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

Form 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2005
o	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: 0-8877

CREDO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)

Colorado (State or other jurisdiction of incorporation or organization)		84-0772991 (IRS Employer Identification No.)
1801 Broadway, Suite 900 Denver, Colorado (Address of principal executive offices)		80202 (Zip Code)

303-297-2200
(Registrant's telephone number, including area code)

        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  ý     No  o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, net of treasury stock, as of the latest practicable date.

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CREDO PETROLEUM CORPORATION AND SUBSIDIARIES

Form 10-Q For the Quarterly Period Ended January 31, 2005

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
	Consolidated Balance Sheets As of January 31, 2005 (Unaudited) and October 31, 2004
	Consolidated Statements of Operations For the Three Months Ended January 31, 2005 and 2004 (Unaudited)
	Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) For the Three Months Ended January 31, 2005 (Unaudited)
	Consolidated Statements of Cash Flows For the Three Months Ended January 31, 2005 and 2004 (Unaudited)
	Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Default Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures

        The terms "CREDO", "Company", "we", "our", and "us" refer to CREDO Petroleum Corporation and its subsidiaries unless the context suggests otherwise.

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CREDO PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

					January 31, 2005			October 31, 2004
					(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents				$	1,175,000		$	518,000
	Short term investments					5,408,000			6,371,000
	Receivables:
		Accrued oil and gas sales				1,688,000			2,051,000
		Trade				798,000			1,019,000
		Other				368,000			58,000
			Total current assets			9,437,000			10,017,000
Oil and gas properties, at cost, using full cost method:
	Evaluated oil and gas properties					31,252,000			30,072,000
	Unevaluated oil and gas properties					2,730,000			2,174,000
	Less: accumulated depreciation, depletion and amortization of oil and gas properties					(13,185,000	)		(12,737,000	)
		Net oil and gas properties, at cost, using full cost method				20,797,000			19,509,000
Exclusive license agreement, net of amortization of $309,000 in 2005 and $291,000 in 2004						390,000			408,000
Other, net						1,069,000			1,042,000
					$	31,693,000		$	30,976,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued liabilities				$	3,132,000		$	4,394,000
	Income taxes payable					—			12,000
		Total current liabilities				3,132,000			4,406,000
LONG-TERM LIABILITIES:
	Deferred income taxes, net					5,167,000			4,605,000
	Exclusive license obligation, less current obligations of $58,000					297,000			297,000
	Asset retirement obligation					733,000			748,000
			Total liabilities			9,329,000			10,056,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
	Preferred stock, no par value, 5,000,000 shares authorized, none issued					—			—
	Common stock, $.10 par value, 20,000,000 shares authorized, 6,340,000 shares issued in 2005 and 2004					634,000			634,000
	Capital in excess of par value					12,577,000			12,463,000
	Treasury stock, at cost, 303,000 shares in 2005 and 2004					(460,000	)		(452,000	)
	Accumulated other comprehensive income (loss)					(8,000	)		(437,000	)
	Retained earnings net of $6,272,000 related to 20% stock dividend in 2003					9,621,000			8,712,000
			Total stockholders' equity			22,364,000			20,920,000
					$	31,693,000		$	30,976,000

The accompanying notes are an integral part of these consolidated financial statements.

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CREDO PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations
(Unaudited)

				Three Months Ended January 31,
				2005			2004
REVENUES:
	Oil and gas sales			$	2,385,000		$	2,605,000
	Operating				159,000			137,000
	Investment income and other				62,000			108,000
					2,606,000			2,850,000
COSTS AND EXPENSES:
	Oil and gas production				488,000			460,000
	Depreciation, depletion and amortization				477,000			429,000
	General and administrative				369,000			331,000
	Interest				9,000			12,000
					1,343,000			1,232,000
INCOME BEFORE INCOME TAXES					1,263,000			1,618,000
INCOME TAXES					(354,000	)		(453,000	)
NET INCOME				$	909,000		$	1,165,000
EARNINGS PER SHARE OF COMMON STOCK—BASIC				$	.15		$	.19
EARNINGS PER SHARE OF COMMON STOCK—DILUTED				$	.15		$	.19
Weighted average number of shares of Common Stock and dilutive securities:
		Basic			6,038,000			5,998,000
		Diluted			6,181,000			6,136,000

The accompanying notes are an integral part of these consolidated financial statements.

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CREDO PETROLEUM CORPORATION AND SUBSIDIARIES

Statement of Stockholders' Equity and Comprehensive Income
(Unaudited)
For the Three Months Ended January 31, 2005

				Common Stock											Accumulated Other Comprehensive Income (Loss)
									Capital In Excess Of Par Value			Treasury Stock						Comprehensive Income			Retained Earnings			Total Stockholders' Equity
				Shares		Amount
Balance, October 31, 2004				6,340,000		$	634,000		$	12,463,000		$	(452,000	)	$	(437,000	)				$	8,712,000		$	20,920,000
Comprehensive Income:
	Net income			—			—			—			—			—		$	909,000			909,000			909,000
	Other comprehensive income:
		Change in fair value of derivatives, net of tax		—			—			—			—			429,000			429,000			—			429,000
Total comprehensive income																		$	1,338,000
Purchase of treasury stock				—			—			—			(8,000	)		—						—			(8,000	)
Tax benefit from the exercise of common stock options				—			—			114,000			—			—						—			114,000
Balance, January 31, 2005				6,340,000		$	634,000		$	12,577,000		$	(460,000	)	$	(8,000	)				$	9,621,000		$	22,364,000

The accompanying notes are an integral part of these consolidated financial statements.

