of cash flows                               (52,602,351)     (70,653,419)     (63,165,742)
                                           --------------   --------------   --------------

Standardized measure of discounted
 future net cash flows(1)                  $  83,502,377    $  88,327,420    $  77,623,835
                                           ==============   ==============   ==============

------------------
(1)  The average sales prices  utilized in the estimation of our proved reserves
     were  $40.41  per Bbl and $5.89 per MCF,  $29.51 per Bbl and $5.82 per MCF,
     and $28.72 per Bbl and $4.43 per MCF at December 31,  2004,  2003 and 2002,
     respectively.


                                        5



Significant Properties.

     Summary  information  on our properties  with proved  reserves is set forth
below as of December 31, 2004.

                                                                       Present
                 Productive Wells              Proved Reserves         Value(1)
            -------------------------   ----------------------------  ----------
               Gross          Net
             Productive    Productive    Crude    Natural
               Wells         Wells        Oil       Gas       Total     Amount
            ------------   ----------   -------   --------   -------  ----------
                                         (MBbl) (MMcf) (MBOE) ($M)

Texas                80        75.91     1,295     15,663     3,906   $  57,706
Colorado             37        24.81       278      5,550     1,203      13,676
Louisiana            19        18.88     1,383      7,878     2,696      42,549
Mississippi           1         0.37         7          -         7         126
            ------------   ----------   -------  ----    ----------   ----------
    Total           137       119.97     2,963     29,091     7,812   $ 114,057
            ============   ==========   =======  ====    ==========   ==========

------------------
(1)  The average sales prices used in the estimation of our proved reserves were
     $40.41 per Bbl and $5.89 per Mcf at December 31, 2004.

     All information set forth herein relating to our proved reserves, estimated
future  net cash flows and  present  values is taken from  reports  prepared  by
Pressler Petroleum Consultants,  independent petroleum engineers.  The estimates
of these  engineers  were based upon their review of  production  histories  and
other  geological,  economic,  ownership  and  engineering  data provided by and
relating  to us. No reports  on our  reserves  have been filed with any  federal
agency.  In  accordance  with the  SEC's  guidelines,  our  estimates  of proved
reserves and the future net revenues from which  present  values are derived are
made  using  year end  crude oil and  natural  gas sales  prices  held  constant
throughout  the  life  of the  properties  (except  to  the  extent  a  contract
specifically provides otherwise). Operating costs, development costs and certain
production-related  taxes were  deducted  in arriving  at  estimated  future net
revenues, but such costs do not include debt service, general and administrative
expenses and income taxes.

     There are  numerous  uncertainties  inherent  in  estimating  crude oil and
natural  gas  reserves  and their  values,  including  many  factors  beyond our
control.  The reserve  data set forth in this  report are based upon  estimates.
Reservoir  engineering is a subjective  process,  which involves  estimating the
sizes of underground  accumulations  of crude oil and natural gas that cannot be
measured in an exact manner.  The accuracy of any reserve estimate is a function
of the quality of available data,  engineering and geological  interpretation of
that  data,  and  judgment.  As a  result,  estimates  of  different  engineers,
including  those used by us, may vary.  In  addition,  estimates of reserves are
subject to revision based upon actual production, results of future development,
exploitation  and exploration  activities,  prevailing crude oil and natural gas
prices,  operating  costs and other  factors.  Such  revisions  may be material.
Accordingly,  reserve estimates are often different from the quantities of crude
oil and natural gas that are ultimately  recovered and are highly dependent upon
the accuracy of the assumptions  upon which they are based. We cannot assure you
that the  estimates  contained  in this report are accurate  predictions  of our
crude oil and natural gas reserves or their  values.  Estimates  with respect to
proved reserves that may be developed and produced in the future are often based
upon  volumetric  calculations  and upon  analogy to similar  types of  reserves
rather than upon actual production history. Estimates based on these methods are
generally  less  reliable  than  those  based  on  actual  production   history.
Subsequent  evaluation of the same reserves based upon  production  history will
result in potentially substantial variations in the estimated reserves.

Production, Revenue and Price History.

     The  following  table sets forth  information  (associated  with our proved
reserves)  regarding  production  volumes of crude oil and natural gas, revenues
and expenses  attributable  to such  production  (all net to our  interests) and
certain price and cost  information  for the years ended December 31, 2004, 2003
and 2002.

                                        6



                                      2004           2003            2002
                                 -------------   -------------   -------------

Production
  Oil (Bbl)                           173,865         221,433         278,374
  Natural gas (Mcf)                 1,033,433       1,191,350       1,487,048
                                 -------------   -------------   -------------
     Total (BOE)                      346,104         419,991         526,215

Revenue
  Oil production                   $5,498,598    $  5,362,657    $  5,859,568
  Natural gas production            5,602,516       5,481,803       4,587,601
                                 -------------   -------------   -------------
     Total                       $ 11,101,114    $ 10,844,460    $ 10,447,169

Operating Expenses               $  4,879,754    $  5,527,841    $  5,430,205

Production Data
  Average sales price (1)
   Per barrel of oil             $      31.63    $      24.22    $      21.05
  Per Mcf of natural gas         $       5.42    $       4.60            3.09
   Per BOE                       $      32.07    $      25.82           19.85

  Average expenses per BOE
   Lease operating               $      14.10    $      13.16    $      10.32
   Depreciation, depletion and
    Amortization                 $       6.31    $       5.30    $       5.13
   General and administrative    $       5.83    $       5.39    $       3.28

-------------------------
(1)  Average  sales  prices are shown net of the settled  amounts of our oil and
     gas hedge contracts.  Average sales prices per BOE, before  adjustments for
     the hedge contracts, were $37.39, $29.38 and $20.55 in 2004, 2003 and 2002,
     respectively.


Productive Wells at December 31, 2004:

     The  following  table  shows  the  number  of  productive  wells  we own by
location:

                     Gross        Net        Gross        Net
                   Oil Wells   Oil Wells   Gas Wells   Gas Wells
                   ---------   ---------   ---------   ---------

     Texas               31       29.99          49       45.92
     Colorado            21       13.45          16       11.36
     Louisiana           14       13.88           5        5.00
     Mississippi          1        0.37           -           -
                   ---------   ---------   ---------   ---------
       Total             67       57.69          70       62.28
                   =========   =========   =========   =========

Developed Acreage at December 31, 2004.

     The following  table shows the developed  acreage that we own, by location,
which is acreage  spaced or assigned to  productive  wells.  Gross acres are the
total  acres in which we own a  working  interest.  Net acres are the sum of the
fractional working interests we own in gross acres.

                    Gross Acres      Net Acres
                   -------------    -----------
     Texas             9,055           8,439
     Colorado          6,000           4,020
     Louisiana         1,320           1,315
                   -------------    -----------
       Total          16,375          13,774
                   =============    ===========

                                        7



Undeveloped Acreage at December 31, 2004.

     The following table shows the undeveloped acreage that we own, by location.
Undeveloped acreage is acreage on which wells have not been drilled or completed
to a point  that would  form the basis to  determine  whether  the  property  is
capable of production of commercial quantities of crude oil and natural gas.

                    Gross Acres      Net Acres
                   -------------    -----------
     Texas            20,420          17,920
     Colorado         11,000           8,250
     Louisiana           375             375
                   -------------    -----------
       Total          31,795          26,545
                   =============    ===========

Drilling Results.

     In 2004, we drilled one well that was  completed as a successful  gas well.
The well was located in Grimes  County,  Texas and was drilled during the fourth
quarter of 2004. The well was completed, brought on-line in mid-January 2005 and
has  produced at any average rate of 600 Mcf per day (net to our  interest)  for
the first 60 days.  We did not drill any wells in 2003.  In 2002, we drilled one
exploratory  well, in which we own an 18% working  interest,  that resulted in a
dry hole and one development well, in which we own 100% working  interest,  that
is currently productive.

Costs Incurred

     The following  table shows the costs  incurred in our oil and gas producing
activities for the past three years:

                                       2004          2003           2002
                                   ------------  ------------   ------------
Property Acquisitions
   Proved                          $     6,742             -    $   562,760
   Unproved                             17,347       110,119         14,401
Development Costs                    6,117,899     2,024,663      5,141,075
                                   ------------  ------------   ------------
                                   $ 6,141,988   $ 2,134,782    $ 5,718,236
                                   ============  ============   ============

Property Dispositions

     The following table shows oil and gas property dispositions:

                                       2004          2003           2002
                                   ------------  ------------   ------------
Oil and gas  properties            $ 5,425,040   $    31,979    $   464,806
Accumulated DD&A                    (1,659,001)      (11,569)       (21,375)
                                   ------------  ------------   ------------
Net oil and gas properties         $ 3,766,039        20,410    $   443,431
                                   ============  ============   ============

     As a result of these  sales we  recorded a loss of  $2,029,932  in 2004 and
$20,409 in 2003 and a gain of $21,569 in 2002.

Marketing

     We sell  substantially  all of our crude oil and natural gas  production to
purchasers  pursuant to sales contracts that typically have a thirty-day primary
term,  although  occasionally  we enter into  longer term  contracts  when it is
advantageous to do so. The sales prices for crude oil and condensate are tied to
industry standard posted prices plus negotiated  premiums.  The sales prices for
natural gas are based upon published index prices,  subject to negotiated  price
deductions.

                                        8



                                  RISK FACTORS

     Our success  depends  heavily  upon our ability to market our crude oil and
natural gas production at favorable prices.

     In recent decades, there have been both periods of worldwide overproduction
and  underproduction  of crude oil and natural gas, and periods of increased and
relaxed energy  conservation  efforts.  Such  conditions have resulted in excess
supply  of, and  reduced  demand  for,  crude oil on a  worldwide  basis and for
natural gas on a domestic basis. At other times, there has been short supply of,
and increased demand for, crude oil and, to a lesser extent,  natural gas. These
changes have resulted in dramatic price fluctuations.

     We may borrow funds to finance capital  expenditures and for other purposes
which could possibly have important consequences to our shareholders,  including
the following:

      (i) Our indebtedness,  acquisitions, working capital, capital expenditures
          or other purposes may be impaired;

     (ii) Funds available for our operations and general  corporate  purposes or
          for capital expenditures will be reduced as a result of the dedication
          of a portion  of our  consolidated  cash flow from  operations  to the
          payment of the principal and interest on our indebtedness;

    (iii) We may be more highly leveraged than certain of our competitors, which
          may place us at a competitive disadvantage;

     (iv) The agreements governing our long-term indebtedness and bank loans may
          contain restrictive financial and operating covenants;

      (v) An  event of  default  (not  cured  or  waived)  under  financial  and
          operating  covenants contained in our debt instruments could occur and
          have a material adverse effect;

     (vi) Certain  of the  borrowings  under  our  debt  agreements  could  have
          floating  rates of interest,  which would cause us to be vulnerable to
          increases in interest rates; and

    (vii) Our degree of leverage could make us more  vulnerable to a downturn in
          general economic conditions.

     We have incurred net losses in the past and there can be no assurance  that
we will be profitable in the future.

     We have  incurred  net losses in three of the last five  fiscal  years.  We
cannot assure you that our current  level of operating  results will continue or
improve. Our activities could require additional debt or equity financing on our
part.  Since the  terms and  availability  of this  financing  depend to a large
degree upon general economic  conditions and third parties over which we have no
control,  we can give no assurance  that we will obtain the needed  financing or
that we will obtain such financing on attractive terms. In addition, our ability
to obtain financing depends on a number of other factors, many of which are also
beyond our  control,  such as interest  rates and  national  and local  business
conditions.  If the cost of obtaining  needed financing is too high or the terms
of such financing are otherwise  unacceptable  in relation to the opportunity we
are  presented  with,  we may  decide to  forego  that  opportunity.  Additional
indebtedness could increase our leverage and make us more vulnerable to economic
downturns  and  may  limit  our  ability  to  withstand  competitive  pressures.
Additional  equity financing could result in dilution to our  shareholders.  Our
future operating results may fluctuate  significantly depending upon a number of
factors,  including  industry  conditions,  prices of crude oil and natural gas,
rates of production,  timing of capital expenditures and drilling success. These
variables  could  have a  material  adverse  effect on our  business,  financial
condition, results of operations and the market price of our Common Stock.

     Estimates of crude oil and natural gas reserves depend on many  assumptions
that may turn out to be inaccurate.

                                        9



     Estimates  of our proved  reserves  for crude oil and  natural  gas and the
estimated  future net revenues  from the  production  of such reserves rely upon
various  assumptions,  including  assumptions  as to crude oil and  natural  gas
prices,  drilling  and  operating  expenses,  capital  expenditures,  taxes  and
availability  of funds.  The  process of  estimating  crude oil and  natural gas
reserves is complex  and  imprecise.  Actual  future  production,  crude oil and
natural  gas  prices,  revenues,  taxes,  development  expenditures,   operating
expenses and  quantities of  recoverable  crude oil and natural gas reserves may
vary  substantially  from the  estimates we obtain from reserve  engineers.  Any
significant  variance in these assumptions could materially affect the estimated
quantities  and present  value of reserves we have set forth.  In addition,  our
proved  reserves  may be subject to downward or upward  revision  due to factors
that are beyond  our  control,  such as  production  history,  results of future
exploration  and  development,  prevailing  crude oil and natural gas prices and
other factors.

     Approximately  22% of our total  estimated  proved reserves at December 31,
2004 were proved undeveloped reserves, which are by their nature less certain.

     Recovery of such reserves  requires  significant  capital  expenditures and
successful  drilling  operations.  The  reserve  data set  forth in the  reserve
engineer reports assumes that substantial  capital  expenditures are required to
develop such reserves.  Although cost and reserve estimates  attributable to our
crude oil and  natural  gas  reserves  have been  prepared  in  accordance  with
industry  standards,  we cannot be sure that the  estimated  costs are accurate,
that development will occur as scheduled or that the results of such development
will be as estimated.

     You should not  interpret  the  present  value  referred  to in this annual
report as the current  market value of our  estimated  crude oil and natural gas
reserves.

     In accordance with  Securities and Exchange  Commission  requirements,  the
estimated  discounted  future net cash flows from proved  reserves are generally
based on prices and costs as of the date of the  estimate.  Actual future prices
and costs may be materially higher or lower.

     The estimates of our proved reserves and the future net revenues from which
the present  value of our  properties  is derived were  calculated  based on the
actual  prices of our  various  properties  on a  property-by-property  basis at
December 31, 2004.  The average sales prices of all  properties  were $40.41 per
barrel of oil and $5.89 per  thousand  cubic feet  (Mcf) of natural  gas at that
date.

     Actual  future  net cash  flows  will  also be  affected  by  increases  or
decreases in  consumption by crude oil and natural gas purchasers and changes in
governmental  regulations or taxation. The timing of both the production and the
incurring of expenses in connection with the development and production of crude
oil and natural gas properties affect the timing of actual future net cash flows
from proved reserves. In addition, the 10% discount factor, which is required by
the  Securities  and Exchange  Commission to be used in  calculating  discounted
future  net cash  flows for  reporting  purposes,  is not  necessarily  the most
appropriate  discount factor.  The effective  interest rate at various times and
the risks  associated  with our  business or the oil and gas industry in general
will affect the accuracy of the 10% discount factor.

     Except to the extent that we acquire properties  containing proved reserves
or  conduct  successful  development  or  exploitation  activities,  our  proved
reserves will decline as they are produced.

     In  general,  the  volume of  production  from  crude oil and  natural  gas
properties  declines as reserves are depleted.  Our future crude oil and natural
gas  production  is highly  dependent  upon our success in finding or  acquiring
additional reserves.

     The  business of  acquiring,  enhancing  or  developing  reserves  requires
considerable capital.

     Our ability to make the necessary capital  investment to maintain or expand
our asset base of crude oil and  natural gas  reserves  could be impaired to the
extent that cash flow from operations is reduced and external sources of capital
become limited or  unavailable.  In addition,  we cannot be sure that our future
acquisition and development activities will result in additional proved reserves
or that we will be able to drill productive wells at acceptable costs.

     Crude oil and natural gas drilling and production activities are subject to
numerous  risks,  many of which are beyond our control.  These risks include (i)
the possibility  that no  commercially  productive oil or gas reservoirs will be
encountered; and, (ii) that operations may be curtailed, delayed or canceled due
to title problems,  weather conditions,  governmental  requirements,  mechanical
difficulties,  or delays in the  delivery of drilling  rigs and other  equipment
that may limit our  ability to  develop,  produce  and market our  reserves.  We
cannot  assure  you that new wells we drill will be  productive  or that we will
recover all or any portion of our investment in such new wells.

                                       10



     Drilling for crude oil and natural gas may not be profitable.

     Any wells that we drill may be dry wells or wells that are not sufficiently
productive  to be  profitable  after  drilling.  Such wells will have a negative
impact on our profitability.  In addition,  our properties may be susceptible to
drainage from production by other operators on adjacent properties.

     Our industry  experiences  numerous  operating risks that could cause us to
suffer substantial losses.

     Such  risks  include   fire,   explosions,   blowouts,   pipe  failure  and
environmental  hazards,  such as oil  spills,  natural  gas leaks,  ruptures  or
discharges of toxic gases.  We could also suffer losses due to personnel  injury
or loss of life;  severe damage to or destruction of property;  or environmental
damage that could result in clean-up responsibilities, regulatory investigation,
penalties or suspension of our operations. In accordance with customary industry
practice, we maintain insurance policies against some, but not all, of the risks
described  above. Our insurance  policies may not adequately  protect us against
loss or liability. There is no guarantee that insurance policies that protect us
against the many risks we face will  continue  to be  available  at  justifiable
premium levels.

     As owners and operators of crude oil and natural gas properties,  we may be
liable under federal,  state and local environmental  regulations for activities
involving water pollution, hazardous waste transport, storage, disposal or other
activities.

     Our past growth has been  attributable  to  acquisitions of producing crude
oil and natural gas properties  with proved  reserves.  There are risks involved
with such acquisitions.

     The  successful   acquisition  of  properties  requires  an  assessment  of
recoverable reserves,  future crude oil and natural gas prices, operating costs,
potential  environmental  and other  liabilities,  and other factors  beyond our
control.  Such assessments are necessarily inexact and their accuracy uncertain.
In  connection  with such an  assessment,  we  perform  a review of the  subject
properties that we believe to be generally  consistent with industry  practices.
Such a review,  however, will not reveal all existing or potential problems, nor
will it  permit  us, as the  buyer,  to become  sufficiently  familiar  with the
properties  to fully  assess  their  capabilities  or  deficiencies.  We may not
inspect every well and, even when an inspection is  undertaken,  structural  and
environmental problems may not necessarily be observable.

     When  we  acquire  properties,  in  most  cases,  we are  not  entitled  to
contractual indemnification for pre-closing liabilities, including environmental
liabilities.

     We  generally  acquire  interests  in  properties  on an "as is" basis with
limited remedies for breaches of  representations  and warranties,  and in these
situations  we cannot  assure you that we will identify all areas of existing or
potential  exposure.  In  those  circumstances  in  which  we  have  contractual
indemnification  rights for pre-closing  liabilities,  we cannot assure you that
the seller will be able to fulfill its contractual obligations. In addition, the
competition to acquire producing crude oil and natural gas properties is intense
and  many  of  our  larger   competitors  have  financial  and  other  resources
substantially  greater than ours.  We cannot  assure you that we will be able to
acquire  producing crude oil and natural gas properties  that have  economically
recoverable reserves for acceptable prices.

     We  may  acquire  royalty,  overriding  royalty  or  working  interests  in
properties that are less than the controlling interest.

     In such  cases,  it is likely  that we will not  operate,  nor  control the
decisions affecting the operations,  of such properties. We intend to limit such
acquisitions  to  properties  operated by  competent  parties  with whom we have
discussed their plans for operation of the properties.

                                       11



     We will need  additional  financing  in the future to  continue to fund our
development and exploitation activities.

     We have made and will continue to make substantial capital  expenditures in
our  exploitation and development  projects.  We intend to finance these capital
expenditures with cash flow from operations,  existing financing arrangements or
new  financing.  We cannot  assure you that such  additional  financing  will be
available.  If it is not available,  our development and exploitation activities
may have to be curtailed,  which could adversely affect our business,  financial
condition and results of operations, as was the case in 2004 and 2003.

     The  marketing of our natural gas  production  depends,  in part,  upon the
availability, proximity and capacity of natural gas gathering systems, pipelines
and processing facilities.

     We could be  adversely  affected by changes in existing  arrangements  with
transporters  of our  natural  gas  since  we do not own  most of the  gathering
systems and pipelines  through which our natural gas is delivered to purchasers.
Our  ability to  produce  and market  our  natural  gas could also be  adversely
affected  by   federal,   state  and  local   regulation   of   production   and
transportation.

