ROYALE ENERGY, INC.
BALANCE SHEETS

March 31,  

December 31,

2003      

2002        

(Unaudited)

   (Audited)   

     ASSETS  

Current Assets

  Cash and cash equivalents

$   4,829,417

$    2,229,944

  Accounts receivable

2,953,565

3,736,236

  Other current assets

1,722,670

1,819,764

  Inventory

         94,625

           63,148

    Total Current Assets

     9,600,277

      7,849,092

Investments

275,000

275,000

Oil and Gas Properties at cost, (successful efforts

  basis), Equipment and Fixtures

   16,029,315

    15,176,635

                     TOTAL ASSETS:

$ 25,904,592

$  23,300,727

See notes to Consolidated Financial Statements

-1-

ROYALE ENERGY, INC.
BALANCE SHEETS

March 31,   

December 31,

2003       

2002       

  (Unaudited)  

    (Audited)   

   LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

  Accounts payable and accrued expenses

$   7,180,879 

$   6,031,047 

  Deferred revenue from turnkey drilling

    2,435,160 

    2,566,188 

    Total Current Liabilities

    9,616,039 

    8,597,235 

Long-term debt, net of current portion

    4,500,000 

    3,500,000 

    Total Liabilities

   14,116,039 

   12,097,235 

Redeemable Preferred Stock

  Series A, convertible preferred stock, no par value,
    259,250 shares authorized; 5,068 and 5,068 shares,
    respectively, issued and outstanding

          12,017 

           12,017 

Stockholders' Equity

  Common stock, no par value, authorized 10,000,000 shares,
    issued and outstanding 5,030,101 and 5,030,101 shares,
    respectively

16,692,095 

16,692,095 

  Convertible preferred stock, Series AA, no par value,
    147,500 shares authorized; 48,581 and 48,581 shares
    issued and outstanding, respectively

191,813 

191,813 

  Accumulated (deficit)

   (5,026,227)

   (5,611,288)

  Total paid in capital and accumulated deficit

11,857,681 

11,272,620 

  Less cost of treasury stock, 20,000 and 20,000 shares

(97,906)

(97,906)

  Paid in capital, treasury stock

       16,761 

       16,761 

    Total Stockholders' Equity

   11,788,553 

   11,203,492 

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY:

$  25,904,592 

$  23,300,727 

See notes to Consolidated Financial Statements

-2-

ROYALE ENERGY, INC.
STATEMENTS OF OPERATIONS

      Three Months Ended March 31,   

2003     

2002      

   (Unaudited) 

   (Unaudited) 

Revenues

  Sale of oil and gas

$     2,145,480

$       875,770 

  Turnkey drilling

1,688,644

1,442,367 

  Supervisory fees and other

         160,664

         154,349 

    Total Revenues

      3,994,788

      2,472,486 

Costs and Expenses

  General and administrative

786,273

628,479 

  Turnkey drilling and development

1,110,768

758,356 

  Lease operating

300,408

434,702 

  Lease impairment

296,649

0 

  Legal and accounting

296,108

352,284 

  Marketing

124,001

194,807 

  Depreciation, depletion and amortization

         394,079

         332,775 

    Total Costs and Expenses

      3,308,286

      2,701,403 

Income (Loss) from Operations

686,502

(228,917)

Other Expense

  Interest expense

           50,575

             4,795 

Income Before Income Tax Expense

635,927

(233,712)

Income Tax Provision

           50,866

                 0 

Net Income (Loss)

$        585,061

$      (233,712)

Diluted Earnings Per Share

$             0.11

$           (0.04)

Basic Earnings Per Share

$             0.12

$           (0.05)

See notes to Consolidated Financial Statements

-3-

ROYALE ENERGY, INC.
STATEMENTS OF CASH FLOWS

     Three Months Ended March 31,     

2002      

2001      

 (Unaudited) 

   (Unaudited) 

CASH FLOWS FROM OPERATING ACTIVITIES

  Net income

$       585,061 

$     (233,712)

  Adjustment to reconcile net income to net cash

    provided (used) by operating activities:

      Depreciation, depletion and amortization

394,079 

332,775 

      Lease impairment

296,649 

0 

  (Increase) decrease in:

      Accounts receivable

782,671 

692,768 

      Prepaid expenses and other assets

65,617 

(49,321)

  Increase (decrease) in:

     Accounts payable and accrued expenses

1,149,832 

698,745 

     Deferred revenues - DWI

      (131,028)

      (174,572)

Net Cash Provided by Operating Activities

3,142,881 

1,266,683 

CASH FLOWS FROM INVESTING ACTIVITIES

  Expenditures for oil and gas properties

(1,463,916)