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CREDO PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Unaudited)

				Three Months Ended January 31,
				2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$	909,000		$	1,165,000
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation, depletion and amortization			477,000			429,000
		Deferred income taxes			385,000			362,000
		Other			30,000			—
	Changes in operating assets and liabilities:
		Proceeds from short term investments			1,317,000			176,000
		Purchase of short term investments			(354,000	)		(933,000	)
		Accrued oil and gas sales			363,000			(428,000	)
		Trade receivables			221,000			(57,000	)
		Other			(192,000	)		(160,000	)
		Accounts payable and accrued costs and expenses			(102,000	)		485,000
		Income taxes payable			(12,000	)		67,000
NET CASH PROVIDED BY OPERATING ACTIVITIES					3,042,000			1,106,000
CASH FLOWS FROM INVESTING ACTIVITIES:
	Additions to oil and gas properties				(2,343,000	)		(881,000	)
	Proceeds from sale of oil and gas properties				—			102,000
	Changes in other long-term assets				(34,000	)		38,000
NET CASH USED IN INVESTING ACTIVITIES					(2,377,000	)		(741,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from exercise of stock options (58,500 options in 2004)				—			233,000
	Purchase of treasury stock (500 shares in 2005 and 2,000 shares in 2004)				(8,000	)		(39,000	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES					(8,000	)		194,000
INCREASE IN CASH AND CASH EQUIVALENTS					657,000			559,000
CASH AND CASH EQUIVALENTS:
	Beginning of period				518,000			1,885,000
	End of period			$	1,175,000		$	2,444,000
Supplemental cash flow information:
	Cash paid during the period for income taxes			$	—		$	25,000
	Cash paid during the period for interest			$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited)
January 31, 2005

1.     BASIS OF PRESENTATION

        Effective November 1, 2004, the company became subject to full SEC reporting requirements due to exceeding the $25,000,000 market capitalization threshold for small business issuers at the end of its most recent two fiscal years. This quarterly report on Form 10-Q is the company's first filing subject to full reporting requirements.

        The accompanying unaudited consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U. S. generally accepted accounting principles for complete financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the company's results for the periods presented. These consolidated financial statements should be read in conjunction with the company's Form 10-KSB for the fiscal year ended October 31, 2004.

2.     SIGNIFICANT ACCOUNTING POLICIES

        Accounting for Oil and Gas Property Costs.     As more fully discussed in Note 1 to the consolidated financial statements included with the company's Form 10-KSB for the fiscal year ended October 31, 2004, the company (i) follows the full cost method of accounting for the costs of its oil and gas properties, (ii) amortizes such costs using the units of production method, and (iii) applies a quarterly full cost ceiling test. Adverse changes in conditions (primarily the effect of price declines on our reserves) could result in permanent write-downs in the carrying value of oil and gas properties as well as non-cash charges to operations, but would not affect cash flows.

        Estimates of Proved Oil and Gas Reserves.     An independent petroleum engineer annually estimates approximately 60% of the company's proved reserves. The company estimates the remainder. Reserve engineering is a subjective process that is dependent upon the quality of available data and the interpretation thereof. In addition, subsequent physical and economic factors such as the results of drilling, testing, production and product prices may justify revision of such estimates. Therefore, actual quantities, production timing, and the value of reserves may differ substantially from estimates. A reduction in proved reserves would result in an increase in depreciation, depletion and amortization ("DD&A") expense. A large reduction in proved reserve quantities or values could result in a permanent write-down in the carrying value of oil and gas properties as discussed in Accounting for Oil and Gas Property Costs above.

        Estimates of Asset Retirement Obligations.     In accordance with Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations", the company makes estimates of future asset retirement costs and the timing thereof in connection with recording its future obligations to plug and abandon wells. Estimated abandonment dates will be revised in the future based on changes to related economic lives, which vary with product prices and production costs. Estimated plugging costs may also be adjusted to reflect changing industry experience. Increases in operating costs and decreases in product prices would increase the estimated amount of the obligation and increase DD&A expense. Cash flows would not be affected until costs to plug and abandon were actually incurred. The following is a reconciliation of the company's asset retirement obligations at January 31, 2005.

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        Accounting Estimates.     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management with regard to these financial statements affect proved oil and gas reserve quantities, depletion, impairment of long-lived assets, revenue accruals, drilling and lease operating expense accruals, income taxes, derivatives, asset retirement obligations and contingencies. Actual results could differ from these estimates.

        Stock-Based Compensation.     In December 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of SFAS No. 123." Among other provisions, the statement amends the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Under current accounting rules the company elected to account for its stock-based employee compensation under the intrinsic value method established by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 

3.     STOCK-BASED COMPENSATION

        If compensation expense had been determined in accordance with the provisions of SFAS No. 123, the company's net income and net income per common share would have been reported as follows: