form_def14a-071604

                                        SCHEDULE 14A

                                       (RULE 14A-101)

                          INFORMATION REQUIRED IN PROXY STATEMENT

                                  SCHEDULE 14A INFORMATION

                PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                           EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [   ]

Check the appropriate box:

[   ] Preliminary Proxy Statement [   ] Confidential, For Use of the Commission Only (As
      Permitted by Rule 14a-6(e)(2))

[X]   Definitive Proxy Statement

[   ] Definitive Additional Materials

[   ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                                  TETON PETROLEUM COMPANY

                      (Name of Registrant as Specified In Its Charter)

          (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[   ] No fee required

[X]   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

      (1)   Title of each class of securities to which transaction applies:

      (2)   Aggregate number of securities to which transaction applies:

      (3)   Per unit price or other underlying value of transaction computed pursuant to
            Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
            calculated and state how it was determined):

      (4)   Proposed maximum aggregate value of transaction:  $15.0 million

      (5)   Total fee paid:  $1,900.50

[X]   Fee paid previously with preliminary materials.

[   ] Check box if any part of the fee is offset as provided by Exchange Act Rule
      0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
      Identify the previous filing by registration statement number, or the form or
      schedule and the date of its filing.

      (1)   Amount Previously Paid:

      (2)   Form, Schedule or Registration Statement No.:

      (3)   Filing Party:

      (4)   Date Filed:


                                  TETON PETROLEUM COMPANY
                                 1600 Broadway, Suite 2400
                                Denver, Colorado 80202-4921

                          NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                  TO BE HELD JULY 16, 2004

TO THE STOCKHOLDERS OF TETON PETROLEUM COMPANY:

You are  cordially  invited to attend the annual  meeting of  stockholders  (the
"Annual  Meeting") of Teton  Petroleum  Company to be held at The Pinnacle Club,
located at 555 17th St., Suite 3700,  Denver,  CO 80202 on July 16, 2004 at 9:30
AM  (local  time).  At the  Annual  Meeting,  you  will be  asked to vote on the
following:

1.   To elect five  Directors to the Company's  Board,  to hold office until his
     successor  is elected and  qualified  or until his earlier  resignation  or
     removal (Proposal No. 1);

2.   To  consider  and act upon a proposal to ratify the  Board's  selection  of
     Ehrhardt Keefe Steiner & Hottman PC as the Company's  independent  auditors
     for the fiscal year ending December 31, 2004 (Proposal No. 2);

3.   To  approve  the sale of the  Company's  indirect  equity  interest  in the
     Siberian-Texan  Joint Stock Company Goloil  ("Goloil"),  which  constitutes
     substantially all of the Company's assets within the meaning of Section 271
     of the Delaware  General  Corporation  Law, to the Open-Joint Stock Oil and
     Gas Company RussNeft ("RussNeft"),  the owner of the remaining interests in
     Goloil;  all as set forth in the Share  Sale and  Purchase  Contract  dated
     April 20, 2004,  between Goltech Petroleum LLC, our wholly owned subsidiary
     and 35.30% owner of Goloil, and RussNeft. (Proposal No. 3);

4.   To approve the issuance of common stock or securities  convertible  into or
     exercisable  for  common  stock  (which  may be  issuable,  exercisable  or
     convertible  below the then current market value of the common stock) which
     could result in an increase in outstanding shares of common stock of 20% or
     more (Proposal No. 4);

5.   To approve the 2004 Non-Employee  Stock Compensation Plan (Proposal No. 5);
     and

6.   To  transact  such other  business as may  properly  come before the Annual
     Meeting and any adjournment or postponement thereof.

BECAUSE  OF  THE  SIGNIFICANCE  OF  THESE  PROPOSALS  TO  THE  COMPANY  AND  ITS
STOCKHOLDERS,  IT IS VITAL THAT EVERY STOCKHOLDER VOTES AT THE ANNUAL MEETING IN
PERSON OR BY PROXY.

The foregoing  items of business are more fully described in the Proxy Statement
that is attached and made a part of this Notice.

The Board has fixed the close of  business  on June 18,  2004 as the Record Date
for determining the stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof.

All stockholders  are cordially  invited to attend the Annual Meeting in person.
Your vote is important  regardless  of the number of shares you own.  Whether or
not you plan to attend the meeting, please take the time to vote in one of these
ways:

     o    By mail - fill in, sign and date the enclosed proxy card and return it
          promptly in the enclosed postage-paid envelope.
     o    By telephone - call the toll-free  telephone number on your proxy card
          to vote by phone.
     o    Via Internet - visit the website  noted on your proxy card to vote via
          the Internet.

You may attend the meeting and vote in person even if you have previously  voted
by proxy in one of the three  ways  listed  above.  Your proxy is  revocable  in
accordance with the procedures set forth in the Proxy Statement.

The Annual Report to stockholders  for the Company's  fiscal year ended December
31,  2003 has been  mailed  with or prior to this  Proxy  Statement.  This Proxy
Statement and the enclosed proxy are expected to be mailed to stockholders on or
about June 23, 2004.

                                          By Order of the Board of Directors,

                                          H. Howard Cooper
                                          Chairman

                                         IMPORTANT

WHETHER  OR NOT YOU PLAN TO ATTEND  THE  MEETING,  PLEASE  SIGN AND  RETURN  THE
ENCLOSED  PROXY CARD AS PROMPTLY AS  POSSIBLE  IN THE  ENCLOSED  POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS.  IF YOU ATTEND THE MEETING AND SO DESIRE,  YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. THANK YOU FOR ACTING PROMPTLY.






                                     TABLE OF CONTENTS
                                     -----------------


GENERAL INFORMATION
SUMMARY TERM SHEET
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
QUESTIONS AND ANSWERS
WHO CAN HELP ANSWER YOUR QUESTIONS?
CORPORATE GOVERNANCE
ELECTION OF DIRECTORS
DIRECTOR COMPENSATION
BOARD COMMITTEES
INFORMATION ABOUT STOCK OWNERSHIP
COMPENSATION COMMITTEE REPORT
INFORMATION ABOUT EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION TABLES
AUDIT COMMITTEE REPORT
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
SALE OF GOLOIL
ISSUANCE OF SECURITIES
APPROVAL OF THE 2004 NON EMPLOYEE COMPENSATION PLAN
ADDITIONAL INFORMATION

APPENDIX A  FINANCIAL SECTION
   APPENDIX A-1 Unaudited Interim Consolidated Financial Statements for the
      Quarter Ended March 31, 2004
   APPENDIX A-2 Audited Annual Consolidated Financial Statements
   APPENDIX A-3 Unaudited Pro Forma Condensed Financial Information
APPENDIX B  2004 NON-EMPLOYEE STOCK COMPENSATION PLAN
APPENDIX C  AUDIT COMMITTEE CHARTER
APPENDIX D  COMPENSATION COMMITTEE CHARTER
APPENDIX E  CODE OF BUSINESS CONDUCT AND ETHICS
APPENDIX F  GOVERNANCE & NOMINATING COMMITTEE CHARTER


--------------------------------------------------------------------------------
IMPORTANT: Please SIGN, DATE, and RETURN the enclosed proxy or submit your proxy
by telephone or the Internet  immediately  whether or not you plan to attend the
Annual Meeting.  A return  envelope,  which requires no postage if mailed in the
United States, is enclosed for your convenience.
--------------------------------------------------------------------------------------------


                                  TETON PETROLEUM COMPANY
                                 1600 Broadway, Suite 2400
                                Denver, Colorado 80202-4921

                                      PROXY STATEMENT


                                    GENERAL INFORMATION

This Proxy  Statement is furnished in connection  with the  solicitation  by the
Board  of  Directors  (the  "Board")  of Teton  Petroleum  Company,  a  Delaware
corporation (the  "Company"),  of proxies in the enclosed form for use in voting
at the Annual Meeting of Stockholders  (the "Annual  Meeting") to be held at The
Pinnacle Club, located at 555 17th St., Suite 3700, Denver, CO 80202 on July 16,
2004 at 9:30 AM (local time), and any adjournment or postponement thereof.


                                     SUMMARY TERM SHEET

This  section  contains a summary of the  material  features  of the sale of the
Company's  indirect  equity  interest in the  Siberian-Texan  Closed Joint Stock
Company  Goloil.  This  summary may not contain all of the  information  that is
important  to you to  understand  the sale fully.  This  summary  includes  page
references in  parentheses  to direct you to more complete  descriptions  of the
topics presented in this summary.

     o    On April  20,  2004,  Goltech  Petroleum  LLC  ("Goltech"),  a company
          organized  under the laws of Texas,  our wholly owned  subsidiary  and
          35.30%  owner of  Siberian-Texan  Closed  Joint Stock  Company  Goloil
          ("Goloil"),  a  company  organized  under  the  laws  of  the  Russian
          Federation,  entered into a Share Purchase and Sale Contract with Open
          Joint-Stock  Oil and Gas  Company  RussNeft  ("RussNeft"),  a  company
          organized under the laws of the Russian  Federation,  the owner of the
          remaining  interest in Goloil.  Under the terms of the Share  Purchase
          and Sale  Contract,  Goltech  has agreed to sell our  35.30%  indirect
          equity  interest  in Goloil to  RussNeft.  The  Company's  interest in
          Goloil constitutes  substantially all of our assets within the meaning
          of Section 271 of the Delaware General  Corporation Law. Completion of
          the Goloil sale is subject to  stockholder  approval and other closing
          conditions.  (See p. 29-30) The sale is being made for the reasons set
          forth under "Sale of Goloil Proposal No. 3" below.

     o    The purchase price for our 35.30%  interest in Goloil is $8,960,229 in
          cash.  In  connection  with the Goloil sale,  the Company also entered
          into a separate  agreement with Goloil for the repayment of all of the
          outstanding  advances  owed  to  the  Company  by  Goloil  (the  "loan
          repayment  agreement").  At the date of the loan repayment  agreement,
          the Company  advances  totaled  $6,039,771  (including  interest at 8%
          through March 31, 2004)  ($3,569,051  of the principal and $131,452 of
          the  accrued  interest  of which had been repaid as of April 2, 2004).
          The  remainder  will  be  paid  at the  closing  of the  Goloil  sale.
          Accordingly,  the  gross  proceeds  of the  Goloil  sale  and the loan
          repayment to the Company will be $15,000,000. (See p. 29)

     o    The closing of the Goloil sale will take place  shortly after the last
          of the closing conditions is satisfied. (See p. 29)

     o    We have not  sought or  received  an  independent  report,  opinion or
          appraisal  regarding  the  fairness  of  the  transaction.  The  Board
          believes,  however, that the consideration offered for our interest in
          Goloil is fair and that the  transaction  is in the best  interests of
          our stockholders. (See p. 30)

     o    No proceeds from the Goloil sale will be distributed to  stockholders.
          (See p. 47)

     o    Immediately following the Goloil sale, our principal asset will be the
          cash from the sale. We are currently  seeking to acquire  interests in
          other oil and gas  properties  primarily  focused  on  Russia  and the
          former  Commonwealth of Independent States (the "CIS states").  We may
          also consider  opportunities  outside our primary geographic focus. We
          have from time to time engaged in preliminary  negotiations  regarding
          possible  acquisitions  in Russia.  However,  no agreements  have been
          reached except for one transaction  (described  herein),  which is not
          likely to occur due to the exercise of a right of first  purchase,  by
          an existing partner. (See p. 47)

     o    There are numerous risks associated with the Goloil sale. Stockholders
          are urged to read and carefully  consider the risk factors  associated
          with the Goloil sale. (See p. 45-49)

     o    The Board  unanimously  recommends that  stockholders vote in favor of
          the proposal to approve the Goloil sale. (See p. 49)

     o    Approval  of the  Goloil  sale  requires  the  affirmative  vote  of a
          majority of the outstanding shares of our common stock. (See p. 4)


                         SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This Proxy Statement contains statements that plan for or anticipate the future.
In this prospectus,  forward-looking  statements are generally identified by the
words "anticipate,"  "plan," "believe," "expect,"  "estimate," and the like. The
forward-looking  statements  are made pursuant to safe harbor  provisions of the
Private  Securities   Litigation  Reform  Act  of  1995.  These  forward-looking
statements include, but are not limited to, statements regarding the following:

     o    general economic conditions;

     o    completion of the sale of Goloil;

     o    our plans to acquire additional oil and gas properties;

     o    uncertainty  created by differences of interpretation of the contracts
          between us and our Russian partner RussNeft;

     o    our ability to fund our share of capital expenditures in Goloil;

     o    Goloil's ability to service its loan repayments to Goltech and Teton;

     o    our ability to raise  additional  capital,  obtain debt financing,  or
          generate  sufficient  revenues  to  make  acquisitions  and  fund  our
          operating and development plan;

     o    our success in completing development and exploration activities;

     o    political stability in Russia;

     o    changes in Russian law, currency regulations, and taxation;

     o    our present company structure;

     o    our accumulated deficit; and

     o    other factors discussed elsewhere in this Proxy Statement.

Although we believe that any  forward-looking  statements  we make in this Proxy
Statement are  reasonable,  because  forward-looking  statements  involve future
risks and  uncertainties,  there are factors that could cause actual  results to
differ  materially  from those expressed or implied.  For example,  a few of the
uncertainties  that could  affect the  accuracy of  forward-looking  statements,
besides the specific factors identified under "Risk Factors" below, include:

     o    our ability to close the Goloil sale on a timely basis;

     o    our  ability  to  complete  acquisitions  of  additional  oil  and gas
          properties;

     o    our ability to obtain financing to complete any such acquisitions;

     o    changes in general  economic and  business  conditions  affecting  the
          Company and the oil industry;

     o    developments  that might make our oil  products  less  competitive  in
          nearby markets; and

     o    changes in our business strategies.

In  light  of the  significant  uncertainties  inherent  in the  forward-looking
statements  made in this Proxy  Statement,  the  inclusion  of this  information
should not be regarded as a  representation  by us or any other  person that our
objectives and plans will be achieved.

We are not undertaking any  responsibility  to release publicly any revisions to
these  forward-looking  statements to take into account events or  circumstances
that occur  after the date of this  Proxy  Statement.  Additionally,  we are not
undertaking  any   responsibility  to  update  you  on  the  occurrence  of  any
unanticipated  events  which may cause  actual  results  to  differ  from  those
expressed or implied by the forward-looking  statements  contained in this Proxy
Statement.  You are cautioned not to place undue  reliance on these  statements,
which speak only as of the date of this Proxy Statement.



                                   QUESTIONS AND ANSWERS

Q:   WHY IS THE COMPANY PROPOSING TO SELL SUBSTANTIALLY ALL OF ITS ASSETS?

     A:   The Board is recommending the Goloil sale at this time because:

          o    Our minority position in Goloil does not allow us to maximize our
               return on this  investment,  since  RussNeft  as  majority  owner
               (after including reversionary interests) can control the decision
               making at Goloil;

          o    RussNeft has since  October 1, 2003 caused Goloil to sell its oil
               production  at a fixed  price which does not allow the Company to
               maximize  the  value  of  its   investment  in  Goloil   (whereas
               previously, we had received a higher price for our oil);

          o    The  Company  would  need  to  seek  external  financing  to fund
               Goloil's accelerated capital expenditure program;

          o    Legal   remedies   for  minority   stockholders   in  Russia  are
               significantly more limited than in the United States;

          o    Because of its  majority  position,  RussNeft is the most logical
               buyer for Goloil;

          o    The sale provides us with an  opportunity to dispose of Goloil at
               a significant  gain currently  estimated at  approximately  $12.6
               million;

          o    We plan to use the  proceeds  of the Goloil  sale to acquire  oil
               properties  where  we  will  have  more  control  than we do with
               respect to Goloil;

          o    We believe there are  currently  oil  properties on the market at
               reasonably attractive prices; and

          o    For the other  reasons set forth  under "Sale of Goloil  Proposal
               No. 3 - No Opinion of Financial  Advisor - Fairness of the Goloil
               Sale".

Q:   HOW MAY STOCKHOLDERS BENEFIT FROM THE GOLOIL SALE?

     A:   Stockholders  should  benefit  from the Goloil sale because we will be
          able to sell Goloil at a significant  gain and have the opportunity to
          use the proceeds of the Goloil sale to acquire  interests in other oil
          projects with greater  potential for future growth,  which may enhance
          the value of our Company.

Q:   WHO IS THE PURCHASER?

     A:   The purchaser will be RussNeft.  RussNeft is the owner through its two
          subsidiaries, McGrady Assets Limited ("McGrady") and Limited Liability
          Company InvestPetrol ("InvestPetrol") of the remaining 64.70% interest
          in  Goloil.  RussNeft  is a  company  organized  under the laws of the
          Russian Federation and is a large independent oil producer in Russia.

Q:   WHAT IS THE PURCHASE PRICE FOR THE ASSETS OF OUR COMPANY?

     A:   The purchase price for our 35.30%  interest in Goloil is $8,960,229 in
          cash.  In  connection  with the Goloil sale,  the Company also entered
          into  an  agreement  with  Goloil  for  the  repayment  of  all of the
          outstanding  advances  owed to the  Company by Goloil.  At the date of
          this agreement,  the Company  advances  totaled  $6,039,771  including
          interest at 8%  ($3,569,051  of the  principal and $131,452 of accrued
          interest of which had been  repaid as of April 2, 2004).  Accordingly,
          the gross  proceeds of the Goloil sale and the loan  repayment  to the
          Company will be $15,000,000.

Q:   WILL ANY OF THE PROCEEDS OF THE GOLOIL SALE BE DISTRIBUTED TO STOCKHOLDERS?

     A:   No,  the  proceeds  of the  Goloil  sale  will not be  distributed  to
          stockholders.  We will use the proceeds of the Goloil sale,  after the
          payment of transaction  expenses,  to pursue possible  acquisitions of
          interests in other oil and gas properties  primarily focused on Russia
          and the former CIS states.

Q:   WHAT WILL HAPPEN IF THE GOLOIL SALE IS APPROVED?

     A:   If the  Goloil  sale is  approved,  we will  complete  the sale of our
          assets subject to satisfaction of the closing  conditions set forth in
          the Share Purchase and Sale Contract.  After the closing, we intend to
          use the sale  proceeds to seek to acquire  interests  in other oil and
          gas properties  primarily focused on Russia and the former CIS states.
          We may also consider other  opportunities  outside our primary area of
          geographic  focus.  Our  stockholders  will not  directly  receive any
          consideration  from the Goloil sale,  and your stock will  continue to
          have the same rights as it did before the sale.

Q:   WHAT WILL HAPPEN IF THE GOLOIL SALE IS NOT APPROVED?

     A:   Even if the Goloil sale is not  approved,  the  Company  plans to seek
          other possible acquisitions in the oil industry,  primarily focused on
          Russia and the former CIS states.  However,  if the Goloil sale is not
          completed,  the Company may  encounter  significant  future  losses in
          Goloil. In addition,  the Company would have to contribute significant
          additional  capital to Goloil at a time when Goloil's revenues are not
          sufficient  to cover  capital  costs due to the  fixed  price at which
          Goloil is selling its oil.

Q:   WHAT HAS HAPPENED WITH THE PROPOSED SAMSON TRANSACTION?

     A:   On April 5, 2004, the Company  announced that it had signed a purchase
          and sale agreement to acquire a majority (52%) interest in a producing
          field in Russia.  This  transaction  was  announced on May 13, 2004 to
          involve a proposed  purchase of a majority  interest  in  Samson/Vitol
          (Cyprus) Limited ("SVC") which owns 100% of ZAO Pechoraneftgas ("PNG")
          which in turn owns a  producing  field in  Russia.  A deposit of $3.85
          million  was  paid  by the  Company  to the  proposed  seller,  Samson
          International Resources ("Samson"). The closing of the acquisition was
          subject to several  conditions,  including  a right of first  purchase
          held by Samson's  partner,  Vitol Holding B.V.  ("Vitol"),  to acquire
          Samson's  interest  in the  field on the  same  terms  offered  by the
          Company.  Vitol  elected to  exercise  this  right in early May.  As a
          result,  Samson  refunded the Company's  deposit,  though the contract
          between Samson and the Company  technically  remains in effect. In the
          event that Vitol does not purchase Samson's 52% interest,  the Company
          and  Samson  could   determine   to  proceed  with  the   contemplated
          transaction  subject to the  satisfactory  completion of the Company's
          due diligence and satisfaction of all other conditions.  However,  the
          Company  believes in light of the exercise of the first purchase right
          by Vitol and the public  announcement  by  Valkyries  Petroleum of its
          purchase of 50% of the  project  from Vitol that this  transaction  is
          unlikely to occur.

Q:   DO I HAVE APPRAISAL RIGHTS IN CONNECTION WITH THE GOLOIL SALE?

     A:   No.  Under  Delaware  law,  you  will  not have  appraisal  rights  in
          connection with the Goloil sale.

Q:   WHAT VOTE IS REQUIRED TO APPROVE THE GOLOIL SALE?

     A:   Approval of the Goloil sale will  require  the  affirmative  vote of a
          majority of the  outstanding  shares of our Common  Stock.  Only votes
          that are cast in favor of the Goloil sale will be counted  towards the
          majority   needed  to  obtain  approval  of  the  Goloil  sale.  If  a
          stockholder  does not vote on this proposal,  the failure to vote will
          have the same effect as a vote against the proposal.  Therefore, it is
          important that you vote on this matter.

Q:   WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS OTHER THAN THE GOLOIL SALE?

     A:   The  affirmative  vote of the holders of a plurality  of the shares of
          the Company  cast at the Annual  Meeting is required  for  Election of
          Directors (Proposal No. 1). The  affirmative  vote of the holders of a
          majority  of  the  outstanding   shares  of  the  Company  present  or
          represented by proxy and entitled to vote on the matter is required to
          consider  and act upon a proposal to ratify the Board's  selection  of
          Ehrhardt Keefe Steiner & Hottman PC as the  Corporation's  independent
          auditors for the fiscal year ending  December 31, 2004  (Proposal  No.
          2). The  affirmative  vote of a  majority  of votes cast at the Annual
          Meeting in person or by proxy is required  to approve the  issuance of
          the  Company's   Common  Stock  or  securities   convertible  into  or
          exercisable  for Common  Stock  which  could  result in an increase in
          outstanding  shares of our Common Stock of 20% or more  (Proposal  No.
          4). The  affirmative  vote of a  majority  of votes cast at the Annual
          Meeting  in  person  or by  proxy  is  required  to  approve  the 2004
          Non-Employee Stock Compensation Plan (Proposal No. 5).

Q:   HOW DO I VOTE?

     A:   If you complete and properly sign the accompanying proxy and return it
          to the  Company,  it will be  voted  as you  direct.  Unless  contrary
          instructions  are given,  shares will be voted in accordance  with the
          Board's recommendations on each of the enumerated proposals and in the
          proxy holders' discretion with regard to any other matters that may be
          properly  presented  at the meeting  and all  matters  incident to the
          conduct of the meeting. If you are a registered stockholder and attend
          the  meeting,  you may deliver  your  completed  proxy card in person.
          "Street name"  stockholders  who wish to vote at the meeting will need
          to obtain a proxy form from the  institution  that holds their shares.
          All votes will be tabulated by the inspector of election appointed for
          the meeting,  who will  separately  tabulate  affirmative and negative
          votes,  abstentions and executed  proxies returned by a broker holding
          shares of the Company's  Common Stock in "street name" which  indicate
          that the broker does not have  discretionary  authority  as to certain
          shares to vote on one or more matters ("broker non-votes").

Q:   CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?

     A:   If you are a registered  stockholder  (that is, if you hold your stock
          in certificate  form),  you may vote by telephone,  or  electronically
          through the Internet, by following the instructions included with your
          proxy card.  If your shares are held in "street  name,"  please  check
          your proxy card or contact your broker or nominee to determine whether
          you will be able to vote by telephone or electronically. Please follow
          the voting  instructions  on the enclosed proxy card. The deadline for
          voting by telephone or  electronically  is 5:00 p.m. (Eastern Standard
          Time) on July 14, 2004.

Q:   CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?

     A:   A proxy may be revoked by giving the Secretary of the Company  written
          notice of  revocation  at any time  before  the  voting of the  shares
          represented  by the proxy.  A stockholder  who attends the meeting may
          revoke a proxy at the meeting.  Attendance at the meeting will not, by
          itself, revoke a proxy.

Q:   WHO IS ENTITLED TO VOTE AT THE MEETING?

     A:   Only holders of record of the  Company's  Common  Stock and  preferred
          stock, $.001 par value per share, on June 18, 2004 will be entitled to
          vote at the Meeting.  At the close of business on the Record Date, the
          Company had issued and  outstanding  9,114,663  shares of Common Stock
          and 269,966 shares of preferred stock. Stockholders of the Company are
          entitled to one vote for each share held. Such shares may not be voted
          cumulatively.

Q:   WHO CAN ATTEND THE MEETING?

     A:   Only  stockholders  as of the Record  Date,  or their  duly  appointed
          proxies,  may attend the meeting,  and each may be  accompanied by one
          guest. Seating, however, is limited.  Admission to the meeting will be
          on a first-come,  first-served basis.  Registration will begin at 8:30
          a.m.  Cameras, recording devices and other electronic devices will not
          be permitted at the meeting.

          For  registered  stockholders,  the  bottom  portion of the proxy card
          enclosed with the Proxy  Statement is their Annual  Meeting  admission
          ticket.  Please note that if you hold your shares in "street name" you
          will need to bring a copy of a  brokerage  statement  reflecting  your
          stock ownership as of the Record Date and check in at the registration
          desk at the meeting.

Q:   WHY IS THE COMPANY SOLICITING PROXIES?

     A:   Because many of our stockholders  are unable to personally  attend the
          Annual  Meeting,  the Board  solicits the enclosed  proxy so that each
          stockholder is given an  opportunity to vote.  This proxy enables each
          stockholder to vote on all matters, which are scheduled to come before
          the  meeting.  When  the  proxy is  returned  properly  executed,  the
          stockholder's  shares  will be voted  according  to the  stockholder's
          directions. Stockholders are urged to specify their choices by marking
          the appropriate boxes on the enclosed proxy card.

          The  Company  will  bear the  entire  cost of  preparing,  assembling,
          printing  and mailing the proxy  materials  furnished  by the Board to
          stockholders.  Copies  of the proxy  materials  will be  furnished  to
          brokerage  houses,  fiduciaries  and custodians to be forwarded to the
          beneficial owners of the Common Stock. In addition to the solicitation
          of proxies by use of the mail,  some of the  officers,  Directors  and
          regular employees of the Company may (without additional compensation)
          solicit proxies by telephone or personal interview, the costs of which
          the Company will bear.

          This Proxy Statement and the accompanying  form of proxy is being sent
          or given to stockholders on or about June 18, 2004.

Q:   WHAT CONSTITUTES A QUORUM?

     A:   In accordance with the Company's bylaws,  the presence of one third of
          the shares entitled to vote,  whether present in person or represented
          by proxy, will constitute a quorum at the meeting. Abstentions will be
          treated as shares that are  present  and  entitled to vote but against
          any  proposal  submitted to  stockholders.  Broker  non-votes  will be
          considered  present but not entitled to vote on any proposal submitted
          to stockholders.


                            WHO CAN HELP ANSWER YOUR QUESTIONS?

You may seek answers to your questions by calling or emailing:

                      Ms. Gillian Kane
                      Vice President, Investor Relations
                      Tel.  (970) 870-1417
                      gkane@tetonpetroleum.com
                      ------------------------

Or by writing or calling the Company at its principal executive offices:

                      Teton Petroleum Company
                      1600 Broadway, Suite 2400
                      Denver, Colorado  80202-4921
                      Tel.  (303) 542-1878
                      Fax.  (303) 542-1817


                                    CORPORATE GOVERNANCE

Board of Directors

The Board  oversees  our  business  affairs  and  monitors  the  performance  of
management.  In accordance with our corporate governance  principles,  the Board
does not involve itself in day-to-day operations.  The Directors keep themselves
informed  through  discussions  with the  Chief  Executive  Officer,  other  key
executives and by reading the reports and other  materials that we send them and
by  participating  in Board and committee  meetings.  Our Directors  hold office
until their  successors have been elected and duly qualified unless the director
resigns or by reason of death or other cause is unable to serve in the  capacity
of  director.  Biographical  information  about our  Directors  is  provided  in
"Election of Directors Proposal No. 1" on page 11.

Director Independence

The Board has determined  that all of the Directors and nominees who would serve
after  July 16,  2004 are  independent  except  for Mr.  Cooper,  the  Company's
Chairman and Founder and Mr.  Arleth,  President,  Chief  Executive  Officer and
Secretary of the Company.  The Board's  determinations of independence were made
in accordance with Section 121A of the American Stock Exchange  ("AMEX") Company
Guide.  The Company was a small business issuer within the meaning of Rule 12b-2
of the  Securities  Exchange Act of 1934,  as amended  (the "1934 Act")  through
December 31, 2003. On that date the Company ceased to be a small business issuer
because its public  float  exceeded  $25  million at the end of two  consecutive
years.  As a result,  the Company ceased  reporting as a small  business  issuer
commencing with the Form 10-Q filed for the quarter ended March 31, 2004.  Small
business  issuers are not required to have a majority of  independent  directors
until their first annual meeting of stockholders after July 1, 2005. However, as
a result of its ceasing to be eligible to report as a small business issuer, the
Company is now required to have a majority of independent  directors  within the
meaning of Section 121A of the AMEX Company  Guide.  The Directors the Board has
determined to be independent are Messrs. Woodcock, Connor and Conroy.

Board Meetings and Attendance

During 2003,  the Board held five meetings.  Except for one director,  who could
not attend one meeting, all other Directors attended 100% of the meetings of the
Board and committees on which he served. The Board also approved certain actions
by unanimous written consent.

Annual Meeting Attendance

It is the Company's policy that Directors should make every effort to attend the
annual meeting of stockholders. In 2003, a blizzard in Denver prevented physical
attendance by Messrs.  Connor, Conroy and Woodcock.  The Directors who could not
attend in person, instead participated by telephone.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our
Directors,  officers and employees,  including our principal  executive officer,
principal  financial  officer and principal  accounting  officer.  A copy of the
Company's Code of Business  Conduct and Ethics is included as Appendix E to this
Proxy Statement.

Nomination of Directors

As  provided  in the  Governance  and  Nominating  Committee's  charter  and our
Company's  corporate  governance  principles,   the  Governance  and  Nominating
Committee  is  responsible  for  identifying  individuals  qualified  to  become
Directors.  The Governance and Nominating  Committee seeks to identify  director
candidates  based on input  provided by a number of sources,  including  (1) the
Governance and Nominating  Committee members,  (2) our other Directors,  (3) our
stockholders, (4) our Chief Executive Officer or Chairman, and (5) third parties
such as  professional  search firms.  In  evaluating  potential  candidates  for
director, the Governance and Nominating Committee considers the entirety of each
candidate's credentials.

Qualifications for consideration as a director nominee may vary according to the
particular  areas of  expertise  being  sought as a  complement  to the existing
composition of the Board.  However,  at a minimum,  candidates for director must
possess:

     o    high personal and professional ethics and integrity;

     o    the ability to exercise sound judgment;

     o    the ability to make independent analytical inquiries;

     o    a  willingness  and ability to devote  adequate  time and resources to
          diligently perform Board and committee duties; and

     o    the appropriate and relevant business experience and acumen.

In addition to these  minimum  qualifications,  the  Governance  and  Nominating
Committee  also takes  into  account  when  considering  whether  to  nominate a
potential director candidate the following factors:

     o    whether  the  person  possesses   specific   industry   expertise  and
          familiarity with general issues affecting our business;

     o    whether the person's nomination and election would enable the Board to
          have a member that qualifies as an "audit committee  financial expert"
          as such term is defined by the Securities and Exchange Commission (the
          "SEC");

     o    whether the person would qualify as an  "independent"  director  under
          the rules of the SEC and AMEX listing standards;

     o    the importance of continuity of the existing  composition of the Board
          to provide long-term stability and experienced oversight; and

     o    the importance of diversified Board  membership,  in terms of both the
          individuals  involved  and  their  various  experiences  and  areas of
          expertise.

The  Governance  and  Nominating  Committee  will consider  director  candidates
recommended  by  stockholders  provided  such  recommendations  are submitted in
accordance  with the  procedures  set forth  below.  In order to provide  for an
orderly and informed review and selection process for director  candidates,  the
Board has determined that stockholders who wish to recommend director candidates
for  consideration  by the Governance and Nominating  Committee must comply with
the following:

     o    the  recommendation  must be made in writing to the  attention  of the
          Company's Corporate Secretary, Karl F. Arleth;

     o    the  recommendation  must  include  the  candidate's  name,  home  and
          business  contact   information,   detailed   biographical   data  and
          qualifications,  information  regarding any relationships  between the
          candidate and the Company  within the last three years and evidence of
          the recommending person's ownership of the Company's Common Stock;

     o    the   recommendation   shall  also   contain  a  statement   from  the
          recommending  stockholder  in support of the  candidate;  professional
          references, particularly within the context of those relevant to Board
          membership,  including issues of character,  judgment, diversity, age,
          independence,  expertise,  corporate  experience,  length of  service,
          other commitments; and personal references; and

     o    a statement from the stockholder  nominee indicating that such nominee
          wants to serve on the Board and could be considered  independent under
          SEC rules and AMEX listing standards, as in effect at that time.

All candidates submitted by stockholders will be evaluated by the Governance and
Nominating  Committee  according to the criteria discussed above and in the same
manner as all other director candidates.

Complaints Regarding Accounting Matters

The Audit  Committee has established  procedures for (i) the receipt,  retention
and treatment of complaints regarding accounting,  internal accounting controls,
or auditing matters ("accounting matters"), and (ii) the confidential, anonymous
submission  by  employees  of the  Company of  concerns  regarding  questionable
accounting or auditing matters.

Communications with Directors

The Board has approved  procedures for  stockholders to send  communications  to
individual Directors or the non-employee Directors as a group.

Written  correspondence should be addressed to the director or Directors in care
of Ms.  Gillian  Kane at the  address  given  under  "Who Can Help  Answer  Your
Questions?"  on page 8. All  correspondence  will be  forwarded  directly to the
intended recipient.

You may also contact  individual  employee  Directors  by calling the  Company's
principal executive offices at (303) 542-1878.



                                   ELECTION OF DIRECTORS

                                       PROPOSAL NO. 1

The Board  proposes the election of the current  Directors of the Company for an
additional  term of one year. The following is  information  about each nominee,
including biographical data for at least the last five years. Should one or more
of these  nominees  become  unavailable  to accept  nomination  or election as a
director,  the individuals named as proxies on the enclosed proxy card will vote
the shares that they  represent  for the  election of such other  persons as the
Board may recommend, unless the Board reduces the number of Directors.

The Board  adheres to  corporate  governance  principles  designed to assure the
continued  vitality of the Board and  excellence in the execution of its duties.
The Board is responsible  for supervision of the overall affairs of the Company.
Following  the Annual  Meeting,  the Board will consist of five  Directors.  All
Directors are U.S. citizens.  The term of each director continues until the next
annual meeting or until successors are elected. The nominees for director are:


                    Principal Occupation for the Past Five Years and
      Name                       Current Directorships                    Age
H. Howard Cooper H.  Howard  Cooper has been our  chairman  and founder
                 since  1996.  Mr. Cooper  was  our  president  and CEO   48
                 from  1996   until  May   2003.   Mr. Cooper   founded
                 American  Tyumen  in  November  1996.  He  served as a
                 director and  president  of American  Tyumen until the
                 merger  with the  Company.  Since the  merger,  he has
                 held these same positions  with the Company.  In 1994,
                 he was a principal  with Central Asian  Petroleum,  an
                 oil and gas  company  with its primary  operations  in
                 Kazakhstan,  located  in Denver,  Colorado.  From 1992
                 to 1994 Mr.  Cooper  served  with  AIG,  an  insurance
                 group.

Karl F. Arleth   Karl F.  Arleth  has  been  our  president  and  Chief
                 Executive  Officer and Corporate  Secretary  since May   55
                 2003 and a  director  since  2002.  From 2002 to 2003,
                 Mr.  Arleth  was the  Chief  Operating  Officer  and a
                 Board member of Sefton  Resources,  Inc.  Between 1999
                 and 2001,  he served as  Chairman  and CEO of Eurogas,
                 Inc.  Ending in 1999,  Mr.  Arleth spent 21 years with
                 Amoco   and   BP-Amoco.   In  1998  he   chaired   the
                 Shareholder  Board  of  the  Azerbaijan  International
                 Operating   Company   (AIOC)  for  BP-Amoco  in  Baku,
                 Azerbaijan.   Concurrently,   in  1998,  he  was  also
                 President  of Amoco  Caspian  Sea  Petroleum  Ltd.  in
                 Azerbaijan.   In  1997,   he  served  as  Director  of
                 Strategic  Planning for Amoco  Corporations  Worldwide
                 Exploration  and  Production  Sector in Chicago.  From
                 1992 to 1996 Mr.  Arleth was President of Amoco Poland
                 Ltd. in Warsaw, Poland.

Thomas F. Conroy Thomas F. Conroy was our Chief  Financial  Officer and
                 Corporate  Secretary  from  March  2002  until  May 1,   66
                 2003,  and a director  since  2002.  Since  2002,  Mr.
                 Conroy    has    been   a    principal    member    of
                 Mann-Conroy-Eisenberg  & Assoc.  LLC, a life insurance
                 and  reinsurance  consulting  firm and since 2001, has
                 been a managing  principal  of  Strategic  Reinsurance
                 Consultants  International  LLC,  a  life  reinsurance
                 consulting  and brokerage  firm.  Ending in 2001,  Mr.
                 Conroy,  spent 27 years  with ING and its  predecessor
                 organizations,  serving in various financial positions
                 and leading  two of its  strategic  business  units as
                 President.   As  President  of  ING  Reinsurance,   he
                 established ING's international  presence,  setting up
                 facilities in The  Netherlands,  Bermuda,  Ireland and
                 Japan.  He also served as an Officer and Board  Member
                 of Security Life of Denver  Insurance  Company and its
                 subsidiaries.   Mr.  Conroy  is  a  certified   public
                 accountant.

James J.         James J. Woodcock  has  been a director since 2002 and
Woodcock         Chairman  of  the  Company's  Compensation  Committee.   65
                 Since  1981,  Mr.  Woodcock has been the owner and CEO
                 of  Hy-Bon  Engineering  Company,  based  in  Midland,
                 Texas.  Hy-Bon is an engineering firm and manufacturer
                 of vapor recovery, gas boosters, and  casing  pressure
                 reduction systems for the  oil industry.  From 1997 to
                 2002, Mr. Woodcock was the  chairman  of Transrepublic
                 Resources,  a  private  oil  and gas  exploration firm
                 located in Midland Texas. Since 1996, Mr. Woodcock has
                 been a board member of Renovar Energy, a private waste
                 to energy firm  located  in Midland  Texas and was its
                 Chairman of the Board until 2003.