     The crude oil and natural gas industry is highly  competitive in all of its
phases.

     Competition  is  particularly  intense with respect to the  acquisition  of
desirable  producing  properties,  the  acquisition of crude oil and natural gas
prospects suitable for enhanced production  efforts,  the obtaining of goods and
services from industry providers,  and the hiring of experienced personnel.  Our
competitors  in  crude  oil  and  natural  gas  acquisition,   development,  and
production include the major oil companies,  in addition to numerous independent
crude  oil and  natural  gas  companies,  individual  proprietors  and  drilling
programs.

     Many of these  competitors  possess  and  employ  financial  and  personnel
resources  substantially  in excess of those which are  available to us and may,
therefore,  be able to pay more for desirable producing properties and prospects
and to define,  evaluate,  bid for, and  purchase a greater  number of producing
properties and prospects than our financial or personnel  resources will permit.
Our ability to generate  reserves in the future will be dependent on our ability
to  select  and  acquire  suitable  producing  properties  and  prospects  while
competing with these companies.

     The domestic oil industry is extensively  regulated at both the federal and
state levels.  Although we believe we are presently in compliance with all laws,
rules and regulations,  we cannot assure you that changes in such laws, rules or
regulations,  or the  interpretation  thereof,  will not have a material adverse
effect on our financial condition or the results of our operations.

     Legislation affecting the oil and gas industry is under constant review for
amendment or  expansion,  frequently  increasing  the  regulatory  burden on the
industry.  There are numerous  federal and state  agencies  authorized  to issue
rules  and  regulations  affecting  the oil and gas  industry.  These  rules and
regulations are often difficult and costly to comply with and carry  substantial
penalties for noncompliance.

     State statutes and  regulations  require  permits for drilling  operations,
drilling  bonds,  and  reports  concerning  operations.  Most  states  also have
statutes  and  regulations  governing   conservation   matters,   including  the
unitization or pooling of properties,  and the establishment of maximum rates of
production from wells. Some states have also enacted statutes  prescribing price
ceilings for natural gas sold within their states.

     Our industry is also  subject to numerous  laws and  regulations  governing
plugging and  abandonment of wells,  discharge of materials into the environment
and other matters  relating to  environmental  protection.  The heavy regulatory
burden on the oil and gas industry  increases the costs of our doing business as
an oil and gas company, consequently affecting our profitability.

     We have "blank check" preferred stock.

     Our  Articles of  Incorporation  authorize  the Board of Directors to issue
preferred stock without further  shareholder action in one or more series and to
designate  the dividend  rate,  voting rights and other rights  preferences  and
restrictions.  The issuance of preferred  stock could have an adverse  impact on
holders  of  Common   Stock.   Preferred   stock  is  senior  to  Common  Stock.
Additionally, preferred stock could be issued with dividend rights senior to the
rights of holders of Common Stock.  Finally,  preferred stock could be issued as
part of a "poison  pill",  which  could have the effect of  deterring  offers to
acquire the Company. See "Description of Securities"

                                       12


     We do not pay dividends on our Common Stock.

     Our board of directors  presently intends to retain all of our earnings for
the expansion of our business;  therefore we do not anticipate distributing cash
dividends on our Common  Stock in the  foreseeable  future.  Any decision of our
board of  directors  to pay  cash  dividends  will  depend  upon  our  earnings,
financial position, cash requirements and other factors.

     One investor controls us.

     As a result of the February 2005 preferred stock offerings,  OCMGW Holdings
("OCMGW") acquired a controlling  interest in us. OCMGW has the right to acquire
45,468,253  shares  of our  Common  Stock  pursuant  to  conversion  of Series G
Preferred  Stock  and  Series H  Preferred  Stock  owned by it which  represents
approximately  65% of the  currently  outstanding  Common  Stock,  assuming  the
conversion  of  preferred  stock held by it.  Pursuant  to the terms of Series G
Preferred Stock, the holders of the Series G Preferred Stock, voting as a class,
have the right to elect a majority of our board of  directors.  OCMGW  currently
owns approximately 95% of the Series G Preferred Stock.

     Mr. J. Virgil Waggoner, Chairman of the Board, owns 9,545,229 shares of our
Common Stock,  which represents  approximately 38% of the currently  outstanding
Common Stock. Additionally,  Mr. Waggoner has the right to acquire an additional
7,180,715  shares  pursuant to  conversion  of  preferred  stock and exercise of
currently  exercisable  warrants  and options.  Mr.  Waggoner has entered into a
Share  Transfer  Restriction  Agreement,  dated  February 28, 2005,  with OCMGW,
restricting  his transfer of shares of capital stock,  and an Irrevocable  Proxy
with respect to his stock thereby allowing OCMGW to vote such shares at any time
in favor of our  Delaware  reincorporation  or,  if the  reincorporation  is not
consummated  by December 31, 2005, in favor of the  conversion of certain of the
Series G into new  preferred  stock.  The  Irrevocable  Proxy also grants OCM GW
Holdings a proxy with additional  rights with respect to his Series H until such
time as all the Series H has converted into Common Stock.

     Additionally,  OCMGW and all  current  directors  and  officers  as a group
represent  approximately  67% of the  outstanding  voting power  (assuming  they
convert all preferred stock other than the Series G Preferred Stock and Series H
Preferred Stock, which vote on an as converted basis, and exercise all currently
exercisable  warrants  and  options  held by them).  For as long as  OCMGW,  Mr.
Waggoner and the other directors and officers continue to own over a majority of
the  outstanding  voting  power,  they will be able to control  elections to the
board of directors  that common  shareholders  are entitled to vote on and other
matters submitted to shareholders.  The percentage ownership of OCMGW, directors
and officers  could be reduced by the issuance of Common Stock on  conversion of
preferred  stock and the exercise of warrants,  although it is impossible to say
how many shares will be actually issued.

     The  holders  of our Common  Stock do not have  cumulative  voting  rights,
preemptive rights or rights to convert their Common Stock to other securities.

     We are  authorized to issue  80,000,000  shares of Common Stock,  $.001 par
value per share.  As of March 29,  2005 there were  24,897,893  shares of Common
Stock issued and outstanding.  Since the holders of our Common Stock do not have
cumulative  voting  rights,  the holder(s) of a majority of the shares of Common
Stock,  and  Series G  Preferred  Stock and Series H  Preferred  Stock (on an as
converted  basis) present,  in person or by proxy,  will be able to elect all of
the remaining members of our board of directors that the holders of the Series G
Preferred  Stock are not entitled to elect as a class.  The holders of shares of
our Common Stock do not have preemptive rights or rights to convert their Common
Stock into other securities.

     The  number  of  shares  of   outstanding   Common  Stock  could   increase
significantly as a result of the recent sale of Series G Preferred Stock sold to
OCMGW and Affiliates.

     If  all  of  the  Common  Stock  underlying  our  various  convertible  and
derivative securities, including warrants and granted employee stock options, is
issued by us,  the  number of our  outstanding  shares  of  Common  Stock  would
increase  to  approximately  103.8  million  shares.   Currently,  we  are  only
authorized to issue 80,000,000 shares of our Common Stock,  24,897,893 shares of
which are  outstanding  as of March 29, 2005.  It is  impossible to say how many
shares,  if any,  we will issue and how many  shares,  in turn,  will be resold.
However,  it is possible that our stock price could decline  significantly  as a
result of an increased number of shares being offered into the market.

                                       13



ITEM 3. Legal Proceedings.

     From time to time, we are involved in litigation relating to claims arising
out of our  operations  or from  disputes  with vendors in the normal  course of
business.  As of March 29,  2005,  we were not engaged in any legal  proceedings
that are expected,  individually or in the aggregate, to have a material adverse
effect on the Company.

ITEM 4. Submission of Matters to a Vote of Security Holders.

     We did not submit any matters to a vote of our security  holders during the
fourth quarter of the fiscal year ended December 31, 2004.

                                     PART II

ITEM 5. Market for Our Common Stock and Related Stockholder Matters.

     The high and low trading  prices for the Common  Stock for each  quarter in
2004,  2003 and 2002 are set forth below.  The trading prices  represent  prices
between dealers, without retail mark-ups,  mark-downs,  or commissions,  and may
not necessarily represent actual transactions.

                                                  High        Low
                                                 ------      ------
        2004
        ----
        First Quarter                            $ .45       $ .32
        Second Quarter                             .56         .33
        Third Quarter                              .85         .45
        Fourth Quarter                             .94         .66

        2003
        ----
        First Quarter                            $ .45       $ .42
        Second Quarter                             .47         .35
        Third Quarter                              .47         .43
        Fourth Quarter                             .47         .32

        2002
        ----
        First Quarter                            $ .66       $ .55
        Second Quarter                             .60         .46
        Third Quarter                              .51         .20
        Fourth Quarter                             .44         .32

Common Stock.

     We are  authorized  to issue up to 80,000,000  shares of Common Stock,  par
value $.001 per share.  As of March 29, 2005,  there were  24,897,893  shares of
Common Stock issued and  outstanding  and held by  approximately  620 beneficial
owners.  Our  Common  Stock is traded  over-the-counter  (OTC)  under the symbol
"GULF.OB". Fidelity Transfer Company, 1800 South West Temple, Suite 301, Box 53,
Salt Lake City, Utah 84115,  (801) 484-7222 is the transfer agent for the Common
Stock.

     Holders of Common Stock are entitled,  among other things,  to one vote per
share on each matter  submitted to a vote of  shareholders  and, in the event of
liquidation,  to share ratably in the  distribution  of assets  remaining  after
payment of liabilities (including preferential  distribution and dividend rights
of holders of  preferred  stock).  Holders  of Common  Stock have no  cumulative
rights.  The holders of a majority of the outstanding shares of the Common Stock
and Series G and H (on an as  converted  basis) have the ability to elect all of
the  directors  that the Series G does not elect.  As of February 28, 2005,  the
holders  of the  Series G  Preferred  Stock  were  granted  the right to elect a
majority of our Board of Directors.

                                       14



     Holders of Common Stock have no preemptive or other rights to subscribe for
shares.  Holders  of  Common  Stock are  entitled  to such  dividends  as may be
declared by the Board out of funds legally  available  therefore.  We have never
paid cash  dividends on the Common Stock and do not  anticipate  paying any cash
dividends in the foreseeable future.

Preferred Stock.

     Our board of directors is authorized,  without further  shareholder action,
to issue  preferred  stock in one or more series and to  designate  the dividend
rate, voting rights and other rights,  preferences and restrictions of each such
series. Our preferred stock is senior to our Common Stock regarding liquidation.
The holders of the  preferred  stock do not have voting  rights  (except for the
Series G and Series H Preferred Stock holders as discussed  below) or preemptive
rights, nor are they subject to the benefits of any retirement or sinking fund.

     As of December  31, 2004,  there was a total of 25,290  shares of preferred
stock  issued and  outstanding  in four  series:  Series A, D, E and F Preferred
Stock.

     In a  subsequent  event,  the  holders of 340 shares our Series F Preferred
Stock converted to an aggregate 170,000 shares of Common Stock.

     The  Series D  Preferred  Stock is not  entitled  to  dividends,  nor is it
redeemable,  however it is convertible to Common Stock at anytime based on $8.00
per share of Common Stock.  The 8,000  outstanding  shares of Series D Preferred
Stock  are held by a former  director  and none has been  converted.  On a fully
converted  basis,  the 8,000 shares of Series D Preferred Stock would convert to
500,000 shares of Common Stock.

     The Series E Preferred  Stock is entitled to receive  dividends at the rate
of 6% per share per  annum,  which may be  deferred  for the next four years and
those deferred dividends will be convertible into Common Stock at the conversion
price of $.90 per share of Common Stock.  The conversion  price for the Series E
Preferred  Stock is based on $2.00  per  share of  Common  Stock.  The  Series E
Preferred Stock is held by a director and none of the 9,000  outstanding  shares
has been redeemed or converted.  On a fully converted basis, the 9,000 shares of
Series E Preferred Stock would convert to 2,250,000  shares of Common Stock. The
Series  E  Preferred  Stock  has an  aggregate  liquidation  preference  of $4.5
million,  and is senior to all of our Common Stock and of equal  preference with
our Series D  Preferred  Stock and junior to our  Series G  Preferred  Stock and
Series H Preferred Stock.

     In a subsequent  event,  on February 28, 2005, we sold 81,000 shares of our
Series G  Preferred  Stock to OCMGW  for an  aggregate  offering  price of $40.5
million in a private  placement.  In addition,  our subsidiary,  GOGC sold 2,000
shares of its Series A Preferred Stock, having a liquidation  preference of $1.0
million, to OCMGW for $1.5 million in a private placement.

     The  Series G  Preferred  Stock  bears a  coupon  of 8% per year and has an
aggregate  liquidation  preference  of $40.5  million.  For the first four years
after issuance,  we may defer the payment of dividends on the Series G Preferred
Stock and these  deferred  dividends  will also be  convertible  into our Common
Stock at $0.90 per share. In addition,  the Series G Preferred Stock is entitled
to vote on an as-converted  basis with the holders of our Common Stock and, as a
class,  is entitled to nominate and elect a majority of the members of the Board
of  Directors  of  GulfWest.  The Series G  Preferred  Stock is senior to all of
GulfWest's outstanding capital stock in liquidation preference.

     In  connection  with the  above  transactions,  the  terms of our  Series A
Preferred  Stock have been amended  such that by March 15, 2005,  all such stock
would either convert into a newly created Series H Preferred  Stock on a one for
one basis or into Common  Stock at a  conversion  price of $0.35 per share.  The
Series H  Preferred  Stock is  required  to be paid a  dividend  of 40 shares of
Common  Stock per Series H Preferred  Stock  share per year.  In  addition,  the
Series H Preferred Stock is convertible  into Common Stock at a conversion price
of $0.35 per  share.  At March 15,  2005,  holders  of 6,700  shares of Series A
Preferred Stock converted to Series H Preferred Stock, one of which subsequently
converted his 200 shares to 285,715 shares of Common Stock, and holders of 3,250
shares of Series A Preferred Stock converted to an aggregate 4,642,859 shares of
Common Stock. The Series H Preferred Stock has an aggregate liquidation value of
$3.35  million and is senior to all of GulfWest's  outstanding  capital stock in
liquidation  preference other than its Series G Preferred Stock. (See discussion
in Note 2  "Operations  and  Management  Plans"  on page  F-16 of the  Financial
Statements).

                                       15



Outstanding Options and Warrants.

     At December 31, 2004, we had  outstanding  employee  stock  options,  fully
vested under our 1994 and 2004 Stock Option and Compensation  Plans, to purchase
1,949,000  shares of Common Stock at prices ranging from $.45 to $1.81 per share
and warrants to purchase 4,000,621 shares of Common Stock at prices ranging from
$.01 to $.75 per share.  In conjunction  with the subsequent  financing event on
February 28, 2005, we established  our 2005 Stock  Incentive Plan and authorized
the issuance of 27 million  shares of Common Stock  pursuant to awards under the
plan, 16,200,000 shares of which were granted on that date.

Recent Sales of Unregistered Securities.

     As shown in the table that  follows,  during 2004 and to March 29, 2005, we
sold  preferred  stock  convertible  to Common  Stock not  registered  under the
Securities Act of 1933, as amended, and exempt under Section 4(2) of the Act. No
underwriters  were used, and no underwriting  discounts or commissions were paid
in connection with the sales.

                                                Exercise/
                                                ---------
                                   Underlying   Conversion
                                   ----------   ----------
  Date    Derivative   Holder(s)     Shares       Price      Consideration
--------  ----------  ----------     ------       -----      -------------
04/27/04  Preferred   Accredited
          Stock       Investors    11,428,571      $ .35     $  4,000,000
 1/10/05  Warrants    Accredited
                      Investors        50,000      $ .01     $    200,000 Loan
 1/21/05  Common      Accredited
          Stock       Investors        29,100        N/A     Loan Extension
02/28/05  Preferred   Accredited
          Stock       Investors    47,857,143      $ .90     $ 42,000,000

     Please see item 1.  Business-  Financial  Recapitalization  for  additional
information.

                                       16



ITEM 6. Selected Financial Data.

     The following  table sets forth selected  historical  financial data of our
company as of December 31, 2004,  2003, 2002, 2001 and 2000, and for each of the
periods then ended. See "Item 1. Business" and "Item 7. Management's  Discussion
and  Analysis of  Financial  Condition  and Results of  Operations."  The income
statement  data for the years ended  December  31,  2004,  2003 and 2002 and the
balance  sheet data at December  31, 2004 and 2003 are derived  from our audited
financial  statements  contained elsewhere herein. The income statement data for
the  years  ended  December  31,  2001 and 2000 and the  balance  sheet  data at
December 31, 2002, 2001 and 2000 are derived from our Annual Report on Form 10-K
for  those  periods.   You  should  read  this  data  in  conjunction  with  our
consolidated  financial  statements  and the notes  thereto  included  elsewhere
herein.


                                                                            
                               ------------------------------------------------------------------------
                                                       Year Ended December 31,
                                   2004           2003           2002           2001           2000
                               -------------  -------------  -------------  -------------  ------------
Income Statement Data
---------------------

Operating Revenues             $ 11,207,673   $ 11,010,723   $ 10,839,797   $ 12,990,581   $ 8,984,175
Net income (loss) from
 operations                       1,557,815        558,774        310,290      3,451,875     2,464,017
Net income (loss)                 8,072,221     (3,024,426)    (4,502,313)     1,044,291       352,774
Dividends on preferred stock       (455,612)      (127,083)      (112,500)       (56,250)            -
Net income (loss) available to
 common shareholders              7,761,863     (3,151,509)    (4,614,813)       988,401       352,774
Net income (loss), per share
 of Common Stock               $        .41   $       (.17)  $       (.25)  $        .05   $       .02
Weighted average number
 of shares of common
 stock outstanding               18,535,022     18,492,541     18,492,541     18,464,343    17,293,848

Balance Sheet Data
------------------

Current assets                 $  2,214,542   $  1,742,689   $  2,353,046   $  2,205,862   $ 2,934,804
Total assets                     57,700,891     52,428,774     53,088,941     51,379,209    32,374,128
Current liabilities              35,568,417     44,619,652     43,998,566     12,492,365     7,594,986
Long-term obligations             1,950,300      1,393,607        137,808     26,541,957    18,077,371
Other liabilities                 1,505,527        591,467      1,128,993              -             -
Stockholders' Equity           $ 18,676,643   $  5,824,648   $  7,823,574   $ 12,344,887   $ 6,701,771


ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

Overview.

     We are primarily engaged in the acquisition,  development, exploitation and
production  of crude oil and natural  gas,  primarily  in the onshore  producing
regions of the United  States.  Our focus is on increasing  production  from our
existing properties through further  exploitation,  development and exploration,
and on acquiring  additional  interests in undeveloped crude oil and natural gas
properties. Our gross revenues are derived from the following sources:

     1.   Oil and gas  sales  that are  proceeds  from the sale of crude oil and
          natural gas production to midstream purchasers;

     2.   Operating  overhead and other income that  consists of  administrative
          fees received for operating  crude oil and natural gas  properties for
          other working  interest  owners,  and for  marketing and  transporting
          natural gas for those owners.  This also includes  earnings from other
          miscellaneous activities.

                                       17



     3.   Well  servicing  revenues that are earnings from the operation of well
          servicing  equipment under contract to other  operators.  During 2004,
          our well servicing equipment was used only for our own account.

     The following is a discussion of our  consolidated  results of  operations,
financial  condition and capital  resources.  You should read this discussion in
conjunction  with our  Consolidated  Financial  Statements and the Notes thereto
contained elsewhere herein.

Results of Operations.

     The factors which most  significantly  affect our results of operations are
(1) the sales price of crude oil and natural  gas,  (2) the level of total sales
volumes of crude oil and natural gas, (3) the cost and  efficiency  of operating
our own properties, (4) depletion and depreciation of oil and gas property costs
and related equipment (5) the level of and interest rates on borrowings, (6) the
level and success of acquiring  or finding new  reserves,  and the  acquisition,
finding and  development  costs incurred in adding these  reserves,  and (7) the
adoption of changes in accounting rules.

     We  consider  depletion  and  depreciation  of oil and gas  properties  and
related  support  equipment  to be  critical  accounting  estimates,  based upon
estimates of total recoverable oil and gas reserves.

     The  estimates  of oil and gas  reserves  utilized  in the  calculation  of
depletion  and   depreciation   are  estimated  in  accordance  with  guidelines
established  by  the  (engineering  standards  reference),  the  Securities  and
Exchange Commission and the Financial  Accounting Standards Board, which require
that  reserve  estimates  be prepared  under  existing  economic  and  operating
conditions  with no  provision  for price and cost  escalations  over prices and
costs existing at year end, except by contractual arrangements.

     We emphasize that reserve estimates are inherently imprecise.  Accordingly,
the  estimates  are  expected  to change  as more  current  information  becomes
available.  Our policy is to amortize  capitalized oil and gas costs on the unit
of  production  method,  based upon these  reserve  estimates.  It is reasonably
possible that the estimates of future cash inflows,  future gross revenues,  the
amount of oil and gas reserves, the remaining estimated lives of the oil and gas
properties,  or any  combination of the above may be increased or reduced in the
near term. If reduced, the carrying amount of capitalized oil and gas properties
may be reduced materially in the near term.

     Comparative  results of operations for the periods  indicated are discussed
below.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenues

     Oil and Gas Sales.  Our  operating  revenues from the sale of crude oil and
natural gas increased by 2% from  $10,844,000  in 2003 to  $11,101,000  in 2004.
Revenue  increases  due  to  higher  oil  and  natural  gas  sales  prices  were
substantially offset by a 17% decrease in sales volumes, 12% of which was due to
normal oil and gas production declines and 5% due to property sales.

     Operating  Overhead  and  Other  Income.  Revenues  from  these  activities
decreased 36% from $166,000 in 2003 to $107,000 in 2004,  primarily due to (1) a
one time $58,000  contract  settlement  received in 2003, and (2) lower pipeline
volumes resulting in less transportation revenue.

Costs and Expenses

     Lease  Operating  Expenses.  Lease  operating  expenses  decreased 12% from
$5,528,000 in 2003 to $4,880,000 in 2004, 5% was due to lower  variable costs on
lower production volumes and 7% due to property sales. On a per BOE basis, costs
increased  from $13.16 in 2003 to $14.10 per BOE in 2004 because of lower volume
and higher vendor prices.

     Depreciation, Depletion and Amortization (DD & A). DD & A decreased 2% from
$2,226,000 in 2003 to $2,185,000 in 2004, due to lower production  volumes. On a
per BOE basis,  the DD & A rate increased from $5.30 in 2003 to $6.31 per BOE in
2004 due to higher than anticipated development costs.

                                       18



     The cost of Dry Holes,  Abandoned  Property and Impaired  Assets expense in
2004 was $453,000 (abandoned- $391,000; impaired- $62,000), compared to $359,000
(dry holes- $70,000; abandoned $289,000) in 2003. The abandoned property was due
to a lack of capital to complete projects resulting in the loss of leases.

     General and  Administrative (G & A) Expenses.  G & A expenses decreased 11%
from  $2,262,000 in 2003 to $2,019,000 in 2004 due to expenses  incurred in 2003
associated with financing efforts that were not culminated.

     Interest Income and Expense. Interest expense increased 24% from $3,363,000
in 2003 to $4,154,000  in 2004.  In April 2004 we retired debt of  approximately
$27.6 million  carrying an interest rate of prime plus 3.5% and replaced it with
debt of approximately  $18.0 million that carries an interest rate of prime plus
11.0%. Also,  included in 2004 is non cash interest expense of approximately $.4
million resulting from the discounting on a note payable issued in 2004.

     Other Financing Costs.  Other financing costs increased 47% from $1,000,000
in 2003 to  $1,472,000 in 2004. In 2003, we recorded an expense of $1,000,000 to
account for the issuance of 2,000 shares of our preferred  stock in  conjunction
with the financial  agreement on the retired debt referred to above. The expense
in 2004  represents  the  amortized  portion  of loan fees  associated  with the
refinancing of debt referred to above.

     Unrealized Gain (Loss) on Derivative Instruments. The estimated future fair
value of  derivative  instruments  at December 31, 2004 resulted in an estimated
unrealized loss of $1,506,000 in 2004 compared to an unrealized gain of $537,000
in 2003. Estimated unrealized gain/ loss on oil and gas price hedges in place on
a particular balance sheet date is based on a "mark to market" calculation based
on a market  price  forecast  on the balance  sheet date  compared to the prices
provided for in the derivative instruments.

     Loss on Sale of  Property  and  Equipment.  We  recorded  a loss on sale of
property and equipment of $2,034,000 in 2004 as compared to $20,000 in 2003. See
Note 3 to the Financial Statements.

     Accretion  Expense.  Accretion expense decreased 6% from $77,000 in 2003 to
$72,000 in 2004 due to sales of oil and gas properties.

     Forgiveness  of Debt.  In 2004 we had  $12,476,000  in debt forgiven as the
result of debt refinancing in April, 2004.

     Dividends on Preferred  Stock.  In 2004, a dividend on preferred  stock due
was $456,000.  In 2003 dividends on preferred stock due was $127,000.  The board
of directors did not declare any dividends be paid.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenues

     Oil and Gas Sales.  Our  operating  revenues from the sale of crude oil and
natural gas increased by 4% from  $10,447,000  in 2002 to  $10,844,000  in 2003.
This  increase  was due to higher  sales  prices,  offset by normal  oil and gas
production declines and resulting in lower production volumes. We were unable to
offset those declines and maintain or increase  production  through  development
efforts because of limited development capital.

     Well  Servicing  Revenues.  There were no revenues from our well  servicing
operations in 2003 compared to $39,000 in 2002 since we ceased  performing  work
for other operators and concentrated on our own properties.

     Operating  Overhead  and  Other  Income.  Revenues  from  these  activities
decreased  53% from  $354,000 in 2002 to $166,000 in 2003,  primarily due to (1)
the loss of an oil and gas  marketing  contract and (2) lower  pipeline  volumes
resulting in less transportation revenue.

Costs and Expenses

     Lease Operating Expenses. Lease operating expenses increased 2% from
$5,430,000 in 2002 to $5,528,000 in 2003 due to increased vendor prices.

                                       19



     Cost of Well Servicing Operations. There were no well servicing expenses in
2003 compared to $56,000 in 2002 since we did not work for other operators.

     Depreciation,  Depletion  and  Amortization  (DD & A). DD & A decreased 17%
from $2,698,000 in 2002 to $2,226,000 in 2003, due to lower production  volumes.
We also recorded in other income  $262,000  related to the cumulative  effect of
adopting SFAS 143 "Asset Retirement Obligations".

     Dry Holes,  Abandoned  Property and Impaired Assets.  The cost of abandoned
property in 2003 was $359,000  because the lack of capital to complete  projects
resulted in the loss of leases.  This  compared to combined  costs of dry holes,
abandoned property and impaired assets of $617,000 in 2002.

     General and  Administrative (G and A) Expenses.  G and A expenses increased
31% from  $1,728,000 in 2002 to  $2,262,000  in 2003 due to expenses  associated
with financing efforts that were not culminated.

     Interest Income and Expense.  Interest expense increased 6% from $3,159,000
in 2002 to $3,363,000 in 2003 due to penalty interest paid to our largest lender
under a provision in the loan agreement.

     Other  Financing  Costs.  In 2003,  we recorded an expense of $1,000,000 to
account for the failed  issuance of 2,000 shares of our  preferred  stock to our
largest lender under a financial agreement.

     Unrealized Gain (Loss) on Derivative Instruments. The estimated future fair
value of derivative  instruments  at December 31, 2003 resulted in an unrealized
gain of $537,000 in 2003 compared to an unrealized loss of $1,597,000 in 2002.

     Loss on Sale of  Property  and  Equipment.  We  recorded  a loss on sale of
property and  equipment  of $20,000 in 2003 as compared to $57,000 in 2002.  See
Note 3 to the Financial Statements.

     Accretion Expense. We recorded accretion expenses of $77,000 as a result of
adapting SPAS 143 "Asset Retirement Obligations", effective January 1, 2003.

     Dividends on Preferred Stock. In 2003, dividends due on preferred stock due
was $127,000, however the board of directors did not declare any dividends to be
paid.  In 2002,  dividends on  preferred  stock due was  $112,000,  and paid was
$112,000.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues

     Oil and Gas Sales.  Our  operating  revenues from the sale of crude oil and
natural gas decreased by 16% from  $12,426,000  in 2001 to  $10,447,000 in 2002.
This  decrease  resulted  from normal oil and gas  production  declines  and the
inability  to offset  those  declines  through  development  efforts  because of
limited development capital.

     Well  Servicing  Revenues.  Revenues  from  our well  servicing  operations
decreased by 77% from $169,000 in 2001 to $39,000 in 2002. This decrease was due
to  performing  less work for third  parties and the sale of one of our workover
rigs.

     Operating  Overhead  and  Other  Income.  Revenues  from  these  activities
decreased 10% from  $395,000 in 2001 to $354,000 in 2002,  primarily as a result
of the termination of a gas transportation sales contract with a local utility.

Costs and Expenses

     Lease Operating Expenses. Lease operating expenses increased 5% from
$5,155,000 in 2001 to $5,430,000 in 2002 due to increased vendor prices.

     Cost of Well Servicing  Operations.  Well servicing  expenses decreased 69%
from  $182,000  in 2001 to $56,000 in 2002 due to less work  under  contract  to
third parties and the sale of one workover rig.

                                       20



     Depreciation, Depletion and Amortization (DD & A). DD & A increased 8% from
$2,491,000  in 2001 to  $2,698,000  in 2002,  due to our proved  reserves  being
calculated slightly lower at the end of 2001.

     Dry Holes, Abandoned Property,  Impaired Assets. The costs of a dry hole in
Louisiana of $339,000,  abandoned  property in Oklahoma of $222,000 and impaired
assets in  Mississippi of $55,000  totaled  $617,000 in 2002 compared to none in
2001.

     General and Administrative (G & A) Expenses.  G & A expenses increased only
slightly from $1,710,000 in 2001 to $1,728,000 in 2002.

     Interest Income and Expense. Interest expense increased 15% from $2,757,000
in 2001 to $3,159,000 in 2002 due to increased debt  associated with the funding
of acquisitions  in August,  2001,  capital used in our development  program and
issuance of warrants associated with working capital loans.

     Unrealized Gain (Loss) on Derivative Instruments. The estimated future fair
value of derivative  instruments  at December 31, 2002 resulted in an unrealized
loss of $1,597,000 in 2002 compared to an unrealized gain of $4,215,000 in 2001.
Also in 2001, an unrealized  loss of  $3,747,000,  resulting from the cumulative
effect of adopting SFAS No. 133 "Accounting for Derivative Instruments and Other
Hedging Activities," was recorded.

     Loss on Sale of  Property  and  Equipment.  We  recorded  a loss on sale of
property and  equipment of $57,000 in 2002 as compared to $118,000 in 2001.  See
Note 3 to the Financial Statements.

     Dividends  on  preferred  stock due was  $112,000  and paid was $112,000 in
2002. Dividends on preferred stock due was $56,000 and paid was $28,000 in 2001.

Contractual Obligations

     Our obligations as of December 31, 2004, under contractual obligations with
maturities exceeding one year, were as follows:


                                                                  
                                                                                        More than 5
                    Total          2005          2006        2007        2008    2009      years
                -------------  -------------  ----------  ----------  ---------  -----  ------------
Long-term debt
 obligations    $ 23,603,897   $ 22,798,447   $ 506,565   $ 286,673   $ 12,212   $  -   $         -
Operating lease
 obligations         302,279        132,979     135,323      33,977          -      -             -
Asset retirement
 obligations       1,144,854              -           -      49,034     20,989      -     1,074,831
                -------------  -------------  ----------  ----------  ---------  -----  ------------
                $ 25,051,030   $ 22,931,426   $ 641,888   $ 369,684   $ 33,201   $  -   $ 1,074,831
                =============  =============  ==========  ==========  =========  =====  ============


Financial Condition and Capital Resources.

     At December 31, 2004, our current  liabilities  exceeded our current assets
by $33,353,875,  primarily because of the classification of approximately  $29.6
million of Company debt as current.  Substantially all of that debt was paid off
in  conjunction  with the  February  28,  2005  investment  by  Oaktree  Capital
Management  (see  below).  We had income  available  to common  shareholders  of
$7,616,609  compared to a loss available to common shareholders of $3,151,509 at
December 31, 2003.

     On April 27, 2004, we completed an $18,000,000  financing  package with new
energy lenders. We used $15,700,000 in net proceeds from the financing to retire
existing debt of  $27,584,145,  resulting in forgiveness of debt of $12,475,612,
the elimination of a hedging liability and the return to the Company of Series F
Preferred  Stock with an aggregate  liquidation  preference of $1,000,000  (this
preferred stock, at the request of the Company,  was transferred by the previous
lender to a financial  advisor to the Company  and to two  companies  affiliated
with two  directors of the Company in  satisfaction  of Company  obligations  to
them. (See "Certain Relationships and Related  Transactions.") This taxable gain
resulting  from these  transactions  will be completely  offset by available net
operating  loss  carryforwards.  The term of the note is eighteen  months and it
bears interest at the prime rate plus 11%. This rate increases by .75% per month
beginning in month ten. We paid the new lenders $1,180,000 in cash fees and also
issued  them  warrants to purchase  2,035,621  shares of our Common  Stock at an
exercise  price of $.01 per share,  expiring in five  years.  The  warrants  are
subject to  anti-dilution  provisions.  In  connection  with the  February  2005
transactions  described  below, the  anti-dilution  provisions were amended such
that  additional  issuances of stock (other than issuances to all holders) would
not trigger an adjustment to the number of shares  issuable upon exercise of the
warrants.

                                       21



     On January 7, 2005,  we amended our April 2004 credit  agreement  to extend
the target date for repayment to February 28, 2005. We exercised  this option on
January 26, 2005. We issued 29,100 shares of our common stock in connection with
this amendment.

     In a  subsequent  event,  on  February  28,  2005,  we  sold  in a  private
placement,  81,000  shares  of our  Series G  Preferred  Stock  to OCMGW  for an
aggregate offering price of $40.5 million.  GOGC issued, in a private placement,
2,000 shares of our Series A Preferred Stock, having a liquidation preference of
$1.0  million,  to OCMGW for $1.5  million.  Net  proceeds of the  offerings  of
approximately  $38 million  after  expenses are being used for the  repayment of
substantially all of our outstanding debt and other past due liabilities and for
general corporate purposes.

     The  Series  G  Preferred  Stock  bears a  coupon  of 8% per  year,  has an
aggregate liquidation  preference of $40.5 million, is convertible in the Common
Stock at $0.90 per share and is  senior  to all of our  capital  stock.  For the
first four years after  issuance,  we may defer the payment of  dividends on the
Series G Preferred  Stock and these deferred  dividends will also be convertible
into our Common Stock at $0.90 per share.  In  addition,  the Series G Preferred
Stock is entitled  to nominate  and elect a majority of the members of the Board
of Directors of GulfWest.

     In connection with these transactions,  the terms of the Series A Preferred
Stock have been amended such that by March 15, 2005, all such stock would either
convert into a newly created Series H Preferred  Stock on a one for one basis or
into  Common  Stock at a  conversion  price of $0.35  per  share.  The  Series H
Preferred  Stock is required to be paid a dividend of 40 shares of Common  Stock
per  share of Series H  Preferred  Stock per year.  In  addition,  the  Series H
Preferred Stock is convertible  into Common Stock at a conversion price of $0.35
per share.  At March 15,  2005,  holders of 6,700  shares of Series A  Preferred
Stock  converted  to Series H  Preferred  Stock and  holders of 3,250  shares of
Series A Preferred  Stock converted to an aggregate  4,642,859  shares of Common
Stock.  One Series H Preferred  Stock  holder  converted  its shares of Series H
Preferred  Stock to 285,715  shares of Common Stock.  The  outstanding  Series H
Preferred Stock has an aggregate  liquidation  preference of $3.250 million. The
Series H Preferred Stock is senior to all of our capital stock other than Series
G Preferred Stock.

     In addition, we amended the terms of our 9,000 shares of Series E Preferred
Stock such that the coupon of 6% per year they bear may be deferred for the next
four years and these deferred dividends will be convertible into Common Stock at
conversion price of $0.90 per share. The initial  liquidation  preference of the
Series E Preferred Stock of $500 per share remains convertible into Common Stock
at $2.00 per share.  The Series E Preferred  Stock has an aggregate  liquidation
preference of $4.5 million,  and is senior to all of our Common Stock,  of equal
preference with our Series D Preferred Stock as to liquidation and junior to our
Series G Preferred Stock and H.

Inflation and Changes in Prices.

     While the general level of inflation  affects certain costs associated with
the petroleum  industry,  factors  unique to the industry  result in independent
price  fluctuations.  Such price  changes have had, and will  continue to have a
material   effect  on  our   operations;   however,   we  cannot  predict  these
fluctuations.

     The following  table indicates the average crude oil and natural gas prices
received over the last three years by quarter.  Average prices per barrel of oil
equivalent,   computed  by  converting  natural  gas  production  to  crude  oil
equivalents  at the rate of 6 Mcf per barrel,  indicate the composite  impact of
changes in crude oil and natural gas prices.

                                    Average Prices(1)
                         ------------------------------------
                                  Crude Oil Per
                            And        Natural     Equivalent
                          Liquids        Gas         Barrel
                         ---------    ---------    ----------
                         (per Bbl)    (per Mcf)
2004
----
First                     $ 27.97      $  4.87      $ 28.59
Second                      30.41         5.34        31.18
Third                       32.72         5.44        33.36
Fourth                      35.32         5.97        35.58

2003
----
First                     $ 24.53      $  5.36      $ 28.08
Second                      23.53         4.47        25.04
Third                       23.85         4.32        24.86
Fourth                      24.99         4.56        25.02

2002
----
First                     $ 19.40      $  2.81      $ 18.31
Second                      20.75         3.16        19.83
Third                       22.04         2.87        19.67
Fourth                      22.38         3.56        22.11

------------------
(1)  Average sales price are shown net of the settled amounts of our oil and gas
     hedge contracts.

                                       22



ITEM 7a. Qualitative and Quantitative Disclosures About Market Risk.

     The following  market rate  disclosures  should be read in conjunction with
our financial  statements and notes thereto beginning on Page F-1 of this Annual
Report. All of our financial instruments are for purposes other than trading. We
only enter into derivative financial instruments in conjunction with our oil and
gas sales price hedging activities.  Hypothetical  changes in interest rates and
prices chosen for the following stimulated sensitivity effects are considered to
be reasonably  possible  near-term  changes  generally based on consideration of
past  fluctuations  for each risk  category.  It is not  possible to  accurately
predict future changes in interest rates and product prices. Accordingly,  these
hypothetical changes may not be an indicator of probable future fluctuations.

Interest Rate Risk

     We are exposed to interest rate risk on debt with variable  interest rates.
At December 31, 2004, we carried  variable rate debt of $30,189,455.  Assuming a
one percentage  point change at December 31, 2004 on our variable rate debt, the
annual pretax net income or loss would change by $301,895.

Commodity Price Risk

     In the past we have entered into, and may in the future enter into, certain
derivative  arrangements  with  respect to  portions  of our oil and natural gas
production to reduce our sensitivity to volatile commodity prices.  During 2004,
2003,  and 2002, we entered into price swaps and put  agreements  with financial
institutions.  We believe that these derivative arrangements,  although not free
of risk, allow us to achieve a more predictable cash flow and to reduce exposure
to price fluctuations.  However, derivative arrangements limit the benefit to us
of  increases  in the prices of crude oil and natural gas sales.  Moreover,  our
derivative  arrangements  apply only to a portion of our  production and provide
only partial price protection  against declines in price.  Such arrangements may
expose us to risk of financial loss in certain circumstances. We expect that the
monthly  volume of  derivative  arrangements  will  vary  from time to time.  We
continuously reevaluate our price hedging program in light of market conditions,
commodity price forecasts,  capital spending and debt service requirements.  The
following  hedges were in place at December 31, 2004 or were added subsequent to
that date and are effective for the periods shown.


                                                 
          Crude Oil                         Volume/ Month         Average Price/ Unit
          ---------                         -------------         -------------------
January 2005 thru October 2005     Swap      10,000 Bbls                $32.00
April  2005 thru June 2005         Swap       2,000 Bbls                $56.50
July 2005 thru October 2005        Swap       1,000 Bbls                $56.50
November & December 2005           Swap      11,000 Bbls                $56.50
January 2006 thru March 2006      Collar     10,000 Bbls      Floor $50.00-$59.00 Ceiling
April 2006 thru December 2006     Collar      9,000 Bbls      Floor $50.00-$59.00 Ceiling
January 2007 thru December 2007   Collar      3,000 Bbls      Floor $45.00-$59.45 Ceiling

          Natural Gas                       Volume/ Month         Average Price/ Unit
          -----------                       -------------         -------------------
January 2005 thru October 2005     Swap      60,000 MMBTU                $5.15
April  2005 thru June 2005         Swap      20,000 MMBTU                $7.45
July 2005 thru October 2005        Swap      10,000 MMBTU                $7.45
November & December 2005           Swap      70,000 MMBTU                $7.45
January 2006 thru December 2006   Collar     70,000 MMBTU      Floor $6.00-$8.25 Ceiling
January 2007 thru December 2007   Collar     20,000 MMBTU      Floor $6.00-$6.95 Ceiling


                                       23



     These volumes represent  approximately 75% of the estimated production (for
both oil and natural gas) on currently producing properties for the remainder of
2005 and for 2006 and approximately 30% of estimated production for 2007.

     We also had, at December 31, 2004,  the following puts options in place for
the months  reflected.  These contracts were terminated in conjunction  with the
new swap and cost-less collars added in March 2005.


                                                      
          Crude Oil                     Monthly Volume           Price per Bbl
          ---------                     --------------           -------------
November 1, 2005 to April 30, 2006        7,000 Bbls               $25.75 put
May 1, 2006 to October 31, 2006           6,000 Bbls               $25.75 put
November 1, 2006 to April 30, 2007        5,000 Bbls               $25.75 put

          Natural Gas                   Monthly Volume          Price per MMBTU
          -----------                   --------------          ---------------
November 1, 2005 to April 30, 2006       50,000 MMBTU               $4.50 put
May 1, 2006 to October 31, 2006          40,000 MMBTU               $4.50 put
November 1, 2006 to April 30, 2007       30,000 MMBTU               $4.50 put


     Effective  January  1,  2001,  we  adopted  SFAS No.  133  "Accounting  for
Derivative Instruments and Other Hedging Activities", as amended by SFAS No. 137
and No. 138. As a result of a financing agreement with an energy lender, we were
required to enter into an oil and gas hedging  agreement with the lender. It has
been  determined this agreement meets the definition of SFAS 133 "Accounting for
Derivative  Instruments  and  Hedging  Activities"  and  is  accounted  for as a
derivative instrument.

     The estimated  change in fair value of the derivatives is reported in Other
Income and Expense as  unrealized  (gain) loss on  derivative  instruments.  The
estimated  fair  value  of the  derivatives  as of the  balance  sheet  dates is
reported in Other Assets (or Other Liabilities) as derivative instruments.

     Oil and gas sales are adjusted for gains or losses related to the effective
portion of hedging  transactions  as the underlying  hedged  production is sold.
Changes in fair value of the  ineffective  portion of  designated  hedges or for
derivative  arrangements  that do not  qualify as hedges are  recognized  in the
consolidated  statement of income as derivative gain or loss. Adjustments to oil
and gas sales  realized from our hedging  activities  resulted in a reduction in
revenues  of  $1,841,209,  $1,496,303  and  $368,776  in 2004,  2003  and  2002,
respectively.  In addition, we accrued an unrealized  gain/(loss) on derivatives
of ($1,505,527), $537,526 and ($1,596,575) in 2004, 2003 and 2002, respectively,
for the fair value of the hedges at each balance  sheet date.  See Note 1 to our
Consolidated  Financial Statements included in this Annual Report for additional
discussion on derivative instruments.

     All hedges which were in existence at March 31, 2004 were  canceled as part
of our debt  restructuring  on April 27,  2004.  As of December  31,  2004,  new
derivative  instruments  in  place  had an  estimated  liability  fair  value of
$1,505,527.  A hypothetical change in oil and gas prices could have an effect on
oil and gas futures  prices,  which are used to  estimate  the fair value of our
derivative instruments. However, it is not practicable to estimate the resultant
change, if any, in the future fair value of our derivative instruments.

     More  generally,  dramatic  price  volatility  in the  natural  gas and oil
markets has existed the past several  years.  In fact, the average quoted prices
for natural gas hovered  around the low levels of $2.10 per MCf in January 2002,
with  the  expectation  of  further  decreases.   However,   the  market  prices
dramatically  reversed  in the  summer  months  of 2002  and have  continued  to
increase

                                       24



ITEM 8. Financial Statements and Supplementary Data.

     Information  with  respect  to this Item 8 is  contained  in our  financial
statements beginning on Page F-1 of this Annual Report.

ITEM 9. Changes In and Disagreements With Accountants and Accounting and
        Financial Disclosure.

     None

ITEM 9A. Controls and Procedures

     At the end of 2004,  our  President,  Chief  Executive  Officer  and  Chief
Financial Officer evaluated the effectiveness of the design and operation of our
disclosure  controls  and  procedures  pursuant  to Rule  13a-15  (b)  under the
Securities  Exchange Act of 1934, as amended ("the  Exchange  Act").  Based upon
this  evaluation,  they concluded  that,  subject to the  limitations  described
below,  the  Company's  disclosure  controls  and  procedures  offer  reasonable
assurance  that the  information  required to be disclosed by the Company in the
reports it files under the Exchange Act is recorded,  processed,  summarized and
reported within the time periods specified in the rules and forms adopted by the
Securities and Exchange Commission.

     During the period  covered by this report,  there has been no change in the
Company's internal controls over financial  reporting that materially  affected,
or is reasonably likely to materially affect, these controls.

     Limitations on the Effectiveness of Controls. Our management, including the
President,  Chief Executive Officer and Chief Financial Officer, does not expect
that the Company's disclosure controls and procedures will prevent all error and
all fraud.  A well  conceived and operated  control system is based in part upon
certain  assumptions  about the likelihood of future events and can provide only
reasonable,  not absolute,  assurance that the objectives of the control systems
are met.  Further,  the design of a control  system  must  reflect the fact that
there are resource constraints,  and the benefits of controls must be considered
relative to their costs.


                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant.

     Information regarding directors and executive officers of the registrant is
incorporated  herein by reference to our Proxy  Statement that is expected to be
filed prior to April 30, 2005.

ITEM 11. Executive Compensation.

     Information  regarding  executive  compensation is  incorporated  herein by
reference to our Proxy Statement that is expected to be filed prior to April 30,
2005

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters.

     Information  regarding  security ownership of certain beneficial owners and
management and related  stockholder  matters is incorporated herein by reference
to our Proxy Statement that is expected to be filed prior to April 30, 2005

ITEM 13. Certain Relationships and Related Transactions.

     Information  regarding certain  relationships  and related  transactions is
incorporated  herein by reference to our Proxy  Statement that is expected to be
filed prior to April 30, 2005.

                                       25



ITEM 14. Principal Accountant Fees and Services.

     Information   regarding   principal   accountant   fees  and   services  is
incorporated  herein by reference to our Proxy  Statement that is expected to be
filed prior to April 30, 2005.

                                       26



GLOSSARY OF INDUSTRY TERMS AND ABBREVIATIONS

The following are definitions of certain industry terms and  abbreviations  used
in this report:

Bbl. Barrel.

BOE. Barrel of oil  equivalent,  based on a ratio of 6,000 cubic feet of natural
gas for each barrel of oil.

Gross Acres or Gross  Wells.  The total  acres or wells,  as the case may be, in
which a working interests is owned.

Horizontal Drilling. High angle directional drilling with lateral penetration of
one or more productive reservoirs.

Mcf. One thousand cubic feet.

Net Acres or Net Wells.  The sum of the fractional  working  interests  owned in
gross acres or gross wells.

Overriding  Royalty  Interest.  The right to receive a share of the  proceeds of
production from a well, free of all costs and expenses, except transportation.

Present Value. The pre-tax present value,  discounted at 10%, of future net cash
flows  from  estimated  proved  reserves,  calculated  holding  prices and costs
constant at amounts in effect on the date of the report  (unless  such prices or
costs are subject to change pursuant to contractual provisions) and otherwise in
accordance  with the  Commission's  rules for  inclusion  of oil and gas reserve
information in financial statements filed with the Commission.

Proceeds of Production.  Money received  (usually  monthly) from the sale of oil
and gas produced from producing properties.

Producing Properties. Properties that contain one or more wells that produce oil
and/or gas in paying quantities (i.e., a well for which proceeds from production
exceed operating expenses).

Productive Well. A well that is producing oil or gas or that is capable of
production.

Prospect.  A lease or group of leases containing  possible reserves,  capable of
producing  crude  oil,  natural  gas,  or  natural  gas  liquids  in  commercial
quantities,  either at the time of acquisition,  or after vertical or horizontal
drilling, completion of workovers, recompletions, or operational modifications.

Proved Reserves. Estimated quantities of crude oil, natural gas, and natural gas
liquids  that  geological  and  engineering  data  demonstrate  with  reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic conditions; i.e., prices and costs as of the date the estimate is made.
Reservoirs  are  considered  proved if either actual  production or a conclusive
formation test supports economic production.

     The area of a reservoir considered proved includes:

     a.   That  portion  delineated  by  drilling  and  defining  by  gas-oil or
          oil-water contacts, if any; and

     b.   The  immediately  adjoining  portions not yet drilled but which can be
          reasonably judged as economically productive on the basis of available
          geological  and  engineering  data. In the absence of  information  on
          fluid contacts, the lowest known structural occurrence of hydrocarbons
          controls the lower proved limit of the reservoir.

     Reserves which can be produced economically through application of improved
recovery  techniques  (such as fluid  injection)  are  included in the  "proved"
classification  when successful testing by a pilot project,  or the operation of
an installed  program in the  reservoir,  provides  support for the  engineering
analysis on which the project or program was based.

     Proved Reserves do not include:

                                       27



a. Oil  that may  become  available  from  known  reservoirs  but is  classified
separately as "indicated additional reserves";

b. Crude oil,  natural gas,  and natural gas  liquids,  the recovery of which is
subject to reasonable  doubt  because of  uncertainty  as to geology,  reservoir
characteristics, or economic factors;

c. Crude oil,  natural  gas, and natural gas liquids that may occur in undrilled
prospects; and

d. Crude oil,  natural gas,  and natural gas liquids that may be recovered  from
oil sales and other sources.

Proved Developed Reserves. Reserves that can be expected to be recovered through
existing wells with existing equipment and operating methods. Additional oil and
gas expected to be obtained  through the application of fluid injection or other
improved recovery techniques for supplementing the natural forces and mechanisms
of primary recovery should be included as proved developed only after testing by
a pilot project or after operation of an installed program has confirmed through
production response that increased recovery will be achieved.

Proved Undeveloped Reserves. Reserves that are expected to be recovered from new
wells on  undrilled  acreage or from  existing  wells where a  relatively  major
expenditure is required for recompletion. Reserves on undrilled acreage shall be
limited to those drilling units offsetting  productive units that are reasonably
certain of production  when drilled.  Proved  reserves for other units that have
not been drilled can be claimed only where it can be demonstrated with certainty
that there is continuity of production from the existing  productive  formation.
Under no  circumstances  should  estimates  for proved  undeveloped  reserves be
attributable to any acreage for which an application of fluid injection or other
improved  recovery  technique is contemplated,  unless such techniques have been
proven effective by actual tests in the area and in the same reservoir.

Recompletion.  The completion for production of an existing  wellbore in another
formation from that in which the well has previously been completed.

Reservoir.  A porous and permeable  underground  formation  containing a natural
accumulation  of producible oil or gas that is confined by  impermeable  rock or
water barriers and is individual and separate from other reservoirs.

Royalty.  The right to a share of production  from a well, free of all costs and
expenses, except transportation.

Royalty Interest.  An interest in an oil and gas property entitling the owner to
a share of oil and natural gas production free of costs of production.

Standardized  Measure. The present value,  discounted at 10%, of future net cash
flows from estimated proved  reserves,  after income taxes,  calculated  holding
prices and costs constant at amounts in effect on the date of the report (unless
such prices or costs are subject to change  pursuant to contractual  provisions)
and otherwise in accordance with the Commission's rules for inclusion of oil and
gas reserve information in financial statements filed with the Commission.

Waterflood.  An engineered,  planned effort to inject water into an existing oil
reservoir  with the intent of  increasing  oil reserve  recovery and  production
rates.

Working Interest.  The operating  interest under a lease, the owner of which has
the right to explore for and produce oil and gas covered by such lease. The full
working  interest  bears 100 percent of the costs of  exploration,  development,
production,  and operation, and is entitled to the portion of gross revenue from
the proceeds of production which remains after proceeds allocable to royalty and
overriding royalty interests or other lease burdens have been deducted.

Workover.  Rig work  performed  to restore an  existing  well to  production  or
improve its production from the current existing reservoir.

                                       28



                                     PART IV

ITEM 15. Exhibits and Financial Statement Schedules.

     (a)  The  following  documents  are  filed  as  part of  this  Report:  (1)
          Financial Statements:

               Consolidated  Balance  Sheets  at  December  31,  2004 and  2003.
               Consolidated Statements of Operations for the years ended
                December 31, 2004, 2003 and 2002.
               Consolidated  Statements  of  Stockholders'  Equity for the years
                ended December 31, 2004, 2003 and 2002.
               Consolidated  Statements  of  Cash  Flows  for  the  years  ended
                December 31, 2004, 2003 and 2002.

               Notes to Consolidated  Financial  Statements,  December 31, 2004,
                2003 and 2002.

          (2)  Financial Statement Schedule:
               Schedule II - Valuation and Qualifying Accounts

          (3)  Exhibits:

          Number    Description
          ------    -----------

            3.1     Articles of Incorporation of the Registrant and Amendments
                    thereto. (Previously filed with our Registration Statement
                    on Form S-1, Reg. No. 33-53526, filed with the Commission on
                    October 21, 1992.)

            3.2     Amendment to the Company's Articles of Incorporation to
                    increase the number of shares of Class A Common Stock that
                    the Company will have authority to issue from 20,000,000 to
                    40,000,000 shares, approved by the Shareholders on November
                    19, 1999 and filed with the Secretary of State of Texas on
                    December 3, 1999. (Previously filed with our Definitive
                    Proxy Statement, filed with the Commission on October 20,
                    1999.)

            3.3     Amendment to the Articles of Incorporation of the Registrant
                    changing  the name of the  Registrant  to  "GulfWest  Energy
                    Inc.",  approved  by the  Shareholders  on May 18,  2001 and
                    filed  with  the   Secretary  of  Texas  on  May  21,  2001.
                    (Previously filed with our Definitive Proxy Statement, filed
                    with the Commission on April 16, 2001.)

            3.4     Bylaws of the Registrant. (Previously filed with our
                    Registration Statement on Form S-1, Reg. No. 33-53526, filed
                    with the Commission on October 21, 1992.)

            3.5     Statement of Resolution Establishing Series H Convertible
                    Preferred Stock, dated February 28, 2005. (Previously filed
                    with our Form 8-K, Reg. No. 001-12108, filed with the
                    Commission on March 4, 2005.)

            3.6     Statement of Resolution Establishing Series G Convertible
                    Preferred Stock, dated February 28, 2005. (Previously filed
                    with our Form 8-K, Reg. No. 001-12108, filed with the
                    Commission on March 4, 2005.)

           *3.7     Certificate of Correction to the Statement of Resolution
                    Establishing Series G Convertible Preferred Stock, dated
                    March 16, 2005.

            3.8     Articles of Amendment amending Statement of Resolution
                    Establishing Series E Preferred Stock, dated February 28,
                    2005. (Previously filed with our Form 8-K, Reg. No.
                    001-12108, filed with the Commission on March 4, 2005.)

            3.9     Articles of Amendment amending Statement of Resolution
                    Establishing Series A Preferred Stock, dated February 28,
                    2005. (Previously filed with our Form 8-K, Reg. No.
                    001-12108, filed with the Commission on March 4, 2005.)

                                       29



           3.10     Statement  of  Resolution  Establishing  and  Designating  a
                    Series of  Shares of  GulfWest  Oil & Gas  Company  Series A
                    Preferred  Stock,  as filed with the  Secretary  of State of
                    Texas on April 26, 2004.  (Previously filed with our Current
                    Report on Form 8-K dated  April 29,  2004 and filed with the
                    Commission on May 10, 2004.)

           3.11     Statement  of  Resolution  Establishing  and  Designating  a
                    Series of Shares of GulfWest  Energy Inc. Series D Preferred
                    Stock, as filed with the Secretary of State of Texas on June
                    11, 2000.  (Previously filed with our Registration Statement
                    on Form S-1, Reg. No. 333-116048,  filed with the Commission
                    on June 1, 2004.)

           3.12     Statement  of  Resolution  Establishing  and  Designating  a
                    Series of Shares of GulfWest  Energy Inc. Series E Preferred
                    Stock,  as  filed  with the  Secretary  of State of Texas on
                    August 14, 2001.  (Previously  filed with our Current Report
                    on Form 8-K dated  August 16, 2001 and filed  Commission  on
                    August 31, 2001.)

           3.13     Statement  of  Resolution  Establishing  and  Designating  a
                    Series of Shares of GulfWest  Energy Inc. Series F Preferred
                    Stock, as filed with the Secretary of State of Texas on June
                    18, 2003.  (Previously filed with our Registration Statement
                    on Form S-1, Reg. No. 333-116048,  filed with the Commission
                    on June 1, 2004.)

            4.1     Letter  Agreement by and among GulfWest Energy Inc., a Texas
                    corporation,  GulfWest  Oil & Gas Company and the  investors
                    listed on the signature page thereof,  dated April 22, 2004.
                    (Previously filed with our Current Report on Form 8-K, dated
                    April 29,  2004 and  filed  with the  Commission  on May 10,
                    2004.)

            4.2     Warrant  Agreement made by and between GulfWest Energy Inc.,
                    and Highbridge/Zwirn  Special  Opportunities FUND, L.P., and
                    Drawbridge Special  Opportunities  Fund LP, Grantees,  dated
                    and  effective  April 29, 2004.  (Previously  filed with our
                    Current  Report on Form 8-K dated  April 29,  2004 and filed
                    with the Commission on May 10, 2004.)

            4.3     Shareholders Rights Agreement between GulfWest Energy Inc.
                    and OCM GW Holdings, LLC dated February 28, 2005.
                    (Previously filed with our Form 13D, Reg. No. 005-54301,
                    filed with the Commission on March 10, 2005.)

           *4.4     Omnibus and Release Agreement among GulfWest Energy Inc.,
                    OCM GW Holdings, LLC and those signatories set forth on the
                    signature page thereto, dated as of February 28, 2004.
                    (Previously filed with our Form 13D, Reg. No. 005-54301,
                    filed with the Commission on March 10, 2005.)

            4.5     Share Transfer Restriction Agreement between J. Virgil
                    Waggoner and OCM GW Holdings, LLC, dated February 28, 2005.

           *4.6     Irrevocable Proxy executed by J. Virgil Waggoner dated
                    February 28, 2005.

           *4.7     Exchange Agreement between GulfWest Energy Inc. and GulfWest
                    Oil & Gas Company, dated February 28, 2005.

           *4.8     Letter Agreement among OCM GW Holdings, LLC, OCM Principal
                    Opportunities Fund III, L.P., OCM Principal Opportunities
                    Fund III GP, LLC, Oaktree Capital Management, LLC, GulfWest
                    Energy Inc., GuflWest Oil & Gas Company and J. Virgil
                    Waggoner dated February 28, 2005

            4.9     Subscription Agreement among OCM GW Holdings, LLC, Allan D.
                    Keel and those individuals listed on the signature page
                    thereto, dated February 28, 2005. (Previously filed with our
                    Form 13D, Reg. No. 005-54301, filed with the Commission on
                    March 10, 2005.)

                                       30



          *4.10     First Amendment to Warrant Agreement among GulfWest Energy
                    Inc., D.B. Zwirn Special Opportunities Fund, L.P. and
                    Drawbridge Special Opportunities Fund, dated February 28,
                    2005.

          *10.1     Employment Agreement between Allan D. Keel and GulfWest
                     Energy, Inc., dated February 28, 2005.

          *10.2     Employment Agreement between E. Joseph Grady and GulfWest
                     Energy, Inc., dated February 28, 2005.

          10.3      GulfWest  Oil  Company  1994 Stock  Option and  Compensation
                    Plan,amended  and  restated as of April 1, 2001 and approved
                    by the shareholders on May 18, 2001.  (Previously filed with
                    our  Proxy  Statement  on  Form  DEF  14A,  filed  with  the
                    Commission on April 16, 2001.)

          *10.4     GulfWest Energy Inc. 2004 Stock Option Incentive Plan

          *10.5     GulfWest Energy Inc. 2005 Stock Option Incentive Plan.

          *10.6     Form of GulfWest Energy Inc. 2005 Stock Incentive Plan
                    Stock Option Agreement.

          *10.7     Form of Warrant Agreement.

          *10.8     Indemnification Agreement between GulfWest Energy Inc. and
                    J. Virgil Waggoner, dated February 28, 2005.

          *10.9     Indemnification Agreement between GulfWest Energy Inc. and
                    B. James Ford, dated February 28, 2005.

         *10.10     Indemnification Agreement between GulfWest Energy Inc. and
                    Skardon F. Baker, dated February 28, 2005.

         *10.11     Indemnification Agreement between GulfWest Energy Inc. and
                      John Loehr, dated February 28, 2005.

         *10.12     Indemnification Agreement between GulfWest Energy Inc. and
                      Allan Keel, dated February 28, 2005.

         *10.13     Letter Agreement among D.B. Zwirn Special Opportunities
                    Fund, LP, GulfWest Oil & Gas, and Drawbridge Special
                    Opportunities Fund, LP, dated January 7, 2005.

          10.14     Series G Subscription Agreement between GulfWest Energy
                    Inc. and OCM GW Holdings, LLC dated February 28, 2005.
                    (Previously filed with our Form 13D, Reg. No. 005-54301,
                    filed with the Commission on March 10, 2005.)

          10.15     Series A Subscription Agreement between GulfWest Oil & Gas
                    Company and OCW GW Holdings, LLC dated February 28, 2005.
                    (Previously filed with our Form 13D, Reg. No. 005-54301,
                    filed with the Commission on March 10, 2005.)

         *10.16     Letter Agreement between W.L. Addison Investment, L.L.C.,
                    GulfWest Energy Inc., and Setex Oil and Gas Company dated
                    February 24, 2005 extending Option Agreement for the
                    Purchase of Oil and Gas Leases dated March 5, 2004.

         *10.17     Letter Agreement between W.L. Addison Investment, L.L.C.,
                    GulfWest Energy Inc., and Setex Oil and Gas Company dated
                    July 15, 2004 extending Option Agreement for the Purchase of
                    Oil and Gas Leases dated March 5, 2004.

          10.18     Option Agreement for the Purchase of Oil and Gas Leases
                    with W.L. Addison Investments L.L.C. dated March 5, 2004
                    (Previously filed with our Registration Statement on Form
                    S-1, Reg. No. 333-116048, filed with the Commission on June
                    1, 2004.)

                                       31



          10.19     Employment Agreement with Thomas R. Kaetzer. (Previously
                    filed with our Registration Statement on Form S-1, Reg. No.
                    333-116048, filed with the Commission on June 1, 2004.)

          10.20     Consulting Agreement with Marshall A. Smith. (Previously
                    filed with our Registration Statement on Form S-1, Reg. No.
                    333-116048, filed with the Commission on June 1, 2004.)

          10.21     Oil and Gas Property Acquisition, Exploration and
                    Development Agreement with Summit Investment Group-Texas,
                    L.L.C. effective December 1, 2001. (Previously filed with
                    our Registration Statement on Form S-1, Reg. No. 333-116048,
                    filed with the Commission on June 1, 2004.)

          10.22     Credit Facility between GulfWest Energy Inc. and
                    Highbridge/Zwirn Special Opportunities FUND, L.P., and
                    Drawbridge Special Opportunities Fund LP, Grantees, dated
                    and effective April 29, 2004. (Previously filed with our
                    Registration Statement on Form S-1, Reg. No. 333-116048,
                    filed with the Commission on June 1, 2004.)

          10.23     Credit Agreement between GulfWest Development Company and
                    Texas Capital Bank, dated November 30, 2000. (Previously
                    filed with our Registration Statement on Form S-1, Reg. No.
                    333-116048, filed with the Commission on June 1, 2004.)

          10.24     First Amendment to Credit Agreement between GulfWest
                    Development Company and Texas Capital Bank, dated October
                    24, 2001. (Previously filed with our Registration Statement
                    on Form S-1, Reg. No. 333-116048, filed with the Commission
                    on June 1, 2004.)

          10.25     Revolving Letter Loan Agreement between GulfWest Energy
                    Inc. and Texas Capital Bank, N.A. dated April 3, 2002.
                    (Previously filed with our Registration Statement on Form
                    S-1, Reg. No. 333-116048, filed with the Commission on June
                    1, 2004.)

          10.26     Change in Terms Agreement between GulfWest Energy Inc. and
                    Southwest Bank of Texas N.A. dated April 29, 2003.
                    (Previously filed with our Registration Statement on Form
                    S-1, Reg. No. 333-116048, filed with the Commission on June
                    1, 2004.) *22.1 Subsidiaries of the Registrant (included on
                    page 3 of this Annual Report.

          *23.1     Consent of Weaver and Tidwell, L.L.P.

          *23.2     Consent of Independent Petroleum Engineers.

            *25     Power of Attorney (included on signature page of this Annual
                    Report).

          *31.1     Certification   of  Chief  Executive   Officer  pursuant  to
                    Exchange Rule  13a-14(a) as adopted  pursuant to Section 302
                    of the Sarbanes-Oxley Act of 2002; filed herewith.

          *31.2     Certification   of  Chief  Financial   Officer  pursuant  to
                    Exchange Rule  13a-14(a) as adopted  pursuant to Section 302
                    of the Sarbanes-Oxley Act of 2002; filed herewith.

            *32     Certification  pursuant to 18.U.S.C Section 1350 pursuant to
                    Section  906  of  the  Sarbanes-Oxley  Act  of  2002;  filed
                    herewith.

                    *Filed Herewith

                                       32



                               S I G N A T U R E S

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                    GULFWEST ENERGY INC.

Date: March 31,2005                                 By  /s/ Allan D. Keel
                                                        ------------------------
                                                        Allan D. Keel, President

                                POWER OF ATTORNEY

     Know all men by these presents,  that each person whose  signature  appears
below   constitutes   and  appoints  Allan  D.  Keel  as  his  true  and  lawful
attorney-in-fact and agent, with full power of substitution,  for him and in his
name, place, and stead, in any and all capacities to sign any and all amendments
or  supplements  to this Annual Report on Form 10-K,  and to file the same,  and
with all exhibits thereto and other documents in connection therewith,  with the
Securities  and Exchange  Commission,  granting unto said  attorney-in-fact  and
agent full power and  authority  to do and perform  each and every act and thing
requisite  and  necessary  to be done as fully to all intents and purposes as he
might or could do in  person,  hereby  ratifying  and  confirming  all that said
attorney-in-fact and agent or his substitute or substitutes,  may lawfully do or
cause to be done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has been  signed  below  by the  following  persons,  on  behalf  of the
registrant, and in the capacities and on the dates indicated.


     Signature                            Title                        Date
----------------------     ----------------------------------     --------------
/s/ J. Virgil Waggoner     Chairman of the Board                  March 29, 2005
----------------------
J. Virgil Waggoner

/s/ Allan D. Keel          President, Chief Executive Officer     March 29, 2005
-----------------          and Director
Allan D. Keel

/s/ E. Joseph Grady        Senior Vice President and              March 29, 2005
--------------------       Chief Financial Officer
E. Joseph Grady

/s/ Richard L. Creel       Vice President Finance and             March 29, 2005
--------------------       Chief Accounting Officer
Richard L. Creel

/s/ Skardon F. Baker       Director                               March 29, 2005
--------------------
Skardon F. Baker

/s/ John E. Loehr          Director                               March 29, 2005
-----------------
John E. Loehr

/s/ B. James Ford          Director                               March 29, 2005
-----------------
B. James Ford

                                       33



                              GULFWEST ENERGY INC.

                                FINANCIAL REPORT

                                DECEMBER 31, 2004





                                 C O N T E N T S

                                                                            Page
                                                                            ----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FINANCIAL STATEMENTS

      Consolidated Balance Sheets............................................F-2

      Consolidated Statement of Operations...................................F-4

      Consolidated Statements of Stockholders Equity.........................F-5

      Consolidated Statements of Cashflows...................................F-7

      Notes to Consolidated Financial Statements.............................F-8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.....................F-33

FINANCIAL STATEMENT SCHEDULE

      SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS........................F-34

      All other Financial Statement Schedules have been omitted because they are
      either  inapplicable  or  the  information  required  is  included  in the
      financial statements or the notes thereto.




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and
 Board of Directors
GULFWEST ENERGY INC.

We have audited the accompanying  consolidated balance sheets of GulfWest Energy
Inc. (a Texas  Corporation)  and  Subsidiaries as of December 31, 2004 and 2003,
and the related consolidated statements of operations,  stockholders' equity and
cash flows for each of the three years in the period  ended  December  31, 2004.
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 the 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.  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 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  consolidated  financial  position  of
GulfWest Energy Inc. and  Subsidiaries as of December 31, 2004 and 2003, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.

/s/WEAVER AND TIDWELL, L.L.P
WEAVER AND TIDWELL, L.L.P.

Dallas, Texas
March 29, 2005

                                       F-1



                      GULFWEST ENERGY INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003


                                     ASSETS



                                                                        2004           2003
                                                                   -------------   ------------
CURRENT ASSETS
                                                                                      
     Cash and cash equivalents                                     $    411,377    $    483,618
     Accounts receivable - trade, net of allowance
          for doubtful accounts of $-0- in 2004 and 2003              1,674,448       1,099,802
     Prepaid expenses                                                   128,717         159,269
                                                                   ------------    ------------
               Total current assets                                   2,214,542       1,742,689
                                                                   ------------    ------------
OIL AND GAS PROPERTIES,
     using the successful efforts method of accounting               58,557,072      58,472,886

OTHER PROPERTY AND EQUIPMENT                                          1,437,206       2,132,220
     Less accumulated depreciation, depletion and amortization       (9,870,962)    (10,017,931)
                                                                   ------------    ------------
     Net oil and gas properties and other property and equipment     50,123,316      50,587,175
                                                                   ------------    ------------
OTHER ASSETS
     Deposits                                                             9,804          20,142
     Investments                                                        274,362              --
                                                                   ------------    ------------
     Debt issuance cost, net                                          1,756,316          78,768
     Deferred tax asset                                               3,322,551
                                                                   ------------    ------------
               Total other assets                                     5,363,033          98,910
                                                                   ------------    ------------
TOTAL ASSETS                                                       $ 57,700,891    $ 52,428,774
                                                                   ============    ============


                                      F-2









                      GULFWEST ENERGY INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003


                      LIABILITIES AND STOCKHOLDERS' EQUITY




                                                               2004            2003
                                                           ------------    ------------
CURRENT LIABILITES
                                                                              
     Notes payable                                         $  4,916,568    $  8,182,165
     Notes payable - related parties                          2,140,000       1,465,000
     Current portion of long-term debt                       22,686,254      29,396,092
     Current portion of long-term debt - related parties        112,192         130,152
     Accounts payable - trade                                 4,654,561       5,002,675
     Accrued expenses                                           940,587         443,568
     Income taxes payable                                       118,255
                                                           ------------    ------------
               Total current liabilities                     35,568,417      44,619,652
                                                           ------------    ------------
NONCURRENT LIABILITIES
     Long-term debt, net of current portion                     805,450          35,801
     Asset retirement obligations                             1,144,854       1,357,206
                                                           ------------    ------------
               Total noncurrent liabilities                   1,950,304       1,393,007
                                                           ------------    ------------
OTHER LIABILITES
        Derivative instruments                                1,505,527         591,467
                                                           ------------    ------------
               Total Liabilities                             39,024,248      46,604,126
                                                           ------------    ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Preferred stock                                                253             190
     Common Stock                                                19,394          18,493
     Additional paid-in capital                              34,062,502      29,283,692
     Retained deficit                                       (15,405,506)    (23,477,727)
                                                           ------------    ------------
               Total stockholders' equity                    18,676,643       5,824,648
                                                           ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $ 57,700,891    $ 52,428,774
                                                           ============    ============



The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                      F-3





                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002



                                                            2004            2003             2002
                                                        ------------   --------------   ------------
OPERATING REVENUES
                                                                                          
     Oil and gas sales                                   $ 11,101,114    $ 10,844,460    $  10,447,169
     Well servicing revenues                                                                    39,116
     Operating overhead and other income                      106,559         166,263          353,512
                                                         ------------    ------------    -------------
          Total Operating Revenues                         11,207,673      11,010,723       10,839,797
                                                         ------------    ------------    -------------
OPERATING EXPENSES
     Lease operating expenses                               4,879,754       5,527,841        5,430,205
     Cost of well servicing operations                                                          56,295
     Depreciation, depletion and amortization               2,184,815       2,226,123        2,697,784
     Dry holes, abandoned property and impaired assets        452,516         358,737          617,365
     Accretion on asset retirement obligations                 72,247           76,823
     Settlement of asset retirement obligations               41,780
     General administrative                                 2,018,746       2,262,425        1,727,858
                                                         ------------    ------------    -------------
          Total Operating Expenses                          9,649,858      10,451,949       10,529,507
                                                         ------------    ------------    -------------
INCOME FROM OPERATIONS                                      1,557,815         558,774          310,290
                                                         ------------    ------------    -------------
OTHER INCOME AND EXPENSE
     Interest expense                                      (4,153,578)     (3,363,330)      (3,159,381)
     Other financing costs                                 (1,472,318)      (1,000,000)
     Loss on sale of property and equipment                (2,034,079)        (19,848)         (56,647)
     Unrealized gain (loss) on derivative instruments      (1,505,527)        537,526       (1,596,575)
     Forgiveness of debt                                   12,475,612
                                                         ------------    ------------    -------------
          Total Other Income and (Expense)                  3,310,110      (3,845,652)      (4,812,603)
                                                         ------------    ------------    -------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLES                                  4,867,925      (3,286,878)      (4,502,313)
INCOME TAX BENEFIT                                          3,204,296
                                                         ------------    ------------    -------------
INCOME (LOSS) BEFORE CUMULATIVE
     EFFECT OF CHANGE IN ACCOUNTING
     PRINCIPLES                                             8,072,221      (3,286,878)      (4,502,313)
CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLES, NET OF INCOME
     TAXES                                                                    262,452
                                                         ------------    ------------    -------------
NET INCOME (LOSS)                                           8,072,221      (3,024,426)      (4,502,313)
DIVIDENDS ON PREFERRED STOCK
     (PAID 2004-$-0-; 2003-$112,500; 2002-$28,125)           (455,612)       (127,083)        (112,500)
                                                         ------------    ------------    -------------
NET INCOME (LOSS) AVAILABLE TO COMMON
     SHAREHOLDERS                                        $  7,616,609    $ (3,151,509)   $  (4,614,813)
                                                         ============    ============    =============
NET INCOME (LOSS) PER SHARE, BASIC
     BEFORE CUMULATIVE EFFECT OF CHANGE
      IN ACCOUNTING PRINCIPLES                           $        .41    $       (.18)   $        (.25)
CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLES                                                        .01
                                                         ------------    ------------    -------------
NET INCOME (LOSS) PER SHARE BASIC                        $        .41    $       (.17)   $        (.25)
                                                         ============    ============    =============
NET INCOME (LOSS) PER SHARE, DILUTED BEFORE CUMULATIVE
     EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES           $        .26    $       (.18)   $        (.25)
CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLES                                                        .01
                                                         ------------    ------------    -------------
NET INCOME (LOSS) PER SHARE, DILUTED                     $        .26    $       (.17)   $        (.25)
                                                         ============    ============    =============



                                      F-4





                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002




                                                                     Number of Shares
                                                                  Preferred       Common
                                                                     Stock         Stock
                                                                  ---------     ----------
                                                                                 
BALANCE, December 31, 2001                                           17,000     18,492,541
     Issuance of warrants for additional financing
     Net loss
     Dividends paid on preferred stock
                                                                  ---------     ----------
BALANCE, December 31, 2002                                           17,000    18,492,541
                                                                  =========     ==========
     Issuance of warrants for additional financing
     Issuance of preferred stock related to current financing         2,000
     Net loss
                                                                  ----------    ----------
BALANCE, December 31, 2003                                           19,000     18,492,541
                                                                  ==========    ==========
     Issuance of warrants for additional financing

     Issuance of preferred stock related to current refinancing       8,000

     Conversion of preferred stock to Common Stock                   (1,710)       901,428

     Net income
                                                                  ----------    ----------
BALANCE, December 31, 2004                                            25,290    19,393,969
                                                                  ==========    ==========





The Notes to Consolidated Financials are an integral part of these statements.

                                      F-5





                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002




 Preferred            Common        Additional Paid-In   Retained
  Stock               Stock               Capital        Deficit
------------       ------------        ------------    ------------
                                                         
$        170       $     18,493        $ 28,164,712    $(15,838,488) 
                                                                     
                                             93,500                  
                                                                     
                                                         (4,502,313)
                                                                     
                                                           (112,500)
------------       ------------        ------------    ------------  
$        170       $     18,493        $ 28,258,212    $(20,453,301) 
============       ============        ============    ============  
                                                                     
                                             25,500
          20                                999,980
                                                                     
                                                         (3,024,426)
------------       ------------        ------------    ------------  
$        190       $     18,493        $ 29,283,692    $(23,477,727) 
============       ============        ============    ============  
                                            916,029                  
                                                                     
          80                              3,863,665                  
                                                                     
         (17)               901                (884)                 
                                                                     
                                                          8,072,221
------------       ------------        ------------    ------------  
$        253       $     19,394        $ 34,062,502    $(15,405,506) 
============       ============        ============    ============  
                                       







The Notes to Consolidated Financials are an integral part of these statements.

                                      F-6






                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002




                                                                         2004             2003            2002
                                                                     ------------    -------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                                                      
     Net income (loss)                                               $  8,072,221    $ (3,024,426)   $ (4,502,313)
     Adjustments  to  reconcile  net  income  (loss)
        to net  cash  Provided  by
          operating activities:
               Depreciation, depletion and amortization                 2,184,815       2,226,123       2,697,784
               Accretion expense                                           72,247          76,823
               Settlement of asset retirement obligations                 (25,769)                               
               Amortization of debt issuance cost                       1,379,818
               Discount expense on note payable                           413,910
               Forgiveness of debt                                    (12,475,612)
               Common  Stock and  warrants  issued
                 and charged to operations                                                 25,500          93,500
               Other financing costs                                                    1,000,000
               Deferred tax asset                                      (3,322,551)
               Income tax payable                                         118,255
               Notes payable issued for  interest expense                  61,046
               Loss on sale of property and equipment                   2,034,079          19,848          56,647
               Dry holes, abandoned property, impaired assets             452,516         358,737         617,365
               Unrealized (gain) loss on derivative instruments         1,505,527        (537,526)      1,596,575
               Cumulative effect of accounting change                                    (262,452)               
               Provision for bad debts                                                     29,201                
               (Increase) decrease in accounts receivable -
                 trade, net                                              (267,271)        232,443        (109,437)
               (Increase) decrease in prepaid expenses                     30,552         144,637        (179,825)
               Increase (decrease) in accounts payable and
                 accrued expenses                                         279,859       1,235,503       1,043,994
                                                                     ------------    ------------    ------------
                   Net cash provided by operating activities              513,642       1,524,411       1,314,290
                                                                     ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Deposits returned                                                     10,338                                
     Proceeds from sale of property and equipment                       1,250,675          38,561         675,440
     Capital expenditures                                              (6,141,988)      1,067,924       (5,861,969)
                                                                     ------------    ------------    ------------
                         Net cash used in investing activities         (4,880,975)      1,029,363       (5,186,529)
                                                                     ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from sale of preferred stock, net                         3,363,745                 
     Payments on debt                                                 (18,144,776)     (1,672,288)      (3,410,778)
     Proceeds from debt issuance                                       21,304,258         973,164        7,394,181
     Debt issuance cost                                                (2,228,135)             
     Dividends paid
                                                                                                         (112,500)
                                                                     ------------    ------------    ------------
                         Net cash  provided by (used in) financing
                           activities                                   4,295,092        (699,124)      3,870,903
                                                                     ------------    ------------    ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          (72,241)       (204,076)         (1,336)

CASH AND CASH EQUIVALENTS,
     Beginning of year                                                    483,618         687,694         689,030
                                                                     ------------    ------------    ------------
CASH AND CASH EQUIVALENTS,
     End of year                                                     $    411,377    $    483,618    $    687,694
                                                                     ============    ============    ============
CASH PAID FOR INTEREST                                               $  3,718,940    $  3,216,034    $  3,004,015
                                                                     ============    ============    ============


                                      F-7

The Notes to Consolidated Financial Statements are an integral part of these
statements.









                     GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Summary of Significant Accounting Policies

         The  following  is a summary  of the  significant  accounting  policies
         consistently   applied  by  management  in  the   preparation   of  the
         accompanying consolidated financial statements.

         Organization

                           GulfWest Energy Inc. and our  subsidiaries  intend to
                  pursue the acquisition of quality oil and gas prospects, which
                  have  proved  developed  and  undeveloped  reserves,  and  the
                  development of prospects with third party industry partners.

                           The accompanying  consolidated  financial  statements
                  include our company and its wholly-owned subsidiaries: RigWest
                  Well  Service,  Inc.   ("RigWest"),   GulfWest  Texas  Company
                  ("GWT"),  both formed in 1996; DutchWest Oil Company formed in
                  1997;  SETEX Oil and Gas Company  ("SETEX")  formed August 11,
                  1998;  Southeast  Texas Oil and Gas  Company,  L.L.C.  ("Setex
                  LLC") acquired September 1, 1998; GulfWest Oil and Gas Company
                  formed  February 18, 1999;  LTW Pipeline Co.  formed April 19,
                  1999; GulfWest  Development Company ("GWD") formed November 9,
                  2000 and GulfWest Oil and Gas Company  (Louisiana) LLC, formed
                  July 31, 2001.  All  material  intercompany  transactions  and
                  balances have been eliminated in consolidation.

         Statement of Cash Flows

                           We consider all highly liquid investment  instruments
                  purchased with remaining maturities of three months or less to
                  be  cash   equivalents   for  purposes  of  the   consolidated
                  statements of cash flows.

                  Non-Cash Investing and Financing Activities:

                           During the twelve  month  period  ended  December 31,
                  2004, in settlement of a contract we issued a note payable for
                  $600,000 in replacement of an account payable for $538,954 and
                  the recognition of an additional  $61,046 of interest expense.
                  Also, as a result of  refinancing  debt in which we recorded a
                  $12,475,612  forgiveness  of  debt,  we  issued  Common  Stock
                  warrants  valued at $916,029 which were recorded as a discount
                  to the face value of the new note issued,  we issued  $500,000
                  of  preferred  stock  of  a  wholly  owned   subsidiary  as  a
                  commission to our financial  advisor,  and recorded a $360,000
                  payable for a loan  termination  fee. The  termination fee was
                  subsequently  increased  by $48,000 as a result of  increasing
                  the principal  amount of the new note. We also financed  field
                  trucks for  $78,036.  In addition,  we invested  $274,362 in a
                  partnership  by  contributing  our cost  basis of $76,732 in a
                  natural gas pipeline and $197,630 in  undeveloped  oil and gas
                  leases to the partnership.

                           During the twelve  month  period  ended  December 31,
                  2003, we adopted  Statement of Financial  Accounting  Standard
                  No. 143 "Asset Retirement Obligations" (SFAS 143). As a result
                  of adopting SFAS 143,  effective  January 1, 2003, we recorded
                  an asset  retirement  obligation  liability of $1,280,383,  an
                  increase in the carrying  value of our oil and gas  properties
                  of  $1,058,445,   a  reduction  in  accumulated  depletion  of
                  $484,390 a change of $262,452 to income as a cumulative effect
                  of a change in accounting principal. This retirement liability
                  was increased during 2004 and 2003 by  recognizing$72,247  and
                  $76,823 respectfully, in accretion expense. Also, we decreased
                  the  current  portion  of long term  debt-related  parties  by
                  applying  $17,300 in deposits and  reclassified  $176,320 from
                  accrued expenses to current portion of long term debt.


                                      F-8



                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  in Summary of Significant Accounting Policies (continued)



         Use of Estimates in the Preparation of Financial Statements

                           The preparation of consolidated  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 consolidated financial statements and the reported amounts
                  of revenues and expenses during the reporting  period.  Actual
                  results could differ from those estimates.

         Oil and Gas Properties

                           We use the  successful  efforts  method of accounting
                  for oil and gas producing activities. Costs to acquire mineral
                  interests  in oil and  gas  properties,  to  drill  and  equip
                  exploratory wells that find proved reserves,  and to drill and
                  equip  development  wells  are  capitalized.  Costs  to  drill
                  exploratory  wells  that  do not  find  proved  reserves,  and
                  geological and geophysical costs are expensed.

                           As we acquire significant oil and gas properties, any
                  unproved property that is considered individually  significant
                  is periodically  assessed for impairment of value,  and a loss
                  is  recognized  at the  time of  impairment  by  providing  an
                  impairment  allowance.  Capitalized costs of producing oil and
                  gas  properties  and  support  equipment,   after  considering
                  estimated  dismantlement  and abandonment  costs and estimated
                  salvage   values,   are   depreciated   and  depleted  by  the
                  unit-of-production method.

                           On the  sale of an  entire  interest  in an  unproved
                  property, gain or loss on the sale is recognized,  taking into
                  consideration  the amount of any  recorded  impairment  if the
                  property has been assessed individually. If a partial interest
                  in an  unproved  property  is sold,  the  amount  received  is
                  treated as a reduction of the cost of the  interest  retained.
                  On the  sale of an  entire  or  partial  interest  in a proved
                  property,  gain or loss is  recognized,  based  upon  the fair
                  values of the interests sold and retained.

         Other Property and Equipment

                           The following  tables set forth  certain  information
                  with respect to our other property and  equipment.  We provide
                  for  depreciation  and  amortization  using the  straight-line
                  method  over  the  following  estimated  useful  lives  of the
                  respective assets:

                       Assets                                      Years
                       ---------------------------------        -------------
                             Automobiles                             3-5
                            Office equipment                         7
                            Gathering system                         10
                            Well servicing equipment                 10


                                      F-9



                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Summary of Significant Accounting Policies - continued

         Other Property and Equipment - continued

                  Capitalized costs relating to other properties and equipment:



                                                        2004          2003
                                                     ----------    --------
                                                                   
                      Automobiles                    $  285,384    $ 420,776
                      Office equipment                  148,173      148,172
                      Gathering system                  271,651      529,486
                      Well servicing equipment          731,998    1,033,786
                                                     -----------   ---------
                                                      1,437,206    2,132,220

                      Less accumulated depreciation    (872,364)  (1,268,330)
                                                     ----------    ---------
                      Net capitalized cost              564,842      863,890
                                                     ==========    =========


         Impairments

                           We  have  adopted  SFAS  144   "Accounting   for  the
                  Impairment  or Disposal of Long- Lived  Assets".  Accordingly,
                  impairments,  measured using fair market value, are recognized
                  whenever events or changes in circumstances  indicate that the
                  carrying amount of long-lived  assets (other than unproved oil
                  and gas properties discussed above) may not be recoverable and
                  the future  undiscounted cash flows  attributable to the asset
                  are less than its carrying value.

         Revenue Recognition

                           We recognize oil and gas revenues on the sales method
                  as oil and gas production is sold.  Differences  between sales
                  and  production  volumes  during the years ended  December 31,
                  2004,  2003,  and 2002 were not  significant.  Well  servicing
                  revenues are recognized as the related services are performed.
                  Operating  overhead  income is  recognized  based upon monthly
                  contractual  amounts for lease  operations and other income is
                  recognized as earned.

         Trade Accounts Receivable

                           We grant credit to creditworthy independent and major
                  oil and gas  companies  for the sale of crude oil and  natural
                  gas. In  addition,  we grant credit to joint owners of oil and
                  gas  properties,  which we,  through  our  subsidiary,  SETEX,
                  operate.  Such amounts are secured by the underlying ownership
                  interests in the  properties.  We also grant credit to various
                  third parties through RigWest for well servicing operations.

                           Trade   accounts   receivable  are  reported  in  the
                  consolidated  balance  sheet  at  the  outstanding   principal
                  adjusted  for  any  chargeoffs.  An  allocation  for  doubtful
                  accounts is recognized  by  management  based upon a review of
                  specific  customer  balances,  historical  losses and  general
                  economic conditions.

                           We maintain cash on deposit in  non-interest  bearing
                  accounts, which, at times, exceed federally insured limits. We
                  have not  experienced  any losses on such accounts and believe
                  we are not exposed to any significant  credit risk on cash and
                  equivalents.

         Fair Value of Financial Instruments

                           At  December  31,  2004  and  2003,   our   financial
                  instruments  consist  of notes  payable  and  long-term  debt.
                  Interest rates currently available to us for notes payable and
                  long-term debt with similar terms and remaining maturities are
                  used to  estimate  fair value of such  financial  instruments.
                  Accordingly,  since interest rates on substantially all of our
                  debt are variable,  market based rates,  the carrying  amounts
                  are a reasonable estimate of fair value.


                                      F-10



                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Debt Issuance Costs

                           Debt  issue  costs  incurred  are   capitalized   and
                  subsequently  amortized over the term of the related debt on a
                  straight-line basis.



                                      F-11




                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Summary of Significant Accounting Policies - continued

         Earnings (Loss) Per Share

                           We have adopted  Statement  of  Financial  Accounting
                  Standards (SFAS) No. 128 "Earnings Per Share",  which requires
                  that both basic earnings (loss) per share and diluted earnings
                  (loss) per share be presented on the face of the  statement of
                  operations.  Basic earnings  (loss) per share are based on the
                  weighted-average  number of outstanding common shares. Diluted
                  earnings  (loss)  per-share are based on the  weighted-average
                  number of  outstanding  common  shares  and the  effect of all
                  potentially diluted common shares.

         Stock Based Compensation

                           In  October   1995,   SFAS  No.  123,   "Stock  Based
                  Compensation,"  (SFAS 123) was issued. This statement requires
                  that we choose between two different methods of accounting for
                  stock   options  and  warrants.   The   statement   defines  a
                  fair-value-based  method of  accounting  for stock options and
                  warrants   but  allows  an  entity  to   continue  to  measure
                  compensation  cost for stock  options and  warrants  using the
                  accounting   prescribed  by  APB  Opinion  No.  25  (APB  25),
                  "Accounting  for Stock Issued to Employees." Use of the APB 25
                  accounting  method  results  in  no  compensation  cost  being
                  recognized if options are granted at an exercise  price at the
                  current  market value of the stock or higher.  We are required
                  by SFAS 123 to make pro forma disclosures of net income (loss)
                  and earnings  (loss) per share as if the fair value method had
                  been applied in its 2004, 2003 and 2002 financial  statements.
                  All options  were  issued  with an exercise  price at or above
                  fair market  value on the date of grant with the  exception of
                  one  grant of  281,000  options,  for  which  we have  accrued
                  $129,260  in  compensation  expense  in 2004.  Also see Recent
                  Accounting Pronouncements.

                           During  2004,  2003 and 2002,  we issued  options and
                  warrants  totaling:  1,610,000  shares  in  2004  (exercisable
                  1,085,000);  35,000 in 2003 (all exercisable);  405,000 shares
                  in 2002 (all  exercisable),  respectively,  to  employees  and
                  directors  as  compensation.  If we had used  the  fair  value
                  method  required  by SFAS 123,  our net income  (loss) and per
                  share information would approximate the following amounts:




                                 2004                          2003                          2002
                       --------------------------   ----------------------------  --------------------------
                            As                                                         As        
                         Reported      ProForma     As Reported      ProForma       Reported       ProForma
                       -----------   -----------    -----------    ------------   -----------    -----------
                                                                                                
  SFAS 123
  compensation cost    $                 425,500    $              $     7,350    $              $    38,300

  APB 25
  compensation cost    $   129,260   $  (129,260)   $              $              $              $          

Net income (loss)      $ 7,616,609   $ 7,320,369    $(3,151,509)   $(3,158,859)   $(4,614,813)   $(4,653,113)

  Income (loss) per
  common share-basic   $       .41   $       .39    $      (.17)   $      (.17)   $      (.25)   $      (.25)

  Income (loss) per
  common
  share-diluted        $       .26   $       .23    $      (.17)   $      (.17)   $      (.25)   $      (.25)



                                      F-12





                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Summary of Significant Accounting Policies - continued

         Stock Based Compensation  - continued

                           The effects of applying  SFAS 123 as disclosed  above
                  are not  indicative of future  amounts.  We anticipate  making
                  additional  stock based  employee  compensation  awards in the
                  future.

                           We  use  the  Black-Sholes  option-pricing  model  to
                  estimate  the  fair  value of the  options  and  warrants  (to
                  employee  and  non-employees)  on the grant date.  Significant
                  assumptions  include (1) risk free  interest  rate 2004- 3.0%,
                  2003 - 3.0%; 2002 - 3.0%; (2) weighted  average  expected life
                  2004- 3.0, 2003 - 3.4; 2002 - 3.6; (3) expected  volatility of
                  2004-  94.32%,  2003 -  147.43%;  2002 -  101.73%;  and (4) no
                  expected dividends.

         Implementation of New Financial Accounting Standards

                           Effective  January 1, 2001,  we adopted  SFAS No. 133
                  "Accounting  for  Derivative  Instruments  and  other  Hedging
                  Activities",  as amended by SFAS No. 137 and No.  138.  It has
                  been determined  that our oil and gas hedging  agreements meet
                  the  definition  of  SFAS  133   "Accounting   for  Derivative
                  Instruments  and other Hedging  Activities"  and are accounted
                  for as a derivative instruments.

                           Effective  January 1, 2002,  we adopted SFAS No. 144,
                  "Accounting  for the  Impairment  or  Disposal  of  Long-Lived
                  Assets."  This  statement  requires the  following  three-step
                  approach for  assessing  and  recognizing  the  impairment  of
                  long-lived   assets:   (1)  consider  whether   indicators  of
                  impairment of long-lived assets are present; (2) if indicators
                  of impairment  are present,  determine  whether the sum of the
                  estimated  undiscounted  future cash flows attributable to the
                  assets in question is less than their carrying amount; and (3)
                  if less,  recognize an impairment  loss based on the excess of
                  the carrying  amount of the assets over their  respective fair
                  values.  In addition,  SFAS No. 144 provides  more guidance on
                  estimating cash flows when performing a  recoverability  test,
                  requires that a long-lived  asset to be disposed of other than
                  by sale (such as  abandoned)  be classified as "held and used"
                  until it is  disposed  of, and  establishes  more  restrictive
                  criteria to classify an asset as "held for sale". The adoption
                  of  SFAS  No.  144  did  not  have a  material  impact  on our
                  financial   statements   since  it  retained  the  fundamental
                  provisions of SFAS No. 121,  "Accounting for the Impairment or
                  Disposal of Long-Lived  Assets and for Long-Lived Assets to be
                  Disposed Of," related to the  recognition  and  measurement of
                  the impairment of long-lived assets to be "held and used".


                                      F-13



                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Summary of Significant Accounting Policies - continued

         Implementation of New Financial Accounting Standards - continued

                           In  June  2002,   the  FASB   issued  SFAS  No.  146,
                  "Accounting  for  Costs   Associated  with  Exit  or  Disposal
                  Activities." SFAS No. 146 addresses  financial  accounting and
                  reporting   for  costs   associated   with  exit  or  disposal
                  activities  and  nullifies  EITF  Issue No.  94-3,  "Liability
                  Recognition  for Certain  Employee  Termination  Benefits  and
                  Other  Costs  to Exit an  Activity  (including  Certain  Costs
                  Incurred in a  Restructuring)."  SFAS No. 146 requires  that a
                  liability  for a cost  associated  with an  exit  or  disposal
                  activity be recognized  when the liability is incurred.  Under
                  EITF Issue No. 94-3,  a liability  for an exit cost as defined
                  was  recognized  at the date of an entity's  commitment  to an
                  exit plan. SFAS No. 146 also  establishes  that the fair value
                  is the objective for the initial measurement of the liability.
                  SFAS No. 146 is  effective  for exit and  disposal  activities
                  that are initiated  after  December 31, 2002.  This  statement
                  will impact the timing of our  recognition of liabilities  for
                  costs associated with future exit or disposal activities.

                           Beginning in 2003,  Statement of Financial Accounting
                  Standards No. 143, "Asset Retirement Obligations" ("SFAS 143")
                  requires  us to  recognize  an  estimated  liability  for  the
                  plugging  and  abandonment  of  our  oil  and  gas  wells  and
                  associated  pipelines and equipment.  Consistent with industry
                  practice, historically we had assumed the cost of plugging and
                  abandonment  would be offset by salvage value  received.  This
                  statement  requires us to record a liability  in the period in
                  which our asset  retirement  obligation  ("ARO") is  incurred.
                  After initial recognition of the liability, we must capitalize
                  an additional asset cost equal to the amount of the liability.
                  In addition to any obligation  that arises after the effective
                  date of SFAS 143, upon initial  adoption we must recognize (1)
                  a liability  for any  existing  ARO's,  (2)  capitalized  cost
                  related to the liability,  and (3)  accumulated  depreciation,
                  depletion and  amortization on that capitalized cost adjusting
                  for the salvage value of related equipment.

                           The  estimated   liability  is  based  on  historical
                  experience  in  plugging  and  abandoning   wells,   estimated
                  remaining lives of those wells based on reserves estimates and
                  federal and state  regulatory  requirements.  The liability is
                  discounted using an assumed credit-adjusted  risk-free rate of
                  7.5%. Revisions to the liability could occur due to changes in
                  estimates of plugging and  abandonment  costs,  changes in the
                  risk-free rate or remaining  lives of the wells, or if federal
                  or  state   regulators  enact  new  plugging  and  abandonment
                  requirements.  At the time of abandonment, we will be required
                  to recognize a gain or loss on abandonment if the actual costs
                  do not equal the estimated costs.

                           The  adoption  of SFAS 143  resulted  in a January 1,
                  2003 cumulative  effect  adjustment to record (i) a $1,058,445
                  increase in the carrying  value of proved  properties,  (ii) a
                  $484,390 decrease in accumulated  depreciation,  depletion and
                  amortization,   (iii)  a  $1,280,383  increase  in  noncurrent
                  liabilities, and (iv) a $262,452 gain, net of tax.

         Recent Accounting Pronouncements

                           On  December  16,  2004,  the  Financial   Accounting
                  Standards  Board (FASB) issued FASB Statement No. 123 (revised
                  2004),  Share-Based  Payments  which is a revision of FASB No.
                  123,  Accounting for Stock-Based  Compensation.  Statement 123
                  (R) supercedes APB opinion No. 25, Accounting for Stock Issued
                  to Employees,  and amends FASB Statement No. 95,  Statement of
                  Cash Flows.  Generally,  the approach in Statement  123 (R) is
                  similar to the approach  described in Statement 123.  However,
                  Statement  123 (R)  requires  all  share-  based  payments  to
                  employees,  including grants of employee stock options,  to be
                  recognized in the income statement based on their fair values.
                  Pro  forma  disclosure  is  no  longer  an  alternative.   The
                  provisions of this  statement  become  effective for our third
                  quarter of 2005.  Management has not yet determined the impact
                  that this  statement will have on our  consolidated  financial
                  statements.

                                      F-14


                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2.  Recapitalization

         At December  31,  2004,  despite  certain  refinancing  during 2004 our
current  liabilities  exceeded our current assets by $33,353,875,  which without
additional  capital left doubt about our ability to survive;  however this doubt
was eliminated pursuant to the 2005 recapitalization described below.

         On April 27, 2004, we completed an $18,000,000  financing  package with
new energy lenders.  We used $15,700,000 to retire existing debt of $27,584,145,
resulting in forgiveness of debt of  $12,475,612,  the  elimination of a hedging
liability and the return to us our Series F Convertible  Preferred Stock with an
aggregate  liquidation  preference of $1,000,000.  This preferred  stock, at our
request,  was  transferred  to  our  financial  advisor  and  to  two  companies
affiliated  with two of our directors.  See "Certain  Relationships  and Related
Transactions."  This  taxable gain  resulting  from these  transactions  will be
completely offset by available net operating loss carryforwards. The term of the
note is eighteen  months and it bears  interest at the prime rate plus 11%. This
rate increases by .75% per month beginning in month ten. We paid the new lenders
$1,180,000  in cash fees and also  issued them  warrants  to purchase  2,035,621
shares of our Common Stock at an exercise  price of $.01 per share,  expiring in
five years. The warrants are subject to anti-dilution provisions.

         We continued to pursue new equity capital  during 2005,  culminating in
the sale of $42,000,000 in newly issued preferred stock. In a subsequent  event,
on February  28,  2005,  we sold in a private  placement,  81,000  shares of our
Series G  Preferred  Stock to OCMGW  for an  aggregate  offering  price of $40.5
million. In addition, our subsidiary,  GulfWest Oil & Gas Company (GOGC) issued,
in a private placement,  2,000 shares of its Series A Preferred Stock,  having a
liquidation  preference of $1.0 million, to OCMGW for $1.5 million. Net proceeds
of the offerings of approximately  $38 million after expenses are being used for
the repayment of debt and other liabilities and for general corporate  purposes.
See note 5.