(1,331,447)

  Other capital expenditures

(79,492)

(7,872)

Net Cash Provided (Used) by Investing Activities

   (1,543,408)

   (1,339,319)

CASH FLOW FROM FINANCING ACTIVITIES   

  Proceeds from long-term debt

1,000,000 

1,000,000 

  Principal payments on long-term debt

                  0 

                  0 

Net Cash Provided (Used) by Financing Activities

    1,000,000 

     1,000,000 

Net increase in cash and cash equivalents

2,599,473 

927,364 

Cash at beginning of year

     2,229,944 

    3,131,223 

Cash at end of period

$   4,829,417 

$  4,059,223 

SUPPLEMENTAL INFORMATION

Cash paid for interest

$         53,457 

$         4,795 

Cash paid for taxes

$                  0 

$         9,958 

See notes to Consolidated Financial Statements

-4-

ROYALE ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normally recurring adjustments, necessary to present fairly the Company's financial position and the results of its operations and cash flows for the periods presented. The results of operations for the three month period is not, in management's opinion, indicative of the results to be expected for a full year of operations. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report.

Note 2 - Earnings Per Share (SFAS 128)

Basic and diluted earnings per share are calculated as follows:

                  Three Months Ended March 31, 2003            

     Income        
   (Numerator)   

        Shares      
(Denominator)

  Per-Share 
   Amount   

Basic Earnings Per Share:

  Net income available to common stock

$           585,061

5,027,644

$         0.12 

Diluted Earnings Per Share:

  Effect of dilutive securities and stock
    options

                         -

            222,680

         (0.01)

Net income available to common stock

$           585,061

         5,321,285

$         0.11 

                  Three Months Ended March 31, 2002            

     Income        
   (Numerator)   

        Shares      
(Denominator)

  Per-Share 
   Amount   

Basic Earnings Per Share:

  Net income available to common stock

$        (233,712)

5,027,175

$       (0.05)

Diluted Earnings Per Share:

  Effect of dilutive securities and stock
    options

                   -  

            279,596

           0.01 

Net income available to common stock

$        (233,712)

         5,306,771

$       (0.04)

Note 3 - Investments

The Company owns 27,500 shares of Series A preferred stock in a privately held broker-dealer. This investment does not have a readily determinable market price and is carried at cost.

-5-

Note 4 - Oil and Gas Properties, Equipment and Fixtures

Oil and gas properties, equipment and fixtures consist of the following:

March 31, 2003

December 31, 2002

Oil and Gas

Producing properties, including drilling costs

$    13,220,918 

$     12,072,748 

Undeveloped properties

2,045,921 

2,457,642 

Lease and well equipment

      5,891,646 

       5,481,318 

21,158,485 

20,011,708 

Accumulated depletion, depreciation & amortization

    (5,568,714)

      (5,218,769)

    15,589,771 

     14,792,939 

Commercial and Other

Furniture and equipment

904,625 

825,133 

Accumulated depreciation

       (465,081)

        (441,437)

        439,544 

         383,696 

    16,029,315 

     15,176,635 

-6-

Item 2.  Management's Discussion And Analysis Of Financial
                 Condition And Results Of Operations

Results Of Operations

For the first three months of 2003, we achieved a net profit of $585,061, a $818,773 increase from the net loss of $233,712 in the first three months of 2002. We attribute this to an increase in oil and gas sales resulting from increased production and higher oil and natural gas prices. Total revenues for the period in 2003 were $3,994,788, an increase of $1,522,302 or 61.6% from the total revenues of $2,472,486 received during the period in 2002.

Oil and gas revenues for the three months ended March 31, 2003 were $2,145,480 compared to $875,770 for the same period in 2002, a $1,269,710 or 145% increase. This increase in revenues was mainly due to an increase in quantity sold and the price received for our production during the period in 2003. The net sales volume for the period in 2003 was approximately 416,495 MCF equivalent, a 46,343 or 12.5% increase from the net sales volume of 370,152 MCF equivalent sold during the period in 2002.

Oil and gas lease operating expenses decreased by $134,294, or 30.9%, to $300,408 for the three months ended March 31, 2003, from $434,702 for the same period in 2002. This was mainly due to a decrease in plugging and abandoning costs during the period in 2003 when compared to the period in 2002.