John T. Connor,  John T.  Connor,  Jr. has been a  director  since 2003
Jr.              and  chairs the  Board's  audit  committee.  He is the   63
                 Founder and Portfolio  Manager of the Third Millennium
                 Russia Fund, a US based  mutual fund  specializing  in
                 the  equities of Russian  public  companies,  which he
                 founded  in  1998.  Mr.  Connor  is a  member  of  the
                 Council  on Foreign  Relations  and the  American  Law
                 Institute.  He is a  director  of  Port.ru.,  Inc.,  a
                 Delaware  corporation,   which  operates  the  leading
                 internet  portal  in  Russia,  mail.ru.  and is also a
                 member of the board of directors  of  Swissfone  Ltd.,
                 based in Washington,  D.C., an Irish company that is a
                 telecom wholesaler.


All officers  hold office until the first  meeting of the Board after the annual
meeting of  stockholders  next  following his election or until his successor is
elected  and  qualified.  A  director  or officer  may also  resign at any time.
Messrs.  Connor,  Conroy and Woodcock  have been  determined  by the Board to be
independent  Directors  within the meaning of Section  121A of the AMEX  Company
Guide. While Mr. Conroy currently qualifies as independent under that provision,
commencing  December 1, 2004, it is possible he will no longer  qualify due to a
more  restrictive  independence  requirement  which takes  effect that day which
disqualifies Directors with an employee relationship within the last three years
rather than within the last year as under the current rules.

Approval of this proposal  requires the  affirmative  vote of a plurality of the
shares of the Company cast at the Annual Meeting.

     THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE ABOVE NOMINEES.



                                   DIRECTOR COMPENSATION

Independent  Directors are compensated as follows:  $6,000 cash for each quarter
served,  plus $2,500 in stock for each Board  meeting  attended,  plus $1,000 in
stock for each  teleconference  call in which  the  director  participates  to a
maximum annual total of $35,000. The number of shares received for participating
in Board meetings and  teleconferences  is determined by the closing share price
at the end of each quarter during which the meeting or teleconference occurred.

In  addition to these fees,  Directors  are  reimbursed  for  reasonable  travel
expenses,  are eligible to participate  in the Company's  stock option plan, and
are covered by the Company's directors and officers insurance.

The outside Directors  received no compensation  during the first nine months of
2003.  For the  fourth  quarter  of 2003,  they  received  $8,500 in the form of
Company stock based on the closing price of $4.98 on December 31, 2003.


                                      BOARD COMMITTEES

The Board has  standing  Audit,  Compensation,  and  Governance  and  Nominating
committees.  Each committee has a written charter.  The charters are included as
appendices to this Proxy  Statement.  Information  concerning the membership and
function of each committee is as follows:

                        Board Committee Membership
                        --------------------------
                                                      Governance and
                          Audit       Compensation      Nominating
Name                    Committee       Committee        Committee
----                    ---------       ---------        ---------
Mr. Cooper
Mr. Arleth
Mr. Woodcock                X               X(2)             X
Mr. Conroy(1)               X               X                X(2)
Mr. Connor                  X(2)

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

     (1)  Mr.  Conroy was  appointed to the Audit  Committee,  the  Compensation
          Committee and the Governance and Nominating Committee on May 11, 2004.

     (2)  Chairman.

Audit Committee

The Audit Committee is responsible for determining the adequacy of the Company's
internal accounting and financial  controls,  reviewing the results of the audit
of the Company performed by the independent public accountants, and recommending
the  selection of  independent  public  accountants.  The functions of the Audit
Committee  and its  activities  during 2003 are  described  in more detail under
"Report of the Audit Committee" on page 21 as well as in the Committee's charter
included  as  Appendix E to this  Proxy  Statement.  During the year,  the Board
examined the  composition of the Audit Committee in light of the adoption by the
AMEX of new  listing  standards  governing  audit  committees.  Based  upon this
examination,  the Board has  determined  that each of the  members  of the Audit
Committee is unrelated,  is an outside member with no other current  affiliation
with the Company,  and is independent as defined by AMEX listing standards.  The
Board has  determined  that Mr.  John  Connor is an "audit  committee  financial
expert" as that term is defined by the SEC and AMEX, and is  "independent"  from
the  Company's  management  as that  term is  defined  in  Item  7(d)(3)(iv)  of
Regulation 14A promulgated  under the 1934 Act. During 2003, the Audit Committee
held three meetings by teleconference.

During the year,  the Board examined the  composition of the Audit  Committee in
light  of  the  adoption  by  AMEX  of new  listing  standards  governing  audit
committees.  Based  upon this  examination,  the Board has  determined  that Mr.
Connor and Mr. Woodcock are unrelated, are outside members with no other current
affiliation  with the Company,  and are  independent  as defined by AMEX listing
standards.  Mr. Conroy was appointed to the Audit  Committee in June 2004 as the
third member of the Committee pursuant to the Board's determination that he does
not have a material  relationship with the Company that would interfere with the
exercise of his independent  judgment.  However, but for the exception described
below,  Mr. Conroy would be deemed not independent for Audit Committee  purposes
under AMEX listing standards because he served as chief financial officer of the
Company from March 2002 until May 2003.  However,  pursuant to  exceptional  and
limited circumstances,  which are described below, the Board has determined that
it is in the best  interests of the Company and its  stockholders  if Mr. Conroy
temporarily serves as the third member of the Committee.

A small  business  issuer  is  required  to have only two  members  on its audit
committee.  The  Company  ceased to be  eligible  to report as a small  business
issuer in early 2004 and began  reporting as a regular  issuer when it filed its
quarterly  report  for the period  ended  March 31,  2004.  As  described  under
"Director Independence" on page 8, the Company was therefore required to appoint
a third member to the Audit Committee.  As neither Mr. Cooper nor Mr. Arleth, by
virtue of their service as current executive officers, qualify for membership on
the Audit  Committee under AMEX listing  standards,  the Company must appoint an
additional Board member. The Company believes it will take some time to identify
a suitable  candidate.  As a result,  the Board has determined that it is in the
best  interests of the Company and its  shareholders  for Mr. Conroy to serve on
the Audit  Committee  while the Company  conducts the search for an appropriate,
qualified new Board member and until a suitable  replacement is found.  Under an
applicable  exception in the AMEX listing standards,  Mr. Conroy became eligible
for temporary service on the Audit Committee in May 2004 as (i) he satisfies the
independence  requirements of Rule 10A-3 under the 1934 Act and (ii) he is not a
current  officer or employee or an  immediate  family  member of such officer or
employee. A director appointed to the Audit Committee pursuant to this exception
may not serve for in excess of two consecutive years and may not chair the Audit
Committee. In making such determination,  the Board considered the fact that Mr.
Conroy is experienced in financial matters and is a certified public accountant.
The Board intends to appoint Mr.  Conroy's  replacement  by the first quarter of
2005.

Compensation Committee

The Compensation  Committee determines matters pertaining to the compensation of
certain  executive  officers of the Company and  administers the Company's stock
option and incentive compensation.  During 2003, the Compensation Committee held
three meetings by teleconference.  The Committee's report starts on page 16. The
Committee's charter is included as Appendix D to this Proxy Statement.

Governance and Nominating Committee

The Board has established a Governance and Nominating  Committee for purposes of
nominating  Directors and for all other purposes  outlined in the Governance and
Nominating  Committee  charter,  including  nominees  submitted  to the Board by
stockholders.  The  Board  has  determined  that  each  of  the  members  of the
Governance and Nominating  Committee is unrelated,  is an outside member with no
other  affiliation with the Company,  and is independent as defined by AMEX. The
Committee's charter is included as Appendix F to this Proxy Statement.


                             INFORMATION ABOUT STOCK OWNERSHIP

The following tables set forth certain information as of May 31, 2004, available
to the  Company  with  respect  to the shares of the  Company  (i) held by those
persons known to the Company to be beneficial  owners (as  determined  under the
rules of the SEC) of more than 5% of the Common Stock then  outstanding and (ii)
held by each of the  Directors,  each of the  executive  officers  named  in the
Summary Compensation Table below, and by all of the Directors and such executive
officers as a group.  The  business  address  for all  Directors  and  executive
officers is c/o Teton  Petroleum  Company,  1600 Broadway,  Suite 2400,  Denver,
Colorado 80202.


                                    5% BENEFICIAL OWNERS

                                                Common Stock
                                                Beneficially   Percent of
   Name and Address of Beneficial Owner             Owned         Class
                                                    -----         -----
   H. Howard Cooper (1)                          1,607,481         15.2%
   Karl F. Arleth (2)                              984,106          9.8%
   James J. Woodcock (3)                           747,358          7.6%
   John T. Connor (4)                              544,093          5.7%

(1)  Includes (i) 145,857 shares of Common Stock, (ii) 458,335 shares underlying
     warrants  exercisable  between $3.24 and $12.00, and (iii) 1,003,289 shares
     underlying options exercisable between $3.48 and $3.60 per share.

(2)  Includes (i) 75,772 shares of Common Stock,  (ii) 197,995 shares underlying
     warrants  exercisable  between $3.24 and $6.00,  and (iii)  710,339  shares
     underlying options exercisable between $3.48 and $3.60 per share.

(3)  Includes (i) 102,948 shares of Common Stock, (ii) 234,262 shares underlying
     warrants  exercisable  between $3.24 and $6.00,  and (iii)  410,148  shares
     underlying options exercisable between $3.48 and $3.60 per share.

(4)  Includes (i) 185,539 shares of Common Stock owned indirectly,  (ii) 183,554
     shares  underlying  warrants  exercisable  between  $3.24 and  $6.00  owned
     indirectly, and (iii) 175,000 shares underlying options exercisable between
     $3.60 and $3.71 per share.



                                   DIRECTORS AND OFFICERS

                                                Common Stock
                                                Beneficially   Percent of
   Name and Address of Beneficial Owner             Owned         Class
                                                    -----         -----
   H. Howard Cooper (1)                          1,607,481         15.2%
   Karl F. Arleth (2)                              984,106          9.8%
   James J. Woodcock (3)                           747,358          7.6%
   John T. Connor (4)                              544,093          5.7%
   Igor Effimoff (5)                               467,058          4.9%
   John J. Mahar (6)                                83,334          1.0%
   Thomas F. Conroy (7)                            159,950          1.7%
   Ilia A. Gurevich (8)                             66,668          0.7%
   Directors and Executive Officers as a Group   4,660,048        46.52%

(1)  Includes (i) 145,857 shares of Common Stock, (ii) 458,335 shares underlying
     warrants  exercisable  between $3.24 and $12.00, and (iii) 1,003,289 shares
     underlying options exercisable between $3.48 and $3.60 per share.

(2)  Includes (i) 75,772 shares of Common Stock,  (ii) 197,995 shares underlying
     warrants  exercisable  between $3.24 and $6.00,  and (iii)  710,339  shares
     underlying options exercisable between $3.48 and $3.60 per share.

(3)  Includes (i) 102,948 shares of Common Stock, (ii) 234,262 shares underlying
     warrants  exercisable  between $3.24 and $6.00,  and (iii)  410,148  shares
     underlying options exercisable between $3.48 and $3.60 per share.

(4)  Includes (i) 185,539 shares of Common Stock owned indirectly,  (ii) 183,554
     shares  underlying  warrants  exercisable  between  $3.24 and  $6.00  owned
     indirectly, and (iii) 175,000 shares underlying options exercisable between
     $3.60 and $3.71 per share.

(5)  Includes  (i) 2,057 shares of Common  Stock (ii) 35,186  shares  underlying
     warrants   exercisable  at  $3.71  per  share,  and  (iii)  429,815  shares
     underlying options exercisable between $3.48 and $3.60 per share.

(6)  Includes 83,334 shares underlying options exercisable at $3.48 per share.

(7)  Includes (i) 17,957  shares of Common Stock (ii) 38,335  shares  underlying
     warrants  exercisable  between $3.24 and $6.00,  and (iii)  103,658  shares
     underlying options exercisable between $3.48 and $3.60 per share.

(8)  Includes  (i) 6,898 shares of Common  Stock (ii) 12,314  shares  underlying
     warrants  exercisable  between  $3.24 and $6.00,  and (iii)  47,456  shares
     underlying options exercisable between $3.48 and $3.60 per share.

The Company  has  furnished  the  following  report  concerning  the  philosophy
underlying the Company's compensation of executive officers.


                               COMPENSATION COMMITTEE REPORT

The Report of the Compensation  Committee (the  "Compensation  Report") does not
constitute soliciting material and should not be deemed filed or incorporated by
reference  into any other Company filing under the Securities Act of 1933 or the
1934 Act,  except to the  extent  the  Company  specifically  incorporates  this
Compensation Report by reference therein.

The Company's executive compensation program is designed to attract,  retain and
motivate  executive officers capable of leading the Company to meet its business
objectives,  to align the  interests of executive  management  with those of the
stockholders,  and to provide  incentives  and  reward  both short and long term
performance  based on the  success of the  Company in  meeting  its  development
milestones  and  business  objectives.   The  Compensation  Committee  places  a
particular emphasis on variable, performance based components, such as the bonus
potential and stock option awards, the value of which could increase or decrease
to reflect changes in corporate and individual performance.

Components of Compensation

Each  executive  officer's  compensation  package is generally  comprised of the
following elements:  (1) a base salary which is established at levels considered
appropriate  for the  duties  and scope of  responsibilities  of each  officer's
position; (2) a performance-based annual bonus; and (3) periodic grants of stock
options to strengthen the mutuality of interests between the executive  officers
and  the  Company's  stockholders.  Executive  officers  are  also  eligible  to
participate in compensation  and employee  benefits  generally  available to all
employees of the Company.

The Compensation Committee believes that this approach best serves the interests
of the  Company  and its  stockholders.  It  enables  the  Company  to meet  the
requirements of the highly competitive environment in which the Company operates
while  ensuring that executive  officers are  compensated in a way that advances
both the short and long term  interests of  stockholders.  Under this  approach,
compensation  for these officers  involves a high  proportion of pay that is "at
risk," namely, the annual bonus and stock options.  The variable annual bonus is
also based, in significant part, on Company performance.  Stock options relate a
significant   portion  of  long  term  remuneration   directly  to  stock  price
appreciation realized by all of the Company's stockholders.

Base Salary

Base salaries for executive officers are set at levels believed by the Committee
to be sufficient to attract and retain qualified executive officers based on the
stage of development of the Company,  the salary levels in effect for comparable
positions  in similarly  situated  companies  within  relevant  industries,  and
internal comparability considerations. Base salaries for the Company's executive
officers  other  than the Chief  Executive  Officer,  as well as changes in such
salaries, are based upon recommendations by the Chief Executive Officer,  taking
into  account  such  factors as  competitive  industry  salaries,  a  subjective
assessment of the nature of the position and the  contribution and experience of
the officer and the length of the officer's  service.  All such  recommendations
are subject to approval or disapproval by the Compensation Committee. Other than
provisions  provided for in employment  agreements,  changes in base salaries of
executives  are  based  on an  evaluation  of the  personal  performance  of the
executive,  prevailing market practices, and the performance of the Company as a
whole. In determining base salaries,  the Committee not only considers the short
term performance of the Company,  but also the success of the executive officers
in developing and executing the Company's strategic plans, developing management
employees and exercising leadership in the development of the Company.

Cash-Based Incentive Bonus

The  Committee  believes  that a portion  of the  total  cash  compensation  for
executive officers should be based on the Company's success in meeting its short
term performance  objectives and  contributions  by the executive  officers that
enable the  Company to meet its long term  objectives,  and has  structured  the
executive compensation program to reflect this philosophy. This approach creates
a direct  incentive  for  executive  officers  to  achieve  desired  short  term
corporate goals that also further the long term  objectives of the Company,  and
places a significant  portion of each executive officer's annual compensation at
risk.

Stock Options

The Compensation Committee believes that equity participation is a key component
of the Company's executive  compensation  program.  Stock options are awarded by
the Committee to executive officers  primarily based on potential  contributions
to the Company's growth and development and marketplace practices.  These awards
are  designed  to retain  executive  officers  and to  motivate  them to enhance
stockholder value by aligning the financial interests of executive officers with
those  of  stockholders.  Stock  options  provide  an  effective  incentive  for
management  to create  stockholder  value  over the long term  because  the full
benefits of the option grants cannot be realized  unless an  appreciation in the
price of the Company's Common Stock occurs over a number of years.

Variable Bonus

The Committee may award annual or interim  special  bonuses in the form of cash,
stock  options,  or restricted  stock to executive  management and employees for
achieving  certain  milestones,  progress  made in the staff and  organizational
development  of  the  Company,   and  advances  in  the  market  acceptance  and
commercialization of the Company's technology.

CEO Compensation

With the framework  described  above,  the Committee  determines  the salary and
bonus of the Chief Executive  Officer based on his leadership,  the execution of
business plans,  and strategic  results.  The complexity of the business and his
experience are also key factors. The Committee has used the following metrics to
determine the CEO's compensation:  the complexity of the Company's international
operations,  the experience that the CEO brings to the Company and its business,
the CEO's ability to continuously  improve the Company's results,  and the CEO's
ability to evaluate and execute on acquisitions  that will enable the Company to
grow its  asset  base in the  near  term.  The  Committee  does not use  narrow,
quantitative  measures or formulas in determining  the CEO's  compensation.  The
Committee  meets  annually to  establish  operational  and  financial  goals and
objectives  for the CEO and  throughout  the year  regularly  meets in executive
sessions and with the CEO to review  performance  against  those  objectives.  A
final meeting of the Compensation  Committee as well as with the entire Board is
held each year during the  Board's  December  meeting to measure  results of the
prior year as well as to set results and establish  compensation  benchmarks for
the subsequent year.

Thomas F. Conroy
James J. Woodcock




                            INFORMATION ABOUT EXECUTIVE OFFICERS

The Chairman and the Chief Executive  Officer are elected annually by our Board.
The remaining  executive  officers are approved by the  executive  committee and
hold office until their successors are elected and duly qualified.

The current executive officers of the Company are as follows:

Name               Age  Position
-----              ---  --------
H. Howard Cooper   48   Executive Chairman of the Board of
                        Directors and Founder
Karl F. Arleth     55   Chief Executive Officer, President,
                        Secretary, and Director
Igor Effimoff      58   Executive Vice President and Chief
                        Operating Officer
John Mahar         50   Executive Vice President of Finance
Patrick A. Quinn   50   Chief Financial Officer
Ilia Gurevich      40   Senior Controller - Russia
Gordon Phair       43   Controller - U.S.

H. Howard  Cooper has been our chairman and founder  since 1996.  Mr. Cooper was
our president  and CEO from 1996 until May 2003.  Mr.  Cooper  founded  American
Tyumen in  November  1996.  He served as a director  and  president  of American
Tyumen  until the merger with the Company.  Since the merger,  he has held these
same positions with the Company.  In 1994, he was a principal with Central Asian
Petroleum,  an oil and gas company with its primary  operations  in  Kazakhstan,
located in Denver,  Colorado.  From 1992 to 1994 Mr.  Cooper served with AIG, an
insurance group.

Karl F. Arleth has been our president and Chief Executive  Officer and Corporate
Secretary  since May 2003 and our director  since 2002.  From 2002 to 2003,  Mr.
Arleth was the Chief Operating  Officer and a Board member of Sefton  Resources,
Inc. Between 1999 and 2001, he served as Chairman and Chief Executive Officer of
Eurogas, Inc. Ending in 1999, Mr. Arleth spent 21 years with Amoco and BP-Amoco.
In 1998  he  chaired  the  Shareholder  Board  of the  Azerbaijan  International
Operating Company (AIOC) for BP-Amoco in Baku, Azerbaijan. Concurrently in 1998,
he was also  President of Amoco Caspian Sea  Petroleum  Ltd. in  Azerbaijan.  In
1997,  he  served as  Director  of  Strategic  Planning  for Amoco  Corporations
Worldwide  Exploration and Production  Sector in Chicago.  From 1992 to 1996 Mr.
Arleth was President of Amoco Poland Ltd. in Warsaw, Poland.

Igor Effimoff has been our Executive Vice President and Chief Operating  Officer
since  2002.  Between  1996 and  2001,  he was  President  of  Pennzoil  Caspian
Corporation,  managing the Company's  interests in the Caspian  Region.  Between
1994 and  1996 he was the  Chief  Executive  Officer  of  Larmag  Energy,  NV, a
privately held Dutch oil and gas  production  company with its primary assets in
the Caspian Sea.

John Mahar has been our  Executive  Vice  President  of  Finance  since 2004 and
served as our interim  Chief  Financial  Officer from April 2003 until  February
2004. Since 1991, he has been a Managing Director of Gladstone Capital,  LLC, an
oil-and-gas  financial  advisory firm based in New York he  co-founded.  Between
1983 and 1991, Mr. Mahar was first Vice President at Schroder Capital Management
International,  Inc.  where he was  responsible  for the  firm's  domestic  U.S.
investment operations.

Patrick A. Quinn,  CPA, CVA has been our Chief Financial  Officer since February
2004,  a position he occupies on a part-time  basis.  Since 1986,  Mr. Quinn has
been the CEO of Quinn & Associates, P.C. (Q&A). Q&A provides accounting, tax and
auditing  services  primarily  to the  oil and gas  industry.  Q&A has  provided
accounting  and tax services to the Company since its  inception.  Mr. Quinn has
extensive  experience in international oil and gas operations  including serving
as the  Controller of Hamilton Oil  Corporation,  which was the first company to
produce oil in the U.K. sector of the North Sea.

Ilia  Gurevich  has been our Senior  Controller  for Russia  since 2003,  having
previously held the position of Controller since 2002. Between 1998 and 2002, he
was a financial analyst for TeleInvest,  an investment firm in Denver, Colorado.
From 1997 to 1998,  he was a Research  Analyst for the firm of MIG-2000,  in Los
Angeles.  From 1993 to 1997, he was Vice  President,  Finance,  for an oil joint
venture affiliated with Sidanco.

Gordon Phair has been our U.S.  Controller since November 2003. Between 1999 and
November 2003, Mr. Phair was an independent  contractor providing accounting and
financial  services  primarily to mining companies.  From 1998 to 1999 Mr. Phair
was the director of accounting for Caleel-Hayden,  a cosmetics distributor.  Mr.
Phair is a certified public accountant.




                               EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The  following  table  provides  information  about the total  compensation  for
services  in all  capacities  to the  Company  or its  subsidiary  for the Chief
Executive Officer and the other most highly  compensated  executive  officers of
the Company whose total annual salary and bonus exceeded $100,000 (collectively,
the "named executive officers"). See the Compensation Committee Report beginning
on page 16 for an explanation of our compensation philosophy.

                                                                  Long-Term
                                                                Compensation
                                                                   Awards
                                                 Other Annual   (Securities)
                                                 Compensation    Underlying
Name and Positions    Year  Salary($)  Bonus($)      ($)           Options)
==============================================================================

H. Howard Cooper      2003  160,000       -           -           603,289
                      2002  160,000    50,000         -              -
                      2001  210,000       -           -              -
------------------------------------------------------------------------------
------------------------------------------------------------------------------

Karl F. Arleth(1)     2003  85,000        -           -           410,338
                      2002     -          -           -              -
                      2001     -          -           -              -
------------------------------------------------------------------------------
------------------------------------------------------------------------------

Igor Effimoff         2003  108,000       -           -            89,815
                      2002     -          -           -              -
                      2001     -          -           -              -


(1)  Reflects  compensation as Chief Executive  Officer for the period beginning
     May 1, 2003 through the end of 2003.

Options/SARs Grants During Last Fiscal Year

The  following  table  provides  information  related to options  granted to our
Directors and named executive officers during the fiscal year ended December 31,
2003.

                 Number of      % of Total
                 Securities      Options       Exercise
                 Underlying     Granted in      Price
                  Options         Fiscal         Per      Expiration
      Name        Granted        2003 (1)       Share        Date
      ----        -------        -------        -----        ----

H. Howard Cooper  603,289         38.2%         $3.48      04/08/13

Karl F. Arleth    410,338         26.0%         $3.48      04/08/13

James J.          210,148         13.3%         $3.48      04/08/13
Woodcock

John T. Connor,   100,000          6.3%         $3.40      08/03/13
Jr.

Igor Effimoff      89,815          5.7%         $3.71      04/08/13

John J. Mahar      83,333          5.3%         $3.48      04/08/13

Thomas F. Conroy   28,658          1.8%         $3.48      04/08/13

(1)  The exercise  price of the stock options was based on the fair market value
     of the stock on the day of the grant.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value

No options were exercised in the last fiscal year.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the 1934 Act requires that the Company's  Directors and certain
of its  officers  file  reports of  ownership  and changes of  ownership  of the
Company  common  stock  with the SEC and  AMEX.  Based  solely on copies of such
reports  provided to the Company,  the Company  believes  that all Directors and
officers filed on a timely basis all such reports  required of them with respect
to stock  ownership  and changes in  ownership  during 2003 except that Mr. John
Mahar  and Mr.  John  Connor  were  late in filing  Form 3s  reporting  becoming
respectively,  an executive officer and a director and Messrs.  Arleth,  Conroy,
Cooper, and Woodcock were late in reporting the grant of stock options under the
2003 Employee Stock Option Plan.

Executive Employment Agreements

The Company and Mr. Cooper, our Chairman,  entered into an employment agreement,
effective May 1, 2002. The employment  agreement is for a three-year term. After
the third year, the agreement is automatically renewed from year to year, unless
it is  terminated  as provided  below.  Mr.  Cooper's  initial  salary under the
agreement  is  $13,333  per month,  which was  increased  to  $16,667  per month
beginning in January 2004. In the Board's discretion,  he may receive additional
bonus compensation.  Mr. Cooper's employment is terminated  immediately upon his
death or  permanent  disability.  The Company may also  terminate  Mr.  Cooper's
employment  immediately for cause,  as defined in the agreement.  Mr. Cooper may
terminate  his  employment  immediately  for  good  reason,  as  defined  in the
agreement.  Additionally,  either the Company or Mr.  Cooper may  terminate  Mr.
Cooper's  employment  upon 60 days  prior  written  notice  to the  other.  Upon
termination of Mr. Cooper's  employment without cause by the Company or for good
reason by Mr. Cooper, Mr. Cooper is entitled to severance pay. The severance pay
is equal to Mr. Cooper's salary for the preceding 24 months.  Such severance may
be paid in monthly installments over 24 months from the date of termination. The
Company may  discontinue  the  severance  payments if Mr.  Cooper  violates  the
confidentiality, noncompetition, or nonsolicitation provisions of his employment
agreement.

Ms. Anya Cooper,  secretary,  signed an employment agreement with the Company on
May 1, 2002. The agreement is for a three-year term, whereby Ms. Cooper's salary
is $6,500 per month. Under the terms of the agreement, Ms. Cooper is entitled to
12 months of severance pay, payable in monthly  installments over 12 months from
the date of termination.  The Company may discontinue the severance  payments if
Ms. Cooper violates the confidentiality  provision of her employment  agreement.
Ms. Cooper is the wife of Mr. Cooper, the Chairman and Founder of the Company.

Mr.  Arleth,  President  and  Chief  Executive  Officer,  signed  an  employment
agreement  on May 1, 2003.  The  agreement  is for a  three-year  term,  with an
initial  salary of $10,000  per month that was  increased  to $15,000  per month
beginning  in January  2004.  Under the terms of the  agreement,  Mr.  Arleth is
entitled  to 24 months  severance  pay in the event of a change of  position  or
control of the Company.



                                   AUDIT COMMITTEE REPORT

The  following  Report of the Audit  Committee  (the  "Audit  Report")  does not
constitute soliciting material and should not be deemed filed or incorporated by
reference  into any other Company filing under the Securities Act of 1933 or the
Securities  Exchange Act of 1934, except to the extent the Company  specifically
incorporates this Audit Report by reference therein.

Role of the Audit Committee

The Audit Committee's primary responsibilities fall into three broad categories:

First, the Committee is charged with monitoring the preparation of quarterly and
annual financial reports by the Company's management, including discussions with
management  and the  Company's  outside  auditors  about draft annual  financial
statements and key accounting and reporting matters;

Second,  the Committee is responsible  for matters  concerning the  relationship
between  the  Company and its outside  auditors,  including  recommending  their
appointment or removal;  reviewing the scope of their audit services and related
fees,  as  well  as any  other  services  being  provided  to the  Company;  and
determining  whether the outside auditors are independent  (based in part on the
annual letter provided to the Company  pursuant to Independence  Standards Board
Standard No. 1); and

Third, the Committee  reviews financial  reporting,  policies,  procedures,  and
internal controls of the Company.

The  Committee  has  implemented  procedures to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or appropriate
to  each of the  matters  assigned  to it  under  the  Committee's  charter.  In
overseeing the preparation of the Company's financial statements,  the Committee
met with management and the Company's outside auditors,  including meetings with
the Company's outside auditors without management present, to review and discuss
all  financial  statements  prior to their  issuance and to discuss  significant
accounting   issues.   Management  advised  the  Committee  that  all  financial
statements  were  prepared in  accordance  with  generally  accepted  accounting
principles,  and the Committee discussed the statements with both management and
the outside  auditors.  The  Committee's  review  included  discussion  with the
outside  auditors of matters  required to be discussed  pursuant to Statement on
Auditing  Standards  No. 61  (Communication  With Audit  Committees)  as well as
matters previously  disclosed in Item 8-A of the Company's Annual Report on Form
10-KSB.

With respect to the  Company's  outside  auditors,  the  Committee,  among other
things,  discussed with Ehrhardt Keefe Steiner & Hottman PC matters  relating to
its independence, including the disclosures made to the Committee as required by
the Independence  Standards Board Standard No. 1 (Independence  Discussions with
Audit Committees).

Audit and Non-Audit Fees

Aggregate  fees for  professional  services  rendered to the Company by Ehrhardt
Keefe Steiner & Hottman PC as of or for the two fiscal years ended  December 31,
2003 and 2002 are set forth below:

                             2003            2002
                             ----            ----
Audit Fees              $ 141,917       $ 142,296
Audit-Related              51,047          33,778
Fees
Tax Fees                    6,500          12,805
                            -----          ------
Total                   $ 199,464       $ 188,879

Audit Fees. Aggregate fees for professional  services rendered by Ehrhardt Keefe
Steiner & Hottman PC in connection with its audit of our consolidated  financial
statements  included in Forms 10-KSB and the quarterly  reviews of our financial
statements included in Forms 10-QSB for the fiscal years 2003 and 2002.

Audit-Related  Fees. These were primarily related to SB-2 and SB-2/A filings for
the registration of our stock, assistance with the AMEX application process, and
reviews  and  discussions  regarding  accounting  treatment  of debt and  equity
transactions.

Tax Fees. These were related to tax compliance and related tax services.

Ehrhardt Keefe Steiner & Hottman PC rendered no  professional  services to us in
connection with the design and implementation of financial  information  systems
in fiscal year 2003 or 2002.

Recommendations  of  the  Audit  Committee.  In  reliance  on  the  reviews  and
discussions  referred to above, the Committee  recommended to the Board that the
Board approve the inclusion of the Company's audited financial statements in the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
2003, for filing with the SEC.

John T. Connor, Jr.
James J. Woodcock


                                  STOCK PERFORMANCE GRAPH

The following  performance  graph reflects the share price  performance of Teton
Petroleum Company since its shares commenced trading in the United States on the
OTC  Bulletin  Board in  November  2001.  (Teton  shares have been traded on the
American Stock  Exchange since May 2003).  The total return of Teton's shares is
compared to 1) the Russell  2000(R)Index,  an index measuring the performance of
2000 companies with small market  capitalizations,  and to 2) a peer group of 26
companies with SIC code 1311 (Crude Oil and Natural Gas  Producers)  with market
capitalizations of less than $100 million. All cumulative returns are calculated
on a fiscal year basis ending on December 31 of each year and have been weighted
by market capitalization.




The Companies included in the peer group are:

Abraxas Pete Corp         Equity Oil Co            Parallel Pete Corp Del

Arena Resources Inc       Exploration Co           Primeenergy Corp

Beta Oil & Gas Inc        Georesources Inc         Pyr Energy Corp

Blue Dolphin Energy Co    Gmx Res Inc              Quest Resource Corp

Castle Energy Corp        Gulfwest Energy Inc New  Tengasco Inc

Chaparral Res Inc         Isramco Inc              Toreador Res Corp

Contango Oil & Gas Co     Kestrel Energy Inc       Tri Vy Corp

Daugherty Res Inc         Magellan Pete Corp       Vaalco Energy Inc

Double Eagle Pete Co      Mexco Energy Corp



                                   AVAILABLE INFORMATION

The Company is subject to the  informational  requirements  of the Exchange Act,
and  in  accordance  therewith  files  reports,  proxy  statements,   and  other
information with the SEC. Such reports,  proxy statements and other  information
may be inspected  without  charge at the principal  office of the SEC, 450 Fifth
Street,  N.W.,  Washington,  D.C. 20549,  and at the regional offices of the SEC
located at 233  Broadway,  New York,  New York 10279 and 175 W.  Jackson  Blvd.,
Suite 900, Chicago, Illinois 60604, and copies of all or any part thereof may be
obtained at  prescribed  rates from the SEC's Public  Reference  Section at such
addresses.  Also,  the SEC  maintains  a World Wide Web site on the  Internet at
http://www.sec.gov  that contains reports,  proxy and information statements and
other information  regarding  registrants that file electronically with the SEC.
Such reports, proxy and information statements and other information also can be
inspected at the office of the American Stock  Exchange,  Inc., 86 Trinity Place
New York, NY 10006.

The Company's  Annual Report to Stockholders  for the fiscal year ended December
31, 2003 (which is not part of the Company's  proxy  soliciting  materials)  has
been mailed to the Company's stockholders with or prior to this proxy statement.
A copy of the Company's Annual Report on Form 10-K,  without  exhibits,  will be
furnished without charge to stockholders upon request to:

                        Ms. Gillian Kane
                        Vice President, Investor Relations
                        Tel.  (970) 870-1417
                        Teton Petroleum Company
                        1600 Broadway, Suite 2400
                        Denver, Colorado  80202-4921




                    RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

                                       PROPOSAL NO. 2

Ehrhardt  Keefe  Steiner & Hottman  PC has served as the  Company's  independent
auditors  since December 1999 and has been appointed by the Board to continue as
the Company's independent auditors for the fiscal year ending December 31, 2004.
In the event that  ratification of this selection of auditors is not approved by
a majority of the shares of Common Stock voting at the Annual  Meeting in person
or by proxy, the Board will reconsider its selection of auditors. Ehrhardt Keefe
Steiner & Hottman PC has no interest, financial or otherwise, in the Company.

A  representative  of  Ehrhardt  Keefe  Steiner & Hottman PC is  expected  to be
present at the Annual Meeting.  The auditors will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.

The proxy holders intend to vote the shares represented by proxies to ratify the
Board's  selection  of  Ehrhardt  Keefe  Steiner & Hottman  PC as the  Company's
independent auditors for the fiscal year ending December 31, 2004.

Policy  on Audit  Committee  Pre-Approval  of Audit  and  Permissible  Non-Audit
Services of Independent Auditors

The Audit Committee  pre-approves all audit and non-audit  services  provided by
the  independent  auditors prior to the engagement of the  independent  auditors
with  respect to such  services.  The Chairman of the Audit  Committee  has been
delegated the authority by the Committee to pre-approve  interim services by the
independent  auditors other than the annual audit.  The Chairman must report all
such pre-approvals to the entire Audit Committee at the next Committee meeting.

Approval of this proposal  requires the affirmative  vote of the majority of the
shares  present in person or  represented  by proxy and  entitled to vote at the
Annual Meeting.


THE BOARD  RECOMMENDS A VOTE FOR  RATIFICATION  OF THE  APPOINTMENT  OF EHRHARDT
KEEFE STEINER & HOTTMAN PC AS THE COMPANY'S  INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2004.



                                       SALE OF GOLOIL

                                       PROPOSAL NO. 3

TO APPROVE THE SALE OF THE COMPANY'S  INDIRECT EQUITY INTEREST IN GOLOIL,  WHICH
CONSTITUTES  THE SALE OF  SUBSTANTIALLY  ALL OF THE COMPANY'S  ASSETS WITHIN THE
MEANING OF SECTION 271 OF DELAWARE GENERALL  CORPORATION  LAW, TO RUSSNEFT,  THE
OWNER OF THE REMAINING  INTERESTS IN GOLOIL;  ALL AS SET FORTH IN THE SHARE SALE
AND PURCHASE  CONTRACT DATED APRIL 20, 2004,  BETWEEN GOLTECH PETROLEUM LLC, OUR
WHOLLY OWNED SUBSIDIARY AND 35.30% OWNER OF GOLOIL, AND RUSSNEFT.

Business of Goloil

The Company,  through its wholly owned subsidiary,  Goltech owns a 35.30% equity
interest  in Goloil.  Goltech's  principal  executive  office is located at 1600
Broadway,  Suite 4200, Denver,  Colorado 80202 and its telephone number is (303)
542-1878. RussNeft owns the remaining 64.70% of Goloil through two subsidiaries,
McGrady and InvestPetrol.  McGrady holds 35.29% and InvestPetrol holds 29.41% of
the equity interests in Goloil.  However,  until Goltech and McGrady receive the
return of 100% of their capital investment in Goloil,  they are each entitled to
a 50%  economic  interest  in  Goloil.  Goloil  is  managed  by a  seven  person
management board on which we have two representatives.  Pursuant to the existing
agreements  among  Goloil's  shareholders,  Goltech and McGrady share equally in
capital  expenditures,  gross revenues,  costs and expenses,  until they receive
100%  return  of  their   investments  in  Goloil.   Limited  Liability  Company
EnergoSoyuz-A  ("EUA"), a wholly owned subsidiary of RussNeft,  is the lessor of
certain  oil field  facilities  to Goloil  pursuant to Lease  Agreement  No. EST
160/000630 (the "EUA Lease  Agreement") among EUA as lessor and Goloil as lessee
dated  as  June  2000.  EUA  is  also  the  recipient  of a  production  payment
("Production  Payment")  consisting of 50% of Goloil's  production  (or at EUA's
option, cash in lieu of such production).  Since October 2003 EUA has taken cash
instead  of oil under the  Production  Payment  in the  amount of  approximately
$650,000  per month.  In  addition,  Goloil has been  selling its oil at a fixed
price of 2,400 Rubles or $11.50 per barrel.  It is possible  that a  significant
portion of such sales have been made to or  through  one or more  affiliates  of
RussNeft.

RussNeft,  which was  founded in the fall of 2002,  is one of  Russia's  largest
independent oil producers.  The address of RussNeft's principal executive office
is 15 Zubarev  Per.,  Building No. 1, Moscow  129164,  Russia and its  telephone
number is  011-7095-411-6335.  In  September  2003,  RussNeft  acquired a 64.70%
equity interest in Goloil in a private  transaction in which it purchased all of
the shareholders of Goloil (other than Goltech), i.e., McGrady and InvestPetrol.
At that time,  RussNeft  also  acquired  EUA,  the  lessor of various  wells and
facilities  to  Goloil  under  the EUA  Lease  Agreement  and  recipient  of the
Production Payment described above. In acquiring such interests, RussNeft became
entitled to appoint a majority of the management board of Goloil and effectively
took control of its operations.