         The Series G Preferred  Stock bears a coupon of 8% per year. The Series
G Preferred Stock has an aggregate liquidation  preference of $40.5 million, and
is senior to all of our capital stock.  For the first four years after issuance,
we may defer the payment of dividends on the Series G Preferred  Stock and these
deferred  dividends will also be convertible  into our Common Stock at $0.90 per
share.  In  addition,  the Series G  Preferred  Stock is  entitled to vote on an
as-converted basis with the Common Stockholders and, as a class, to nominate and
elect a majority  of the  members of the Board of  Directors  of  GulfWest.  The
Series G  Preferred  Stock is senior  in  liquidation  preference  to all of our
capital stock.

         In  connection  with  these  transactions,  the  terms of the  Series A
Preferred  Stock have been amended  such that by March 15, 2005,  all such stock
will either convert into a newly created  Series H Preferred  Stock on a one for
one basis or into Common  Stock at a  conversion  price of $0.35 per share.  The
Series H Convertible  Preferred  Stock has a liquidation  preference of $500 per
share and is  required  to be paid a dividend  of 40 shares of Common  Stock per
share per  year.  In  addition,  the  Series H  Convertible  Preferred  Stock is
convertible into Common Stock at a conversion price of $0.35 per share. At March
15,  2005,  holders of 6,700  shares of Series A Preferred  Stock  converted  to
Series H Preferred Stock and holders of 3,250 shares of Series A Preferred Stock
converted to an aggregate  4,642,859  shares of Common  Stock.  The  outstanding
Series H  Preferred  Stock has an  aggregate  liquidation  preference  of $3.350
million and is senior to all of our capital  stock other than Series G Preferred
Stock.


                                      F-15


                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         In  addition,  we  amended  the terms of our  9,000  shares of Series E
Preferred  Stock such that the  coupon of 6% per year they bear may be  deferred
for the next four years and these deferred  dividends  will be convertible  into
Common Stock at  conversion  price of $0.90 per share.  The initial  liquidation
preference of the Series E Preferred Stock of $500 per share remains convertible
into  Common  Stock at $2.00 per  share.  The  Series E  Preferred  Stock has an
aggregate  liquidation  preference of $4.5 million,  and is senior to all of our
Common Stock,  of equal  preference with our Series D Preferred Stock and junior
to our Series G Preferred Stock and Series H Preferred Stock.




Note 3.  Cost of Oil and Gas Properties

                  The  following  tables  set  forth  certain  information  with
         respect  to our oil  and  gas  producing  activities  for  the  periods
         presented:

         Capitalized Costs Relating to Oil and Gas Producing Activities:




                                                                          2004                      2003
                                                                     -------------           ---------------
                                                                                           
            Unproved oil and gas properties                                 81,366                    261,650
            Proved oil and gas properties                               54,947,396                 54,669,482
            Support equipment and facilities                             3,528,310                  3,541,754
                                                                     -------------           ----------------
                                                                        58,557,072                 58,472,886
            Less accumulated depreciation, depletion and
                   amortization                                         (8,998,598)                (8,749,601)
                                                                     -------------           ----------------
             Net capitalized costs                                   $  49,558,474           $    49,723,285
                                                                     =============           ================

         Results of Operations for Oil and Gas Producing Activities:


                                                                    2004             2003            2002
                                                                ------------    -------------    ------------
                                                                                                
    Oil and gas sales                                            $11,101,114    $ 10,844,466    $ 10,447,169
    Production costs                                              (4,879,754)     (5,527,841)     (5,430,205)
    Depreciation, depletion and amortization                      (1,954,256)     (1,527,727)     (2,187,036)
    Accretion expense                                                (72,247)        (76,823)           --
    Income tax expense                                                  --              --              --
                                                                ------------    ------------    ------------
    Results of operations for oil and gas
          producing activities - income                          $ 4,194,857    $  3,712,075    $  2,829,928
                                                                ============    ============    ============



                                                                    2004             2003            2002
                                                                ------------    -------------    ------------
    Costs Incurred in Oil and Gas Producing Activities:
    Property Acquisitions
                                                                                       
         Proved                                                 $      6,742    $         --    $    562,760
         Unproved                                                     17,347         110,119          14,401
    Development Costs                                              6,117,899       2,024,663       5,141,075
                                                                ------------    ------------    ------------
                                                                $  6,141,988    $  2,134,782    $  5,718,236
                                                                ============    ============    ============


The following table shows oil and gas property dispositions:


                                                                    2004             2003            2002
                                                                ------------    -------------    ------------
                                                                                                
     Oil and gas properties                                     $  5,425,040    $     31,979    $    464,806
     Accumulated DD&A                                             (1,659,001)        (11,569)        (21,375)
                                                                ------------    ------------    ------------
      Net oil and gas properties                                $  3,766,039    $     20,410    $    443,431
                                                                ============    ============    ============


         As a result of these sales we recorded a loss of $2,029,932 in 2004 and
$20,409 in 2003 and a gain of $21,569 in 2002.


                                      F-16



                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3.  Cost of Oil and Gas Properties - continued

         A  reconciliation  of our asset retirement  obligation  liability is as
follows:



                                                        2004           2003
                                                    -----------    -----------
                                                                     
               Balance January 1                   $ 1,357,206           --  
               Cumulative effect adjustment                --        1,280,383
               Accretion expense                         72,247         76,823
               Liability settled                        (25,769)          --  
               Liability reduced from assets sold      (331,173)          --  
               Revisions                                 72,343               
                                                    -----------    -----------
               Balance December 31                    1,144,854      1,357,206
                                                    ===========    ===========

 
Note 4.  Accrued Expenses

         Accrued expenses consisted of the following:



                                                    December 31,   December 31,
                                                       2004             2003
                                                    -----------    -------------
                                                                   
              Accrued compensation
                 expense on variable options        $   129,260    $          --
              Payroll taxes                                  --            5,833
              Interest                                  769,327          395,735
              Professional fees                          42,000           42,000
                                                    -----------    -------------
                                                    $   940,587    $     443,568
                                                    ===========    =============



                                      F-17


                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5.  Notes Payable and Long-Term Debt

         Notes payable is as follows:



                                                                                       2004         2003
                                                                                   ----------   -----------
                                                                                         
      Non-interest  bearing note payable to an unrelated  party;  payable out of
           50% of the net transportation revenues from a certain natural gas
           pipeline that is not yet in service; no due date.                           40,300        40,300

      Promissory note payable to a former director at 8%; due May, 2001;
            unsecured. Retired March, 2005                                             40,000        40,000

      Promissory note payable to an unrelated party at 10%; payable on
           demand; unsecured. Retired March, 2005                                       5,000        45,000

      Line of credit (up to $2,500,000) to a bank; due October, 2002; secured
           by guaranty of a director; interest greater of prime rate less .25% or
           5.25%, (prime rate 5.25% at December 31, 2004).  Line of credit
           increased to $3,000,000 and due date extended to April, 2004. Retired
           and replaced April, 2004.                                                              2,995,488

      Promissory note payable to an unrelated party; payable on demand; interest
           at 8%; interest increased to 12% on January 1, 2003; secured
           by certain oil and gas properties. Retired March, 2005.                    180,000       300,000

      Note payable to a bank; due July, 2004; secured by guaranty of a director;
           interest at prime rate (prime rate 5.25% at December
           31, 2004 with a floor of 4.75% and a ceiling of 8.0%.
           Retired February, 2005                                                     948,291       948,400

      Promissory note payable to unrelated party; interest at 6%; due June,
           2003. Retired January, 2005.                                                55,300        55,300

      Promissory note payable to one of our directors; interest at 8%;
           due on demand; unsecured. Retired March, 2005.                              50,000        50,000

      Promissory note  payable to one of our  directors;  interest at prime rate
           (prime rate 5.25% at December 31, 2004);  due May,  2003;  secured by
           Common Stock of DutchWest Oil Company, our wholly owned subsidiary. 
           Retired March, 2005                                                      1,450,000     1,375,000

      Promissory  note  payable  to an  unrelated  party at 8%;  due June  2003;
           secured by 4% in the last draft of the Common Stock of DutchWest
           Oil Company, our wholly owned subsidiary. Retired March, 2005.             100,000       100,000

      Promissory note payable to an unrelated party at 8%; due May 2003; secured
           by 8% of the Common Stock of DutchWest Oil Company,
           our wholly owned subsidiary. Retired March, 2005.                          140,000       200,000

      Note payable to an entity owned by two directors of the company, due
              September 2004; interest at prime plus 2% (prime rate 5.25% at
              December 31, 2004). Secured by oil and gas leases. Retired March,
              2005.                                                                   600,000



                                      F-18




                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5.  Notes Payable and Long-Term Debt

         Notes payable is as follows - continued:



                                                                                       2004               2003
                                                                                   -------------     --------------
                                                                                              
        Line of credit (up to $3,500,000)  to a bank; due June 2004;  secured by
             the guaranty of a director; interest at prime rate (prime rate 5.25% 
             at December  31,  2004)  with a floor of  4.75%  and a  ceiling  of 8.0%    
             Retired February, 2005.                                                   3,447,677          3,497,677
                                                                                   -------------    --------------
                                                                                   $   7,056,568    $     9,647,165
                                                                                   =============    ==============

         The weighted  average  interest  rate for notes payable at December 31,
             2004 and 2003 was 5.79% and 5.0%, respectively.

         Long-term debt is as follows:

                                                                                        2004             2003
                                                                                   -------------    ---------------
       Line of credit (up to $3,000,000) to a bank;  due July,  2005;  secured by
           the guaranty of a director; interest greater prime rates less
           .25% or  5.25% (prime note 5.25% at December 31, 2004); 
           retired February 2005.                                                  $   2,995,488    $           --


      Subordinated promissory notes to various individuals at 9.5% interest
           per annum; amounts include $50,000 due to related parties; past due.
           Retired $100,000 March, 2005.                                                 150,000            150,000

      Notes payable to finance vehicles, payable in aggregate monthly
           installments of approximately $4,000, including interest of.9% to
           13% per annum; secured by the related equipment; due various
           dates through 2007.                                                            99,900             69,500

      Promissory note to a director; interest at 8.5%; due December 31, 2003.
            Retired March, 2005.                                                          62,192             78,941

      Note payable to an energy lender;  interest at prime plus 3.5% (prime rate
           5.25% at December  31, 2004)  payable  monthly out of 90% net profits
           from certain oil and gas  properties;  final  payment due May,  2004;
           secured by related oil and gas properties. Refinanced March 2004                              27,574,769

      Note    payable to lender; interest at prime plus 11% (prime rate 5.25% at
              December 31, 2004) interest only; due October,2006; secured by
              related oil and gas properties. Retired February, 2005.                 19,021,880                 --



                                      F-19




                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5.  Notes Payable and Long-Term Debt

         Long-term debt is as follows - continued:



                                                                                       2004                2003
                                                                                 ---------------     --------------
                                                                                               
        Note payable  to a bank  with  monthly  principal  payments  of  $36,000;
            interest  at prime plus 1% (prime  rate 5.25% at  December  31, 2004
            with a minimum prime rate of 5.5%; final payment due November, 2003;
            secured by related oil and gas properties; extended to July, 2007.
            Retired February, 2005                                                     1,224,000          1,564,000

       Note payable to unrelated party to finance  saltwater  disposal well with
            monthly installments of $4,540, including interest at 10% per annum;
            final payment due January,  2005;  secured by related well.  Retired
            March, 2005.                                                                  50,436            123,624

       Note payable  to  related  party  to  finance   equipment   with  monthly
            installments  of $608,  including  interest at 11% per annum;  final
            payment due February,  2004; secured by related  equipment.  Retired
            February, 2004.                                                                                   1,211
                                                                                 ---------------    ---------------
                                                                                      23,603,896         29,562,045
       Less current portion                                                          (22,798,446)       (29,526,244)
                                                                                 ---------------    --------------
       Total long-term debt                                                      $       805,450    $        35,801
                                                                                 ===============    ==============

         Estimated annual maturities for long-term debt are as follows:

                   2005                                                          $    22,798,447
                   2006                                                                  506,565
                   2007                                                                  286,673
                   2008                                                                   12,212
                   2009                                                                 -
                                                                                ----------------
                                                                                $     23,603,897
                                                                                ================

         Note Payable and long- term debt remaining after the retirement of debt
in February and March, 2005

               Note payable                                                      $        40,300
                                                                                 ===============
               Long- term debt                                                   $       149,900
               Less current portion                                                      (88,449)
                                                                                 ---------------
               Total long- term debt                                             $        61,451
                                                                                 ===============


                                      F-20




                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 6.  Stockholders' Equity




         Common Stock
         ------------
                                                                                    2004               2003
                                                                              -----------------    --------------
                                                                                             
      Par  value $.001;  80,000,000 shares authorized;  19,393,969 shares issued
           and outstanding as of December 31, 2004 and
           2003, respectively                                                 $          19,394    $       18,493
                                                                              =================    ==============

         Preferred Stock
         ---------------
      Series D, par value $.01;  12,000 shares  authorized;  8,000 shares issued
           and outstanding at December 31, 2004 and 2003. The Series D preferred
           stock does not pay dividends and is not  redeemable.  The liquidation
           value is $500 per share.  After  three  years from the date of issue,
           and thereafter, the shares are convertible to Common Stock based upon
           a value of $500 per Series D share  divided by $8 per share of Common
           Stock.                                                                            80                80

      Series E, par value $.01; 9,000 shares authorized; 9,000 shares issued and
           outstanding  at  December  31,  2004  and  2003.  The  Series  E pays
           dividends,  as declared, at a rate of 2.5% per annum increasing to 6%
           per annum July 1, 2004,  has a  liquidation  value of $500 per share,
           may be redeemed at our option and,  as  amended,  is  convertible  to
           Common Stock based upon a value of $500 per Series E share divided by
           $2 per share of Common Stock.                                                     90                90

      Series F, par value $.01;  2,000 shares  authorized;  340 and 2,000 shares
           issued and  outstanding  at December  31, 2004 and  December 31, 2003
           respectfully.  The  Series  F  preferred  stock  pays  dividends,  as
           declared, at a rate of $2.5% per share annum, has a liquidation value
           of $500 per share,  may be redeemed at our option and is  convertible
           to Common Stock based upon a value of $500 per Series F share divided
           by $1 per share of Common Stock                                                    3                20

      Series A, par value $.01;  10,000 shares  authorized;  7,950 shares issued
           and  outstanding at December 31, 2004.  The Series A preferred  stock
           pays  dividends,  as  declared,  at a rate  of 9 % per  annum,  has a
           liquidation  value of $500 per share,  may be  redeemed at our option
           and is  exchangeable  for Common Stock based upon a value of $500 per
           Series A share divided by $.35 per share of Common Stock.                         80
                                                                                ---------------    --------------
                                                                                $           253               190
                                                                                ===============    ==============


         All classes of preferred  shareholders have liquidation preference over
common  shareholders  of $500  per  preferred  share,  plus  accrued  dividends.
Dividends  in arrears at  December  31, 2004 were  $608,087  (Series A $244,147;
Series E $347,409; Series F $16,531).


                                      F-21




                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Stock Options
-------------

         We  maintain  a 1994  Stock  Option  and  Compensation  Plan (the "1994
Plan"),  which  terminated  on February 11, 2004.  There are options to purchase
424,000 shares of Common Stock still  outstanding and exercisable under the 1994
Plan.  Effective  July 15,  2004,  we  implemented  our 2004  Stock  Option  and
Compensation  Plan (the "2004  Plan").  There are options to purchase  1,525,000
shares of Common Stock outstanding under the 2004 Plan.  Following is a schedule
by year of the activity  related to stock  options,  including  weighted-average
("WTD AVG") exercise prices of options in each category.




Note 6.  Stockholders' Equity - continued



                                             2004                            2003                          2002
                                ------------------------------    --------------------------    -----------------------
                                Wtd Avg                           Wtd Avg                       Wtd Avg
                                 Prices            Number         Prices         Number          Prices        Number
                                ---------      ---------------    --------    --------------    ---------    ----------
                                                                                                  
     Balance, January 1         $  .90               1,102,000    $   .90        1,067,000      $  1.03      1,097,000
        Options issued          $  .48               1,610,000    $   .75           35,000      $   .75         35,000
        Options expired         $ (.80)               (763,000)   $    --               --      $  3.00        (65,000)
                                               ---------------                --------------                 ----------
     Balance, December 31       $  .60               1,949,000    $   .90        1,102,000      $   .90      1,067,000
                                               ===============                ==============                 ==========


         Options to purchase  1,474,000  shares of Common Stock were exercisable
at December 31, 2004.  Following is a schedule by year and by exercise  price of
the expiration of our stock options issued as of December 31, 2004:




                            2005          2006          2007            2008         Thereafter         Total
                          -----------   ----------    ----------    -------------    ------------    ------------
                                                                                    
            $ .45                                                        950,000         475,000       1,425,000
            $ .75                                        35,000          250,000                         285,000
            $ .83                          65,000                                                         65,000
            $1.13           100,000                                                                      100,000
            $1.20            14,000                                                                       14,000
            $1.81                                                         60,000                          60,000
                         -----------    ----------    ----------    -------------    ------------    ------------
                             114,000        65,000        35,000        1,260,000         475,000       1,949,000
                         ===========    ==========    ==========    =============    ============    ============



         281,000 of the options issued are subject to variable award  accounting
treatment. As a result, we accrued $129,260 as compensation expense in 2004.

Stock Warrants

         We have issued a significant  number of stock warrants for a variety of
reasons, including compensation to employees, additional inducements to purchase
our common or preferred stock,  inducements  related to the issuance of debt and
for  payment  of goods and  services.  Following  is a  schedule  by year of the
activity related to stock warrants,  including  weighted-average exercise prices
of warrants in each category:




                                               2004                     2003                      2002
                                     -----------------------   ------------------------  -------------------------
                                      Wtd Avg                   Wtd Avg                   Wtd Avg
                                      Prices         Number     Prices         Number     Prices         Number
                                     ---------    ----------   ---------    -----------  ---------    ------------
                                                                                           
         Balance, January 1          $   .76       1,965,000   $  1.24       2,181,754   $ 2.15         1,306,754
             Warrants issued         $   .01       2,035,621   $   .75         150,000   $  .75         1,145,000
             Warrants exercised           -                         -
                  or expired              -              -     $  3.61        (366,754)  $ 3.57         (270,000)
                                                  ----------                -----------               ------------
         Balance, December 31        $   .38       4,000,621   $   .76       1,965,000   $ 1.24          2,181,754
                                                  ==========                ===========               ============


         Included  in the  "warrants  issued" and  "warrants  exercised/expired"
columns in 2002 were 270,000 warrants whose price was reduced in 2002 to $.75.

                                      F-23






                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 6.  Stockholders' Equity - continued

         Following is a schedule by year and by exercise price of the expiration
of our stock warrants issued as of December 31, 2004:



                              2005           2006         2007            2008           2009            Total
                              ----           ----         ----            ----           ----            -----
                                                                                           
         $      .01                                                                     2,035,621       2,035,621
                .75          225,000     1,590,000                                                      1,815,000
               .875          150,000                                                                      150,000
                           ---------    ----------    -------------    -----------    -----------      ----------
                             375,000     1,590,000          -               -           2,035,621       4,000,621
                           =========    ==========    =============    ===========    ===========      ==========


         Warrants  outstanding  to our  officers,  directors  and  employees  at
December  31,  2004  and  2003  were  approximately   1,515,000  and  1,515,000,
respectively. The exercise prices on these warrants range from $.75 to $.875 and
expire on various dates through 2006.

Note 7.  Income (Loss) Per Common Share

         The following is a  reconciliation  of the numerators and  denominators
used in computing income (loss) per share:




                                                         2004                  2003                 2002
                                                   ---------------   -----------------    ------------------
                                                                                                 
         Net income (loss)                         $    8,072,221    $      (3,024,426)   $       (4,502,313)
         Preferred stock dividends                       (455,612)            (127,083)             (112,500)
                                                   ---------------   -----------------    ------------------
         Income (loss) available to common
         shareholders (numerator)                  $    7,616,609    $      (3,151,509)   $        4,614,813
                                                   ===============   =================    ==================
         Weighted-average number of shares
            of Common Stock - basic                                                             
            (denominator)                              18,535,022           18,492,541            18,492,541
                                                   ---------------   -----------------    ------------------
         Income (loss) per share - basic           $          .41    $            (.17)   $              .25
                                                   ===============   =================    ==================
         Weighted - average number of shares
         of Common Stock - diluted
         (denominator)                                 31,618,275           18,492,541            18,492,541
                                                   ---------------   -----------------    ------------------
         Income (loss) per share - diluted         $          .26    $            (.17)   $             (.25)
                                                   ===============   =================    ==================


         Potential  dilutive  securities  (stock  options,  stock  warrants  and
convertible  preferred stock) in 2003 and 2002 have not been considered since we
reported a net loss and, accordingly, their effects would be antidilutive.