Turnkey drilling revenues for the three months ended March 31, 2003 were $1,688,644 which were offset by drilling and development costs of $1,110,768. For the same period in 2002, turnkey drilling revenues were $1,442,367, while drilling and development costs were $758,356. This represents an increase in revenues of $246,277 or 17.1% and an increase in costs of $352,412 or 46.5%. This increase in turnkey drilling revenues and costs was mainly due to the drilling of five wells during the first three months of 2003 while we drilled three wells during the same period in 2002.

The aggregate of supervisory fees and other income was $160,664 for the three months ended March 31, 2003, an increase of $6,315 (4.1%) from $154,349 during the same period in 2002. This increase was mainly due to an increase in supervisory fees received during the period in 2003 when compared to the same period in 2002.

Depreciation, depletion and amortization expense increased to $394,079 from $332,775, an increase of $61,304 (18.4%) for the three months ended March 31, 2003, as compared to the same period in 2002. This increase was mainly due to the increase in the number of oil and gas assets that we own.

General and administration expenses increased by $157,794, or 25.1%, from $628,479 for the three months ended March 31, 2002 to $786,273 for the same period in 2003. This increase can be attributable to higher employee salaries, due to increased staffing, and increased travel costs. Legal and accounting expense decreased to $296,108 for the period, compared to $352,284 for

-7-

the first three months of 2002, a $56,176 (16%) decrease, which can be attributable to lower litigation costs during the first three months of 2003. Marketing expense for the three months ended March 31, 2003, decreased $70,806 or 36.4%, to $124,001, compared to $194,807 for the same period in 2002. Marketing expense varies from period to period according to the number of marketing events attended by personnel their associated costs.

We periodically review for impairment proved and unproved properties and charge impairments of value to expense. As a result of this assessment, $296,649 was recorded as a lease impairment in the first three months of 2003 while no impairments were recorded during the period in 2002.

During the period in 2003, we increased borrowings under our commercial bank credit line, interest expense increased to $50,575 for the three months ended March 31, 2003 from $4,795 for the same period in 2002, a $45,780 or 955% increase.

Capital Resources And Liquidity:

At March 31, 2003, we had current assets totaling $9,600,277 and current liabilities totaling $9,616,039, a $15,762 working capital deficit, exclusive of unused credit. We had cash and cash equivalents at March 31, 2003 of $4,829,417 compared to $2,229,944 at December 31, 2002. During the period ending March 31, 2003, we drew $1,000,000 from our credit line to meet our drilling schedule. We expect to generate sufficient cash from operations during the remainder of 2003 to fund operating and capital expenditure requirements. Unused available credit from our bank totaled approximately $437,000 at March 31, 2003.

Operating Activities.  For the three months ended March 31 2003 cash provided by operating activities totaled $3,142,881 compared to $1,266,683 provided by operating activities for the same period in 2002, mainly due to higher oil and natural gas prices and sales during the period in 2003.

Investing Activities.  Net cash used by investing activities, primarily in capital acquisitions of oil and gas properties, amounted to $1,543,408 for the first three months of 2003, compared to $1,339,319 used by investing activities for the same period in 2002. The increase in cash used was mainly due to the drilling of five wells during the period in 2003, when compared to the drilling of three wells during the period in 2002.

Financing Activities.  For the three months ended March 31, 2003 and March 31, 2002, net cash provided by financing activities was $1,000,000, which we drew from our bank credit line. We drew these funds in order to meet our drilling schedule.

Item 3.  Disclosure Controls and Procedures

As of March 31, 2003, an evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our

-8-

management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of March 31, 2003.

There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to March 31, 2003.

PART II.       OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

a.      Exhibits.

99.1  Certification pursuant to 18 U.S.C. Section 1350

b.      Reports on Form 8-K.

We filed a report on Form 8-K dated March 27, 2003, incorporating a public announcement of our earnings for fiscal 2002.

Signatures

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.

ROYALE ENERGY, INC.

Date:    May 14, 2003

/s/ Donald H. Hosmer                       

Donald H. Hosmer, President and Chief Executive Officer

Date: May 14, 2003

/s/ Stephen M. Hosmer                       

Stephen M. Hosmer, Executive Vice President and Chief Financial Officer

-9-

Certifications

I, Donald H. Hosmer, President and Chief Executive Officer of Royale Energy, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Royale Energy, Inc.;

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

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

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

      b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

      a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

-10-

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

/s/ Donald H. Hosmer

Donald H. Hosmer, President and Chief Executive Officer

I, Stephen M.. Hosmer, Chief Financial Officer of Royale Energy, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Royale Energy, Inc.;

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

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

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

      b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

      a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

-11-

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

/s/ Stephen M. Hosmer

Stephen M. Hosmer, Executive Vice President and Chief Financial Officer

-12-