Goloil holds a twenty-five  year  renewable  license to produce oil and gas in a
portion of Western Siberia. The license was issued by the Russian Federation and
expires in 2022, but may be extended if Goloil  complies with certain  specified
conditions  and undertakes  additional  operations at the end of the term of the
license. The Goloil license encompasses 187 square kilometers (116 square miles)
in the south  central  portion of the west Siberian  basin.  The license area is
located approximately 50 miles north of Nizhnevartovsk in western Siberia. Three
oil producing fields are located within the license area: Golevaya, Eguryak, and
South Eguryak.

The following chart shows the current ownership structure of Goloil.



Description of Arrangements with Goloil and RussNeft

The most recent  estimate of Teton's  share of the oil reserves  owned by Goloil
was  prepared for  inclusion in our Form 10-KSB for the year ended  December 31,
2003 that we filed with the SEC. The  analysis  was prepared by the  independent
oil and gas reservoir engineering firm, Gustavson Associates which is located in
Boulder, Colorado.

The price of oil used for this  analysis  was 2,400  rubles per ton  ($11.50 per
barrel at March 31, 2004 exchange rates), net of  transportation,  marketing and
export  duties,  which is the price Goloil has realized  from October 1, 2003 to
the present time under the pricing  arrangement  set by  RussNeft.  The analysis
took into  account  other  factors  including  the costs to operate and maintain
Goloil's  wells,  important  taxes such the Mineral  Extraction Tax, the Russian
profits tax, Value Added Tax (VAT), and required capital expenses.

In addition to the economic and tax parameters  discussed  above,  the Gustavson
analysis  also took into account the somewhat  complex  ownership  and financing
structure of Teton's ownership in Goloil.

As noted above,  Teton owns 35.30% of the shares of Goloil. But Teton has always
been entitled to 50% of the net profits from Goloil  because  InvestPetrol,  the
owner of 29.41% of Goloil's  shares has never invested in the development of the
license and  consequently is not entitled to any profits until Teton and McGrady
fully recover their investment.  Based on the Gustavson analysis, this would not
occur  until 2011 or 2012,  at which time  Teton's  interest  in the  profits of
Goloil would be reduced from 50% to 35.30%.

Gustavson's analysis also takes into account the Production Payment.  Since 2001
Goloil has paid EUA a fee payable in oil production  (i.e.  physical  barrels of
oil), or cash, at an amount equivalent to 50% of Goloil's oil production.  Since
RussNeft  (which now owns EUA)  became the  majority  owner of Goloil in October
2003, the  production  payment has been paid as a flat monthly fee of 19 million
rubles  (approximately  $650,000) and Gustavson applied this amount through June
2007, when the production payment is due to expire.

Based on the  above,  Gustavson  estimated  that the  share of  Goloil's  proved
reserves  attributable  to Teton was  approximately  8,262,000  barrels  of oil.
Teton's share of the future cash flow from the  production of these reserves was
estimated at $12,225,000  and its present value,  using a 10% discount rate, was
estimated at $5,993,000. These numbers are after Russian profits tax, but do not
take into account any U.S. federal income taxes.

In order to realize these cash flows,  Gustavson  estimated  that Teton would be
required  to invest  approximately  $14.6  million in capital  expenditures  for
drilling and infrastructure over the next three years, before Goloil would begin
to generate positive cash flow to Teton's interest.

As  required by the  Financial  Accounting  Standards  Board,  the  standardized
measure of  discounted  future net cash flows is computed  by applying  year-end
prices,  costs and  legislated  tax rates  and a  discount  factor of 10% to net
proved   reserves.   The   standardized   measure   includes  costs  for  future
dismantlement,  abandonment and rehabilitation obligations. The Company believes
the standardized  measure does not provide a reliable  estimate of the Company's
expected future cash flows to be obtained from the development and production of
its oil and gas properties or the value of its proved oil and gas reserves.  The
standardized measure is prepared on the basis of certain prescribed  assumptions
including year-end prices,  which represent a single point in time and therefore
may cause  significant  variability  in cash  flows  from year to year as prices
change.

Revenues/Assets

Our oil revenues from the Goloil license were $6,923,320 in 2002, $11,437,802 in
2003 and  $2,962,500  in the quarter  ended March 31,  2004.  In each period the
Goloil  revenues  accounted  for 100% of our revenues and our interest in Goloil
constitutes our only operating asset. Consequently, this sale constitutes a sale
of  substantially  all of our assets for purposes of Delaware law.  Accordingly,
the sale is being submitted to stockholders for approval pursuant to Section 271
of the Delaware General Corporation Law.

Background of the Negotiations

The Company's  acquired an initial interest in Goloil in September 1996. Between
1996 and 1998, the Company's added to its interest in Goloil  ultimately  owning
70.6% of the shareholding in Goloil, with the balance being owned by a number of
minority shareholders whose interests were ultimately purchased by InvestPetrol.
Initially,  Goltech was to provide 100% of the capital  required for  investment
and would be entitled to 100% of the revenue until such time as Goltech recouped
its investment and interest on that investment. Goltech was also the operator of
Goloil.  However,  the Company  lacked the necessary  capital to drill wells and
lacked the ability to  transport  its oil through  the  Russian  State  Pipeline
Company  ("TransNeft")  since  the  field  was not  connected  to the  TransNeft
pipeline system.

In order to comply with the terms and work program  obligations  for its license
and  commence  drilling by the time  required by its  license,  the Company sold
one-half  of its 70.6%  interest in Goloil to a Russian  partner,  Mediterranean
Overseas Trust, a trust organized under the Republic of Malta ("MOT").  Pursuant
to a Master  Agreement ("the Master  Agreement")  dated June 19, 2000 among MOT,
Goltech and Teton.  Also in June 2000,  the Company and MOT entered into the EUA
Lease Agreement with EUA, an affiliate of MOT, pursuant to which EUA drilled and
completed five wells on the Eguryak license, completed construction of a 24 mile
long  pipeline  connection to the TransNeft  pipeline  system and  constructed a
separation  and oil  processing  unit.  EUA leased  these  facilities  to Goloil
pursuant to the EUA Lease Agreement in exchange for the Production  Payment that
consists of 50% of Goloil's  production through 2007 subject to minimum delivery
requirements (all of which could be taken in oil to be sold domestically  within
Russia or in cash). The Master Agreement,  among other things, provided that MOT
would buy a 50%  interest in Goltech.  In addition to taking its 50% interest in
Goltech,  MOT became  entitled to appoint a majority of the management  board of
Goloil and assumed operating control of Goloil.  The Production  Payment and the
investment plan were memorialized in an oilfield  development  agreement and the
EUA Lease  Agreement,  which were  entered  into between the parties on June 30,
2000.

The  description  of  the  Agreements   between  MOT,   Goltech  and  Teton  are
incorporated  by reference to the  Company's  Annual Report on Form 10-K for the
year ended December 31, 2003 under the caption "Item 1.  Description of Business
- MOT Agreements."  Except as modified by the 10/2003 MOU (as defined below), it
has been Teton's view that these  agreements  with RussNeft's  subsidiaries  are
still in effect.  However,  as a practical matter it may be difficult to enforce
these  agreements  against  those  subsidiaries  for the reasons set forth under
"Risk Factors - Risks if Asset Sale is Not Approved."

By allowing MOT to take domestic  (Russian) oil as payment,  the Company ensured
that  it  would  be able to sell  most  of its  own  allocation  of the  field's
production into the non-Russian markets for hard currency where it could receive
a  substantially  higher  price per  barrel  than was  provided  by the  Russian
domestic market.  At the time the June 2000 agreements were signed,  the average
price  received by Goloil for Russian  domestic  oil was  approximately  $10 per
barrel and the average price received by Goloil for export oil was approximately
$23 per barrel.  More  importantly,  the  transaction  served a vital  immediate
purpose by facilitating the Company's  ability to raise the capital necessary to
continue to meet the  license's  work  requirements  as specified by the Russian
government. The Company proceeded with the transaction because it believed that:

o    MOT was capable of quickly establishing production and generating cash flow
     at Goloil;

o    these assets were undervalued due to poor  infrastructure as well as due to
     Russia's status as an emerging market with a nascent  political  system and
     an embryonic legal system; and

o    if Teton had not secured the financing for the drilling program, separation
     and oil processing unit and connecting  pipeline,  the Goloil license could
     have  been  revoked  by the  Russian  Government  for  failure  to meet the
     license's requirements.

Notwithstanding  the clear need the Company had to  consummate  the  transaction
with MOT and its affiliate EUA, as the Company matured,  it became  increasingly
evident that the  transaction  did not provide an ideal platform for the Company
because of:

o    our lack of  operating  control  of  Goloil  once  RussNeft  purchased  its
     majority interest;

o    the lack of  operating  discipline  from its Russian  Partner  resulting in
     operating revenues that covered operating costs but not capital expenses.

Goltech, Teton and MOT entered into a new arrangement known as the Restructuring
and Funding  Agreement (the  "Restructuring  Agreement") dated October 19, 2001.
The  Restructuring  Agreement allowed MOT ultimately to transfer its interest in
Goloil from Goltech to McGrady, an MOT subsidiary,  thus making McGrady a direct
stockholder in Goloil along with  InvestPetrol and our Goltech  subsidiary.  The
Restructuring  Agreement  also provided for the Company and MOT to share equally
in funding responsibility for Goloil.

In or around April 2002, the Company  believes that MOT and its affiliates began
to change the payment  terms under the  Restructuring  Agreement  and the Master
Agreement by, among other  things,  paying to EUA 50% of Goloil's cash oil sales
revenue, rather than taking oil in-kind under the Production Payment to EUA.

On November 12, 2002, Mr. Cooper sent a letter to MOT that,  among other things,
indicated  the  Company's  interest  in  redefining  the  relationship  to  more
accurately  reflect the original  operating  concept,  including the  Production
Payment.  On November 26, 2002, the parties signed a memorandum of understanding
(the "11/2002 MOU") that, among other things,  defined agreements to control the
relationship  between McGrady, and the Company going forward. As a result of the
11/2002 MOU, an amendment  to the EUA Lease  Agreement  dated March 25, 2002 was
signed that clearly  defined the  Production  Payment as 50% of production to be
sold into the domestic  (Russian)  market.  The MOU also allowed MOT to complete
its  withdrawal  from  Goltech and  transfer its interest to McGrady as a direct
stockholder  in Goloil.  The 11/2002  MOU also  provided  for joint  approval of
capital expenditures by Goltech and MOT.

After the 11/2002 MOU was  executed,  and from April to September  of 2003,  the
Company began a series of discussions with InvestPetrol,  McGrady, and EUA, with
respect to a potential  buyout of their interests in Goloil.  These  discussions
ultimately did not lead to any agreement due to an inability to agree on price.

On September  14,  2003,  MOT  informed  the Company of  RussNeft's  purchase of
McGrady, InvestPetrol and EUA.

On  September  29,  2003,   Messrs.   Arleth,   Cooper  and  Effimoff  met  with
representatives  of RussNeft in Moscow to discuss entering into a new memorandum
of understanding.

At  subsequent  meetings,  RussNeft  indicated  that it wanted to sell  Goloil's
production  at a fixed price based on the average  price Goloil had received for
its oil (both  domestic and export) for the previous  year.  That price of 2,400
rubles per ton (or $11.50 per barrel)  became the price at which Goloil sold its
oil  commencing  in  October  2003.  On  October  2,  2003,  Teton  signed a new
memorandum of understanding dated October 2, 2003 with RussNeft,  Teton, McGrady
InvestPetrol,  Goltech and Goloil (the "10/2003 MOU") which, among other things,
recognized  certain of the existing  arrangements and provided the parties would
seek a more general  basis of  cooperation  to be  negotiated  in the future but
suspend for further  discussion  RussNeft's stated intention to have Goloil sell
its production at 2,400 rubles per ton.

Between  mid-October 2003 and November 2003,  Messrs.  Effimoff (Chief Operating
Officer)and  Gurevich (the Company's Senior Controller) met with representatives
of RussNeft in an effort to agree on the outstanding issues not addressed in the
10/2003 MOU. During this time, Goloil began selling its oil at $11.50 per barrel
and  making  payments  to EUA at a flat  rate of 19  million  rubles  per  month
(approximately $650,000) in lieu of the production payment.

On November 3, 2003, Mr. Gurevich met with Mr. Sergei Bakhir, Vice President for
Operations of RussNeft,  and other RussNeft  executives in Moscow to discuss the
various  issues  between  the  parties.  During  the  course  of  that  meeting,
representatives  of RussNeft first  indicated an interest in purchasing  Teton's
share of Goloil.

In November  and  December  2003,  representatives  of the Company  continued to
explore with RussNeft whether a common ground could be found for proceeding with
the relationship. On December 15, 2003, the Company received RussNeft's proposed
budget for Goloil for 2004.  Among  other  things,  the budget  provided  for an
accelerated  drilling  program  and  capital  expenditures  that were beyond the
Company's  means and which might never be recovered  under the RussNeft  pricing
policy of selling  all of  Goloil's  production  for 2,400  rubles  per ton.  On
December 22, 2003,  the proposed  2004 Goloil  budget was approved by the Goloil
board. The Company  representatives  on Goloil's board opposed the proposed 2004
budget.

On January 18 and 19, Messrs.  Cooper,  Effimoff and Arleth met at the Company's
Colorado office to consider the status of the relationship with RussNeft and the
possibility of  recommending  a sale of the Company's  interest in Goloil to the
Company's Board.

In late January 2004 through  February 12, 2004,  Messrs.  Effimoff and Gurevich
traveled to Moscow to, discuss with RussNeft the terms of a possible sale of the
Company's interest in Goloil.

On January  20,  2004,  the  Company  hired an  affiliate  of Troika  Dialog,  a
Moscow-based  investment  bank  ("Troika"),  with  a  mandate  to  assist  it in
negotiating the sale of its interest in Goloil.

On February 10, 2004, the Company received a letter from Mr.  Gutseriev  through
Troika.  Among other things, the letter offered the Company $4.5 million for its
share in Goloil, which included payment of debt and equity for the Company.

During  February  2004,  representatives  of  Troika,  acting  on  behalf of the
Company,  met with Mr. Gutseriev on several occasions to discuss a revised offer
for the Company's interest in Goloil.

On March 2, 2004, following a Goloil Board meeting,  Messrs.  Cooper and Arleth,
accompanied by  representatives  of Troika,  met with Mr. Gutseriev in Moscow to
negotiate the proposed sale of Teton's stake in Goloil.

On March 26, 2004, during a telephonic Board meeting,  Mr. Arleth discussed with
the  other  Board  members  the plan to sell  Goltech's  interest  in  Goloil to
RussNeft if a fair and  reasonable  transaction  could be  structured  under the
circumstances. The Board endorsed management's assessment and recommendation.

On March 31, 2004, we signed an agreement  with  RussNeft  regarding the sale of
its interest in Goloil.

On April 5, 2004, we announced an agreement to acquire a majority  interest in a
producing field in Russia (later disclosed to be the Samson transaction).

On April 6, 2004, the Company's Board unanimously approved the proposed terms of
the Goloil sale and authorized the execution of a definitive agreement.

On April 12, 2004, we announced the sale of Goloil.  The press release stated in
relevant part:

     "Teton will sell its 35% stake in the Goloil  license to a private  Russian
     independent. In addition, the sale price will include all outstanding loans
     and accrued interest owed to Teton.  The closing of the Goloil  transaction
     is subject to approval by Teton's shareholders."

On April 20, 2004, a revised  definitive  Share  Purchase and Sale Contract (the
"Share  Purchase  and Sale  Contract")  between the Company and RussNeft for the
sale of the Company's interest in Goloil was executed.

On May 13, 2004, we announced,  among other things,  further  information on the
Goloil sale,  that Vitol had exercised its first  purchase right with respect to
the Samson  transaction  and that our $3.85  million  deposit  on this  proposed
purchase had therefore been fully refunded.

The aggregate consideration of US$15,000,000 was ultimately arrived at through a
variety of factors:

o    The  amount of the loans,  including  accrued  interest,  due  Goltech  had
     previously been established at US$6,039,771 at March 31, 2004; and

o    The balance or US$8,960,229 was based in part on the parties'  agreement on
     the value of the reserves.

Summary of Material Terms of the Share Purchase and Sale Contract

On April 6 and April 13,  2004,  our Board  unanimously  approved and on May 11,
2004, it unanimously  ratified the Share Purchase and Sale Contract  between our
wholly owned subsidiary  Goltech  Petroleum LLC and RussNeft,  pursuant to which
Goltech agreed to sell our indirect 35.30%  interest in Goloil to RussNeft.  The
definitive  Share  Purchase  and Sale  Contract  was executed by both parties on
April 20, 2004.  Under Delaware law,  completion of the Goloil sale requires the
approval  of our  stockholders  since the Goloil  sale  constitutes  the sale of
substantially all of our assets.

The material terms of the Share Purchase and Sale Contract are summarized below.

Parties

The parties to the Share Purchase and Sale Contract are Goltech Petroleum LLC, a
Texas limited liability company and our wholly owned subsidiary, and RussNeft.

The Assets

The asset to be sold is Goltech's  35.30%  ownership  stake in Goloil.  Goloil's
significant  asset is a license  that  encompasses  187 square  kilometers  (116
square miles) in the south central  portion of the west  Siberian  basin.  It is
located  approximately  10 miles to the  north  and west of  Samotlor,  Russia's
largest oil field.  Three producing  fields are located within the license area:
Golevaya,  Eguryak,  and South Eguryak.  The Goloil license expires in 2022, but
may be extended upon  compliance  with a specified  program of operations and an
undertaking  of  additional  investment  after the end of the term.  The  Goloil
license may be  terminated  prior to its term if Goloil fails to comply with the
requirements of the license. The Assets to be sold constitute  substantially all
of our operating assets.

The Purchase Price

The purchase  price for our 35.30%  interest in Goloil is $8,960,229 in cash. As
is  described  below,  Goloil  will also repay  advances  made by the Company to
Goloil totaling $6,039,771, of which $3,569,051 of the principal and $131,452 of
the accrued  interest had been repaid as of April 2, 2004. The gross proceeds of
the two transactions to the Company will be $15,000,000.  The advances were made
to  Goloil  by the  Company  to  finance  our  50%  share  of  Goloil's  capital
expenditures and currently bear interest at the rate of 8% per annum.

Closing

Unless otherwise agreed by the parties,  the closing date for the Goloil sale is
expected to take place shortly after shareholder  approval of the Goloil sale is
obtained and all other conditions of the Goloil sale are met.

Representations and Warranties

The agreement contains various customary  representations and warranties made by
each of the parties to the agreement. Such representations and warranties relate
to,  among other  things,  the  enforceability  of the  agreement,  the parties'
organization,  the parties' authority to enter into the agreement, and the title
to the shares of Goloil being transferred.

Conditions to Completion of the Goloil Sale

In addition to stockholder  approval of the  transaction,  the completion of the
sale of our assets is subject to the  repayment of  $6,039,771  in loans made by
the Company to Goloil,  $3,569,051  of the principal and $131,452 of the accrued
interest of which had been repaid as of April 2, 2004.

Termination of the Share Purchase and Sale Contract

The  contract  may be  terminated  and the Goloil  sale  abandoned  for  various
reasons, including:

o    by mutual consent of the parties;

o    if we have not sent a notice to  RussNeft by August 1, 2004,  stating  that
     our stockholders have approved the Goloil sale;

o    if RussNeft has not issued certain  letters of credit to support payment of
     the  Purchase  Price and the  repayment  of  advances  as  required  by the
     agreement by August 16, 2004; and

o    if Goloil has not repaid all debts,  including  the  principal and interest
     under all of its loan  agreements  with the  Company,  pursuant to the loan
     repayment agreement described below.

Regulatory Approvals

The sale is subject to Russian Anti-Monopoly Commission approval.

Repayment of Loan Advances

In  connection  with the Goloil  sale,  the Company also entered into a separate
agreement  with Goloil for the  repayment  of all of the  outstanding  loans and
advances  owed to the  Company  by  Goloil.  At the date of the  loan  repayment
agreement,  the amount of advances by the Company to Goloil,  including interest
totaled  $6,039,771.  As of April  2,  2004,  $3,569,051  of the  principal  and
$131,452 of the accrued interest had been repaid.  As noted above, the repayment
of the  loans is a  condition  to the  closing  of the Share  Purchase  and Sale
Contract.

Expenses of the Goloil Sale

Whether or not the Goloil sale is completed,  each party is required to bear its
own costs and expense  including  fees of attorneys,  accountants  and financial
advisors.  We currently  estimate our legal and  accounting  costs in connection
with the sale to be approximately $250,000.  Additionally, if the Goloil sale is
completed,  we will owe an  investment  banking  fee of  $750,000  to  Troika in
connection with its arrangement of the Goloil sale.

Absence of Dissenters' Rights of Appraisal

Under the  applicable  provisions  of  Delaware  General  Corporation  Law,  the
Company's  stockholders  will have no appraisal  rights in  connection  with the
Proposed  Transaction  to seek  appraisal  for the fair  value of the  shares of
Common Stock.  Currently  there are provisions  made by the Company to grant any
unaffiliated security holders access to the corporate files of the Company or to
obtain counsel or appraisal services at the expense of the Company.

No Opinion of Financial Advisor - Fairness of the Goloil Sale

The Board believes that in light of all the  circumstances,  including those set
forth under "Risk Factors"  below,  that the proposed Goloil sale is in the best
interests of and is fair and reasonable to the  stockholders  of the Company and
unanimously recommends that our stockholders approve the sale of Goloil.

Our Board has  considered  a number of  factors  in  reaching  this  conclusion,
including, in particular, the following:

o    The  Company  expects to  realize a  significant  gain on the  Goloil  sale
     currently estimated at approximately $12.6 million;

o    The fact that RussNeft is the most likely  purchaser for Goloil since it is
     already the majority owner of Goloil;

o    The fact  that  there is a  limited  universe  of  alternate  buyers  for a
     minority interest in a Russian oil and gas company;

o    The  expected  long term  recovery of profits by our  Company  based on the
     current  structure of Goloil's  ownership  and the  positions  RussNeft has
     taken under the agreements and, in particular,  the fact that we would have
     had to invest  approximately  $14.6  million in Goloil  over the next three
     years to fund RussNeft's accelerated capital expenditure programs, in order
     to receive  approximately $13.3 million in cash flow from reserves,  rather
     than receiving $15 million of cash in the Goloil sale now.

o    Our minority position in Goloil does not allow us to maximize our return on
     investment  since  RussNeft as majority owner is able to make decisions for
     the benefit of RussNeft;

o    RussNeft has caused  Goloil to sell its  production  at a fixed price which
     does not allow the  Company  to  maximize  the value of its  investment  in
     Goloil;

o    The inability of the Company to effectively prevent the discounted sales of
     Goloil production;

o    The difficulties the Company would face in continuing its relationship with
     RussNeft;

o    The fact that  legal  remedies  for  minority  stockholders  in Russia  are
     significantly  more  limited  than in the United  States and the  potential
     costs and  effectiveness  of seeking  redress in Russian  courts  against a
     Russian party;

o    The fact that the Company pays the Russian  mineral  extraction tax and the
     lifting  costs on the 50% of Goloil's  production  that is paid to EUA as a
     production payment and will do so through 2007;

o    The fact that InvestPetrol has a 29.41%  reversionary  interest in Goloil's
     profits  from and  after  the time at which  Teton  receives  its  original
     investment  back which would reduce Teton's profit interest after payout of
     its investment;

o    Reductions  in Goloil's  revenues and  projected  future net revenues  from
     proved  reserves as a result of the sales by Goloil at a fixed price and in
     2002 as a result  of  various  other  factors  previously  reported  by the
     Company;

o    The  Company's  desire  to own a  controlling  interest  in  its  operating
     business;

o    The potential availability of other potential oil fields for sale in Russia
     at attractive  prices  comparable to the price the Company would receive in
     the sale of Goloil; and

o    The potential  availability of the proceeds from the sale of Goloil for use
     in pursuing other opportunities with the potential to improve the Company's
     economic position.

Teton believes that the Goloil sale is fair to unaffiliated  security holders in
light  of all the  circumstances.  The  transaction  is not  structured  so that
approval  of a  majority  of  unaffiliated  stockholders  is  required  and  the
non-employee  directors  did not retain an  unaffiliated  representative  to act
solely on behalf of  unaffiliated  security  holders for purposes of negotiating
the terms of the Goloil sale or  preparing a report  concerning  the fairness of
the Goloil sale.  However,  the Company did retain an investment banking firm to
negotiate  the best price for the  Goloil  sale and all  non-employee  directors
unanimously  approved  the sale.  Given the price and the  limited  alternatives
available  to a sale to RussNeft,  the Company  believes the sale to be fair and
reasonable under the circumstances.

Countervailing Considerations

The Board  also  identified  and  considered  a number of  potentially  negative
factors in its  deliberations  concerning  the Goloil sale,  including,  but not
limited to:

o    The risk  that if the  Company  cannot  complete  an  acquisition  within a
     reasonable  time  after  closing  Goloil  that its  Common  Stock  could be
     delisted from the AMEX;

o    The risk that the Company  cannot  promptly  reinvest the proceeds from the
     Goloil sale it risks  dissipating  those  proceeds in payment of  operating
     expenses; and

o    The  potential  for a negative  perception  being  created in the market by
     reason of our not having a completed  acquisition  to replace our operating
     business before exiting from our existing business.

Procedural Safeguards

The Board believes that sufficient  procedural  safeguards are present to ensure
the fairness of the Goloil sale. The belief is based upon the following factors:

o    Approval of the Share Purchase and Sale Contract  requires the  affirmative
     vote of a majority of the outstanding Common Stock of the Company;

o    The Goloil sale was  unanimously  approved by the Directors of the Company,
     including the independent members of the Board; and

o    The Company retained an investment banking firm to negotiate the sale price
     of the Goloil sale with RussNeft.

Accounting Treatment of Proposed Transaction

Under accounting  principles generally accepted in the United States of America,
upon consummation of the Proposed Transaction,  we expect to reflect the results
of operations of Goloil as discontinued  operations,  including the related gain
on the sale,  net of any  applicable  taxes  commencing  in the third quarter of
2004. For further information see the Pro Forma financial  information  included
as Appendix A-3.

SUMMARY PRO FORMA FINANCIAL INFORMATION

Attached  as  Appendix  A-3 is  the  Company's  unaudited  pro  forma  condensed
financial information, which gives effect to the sale of Goloil. As discussed in
Appendix  A-3,  and  summarized  below,  the  operations  of  Goloil  have  been
reclassified  to  discontinued  operations  and a gain of $12.6 million has been
recorded on the sale. The pro forma  condensed  financial  information  does not
purport to represent  what the results of operations  and financial  position of
the Company would  actually have been nor do they purport to project the results
of operations  or financial  position of the Company for any future period or as
of any date. The summary pro forma  information  set forth below is qualified in
its entirety by reference to the pro forma information set forth in Appendix A-3
including the notes thereto.

The following table  summarizes key financial items as historically  provided by
the Company and then on a pro forma basis,  assuming the sale  occurred on March
31, 2004:


                                TETON PETROLEUM COMPANY
                             SUMMARY PRO FORMA INFORMATION
                          GIVING EFFECT TO THE SALE OF GOLOIL

                                          December 31, 2003                 March 31, 2004
                                          -----------------                 --------------
                                      Historical       Pro Forma      Historical        Pro Forma
                                     Amounts, as         After         Amounts,           After
Statement of Operations Data:          Reported       Goloil Sale     as Reported      Goloil Sale
                                     ----------------------------     -----------------------------

  Sales                              $ 11,437,802     $        -      $  2,962,500     $         -

  Net loss from continuing
   operations applicable to
   common shares:                      (8,415,537)     (6,816,857)      (3,075,083)      (2,639,787)

  Net income (loss) from
   discontinued operations
   applicable to common shares:                -       (1,598,680)              -        12,177,001

  Net (loss) income applicable to
   common shares:                      (8,415,537)     (8,415,537)      (3,075,083)       9,537,214

  Net loss from continuing
   operations per common share:             (1.23)          (1.00)           (0.35)           (0.30)

  Net income (loss) from
   discontinued operations
   per common share:                           -            (0.23)              -              1.39

  Weighted average common shares
   outstanding                          6,840,303       6,840,303        8,747,165        8,747,165

  Net (loss) income from per common
   share                             $      (1.23)          (1.23)    $      (0.35)    $       1.09

Balance Sheet Data:

  Current assets                                                        10,325,326       20,696,760

  Total assets                                                          21,132,672       20,723,128

  Current liabilities                                                   13,011,002          732,261

  Total liabilities                                                     13,140,502          732,261

  Total stockholders' equity                                             7,992,170       19,990,867


SELECTED CONSOLIDATED FINANCIAL DATA

The following table contains selected consolidated  Financial Data and Operating
Information  of the Company for the three  months  ended March 31, 2004 and 2003
and for each of the five years ended  December  31, 2003 and is qualified in its
entirety by reference to the unaudited  financial  statements of the Company for
the quarter  ended  March 31, 2003 and March 31, 2004 and the audited  financial
statements  for the three years ended December 31, 2003 set forth in Appendix A.
The results for the quarter  ended March 31, 2004 are not  indicative of results
for the full year 2004.

                                TETON PETROLEUM COMPANY
                   SELECTED FINANCIAL DATA AND OPERATING INFORMATION
                             (In $000's, except as noted)

                                For the Quarter
                                     Ended
                                    March 31,                   For the Years Ended December 31,
                              ------------------    -----------------------------------------------------
                               2004       2003        2003        2002       2001       2000       1999
                              ------------------    -----------------------------------------------------
Financial
---------
  Operating Revenues          $ 2,963    $ 3,409    $ 11,438    $  6,923    $ 1,625    $ 1,675    $ 1,518

  Net loss                     (2,522)      (781)     (5,635)    (10,974)    (1,658)    (3,066)    (1,025)

  Comprehensive loss           (3,360)      (695)     (8,247)    (11,115)    (1,742)    (2,957)      (325)

  Net cash provided by (used
   in) operating activities    (1,563)       192      (3,011)     (5,169)    (1,553)    (1,069)      (903)

  Total assets                 21,133     10,995      20,718      10,012      2,211      2,317      1,789

  Oil and gas properties,
   net (successful efforts)     8,564      7,479       9,340       4,896      1,169      1,490      1,482

  Notes payable                     0          0           0           0        844      1,425        577

  Proportionate share of
   notes payable                8,220      2,845       7,419       2,948        770        395          0

  Working capital (deficit)    (2,686)    (2,865)     (1,160)        176     (1,430)      (982)      (246)

  Stockholders' equity
   (deficit)                    7,992      5,154      10,205       4,879       (382)        58     (1,212)

  Weighted average Common
   shares outstanding -
   basic and diluted            8,747      6,321       6,840       3,105      2,244      1,470      1,096

  Basic and diluted loss per
   common share                 (0.35)     (0.12)      (1.23)      (3.53)     (0.72)     (2.04)     (0.96)

  Cash dividends declared
   per common share               0.0        0.0         0.0         0.0        0.0        0.0        0.0

Operating
---------
  Net productive wells(1)        10.5        7.5        10.5         6.5        3.5        1.5        1.0

  Net oil production -
   barrels                        167        151         632         471         95        143        134

  Oil and gas property and
   equipment expenditures         190      2,887       5,392       3,222        322      2,002        257

  Proved reserves -
   barrels(2, 3)                8,095     13,113       8,262      13,264     40,174      8,500     19,375

  Proved developed reserves
   - barrels(2, 3)              3,649      4,416       3,816       4,567     15,493      1,300      2,300

(1)  Net well count is based on Teton's  effective net interest as of the end of
     each year.  Prior to August  2000,  Teton  owned 100% of the  interests  in
     Goltech.  Subsequent  to August  2000 our  interest  was reduced to 50%. In
     November, 2002, it again became 100%.

(2)  Teton revised its estimated proved and proved developed  reserves  downward
     at the end of 2002. The reserve estimates were decreased at the end of 2002
     based on additional  data derived from  production and other data from both
     new and older wells  producing in 2002.  These had been revised  upwards in
     the previous year  following the  preparation  of a waterflood  feasibility
     study that indicated the existence of  substantial  reserves from secondary
     recovery.  The decline in reserves from 1999 to 2000, reflected the sale of
     50% of Teton's shares in Goloil to MOT.

(3)  Teton again  reduced its estimated  proved  reserves at the end of 2003. In
     particular,  the performance of several of the Company's Jurassic formation
     wells  led  its  engineers  to  reduce  the  anticipated   primary  (before
     waterflood)  recovery of reserves and revise their opinion  concerning  the
     necessity  of  waterflooding.  While the  Company  anticipates  Goloil will
     eventually recover most of the reduction in reserves through waterflooding,
     SEC  regulations do not permit the inclusion of such reserves in the proven
     category  in the  absence  of  either a pilot  program  or  formal  written
     commitment by the operator and  non-operators  in a project to commence the
     waterflood  project.  The Company also removed several  Jurassic  locations
     from the proved  category,  either because they were deemed  uneconomic for
     primary production alone,  based on the performance of offsetting  Jurassic
     producing  wells or in two cases  because the operator and Company have not
     yet formally  agreed to drill them. The Company would expect to restore the
     reserves from the two wells to the proven category when they are drilled.


FORWARD LOOKING STATEMENTS

With the  exception of  historical  matters,  the matters  discussed  herein are
forward looking statements that involve risks and uncertainties. Forward looking
statements  include,  but are not limited to statements  concerning  anticipated
trends in revenues.  Our actual results could differ materially from the results
discussed in such forward-looking statements.  There can be no assurance that we
will achieve the results expressed or implied in forward-looking statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

Teton Petroleum Company is an independent oil and gas exploration and production
company whose primary focus is the Russian Federation and former Commonwealth of
Independent  States ("CIS").  The Company,  through its wholly owned subsidiary,
Goltech owns a 35.30%  equity  interest in Goloil.  RussNeft  owns the remaining
64.70% of Goloil through two  subsidiaries,  McGrady and  InvestPetrol.  McGrady
holds 35.29% and  InvestPetrol  holds 29.41% of the equity  interests in Goloil.
However,  until Goltech and McGrady  receive the return of 100% of their capital
investment  in  Goloil,  they are each  entitled  to a 50% net profit in Goloil.
Goloil  is  managed  by a seven  person  management  board  on which we have two
representatives.   Pursuant   to  the   existing   agreements   among   Goloil's
shareholders,  Goltech and McGrady share equally in capital expenditures,  gross
revenues,   costs  and  expenses,  until  they  receive  100%  return  of  their
investments in Goloil. Limited Liability Company EnergoSoyuz-A ("EUA"), a wholly
owned  subsidiary of RussNeft,  is the lessor of certain oil field facilities to
Goloil  pursuant  to a Lease  Agreement  No.  EST  160/000630  (the  "EUA  Lease
Agreement")  among EUA as lessor and Goloil as lessee dated as June 2000. EUA is
also the recipient of a production payment ("Production  Payment") consisting of
50%  of  Goloil's  production  (or  at  EUA's  option,  cash  in  lieu  of  such
production).  Since  October  2003 EUA has taken  cash  instead of oil under the
Production  Payment  in the  amount of  approximately  $650,000  per  month.  In
addition,  Goloil has been  selling its oil at a fixed price of 2,400  rubles or
$11.50 per barrel. It is possible that a significant  portion of such sales have
been made to or through one or more affiliates of RussNeft.

RussNeft,  which was  founded in the fall of 2002,  is one of  Russia's  largest
independent oil producers.  In September 2003, RussNeft acquired a 64.70% equity
interest in Goloil in a private  transaction  in which it  purchased  all of the
shareholders   of  Goloil  (other  than  Goltech)   consisting  of  McGrady  and
InvestPetrol.  At that time,  RussNeft  also acquired EUA, the lessor of various
wells and facilities to Goloil under the EUA Lease Agreement.  In acquiring such
interest, RussNeft became entitled to appoint a majority of the management board
of Goloil and acceded to EUA's interest in the production  payment and McGrady's
and InvestPetrol's reversionary interests in Goloil.

Goloil holds a twenty-five  year  renewable  license to produce oil and gas in a
portion of Western Siberia. The license was issued by the Russian Federation and
expires in 2022, but may be extended if Goloil  complies with certain  specified
conditions  and undertakes  additional  operations at the end of the term of the
license.  The Goloil license encompasses 187 square kilometers (78 square miles)
in the south  central  portion of the west Siberian  basin.  The license area is
located approximately 50 miles north of Nizhnevartovsk in western Siberia. Three
oil producing fields are located within the license area: Golevaya, Eguryak, and
South Eguryak.

Highlights from the year ended December 31, 2003 include:

o    Annual sales  increased by 42.5% from  443,268 to 631,626  barrels,  net to
     Teton.

o    Seven new wells  (gross)  were  drilled  on the  Company's  Goloil  license
     bringing the total to 21 wells, 16 of which were in production at year-end.
     Of the 21 wells, one is awaiting completion,  and four are off-line pending
     upgrades to the gathering system.

o    Revenues increased 65.2%, from $6,923,320 to $11,437,802.

o    The  Company's  net  loss  for  the  year  narrowed  from   $10,973,923  to
     $5,634,844.

o    In April 2003,  Teton's  Board of  Directors  made  several  changes to the
     management of the Company the most  important of which was the  appointment
     of a new President and Chief Executive  Officer,  Karl Arleth,  who assumed
     responsibility  for  the  day-to-day  management  of  the  Company.   Other
     management  changes  made  at  the  time  included  the  appointment  of  a
     Controller and an interim full-time Chief Financial Officer.

o    Also in April 2003, the Company  relocated its corporate  headquarters from
     Steamboat Springs,  CO to Denver, CO and over the next several months hired
     several  administrative  and accounting  personnel to support the Company's
     plans for  growth.  The  Company  also took steps to tighten  its  internal
     controls,  enhance  its  ability to evaluate  potential  acquisitions,  and
     improve its information systems.

o    In May 2003, the Company effected a 1:12 reverse share split and listed its
     shares on the American Stock Exchange.

o    Also in May 2003, the Company  announced the signing of a purchase and sale
     agreement to acquire the 50% ownership interest in LLC Chernogorskoye  held
     by Anderman Smith, which if completed would have added  approximately 4,000
     BOPD to the Company's net oil production.  However,  the Company was unable
     to close this  transaction due to differences  with the seller over closing
     price adjustments the Company believed  necessary  following due diligence.
     Although discussions continued on this possible acquisition until spring of
     2004, such discussions were terminated in May 2004.

o    In November 2003, the Company successfully  concluded the private placement
     of $9.8 million (with an additional  $500,000 issued in January of 2004) of
     8% Convertible  Preferred Stock to be used primarily for working capital in
     the Goloil license and for general corporate purposes.

o    The  Company  opened a Moscow  Representative  Office in December to better
     monitor its  operations in Russia as well as to establish a higher  profile
     in the Russian oil industry and facilitate  greater deal-flow as it pursues
     acquisition opportunities there and in other FSU states.

Financial  highlights  from  the  quarter  ended  March  31,  2004  include  the
following:

o    Teton's  share of  production  from  Goloil  increased  by 10.5% to 167,162
     barrels year over year in the first quarter.

o    First  quarter  production  revenues  declined  year  over year by 13.1% to
     $2,962,500  primarily  as a  consequence  of the  low oil  prices  received
     related to new product  marketing  arrangements  put in place for Goloil by
     RussNeft starting in the fourth quarter of 2003.

o    Teton's net loss for the first quarter  widened from $781,085 to $2,522,113
     from the same period in 2003.

During 2004 Teton's activities have been focused in three areas:

1)   Discussions  with its partner  RussNeft  over the  management of its Goloil
     subsidiary;

2)   Negotiating the proposed sale of Goloil to RussNeft; and

3)   Acquiring other producing oil properties in Russia and the CIS.

Sale of Goloil Interest to RussNeft

In September  2003,  RussNeft,  a newly formed Russian  independent oil producer
acquired   the  64.70%  of  Goloil   shares  held  by   Mediterranean   Overseas
Trust/McGrady and InvestPetrol and assumed responsibility for operating Goloil's
Eguryak License.

Commencing  October 1, RussNeft began selling  Goloil's  production to an entity
believed by the  Company to be an  affiliate  of  RussNeft  for a fixed price of
2,400  rubles per ton  ($11.50  per  barrel),  a price  substantially  below the
blended market price Goloil  formerly  received  selling its production into the
export,  near abroad and domestic markets and significantly below current market
prices. As a consequence, the Company estimates its revenues after taxes for the
quarter were reduced by  approximately  $1.44 million in fourth  quarter of 2003
and by $2.02  million  in the first  quarter  of 2004  from  what it would  have
received  under  its  previous  arrangements.   Moreover,   since  this  pricing
arrangement  prevailed  through the end of the fourth  quarter  and beyond,  the
Company had to significantly  reduce the present value of its reserves effective
January 1, 2004,  as detailed in its Form  10-KSB/A for the year ended  December
31, 2003.

Efforts to resolve these and other issues with  RussNeft  culminated in a series
of meetings in Russia  starting in November  2003 between Teton  executives  and
representatives  of RussNeft,  which failed to yield an  acceptable  resolution.
Shortly  thereafter,  the Company and RussNeft  began to discuss the terms of an
exit via a sale of Teton's interest in Goloil to RussNeft.

The proposed sale of the Company's  interest was announced on April 11, 2004 and
on May 12,  2004 the  Company  provided  additional  detail  in a press  release
including the sales price.  The purchase price for our 35.30% interest in Goloil
is $8,960,229 in cash. As is described  below,  Goloil will also repay  advances
made by the Company to Goloil totaling  $6,039,771,  of which  $3,569,051 of the
principal  and  $131,452 of the accrued  interest had been repaid as of April 2,
2004.  The  gross  proceeds  of the  two  transactions  to the  Company  will be
$15,000,000.  The advances were made to Goloil by the Company to finance our 50%
share of Goloil's  capital  expenditures and currently bear interest at the rate
of 8% per annum.  On May 12, 2004,  the Company also  disclosed  that the Goloil
sale would result in a gain of approximately $12 million.

Unless otherwise agreed by the parties,  the closing date for the Goloil sale is
expected to take place shortly after shareholder  approval of the Goloil sale is
obtained and all other conditions of the Goloil sale are met.

The sale is subject to Russian Anti-Monopoly Commission approval.

2004 Operational and Financial Objectives

With the Company's  agreement to sell Goloil,  subject to shareholder  approval,
the  Company is now  focusing  its  efforts  on  seeking to acquire  oil and gas
properties as described below.

The Company plans to use the proceeds from this transaction to acquire other oil
and  gas   properties.   The  Company  is  primarily   focused  on   acquisition
opportunities  in Russia  and the former  CIS  states  with the  characteristics
described below.  However, the Company may consider other opportunities  outside
its area of geographic  focus, as described below. The Company has been actively
seeking acquisitions of properties for approximately one year. Specifically, the
Company  has been  targeting  small to  medium-sized  oil fields  with  existing
production  ranging  from  1,000 to  5,000  barrels  of oil per day with  proven
reserves that provide  immediate cash flow,  production,  and an opportunity for
additional upside potential from  developmental  drilling and other exploitation
opportunities.  The Company has been  focusing its efforts in the West  Siberian
Basin and in the Komi Region of Russia but could consider  opportunities  either
inside or outside of Russia and the former CIS states where:

o    It can achieve operating control over the acquired asset;

o    There is sufficient operating infrastructure,  including gathering systems,
     pipeline   connections,   electricity   generation,   and  oil   processing
     facilities;

o    The  acquisition  cost is  between  US$1.50 - US$3.00  per barrel of proved
     reserves (for Russian and CIS properties); and

o    The  investment  has the potential to produce an internal rate of return in
     excess of 15%.

The Company has engaged in preliminary negotiations regarding several properties
in  Russia  during  the  past  year,  and  is  continuing  to  seek  acquisition
opportunities, but has not, as of the date of this Proxy Statement, entered into
any agreements  with any party except as described  below with respect to Samson
International Resources.

Teton's plans to pursue such acquisitions means that it will incur increased due
diligence and legal  expenses,  that will be reflected in its G&A expenses.  The
Company  is  now  devoting   significant   internal   resources  to   evaluating
acquisitions while also utilizing the services of outside  technical,  legal and
accounting consultants.

Samson International Transaction

On April 5, 2004,  the Company  announced that it had signed a purchase and sale
agreement to acquire a majority  (52%)  interest in a producing  field in Russia
subject to many  conditions and further due  diligence.  A cash deposit of $3.85
million was paid by the Company to Samson International  Resources ("Samson") in
connection with the proposed sale. The closing of the acquisition was subject to
several  conditions,  including  a right  of  first  purchase  held by  Samson's
partner,  Vitol,  to acquire  Samson's  interest  in the field on the same terms
offered by the Company.  Vitol  elected to exercise this right in May and Samson
subsequently refunded the Company's deposit on May 11, 2004, though the contract
between Samson and the Company  technically remains in effect. In the event that
Vitol does not  purchase  Samson's  52%  interest,  the Company and Samson could
determine to proceed with the transaction subject to the Company's due diligence
and assuming that all other conditions to the sale are met. However, the Company
believes,  in light of the exercise of the first purchase  right by Vitol,  that
this transaction is unlikely to occur.

Results of Operations for the Year Ended December 31, 2003

The  table  below  summarizes  some  of the  most  important  components  of our
revenues,  operating  costs and net loss during in 2003.  Please note that since
Teton  absorbs  its  share  of the cost of  producing  the oil  paid  under  the
production  payment  (included  in the  cost  amounts),  per  barrel  costs  are
effectively doubled.

           Operating Highlights for the Year ended December 31
                (in U.S. Dollars, unless otherwise noted)


                             2003          2002         Change($)    Change(%)
                          ---------------------------------------------------

Sales, Barrels                631,626       443,268        188,358       42.5%
Average Daily Sales,
Barrels                         1,730         1,214            516       42.5%
Average Selling Price,
$/barrel                  $     18.11   $     15.62    $      2.49       15.9%
Revenues                  $11,437,802   $ 6,923,320    $ 4,514,482       65.2%

Costs of Sales and
Expenses, excl. DD&A
 Production Costs           2,020,447     1,218,411        802,036       65.8%
 Transportation &
  Marketing                   807,266       611,956        195,310       31.9%
 Taxes other than Income
  taxes                     5,864,920     3,537,990      2,326,930       65.8%
 Export Duties              1,492,999       910,936        582,063        63.9%
                          -----------   -----------    -----------    -------
                           10,185,632     6,279,293      3,906,339       62.2%

Results from Goloil
 Operations, before DD&A    1,252,170       644,027        608,143       94.4%
  Less General &
   Administrative Expense,
   Goloil                     837,134       588,774        248,360       42.2%
                          -----------   -----------    -----------    -------
Goloil operating (loss)
 income before DD&A           415,036        55,253        359,783         -

Depreciation, Depletion
 & Amortization, Goloil     1,582,513       451,930      1,130,583      250.2%
                          -----------   -----------    -----------    -------

Operating loss, Goloil    (1,167,477)      (396,677)      (770,800)        -

General & Administrative
 Expense, Teton             3,919,746     4,744,952       (825,206)     -17.4%
                          -----------   -----------    -----------    -------

Operating Loss, Teton     $(5,087,223)  $(5,141,629)   $    54,406         -
                          ===========   ===========    ===========    =======


        Costs and Expenses Per Barrel during the Year ended December 31
                     (in U.S. Dollars)

                                          Change
Controllable Costs         2003    2002     ($)    % Change
                         -----------------------------------
                         -----------------------------------
 Production Costs          $ 3.20 $ 2.75    $0.45    16.4%
 G&A - Goloil                1.33   1.33    (0.00)   -0.0%
 G&A - Teton                 6.21  10.70    (4.49)  -42.0%
                            -----  -----   ------   ------
                            10.74  14.78    (4.04)  -27.4%

Non-Controllable Costs
 Transportation &
  Marketing                  1.28   1.38     (0.10)   -7.2%
 Taxes other than
Income Taxes                 9.29   7.98      1.31    16.4%
 Export Duties               2.36   2.06      0.30    14.6%
                            -----  -----     -----    -----
                           $12.93  $11.42    $1.51    13.2%

In 2003, Teton's net loss narrowed from $10,973,923 to $5,634,844, or $8,415,537
after giving effect to the imputed preferred stock dividends for inducements and
beneficial  conversion  charges  associated  with the  Company's 8%  convertible
preferred  stock  offering and subsequent  conversion.  In terms of earnings per
share,  Teton's  loss  narrowed  from $3.53 to $1.23 per share.  The decrease in
losses was largely  attributable to improved  operating  results at Goloil and a
significant  decline  in  non-cash  charges  related  to  financing,  offset  by
increased  salaries  and  other  expenses  related  to the  Company's  increased
staffing levels.

Oil revenues  increased from  $6,923,320 to  $11,437,802  from 2002 to 2003. The
increase was due to both a 42.5%  increase in barrels sold and a 15.9%  increase
in the  average  price per  barrel  sold  from  $15.62  to  $18.11  per  barrel.
Historically, Teton has not hedged its sales and this remained the case in 2003.
However,  as discussed  above revenues were less than expected during the fourth
quarter of 2004 by $1.44  million due to the fixed price paid by an affiliate of
RussNeft when compared to blended market price Goloil received  previously.  The
Company  anticipates that a similar reduction in revenues and operating earnings
for each 2004 quarter in which the Company retains an interest in Goloil.

Teton's  share of Goloil's  costs of sales and  expenses  (before  depreciation,
depletion  and  amortization  expenses  or "DD&A")  increased  62.2%,  which was
slightly less than the increase in revenues. As seen from the table above, taxes
other than income taxes and export  tariffs are both important  contributors  to
these costs and expenses accounting for more than 70% of the total costs in both
2002 and 2003. Both are tied directly to revenues, and in the case of the export
tariff,  to the price of oil as well.  Export tariffs would have been higher had
not Goloil  effectively  stopped  exporting oil at the end of the third quarter,
instead  selling  all of its  production  domestically  for a flat  fee of 2,400
rubles per barrel.

Teton's share of Goloil's operating income before DD&A increased from $55,253 to
$415,036  from 2002 to 2003,  but  after  Goloil's  DD&A its share of  operating
losses rose from $396,677 to $1,167,477.  DD&A itself increased by 250.1%,  from
$451,930 to $1,582,513,  reflecting the capital expenditures  incurred by Goloil
as it has developed its license.

General and administrative expense ("G&A") at Teton decreased from $4,774,952 to
$3,919,746 or 17.4% from 2002 to 2003. The decrease was largely  attributable to
a $1,562,575  decline in fees paid to consultants for capital raising activities
offset by  increases  in  compensation  to officers  and  employees  ($323,951),
professional fees ($109,146),  travel and entertainment ($193,773), and expenses
relating to  marketing,  advertising,  and  investor  relations  ($167,987).  In
addition to the increase in compensation relating to additional staffing to meet
Company goals and objectives, most of the other G&A increases were the result of
activities such as Teton's  preferred  stock offering,  its listing on the AMEX,
the filing of its  registration  statement  with the SEC, and due diligence with
respect to the proposed acquisition of LLC Chernogorskoye.


Results of Operations for the Quarter Ended March 31, 2004

The  table  below  summarizes  some  of the  most  important  components  of our
revenues,  operating costs and net loss in the first quarter of this year. It is
important to note that since Teton  absorbs 50% of the cost of producing the oil
paid under the Goloil production payment (included in the cost amounts), Teton's
per barrel production costs are effectively doubled.

              Operating Highlights for the Quarter ended March 31
                   (in U.S. Dollars, unless otherwise noted)

                                               2004    2003    Change % Change

Sales, Barrels                               167,162      151,304       15,858      10.5%
Average Daily Sales, Barrels                   1,837        1,663          174      10.5%
Average Selling Price, $/barrel                17.72        22.53        (4.81)    -21.3%
Revenues                                   2,962,500    3,408,718     (446,218)    -13.1%

Costs of Sales and Expenses, excl. DD&A
  Production Costs                           622,277      326,305      295,972      90.7%
  Transportation & Marketing                       -      280,965     (280,965)   -100.0%
  Taxes other than Income taxes            1,973,275    1,427,572      545,703      38.2%
  Exploration cost (Geology & Geophysics)    154,776       93,148       61,628      66.2%
  Export Duties                                   -       559,240     (559,240)   -100.0%
                                           ---------    ---------    ---------    ------
                                           2,750,328    2,687,230       63,098       2.3%

Results from Goloil Operations, before
 DD&A                                        212,172      721,488     (509,315)       -
  Less General & Administrative Expense,
   Goloil                                    184,086      219,557      (35,471)    -16.2%
                                           ---------    ---------    ---------    ------
                                              28,086      501,931     (473,844)       -

Depreciation, Depletion & Amortization,
 Goloil                                      390,386      332,738       57,648      17.3%

Operating Income (Loss), Goloil             (362,300)     169,193     (531,493)       -

General & Administrative Expense, Teton    2,102,638      772,899    1,329,739     172.0%
Depreciation, Depletion & Amortization,
 Teton                                        19,284           -            -         -

Operating Income (Loss), Teton            (2,484,222)    (603,706)  (1,880,516)       -



             Costs and Expenses during the Quarter ended March 31
                            (in U.S. $ per barrel)

                                            2004    2003    Change     % Change
Controllable Costs
  Production Costs                          3.72    2.16      1.57         72.7%
  G&A - Goloil                              1.10    1.45     (0.35)       -24.1%
  G&A - Teton                              12.58    5.11      7.47        146.2%
                                         --------  ------    -----       ------
                                           17.40    8.72      8.69        99.5%

Non-Controllable Costs
  Transportation & Marketing                   -    1.86     (1.86)      -100.0%
  Taxes other than Income Taxes            11.80    9.44      2.37         25.1%
  Export Duties                                -    3.70     (3.70)      -100.0%
                                           -----  ------    ------       ------
                                           11.80   14.99     (3.18)       -21.2%

During the first quarter,  Teton's net loss, applicable to Common stock, widened
from $781,085 in the first  quarter of 2003 to  $3,075,083  or $2,293,998  after
taking into  account  non-cash  inducement  charges of $521,482  for  beneficial
conversion  of the  preferred  stock and  preferred  dividends of $31,488 in the
first quarter of 2004. On a per share basis, Teton's loss widened from $0.12 per
share to $0.35.  The  increased  loss was largely due to a shift in its share of
Goloil's  operating  income from a gain of $169,193 in the first quarter of 2003
to a loss of  $362,300 in the first  quarter of 2004,  along with an increase in
Teton  domestic  general and  administrative  ("G&A")  expenses from $772,899 to
$2,102,638  during  the  same  periods,  both  of  which  are  discussed  in the
paragraphs below.

Teton's  share of  Goloil  revenues  fell year  over  year  from  $3,408,718  to
$2,962,500  in the first  quarter.  The decrease  reflected a 21.3%  decrease in
average  selling price from $22.53 to $17.72 per barrel,  partially  offset by a
10.5% increase in production volume from 151,304 to 167,162 barrels.  Production
costs  increased  by  $295,972,  or 90.7%,  while taxes other than income  taxes
increased  by $545,703 or 38.2%.  The increase in  production  costs was tied to
increased  workover  activity and higher diesel fuel  expenditures.  Taxes other
than income taxes include the Russian  Minerals  Extraction  Tax and Value Added
Tax (VAT) and represent significant expenses for all Russian oil producers.  The
Mineral  Extraction  Tax is a tax on  revenues  tied to the price of Urals blend
crude,  a benchmark  for  exports.  Goloil no longer  incurs  export  tariffs or
transportation  charges under the marketing  arrangement now in place; all sales
take place at the wellhead.  Teton's share of Goloil's depreciation,  depletion,
and amortization expenses increased by $57,648.

First  quarter  domestic  G&A  expense  at  Teton  increased  from  $772,899  to
$2,102,638 year over year, an increase of 172.0%.  The key factors  contributing
to this increase were an increase in  compensation  costs of $522,723  including
management  bonuses paid in January,  as well as increases  in  advertising  and
public  relations  expenses  of  $307,262,  legal  and  accounting  expenses  of
$150,248,  franchise  taxes  of  $128,000,   consulting  fees  of  $97,467,  and
geological and engineering  expenses of $73,922.  In addition to the increase in
compensation   relating  to  additional  staffing  to  meet  Company  goals  and
objectives,  many of the other  increases  in G&A  expenses  were the  result of
Teton's  due  diligence  and  financing   costs  incurred  in  connection   with
preliminary  negotiations  to acquire and develop new oil and gas  properties in
Russia.

Liquidity and Capital Resources

The Company  had a cash  balance of  $7,856,899  on March 31, 2004 and a working
capital deficit of $2,685,676.  Excluding the pro rata consolidation of Goloil's
working capital deficit, Teton has a working capital surplus of $7,011,577.

Assuming  shareholder  approval is obtained and the sale of Goloil closes in the
latter half of July,  the Company  anticipates  it will have  approximately  $20
million in cash at the end of July 2004. In addition,  its $9.9 million share of
Goloil's net liabilities will be extinguished  leaving it with a working capital
position essentially equal to its cash.

Sources and Uses of Funds

Historically,  Teton's  primary  source of liquidity  has been cash  provided by
equity  offerings.  Such  offerings  will continue to play an important  role in
financing Teton's business and the Company anticipates seeking approval to raise
additional  equity  capital  from its  shareholders  at its annual  meeting.  In
addition,  the Company is working to establish a borrowing  facility with one or
more international  banks, most likely in the form of a revolving line of credit
that will be used primarily for the acquisition of producing  properties and for
developmental  drilling  and  other  capital  expenditures.   There  can  be  no
assurances  however,  as to whether  and on what terms such  financing  would be
available.

The Company's cash flow is dependent on its ability to obtain dividends and loan
repayments   from  Goloil  through  its  Goltech   subsidiary.   As  a  minority
shareholder,  the  Company  lacks  power to compel  Goloil to put  dividends  to
Goltech.  Teton will continue in the position of minority  stockholder  in which
under  Russian  law,  its rights and  remedies  are limited  compared to Western
standards.  As majority  owner,  RussNeft could cause the Company not to receive
any cash flow or profit from its investment in Goloil.

The Company  also  currently  lacks  funding to finance its share of  RussNeft's
accelerated  drilling plans for Goloil.  The Company has disagreed with RussNeft
over  the  pace  of a  drilling  at  Goloil.  RussNeft  has  proposed  plans  to
significantly accelerate Goloil's drilling program. The Company's budgeted share
of Goloil  capital  expenditures  is  approximately  $14.6 million over the next
three years. The Company would have to seek external  financing to pay its share
of this program and believes that such  investment  would not result in adequate
returns  to  its  shareholders   given  the  current  economics  of  its  Goloil
investment.  If the sale of Goloil were completed these  uncertainties  would be
removed.

Cash Flows and Capital Expenditures

Cash used in operating  activities for the three months ended March 31, 2004 was
$1,563,180 compared to cash provided by operating activities of $191,787 for the
three months ended March 31, 2003.  As described  above the  Company's  net loss
increased to $2,522,113 from $781,085 at March 31, 2003.

RussNeft,  the  operator of Goloil  continues to proceed in the  development  of
Goloil's oil and gas resulting in the Company  investing  $190,444 in the Goloil
oil and gas properties in the first quarter.  Resulting from the Company's first
quarter negotiations with RussNeft,  the company received $1,065,000 from Goloil
as repayment of advances made to Goloil prior to December 31, 2003.  The Company
received an additional $3,658,252 as of April 2, 2004.

During the first quarter of 2004, the Company received $449,997 from the sale of
Preferred  stock.  The increase in proceeds  from  advances  represents  amounts
advanced  by RussNeft to Goloil.  As  discussed  above,  such  advances  will be
eliminated  upon  completion of the  Company's  proposed sale of its interest in
Goloil.

The following  table shows Teton's  contractual  obligations,  including its pro
rata share of Goloil's  liabilities  and planned future capital  expenditures by
expected maturity.

Contractual Obligations      Payments due by period
----------------------------------------------------------------------------------------
                               Total      Less than        1-3          3-5    More than
                                           1 year         years        years    5 years
----------------------------------------------------------------------------------------
Proportionate Share of       $8,219,652  $8,219,652              0        0            0
Goloil Debt (1)
----------------------------------------------------------------------------------------
Share of Goloil Capital     $14,600,000           0    $14,600,000        0            0
Expenditure Budget (2)
----------------------------------------------------------------------------------------
Asset Retirement Obligation    $129,500           0              0        0     $129,500
----------------------------------------------------------------------------------------
Total Contractual           $22,949,152  $8,219,652    $14,600,000        0     $129,500
Obligations
----------------------------------------------------------------------------------------

(1)  Represents  Teton's pro rata share of Goloil's  debts.  Teton is not liable
     for Goloil's debts.

(2)  Based on current  capital  expenditure  plans,  including  the  accelerated
     drilling  budget  approved by the Goloil Board of Directors on December 22,
     2003.

Income Taxes, Net Operating Losses and Tax Credits

Currently,  Goloil pays a profits  tax in Russia  equal to 24% of net profits as
defined  by Russian  income tax law.  As  discussed  in our 10-KSB the  taxation
system in Russia is evolving as the central government  transforms itself from a
command to a  market-oriented  economy.  Based on  current  tax law and the U.S.
Russian  Income Tax Treaty the profits  tax paid to Russia will be a  creditable
tax when  determining the Company's U.S. income taxes payable,  if any. At March
31,  2004 the  Company  has a U.S.  net  operating  loss tax  carry  forward  of
approximately  $20,000,000,  utilization  of which is limited  under IRC section
382.

While Teton expects to realize a profit of approximately  $12.6 million from the
sale of  Goloil,  Teton's  tax  advisors  anticipate  that it will  incur only a
relatively small Alternative Minimum Tax liability of approximately $180,000.

Critical Accounting Policies

In the  ordinary  course of  business,  we have made a number of  estimates  and
assumptions  relating to the  reporting of results of  operations  and financial
condition in the  preparation  of our financial  statements  in conformity  with
accounting  principles  generally accepted in the United States.  Actual results
could differ significantly from those estimates under different  assumptions and
conditions. We believe that the following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of
our  financial  condition  and  results  of  operations  and  require  our  most
difficult,  subjective,  and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.

Reserve Estimates:  The information regarding the Company's share of oil and gas
reserves, the changes thereto and the resulting net cash flows are all dependent
upon  assumptions  used in preparing  the  Company's  annual  reserve  study.  A
qualified  independent  petroleum  engineer,  in  accordance  with  standards of
applicable  regulatory  agencies  and the  Securities  and  Exchange  Commission
definitions,  prepares the Company's  reserve study.  Estimates of  economically
recoverable  oil and natural gas reserves and future net cash flows  necessarily
depend upon a number of variable  factors and  assumptions,  such as  historical
production from the area compared with  production  from other producing  areas,
the assumed  effects of regulations  by  governmental  agencies and  assumptions
governing  future oil and natural  gas prices,  the  exchange  rate  between the
Russian  ruble  and the U.S.  dollar,  future  operating  costs,  severance,  ad
valorem,  export,  excise and other  taxes,  development  costs and workover and
remedial  costs,  all of which  may,  in fact,  vary  considerably  from  actual
results. For these reasons, estimates of the economically recoverable quantities
of oil and natural  gas  attributable  to any  particular  group of  properties,
classifications of such reserves based on risk of recovery, and estimates of the
future  net  cash  flows  expected  there  from  may  vary  substantially.   Any
significant  variance in the assumptions  could materially  affect the estimated
quantity and value of the reserves, which could affect the carrying value of the
Company's  oil and gas  properties  and the rate of depletion of the oil and gas
properties. Management believes that the current assumptions used in preparation
of the reserve study are reasonable. The Company's revised downward its estimate
of oil and gas  reserves  by 4.4 million  barrels in the fourth  quarter of 2003
primarily  due  to the  reclassification  of  certain  waterflood  reserves  and
reserves  associated  with  undrilled  locations  to  probable.   Only  reserves
associated  with two wells planned and budgeted for 2004 have been classified as
proved undeveloped. The Company's estimated proved reserves at December 31, 2003
and  2002  were  prepared  by  independent  petroleum  engineering   consultants
Gustavson and Associates.

Property, Equipment and Depreciation: The Company follows the successful efforts
method of accounting for oil and gas properties. As of March 31, 2004 all of the
Company's  oil and gas assets are held in one cost  center  located in  Siberia,
Russia.  As the Company makes  additional  acquisitions  it will have additional
cost centers.  Under the  successful  efforts  method of accounting the costs of
development wells are capitalized, but exploratory wells are capitalized only if
they are  successful.  The Company plans to increase its oil and gas reserves by
acquisition and the development of reserves in place.  Accordingly,  acquisition
and drilling costs on successful  wells will be capitalized.  Capitalized  costs
will be depleted and depreciated  using the units of production  method based on
estimated proved oil reserves as determined by independent engineers,  currently
Gustavson and  Associates.  If the estimates of oil and gas reserves are changed
materially then the amount of depreciation and depletion recorded by the Company
could increase or decrease materially. In addition the carrying costs of the oil
and gas properties are subject to the requirements of SFAS No. 144,  "Accounting
for the Impairment or Disposal of Long-Lived Assets." The Company is required to
impair the net book value for a cost  center when such net book value is greater
than the estimated future cash flows for such cost center. At March 31, 2004 the
Company's  estimated cash flow for its Siberian cost center,  using the domestic
Russian  price of 2,400  rubles per ton ($11.50 per barrel)  exceed the carrying
value.

Pro Rata  Consolidation:  The Company  currently pro rata  consolidates  its 50%
interest in Goloil,  because, as of March 31, 2004,  Management believes that to
be the most meaningful presentation.  If the Company completes the proposed sale
of its  interest  in Goloil  then the assets and  liabilities  of Goloil will be
eliminated in recording the gain on sale.

Production  Payment:  During  June,  2000  the  Company  entered  into a  Master
Agreement that requires,  among other things, a seven year production payment to
EUA  equal to 50% of the oil  produced  from new and  existing  Goloil  wells in
exchange for wells and  facilities  constructed  by EUA.  Because the production
payment  was for a  specified  amount  of  production  and  not for a fixed  and
determinable  dollar  amount,  the Company did not record such  transaction as a
loan.  Currently,  Goloil is paying EUA a flat amount of  19,000,000  rubles per
month (approximately $650,000 per month), which, at current prices, is less than
50% of the oil produced. If the Company is not successful in its efforts to sell
Goloil to RussNeft,  we would  continue our interest in Goloil  reserves,  which
would continue to be subject to a production  payment  through June 2007,  which
may cause future impairment of our investment in such properties.

Asset  Retirement  Obligation:  During  the fourth  quarter of 2004 the  Company
applied the provisions of SFAS 143 "Accounting for Asset Retirement Obligations"
and recorded the estimated December 31, 2003 liability for the retirement of its
Russian oil and gas assets along with a  corresponding  increase in the carrying
value of the related oil and gas  properties.  The liability was estimated based
on the estimated,  discounted future cost to plug the oil and gas wells existing
at December 31, 2003 plus the costs of clean up based on the  Company's  current
understanding  of the standards  that will be applied at the time of retirement.
The Company recorded an increase in the asset retirement  obligation  during the
first  quarter  of 2004  solely due to the  accretion  of the  discount.  If the
Company  does  not  sell  Goloil,   the  Company  will  continually  review  the
assumptions  it used in  making  such  estimate  and  revise  the  liability  as
required.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED TRANSACTION

The Proposed  Transaction should not result in the recognition of income or gain
to the Company's stockholders, as none of the sales proceeds will be distributed
as a dividend or otherwise  with respect to the Company's  shares.  The Proposed
Transaction should be a "taxable" transaction to the Company for U.S. income tax
purposes.  However,  the Company  expects to  recognize  gain from the  Proposed
Transaction  in an amount  that is less than the  amount  of its  available  net
operating loss  carry-forwards.  Accordingly,  the Proposed  Transaction  should
result in relatively modest amounts due for U.S. federal income tax,  consisting
entirely of "alternative minimum tax" estimated at approximately $181,000.

TETON WILL NOT SEEK AN OPINION OF COUNSEL  WITH RESPECT TO THE  ANTICIPATED  TAX
CONSEQUENCES.  THE FOREGOING  SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
IS INCLUDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO
ANY STOCKHOLDER.  TETON RECOMMENDS THAT EACH STOCKHOLDER  CONSULT HIS OR HER OWN
TAX ADVISER REGARDING THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION.

No U.S.  regulatory  requirements  must be complied  with or approvals  obtained
prior to the completion of the sale, other than stockholder approval.

CERTAIN RUSSIAN TAX CONSEQUENCES OF THE PROPOSED TRANSACTION

Neither  the Company  nor  Goltech  will be liable for any taxes  imposed by the
Russian Federation or any constituent entity thereof arising out of the Proposed
Transaction. Under the Tax Code of the Russian Federation, a nonresident foreign
entity  is not  subject  to tax on  income  from the sale of shares of a Russian
company  unless  more than  fifty  percent  (50%) of the  assets of the  Russian
company,  as measured  by book value,  are  immovable  property.  The double tax
treaty  between the U.S.  and the  Russian  Federation  contains an  essentially
identical exemption. Goloil has undertaken to provide a certified statement that
less than 50% of its assets are immovable property.

USE OF PROCEEDS

The Company plans to use the proceeds from this transaction to acquire other oil
and  gas   properties.   The  Company  is  primarily   focused  on   acquisition
opportunities  in Russia  and the former  CIS  states  with the  characteristics
described below.  However, the Company may consider other opportunities  outside
its area of geographic  focus, as described below. The Company has been actively
seeking acquisitions of properties for approximately one year. Specifically, the
Company  has been  targeting  small to  medium-sized  oil fields  with  existing
production  ranging  from  1,000 to  5,000  barrels  of oil per day with  proven
reserves that provide  immediate cash flow,  production,  and an opportunity for
additional upside potential from  developmental  drilling and other exploitation
opportunities.  The Company has been  focusing its efforts in the West  Siberian
Basin and in the Komi Region of Russia but could consider  opportunities  either
inside or outside of Russia and the former CIS states where:

o    It can achieve operating control over the acquired asset;

o    There is sufficient operating infrastructure,  including gathering systems,
     pipeline   connections,   electricity   generation,   and  oil   processing
     facilities;

o    The  acquisition  cost is  between  US$1.50 - US$3.00  per barrel of proved
     reserves (for Russian and CIS properties); and

o    The  investment  has the potential to produce an internal rate of return in
     excess of 15%.

The Company has engaged in preliminary negotiations regarding several properties
in  Russia  during  the  past  year,  and  is  continuing  to  seek  acquisition
opportunities, but has not, as of the date of this Proxy Statement, entered into
any agreements  with any party except as described  below with respect to Samson
International Resources.

SAMSON INTERNATIONAL TRANSACTION

On April 5, 2004,  the Company  announced that it had signed a purchase and sale
agreement to acquire a majority  (52%)  interest in a producing  field in Russia
subject to many  conditions and further due  diligence.  A cash deposit of $3.85
million was paid by the Company to Samson International  Resources ("Samson") in
connection with the proposed sale. The closing of the acquisition was subject to
several  conditions,  including  a right  of  first  purchase  held by  Samson's
partner,  Vitol,  to acquire  Samson's  interest  in the field on the same terms
offered by the Company.  Vitol  elected to exercise this right in May and Samson
subsequently refunded the Company's deposit on May 11, 2004, though the contract
between Samson and the Company  technically remains in effect. In the event that
Vitol does not  purchase  Samson's  52%  interest,  the Company and Samson could
determine to proceed with the transaction subject to the Company's due diligence
and assuming that all other conditions to the sale are met. However, the Company
believes,  in light of the exercise of the first purchase  right by Vitol,  that
this transaction is unlikely to occur.

RISK FACTORS

The  proposed  Goloil  sale  poses a high  degree of risk for our  stockholders.
Before  deciding how to vote on this  proposal,  stockholders  should  carefully
consider the following risks.

Risks of Doing Business in Russia

Weaknesses  relating to the Russian legal system and Russian  legislation create
an uncertain environment for investment and for business activity.

Russia is still  developing the legal  framework  required by a market  economy.
Several fundamental Russian laws have only recently become effective. The recent
nature of much of Russian  legislation  and the rapid  evolution  of the Russian
legal system place the enforceability and underlying  constitutionality  of laws
in doubt and result in ambiguities,  inconsistencies and anomalies. In addition,
Russian   legislation   often  leaves   substantial   gaps  in  the   regulatory
infrastructure. Among the risks of the current Russian legal system are:

o    since 1991,  Soviet law has been largely,  but not entirely,  replaced by a
     new legal regime as established by the 1993 Federal Constitution,  the 1995
     Civil  Code  and  by  other  federal  laws,  and  by  decrees,  orders  and
     regulations issued by the president, the government and federal ministries,
     which  are,  in  turn,   complemented  by  regional  and  local  rules  and
     regulations.  These  legal  norms,  at times,  overlap  or  contradict  one
     another;

o    limited  judicial  and  administrative  guidance  on  interpreting  Russian
     legislation;

o    the relative inexperience of judges in interpreting Russian legislation;

o    a high degree of discretion on the part of governmental authorities; and

o    bankruptcy procedures that are not well developed and are subject to abuse.

All of these  weaknesses  could  affect our ability to enforce our rights  under
contracts, or to defend ourselves against claims by others.

Lack of  independence  and  inexperience of certain members of the judiciary and
the  difficulty  of enforcing  court  decisions and  governmental  discretion in
instigating, joining and enforcing claims could prevent us or you from obtaining
effective  redress in a court  proceeding,  including  enforcing our rights as a
stockholder   of  a  Russian   company  or  in  respect  of   expropriation   or
nationalization.

The  independence  of the  judicial  system  and  its  immunity  from  economic,
political and nationalistic  influences in Russia remains largely untested.  The
court system is understaffed  and  underfunded.  Judges and courts are generally
inexperienced  in the area of business and corporate law.  Russia is a civil law
jurisdiction  and,  as such,  judicial  precedents  have no  binding  effect  on
subsequent  decisions.  In  addition,  most  court  decisions  are  not  readily
available to the public.  Enforcement of court judgments can in practice be very
difficult  in Russia.  All of these  factors make  judicial  decisions in Russia
difficult to predict and effective redress uncertain. Additionally, court claims
are often  used in  furtherance  of  political  aims.  We may be subject to such
claims  and as a  foreign  party  may  not be able to  receive  a fair  hearing.
Additionally,  court  judgments  are not  always  enforced  or  followed  by law
enforcement agencies.

These   uncertainties   also  extend  to  property   rights.   During   Russia's
transformation from a centrally planned economy to a market economy, legislation
has  been  enacted  to  protect  private  property  against   expropriation  and
nationalization.  However,  it is possible that due to the lack of experience in
enforcing these provisions and due to political changes, these protections would
not be enforced in the event of an attempted expropriation or nationalization.

Unlawful  or  arbitrary  government  action  may have an  adverse  effect on our
business.

Government  authorities  have a high degree of discretion in Russia and at times
exercise their discretion  arbitrarily,  without hearing or private notice,  and
sometimes in a manner that is contrary to law. Moreover, the government also has
the  power in  certain  circumstances,  by  regulation  or  government  act,  to
interfere with the performance of, nullify or terminate  contracts.  Unlawful or
arbitrary governmental actions have included withdrawal of licenses,  sudden and
unexpected tax audits,  criminal  prosecutions  and civil  actions.  Federal and
local government  entities have also used common defects in matters  surrounding
share issuances and  registration as pretexts for court claims and other demands
to invalidate  such  issuances and  registrations  and/or to void  transactions.
Unlawful  or  arbitrary  government  action,  if  directed  at us,  could have a
material adverse effect on our business.

Risks if Goloil Sale is Not Approved

The Company would need to seek external financing to fund Goloil's accelerated capital
expenditure program.

The  Company  currently  lacks  funding  to  finance  its  share  of  RussNeft's
accelerated  drilling plans for Goloil.  The Company has disagreed with RussNeft
over  the  pace  of a  drilling  at  Goloil.  RussNeft  has  proposed  plans  to
significantly accelerate Goloil's drilling program. The Company's budgeted share
of Goloil  capital  expenditures  is  approximately  $14.6 million over the next
three years. The Company would have to seek external  financing to pay its share
of this program and believes that such  investment  would not result in adequate
returns  to  its  shareholders   given  the  current  economics  of  its  Goloil
investment.

The  Company's  cash flow is dependent on its ability to obtain  dividends  from
Goloil.

The Company's cash flow is dependent on its ability to obtain dividends and loan
repayments   from  Goloil  through  its  Goltech   subsidiary.   As  a  minority
shareholder,  the  Company  lacks  power to compel  Goloil to put  dividends  to
Goltech.  Teton will continue in the position of minority  stockholder  in which
under  Russian  law,  its rights and  remedies  are limited  compared to Western
standards.  As majority  owner,  RussNeft could cause the Company not to receive
any cash flow or profit from its  investment  in Goloil.  While Teton could take
legal action in the Russian courts against RussNeft,  such actions would be very
expensive and  time-consuming,  and it might be extremely difficult for Teton to
prevail.

It may be difficult  to sell our  investment  in Goloil to another  buyer if the
Goloil sale to RussNeft is not approved.

The Company's minority status and lack of control over Goloil's operations makes
it an illiquid investment. If the Goloil sale to RussNeft is not approved, it is
likely to be extremely  difficult  for the Company to find another buyer willing
to purchase  our  interests  in Goloil on  equivalent  terms given our  minority
status and RussNeft's control over the operations of Goloil.

Any  continuing   relationship   with  RussNeft   involves  numerous  risks  and
difficulties.

RussNeft has effective  control of Goloil as its majority  owner.  If the Goloil
sale is not  completed,  the Company may face  substantial  difficulties  in its
continuing  relationship  with  RussNeft  and in  realizing  further  value from
Goloil. For example, we would be required to fund our shared substantial capital
expenditures  of Goloil  for which we would need to obtain  external  financing.
Also,  RussNeft's  decision  to sell  Goloil's  production  at a fixed price has
adversely  affected  the  economics  of our  investment.  The Company  therefore
believes  that if the Goloil  sale is not  consummated  it will be  increasingly
difficult for the Company to realize value from Goloil.  Given the  difficulties
of  enforcing  minority   stockholder  rights  in  Russia  as  explained  below,
litigation may not be an effective option for the Company.

Goloil has a substantial amount of indebtedness, which could limit its financing
options and consume a substantial portion of its operating cash flow.

Goloil, the entity in which we have an equity interest, has a substantial amount
of  indebtedness.  As of March  31,  2004,  Goloil  had  total  indebtedness  of
approximately $16,440,000; all of which is owed to other equity interest holders
in Goloil.  The level of indebtedness  could have important  consequences to the
holders of our securities.

For example, it:

o    may limit  Goloil's  ability to obtain  additional  financing  for  working
     capital, capital expenditures or general corporate purposes;

o    will require Goloil to dedicate a substantial portion of its cash flow from
     operation  to the payment or principal  and interest on its debt,  reducing
     the funds available for distribution to us or for other purposes  including
     expansion through acquisitions,  capital  expenditures,  marketing spending
     and expansion of our product offerings; and

o    may  limit  our  flexibility  to adjust to  changing  business  and  market
     conditions  and make us more  vulnerable to a downturn in general  economic
     conditions as compared to our competitors.

Goloil's ability to make scheduled payments or to refinance its obligations with
respect  to  its  indebtedness  will  depend  on  its  financial  and  operating
performance, which, in turn, is subject to prevailing economic conditions and to
financial, business and other factors beyond its control.

In addition,  the debt is secured by  substantially  all of Goloil's  assets and
there  are no  guarantees  on the  loan.  Although  the debt is  current  and in
compliance, the noteholders may foreclose in the event of a default.

There is little effective protection of minority stockholders in Russia.

In general,  minority  stockholder  protection  under  Russian law derives  from
supermajority  other  special  stockholder  approval  requirements  for  certain
corporate action (including  "interested party"  transactions  discussed in more
detail  below),  as well as from the ability of a stockholder to demand that the
Company purchase the shares held by that  stockholder if that stockholder  voted
against or  abstained  from  voting on  certain  types of  action.  While  these
protections  are  similar  to the types of  protections  available  to  minority
stockholders in the U.S., in practice  corporate  governance  standards for many
Russian  companies have proven to be poor, and minority  stockholders in Russian
companies have suffered losses due to abusive share  dilutions,  asset transfers
and  transfer-pricing  practices.  Stockholder  meetings  have been  irregularly
conducted,  and  stockholder  resolutions  have not  always  been  respected  by
management.

In  addition,   where  they  apply,  the  supermajority   stockholder   approval
requirement  is met by a vote of 75% of all voting  shares that are present at a
stockholders' meeting. Thus, controlling  stockholders owning slightly less than
75% of outstanding  shares of the Company may have a 75% or more voting power if
certain  minority  stockholders  are not present at the meeting.  In  situations
where controlling  stockholders effectively have 75% or more of the voting power
at a stockholders'  meeting, they are in a position to approve amendments to the
charter of the Company,  which could be prejudicial to the interests of minority
stockholders.

Disclosure  and reporting  requirements  and  anti-fraud  legislation  have been
enacted in Russia only  recently.  Most Russian  companies  and managers are not
accustomed to restrictions on their activities arising from these  requirements.
The concept of fiduciary  duties of  management  or  Directors'  duties to their
companies or  stockholders  is also  relatively  new and is not well  developed.
Violations of disclosure  and  reporting  requirements  or breaches of fiduciary
duties to us could materially adversely affect the value of our Common Stock.

While  the  Russian  Federal  Law  on  Joint  Stock   Companies   provides  that
stockholders  owning not less than 1% of the Company's ordinary shares may bring
an action for damages on behalf of the  Company,  Russian  courts do not to date
have  significant  experience  with such suits.  Russian  corporate law does not
contemplate class action litigation. Accordingly, a foreign investor's practical
ability to pursue legal redress  against  RussNeft may be limited.  Our minority
status in Goloil is  therefore  subject to  significant  risks under the laws of
Russia.

Risks if Goloil Sale is Approved

Even if approved by our stockholders, the Goloil sale may not be completed.

The completion of the Goloil sale is subject to several conditions.  Even if our
stockholders  approve the Goloil sale,  there can be no assurance that the other
conditions to closing will be met and that the Goloil sale will be completed. If
the Goloil sale is not  completed,  we will have spent a  substantial  amount of
time  and  financial  resources  in  connection  with  the  transaction  without
realizing  any gain and will be subject to all of the risks  described  above if
the Goloil sale is not approved.

If the Goloil sale is completed,  we will have no remaining  operating  business
and no source of continuing revenue.

If the  Goloil  sale is  completed,  we will  transfer  to  RussNeft  all of our
currently  productive assets and have no operating assets.  Further revenues and
profits of the Company will  therefore be completely  dependent on completing an
acquisition  of  producing   properties.   The  Company  is  currently   seeking
acquisition  opportunities,  primarily  focused  on Russia  and the  former  CIS
states. While we have from time to time been engaged in preliminary negotiations
with respect to such  opportunities,  no agreements have been signed (other than
with  respect  to the  Samson  transaction).  As was the case  with  the  Samson
transaction,  even signed  agreements  to purchase oil  properties in Russia are
often subject to rights of first refusal,  which can supersede  such  agreements
and cause them not to close.  Therefore,  we can give no assurance that any such
acquisition can be completed on reasonable terms or in a reasonable time frame.

There is no plan to  distribute  any of the  proceeds  of the Goloil sale to our
stockholders.

We do not intend to distribute  any portion of the proceeds from the Goloil sale
to our stockholders. Our intention is to use the net proceeds of the Goloil sale
to acquire  interests  in other  companies  engaged in Russian  oil  production.
Pending such uses,  the net proceeds will be invested in short term money market
instruments,  bank  deposits  or other  liquid  instruments.  While we have been
engaged in preliminary  negotiations regarding potential acquisitions and expect
to continue to seek acquisition opportunities, there can be no assurance that we
will be successful in  consummating  or reaching an agreement for a transaction.
If we are not  successful  in acquiring  an interest in another  business in the
near future, we could end up spending a significant  portion of the net proceeds
of the Goloil sale on overhead and operating expenses.

Any new business opportunity will likely involve significant risks.

Potential business  opportunities of the Company may involve  significant risks.
Our acquisition of or participation in new business opportunities in the Russian
oil and gas  industry  may be illiquid  and could  result in a total loss to the
Company  and our  stockholders  if the  business  or  opportunity  proves  to be
unsuccessful.  In addition,  any such acquisition would be subject to all of the
risks of doing business in Russia describe above.

We may be unable to acquire or may be delayed in  acquiring  interests  in other
Russian oil industry  companies  due to factors  beyond our  control,  including
regulatory  requirements and changes in economic  conditions.  For example,  the
Company  believes that prices for Russian oil  properties are rising rapidly due
to record high oil prices now being  experienced  in the market place.  If these
trends  continue and the Company is not able to complete a purchase  transaction
in the near future,  the Company may not be able to acquire new producing assets
on favorable terms.

Although we are in preliminary discussions regarding other acquisitions,  we may
be unable to acquire or may be delayed in acquiring such interests.

Risks of Proposed Samson Transaction

If Vitol does not complete its purchase of the Samson assets,  the Company could
become obligated to complete the transaction if all other conditions to the sale
are met.  However,  not only has Vitol  exercised its first refusal right but it
has publicly announced that it has agreed to resell the Samson assets to a third
party.  Based on the  foregoing,  we do not  believe  that the  Company  will be
required  to complete  the Samson  transaction.  However,  in the event that the
Company  enters  into  another  acquisition  agreement  and is also  required to
complete the Samson  transaction,  it could be in the position of having to find
new external  financing for both  transactions.  While the Company believes that
such financing would be obtainable, there can be no assurance that this would be
the case on attractive terms.

Possible Need to Obtain Further Debt and Equity Financing

If the Company  enters  into an  agreement  to purchase a producing  field for a
price greater than its cash on hand and the proceeds of the sale of Goloil, then
it may  need to seek  additional  debt or  equity  financing  to  complete  such
purchase.  The Company is seeking  approval to issue Common Stock or  securities
convertible  into Common Stock for this purpose  under  Proposal No. 4. However,
there can be no  assurance  as to the  terms on which  such  financing  would be
available,  if at all.  The Company has been  working to develop a  relationship
with a group  of  commercial  banks  in the  event it  determines  to seek  debt
financing for a portion of any acquisition.  However,  there can be no assurance
that any such bank  financing  would be  available on  acceptable  terms for any
particular acquisition.

If We  Are  Classified  as  an  Investment  Company,  We  Could  Be  Subject  to
Restrictive and Costly Regulation.

If the Goloil sale is completed,  the cash proceeds  received from the sale will
represent a significant  portion of our assets.  It is possible that we could be
classified as an "investment  company" under the Investment  Company Act of 1940
("1940  Act") if more than a  specified  percentage  of our  assets  are held in
investment securities as defined in the 1940 Act. The 1940 Act and the rules and
regulations promulgated under the act are extremely restrictive. Compliance with
the 1940 Act would be very costly,  and it would be difficult or impossible  for
us to  execute  our  business  plan.  We do  not  believe  that  we  will  be an
"investment  company"  after the  Goloil  sale,  and we intend  to  conduct  our
activities  and invest the  proceeds  of the  Goloil  sale so as to avoid  being
classified as such.

Potential for Delisting from AMEX if an Acquisition of Operating Asset Cannot be
Closed

Under Section 1002 of the AMEX Company Guide, the Exchange may seek delisting of
the  Company's  shares if it has sold or  otherwise  disposed  of its  principal
operating  assets,  or has  ceased to be an  operating  company  for any  reason
whatsoever.  As a  result,  unless  the  Company  is  able to  promptly  acquire
additional  operating assets following the Goloil sale, it is possible that AMEX
could commence delisting  proceedings which the result that the Company's Common
Stock could  ultimately be delisted from the Exchange.  However,  the Company is
currently seeking to acquire other operating assets.

Once the AMEX staff  identifies a Company as being below the  continued  listing
criteria,  the  Exchange  staff will  notify the Company by letter of its status
within 10  business  days.  This letter  will also  provide the Company  with an
opportunity to provide the Exchange staff with a plan (the "Plan")  advising the
Exchange staff of action the Company has taken,  or will take,  that would bring
it into  compliance  with the continued  listing  standards  within 18 months of
receipt of the letter.  However,  the Exchange staff may establish a time period
of less than 18 months for a Company to regain compliance.

Within 5 business days after receipt of the letter, the Company must contact the
Exchange  staff to confirm  receipt of the  notification,  discuss any  possible
financial data of which the Exchange staff may be unaware,  and indicate whether
or not it  plans  to  present  a Plan;  otherwise,  delisting  proceedings  will
commence.

The Company has 30 days from the receipt of the letter to submit its Plan to the
Exchange staff for review. However, the Exchange staff may require submission of
a Company's Plan within less than 30 days (but in no event less than seven days)
if the Exchange  staff has  established a time period of 90 days or less for the
Company to regain compliance.  If it does not submit a Plan within the specified
time period, delisting procedures will commence.

The Plan must include specific milestones,  quarterly financial projections, and
details  related to any  strategic  initiatives  the Company  plans to complete.
Exchange staff will evaluate the Plan and make a determination as to whether the
Company has made  reasonable  demonstration  in the Plan of an ability to regain
compliance within the time period decided.

If the Exchange staff does not accept the Plan, the Exchange staff will promptly
initiate  delisting  proceedings.  The Company may appeal the  Exchange  staff's
determination  not to  accept  the  Plan,  and  request  a  review  thereof,  in
accordance with specific procedures.

If the  Exchange  staff  accepts  the  Plan,  the  Company  must  make a  public
announcement,  within  five  business  days  from  receipt  of the  notification
thereof,  disclosing  the fact that it has fallen  below the  continued  listing
standards of the Exchange and that its listing is being continued pursuant to an
extension.  The Exchange staff will review the Company on a quarterly  basis for
compliance with the Plan. If the Company does not show progress  consistent with
the Plan, the Exchange  staff will review the  circumstances  and variance,  and
determine   whether  such  variance   warrants  the  commencement  of  delisting
procedures.  Should the  Exchange  staff  determine  to proceed  with  delisting
procedures, it may do so regardless of the Company's continued listing status at
that time.

If, prior to the end of the extension period, the Company is able to demonstrate
compliance with the continued  listing standards for a period of two consecutive
quarters, the Exchange staff will deem the Plan period over. If the Company does
not meet continued  listing  standards at the end of the extension  period,  the
Exchange  staff will promptly  initiate  delisting  procedures.  The Company may
appeal an Exchange staff  determination to initiate  delisting  procedures,  and
request a review thereof, in accordance with specific procedures.

In the event the Company's Common Stock is delisted from AMEX,  trading, if any,
in  the   Company's   Common  Stock  would   thereafter   be  conducted  in  the
over-the-counter  market. As a result of such delisting, the market price of the
Company's  Common Stock could be materially  adversely  affected and an investor
could find it more difficult to dispose,  or to obtain accurate quotations as to
the market value, of the Common Stock.

Because we are  currently  seeking to acquire  other oil and gas  properties  as
described herein, we do not believe that there is a substantial  likelihood that
our Common Stock will be delisted,  although  there can be no assurance  that an
acquisition can be completed within the timeframe described above.


PRO FORMA FINANCIAL INFORMATION

Certain pro forma financial information is included in Appendix A-3.

THE BOARD OF DIRECTORS OF TETON BELIEVES THAT THE PROPOSED TRANSACTION IS IN THE
BEST INTERESTS OF, AND IS FAIR AND  REASONABLE  TO, TETON AND ITS  STOCKHOLDERS.
THE  BOARD OF  DIRECTORS  UNANIMOUSLY  APPROVES  THE  PROPOSED  TRANSACTION  AND
UNANIMOUSLY  RECOMMENDS THAT THE STOCKHOLDERS  VOTE FOR APPROVAL OF THE PROPOSED
TRANSACTION AT THE ANNUAL MEETING.




                                   ISSUANCE OF SECURITIES

                                       PROPOSAL NO. 4

TO APPROVE  THE  ISSUANCE  OF COMMON  STOCK OR  SECURITIES  CONVERTIBLE  INTO OR
EXERCISABLE FOR COMMON STOCK (WHICH MAY BE ISSUABLE,  EXERCISABLE OR CONVERTIBLE
BELOW THE THEN CURRENT  MARKET VALUE OF THE COMMON  STOCK) WHICH COULD RESULT IN
AN INCREASE IN OUTSTANDING SHARES OF COMMON STOCK OF 20% OR MORE

We are seeking  your  approval  pursuant to the AMEX Company  Guide  Section 713
where there is a sale or issue of Common Stock or  securities  convertible  into
Common Stock equal to 20% of more of the  presently  issued  outstanding  Common
Stock for less than the greater of book or market value of the Common Stock.

Following  the  completion  of the sale of Goloil,  the Company will continue to
seek to negotiate the purchase of additional  oil and gas  properties  primarily
focused on Russia and the former CIS  states.  For  example,  we  announced  the
signing of a Purchase  -Sale  Agreement to acquire a 52% interest in Samson.  We
believe that the Samson  transaction  is not likely to be  completed  due to the
exercise  by,  another  shareholder,  Vitol of its  right of first  purchase  to
purchase the Samson properties.  Vitol has also publicly announced its intention
to resell the Samson  properties  acquired from Samson  pursuant to the right of
first purchase.

The  Company  intends to seek  other  transactions  involving  the  purchase  of
controlling  interests  in other oil and gas  properties  primarily  focused  on
Russia and the former CIS states. We may also consider opportunities outside our
primary  geographic  focus.  The  Company  has  determined  to  target  small to
medium-sized oil fields with existing production typically ranging from 1,000 to
5,000 barrels per day. We intend to finance the purchase of any such transaction
or transaction,  from the net proceeds of the sale of Goloil,  from cash on hand
(estimated at $7.86 million at March 31, 2004) and, if necessary,  from debt and
equity financing.  Debt financing could include borrowings from commercial banks
or other financial  institutions,  which  borrowings may be secured.  The equity
portion of any such  financing  is  expected to be in the form of one or more of
the following:

o     common stock;
o     preferred stock;
o     convertible debentures; and/or
o     warrants entitling the holders to purchase common stock or preferred stock.

It is not  currently  possible to estimate the amount of any Common Stock or the
terms or amount of any convertible  securities or warrants since the Company has
not  entered  into any  agreements  for the  purchase  of  additional  assets or
properties.  The purpose of the  authorization of the securities is to allow the
Board to  authorize  the  issuance of the  securities  without  seeking  further
approval from  stockholders if an acquisition  transaction is  consummated.  The
Board does not currently intend to seek further  authorization  for the issuance
of the securities by a vote of security holders.  The securities are expected to
be issued in one or more private  placements exempt from registration  under the
Securities Act of 1933.

The issuance  price,  conversion  price or exercise  price for any Common Stock,
convertible  securities or warrants  could be below current  market value and or
book  value  of the  Common  Stock at the time of  issuance  of such  securities
depending  on market  conditions  at the time of issuance.  Therefore,  existing
stockholders may be diluted by such issuances.

Description of Common Stock

We are authorized to issue up to 250,000,000  shares of Common Stock,  par value
$.001.  As of March 31,  2004,  there  were  9,101,830  shares  of Common  Stock
outstanding.  Holders of the Common  Stock are entitled to one vote per share on
all  matters  to be  voted  upon by the  stockholders  and  have no  preemptive,
subscription, redemption or conversion rights.

Description of Preferred Stock

We are authorized to issue up to 25,000,000  shares of Preferred Stock. At March
31,  2004,  there were  outstanding  269,970  shares of Series A 8%  Convertible
Preferred  Stock (the "Series A Preferred").  The Series A Preferred is entitled
to  quarterly  dividends  at the annual rate of 8.0%.  The Series A Preferred is
currently convertible at any time into shares of the Company's Common Stock on a
one for one basis.  The Series A Preferred  carries a liquidation  preference of
$4.35 per share plus accrued and unpaid  dividends,  if any, in the event of the
winding-up or liquidation of the Company, and may not be redeemed by the Company
until one year following the issuance date. On and after such date, the Series A
Preferred is  redeemable at a redemption  price of $4.35 per share.  As at March
31, 2004, the aggregate liquidation  preference amount of the Series A Preferred
was $1,197,839, including accrued and unpaid dividends. The rights, preferences,
privileges  and  restrictions  of any preferred  stock of any series that may be
issued in the future will be fixed by the certificate of designation relating to
that series.

The Company's Board may issue additional authorized shares of preferred stock in
one or more series and may, subject to the Delaware General Corporation Law:

o    Fix its rights, preferences, privileges and restrictions;
o    Fix the number of shares and designations of any series; and
o    Increase or decrease the number of shares of any series if not adjusting to
     a level below the number of then outstanding shares.

The  Board  may  issue  preferred  stock  with  voting,  liquidation,  dividend,
conversion and such other rights which could negatively  affect the voting power
or other rights of the common stockholders without the approval of the Company's
common  stockholders.  Any issuance of preferred  stock could have the effect of
delaying or preventing a change in control of the Company.

Description of Warrants

We may issue separately,  or together with any Common Stock,  preferred stock or
convertible  debentures,  warrants  for the  purchase of other  shares of Common
Stock or preferred stock ("Warrants").  The Warrants may be issued under warrant
agreements to be entered into between us and a bank or trust company, as warrant
agent, or may be represented by certificates  evidencing the Warrants. The terms
of such  Warrants,  including  the exercise  price and  exercise  period will be
determined by our Board prior to the issuance thereof.

At March 31, 2004, we had outstanding  Warrants to purchase  7,932,553 shares of
our Common Stock exercisable at prices ranging from $2.72 to $12.

Section 713 of the AMEX Company Guide

Section 713 of the AMEX Company  Guide  requires  that certain  transactions  be
approved by the Company's  stockholders.  Specifically,  stockholder approval is
required  under  Section 713 for a  transaction,  other than a public  offering,
involving  the sale,  issuance,  or potential  issuance by the Company of Common
Stock (or  securities  convertible  into Common  Stock)  equal to 20% or more of
presently outstanding stock for less than the greater of book or market value of
the stock.

Because the possible issuances  described in this proposal involve the potential
issuance  by the  Company  of Common  Stock or  securities  convertible  into or
exercisable  for Common  Stock for less than the greater of book or market value
of the stock that  could,  depending  on the size of the  issuance,  potentially
amount to greater  than 20% of its  presently  outstanding  Common  Stock,  this
proposal is subject to Section 713 and, therefore, requires your approval.

AMEX has the  authority  to delist the  securities  of any issuer  that fails to
comply with its listing criteria, including the stockholder voting provisions of
Section 713.  Therefore,  if we do not obtain your  approval and we  nonetheless
issue such shares, the Company's Common Stock could be delisted from AMEX.

Under  Delaware  General  Corporation  Law,  stockholders  are not  entitled  to
dissenters' rights of appraisal with respect to this proposal.

Accounting  Treatment of Below Market Issuances of Preferred Shares  Convertible
into Common Shares

If we issue preferred  shares of stock,  which are  convertible  into our common
shares  at below  market  prices of our  Common  Stock at  issuance,  we will be
required to record a non-cash  accounting  charge for the beneficial  conversion
feature.  The non-cash charges will be treated as a preferred stock dividend and
will increase our loss per common share or reduce any future earnings per share.
These charges may be  significant.  We recorded  similar charges for the quarter
ended  March 31, 2004 and the  year-ended  December  31,  2003 of  approximately
$119,000 and $1,064,000, respectively.

THE BOARD  RECOMMENDS  A VOTE FOR THE PROPOSAL TO APPROVE THE ISSUANCE OF COMMON
STOCK OR SECURITIES CONVERTIBLE INTO OR EXERCISABLE FOR COMMON STOCK WHICH COULD
RESULT IN AN INCREASE IN OUTSTANDING SHARES OF COMMON STOCK OF 20% OR MORE



                    APPROVAL OF THE 2004 NON EMPLOYEE COMPENSATION PLAN

                                       PROPOSAL NO. 5

At the Annual Meeting, the Company's stockholders are being asked to approve the
2004 Non Employee Compensation Plan ("2004 Non Employee Compensation Plan"). The
Board has unanimously  approved the 2004 Non Employee  Compensation Plan and has
directed that it be submitted for the approval of the stockholders at the annual
meeting.  The 2004 Non Employee  Compensation  Plan will become effective on the
date of stockholder approval (the "Effective Date").

The following  description of the 2004 Non Employee  Compensation Plan is only a
summary of the important  provisions of the 2004 Non Employee  Compensation Plan
and does not contain all of the terms and  conditions  of the 2004 Non  Employee
Compensation  Plan. The full text of the 2004 Non Employee  Compensation Plan is
attached as Appendix B.

What is the Purpose of the 2004 Non Employee Compensation Plan?

The  purpose  of the 2004 Non  Employee  Compensation  Plan is to help us retain
consultants,  professionals,  and service  providers who provide services to the
Company in connection with, among other things,  the Company's  obligations as a
publicly  held  reporting  company.  In addition,  we expect to benefit from the
added  interest  that the awardees will have in our welfare as a result of their
ownership or increased ownership of our Common Stock.

Over the last two years, we have been able to engage consultants, professionals,
and service providers by compensating them through the issuance of shares of our
Common Stock.  In the first three months of 2004 and the year ended December 31,
2003,  the Company  issued 7,500  shares and 7,402  shares to such  consultants,
primarily  for investor  relations'  services.  This  afforded us the ability to
preserve our cash. In addition, Section 711 of the AMEX Company Guide, which was
amended in October 2003,  now requires that such  compensation  arrangements  be
approved by the Company's stockholders. For the foregoing reasons, the Board has
unanimously approved the 2004 Non Employee  Compensation Plan, as a separate and
distinct plan from the Company's  existing 2003 Employee  Stock Option Plan, and
has directed that such plan be submitted for the approval of the stockholders at
the annual meeting.

What  Types of Awards Can Be Granted  Under the 2004 Non  Employee  Compensation
Plan?

Awards authorized under the 2004 Non Employee Compensation Plan shall consist of
shares of our Common  Stock.  Such  awards may be subject to  forfeiture  in the
event  of  premature   termination  of  engagement,   failure  to  meet  certain
performance objectives, or other conditions, as may be determined by the Board.

Each award described  above is sometimes  referred to in this Proxy Statement as
an "Award,"  and all such awards are sometime  collectively  referred to in this
Proxy  Statement  as "Awards" and  individuals  receiving  Awards are  sometimes
referred to as "Awardees."

How Will the 2004 Non Employee Compensation Plan Be Administered?

The 2004 Non  Employee  Compensation  Plan  will be  administered  by the  Board
(provided  however,  that the  Board may  delegate  such  administration  to the
Compensation Committee).

Subject  to  the  express  terms  and   conditions  of  the  2004  Non  Employee
Compensation Plan, the Board will have full power to make Awards, to construe or
interpret  the 2004 Non Employee  Compensation  Plan,  to  prescribe,  amend and
rescind   rules  and   regulations   relating  to  it  and  to  make  all  other
determinations  necessary  or  advisable  for  its  administration.   Except  as
otherwise  provided in the 2004 Non Employee  Compensation  Plan,  the Board may
also determine which persons shall be granted  Awards,  the nature of the Awards
granted,  the number of shares  subject  to Awards and the time at which  Awards
shall be made. Such determinations will be final and binding.

How Much Stock Will Be Available Under the 2004 Non Employee Compensation Plan?

The only class of stock subject to an Award is Common Stock.  The maximum number
of shares of Common  Stock  with  respect  to which  Awards  may be  granted  is
1,000,000 shares;  however, this number is subject to adjustment in the event of
a  recapitalization,  reorganization  or similar  event.  The maximum  number of
shares of Common  Stock  with  respect  to which  Awards  may be  granted to any
participant in any year under the 2004 Non Employee Compensation Plan is 500,000
shares.  Shares shall  consist,  in whole or in part, of authorized and unissued
shares or treasury shares.  Any shares represented by Awards that are cancelled,
forfeited, terminated or expired will again be available for grants and issuance
under the 2004 Non Employee Compensation Plan.

Who Is Eligible to Participate in the 2004 Non Employee Compensation Plan?

Persons eligible for Awards under the 2004 Non Employee  Compensation  Plan will
be limited to consultants,  professionals  and service  providers of the Company
and our  subsidiaries  ("Eligible  Persons").  The Board  will  select  who will
receive  Awards  and the amount and nature of such  Awards.  Board  members  and
officers and employees of the Company are not eligible to receive Awards.

What Happens If the Number of Outstanding  Shares  Changes  Because of a Merger,
Consolidation, Recapitalization or Reorganization?

In the  event  that our  outstanding  shares  of  Common  Stock  are  increased,
decreased or changed or  converted  into other  securities  by reason of merger,
reorganization,  consolidation,  recapitalization, stock dividend, extraordinary
cash  dividend or other change in our corporate  structure  affecting the stock,
the  number  of  shares  that may be  delivered  under  the  2004  Non  Employee
Compensation  Plan and the number and/or the purchase price of shares subject to
outstanding Awards under the 2004 Non Employee Compensation Plan may be adjusted
at the sole  discretion of the Board to the extent that the Board  determines to
be  appropriate,  provided,  however,  that the number of shares  subject to any
Awards will always be a whole number.

When Will the 2004 Non Employee Compensation Plan Terminate?

The 2004 Non  Employee  Compensation  Plan will expire on the tenth  anniversary
from the date of stockholder approval,  but the Board may terminate the 2004 Non
Employee  Compensation  Plan at any time prior to that date and  Awards  granted
prior to such  termination may extend beyond such date.  Termination of the 2004
Non Employee Compensation Plan will not alter or impair,  without the consent of
the Awardee,  any of the rights or  obligations of any Award made under the 2004
Non Employee Compensation Plan.

What Changes Can the Board Make to the 2004 Non Employee Compensation Plan?

The Board may from time to time alter,  amend,  suspend or discontinue  the 2004
Non Employee  Compensation Plan.  However, no such action of the Board may alter
the  provisions  of the 2004 Non Employee  Compensation  Plan so as to alter any
outstanding  Awards to the detriment of the Awardee or participant  without such
participant's  or Awardees  consent,  and no  amendment to the 2004 Non Employee
Compensation  Plan may be made without  stockholder  approval if such  amendment
would  materially  increase the benefits to the Awardees or the  participants in
the 2004 Non  Employee  Compensation  Plan,  materially  increase  the number of
shares issuable under the 2004 Non Employee  Compensation Plan, extend the terms
of the 2004 Non Employee Compensation Plan or the period during which Awards may
be granted or exercised or materially  modify  requirements as to eligibility to
participate in the 2004 Non Employee Compensation Plan.

What Are the  Important  Provisions  of the Plan  With  Respect  to Each Type of
Award?

The Board may, at its  discretion,  award  shares of Common Stock to a recipient
(the "Stock  Awards").  The Stock Awards will be issued pursuant to an agreement
between the Company and the Awardee.  Each  recipient of a Stock Award will be a
stockholder  and have all the  rights  of a  stockholder  with  respect  to such
shares,  including  the  right  to vote  and  receive  all  dividends  or  other
distributions made or paid with respect to such shares.

If the recipient of an Award ceases to be a consultant,  professional or service
provider  for any  reason,  then the  Award may be  subject  to  forfeiture,  as
provided in the particular  agreement,  unless such  forfeiture is waived by the
Board when it, in its  discretion,  determines  that such  waiver is in our best
interests.

In the event of a participant's retirement, permanent disability or death, or in
cases of special circumstances,  the Board may waive any or all of the remaining
restrictions  and limitations  imposed under the 2004 Non Employee  Compensation
Plan with respect to any Awards.

What are the Restrictions on Transferability?

These  Shares  of  stock  may  not be  sold,  exchanged,  transferred,  pledged,
hypothecated,   or  otherwise   disposed  of  until  such  time  as  any  stated
restrictions  lapse.  The Board,  in its  absolute  discretion,  may impose such
restrictions  on the  transferability  of the  Awards  granted  in this 2004 Non
Employee Compensation Plan as it deems appropriate.  Any such restrictions shall
be set forth in the Agreement with respect to such Awards and may be referred to
on the certificates  evidencing shares issued pursuant to any such Award. Shares
of restricted  stock will be evidenced by a certificate that bears a restrictive
legend.

What are the U.S.  Federal  Income  Tax  Consequences  of the 2004 Non  Employee
Compensation Plan?

The  following   discussion  is  a  summary  of  the  U.S.  Federal  income  tax
consequences  to recipients  of Awards and to us with respect to Awards  granted
under  the  2004  Non  Employee   Compensation   Plan.  The  2004  Non  Employee
Compensation Plan is not qualified under Section 401(a) of the Code.

Stock  awarded  to an  Awardee  may be  subject  to any  number of  restrictions
(including  deferred  vesting,  limitations  on  transfer,  and  forfeitability)
imposed by the Board. In general,  the receipt of stock with  restrictions  will
not result in the  recognition  of income by an  Awardee  until such time as the
shares are either not forfeitable or are freely transferable.  Upon the lapse of
such  restrictions,  the Awardee will be required to include as ordinary  income
the  difference  between the amounts  paid for the stock,  if any,  and the fair
market  value of such  stock on the date the  restrictions  lapse and we will be
entitled to a  corresponding  deduction.  In addition,  any dividends  paid with
respect to the stock prior to the lapse of the  restrictions  will be treated as
compensation  income  by the  Awardee  and will be  deductible  by the  Company.
Awardees  receiving  Stock  Awards may elect to include  the value of such stock
(less any amounts paid for such stock) as ordinary  income at the time the Award
is made.  Awardees making this election would treat any gain or loss realized on
a sale of the stock as capital  gain or loss,  but would not be  entitled to any
loss deduction if they forfeited the stock pursuant to the restrictions  imposed
by the Board.

In view of the complexity of the tax aspects of transactions involving the grant
and  exercise  Awards,  and because the impact of taxes will vary  depending  on
individual  circumstances,  each  Awardee  receiving an Award under the 2004 Non
Employee Compensation Plan should consult their own tax advisor to determine the
tax consequences in such Awardee's particular circumstances.

Registration with the Securities and Exchange Commission

We intend to file a  Registration  Statement  on Form S-8  covering the 2004 Non
Employee  Compensation  Plan  if the  2004  Non  Employee  Compensation  Plan is
approved by the stockholders.

Required Vote

Approval of the 2004 Non Employee  Compensation Plan requires the receipt of the
affirmative  vote of a majority  of the  shares of the  Company's  Common  Stock
present in person or by proxy and voting at the Annual Meeting.

                        THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF
                          THE 2004 NON-EMPLOYEE COMPENSATION PLAN



                                   ADDITIONAL INFORMATION

Other Business

The Board is not aware of any other  business that will come before the Meeting,
but if any such matters are properly  presented,  the proxies  solicited  hereby
will be voted in accordance  with the best  judgment of the persons  holding the
proxies.  All shares  represented by duly executed  proxies will be voted at the
Meeting.

Stockholder Proposals

In order for  stockholders  proposals to be included in Teton's proxy  statement
for the 2005 Annual  Meeting,  they must be  received by Teton at its  principal
executive office, 1600 Broadway,  Suite 2400, Denver,  Colorado 80202 by January
18, 2004. All other stockholder proposals,  including nominations for Directors,
must be  received  by Teton not less than 60 days or more than 90 days  prior to
such Meeting, which is tentatively scheduled for May 13, 2005.

Availability of Certain Documents Referred to Herein

This Proxy  Statement  refers to certain  documents  of the Company that are not
presented  herein or delivered  herewith.  Such  documents  are available to any
person,  including  any  beneficial  owner,  to whom  this  Proxy  Statement  is
delivered,  upon oral or written  request,  without charge,  directed to Gillian
Kane, Vice President,  Investor  Relations,  Teton Petroleum  Company,  P.O. Box
774327, Steamboat Springs, Colorado 80477, telephone number (970) 870-1417.

It is  important  that the proxies be returned  promptly and that your shares be
represented.  Stockholders are urged to mark, date,  execute and promptly return
the accompanying proxy card in the enclosed envelope.

                                          By Order of the Board of Directors,


                                          ------------------------------
                                          H. Howard Cooper, Chairman



Denver, Colorado
June 18, 2004



                                         APPENDIX A



                                     FINANCIAL SECTION




                                  TETON PETROLEUM COMPANY

                         Appendix A - Index to Financial Statements
                         ------------------------------------------

  Unaudited Interim Consolidated Financial Statements for the Quarter Ended March 31, 2004


Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements


                      Audited Annual Consolidated Financial Statements

Independent Auditors' Report

Consolidated Balance Sheet

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statement of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements


          Unaudited Pro Forma Condensed Financial Information as of March 31, 2004

Pro Forma Balance Sheet

Pro Forma Statements of Operations

Notes to Unaudited Pro Forma Balance Sheet and Statement of Operations




                                  APPENDIX A-1

 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 2004




                                  TETON PETROLEUM COMPANY

  Unaudited Interim Consolidated Financial Statements for the Quarter Ended March 31, 2004

                                Consolidated Balance Sheets

                          Assets                                March 31,      December 31,
                                                                  2004             2003
                                                               ------------   ------------
                                                               (Unaudited)       (Audited)
Current assets
  Cash...................................................       $ 7,856,899   $  7,588,439
  Proportionate share of Goloil accounts receivable .....            16,538         15,739
  Proportionate share of Goloil VAT and other accounts
   receivable...............................................      1,756,637      1,078,369
  Proportionate share of Goloil inventory................           622,981        448,812
  Prepaid expenses and other assets......................            72,271         95,693
                                                                 ----------    -----------
      Total current assets...............................        10,325,326      9,227,052
                                                                 ----------    -----------

Non-current assets.......................................
  Oil and gas properties, net (successful efforts).......         8,564,084      9,339,786
  Cogeneration plant construction in- progress...........         1,758,620      1,700,696
  Fixed assets, net......................................           484,642        450,841
                                                                 ----------    -----------
      Total non-current assets...........................        10,807,346     11,491,323
                                                                 ----------    -----------
Total assets.............................................       $21,132,672    $20,718,375
                                                                 ==========    ===========

                  Liabilities and Stockholders' Equity
Current liabilities
  Accounts payable and accrued liabilities...............          $732,261    $   376,429
  Proportionate share of accounts payable and accrued
   liabilities...........................................         4,059,089      2,590,901
  Current portion of proportionate share of notes payable
   owed to affiliate (Note 2)............................         8,219,652      7,419,409
                                                                 ----------    -----------
      Total current liabilities..........................        13,011,002     10,386,739
                                                                 ----------    -----------

Non-current liabilities
  Asset retirement obligation............................           129,500        126,500
                                                                 ----------    -----------
      Total non-current liabilities                                 129,500        126,500
                                                                 ----------    -----------
      Total liabilities                                          13,140,502     10,513,239
                                                                 ----------    -----------

Commitments and contingencies
Stockholders' equity
  Series A convertible preferred stock, $.001 par value,
   25,000,000 shares authorized, 269,970 and 618,231
   issued and outstanding at March 31, 2004 and December
   31, 2004.  Liquidation preference at March 31, 2004 and
   December 31, 2003 of $1,197,839 and $2,689,305........               270            618
  Common stock, $0.001 par value, 250,000,000 and
   100,000,000 shares authorized, 9,101,830 and 8,584,068
   shares issued and outstanding at March 31, 2004 and                9,101
   December 31, 2003.....................................                            8,584
  Additional paid-in capital.............................        37,548,890     37,073,366
  Unamortized preferred stock dividends..................             --          (118,610)
  Accumulated deficit....................................       (30,179,691)   (27,657,578)
  Foreign currency translation adjustment................           613,600        898,756
                                                                 ----------    -----------
      Total stockholders' equity.........................         7,992,170     10,205,136
                                                                 ----------    -----------
Total liabilities and stockholders' equity...............       $21,132,672    $20,718,375
                                                                 ==========    ===========

      See notes to unaudited consolidated financial statements.


                                  TETON PETROLEUM COMPANY

           Unaudited Consolidated Statements of Operations and Comprehensive Loss

                                                              For the Three Months Ended
                                                                       March 31,
                                                             ----------------------------
                                                                2004             2003
                                                             ------------    ------------

Sales....................................................    $  2,962,500    $  3,408,718
Cost of sales and expenses
  Oil and gas production.................................         622,277         326,305
  Transportation and marketing...........................              --         280,965
  Taxes other than income taxes..........................       1,973,275       1,427,572
  Export duties..........................................              --         559,240
  Exploration............................................         154,776          93,148
  General and administrative - Goloil....................         184,086         219,557
  General and administrative - Teton Petroleum...........       2,102,638         772,899
  Depreciation, depletion and amortization...............         409,670         332,738
                                                             ------------    ------------
      Total cost of sales and expenses...................       5,446,722       4,012,424
                                                             ------------    ------------

Loss from operations.....................................      (2,484,222)       (603,706)
                                                             ------------    ------------

Other income (expense)
  Other income...........................................          17,640          21,688
  Interest expense.......................................         (55,531)        (94,225)
                                                            --------------  -------------
      Total other income (expense).......................         (37,891)        (72,537)
                                                             ------------    ------------

Net loss before taxes....................................      (2,522,113)       (676,243)
                                                            --------------  --------------

Foreign income tax.......................................              --        (104,842)

Net loss.................................................      (2,522,113)       (781,085)
Imputed preferred stock dividends for inducements and
 beneficial conversion charges...........................        (521,582)             --

Preferred stock dividend.................................         (31,488)             --

Net loss applicable to common stock......................      (3,075,083)       (781,085)

Other comprehensive (loss), net of tax
   Effect of exchange rates..............................        (285,156)         86,000
                                                             -------------   ------------

      Other comprehensive (loss) income..................        (285,156)   $     86,000
                                                            --------------  -------------

Comprehensive loss.......................................    $ (3,360,239)   $   (695,085)
                                                             =============  ==============

Basic and diluted weighted average common shares
 outstanding.............................................       8,747,165       6,321,218
                                                             ============    ============

Basic and diluted (loss) income per common share.........    $       (.35)   $       (.12)
                                                             ============    ============


      See notes to unaudited consolidated financial statements.