                                      F-24





                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 8.  Related Party Transactions

         As  described  in "Our  Company -  Financial  Recapitalization"  OCM GW
Holdings purchased 81,000 shares of Series G Preferred Stock and 2,000 shares of
Series A Preferred  Stock for $42 million.  Skardon F. Baker, a director,  is an
employee of and B. James Ford, also a director is a managing director of Oaktree
Capital Management, LLC, the ultimate parent of OCM GW Holdings.

         In connection  with our April 2004  financing,  J. Virgil  Waggoner,  a
director,  and Star-Tex Trading Co., an entity managed by John Loehr, an officer
at the time and  currently a director,  purchased  3,000  shares and 200 shares,
respectively, of Series A Preferred Stock at a price of $500 per share. Both Mr.
Waggoner and Star-Tex, in connection with the February 2005 offering, elected to
exchange those shares for an equal number of shares of Series H Preferred Stock.

         On October 23, 1995, we sold $25,000 each of 9%  promissory  notes in a
private offering to two trusts, the trustee of whom is John E. Loehr, an officer
at the time of the  transaction  and  currently a  director.  The balance of the
notes plus accrued interest  thereon at February 28, 2005 was $87,855.  The note
was paid off in connection with the February 2005 offering.

         In June, 1999, we issued a promissory note with interest at 8.5% to Mr.
Marshall  A. Smith III, an officer  and  director at the time,  in the amount of
$124,083 for accrued compensation.  At February 28, 2005, the note had a balance
and  accrued  and  unpaid  interest  of  $99,360  and was being  paid in monthly
installments  of  approximately  $1,500  per  month.  The  note  was paid off in
connection with the February 2005 offering.

         On November 6, 2002, Mr. J. Virgil Waggoner, a director,  provided us a
loan in the initial amount of $1,200,000,  which was subsequently increased to a
total of $1,500,000,  which was  outstanding at February 28, 2005. We issued Mr.
Waggoner a promissory  note with  interest at the prime rate (prime rate 4.0% at
May 26, 2004), secured by common stock of our wholly-owned subsidiary, DutchWest
Oil Company.  Mr. Waggoner also received  warrants to purchase 625,000 shares of
our common stock at an exercise  price of $.75 per share.  The note with accrued
interest was paid off in connection with the February 2005 offering, for a total
payment amount of $1,727,655.

         On April 26,  2001,  we  obtained a line of credit of up to  $2,500,000
from a bank for which two directors,  Mr. J. Virgil Waggoner and Mr. Marshall A.
Smith, were guarantors.  On April 3, 2002, the balance of the line of credit was
retired and a new line of credit of up to $3,000,000  was obtained from the bank
for which Mr.  Waggoner  and Mr. Smith were  guarantors.  The line of credit was
paid off in connection with the February 2005 offering.

         On March 5, 2004, we entered into an Option  Agreement for the Purchase
of Oil and Gas Leases (the "Addison  Agreement") with W. L. Addison  Investments
L.L.C., a private company owned by Mr. J. Virgil Waggoner and Mr. John E. Loehr,
two of our directors ("Addison"). Under the Addison Agreement, Addison agreed to
pay Summit,  on our behalf,  the  non-recouped  and  outstanding  advanced funds
amounting  to  $1,200,000,  thereby  retiring  the Summit  Agreement  except for
certain surviving obligations with respect to areas of mutual interest and lease
bank agreements. For consideration of such payment, Addison acquired certain oil
and gas  leases  and  wellbores  from  Summit  but  agreed to grant us a 180-day
redemption  option  (which was extended by mutual  consent) to purchase the same
for $1,200,000,  plus interest at the prime rate plus 2%. We tendered  Addison a
promissory note in the amount of $600,000,  with interest at the prime rate plus
2%, to  substitute  for an account  payable to  Summit,  pursuant  to the Summit
Agreement,  in the same amount.  The note would be considered paid in full if we
exercised the redemption option and paid the $1,200,000,  plus interest.  Summit
retained the right to participate  up to a 25% working  interest in the drilling
of any wells on the leases  acquired by Addison.  In the event we exercised  the
redemption option, Addison could have, at its sole option,  retained up to a 25%
working interest in the leases.  The Addison  Agreement was extended on July 15,
2004. We exercised the redemption option and Addison received  $1,275,353 at the
closing of the February  2005 offering and waived its rights under the agreement
to a working interest under the leases.

                                      F-25


                    GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         As part of the April  2004  refinancing,  the former  lender  agreed to
return all 2,000 shares of our Series F Preferred  Stock held by it. Rather than
receive the shares as treasury  shares (which would have meant  cancellation  of
the series) at our request the former lender transferred 400 of the shares to ST
Advisory  Corp.,  an entity  owned by John  Loehr,  our former CEO and a current
director,  400 of the shares to a financial  advisor to the Company,  and 200 of
the shares to Thomas R.  Kaetzer,  our  President  and Director at that time and
1,000 shares to  Intermarket  Management  LLC, an entity  partially  owned by M.
Scott  Manolis,  one of our  directors  at that time.  These  transfers  were to
compensate the financial advisor and Mr. Loehr,  Kaetzer and Manolis for service
to the Company.  On September 29, 2004,  the  financial  advisor with 400 shares
transferred 140 shares to three non-management transferees.

         $675,203 of the proceeds  from the February  2005 offering went towards
the payment of accrued and unpaid  dividends of the preferred  stock.  J. Virgil
Waggoner  received $469,603 as a result. On December 22, 2004, ST Advisory Corp,
Intermarket  Management LLC and Mr. Kaetzer  converted  their Series F preferred
shares into common stock. At the closing of the February 2005 offering they were
paid their  proportionate  share of accrued  dividends  due on the 2000  shares,
which totaled $17,167.

         As part of the closing of the February 2005 offering,  the investor and
the Company  agreed to pay certain  legal,  accounting  and other due  diligence
costs and, also certain closing fees which totaled  approximately $3.75 million.
Of this certain related parties received the following fees:  OCWGW  $1,000,000;
Intermarket  Management LLC $500,000; Mr. Allan D. Keel $300,000 (which was used
to invest in the subject offering).

         In  January  2005,  Allan D.  Keel,  our  current  president  and chief
executive  officer,  and another individual lent an aggregate of $200,000 to the
Company,  which was  repaid in full out of the  proceeds  of the  February  2005
offering.  $120,000 of that loan was attributable to Mr. Keel. In addition,  Mr.
Keel received  warrants to purchase 30,000 shares of Common Stock at $0.01 share
in connection with this transaction.

Note 9.   Income Taxes

         The   components  of  the  net  deferred   federal  income  tax  assets
(liabilities) recognized in our consolidated balance sheets were as follows:


                                      F-26


                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 9.   Income Taxes - continued




                                                                     December 31,          December 31,
                                                                         2004                  2003
                                                                         ----                  ----
         Deferred tax assets
                                                                                            
             Net operating loss carryforwards                      $   4,873,859         $  6,352,507
             Income tax credits                                          118,255
             Oil and gas properties                                      198,596              610,381
             Derivative instruments                                      572,100              201,099
             Accretion                                                    56,647               26,120
                                                                   -------------         ------------
         Net deferred tax assets before
             valuation allowance                                       5,819,457            7,190,107

         Valuation Allowance                                          (2,496,906)          (7,190,107)
                                                                   -------------         ------------
         Net deferred tax assets (liabilities)                     $   3,322,551         $          -
                                                                   =============         ============


         At December  31, 2003 we had  recorded a  valuation  allowance  for the
entire balance of our deferred tax asset,  due the uncertainty of our ability to
ever realize that benefit. Due to a change in circumstances  described below, we
made an adjustment to the valuation allowance in 2004 resulting from a change in
judgment  about the  realizability  of the net operating loss  carryforwards  in
future  years.  On  February  28,  2005 we sold $  42,000,000  in  newly  issued
preferred stock. We realized approximately $38,000,000, net of offering expenses
(See Note 2). We used the  proceeds  to  retire  substantially  all of our notes
payable,  paid substantial  amounts of accounts payable and accrued expenses and
retained approximately  $2,000,000 for working capital. After these transactions
we had approximately  $190,000 in notes payable remaining.  Of the retired notes
$20,094,000  bore  interest  at the prime  rate  plus 11%.  As a result of these
transactions  we believe we will generate  enough future taxable income to fully
realize all of our available net operating loss  carryforwards  other than those
limited by Internal Revenue Code Section 382.

         We had no income tax provision in 2003 and 2002. The provision for 2004
consists of the following:

                                                                      2004
                                                               -----------------
    Current tax                                                 $      118,255
    Deferred tax                                                     1,252,395
    Re-evaluation of beginning valuation allowance                  (4,693,201)
                                                               -----------------
    Current income tax provision                                $  (3,322,551)
                                                               =================


         The following  table  summarizes the difference  between the actual tax
provision and the amounts  obtained by applying the statutory tax rate of 38% to
the income (loss)  before income taxes for the year ended  December 31, 2004 and
34% for the years ended December 31, 2003 and 2002.




                                                                     2004                2003                2002
                                                               -----------------   ---------------   -------------
                                                                                                        
         Tax (benefit) calculated at statutory rate            $     1,849,812     $   (1,028,305)   $  (1,530,786)

          Increase (reductions) in taxes due to:
              Income tax credits                                      (118,255)
              Effect on non-deductible expenses                        170,530            362,910           65,174
              Change in valuation allowance                         (4,693,201)           934,422        1,586,988
              Other                                                   (531,437)          (269,027)        (121,376)
                                                               -----------------   ---------------   ---------------
         Current income tax provision                          $    (3,322,551)    $           --    $           --
                                                               =================   ===============   ===============


                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




         As of December  31, 2004 we had net  operating  loss  carryforwards  of
approximately  $12,800,000,  which are available to reduce future taxable income
and the related income tax  liability.  We expect we will not be able to utilize
carryforwards  of  approximately  $6,600,000 due to the  limitations of Internal
Revenue Code Section 382. The net operating loss carryforward expires at various
dates through 2023.

                                      F-27



                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 10.    Commitments and Contingencies

         Oil and Gas Hedging Activities

         We entered into an agreement  with an energy lender  commencing in May,
2000,  to hedge a portion of our oil and gas sales for the  period of May,  2000
through April,  2004. The agreement  called for initial volumes of 7,900 barrels
of oil and  52,400  Mmbtu of gas per month,  declining  monthly  thereafter.  We
entered  into  an  additional  agreement  with  the  energy  lender,  commencing
September, 2001, to hedge an additional portion of our oil and gas sales for the
periods of  September,  2001  through  July,  2004 and  September,  2001 through
December 2003, respectively.  The agreement called for initial volumes of 15,000
barrels of oil and 50,000 Mmbtu of gas per month,  declining monthly thereafter.
These  agreements  were  terminated  in April 2004 with the  refinancing  of the
related debt. We entered into a second agreement, as a result of refinancing the
debt,  commencing  May 2004, to hedge a portion of our oil and gas sales for the
period of May 2004 through  October 2005. The agreement calls for 10,000 barrels
of oil and 60,000 Mmbtu of gas per month.  As a result of these  agreements,  we
realized a reduction in revenues of $1,841,209 , $1,496,303 and $368,776 for the
twelve - month periods  ended  December 31, 2004,  2003 and 2002,  respectively,
which is included in oil and gas sales.

         Lease Obligations

         We lease  office space at one  location  under a sixty-four  (64) month
lease,  which  commenced  December  1, 2001 and was  amended  May 30, 2002 after
expansion.  Annual  commitments  under the lease are:  2005 -  $132,979,  2006 -
$135,323 and 2007 - $33,977. Total rent expense for the years ended December 31,
2004,  2003  and  2002  were  approximately  $142,500,   $134,500  and  $91,000,
respectively.

         Litigation

         From time to time,  we are  involved in  litigation  arising out of our
operations or from disputes with vendors in the normal course of business. As of
March 29, 2005, we were not engaged in any legal  proceedings that are expected,
individually or in the aggregate,  to have a material effect on our consolidated
financial statements.

Note 11.    Oil and Gas Reserves Information (Unaudited)

         The  estimates  of  proved  oil  and  gas  reserves   utilized  in  the
preparation  of the  financial  statements  are  estimated  in  accordance  with
guidelines  established  by the  Securities  and  Exchange  Commission  and  the
Financial  Accounting  Standards Board,  which require that reserve estimates be
prepared under existing economic and operating  conditions with no provision for
price and cost  escalations over prices and costs existing at year end except by
contractual arrangements.

         We  emphasize  that  reserve   estimates  are   inherently   imprecise.
Accordingly,  the estimates  are expected to change as more current  information
becomes  available.  Our policy is to amortize  capitalized oil and gas costs on
the unit of  production  method,  based  upon  these  reserve  estimates.  It is
reasonably  possible  that,  because  of  changes  in market  conditions  or the
inherent  imprecision of these reserve  estimates,  that the estimates of future
cash inflows,  future gross  revenues,  the amount of oil and gas reserves,  the
remaining  estimated lives of the oil and gas properties,  or any combination of
the above may be increased or reduced in the near term. If reduced, the carrying
amount of capitalized  oil and gas  properties may be reduced  materially in the
near term.

                                      F-29




                     GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11.    Oil and Gas Reserves Information (Unaudited) - continued

         The following  unaudited  table sets forth proved oil and gas reserves,
all within the United States,  at December 31, 2004,  2003,  and 2002,  together
with the changes therein.




                                                                                    Crude Oil          Natural Gas
                                                                                     (BBls)               (Mcf)
                                                                                 ----------------    ----------------
         QUANTITIES OF PROVED RESERVES:
              Balance December 31, 2001                                               5,871,837         39,257,907
                                                                                                           
                   Revisions                                                           (125,468)         (4,959,229)
                   Extensions, discoveries and additions                                 22,129           1,090,024
                   Purchase                                                              52,480           1,090,025
                   Sales                                                                (20,698)           (837,856)
                   Production                                                          (278,374)         (1,487,048)
                                                                                 ----------------    ----------------
              Balance December 31, 2002                                               5,521,906          34,158,823
                   Revisions                                                           (262,608)           (308,080)
                   Extensions, discoveries and additions                                -                   -
                   Purchase                                                             -                   -
                   Sales                                                                -                   -
                   Production                                                          (221,335)         (1,190,624)
                                                                                 ----------------    ----------------
              Balance December 31, 2003                                               5,037,963          32,660,119
                   Revisions                                                           (426,932)         (2,857,240)
                   Extensions, discoveries and additions                                -                 2,823,427
                   Purchase                                                             -                   -
                   Sales                                                             (1,474,115)         (2,502,596)
                   Production                                                          (173,865)         (1,033,433)
                                                                                 ----------------    ----------------
              Balance December 31, 2004                                               2,963,051         29,090,277
                                                                                 ================    ================
         PROVED DEVELOPED RESERVES:
              December 31, 2002                                                        4,025,552         25,374,113
                                                                                 ================    ================
               December 31, 2003                                                        3,772,926         24,642,407
                                                                                 ================    ================
              December 31, 2004                                                        2,575,403         20,965,574
                                                                                 ================    ================




                                      F-30








                     GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11.    Oil and Gas Reserves Information (Unaudited) - continued

         STANDARDIZED MEASURE:

         Standardized  measure of discounted  future net cash flows  relating to
proved reserves:




                                                                  2004                  2003               2002
                                                           -----------------      --------------       --------------
                                                                                                         
         Future cash inflows                               $     290,998,312      $  336,795,385       $  308,381,837
         Future production and development costs
            Production                                            80,880,330         109,468,727          105,629,872
            Development                                           24,141,982          21,460,459            23,350,811
                                                           -----------------      --------------       --------------
         Future cash flows before income taxes                   185,976,000         205,866,199          179,401,154
         Future income taxes                                     (49,871,272)        (46,885,360)         (38,611,577)
                                                           -----------------      ---------------      --------------
         Future net cash flows after income taxes                136,104,728         158,980,839          140,789,577
         10% annual discount for estimated
           timing of cash flows                                  (52,602,351)        (70,653,419)         (63,165,742)
                                                           -----------------     ----------------      --------------
         Standardized measure of discounted
           future net cash flows                           $      83,502,377     $    88,327,420       $   77,623,835
                                                           ==================    ================      ==============



         The  following  reconciles  the change in the  standardized  measure of
discounted future net cash flows:





                                                                           
Beginning of year                          $ 88,327,420      $ 77,623,835    $ 48,849,383

Changes from:
   Purchases of proved reserves                    --                --         3,054,793
   Sales of producing properties            (13,756,990)             --          (953,159)
   Extensions, discoveries and improved
    recovery, less related costs             10,280,787              --         2,002,176
   Sales of oil and gas produced, net of
       production costs                      (6,221,360)       (5,316,619)     (5,016,964)
   Revision of quantity estimates           (12,614,337)       (3,751,921)     (9,974,557)
    Accretion of discount                    11,439,568         9,889,881       5,649,945
   Change in income taxes                    (4,552,701)       (4,793,281)    (13,624,917)
   Changes in estimated future
       development costs                     (8,040,393)        2,003,801      (5,254,561)
  Development costs incurred that
       reduced future development costs       6,117,899         2,024,663       5,569,881
  Change in sales and transfer prices,
       net of production costs                8,245,446        16,470,113      46,903,282
  Changes in production rates (timing)
       and other                              4,277,038        (5,823,052)        418,533
                                           ------------      ------------    ------------
 End of year                               $ 83,502,377      $ 88,327,420    $ 77,623,835
                                           ============      ============    ============


                                      F-31





                     GULFWEST ENERGY INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12.    Quarterly Results (Unaudited)

         Summary data relating to the results of operations for each quarter for
the years ended December 31, 2004 and 2003 follows:




                                                                      Three Months Ended
                                          ---------------------------------------------------------------------------
                                             March 31             June 30          September 30        December 31
                                          ----------------    ----------------    ---------------    ----------------
          2004
                                                                                                     
              Net sales                   $    2,538,729      $    2,535,266      $   2,802,946       $    3,330,732
              Gross profit                       363,693             320,452            542,172              784,014
              Net income (loss)                 (303,003)          9,323,281         (4,905,958)           3,502,289
                                                                     
              Income(loss)per common
              share  Basic                $        (.02)      $          .50      $        (.27)      $          .19
                        Diluted           $        (.02)      $          .29      $        (.27)      $          .10
         2003
              Net sales                   $    3,250,603      $    2,790,124      $    2,436,063      $     2,533,933
              Gross profit                       862,683             406,576              81,573             (433,321)
              Net income (loss)                  120,659             (1,231,883)        (399,457)          (1,640,828)
              Income(loss) per common
              share-Basic and Diluted     $         .01       $         (.07)     $         (.02)     $          (.09)



                                      F-32



         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE
                          FINANCIAL STATEMENT SCHEDULE







 To the Stockholders and Board of Directors GULFWEST ENERGY INC.

Our report on the consolidated  financial statements of GulfWest Energy Inc. and
Subsidiaries as of December 31, 2004 and 2003 and for each of the three years in
the period ended December 31, 2004, is included on page F-1. In connection  with
our audit of such consolidated  financial  statements,  we have also audited the
related financial statement schedule for the years ended December 31, 2004, 2003
and 2002 on page F-34.

In our  opinion,  the  financial  statement  schedule  referred  to above,  when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.




/s/ WEAVER AND TIDWELL, L.L.P.
--------------------------------
WEAVER AND TIDWELL, L.L.P.

Dallas, Texas
March 29, 2005

                                      F-33







                      GULFWEST ENERGY INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002


                                              BALANCE                                                       BALANCE
                                                AT                                                            AT
                                             BEGINNING          PROVISIONS/          RECOVERIES/              END
DECRIPTION                                   OF PERIOD           ADDITIONS            DEDUCTIONS           OF PERIOD
--------------------------------------    ----------------    -----------------    -----------------     --------------
For the year ended

     December 31, 2002
                                                                                            
          Accounts and notes

               receivable related parties $        740,478    $                    $       (740,478)     $
                                          ================    =================    =================     ==============

          Valuation allowance for
               deferred tax assets        $   4,668,697       $     1,586,988      $                     $  6,255,685
                                          ================    =================    =================     ==============
For the year ended

     December 31, 2003

          Valuation allowance for
               deferred tax assets        $   6,255,685       $        934,422                           $  7,190,107
                                          ================    =================    =================     ==============
For the year ended

     December 31, 2004

          Valuation allowance for
               deferred tax assets        $   7,190,107                            $   (4,693,201)         $2,496,906
                                          ================    =================    =================     ==============


                                      F-34