                                  TETON PETROLEUM COMPANY

                      Unaudited Consolidated Statements of Cash Flows

                                                                  For the Years Ended
                                                                       March 31,
                                                             ---------------------------
                                                                2004             2003
                                                             ------------    -----------
Cash flows from operating activities
  Net loss...............................................    $(2,522,113)    $  (781,085)
                                                             ------------    -----------
  Adjustments to reconcile net loss to net cash used in
   operating activities
   Depreciation, depletion, and amortization.............        409,670         332,738
   Stock and warrants issued for services and interest...        117,094              --
   Debentures issued for services........................             --              --
   Changes in assets and liabilities
     Accounts receivable.................................       (679,067)       (488,956)
     Prepaid expenses and other assets...................         23,422          75,446
     Inventory...........................................       (174,169)         19,104
     Accounts payable and accrued liabilities............      1,261,983       1,034,540
                                                             -----------     -----------
                                                                 958,933         972,872
                                                             -----------     -----------
      Net cash provided by (used in) investing activities     (1,563,180)        191,787
                                                             ------------    -----------

Cash flow from investing activities
  Repayment of loans from Goloil                               1,065,000              --
  Oil and gas properties and equipment expenditures......       (190,444)     (2,886,831)
                                                            -------------   -------------

      Net cash provided by (used in) investing activities        874,556      (2,886,831)
                                                            ------------    -------------

Cash flows from financing activities
  Net (repayments) proceeds from advances under notes
   payable from affiliate                                        800,243        (103,714)
  Proceeds from issuance of stock, net of issue costs of
   $50,000 and $98,100                                           449,997       2,406,510
  Payments of dividends                                           (8,000)             --
                                                            -------------   ------------

      Net cash provided by financing activities..........      1,242,240       2,302,796
                                                             -----------     -----------

Effect of exchange rates.................................       (285,156)         86,000
                                                             ------------    -----------

Net (decrease) increase in cash..........................        268,460        (306,248)

Cash - beginning of year.................................      7,588,429         712,013
                                                             -----------     -----------

Cash - end of period.....................................    $ 7,856,899     $   405,765
                                                             ===========     ===========


Supplemental disclosure of non-cash activity:

During the first quarter of 2004, the Company had the following transactions:

100,000 warrants were issued to a consultant for services valued at $102,094.

13,750  shares of  common  stock  were  issued  for the  settlement  of  accrued
liabilities valued at $58,700.

The Company issued (i) 1,306,669 non-qualified options to officers and Directors
valued  at  $3,243,406;  and (ii)  108,331  incentive  stock  options  valued at
$268,899 with no expense being recorded for accounting purposes.

The Company issued 3,750 shares of common stock for services valued at $15,000.

The Company has accrued a liability for (i) $52,362 related to the obligation to
issue 50,000 warrants to consultants;  (ii) $32,329 related to the obligation to
issue 7,876  common  shares to  consultants;  and (iii)  $28,500  related to the
obligation to issue 5,955 shares for services rendered by the outside Directors.

Approximately  $2,383,000 of capital expenditures for oil and gas properties was
included in accounts payable at March 31, 2004 and  approximately  $1,786,000 of
capital  expenditures  was in  accounts  payable  at  December  31,  2003 for an
increase during the three months ended March 31, 2004 of $597,000.

Conversion of 463,207 shares of preferred stock, plus dividends of 37,057 shares
converted into 500,264 shares of common stock.

We issued 50,000 warrants valued at $22,863 in settlement of accrued liabilities
at December 31, 2003.

During the first quarter of 2003, the Company had the following transactions:

7,408 shares of stock were issued to a consultant for services valued at $20,000
provided in 2001 and accrued in payables.

73,422 shares of stock and 66,667 warrants exercisable at $6.00 were issued to a
consultant  for  services  provided in 2002  valued at  $200,000  and accrued in
accounts payable.

$25,000 of stock  subscriptions  receivable  outstanding  at March 31, 2003 were
collected in April 2003.

      See notes to unaudited consolidated financial statements.


Notes to Unaudited Consolidated Financial Statements

Note 1 - Basis of Presentation and Significant Accounting Policies

The  March  31,  2004  financial   statements  are  unaudited  and  reflect  all
adjustments (consisting only of normal recurring adjustments), which are, in the
opinion  of  management,  necessary  for a fair  presentation  of the  financial
position and operating results for the interim periods.  The unaudited financial
statements  as of March 31, 2004,  as is customary in the oil and gas  industry,
reflect a pro-rata  consolidation of the Company's 50% interest in ZAO Goloil, a
Russian closed joint-stock  company.  However,  see note 5 regarding the sale of
Goloil. The unaudited  financial  statements  contained herein should be read in
conjunction  with the financial  statements  and notes thereto  contained in the
Company's financial statements for the year ended December 31, 2003, as reported
in the Company's Form 10-KSB filed March 30, 2004. The results of operations for
the period ended March 31, 2004 are not  necessarily  indicative  of the results
for the entire fiscal year.

Certain amounts for March 31, 2003 have been adjusted to include  adjustments to
exploration  expenses and  depreciation,  depletion and amortization made during
the fourth quarter of 2003.

Foreign Currency Exchange Rates

The  conversion  of the  functional  currency  of Goloil (a Russian  Company) in
rubles to the  reporting  currency  of U.S.  dollars is based upon the  exchange
rates in effect.  The  exchange  rates in effect at March 31, 2004 and 2003 were
28.48 and 31.67 rubles to the U.S.  dollar,  respectively.  The average rates in
effect during the three months ended March 31, 2004 and 2003 was 29.00 and 31.67
rubles to the U.S. dollar, respectively.

Earnings Per Share

At the March 19, 2003 meeting, the Company's  shareholders  approved a reverse 1
for 12 stock split.  All share amounts and earnings per share have been adjusted
to reflect the split.

All potential dilutive securities have an antidilutive effect on earnings (loss)
per share and  accordingly,  basic and dilutive  weighted average shares are the
same.

The following table reflects the effects of dilutive  securities as of March 31,
2003, which could dilute future earnings:

Dilutive effects of stock options                                         2,993,037
Dilutive effects of warrants                                              7,932,553
Dilutive effects of convertible preferred shares                            526,441
                                                                            -------
                                                                         11,452,031
                                                                         ==========


Note 2 - Proportionate Share of Liabilities

The  proportionate   share  of  accounts  payable  and  accrued  liabilities  of
$4,059,089 at March 31, 2004, are  obligations of Goloil and not Teton Petroleum
nor have they been guaranteed by Teton Petroleum.

The  Company's  50%  pro-rata  share of notes  payable  advances  made which are
advances to Goloil by an affiliate are also  obligations  of Goloil at March 31,
2004 and not Teton Petroleum nor have they been  guaranteed by Teton  Petroleum.
However, see note 5 regarding the proposed sale of Goloil.

The  Company's  pro-rata  share of Goloil  notes  payable  owed to an  affiliate
totaled  $8,219,652  at March 31, 2004.  The  proceeds  were used to pay certain
operating expenses and capital  expenditures of Goloil.  These notes provide for
interest rates of 8%, with quarterly  interest  payments,  maturing through June
2004.  These notes are secured by  substantially  all Goloil  assets.  The notes
payable will be repaid from cash flow from ZAO Goloil as available,  or extended
to future periods. However, see note 5 regarding the proposed sale of Goloil.

Note 3 - Stockholder's Equity

In March 2003, the stockholders approved an increase in the amount of authorized
common shares from  100,000,000 to 250,000,000  and also approved  25,000,000 of
preferred stock authorized for future issuances.

Private Placements of Common Stock

17,500  common  shares  valued at $73,700 were issued for (i) the  settlement of
accrued  liabilities  of $58,700;  and (ii) services  provided by consultants of
$15,000.

Private Placements of Series A Convertible Preferred Stock

During the period  ending  March 31, 2004 the  Company  received  the  following
proceeds  from the issuance of privately  placed  preferred  stock at a price of
$4.35 per share.

Proceeds of $450,000 (net of cash costs of $50,000) from the issuance of 114,942
shares of 8% convertible preferred stock.

The preferred shares carry an 8% dividend,  payable quarterly commencing January
1, 2004 and are convertible into common stock at a price of $4.35 per share. The
preferred  stock is entitled to vote on all matters  presented to the  Company's
common  stockholders,  with the  number of votes  being  equal to the  number of
underlying  common  shares.  The  preferred  stock also  contains a  liquidation
preference  of $4.35 per share plus  accrued  unpaid  dividends.  The  preferred
shares can be redeemed  by the  Company  after one year for $4.35 per share upon
proper notice of redemption being provided by the Company.

In connection with the preferred share private  placements,  certain  placements
were  entered  into when the  underlying  price of the common stock to which the
preferred  shares are  convertible  into,  exceeded $4.35 the stated  conversion
rate. As a result of the underlying shares being  in-the-money,  the Company was
required to compute a beneficial  conversion charge,  which is calculated as the
difference  between the conversion price of $4.35 and the closing stock price on
the effective date each offering,  multiplied by the total of the related common
shares to be issued upon  conversion of the preferred  stock.  These charges are
reflected as a dividend to the preferred  shareholders  and are recognized  over
the period in which the  preferred  stock  first  becomes  convertible.  For the
Tranche 1 shares the  charge  was  immediately  recognized  as the  shares  were
immediately  convertible  into  common.  For  Tranche 2 the shares  could not be
converted until a shareholder  vote on January 27, 2004 took place approving the
issuance of additional  common  shares.  The  calculated  beneficial  conversion
feature on Tranche 2 was therefore  amortized  from the  effective  date of each
issuance through January 27, 2004. This resulted in total beneficial  conversion
charges  of  $1,182,452,  of which  $1,063,842  was  recorded  during the fourth
quarter of 2003, and $118,610 was amortized and recorded as preferred  dividends
in January 2004.

In order to induce  convertible  preferred  shareholders  to  convert  to Common
shares,  the Company  agreed to issue  Common  share  dividends of 8% for a full
year,  totaling  $140,815,  and  agreed to issue,  402,990  warrants,  valued at
$262,057, resulting in a total inducement charge of $402,872 to be recognized as
a preferred dividend in the first quarter for those investors which accepted the
inducement offer. As a result,  shareholders converted 463,207 of 8% convertible
preferred  shares to common stock at a price of $4.35 per share during the first
quarter of 2004. The warrants issued were valued using the Black-Scholes  option
pricing model using the following assumptions:  volatility of 55.2%, a risk-free
rate of 1.59%, zero dividend payments, and a life of two years.

Note 4 - Stock Options

At the annual meeting on March 19, 2003, the Company's  shareholders approved an
employee stock option plan and authorized  2,083,333  shares of Common Stock for
issuance thereunder.  Under the plan, incentive and non-qualified options may be
granted.

During the first quarter of 2004,  the Company  issued  1,306,669  non-qualified
options to  employees,  officers and Directors  valued at  $3,243,406  using the
Black-Scholes option-pricing model with the following assumptions: volatility of
55.2%, a risk-free rate of 4%, zero dividend payments,  and a life of ten years.
The Company also issued  108,331  incentive  options to employees,  officers and
Directors valued at $268,899 using the Black-Scholes  option-pricing model under
the same assumptions described above.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no compensation  cost has been recognized for stock options issued
to  employees,   officers  and  Directors  under  the  stock  option  plan.  Had
compensation  cost for the Company's  options issued to employees,  officers and
Directors been  determined  based on the fair value at the grant date for awards
consistent  with the provisions of SFAS No. 123, as amended by SFAS No. 148, the
Company's  net loss and basic loss per common  share would have been  changed to
the pro forma amounts indicated below:

                                                     For the Three Months Ended
                                                             March 31,
                                                   -------------------------------
                                                        2004             2003
                                                   -------------     -------------

Net loss - as reported..........................    $(3,075,083)      $  (781,085)
                                                   -------------     -------------

Add fair value of employee compensation expense.     (3,512,304)               --
                                                   -------------     ------------

Net loss per common share - pro forma...........    $(6,587,387)      $  (781,085)
                                                   =============     =============

Basic loss per common share - as reported.......   $       0.35      $       0.12
                                                   ============      ============

Basic loss per common share - pro forma.........   $       0.75      $       0.12
                                                   ============      ============


Note 5-Proposed Sale of Goloil Shares

During April 2004 the Company  entered into a Sale and Purchase  Agreement  (the
"Agreement") with RussNeft, an Open Joint-Stock Company organized under the laws
of the Russian Federation.  RussNeft is the current operator of Goloil. Pursuant
to the  terms of the  Agreement,  RussNeft  will pay  $8,960,000  for all of the
Company's shares held in Goloil.  In connection with the Agreement,  the Company
entered  into a  separate  agreement  with  Goloil for  repayment  of all of the
outstanding  advances  owed to the  Company.  At the  date the  parties  reached
agreement, the Company had advances totaling $6,040,000, of which $1,065,000 and
$3,600,000   had  been  received  as  of  March  31,  2004  and  May  11,  2004,
respectively. The Company will pay an investment banking fee of $750,000 related
to the sale and estimates its expenses in connection with the negotiation of the
agreement to be $135,000.

The Company had recorded the advances as investments  in Goloil and  accordingly
such amount had been included in the carrying value of oil and gas properties.

The  transaction  is subject to the customary  conditions  and is subject to the
approval of the shareholders of the Company.

If approved, the gross proceeds from the two transactions,  totaling $15,000,000
less  the  estimated   $885,000  in  costs  combined  with  the  elimination  of
approximately  $9,900,000 in liabilities,  net of current assets, will result in
the  Company  recording  an  estimated  gain of  $12,601,000  during  2004.  The
following  unaudited pro forma condensed  balance sheet gives effect to the sale
of shares assuming the sale of Goloil shares occurred on March 31, 2004:

Current assets                   $ 20,685,000
Non-current assets                     26,000
                                 ------------
Total assets                     $ 20,711,000
                                 ============

Current liabilities              $    710,000
Stockholders' equity               20,001,000
                                 ------------
Total liabilities and
  stockholders' equity           $ 20,711,000
                                 ============

The  condensed pro forma balance  sheet  reflects the  historical  balance sheet
included in this Form 10-Q adjusted for the following:

a.   The  proceeds  of  $8,960,000  from  the  sale of  Goloil  shares  plus the
     remaining $4,975,000 advances to be received, subsequent to March 31, 2004,
     less  estimated  expenses  of $885,000  and  alternative  minimum  taxes of
     $181,000.

b.   Elimination   of  Goloil's   assets  and   liabilities,   which  have  been
     historically consolidated on a pro rata basis.

c.   Recording a gain from the disposition of a discontinued  operation,  net of
     tax, of approximately $12,601,000.

Assuming  the sale  occurred  on January 1, 2004 Teton  would have had, on a pro
forma basis, an estimated net loss from  operations  applicable to common shares
of  $2,462,000  and as a  result  of  the  sale,  net  income  of  approximately
$9,703,000.  On a pro forma basis, the loss per share from continuing operations
would be $.28 per common share and net income per common share would be $1.11.

Note 6-Proposed Acquisition

On April 5, 2004 the Company entered into an agreement with Samson International
Resources   ("Samson")  for  the  purchase  of  Samson's  52%  interest  in  ZAO
Pechoraneftegas ("PNG") in the Komi region of Siberia. Teton paid Samson a $3.85
million deposit.  Since then,  Samson's partner in PNG, Vitol Cypress ("Vitol"),
has  exercised  its  preferential  right to  acquire  Samson's  interest  in the
property.  Teton's deposit has been fully refunded,  but the contract remains in
effect.  In the event that Vitol does not close on Samson's 52% interest,  Teton
and Samson may continue with the transaction with closing subject to Teton's due
diligence and other customary conditions.

Teton continues to negotiate the  acquisition of new fields in Russia,  although
currently no definitive  agreements  have been reached.  We will provide further
information on the above  transactions,  as well as others,  through  additional
press releases and the soon-to-be released proxy statement.




                                        APPENDIX A-2

                      AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders
Teton Petroleum Company
Denver, Colorado


We have audited the accompanying  consolidated  balance sheet of Teton Petroleum
Company as of December  31, 2003,  and the related  consolidated  statements  of
operations and comprehensive loss, changes in stockholders' (deficit) equity and
cash flows,  for the years ended  December  31, 2003 and 2002.  These  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 financial
statements are free of material  misstatement.  An audit includes  assessing the
accounting principals 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 financial  position of Teton  Petroleum
Company  and  subsidiary  as of  December  31,  2003,  and the  results of their
operations and their cash flows for the years ended  December 31, 2003 and 2002,
in conformity with accounting principles generally accepted in the United States
of America.


                                          /s/Ehrhardt Keefe Steiner & Hottman PC
                                          --------------------------------------
                                             Ehrhardt Keefe Steiner & Hottman PC

March 29, 2004
Denver, Colorado



                                  TETON PETROLEUM COMPANY


                                 Consolidated Balance Sheet
                                     December 31, 2003


Assets
Current assets
  Cash..................................................                   $  7,588,439
  Proportionate share of accounts receivable ...........                         15,739
  Proportionate share of VAT receivable.................                      1,078,369
  Proportionate share of inventory......................                        448,812
  Prepaid expenses and other assets.....................                         95,693
                                                                            -----------
      Total current assets..............................                      9,227,052
                                                                            -----------

Non-current assets
  Oil and gas properties, net (successful efforts)......                      9,339,786
  Cogeneration plant construction in- progress..........                      1,700,696
  Other property and equipment, net.....................                        450,841
                                                                            -----------
      Total non-current assets..........................                     11,491,323
                                                                            -----------

Total assets............................................                    $20,718,375
                                                                            ===========

Liabilities and Stockholders' Equity
Current liabilities
  Accounts payable and accrued liabilities..............                    $   376,429
  Proportionate share of accounts payable and accrued
liabilities.............................................                      2,590,901
  Proportionate share of notes payable owed to affiliate                      7,419,409
                                                                            -----------
      Total current liabilities.........................                     10,386,739
                                                                            -----------

Non-current liabilities
  Asset retirement obligation...........................                        126,500
                                                                            -----------
      Total non-current liabilities.....................                        126,500
                                                                            -----------
      Total liabilities.................................                     10,513,239
                                                                            -----------

Commitments and contingencies

Stockholders' equity
  Series A convertible preferred stock, $.001 par
   value, 25,000,000 shares authorized, 618,231 issued
   and outstanding. Liquidation preference at December
   31, 2003 of $2,689,305...............................                            618
  Common stock, $.001 par value, 250,000,000 shares
   authorized, 8,584,068 shares issued and outstanding
   at December 31, 2003.................................                          8,584
  Additional paid-in capital............................                     37,073,366
  Unamortized preferred stock dividends.................                       (118,610)
  Accumulated deficit...................................                    (27,657,578)
  Foreign currency translation adjustment...............                        898,756
                                                                            -----------
      Total stockholders' equity........................                     10,205,136
                                                                            -----------

Total liabilities and stockholders' equity..............                    $20,718,375
                                                                            ===========



                                  TETON PETROLEUM COMPANY

                Consolidated Statements of Operations and Comprehensive Loss


                                                                For the Years Ended
                                                                    December 31,
                                                            ----------------------------
                                                               2003             2002
                                                            ------------    ------------

Sales...................................................    $ 11,437,802    $  6,923,320
Cost of sales and expenses..............................
  Oil and gas production................................       2,020,447       1,218,411
  Transportation and marketing..........................         807,266         611,956
  Taxes other than income taxes.........................       5,864,920       3,537,990
  Export duties.........................................       1,492,999         910,936
  General and administrative - Goloil...................         837,134         588,774
  General and administrative - Teton....................       3,919,746       4,744,952
  Depreciation, depletion and amortization..............       1,582,513         451,930
                                                            ------------    ------------
      Total cost of sales and expenses..................      16,525,025      12,064,949
                                                            ------------    ------------

Loss from operations....................................      (5,087,223)     (5,141,629)
                                                            ------------    ------------

Other income (expense)
  Other income..........................................          17,445          51,751
  Interest expense......................................        (347,740)       (385,939)
  Financing charges.....................................        (132,818)     (5,498,106)
                                                            ------------    ------------
      Total other income (expense)......................        (463,113)     (5,832,294)
                                                            ------------    ------------

Net loss before tax.....................................      (5,550,336)    (10,973,923)
Foreign income tax......................................         (84,508)             -
                                                            ------------    -----------

Net loss................................................      (5,634,844)    (10,973,923)
Imputed preferred stock dividends for inducements and
 beneficial conversion charges..........................      (2,780,693)             -
                                                            -------------   -----------
      Net loss applicable to common shares..............      (8,415,537)    (10,973,923)

Other comprehensive loss, net of tax
  Effect of exchange rates..............................         168,256        (140,773)
                                                            ------------    ------------

Comprehensive loss .....................................    $ (8,247,281)   $(11,114,696)
                                                            ============    ============

Basic and diluted weighted average common shares
 outstanding............................................       6,840,303       3,105,235
                                                            ============    ============

Basic and diluted loss per common share.................    $     (1.23)   $      (3.53)
                                                            ===========    ============




                                  TETON PETROLEUM COMPANY

            Consolidated Statements of Changes in Stockholders' (Deficit) Equity
                       For the Years Ended December 31, 2003 and 2002

                                                                                                 Unamortized   Foreign
                                         Preferred Stock         Common Stock       Additional   Preferred     Currency
                                       -------------------    -------------------    Paid-in       Stock      Translation   Accumulated  Stockholders'
                                        Shares      Amount     Shares      Amount    Capital     Dividends     Adjustment     Deficit       Equity
                                       ---------    ------    ---------    ------   ----------   ----------    ---------    ----------    ----------

Balance - December 31, 2001..........         -         -     2,374,046     2,374   $9,792,722           -     $ 871,273   (11,048,811)     (382,442)

Common stock issued for cash.........         -         -     1,223,737     1,224    3,332,236           -            -             -      3,333,460

Common stock subscriptions paid in
2003.................................         -         -       712,045       712    1,938,898           -            -             -      1,939,610

Common stock and warrants issued for
services.............................         -         -       221,198       221      836,905           -            -             -        837,126

Common stock issued for conversion
of convertible debentures............         -         -      1,758,49     1,758    5,353,231           -            -             -      5,354,989

Warrants issued and in-the-money
conversion feature on convertible
debentures...........................         -         -            -         -     4,557,845           -            -             -      4,557,845

Warrants issued with notes payable...         -         -            -         -       150,016           -            -             -        150,016

Warrants issued in connection with
extensions on notes payable                   -         -            -         -       203,362           -            -             -        203,362

Net loss.............................         -         -            -         -            -            -            -    (10,973,923)  (10,973,923)

Foreign currency translation
adjustment...........................         -         -            -         -            -            -      (140,773)           -       (140,773)

Balance - December 31, 2002 .........         -         -     6,289,520     6,289   26,165,215           -       730,500   (22,022,734)    4,879,270

Common stock issued for cash -  net
of commissions of $98,100............         -         -       437,012       437    1,091,463           -            -             -      1,091,900

Common stock issued for settlement
of accounts payable and accrued
liabilities..........................         -         -        79,793        80      219,920           -            -             -        220,000

Options issued to advisory board and
common stock issued for services.....         -         -         1,035         1       97,901           -            -             -         97,902

Warrants issued with notes payable...         -         -            -         -       110,170           -            -             -        110,170

Preferred stock issued for cash, net
of commissions of $473,838 (cash)
and $99,168 (non-cash)...............  2,226,680     2,226           -         -     9,110,830           -            -             -      9,113,056

Preferred stock converted to common
stock                                 (1,645,099)   (1,645)   1,776,708     1,776         (131)          -            -             -             -

Preferred stock issued in exchange
for notes payable and accrued
interest of $9,426...................     36,650        37           -         -       159,389           -            -             -        159,426

In-the-money conversion feature
charges to be amortized..............         -         -            -         -     1,182,452   (1,182,452)          -             -             -

Amortization of in-the-money
conversion feature charges...........         -         -            -         -    (1,063,842)   1,063,842           -             -             -

Net loss.............................         -         -            -         -            -            -            -     (5,634,844)   (5,634,844)

Foreign currency translation
adjustment...........................         -         -            -         -            -            -       168,256            -        168,256

Balance - December 31, 2003..........    618,231       618    8,584,068    $8,584  $37,073,366   $ (118,610)   $ 898,756  $(27,657,578)  $10,205,136




                           Consolidated Statements of Cash Flows

                                                                For the Years Ended
                                                                    December 31,
                                                            ---------------------------
                                                               2003            2002
                                                            -----------    ------------
Cash flows from operating activities
  Net loss..............................................    $(5,634,844)   $(10,973,923)
                                                            -----------    ------------
  Adjustments to reconcile net loss to net cash used in
   operating activities
   Depreciation, depletion, and amortization............      1,582,513         451,930
   Stock based compensation for variable plan warrants..             -               -
   Stock and stock options issued for services and
    interest............................................        107,128              -
   Warrants issued for notes payable extensions.........        110,170          46,582
   Stock and warrants issued for services...............             -          837,126
   Debentures issued for services.......................             -          267,500
   Amortization of debenture and note payable discounts.             -        5,331,412
   Changes in assets and liabilities....................
     Accounts receivable................................        462,000      (1,048,608)
     Prepaid expenses and other assets..................         (4,247)        (57,446)
     Inventory..........................................         54,177        (313,489)
     Accounts payable and accrued liabilities...........        311,901         290,131
                                                            -----------     -----------
                                                              2,623,642       5,805,138
                                                            -----------     -----------
      Net cash used in operating activities.............     (3,011,202)     (5,168,785)
                                                            -----------     -----------

Cash flows from investing activities
  Oil and gas properties and equipment expenditures.....     (5,392,450)     (3,222,349)
  Construction in progress..............................     (1,700,696)             -
                                                            -----------     -----------
      Net cash used in investing activities.............     (7,093,146)     (3,222,349)
                                                            -----------     -----------

Cash flows from financing activities
  Net proceeds from advances under notes payable owed
   to affiliates........................................      4,470,984       2,178,525
  Proceeds from stock subscription......................      1,939,610              -
  Proceeds from issuance of stock, net of $473,838
   commissions..........................................     10,251,924              -
  Proceeds from issuance of convertible debentures......             -        4,143,643
  Proceeds from notes payable...........................        628,750         300,000
  Payments on notes payable.............................       (478,750)       (894,210)
  Issuance of common stock..............................             -        3,333,460
                                                            -----------     -----------
      Net cash provided by financing activities.........     16,812,518       9,061,418
                                                            -----------     -----------

Effect of exchange rates................................        168,256        (140,773)
                                                            -----------     -----------

Net increase in cash....................................      6,876,426         529,511

Cash - beginning of year................................        712,013         182,502
                                                            -----------     -----------

Cash - end of year......................................    $ 7,588,439     $   712,013
                                                            ===========     ===========


Supplemental disclosure of cash flow information:

    Cash paid for:                        Interest

          2003                          $    18,202
          2002                          $   120,008

Supplemental disclosure of non-cash activity:

     During the year ended  December  31,  2003,  the Company had the  following
     transactions:

          128,700  warrants  issued  with  debt  and  valued  at  $110,170  were
          initially recorded as a discount on the note payable.  At December 31,
          2003,  the full amount of the discount had been amortized as financing
          costs.

          79,793  shares of common stock were issued for  settlement of accounts
          payable and accrued liabilities valued at $220,000.

          The Company  issued  30,000  non-qualified  options to advisory  board
          members valued at $94,702.

          The Company issued 1,035 shares of common stock for services valued at
          $3,201.

          The  Company  has  accrued a  liability  for  $46,968  related  to the
          obligation  to issue  57,420  warrants  to a  consultant  for  capital
          raising services.

          12,000 preferred shares were issued to consultants for services valued
          at $52,200 related to capital raising.

          Approximately  $1,785,000  of  capital  expenditures  for  oil and gas
          properties was included in accounts payable at December 31, 2003.

     During 2002, the Company had the following transactions:

          In exchange  for the  extension  of  principal  payments on four notes
          payable,  the Company  modified  expiration  dates of certain warrants
          previously  held by the note holders and issued an  additional  10,416
          such  warrants.  The fair value of the  modification  of the  warrants
          totaled $46,582 and has been recorded as financing costs.

          A note payable of $250,000 was converted into a convertible  debenture
          with 83,333  warrants  also being  issued  under the same terms of the
          Company's private placement offering of convertible debentures.

          1,647,881  warrants were issued with convertible  debentures valued at
          $811,559 were initially  recorded as a discount on the debentures.  At
          December 31, 2002,  the full amount of the discount had been amortized
          as financing costs.

          In-the-money   conversion  features  on  convertible  debt  valued  at
          $3,746,285 were recognized as financing costs.

          The Company issued 143,678  warrants in connection  with related party
          notes  payable of $450,000  and $50,000.  The warrants  were valued at
          $156,781 and recorded as financing costs.

          $267,500 of  convertible  debentures  with 89,167  warrants  valued at
          $14,250  for a total  amount of  $281,750  was issued  for  consulting
          services.

          41,667  warrants  issued with a note payable  valued at $150,016  were
          initially recorded as a discount on the note payable.  At December 31,
          2002 the full  discount had been  amortized  and recorded as financing
          costs.

          $4,661,143  of  debentures  and  accrued  interest  of  $227,075  were
          converted into 1,758,494 shares of stock with $466,771 being paid as a
          premium at conversion and recorded as financing costs.

          221,198 shares of stock were issued to consultants for services valued
          at $607,790.

          133,333  warrants were issued to  consultants  for services  valued at
          $215,086.

          Approximately  $1,142,000  of  capital  expenditures  for  oil and gas
          properties was included in accounts payable at December 31, 2002.

          During the fourth quarter of 2002, the Company received  $1,939,610 of
          stock  subscriptions  receivable for 712,045 shares of stock. The cash
          for these subscriptions was paid during the first quarter of 2003.



Note 1 - Description of Business and Summary of Significant Accounting Policies
-------------------------------------------------------------------------------

Teton  Petroleum  Company  (the  Company)  is an oil  and  gas  exploration  and
production  company  whose current  focus is the Russian  Federation.  Since the
Company's  operations are exclusively in the Russian Federation it is subject to
certain  risks  not  typically  associated  with  companies  in  North  America,
including,  but not limited to,  fluctuations in currency  exchange  rates,  the
imposition of exchange  control  regulations,  the possibility of  expropriation
decree,  undeveloped  business  practices  and  laws,  and less  liquid  capital
markets.

The  exploration and  development of oil and gas reserves  involves  significant
financial  risks.  The  ability  of the  Company  to meet  its  obligations  and
commitments under the terms and conditions of its licensing agreements and carry
out its planned  exploration  activities is dependent upon  continued  financial
support from its stockholders,  the ability to develop economically  recoverable
reserves,  and its ability to obtain necessary financing to complete development
of the reserves.

Should the Company's  licenses be revoked as a result of changes in legislation,
title  disputes or failure to comply with license  agreements,  there would be a
material write-down of the oil and gas properties. The accompanying consolidated
financial  statements do not reflect any adjustments that may be required due to
these uncertainties.

The United  States dollar is the  principal  currency of the Company's  business
and,  accordingly,  these  consolidated  financial  statements  are expressed in
United States dollars.

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the accounts of Teton
Petroleum  Company  and its wholly  owned  subsidiary,  Goltech  Petroleum,  LLC
("Goltech").  All intercompany accounts and transactions have been eliminated in
consolidation.

During 2002,  the Company  owned a 50%  interest in Goltech,  which had a 70.59%
interest in ZAO Goloil. Accordingly ZAO Goloil was consolidated into Goltech and
the Company  reflected  its 50% share of Goltech.  As of December 31, 2002,  the
other 50% member of Goltech  relinquished  their ownership  interest in exchange
for a 35.295% direct  ownership  interest in ZAO Goloil.  The audited  financial
statements  as of December 31, 2003 and 2002, as is customary in the oil and gas
industry,  reflect a pro-rata  consolidation  of the  Company's  interest in ZAO
Goloil  (a  Russian  Company)  through  its  wholly  owned  subsidiary  Goltech.
Management believes this to be the most meaningful presentation as the Company's
only significant asset is its investment in Goltech Petroleum,  LLC. The Company
is  required  to provide  50% of the  capital  expenditure  requirements  and is
entitled to a 50% operating  interest until  repayment of its investment  occurs
("Payout").  Under the pro-rata  consolidation  method the Company  includes its
pro-rata  share of the  assets  (50%),  liabilities  (50%),  revenues  (50%) and
expenses (50%) of the accounts of Goloil until repayment (payout) of our current
and any future loans to Goloil occurs. The intercompany  balances of Goltech and
Teton do not fully eliminate under the pro-rata  consolidation  method,  and the
remaining receivable on Teton's accounts has been included as a component of oil
and gas  properties,  as this balance will only be repaid  through net cash flow
generated from oil and gas properties.

In September OAO NK RussNeft acquired the shares held by Mediterranean  Overseas
Trust and  InvestPetrol in Goloil and assumed  responsibility  for operating the
License.  During the transition,  the Company  subsequently learned in November,
Goloil sold  substantially  less than its export quota into export markets where
prices  are  substantially  higher,  instead  selling  the  production  into the
domestic market.

Commencing  October 1, RussNeft began selling  Goloil's  production to a related
party for a fixed price of 2,400  rubles per ton  (roughly  $11 per  barrel),  a
price  substantially  below the blended  market price Goloil  formerly  received
selling its production into the export,  near abroad and domestic markets.  As a
consequence, the Company estimates its revenues after taxes for the quarter were
reduced by approximately $1.44 million. Moreover, since this pricing arrangement
prevailed through the end of the fourth quarter and beyond,  the Company has had
to significantly  reduce the present value of its reserves  effective January 1,
2004. In addition,  RussNeft has adjusted the amount of production payment to be
paid to EnergoSoyuz-A ("EUA") to a fixed amount per month which is less than the
50% of oil produced previously agreed to, based on the current price.

Teton has strenuously objected to RussNeft's actions and is continuing to engage
its management in discussions over the issue,  while retaining  counsel with the
intention of vigorously  pursuing it rights under  previous  agreements and as a
significant  minority  shareholder  in Goloil.  While  counsel  has  advised the
Company  that its  position  has merit,  the outcome of this  dispute  cannot be
predicted at the current time.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities, disclosures of contingent assets and liabilities at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents
-------------------------

The Company considers all highly liquid  instruments  purchased with an original
maturity of three months or less to be cash equivalents. The Company continually
monitors  its  positions   with,  and  the  credit  quality  of,  the  financial
institutions  it invests with. As of the balance sheet date,  the Company had no
cash equivalents.

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

The Company  recognizes  oil sales  revenue at the point in time oil  quantities
have been delivered to purchasers.

Comprehensive Income
--------------------

Comprehensive  income is defined as the  change in equity  during a period  from
transactions and other events from non-owner  sources.  Comprehensive  income is
the  total of net  income or loss and other  comprehensive  income or loss.  The
effect of foreign currency  exchange rates currently is the Company's only item,
which constitutes comprehensive income or loss.

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

The Company uses 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,  geological and geophysical  costs, and
costs of carrying and retaining  unproved  properties are expensed.  The Company
also evaluates costs  capitalized for exploratory  wells, and if proved reserves
cannot be determined  within one year from  drilling  exploration  wells,  those
costs are written-off and recorded as an expense.

Unproved  oil  and  gas  properties  that  are   individually   significant  are
periodically  assessed for impairment of value,  and a loss is recognized at the
time  of  impairment  by  providing  an  impairment  allowance.  Other  unproved
properties  are  amortized  based  on the  Company's  experience  of  successful
drilling and average  holding  period.  Currently  the Company holds no unproved
properties.

Capitalized  costs  of  producing  oil and  gas  properties,  after  considering
estimated  dismantlement and abandonment costs and estimated salvage values, are
depreciated  and  depleted  by  the   unit-of-production   method.   Significant
development  projects  are  excluded  from the  depletion  calculation  prior to
assessment  of the existence of proven  reserves  that are ready for  commercial
production.  The Company had a cogeneration plant under construction at December
31,  2003,  the  Company's  share of which  totaled  $1,700,696,  which has been
excluded from properties subject to depletion until its completion.  The Company
did not have any significant development projects, which have been excluded from
depletion  at December  31,  2003.  Support  equipment  and other  property  and
equipment are depreciated over their estimated useful lives.

On the sale or retirement of a complete unit of a proved property,  the cost and
related  accumulated  depreciation,  depletion,  and amortization are eliminated
from the property accounts, and the resulting gain or loss is recognized. On the
retirement or sale of a partial unit of proved property,  the cost is charged to
accumulated  depreciation,  depletion, and amortization with a resulting gain or
loss recognized in income based on the amount of proceeds.

On the sale of an  entire  interest  in an  unproved  property  for cash or cash
equivalent,  gain or loss on the sale is recognized,  taking into  consideration
the  amount  of any  recorded  impairment  if the  property  had  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.

All of the Company's  oil and gas assets are held in one cost center  located in
Siberia,   Russia.  The  Russian  Federation  (RF)  has  performed   substantial
exploration  efforts on properties on which the Company has received  successful
tenders  for  future  exploration  and  development.  As a result,  those  areas
accepted  under  tender by the RF are known to contain  proved  reserves and the
Company's efforts are focused on further development of such reserves.

The net carrying  value of the Company's oil and gas properties is limited to an
estimated  net  recoverable  amount.  The net  recoverable  amount  is  based on
undiscounted  future net revenues and is determined by applying factors based on
historical  experience  and other data such as primary lease terms of properties
and average holding periods.  If it is determined that the net recoverable value
is less  than  the net  carrying  value  of the  oil  and  gas  properties,  any
impairment is charged to operations.

Inventories
-----------

Inventory  includes  extracted oil  physically in the pipeline prior to delivery
for  sale  and oil  held by third  parties  valued  at the cost of  development.
Inventory also includes  various  supplies and spare parts and is valued at cost
using the weighted average method.

Property and Equipment
----------------------

Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line  method over the estimated useful lives for owned assets,  ranging
from 3 to 27 years.

Feasibility Study TDA Grants
----------------------------

Grants that are  received for use on oil and gas  properties  are recorded as an
offset to expenditures incurred under the grants.

One such  study  was  completed  in 2001.  In the  event  that  the  project  is
implemented  and a  substantial  economic  benefit is reaped,  funds  previously
advanced by the TDA may be required to be reimbursed.  Goloil may be required to
reimburse  the TDA in the  form of a  success  fee if  certain  events  occur by
December  31, 2004,  which  include:  taking an equity  position in the project,
financing  development of the license area, or obtaining  external financing for
development of the license area.

The Company has also  received a $300,000  grant from the TDA for a  feasibility
study for field development and pipeline construction.  As of March 25, 2004 the
Company has completed and submitted to TDA its feasibility  study of the Eguryak
license  area.  The Company has received  $255,000 as of December 31, 2003 under
the  grant.  In the event  that the  project is  implemented  and a  substantial
economic benefit is reaped, funds previously advanced by the TDA may be required
to be  reimbursed.  The Company may be required to reimburse the TDA in the form
of a success fee if certain events occur based  substantially  on the results of
the study by December 31, 2005, which include:  taking an equity position in the
project,  financing  development  of the  license  area  or  obtaining  external
financing for development of the license area.

For the years ended  December 31, 2003 and 2002,  the Company  received $0 under
TDA grants, respectively.

Impairment of Long-Lived Assets
-------------------------------

The Company evaluates its long-lived  assets for impairment,  in accordance with
the provisions  established under Statement of SFAS no. 144, "Accounting for the
Impairment  or  Disposal  of  Long-Lived  Assets",  when  events or  changes  in
circumstances  indicate that the related carrying amount may not be recoverable.
An impairment is considered to exist if the total estimated future cash flows on
an  undiscounted  basis are less than the carrying amount of the related assets.
An impairment  loss is measured and recorded based on the  discounted  estimated
future cash flows.  Changes in significant  assumptions  underlying  future cash
flow  estimates  or fair  values of  assets  may have a  material  effect on the
Company's financial position and results of operations.

Asset Retirement Obligations
----------------------------

During 2003 the Company applied the provisions of SFAS No. 143,  "Accounting for
Asset Retirement  Obligations."  The Company recorded $126,500 as the fair value
of the Company's  estimated  liability for the retirement of its Russian oil and
gas assets  along with a  corresponding  increase in the  carrying  value of the
related  oil and gas  properties  as of  December  31,  2003,  as the  effect of
adopting  SFAS No.  143 on  January 1, 2003 was not  material.  Had the  Company
adopted  SFAS No.  143 on  January  1, 2003 the net loss to common  shareholders
would have been increased by $13,000.

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

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-  Transition and  Disclosure."  This statement amends SFAS No. 123,
"Accounting  for Stock-Based  Compensation"  to provide  alternative  methods of
transition  for an entity that  voluntarily  changes to the fair value method of
accounting  for  stock-based  compensation.  In  addition,  SFAS 148  amends the
disclosure  provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's  accounting  policy decisions with respect to stock-based
employee compensation on reported results of operations. The Company has adopted
the disclosure-only  provisions of Statement of Financial  Accounting  Standards
No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been  recognized  for stock options  issued to employees,  officers and
Directors under the stock option plan. Had  compensation  cost for the Company's
options issued to employees, officers and Directors been determined based on the
fair value at the grant date for awards  consistent  with the provisions of SFAS
No. 123, as amended by SFAS No. 124, the  Company's  net loss and basic loss per
common share would have been changed to the pro forma amounts indicated below:

                                                                For the Years Ended
                                                                    December 31,
                                                            ----------------------------
                                                               2003             2002
                                                            -----------     ------------

Net loss applicable to common shareholders - as reported    $ (8,415,537)   $(10,973,923)
Net loss applicable to common shareholders - pro forma      $(13,389,678)   $(11,945,964)
Basic loss per common share - as reported                   $     (1.23)    $     (3.53)
Basic loss per common share - pro forma                     $     (1.96)    $     (3.84)

The fair value of each warrant grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used:

                                                                For the Years Ended
                                                                    December 31,
                                                            ----------------------------
                                                               2003             2002
                                                            -----------     ------------

Approximate risk free rate                                     4.00%           4.50%
Average expected life                                        10 years         2 years
Dividend yield                                                  -%               -%
Volatility                                                     100%            87.20%
Estimated fair value of total options granted               $4,974,141        $972,041


Foreign Currency Translation
----------------------------

All assets and liabilities of the Company's  subsidiary are translated into U.S.
dollars using the prevailing exchange rates as of the balance sheet date. Income
and expenses are translated  using the weighted  average  exchange rates for the
period.  Stockholders'  investments  are translated at the  historical  exchange
rates  prevailing  at the time of such  investments.  Any gains or  losses  from
foreign   currency   translation  are  included  as  a  separate   component  of
stockholders'  equity.  The  prevailing  exchange rates at December 31, 2003 and
2002  were  approximately  1 U.S.  dollar to 29.45 and  31.78,  Russian  rubles,
respectively. For the years ended 2003 and 2002, the average exchange rate for 1
U.S. dollar was 30.66 and 31.39, Russian rubles, respectively.

Basic Loss Per Share
--------------------

The Company applies the provisions of Statement of Financial Accounting Standard
No. 128,  "Earnings Per Share" (FAS 128). All dilutive  potential  common shares
have an antidilutive effect on diluted per share amounts and therefore have been
excluded in determining net loss per share. The Company's basic and diluted loss
per share is  equivalent  and  accordingly  only  basic  loss per share has been
presented.

The following  table reflects the effects of dilutive  securities as of December
31, 2003.

Dilutive effects of stock options                          $ 1,578,037
Dilutive effects of warrants                                 7,389,981
Dilutive effects of convertible preferred shares             2,381,351
                                                           -----------

                                                           $11,349,369
                                                           ===========

Fair Value of Financial Instruments
-----------------------------------

The  carrying  amounts  of  financial   instruments   including  cash,  accounts
receivable,  sundry receivables,  accounts payable,  accrued liabilities,  notes
payable and convertible  debentures  approximated  fair value as of December 31,
2003 because of the relatively short maturity of these instruments.

The carrying amounts of notes payable and debt issued  approximate fair value as
of December 31, 2003 because  interest  rates on these  instruments  approximate
market interest rates. The Company has no derivative financial instruments.

The Company is exposed to foreign currency risks to the extent that transactions
and balances are denominated in currencies  other than the United States dollar.
This risk could be significant for those  transactions and balances  denominated
in rubles, as the ruble has experienced significant devaluation in the past.

Reclassifications
-----------------

Certain  amounts  in  the  2002  consolidated  financial  statements  have  been
reclassified to conform to the 2003 presentation.

Recently Issued Accounting Pronouncements
-----------------------------------------

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
establishes  standards for how an issuer measures certain financial  instruments
with  characteristics of both liabilities and equity and requires that an issuer
classify a financial  instrument  within its scope as a  liability  (or asset in
some  circumstances).  SFAS No.  150 was  effective  for  financial  instruments
entered into or modified  after May 31, 2003 and  otherwise  was  effective  and
adopted by the Company on July 1, 2003. As the Company has no such  instruments,
the  adoption  of  this  statement  did  not  have an  impact  on the  Company's
consolidated financial statements.

During December 2003, the FASB issued Interpretation No. 46R,  "Consolidation of
Variable  Interest  Entities" ("FIN 46"),  which requires the  consolidation  of
certain entities that are determined to be variable interest entities ("VIE's").
An entity is considered to be a VIE when either (i) the entity lacks  sufficient
equity  to carry on its  principal  operations,  (ii) the  equity  owners of the
entity cannot make decisions about the entity's activities or (iii) the entity's
equity neither  absorbs losses or benefits from gains.  Teton  Petroleum owns no
interests in variable interest  entities,  and therefore this new interpretation
will not affect the Company's consolidated financial statements.


Note 2 - Investments in Goltech Petroleum, LLC
----------------------------------------------

Effective  in August 2000,  the Company  entered  into a  transaction  agreement
selling a 50% equity  interest in Goltech in exchange for $1,000,000  cash and a
$5.6 million investment in the license area for drilling additional wells on the
license  area,  completion  of a pipeline and the  construction  of a processing
facility (the oilfield  development  program).  The $1,000,000 received was also
invested in the license area to complete the oilfield  development  program. The
party to the  agreement  obtained the right to name 50% of the board of managers
and became the general manager of Goltech. No gain or loss was recognized on the
transaction  as  the  proceeds  were  immediately   reinvested  into  the  field
development  and pipeline  completion  project.  ZAO Goloil was also required to
make a production  payment to compensate  the other party for its  investment in
the license area. The production  payment  requires ZAO Goloil to deliver 50% of
the production from existing and future wells through July 2007. The other party
is obligated  under an agreement to only sell their share of the  production  in
the Russian  domestic  market.  Effective  December  31,  2002,  the other party
withdrew as a member of Goltech and in exchange for relinquishment of 50% of its
membership  interests in Goltech,  it received  35.295% of the ZAO Goloil shares
and the  return of its  $1,000,000  initial  contribution.  ZAO  Goloil is still
obligated under the production payment.

The  other  membership  holder  (the  "affiliate")  to  Goltech  Petroleum,  LLC
(Goltech) had invested  approximately  $7,000,000 under the oilfield development
agreement outside of Goltech and Goloil as of December 31, 2003. These costs are
reflected in the accounts of another entity  controlled by the affiliate and are
not  reflected  anywhere  in the  financial  statements  of the  Company.  These
expenditures  were used to drill and complete four additional wells and complete
a pipeline on the Company's  license area that provides the ability to transport
oil directly  through this  pipeline  year-round  to other larger  pipelines for
ultimate  sale.  The  Company has  compensated  the  affiliate  in the form of a
production  payment of approximately  2,262,343  barrels of oil through December
31, 2003.  The Company also has the obligation to compensate the affiliate for a
minimum of 4,088,000 barrels of oil (1,825,657 barrels remaining at December 31,
2003)  over  a  seven-year   period  for  its  investments  under  the  oilfield
development  agreement.  See Note 10 for a discussion of the changes made to the
production  payment being  proposed by OAO NK RussNeft,  a newly formed  Russian
independent oil producer ("RussNeft").

Additionally,  the  affiliate  has net direct  loans to Goloil of  approximately
$14,839,000,  which  have  been  used  to help  fund  capital  expenditures  for
completion of a processing facility and to help fund other related expenses. The
Company has reflected a 50% of these loans in its financial statements under the
pro-rata consolidation method (Note 6).


Note 3 - Property and Equipment
-------------------------------

Property and equipment consist of the following at December 31, 2003:

Building                                                    $   123,942
Vehicles                                                        178,598
Computers and equipment                                          30,053
Other equipment                                                 175,707
Furniture and fixtures                                           27,689
                                                            -----------
                                                                535,989
Less: Accumulated depreciation                                  (85,148)
                                                            -----------

                                                            $   450,841
                                                            ===========

Note 4 - Oil and Gas Properties
-------------------------------

Goloil License
--------------

The Company  holds an interest in the license for the Eguryak  license  area for
exploration  and  production  of oil and gas  through its  investment  in Goloil
(which is held through its 100% owned subsidiary,  Goltech). This license grants
Goloil the  exclusive  right to explore and develop an area in Siberia  covering
186.8 square  kilometers and includes the Eguriakhskoe,  South  Eguriakhskoe and
Golevoye oil fields situated in the  Nizhnevartovsk  Region. The license expires
on May 21, 2022,  subject to  additional  extensions  as approved by  applicable
bodies of the  Russian  Federation.  The  license  may also be  canceled  by the
Company with a 90-day written notice.

The  license  requires  Goloil to drill a minimum of five wells over four years,
conduct an additional  seismic  survey  aggregating  30 square  kilometers,  and
evaluate geological data from the 186.8 square kilometers of the license. Goloil
was also  required to conduct  production  tests on six wells  between  1997 and
2000. In addition to performing its duties under the license, Goloil must comply
with Russian  environmental and archeological laws.  Currently,  the Company has
fulfilled its requirements under the license. Management is continuing to pursue
completion of future required  performance criteria and believes that there will
be no adverse  effects on the  Company's  license for failure to comply with any
past license requirements.

The license requires Goloil to pay all taxes including mining tax,  property tax
and certain  ecological taxes. All geological  information  obtained at Goloil's
expense is the property of Goloil, while all geological  information obtained at
the  expense  of the  Russian  government  may be  used by  Goloil.  Oil and gas
produced from the licensed property, subject to certain royalty payments, is the
property of Goloil.

During  2003,  Goloil  began  the  construction  of  a  gas-powered   electrical
generating plant, which will be operational in the first quarter of 2004.

See Note 10 for a discussion of a dispute with RussNeft, the operator of Goloil.


Note 5 - Notes Payable
----------------------

During 2003:

The Company received  proceeds of $628,750 from the issuance of promissory notes
to three shareholders.  In connection with these notes,  128,700 warrants valued
at $110,170 were issued.  At December 31, 2003,  the full amount of the discount
had been amortized and recorded as a non-cash  financing charge. The Company has
recorded  the value of these  warrants  using the  Black-Scholes  option-pricing
model using the following  assumptions:  volatility of 73%, a risk-free  rate of
3.5%, zero dividend payments, and a life of one year.

The Company paid $478,750 of the  promissory  notes issued during the year.  The
remaining  $150,000  along with  accrued  interest of $9,426 was  exchanged  for
Teton's 8% convertible preferred shares.

During 2002:

The scheduled  March 1, 2002  principal  payments on two notes payable  totaling
$250,000 to  stockholders  were extended to April 15, 2002. In exchange for this
extension,  the holders were issued  10,417  stock  purchase  warrants,  with an
exercise  price of $6.00 that expired  February  2004,  which had been valued at
$14,469  using the Black  Scholes  option  pricing  model  with  assumptions  of
volatility  of  100%,  risk  free  rate of 5.5%  and no  dividend  yield.  These
extensions were recorded in the first quarter of 2002 as financing costs.  These
notes were fully paid off in 2002.

The Company  issued  143,678  warrants in  connection  with related  party notes
payable of $450,000  and  $50,000.  The  warrants  were  valued at $156,781  and
recorded as financing costs. Additionally, in the first quarter of 2002, the due
dates of the two notes payable totaling  $500,000 was extended by the holders to
April 15, 2002. As consideration for this extension the Company agreed to modify
the expiration  dates of certain  warrants  previously  held by the note holders
from October 31, 2002 to January 31, 2003.  These  extensions  were valued based
upon the  incremental  fair value of the  warrants on the date of  modification,
which totaled approximately  $32,000. The values were calculated using the Black
Scholes  option-pricing  model under the  assumptions  described in the previous
paragraph,  and were  recorded  in the first  quarter of 2002,  the  quarter the
modifications occurred.

During 2002, the Company paid $200,000 of a $450,000 note payable outstanding at
December 31, 2001.  The  remaining  $250,000 was  converted  into a  convertible
debenture  with  83,333  warrants  also  being  issued  in  connection  with the
Company's private placement offering of convertible debentures.

The  Company  also paid off a $50,000  note  payable  to a  stockholder  and the
$94,210  note  payable to an officer  during  2002,  which were  outstanding  at
December 31, 2001.

During 2002, the Company received  proceeds of $300,000 on a note payable from a
stockholder.  In connection  with the note,  41,667  warrants valued at $150,016
were issued and recorded as financing charges. The Company paid off this note in
November  2002.  The Company has recorded the value of these  warrants using the
Black Scholes option-pricing model using the following  assumptions:  volatility
of 138%,  a risk-free  rate of 4.5%,  zero  dividend  payments,  and a life of 2
years.

Total  expense  recorded   associated  with  the  above  warrant  issuances  and
modifications  totaled  $353,379  and have been  recorded as non-cash  financing
charges during the year ended December 31, 2002.


Note 6 - Proportionate Share of Liabilities
-------------------------------------------

The  proportionate   share  of  accounts  payable  and  accrued  liabilities  of
$2,590,901  at  December  31,  2003 are  obligations  of  Goloil  and not  Teton
Petroleum nor have they been guaranteed by Teton Petroleum.

The following  notes  reflect the Company's 50% pro-rata  share of notes payable
advances  made by and owed to Goloil owed to an  affiliate.  These  advances are
obligations of Goloil at December 31, 2003 and not Teton Petroleum nor have they
been guaranteed by Teton Petroleum.

Pro-rata  share of Goloil notes  payable owed to an  affiliate.  The
proceeds  were used to pay certain  operating  expenses  and capital
expenditures  of Goloil.  These notes provide for interest  rates of
8%, with interest payable either quarterly or on maturity,  maturing
through  December  2004.  These notes are  secured by  substantially
all Goloil  assets.  The notes payable will be repaid from cash flow
from ZAO Goloil as available, or extended to future periods.            $ 7,419,409
                                                                        -----------
Less: current portion                                                    (7,419,409)
                                                                        -----------

                                                                        $        -
                                                                        ===========


Note 7 - Stockholders' Equity
-----------------------------

Changes in Stockholders' Equity during 2003
-------------------------------------------

On March 19, 2003,  the  stockholders  authorized  an increase in the  Company's
common shares from 100,000,000 to 250,000,000 and authorized  25,000,000  shares
of preferred stock for future issuance.

Private Placements of Common Stock

During the year ended  December  31, 2003 the  Company  received  the  following
proceeds from the issuance of privately placed common stock:

$1,091,900  (net of costs of $98,100)  from the  issuance  of 437,012  shares of
common stock. In connection with the private placement,  the Company also issued
a warrant for each $3.00 stock investment. The warrants have a term of two years
and an exercise price of $6.00,

$1,939,610  during the year ended December 31, 2003 related to outstanding stock
subscriptions receivable at December 31, 2002,

80,828  common  shares  valued at  $317,902  were issued for (i)  settlement  of
accounts payable and accrued liabilities of $220,000; and (ii) services provided
by the advisory board of $97,902.

Private Placements of Series A Convertible Preferred Stock
----------------------------------------------------------

During the year ended  December  31, 2003 the  Company  received  the  following
proceeds  from the issuance of  privately  placed  preferred  stock issued at an
offering price of $4.35 per share.

Proceeds of $9,145,450 (net of cash costs of $473,888 and net of $46,968 related
to the  obligation to issue  warrants for capital  raising) from the issuance of
2,266,680 shares of 8% convertible preferred stock.

$14,574 from the issuance of 40,000  preferred shares in exchange for a $150,000
note payable outstanding and accrued interest of $9,426.

We also issued  12,000  preferred  shares to a  consultant  for capital  raising
services valued at $52,200.

The preferred shares carry an 8% dividend,  payable quarterly commencing January
1, 2004 and are convertible into common stock at a price of $4.35 per share. The
preferred  stock is entitled to vote on all matters  presented to the  Company's
common  stockholders,  with the  number of votes  being  equal to the  number of
underlying  common  shares.  The  preferred  stock also  contains a  liquidation
preference  of $4.35 per share plus  accrued  unpaid  dividends.  The  preferred
shares can be redeemed  by the  Company  after one year for $4.35 per share upon
proper notice of redemption being provided by the Company.

In connection with the preferred  share private  placement for Tranches 1 and 2,
certain  placements  were entered into when the  underlying  price of the common
stock to which the preferred  shares are convertible  into,  exceeded $4.35, the
stated conversion rate. As a result of the underlying shares being in-the-money,
the Company was required to compute a  beneficial  conversion  charge,  which is
calculated  as the  difference  between  the  conversion  price of $4.35 and the
closing stock price on the effective  date of each  offering,  multiplied by the
total of the related common shares to be issued upon conversion of the preferred
stock.  These charges are reflected as a dividend to the preferred  shareholders
and are  recognized  over the period in which the preferred  stock first becomes
convertible.  For the Tranche 1 shares the charge was immediately  recognized as
the shares were immediately  convertible  into common.  For Tranche 2 the shares
could not be converted  until a shareholder  vote on January 27, 2004 took place
approving the issuance of additional  common shares.  The calculated  beneficial
conversion feature on Tranche 2 was therefore  amortized from the effective date
of each issuance  through  January 27, 2004.  This resulted in total  beneficial
conversion charges of $ 1,182,452,  of which $1,063,842 were recorded during the
fourth quarter of 2003, and $118,610 will be amortized and recorded as preferred
dividends in January of 2004.

The Company also sent each preferred  shareholder an inducement offer to convert
their shares of preferred  into common  shares.  If converted  within 60 days of
closing,  the  investors  will be entitled to receive (i)  dividends  payable in
common  stock  equivalent  to one years worth of  dividends;  and (ii) 2 Class B
Warrants for each $10 invested, exercisable at $6.00 per share.

In  connection  with the  preferred  share  private  placement  for  Tranche  1,
shareholders  converted  1,645,099 of 8% convertible  preferred shares to common
stock at a price of $4.35 per share.  Common  share  dividends  of 8% for a full
year were paid totaling  $546,173 and  1,431,237  warrants were issued valued at
$1,170,678,  for  a  total  inducement  charge  of  $1,716,851  recognized  as a
preferred  dividend during the fourth quarter for those investors which accepted
the inducement  offer.  The warrants issued were valued using the  Black-Scholes
option  pricing  model using the  following  assumptions:  volatility  of 55%, a
risk-free rate of 1.875%, zero dividend payments, and a life of two years.

In connection with the preferred share private placement for Tranche 2, a common
share  dividend of 8% for a full year was paid  totaling  $157,601  and warrants
were issued valued at $337,805,  for a total inducement charge of $495,406 which
will be  recognized  as a  preferred  dividend  in the  first  quarter  of 2004,
associated with the preferred stock  inducement  offer ending on March 27, 2004.
The warrants  issued were valued using the  Black-Scholes  option  pricing model
using the following assumptions:  volatility of 55%, a risk-free rate of 1.875%,
zero dividend payments, and a life of two years.

Warrants to Purchase Common Shares
----------------------------------

During 2003, the Company issued 440,140  warrants to entities for their services
directly related to raising capital under private  placements.  The Company also
issued 128,700 warrants in conjunction with debt valued at $110,170.

During 2003, the Company  issued  1,019,883  warrants in connection  with common
stock private placement  offerings,  with an exercise price of $6.00 that expire
December 30, 2004.

Changes in Stockholder Equity During 2002
-----------------------------------------

Private Placements of Common Stock
----------------------------------

During the year ended  December  31, 2002 the  Company  received  the  following
proceeds from the issuance of privately placed common stock:

$3,333,460 from the issuance of 1,223,737  shares of common stock. In connection
with the private placement offerings, the Company also issued a warrant for each
$3.00 stock  investment.  The warrants  have a term of two years and an exercise
price of $6.00.

$605,136  from the  issuance  of 221,198  common  shares  issued for  consulting
services.

$23,200 from the issuance of 7,407 common shares for services  provided in 2001.
The Company accrued a liability for this amount at December 31, 2002.

Convertible Debentures
----------------------

During  2002,  the  Company  received  proceeds of  $4,163,143  from the private
placement of  convertible  debentures.  The debentures had a term of three years
from April 1, 2002 and provided for interest at 10% per annum payable  annually.
The  debentures  provided  that the holder may convert the debenture and accrued
interest into shares of common stock at a $3 conversion rate.

The  debentures  also  included  warrants to purchase  common  stock and have an
exercise price of $6 and a term of two years. Each debenture holder received one
warrant for each $.25 (pre-split) of investment made in debentures.

On September 1, 2002, the Company redeemed all debentures outstanding for shares
of its common stock. The debentures were redeemed at 110% of their face value by
issuing one share of common stock for each $3 of  redemption  value,  which also
incorporates any accrued interest through  September 1, 2002.  Financing charges
were recorded for the difference between the cumulative 10% contractual interest
accrued  through  September  1, 2002 and the 10% premium  paid upon  redemption,
which totaled $466,771.

As a  result  of the  warrants  issued  with  the  debentures  and  in-the-money
conversion   features  present  at  issuance,   non-cash  financing  charges  of
$4,714,625  were expensed.  While the stock to which the  conversion  rights and
warrants apply is restricted  stock, the valuation with respect to this stock in
calculating  the discount  was "as if" the stock was  immediately  salable.  The
effect of this is to make the amount of discount  and its  related  amortization
higher than it would  otherwise have been.  Management  believes these costs are
non-recurring  and will manage future  capital  raising  programs to minimize or
eliminate these costs.

Warrants to Purchase Common Shares

During 2002,  the Company issued  133,333  warrants to consultants  for services
valued at $215,086.  The Company also issued  616,793 to employees and Directors
for services performed.

The following table presents the activity for warrants outstanding:

                                                                              Weighted
                                                                              Average
                                                                              Exercise
                                                              Shares           Price
                                                            ------------    ------------

Outstanding - December 31, 2001                                 544,098     $       5.28
  Granted                                                     4,068,682             5.52
  Forfeited/canceled                                            (25,000)            2.04
                                                            ------------    ------------

Outstanding - December 31, 2002                               4,587,780             5.52
  Granted                                                     3,210,249             2.49
  Forfeited/canceled                                           (408,048)            0.30
                                                            ------------    ------------

Outstanding - December 31, 2003                               7,389,981     $       5.63
                                                           ============     ============

The following table presents the composition of warrants outstanding and exercisable:

                                              Shares Outstanding
                                         -----------------------------
Range of Exercise Prices                    Number          Price*           Life*
------------------------                 -----------     -------------    -------------

$2.72 - $4.80                                997,800     $        0.41             0.27
$6.00 - $12.00                             6,392,181              5.22             0.93
                                         -----------     -------------    -------------

Total - December 31, 2003                  7,389,981     $        5.63             1.20
                                        ============     =============    =============

*Price and Life reflect the weighted average exercise price and weighted average remaining
contractual life, respectively.


Note 8 - Stock Options
----------------------

At the annual meeting on March 19, 2003, the Company's  shareholders approved an
employee stock option plan and authorized  2,083,333  shares of Common Stock for
issuance thereunder.  Under the plan, incentive and non-qualified options may be
granted.   During  the  second  quarter  of  2003,  the  Company  issued  30,000
non-qualified  options to outside advisory board members which has been recorded
as compensation  expense during the  three-months  ended June 30, 2003 valued at
$94,701,  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions: volatility of 100%, a risk-free rate of 4%, zero dividend payments,
and a life of ten years. The Company also issued 1,448,037  incentive options to
employees,  officers and Directors valued at $4,571,026 using the  Black-Scholes
option-pricing  model under the same  assumptions  described above. In the third
quarter,  100,000 options valued at $308,414 were issued to a director under the
Company Plan.

As of December 31, 2003,  1,478,037 options with an exercise price of $3.48 were
outstanding  as well as 100,000  options  with an exercise  price of $3.71.  The
weighted  average price and contractual life of both issues were $3.26 and $3.71
and 8.59 and .61 years, respectively.

The following table presents the activity for stock options outstanding:

                                              Shares Outstanding
                                         -----------------------------
Range of Exercise Prices                    Number          Price*           Life*
------------------------                 -----------     -------------    -------------

Outstanding - December 31, 2002                   -      $        -                -
Issued                                     1,578,037              3.49             9.20
                                         -----------     -------------    -------------

Outstanding - December 31, 2003            1,578,037     $        3.49             9.20
                                        ============     =============    =============

*Price and Life reflect the weighted average exercise price and weighted average remaining
contractual life, respectively.


Note 9 - Income and Other Taxes
-------------------------------

The Company has incurred  losses since inception and, as a result of uncertainty
surrounding the use of those net operating loss carry-forwards, no provision for
income taxes has been recorded.

The Company has net  operating  loss  carry-forwards  for U.S.  tax  purposes of
approximately  $18,500,000,  which expire between 2012 and 2023, if unused,  and
have been fully reserved by a valuation allowance.

Taxes  payable are tax  liabilities  of its  Russian  subsidiary,  Goloil  (held
through its wholly owned subsidiary Goltech). Tax payments made by Goloil to the
Russian  government  include profits taxes,  value-added taxes ("VAT"),  unified
social taxes, transport taxes and property taxes.

The Company had no income tax liabilities for the years ended December 31, 2003.
ZAO Goloil has net operating loss carry-forwards,  which are available to offset
future  taxable  income,  which  will  expire in 2013.  The  foreign  income tax
carry-forwards  for  Russian  tax  purposes  are  limited to a maximum of 30% of
taxable  income in any year.  As of December  31,  2003,  Goloil had $210,662 in
deferred tax assets  ($105,331 net to Teton) and $34,906  ($17,453 net to Teton)
in deferred tax liabilities.  These amounts can be applied against future income
taxes.


Note 10 - Commitments and Contingencies
---------------------------------------

Contingencies
-------------

Dispute with Current Operator of Goloil

In September,  RussNeft acquired the shares held by Mediterranean Overseas Trust
and InvestPetrol in Goloil and assumed responsibility for operating the License.
During the  fourth  quarter,  the  Company  subsequently  learned,  Goloil  sold
substantially  less than its export quota into export  markets  where prices are
substantially higher, instead selling the production into the domestic market.

Commencing  October 1, RussNeft began selling  Goloil's  production to a related
party of RussNeft (RussTrade) for a fixed price of 2,400 rubles per ton (roughly
$11 per barrel),  a price  substantially  below the blended  market price Goloil
formerly  received  selling  its  production  into the  export,  near abroad and
domestic  markets.  As a consequence,  the Company  estimates its revenues after
taxes for the quarter were reduced by  approximately  $1.44  million.  Moreover,
since this pricing  arrangement  prevailed through the end of the fourth quarter
and beyond, the Company has had to significantly reduce the present value of its
reserves  effective  January 1, 2004.  In  addition,  RussNeft  has adjusted the
amount of  production  payment  to be paid to  EnergoSoyuz-A  ("EUA") to a fixed
amount per month which is less than the 50% of oil  produced  previously  agreed
to, based on the current price.

Teton has strenuously objected to RussNeft's actions and is continuing to engage
its management in discussions over the issue,  while retaining  counsel with the
intention of vigorously  pursuing it rights under  previous  agreements and as a
significant  minority  shareholder  in Goloil.  While  counsel  has  advised the
Company  that its  position  has merit,  the outcome of this  dispute  cannot be
predicted at the current time.

Taxation

The taxation system in Russia is evolving as the central  government  transforms
itself from a command to a market-oriented  economy. There were many new Russian
Federation  and  Republic  taxes  and  royalty  laws  and  related   regulations
introduced  over the last few years.  Many of these were not clearly written and
their application is subject to the  interpretation of the local tax inspectors,
Central Bank  officials and the Ministry of Finance.  Instances of  inconsistent
interpretation  between local,  regional and federal tax authorities and between
the Central Bank and Ministry of Finance are not unusual.  The current regime of
penalties and interest related to reported and discovered  violations of Russian
laws, decrees and related regulations are severe. Penalties include confiscation
of the amounts at issue (for tax law violations),  as well as fines of up to 40%
of the unpaid taxes. Interest is assessable at rates of up to 0.1% per day. As a
result,  penalties  and interest can result in amounts that are multiples of any
unreported taxes.

The Company's  policy is to accrue  contingencies  in the  accounting  period in
which a loss is deemed  probable and the amount is reasonably  determinable.  In
this regard,  because of the  uncertainties  associated with the Russian tax and
legal  systems,  the ultimate  taxes as well as penalties and interest,  if any,
assessed may be in excess of the amounts paid to date as of December 31, 2003.

Management  believes  based upon its best estimates that the Company has paid or
accrued  all taxes that are  applicable  for the current  and prior  years,  and
compiled with all essential  provisions of laws and  regulations  of the Russian
Federation.

Environmental

The Company may be subject to loss  contingencies  pursuant to Russian  national
and regional  environmental claims that may arise for the past operations of the
related  fields,  which it  operates.  As Russian  laws and  regulations  evolve
concerning environmental  assessments and cleanups, the Company may incur future
costs,  the amount of which is currently  indeterminable  due to such factors as
the current state of the Russian regulatory process, the ultimate  determination
of responsible parties associated with these costs and the Russian  government's
assessment  of  respective  parties'  ability to pay for those costs  related to
environmental reclamation.

Political

The Company's  operations and financial position will continue to be affected by
Russian political  developments including the application of existing and future
legislation,  regulations and claims pertaining to production, imports, exports,
oil and gas regulations and tax regulations.  The likelihood of such occurrences
and their effect on the Company could have a significant impact on the Company's
current activity and its overall ability to continue operations. Management does
not believe that these contingencies, as related to its operations, are any more
significant than those of similar enterprises in Russia.

Commitments

Mr. Howard Cooper, Chairman,  signed an agreement on May 1, 2002. The employment
agreement is for a three-year  term,  whereby Mr. Cooper's salary is $13,333 per
month. Under the terms of the agreement,  Mr. Cooper is entitled to 24 months of
severance pay, payable in monthly  installments over 24 months, from the date of
termination.  The Company may discontinue  the severance  payments if Mr. Cooper
violates the confidentiality,  noncompetition,  or nonsolicitation provisions of
his employment agreement.

Mr. Karl Arleth,  President and Chief Executive Officer,  signed an agreement on
May 1, 2003. The employment agreement is for a three-year term, with a salary of
$10,000 per month.  Under the terms of the agreement,  Mr. Arleth is entitled to
24 months  severance  pay in the event of change of  position  or control of the
company.

Ms. Anya Cooper,  Secretary,  signed an agreement on May 1, 2002. The employment
agreement is for a three-year  term,  whereby Ms.  Cooper's salary is $6,500 per
month. Under the terms of the agreement,  Ms. Cooper is entitled to 12 months of
severance pay, payable in monthly  installments  over 12 months from the date of
termination.  The Company may discontinue  the severance  payments if Ms. Cooper
violates the confidentiality provision of her employment agreement.


Note 11 - Supplemental Oil and Gas Disclosures
----------------------------------------------

The  following  is a  summary  of  costs  incurred  in  oil  and  gas  producing
activities:

Included below is the Company's investment and activity in oil and gas producing
activities,  which  includes a  proportionate  share of ZAO Goloil's oil and gas
properties, revenues, and costs.

                                                                For the Years Ended
                                                                    December 31,
                                                            ---------------------------
                                                               2003             2002
                                                            -----------     -----------

Property acquisition costs                                  $        -      $        -
Construction in progress                                      1,700,696              -
Development costs                                             5,207,931       4,150,742
                                                            -----------     -----------

Total                                                       $ 6,908,627     $ 4,150,742
                                                            ===========     ===========

The following reflects the Company's capitalized costs associated with oil and gas
producing activities:

                                                                For the Years Ended
                                                                    December 31,
                                                            ---------------------------
                                                               2003             2002
                                                            -----------     -----------

Property acquisition costs                                  $   595,558     $   595,558
Construction in progress                                      1,700,696              -
Development costs                                            10,808,813       4,830,421
                                                            -----------     -----------
                                                             13,105,067       5,425,979
Accumulated depreciation, depletion, amortization and
 valuation allowances                                        (2,064,585)       (529,671)
                                                            -----------     -----------

Net capitalized costs                                       $11,040,482     $ 4,896,308
                                                            ===========     ===========

Results of Operations from Oil and Gas Producing Activities
-----------------------------------------------------------

Results of operations from oil and gas producing  activities  (excluding general
and administrative expense, and interest expense) are presented as follows:

                                                                For the Years Ended
                                                                    December 31,
                                                            ---------------------------
                                                               2003             2002
                                                            -----------     -----------

Oil and gas sales                                           $11,437,802     $ 6,923,320
Oil and gas production                                       (2,020,447)     (1,218,411)
Transportation and marketing                                   (807,266)       (611,956)
Export duties                                                (1,492,999)       (910,936)
Taxes other than income taxes                                (5,864,920)     (3,537,990)
Depletion, depreciation and amortization                     (1,534,914)       (451,930)
                                                            -----------     -----------

Results of operations from oil and gas producing
activities                                                  $  (282,744)    $   192,097
                                                            ===========     ===========

Reserves (Unaudited) - Base Case
--------------------------------

Proved oil and gas reserves are the estimated  quantities of crude oil,  natural
gas, and natural gas liquids which  geological and engineering  data demonstrate
with  reasonable  certainty  to  be  recoverable  in  future  years  from  known
reservoirs under existing economic and operating conditions.  Proved development
oil and gas  reserves  are  those  reserves  expected  to be  recovered  through
existing wells with existing equipment and operating  methods.  The reserve data
is based on studies prepared by an independent engineer.  All proved reserves of
oil and gas are located in Russia.

See Note 10 to the  financial  statements  for a full  discussion of the dispute
with RussNeft.  As the outcome of this dispute cannot be predicted at this time,
the Company has prepared two separate  proved oil reserve cases:  the "Base Case
SEC reserves and Cash Flow  Projections" and the "Alternate Case". The Base Case
assumes  that the  Company is not  successful  in it's  dispute  with  RussNeft,
accordingly,  the price received for oil is set at 2,400 rubles per ton ($11 per
barrel) and the  production  payment is deducted  assuming 19 million rubles per
month ($645,000 per month less VAT). The Alternate Case assumes that the Company
is  successful  in the  dispute  and that  RussNeft  and Goloil  would honor all
pre-existing  agreements.  In the Base Case, future cash flows are substantially
less than in the Alternate Case, however oil reserves  quantities are greater as
a result  of  payout  being  delayed  and how the  production  payment  is being
calculated.  Management has elected to report the lower, alternate case reserves
as its oil reserves.

                                                                For the Years Ended
                                                                    December 31,
                                                            ---------------------------
                                                               2003             2002
                                                            -----------     -----------

Proved reserves (bbls), beginning of period                  13,264,000      40,174,000
Production                                                     (632,000)       (471,000)
Extension of reservoir                                               -        2,000,000
Revisions of previous estimates                              (4,370,000)    (28,439,000)
                                                            -----------     -----------

Proved reserves (bbls), end of period                         8,262,000      13,264,000
                                                            ===========     ===========

Proved developed reserves (bbls), beginning of period         4,567,000       5,493,000
                                                            ===========     ===========

Proved developed reserves (bbls), end of period               3,816,000       4,567,000
                                                            ===========     ===========

Standardized Measure of Discounted Future Net Cash Flows (Unaudited)
--------------------------------------------------------------------

SFAS No. 69 prescribes guidelines for computing a standardized measure of future
net cash flows and changes therein relating to estimated  proved  reserves.  The
Company has followed these guidelines, which are briefly discussed below.

Future cash inflows and future  production and development  costs are determined
by applying year-end prices and costs to the estimated quantities of oil and gas
to be  produced.  Estimated  future  income  taxes are  computed  using  current
statutory  income tax rates for those countries  where  production  occurs.  The
resulting future net cash flows are reduced to present value amounts by applying
a 10% annual discount factor.

The assumptions used to compute the standardized measure are those prescribed by
the  Financial  Accounting  Standards  Board and,  as such,  do not  necessarily
reflect the Company's  expectations for actual revenues to be derived from those
reserves  nor their  present  worth.  The  limitations  inherent  in the reserve
quantity estimation process, as discussed previously,  are equally applicable to
the standardized  measure  computations  since these estimates are the basis for
the valuation process.

The following  summarizes the Base Case standardized  measure and sets forth the
Company's future net cash flows relating to proved oil and gas reserves based on
the  standardized  measure  prescribed  in  Statement  of  Financial  Accounting
Standards  No. 69 assuming  the Company is not  successful  in it's dispute with
RussNeft.

                                                                For the Years Ended
                                                                   December 31,
                                                            ---------------------------
                                                               2003            2002
                                                            -----------     -----------

Future cash inflows                                        $ 114,992,000   $ 230,581,000
Future production costs                                      (80,812,000)   (151,167,000)
Future development costs                                     (14,595,000)    (18,556,000)
Future income tax expense                                     (7,360,000)    (16,365,000)
                                                           -------------   -------------
Future net cash flows (undiscounted)                          12,225,000      44,493,000
Annual discount of 10% for estimated timing of cash
flows                                                         (6,232,000)    (19,069,000)
                                                           -------------   -------------

Standardized measure of future net discounted cash flows   $   5,993,000   $  25,424,000
                                                           =============   =============

Changes in Standardized Measure Base Case (Unaudited)
-----------------------------------------------------

The following are the principal sources of change in the standardized measure of
discounted future net cash flows:

                                                                For the Years Ended
                                                                   December 31,
                                                            ---------------------------
                                                               2003            2002
                                                            -----------     -----------

Standardized measure, beginning of period,                 $  25,424,000   $  40,362,000
Net changes in prices and production costs                   (11,483,000)    189,975,000
Future development costs                                      (3,098,000)     22,344,000
Revisions of previous quantity estimates                     (11,806,000)   (274,605,000)
Extension of reservoir                                                -       19,867,000
Accretion of discount                                          2,542,000       4,036,000
Changes in income taxes, net                                   4,414,000      23,445,000
                                                           -------------   -------------

Standardized measure, end of period, 2003 and 2002         $   5,993,000   $  25,424,000
                                                           =============   =============

Reserves (Unaudited) - Alternate Case

The following summary sets forth the Company's future net cash flows relating to
proved oil and gas reserves  based on the  standardized  measure  prescribed  in
Statement of Financial Accounting Standards No. 69 and assuming that the Company
is successful in resolving its dispute with RussNeft, the Alternate Case.

                                                                For the Years Ended
                                                                   December 31,
                                                           -----------------------------
                                                               2003            2002
                                                           -------------   -------------

Future cash inflows                                        $ 175,631,000   $ 230,581,000
Future production costs                                     (104,257,000)   (151,167,000)
Future development costs                                     (14,595,000)    (18,556,000)
Future income tax expense                                    (15,567,000)    (16,365,000)
                                                           -------------   -------------
Future net cash flows (undiscounted)                          41,212,000      44,493,000
Annual  discount  of 10% for  estimated  timing  of cash
flows                                                        (17,560,000)    (19,069,000)
                                                           -------------   -------------

Standardized measure of future net discounted cash flows   $  23,652,000   $  25,424,000
                                                           =============   =============

Changes in Standardized Measure (Unaudited)
-------------------------------------------

The following are the principal sources of change in the standardized measure of
discounted future net cash flows:

                                                                For the Years Ended
                                                                   December 31,
                                                           -----------------------------
                                                               2003            2002
                                                           -------------   -------------

Standardized measure, beginning of period,                 $  25,424,000   $  40,362,000
Net changes in prices and production costs                    50,949,000     189,975,000
Future development costs                                      (3,098,000)     22,344,000
Revisions of previous quantity estimates                     (52,623,000)   (274,605,000)
Extension of reservoir                                                -       19,867,000
Accretion of discount                                          2,542,000       4,036,000
Changes in income taxes, net                                     458,000      23,445,000
                                                           -------------   -------------

Standardized measure, end of period, 2003 and 2002         $  23,652,000   $  25,424,000
                                                           =============   =============


Note 12 - Fourth Quarter Adjustments
------------------------------------

The following  significant  adjustments  were recorded by the Company during the
fourth quarter of 2003:

Depletion, amortization and amortization                    $   919,744
Exploration expenses                                            275,416
Imputed preferred stock dividends for inducements and
 beneficial conversion charges                                2,762,137
                                                            -----------

Total impact on loss applicable to common stockholders      $ 3,957,297
                                                            ===========

As described in Note 10 to these financial statements,  the operations of Goloil
have had some  significant  management  changes that have affected the operating
results of Goloil during the fourth quarter. The effects of these changes can be
seen  in the  accompanying  table  reflecting  the  fourth  quarter  results  of
operations.

                                                              Fourth
                                                              Quarter
                                                               2003
                                                           -----------
Sales, Barrels                                                  150,938
Average Daily Sales, Barrels                                      1,654
Average Selling Price, $/barrel                             $     15.45

Revenues                                                    $ 2,332,464

Costs of Sales and Expenses, excl. DD&A
Production Costs                                                563,590
Transportation & Marketing                                        6,061
Taxes other than Income taxes                                 1,700,920
Export Duties                                                        -
                                                           ------------

Results from Goloil Operations, before DD&A                      61,889
Less General & Administrative Expense, Goloil                   188,229
                                                            -----------
Goloil operating (loss) income before DD&A                     (126,340)

Depreciation, Depletion & Amortization, Goloil                  919,744
                                                            -----------

Operating loss, Goloil                                       (1,046,084)

General & Administrative Expense, Teton                       1,244,063
                                                            -----------

Operating Loss, Teton                                       $(2,290,147)
                                                            ===========


                                        APPENDIX A-3

                 UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION AS OF
                                       MARCH 31, 2004



          Unaudited Pro Forma Condensed Financial Information as of March 31, 2004


Introduction

The following unaudited pro forma condensed  financial  information gives effect
to the sale of Teton Petroleum Company's (the "Company") entire interest (35.30%
of the outstanding ordinary shares of stock) in the Siberian-Texan  Closed Joint
Stock Company Goloil  ("Goloil").  These pro forma  statements are presented for
illustrative  purposes only. The pro forma  adjustments are based upon available
information and assumptions that the Company believes to be reasonable.

The  unaudited  pro  forma  condensed  balance  sheet as of March  31,  2004 was
prepared  by using  the  historical  cost  consolidated  balance  sheet  for the
Company, giving effect to the repayment of all loans outstanding and the related
sale of our entire equity interest of Goloil (35.30% of the outstanding  shares)
as if closing had occurred on March 31, 2004.

The unaudited pro forma  condensed  statement of operations for the three months
ended March 31, 2004 and for the year ended  December 31, 2003 were  prepared by
using the  historical  consolidated  statement of operations for the Company and
then reclassifying the operations of Goloil as discontinued  operations and then
recording the gain on sale assuming the sale had occurred on March 31, 2004 as a
component of discontinued operations.

These pro forma condensed financial  statements do not purport to represent what
the results of  operations or financial  position of the Company would  actually
have been if the  repayment  of  outstanding  loans and the related  sale of the
Company's  interest in Goloil had occurred on the dates referred to above nor do
they purport to project the results of operations  or financial  position of the
Company for any future period or as of any date, respectively.



                             Teton Petroleum Company
                             Pro Forma Balance Sheet
                               As of March 31, 2004

                                    Historical  Pro forma adjustments   Pro forma
                                                ----------------------
                                      Amounts      Loan      Sale of   After Sale
                                                Repayment   investment
                                       (1)         (2)         (3)
                                   ------------------------------------------------
Assets
Current assets:
  Cash                              $ 7,856,899   $ 5,101,422   $ 7,664,640   $20,622,961
  Proportionate share of Goloil
   accounts receivable                   16,538            -        (16,538)           -
  Proportionate share of Goloil
   VAT receivable and
   other receivables                  1,756,637            -     (1,755,109)       1,528
  Proportionate share of Goloil
   inventory                            622,981            -       (622,981)           -

  Prepaid expenses and other assets      72,271            -             -         72,271
                                   ------------------------------------------------------

         Total current assets        10,325,326     5,101,422     5,270,012    20,696,760
                                   ------------------------------------------------------

Non-current assets:
  Oil and gas properties, net
   (successful efforts)               8,564,084    (5,101,422)   (3,462,662)           -
  Co-generation plant construction
   in progress                        1,758,620            -     (1,758,620)           -
  Fixed assets, net                     484,642            -       (458,274)       26,368
                                   ------------------------------------------------------
          Total non-current assets   10,807,346    (5,101,422)   (5,679,556)       26,368
                                   ------------------------------------------------------

Total assets                        $21,132,672   $        -       (409,544)  $20,723,128
                                   ======================================================

Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable and accrued
   liabilities                      $   732,261   $        -    $        -    $   732,261
  Proportionate share of Goloil
   accounts payable and
   accrued liabilities                4,059,089            -     (4,059,089)           -
  Current portion of proportionate
   share of notes payable owed
   to affiliate                       8,219,652            -     (8,219,652)           -
                                   ------------------------------------------------------
       Total current liabilities     13,011,002            -    (12,278,741)      732,261

Non-current liabilities
  Asset retirement obligation           129,500            -       (129,500)           -
                                   ------------------------------------------------------
       Total liabilities             13,140,502            -    (12,408,241)      732,261
                                   ------------------------------------------------------

Commitments and contingencies

Stockholders' equity:
  Series A convertible preferred
   stock                                    270            -             -            270
  Common stock                            9,101            -             -          9,101
  Additional paid-in capital         37,548,890            -             -     37,548,890
  Unamortized preferred stock
   dividends                                 -             -             -             -
  Accumulated deficit               (30,179,691)           -     12,612,297   (17,567,394)
  Foreign currency translation
   adjustment                           613,600            -       (613,600)           -
                                   ------------------------------------------------------
      Total stockholders' equity      7,992,170            -     11,998,697    19,990,867
                                   ------------------------------------------------------

Total liabilities and
stockholders' equity                $21,132,672   $        -       (409,544)  $20,723,128
                                   ======================================================



                           Teton Petroleum Company
                     Pro Forma Statements of Operations
                  For the three months ended March 31, 2004

                                  Historical        Pro forma adjustments      Pro Forma
                                                  -------------------------
                                  Amounts (1)      Eliminate      Record       After Sale
                                                   Goloil (4)     Gain (3)
                                  -------------------------------------------------------

Sales                               $ 2,962,500   $(2,962,500)  $        -    $        -
                                  -------------------------------------------------------
Cost of sales and expenses:
  Oil and gas production                622,277      (622,277)           -             -
  Transportation and marketing               -             -             -             -
  Taxes other than income taxes       1,973,275    (1,973,275)           -             -
  Exploration                           154,776      (154,776)           -             -
  General and
   administrative-Goloil                184,086      (184,086)           -             -
  General and administrative-Teton    2,102,638            -             -      2,102,638
  Depreciation, depletion and
   amortization                         409,670      (407,851)           -          1,819
                                  -------------------------------------------------------
     Total cost of sales
      and expenses                    5,446,722    (3,342,265)           -      2,104,457
                                  -------------------------------------------------------

Income (loss) from operations
                                     (2,484,222)      379,765            -     (2,104,457)
                                  -------------------------------------------------------

Other income (expense)
  Other income                           17,640            -             -         17,640
  Gain on sale of ZAO Goloil                 -             -             -             -
  Interest expense                      (55,531)       55,531            -             -
  Financing charges                          -                           -             -
                                  -------------------------------------------------------
     Total other income
      (expense)                         (37,891)       55,531            -         17,640
                                  -------------------------------------------------------

Net income (loss) from continuing
operations, before taxes             (2,522,113)      435,296            -     (2,086,817)

Foreign income tax                           -             -             -             -
                                  -------------------------------------------------------

Income (loss) from continuing
operations                           (2,522,113)      435,296            -     (2,086,817)

Imputed preferred stock dividends
 for inducements and
 beneficial conversion charges         (521,482)                                 (521,482)

Preferred stock dividend                (31,488)           -             -        (31,488)
                                  -------------------------------------------------------
  Net income (loss) from
   continuing operations
   applicable to common stock        (3,075,083)      435,296            -     (2,639,787)

Discontinued operations, net of
 tax                                         -       (435,296)   12,612,297    12,177,001

Net income (loss) applicable to
 common stock                        (3,075,083)           -     12,612,297     9,537,214

Other comprehensive income, net
 of tax effect of exchange rates       (285,156)           -       (613,600)     (898,756)
                                  -------------------------------------------------------

Comprehensive income (loss)         $(3,360,239)  $        -    $11,998,697   $ 8,638,458
                                  =======================================================

Basic and diluted weighted
 average common shares outstanding    8,747,165   $        -         -          8,747,165
                                  =======================================================

Basic and diluted income (loss)
 per common share
 for continuing operations                (0.35)                                    (0.30)
                                  =============                               ===========

Basic and diluted income (loss)
 per common share
 for discontinued operations                 -                                       1.39
                                  =============                               ===========

Basic and diluted income (loss)
 per common share                   $     (0.35)                                     1.09
                                  =============                               ===========



                      Teton Petroleum Company
                 Pro Forma Statements of Operations
                For the year ended December 31, 2003

                                          ----------------
                                Historical   Eliminate        Pro Forma
                                Amounts(1)    Goloil(4)      After Sale
                                ----------------------------------------

Sales                           $11,437,802   $(11,437,802)   $       -
                                ----------------------------------------
Cost of sales and expenses
  Oil and gas production          2,020,447     (2,020,447)           -
  Transportation and marketing      807,266       (807,266)           -
  Taxes other than income taxes   5,864,920     (5,864,920)           -
  Export duties                   1,492,999     (1,492,999)           -
  General and
   administrative-Goloil            837,134       (837,134)           -
  General and
   administrative-Teton           3,919,746             -      3,919,746
  Depreciation, depletion and
   amortization                   1,582,513     (1,581,468)        1,045
                                ----------------------------------------
     Total cost of sales
      and expenses               16,525,025    (12,604,234)    3,920,791
                                ----------------------------------------

Income (loss) from operations
                                 (5,087,223)     1,166,432    (3,920,791)
                                ----------------------------------------

Other income (expense)
  Other income                       17,445             -         17,445
  Interest expense                 (347,740)       347,740            -
  Financing charges                (132,818)                    (132,818)
                                ----------------------------------------
    Total other income
     (expense)                     (463,113)       347,740      (115,373)
                                ----------------------------------------

Net income (loss) from
 continuing operations, before
 taxes                           (5,550,336)     1,514,172    (4,036,164)

Foreign income tax                  (84,508)        84,508            -
                                ----------------------------------------

Income (loss) from continuing
 operations                      (5,634,844)     1,598,680    (4,036,164)

Imputed preferred stock
 dividends for inducements and
 beneficial conversion charges   (2,780,693)            -     (2,780,693)
                                ----------------------------------------

Net income (loss) from
 continuing operations
 applicable to common shares     (8,415,537)     1,598,680    (6,816,857)

Discontinued operations, net of
 tax                                     -      (1,598,680)   (1,598,680)

Net income (loss) applicable to
 common shares                   (8,415,537)            -     (8,415,537)

Other comprehensive income, net
 of tax
 Effect of exchange rates           168,256             -        168,256
                                ----------------------------------------

Comprehensive income (loss)     $(8,247,281)  $         -    $(8,247,281)
                                ========================================

Basic and diluted weighted
 average common
 shares outstanding               6,840,303      6,840,303     6,840,303
                                ========================================

Basic and diluted income (loss)
 per common share
 for continuing operations      $     (1.23)                  $    (1.00)
                                ===========                   ==========

Basic and diluted income (loss)
 per common share
 for discontinued operations    $        -                    $    (0.23)
                                ===========                   ==========

Basic and diluted income (loss)
 per common share               $     (1.23)                  $    (1.23)
                                ===========                   ==========




           Notes to Unaudited Pro Forma Balance Sheet and Statement of Operations

1.   Reflects the historical financial statement balances,  as of March 31, 2004
     and for the  three  months  ended  March  31,  2004 and for the year  ended
     December 31, 2003 as filed by the Company on Forms 10-Q and 10-KSB.

2.   To reflect the repayment of all outstanding  loans and accrued  interest as
     of March 31, 2004.

     Because these loans are reflected as part of the Company's  investment  and
     will only be repaid through the future  production or sale of the Company's
     oil and gas properties,  the repayment has been reflected as a reduction of
     the carrying value of oil and gas properties.

3.   To record the disposal of Goloil  assuming  the sale  occurred on March 31,
     2004  reflecting the  elimination of all assets and  liabilities of Goloil,
     the proceeds  received  from the sale of the Company's  equity  interest in
     Goloil and to record the related gain from disposal.


The proceeds and gain from disposal are determined as follows:

   Sale price for Goloil shares                $8,960,229
   Less direct transaction expenses:
         Commission                              (750,000)
         Legal and accounting                    (250,000)
                                                ---------
   Net proceeds before taxes                    7,960,229

   Estimated alternative minimum taxes           (181,000)
   due

   Net proceeds after taxes                    $7,779,229

   Investment in net assets of Goloil:
         Net assets before loan repayment       $ 881,954
         Repayment of outstanding loans        (5,101,422)
                                              -----------
   Net assets (deficit) of Goloil              (4,219,468)

   Gain on disposal of subsidiary            $ 11,998,697
   Plus reclassifications of translation          613,600
                                                  -------
   gain on disposal
   Gain on disposal net of taxes             $ 12,612,297


   Net proceeds after taxes                    $7,779,229
   Elimination of Goloil cash at March           (114,589)
   31, 2004
   Net pro forma adjustment to cash
   balances at March 31, 2004                  $7,664,640
                                               ==========


4.   To reclassify the results of Goloil as discontinued operations for the year
     ended December 31, 2003.



                                         APPENDIX B

                         2004 NON-EMPLOYEE STOCK COMPENSATION PLAN

1.    PURPOSE

The purpose of the Teton Petroleum Company 2004 Non-Employee  Stock Compensation
Plan (the "Plan") is to promote the  interests of Teton  Petroleum  Company (the
"Company")  and its  stockholders  by allowing the Company to attract and retain
consultants,  professionals,  and service  providers who provide services to the
Company  ("Eligible  Persons")  in  connection  with,  among other  things,  the
Company's obligations as a publicly held reporting company. The Plan is expected
to  contribute  to  the  attainment  of  these   objectives  by  increasing  the
proprietary  interest of the Eligible  Persons in the growth and  performance of
the Company  through the grant to such  persons of shares of Common  Stock,  par
value $0.001 per share  ("Shares"),  of the Company,  the grant to such Eligible
Persons of Shares  which are  restricted  as  provided in Section 5 of this Plan
("Restricted Shares").

2.    ADMINISTRATION

The Plan  shall be  administered  by the  Company's  Board of  Directors  or the
Compensation Committee (collectively referred to as the "Board"). Subject to the
provisions of the Plan,  the Board shall be authorized to interpret the Plan; to
establish, amend and rescind any rules and regulations relating to the Plan; and
to make all determinations  necessary or advisable for the administration of the
Plan.  The  determinations  of the Board in the  administration  of the Plan, as
described  herein,  shall be final and  conclusive.  Each of the Chief Executive
Officer or the Chief Financial Officer and the Secretary of the Company shall be
authorized to implement  the Plan in accordance  with its terms and to take such
actions of a ministerial  nature as shall be necessary to effectuate  the intent
and purposes of the Plan. The validity,  construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware.

3.    ELIGIBILITY

The class of individuals  eligible to receive  Restricted  Shares (the "Awards")
under the Plan, shall be persons who are not employees,  affiliates,  Directors,
officers,  or  associates  of the  Company or any of its  affiliates  ("Eligible
Persons").  Any holder of an Award granted under the Plan shall  hereinafter  be
referred to as a "Participant,"  an "Awardee," or collectively as "Participants"
or "Awardees."

4.    SHARES SUBJECT TO THE PLAN

     (a) Subject to adjustment  as provided in Section 6, the maximum  number of
Shares that may be delivered to  Participants  under the Plan shall be 1,000,000
Shares;  provided,  however,  that the maximum  number of Shares of Common Stock
with  respect to which Awards may be granted to any  participant  in any year is
500,000 Shares.  The Shares to be delivered under the Plan may consist of either
Shares authorized and reserved for the Plan or Shares  subsequently  acquired by
the Company as treasury Shares, including Shares purchased in the open market or
in private transactions.

     (b) In the  event  that  prior  to the date the  Plan  shall  terminate  in
accordance with Section 10, any Award granted under the Plan expires unexercised
or unvested or is terminated,  surrendered or cancelled  without the delivery of
Shares,  or any Restricted  Shares are forfeited  back to the Company,  then the
Shares subject to such Award may be made  available for subsequent  Awards under
the terms of the Plan.

5.    GRANT, TERMS AND CONDITIONS OF RESTRICTED SHARES

     (a) The Board may from time to time grant Restricted  Shares under the Plan
to Eligible Persons, subject to such restrictions, conditions and other terms as
the Board may determine.  At the time a grant of Restricted  Shares is made, the
Board shall  determine  the  duration of the period  (the  "Restricted  Period")
during which, and the conditions  under which, the Restricted  Shares shall vest
and no longer be subject to  forfeiture  to the  Company.  The Board may, in its
discretion,  at the  time a  grant  of  Restricted  Shares  is  made,  prescribe
restrictions  in  addition  to or other than the  expiration  of the  Restricted
Period.

     (b) The Restricted  Shares granted under this Plan shall have the following
terms and conditions:

          (i) Nontransferability of Restricted Shares. Restricted Shares may not
     be assigned,  alienated,  pledged, attached, sold or otherwise transferred,
     encumbered or disposed of during the applicable  Restricted Period or prior
     to the satisfaction of any other restrictions  prescribed by the Board with
     respect  to  such  Restricted   Shares.   Notwithstanding   the  foregoing,
     Restricted  Shares may be  transferred  pursuant  to a  qualified  domestic
     relations  order, as defined in Section 414(p) of the Internal Revenue Code
     of 1986, as amended, or any successor provision.

          (ii) Termination of Service as Eligible Person.  Any Restricted Shares
     granted to a  Participant  pursuant to this Plan shall be  forfeited if the
     Participant  terminates  service as a  consultant  to the  Company  for any
     reason  other than death or total  disability  prior to the  expiration  or
     termination of the applicable Restricted Period and the satisfaction of any
     other  conditions   applicable  to  such  Restricted   Shares.   Upon  such
     forfeiture, the Chief Executive Officer, the Chief Financial Officer or the
     Secretary  of the  Company  shall  cause  the  Restricted  Shares  that are
     forfeited  to the  Company to be either  cancelled  or retained as treasury
     Shares.  If a  Participant  shall die while serving as a consultant or if a
     Participant's  service as a consultant to the Company ceases as a result of
     the  Participant's   becoming  totally   disabled,   all  restrictions  and
     conditions  applicable  to the  Restricted  Shares held by the  Participant
     shall immediately lapse.

          (iii) Change of Control.  Upon the  occurrence of a Change of Control,
     all restrictions and conditions applicable to the Restricted Shares held by
     Participants  shall  immediately  lapse.  "Change in Control"  shall mean a
     merger or  consolidation  in which  securities  possessing  more than fifty
     percent  (50%)  of  the  total  combined  voting  power  of  the  Company's
     outstanding  securities are  transferred  to a person or persons  different
     from  the  persons  holding  those  securities  immediately  prior  to such
     transaction,  or  the  sale,  transfer  or  other  disposition  of  all  or
     substantially all of the Company's assets to a non-Affiliate of the Company
     (other than a sale to the Open-Joint Stock Oil and Gas Company RussNeft).

          (iv) Award Agreement.  Each grant of Restricted Shares under this Plan
     shall be evidenced by an agreement  with the Company,  which shall  contain
     the terms and  conditions of the Restricted  Shares and shall  otherwise be
     consistent with the provisions of this Plan.

     (c) If the Board deems it necessary or appropriate,  the Company may issue,
in the name of each Participant to whom Restricted Shares have been granted, one
or more stock  certificates  representing the total number of Restricted  Shares
granted  to the  Participant;  provided  that such  stock  certificates  bear an
appropriate  legend  or other  restriction  on  transfer.  The  Chief  Executive
Officer,  the Chief Financial Officer or the Secretary of the Company shall hold
such stock certificates,  properly endorsed for transfer,  for the Participant's
benefit until such time as the  Restricted  Shares are forfeited to the Company,
or the applicable  Restricted Period expires and any other conditions applicable
to the Restricted Shares are satisfied.

     (d)  Holders  of  Restricted  Shares  shall not have the right to vote such
Restricted  Shares or the right to receive any  dividends  with  respect to such
Restricted  Shares.  All  distributions,  if any, received by a Participant with
respect  to  Restricted  Shares  as a  result  of  any  split-up,  distribution,
combination of shares, or other similar transaction  affecting the Shares, shall
be subject to the restrictions of this Section 5.

     (e) Upon the expiration or termination of the applicable  Restricted Period
and the  satisfaction  of any other  conditions  prescribed  by the  Board,  the
restrictions  applicable  to the  Restricted  Shares  shall  lapse  and a  stock
certificate  for or other  appropriate  documentation  evidencing  the number of
Restricted  Shares with respect to which the  restrictions  have lapsed shall be
delivered, free of all such restrictions, to the Eligible Person or the Eligible
Person's beneficiary or estate, as the case may be.

6.    ADJUSTMENT AND CHANGES IN SHARES

If,  after  the  Effective  Date,  there is a Share  dividend  or  Share  split,
recapitalization  (including  payment  of an  extraordinary  dividend),  merger,
consolidation,  combination,  spin-off,  distribution of assets to stockholders,
exchange of shares, or other similar corporate change affecting the Shares,  the
Board shall  appropriately  adjust the aggregate  number of Shares available for
Awards under the Plan or subject to outstanding  Awards,  and any other factors,
limits or terms affecting any outstanding or subsequently issuable Awards as may
be appropriate.

7.    PLAN AMENDMENT AND TERMINATION

The Plan shall  automatically  terminate on the tenth  anniversary of the Plan's
Effective  Date. The Board may terminate,  suspend or amend the Plan at any time
without stockholder  approval except to the extent that stockholder  approval is
required to satisfy applicable  requirements imposed by (a) Rule 16b-3 under the
Exchange  Act,  or any  successor  rule or  regulation;  or (b) the rules of any
exchange on or through  which the Shares are then listed or traded.  If the Plan
is terminated,  the terms of the Plan,  notwithstanding such termination,  shall
continue to apply to Awards granted prior to such termination.

8.    APPLICABLE LAW AND REGISTRATION

The  grant  of  Awards  and the  issuance  of  Shares  shall be  subject  to all
applicable  laws,   rules  and  regulations,   and  to  such  approvals  of  any
governmental  agencies or  exchanges  as may be  required.  Notwithstanding  the
foregoing,  no Shares  shall be issued  under the Plan  unless  the  Company  is
satisfied that such issuance will be in compliance with  applicable  federal and
state securities laws.  Shares issued under the Plan may be subject to such stop
transfer orders and other restrictions as the Board may deem advisable under the
rules,  regulations  and  other  requirements  of the  Securities  and  Exchange
Commission,  any  exchange  on or through  which the  Shares are then  listed or
traded, or any applicable federal or state securities law. The Board may cause a
legend or legends to be placed on any certificates issued under the Plan to make
appropriate  reference  to  restrictions  within the scope of this  Section 8 or
other provisions of the Plan.

9.    TAX CONSEQUENCES

The 2004 Non Employee Compensation Plan is not qualified under Section 401(a) of
the Code.

Stock  awarded  to an  Awardee  may be  subject  to any  number of  restrictions
(including  deferred  vesting,  limitations  on  transfer,  and  forfeitability)
imposed by the Board. In general,  the receipt of stock with  restrictions  will
not result in the  recognition  of income by an  Awardee  until such time as the
shares are either not forfeitable or are freely transferable.

10.   EFFECTIVE DATE AND DURATION OF PLAN

The Plan shall  become  effective on the date of the adoption of the Plan by the
Board and the  Shareholders  ("Effective  Date").  Subject to the  provisions of
Section 7, the Plan shall continue until the tenth  anniversary of the Effective
Date unless the Plan is terminated  by  exhaustion  of the Shares  available for
issuance under the Plan.


                                         APPENDIX C

                                  AUDIT COMMITTEE CHARTER

Organization

This charter governs the operations of the audit committee.  The committee shall
review and reassess the charter at least annually and obtain the approval of the
Board. The committee shall be appointed by the Board and shall comprise at least
two  Directors,  each of whom is  independent  of  management  and the  Company.
Members  of the  committee  shall  be  considered  independent  if they  have no
relationship  that may interfere  with the exercise of their  independence  from
management and the Company. All committee members shall be financially literate,
or shall become  financially  literate within a reasonable  period of time after
appointment  to the committee  and at least one member shall have  accounting or
related financial management expertise.

Statement of Policy

The audit  committee shall provide  assistance to the Board in fulfilling  their
oversight  responsibility  to  the  stockholders,  potential  stockholders,  the
investment community,  and others relating to the Company's financial statements
and the financial  reporting  process,  the systems of internal  accounting  and
financial  controls,  the annual  independent  audit of the Company's  financial
statements,  and the legal  compliance  and ethics  programs as  established  by
management and the board. In so doing, it is the responsibility of the committee
to  maintain  free and open  communication  between the  committee,  independent
auditors and management of the Company.  In discharging  its oversight role, the
committee is empowered to  investigate  any matter brought to its attention with
full access to all books, records,  facilities, and personnel of the Company and
the power to retain outside counsel, or other experts for this purpose.

Responsibilities and Processes

The primary  responsibility  of the audit  committee is to oversee the Company's
financial  reporting  process on behalf of the board and  report the  results of
their  activities  to the board.  Management  is  responsible  for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing  those  financial  statements.   The  committee  in  carrying  out  its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing  conditions  and  circumstances.  The  committee
should  take the  appropriate  actions to set the overall  corporate  "tone" for
quality  financial  reporting,   sound  business  risk  practices,  and  ethical
behavior.

The following shall be the principal  recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide  with  the  understanding  that  the  committee  may  supplement  them  as
appropriate.

o    The committee  shall have a clear  understanding  with  management  and the
     independent   auditors  that  the   independent   auditors  are  ultimately
     accountable to the board and the audit committee, as representatives of the
     Company's stockholders. The committee shall have the ultimate authority and
     responsibility to evaluate and, where appropriate,  replace the independent
     auditors.  The committee shall discuss with the auditors their independence
     from  management  and the Company  and the matters  included in the written
     disclosures  required by the Independence  Standards Board.  Annually,  the
     committee  shall  review and  recommend  to the board the  selection of the
     Company's independent auditors, subject to stockholders' approval.

o    The committee shall discuss with the independent auditors the overall scope
     and plans for their  respective  audits  including the adequacy of staffing
     and compensation. Also, the committee shall discuss with management and the
     independent  auditors the adequacy and  effectiveness of the accounting and
     financial  controls,  including the Company's  system to monitor and manage
     business  risk, and legal and ethical  compliance  programs.  Further,  the
     committee shall meet separately  with the  independent  auditors,  with and
     without management present, to discuss the results of their examinations.

o    The committee shall review the interim financial statements with management
     and the independent auditors prior to the filing of the Company's Quarterly
     Report on Form 10-Q.  Also, the committee  shall discuss the results of the
     quarterly  review and any other matters  required to be communicated to the
     committee by the  independent  auditors under generally  accepted  auditing
     standards.  The chair of the committee  may represent the entire  committee
     for the purposes of this review.

o    The committee shall review with management and the independent auditors the
     financial  statements to be included in the Company's Annual Report on Form
     10-K (or the annual  report to  stockholders  if  distributed  prior to the
     filing of Form 10-K),  including their judgment about the quality, not just
     acceptability,  of accounting principles, the reasonableness of significant
     judgments,  and the clarity of the disclosures in the financial statements.
     Also,  the committee  shall discuss the results of the annual audit and any
     other  matters  required  to  be  communicated  to  the  committee  by  the
     independent auditors under generally accepted auditing standards.



                                         APPENDIX D

                               COMPENSATION COMMITTEE CHARTER

1. PURPOSE

The Executive  Compensation  Committee  ("Committee")  shall assist the Board of
Directors  in  the  discharge  of  its  responsibilities  with  respect  to  the
compensation of the Corporation's  outside Directors,  executive  officers,  and
other key employees, and for such purpose shall review compensation arrangements
for the  Corporation's  executive  officers and administer all employee  benefit
plans, including any equity incentive plan adopted by the Corporation.

The  Committee  is  authorized  to  approve  the  compensation  payable  to  the
Corporation's   executive   officers  and  other  key  employees,   approve  all
perquisites,  equity incentive awards, and special cash payments made or paid to
the  Corporation's  executive  officers  and other key  employees,  and  approve
severance  packages with cash and/or  equity  components  for the  Corporation's
executive officers and other key employees.

2. COMPOSITION OF THE EXECUTIVE COMPENSATION COMMITTEE

The Committee shall consist of not less than two Directors each of whom shall be
an  independent   director  under  American  Stock  Exchange   ("AMEX")  listing
standards,  a "nonemployee director" within the meaning of Rule 16b-3 issued the
Securities and Exchange Commission ("SEC"), and an "outside director" within the
meaning of  Section  162(m) of the  Internal  Revenue  Code,  as  amended.  Each
appointed Committee member shall be subject to annual  reconfirmation and may be
removed by the Board at any time.

3. RESPONSIBILITIES AND DUTIES

In carrying out the purpose and  authorities  set forth in Section 1 above,  the
Committee shall:

A.   Executive Officer Compensation.  Review and approve the corporate goals and
     objectives   relevant  to  the  compensation  of  the  Corporation's  Chief
     Executive  Officer  ("CEO")  and other  executive  officers,  evaluate  the
     officers'  performance in light of those goals and objectives,  and set the
     officers' compensation level based on this evaluation;

B.   Significant Officer Contracts.  Review and approve  significant  employment
     agreements,   arrangements,   or  transactions  with  executive   officers,
     including any arrangements having any compensatory effect or purpose;

C.   Director  Compensation.  Review  and  recommend  to the  Board  appropriate
     director  compensation   programs  for  service  as  Directors,   committee
     chairmanships,  and  committee  members,  consistent  with  any  applicable
     requirements of the listing standards for independent Directors;

D.   Compensation  Policies  and  Performance  Review.  Periodically  assess the
     Corporation's  policies applicable to the Corporation's  executive officers
     and  Directors,  including the  relationship  of corporate  performance  to
     executive compensation;

E.   Equity Plan Awards.  Approve stock option grants and other  equity-based or
     incentive  awards under any stock option or equity  incentive  compensation
     plans  adopted  by the  Corporation,  and  otherwise  assist  the  Board in
     administering awards under these plans;

F.   Evaluate Stock and Incentive Plans.  Evaluate and make  recommendations  to
     the Board  concerning  any stock  option or equity  incentive  compensation
     plans proposed for or adopted by the Corporation  and make  recommendations
     to the Board with respect to incentive  compensation plans and equity-based
     plans;

G.   Retention of Compensation  Consultants and Other  Professionals.  Have full
     authority  to  hire   independent   compensation   consultants   and  other
     professionals   to  assist  in  the  design,   formulation,   analysis  and
     implementation  of compensation  programs for the  Corporation's  executive
     officers and other key employees;

H.   Committee  Report  in Proxy  Statement.  Assist in the  preparation  of and
     approve a report of the Committee for inclusion in the Corporation's  proxy
     statement for each annual meeting of  stockholders  in accordance  with the
     rules of the SEC and any requirements of the AMEX;

I.   Review.  Periodically  review  the  operation  of all of the  Corporation's
     employee benefit plans,  though  day-to-day  administration  of such plans,
     including  the  preparation  and filing of all  government  reports and the
     preparation   and  delivery  of  all  required   employee   materials   and
     communications, shall be performed by Corporation management;

J.   Access to Executives.  Have full access to the Corporation's  executives as
     necessary to carry out its responsibilities;

K.   Other  Activities.  Perform  any  other  activities  consistent  wit h this
     Charter,  the  Corporation's  By-laws and governing law as the Committee or
     the Board deems necessary or appropriate;

L.   Review Charter. Review the Committee Charter from time to time for adequacy
     and recommend any changes to the Board; and

M.   Report  to  Board.  Report to the  Board of  Directors  on the major  items
     covered at each Committee meeting.

4. EXECUTIVE COMPENSATION COMMITTEE MEETINGS

The  Committee  shall meet with the CEO at or near the start of each fiscal year
to discuss  the goals and  incentive  compensation  programs to be in effect for
such fiscal  year and the  performance  targets  triggering  payout  under those
programs.  The Committee  shall,  by duly authorized  resolution,  establish the
incentive  compensation  programs  to be in effect for the  fiscal  year for the
Corporation's executive officers and other participants, including the financial
objectives to be attained and the  procedures  for  determining  the  individual
awards payable under those programs. At or near the end of each fiscal year, the
Committee  shall  meet to review  performance  under  those  programs  and award
bonuses  thereunder.  At that time the  Committee  shall also adjust base salary
levels in effect for the Corporation's executive officers and review the overall
performance of the Corporation's employee benefit plans.

The  Committee  shall  also  meet as and when  necessary  to act upon any  other
matters  within its  jurisdiction  under this  Charter.  A majority of the total
number of members of the  Committee  shall  constitute a quorum at all Committee
meetings.  A majority of the members of the Committee  acting shall be empowered
to act on behalf of the Committee.

Minutes shall be kept of each meeting of the Committee.



                                         APPENDIX E

                            CODE OF BUSINESS CONDUCT AND ETHICS

Treat in an Ethical Manner Those to Whom Teton Petroleum Company has an Obligation

The officers, Directors and employees of Teton Petroleum Company (the "Company")
are  committed  to  honesty,  just  management,  fairness,  providing a safe and
healthy  environment  free  from the fear of  retribution,  and  respecting  the
dignity  due  everyone.  For the  communities  in  which we live and work we are
committed  to  observe  sound  environmental  business  practices  and to act as
concerned and responsible neighbors, reflecting all aspects of good citizenship.

For our  stockholders  we are  committed  to pursuing  sound growth and earnings
objectives and to exercising prudence in the use of our assets and resources.

For our  suppliers  and partners we are  committed to fair  competition  and the
sense of responsibility required of a good customer and teammate.

Promote a Positive Work Environment

All employees want and deserve a workplace where they feel respected, satisfied,
and appreciated.  We respect cultural diversity and will not tolerate harassment
or  discrimination of any kind -- especially  involving race,  color,  religion,
gender, age, national origin, disability, and veteran or marital status.

Providing an  environment  that supports  honesty,  integrity,  respect,  trust,
responsibility, and citizenship permits us the opportunity to achieve excellence
in our workplace.  While  everyone who works for the Company must  contribute to
the  creation  and  maintenance  of  such an  environment,  our  executives  and
management  personnel  assume  special   responsibility  for  fostering  a  work
environment  that is free from the fear of  retribution  and will  bring out the
best in all of us.

Supervisors must be careful in words and conduct to avoid placing, or seeming to
place, pressure on subordinates that could cause them to deviate from acceptable
ethical behavior.

Protect Yourself, Your Fellow Employees, and the World We Live In

We are  committed to providing a drug-free,  safe and healthy work  environment,
and to observing  environmentally sound business practices. We will strive, at a
minimum,  to do no harm and where possible,  to make the communities in which we
work a better  place to live.  Each of us is  responsible  for  compliance  with
environmental, health and safety laws and regulations.

Keep Accurate and Complete Records

We must maintain accurate and complete Company records. Transactions between the
Company  and  outside   individuals  and  organizations  must  be  promptly  and
accurately entered in our books in accordance with generally accepted accounting
practices  and   principles.   No  one  should   rationalize  or  even  consider
misrepresenting  facts or falsifying  records. It will not be tolerated and will
result in disciplinary action.

Obey the Law

We will  conduct  our  business  in  accordance  with  all  applicable  laws and
regulations.  Compliance  with the law  does not  comprise  our  entire  ethical
responsibility.  Rather,  it is a minimum,  absolutely  essential  condition for
performance of our duties. In conducting business, we shall:

     A.   STRICTLY ADHERE TO ALL ANTITRUST LAWS

          Officer, Directors and employees must strictly adhere to all antitrust
          laws. Such laws exist in the United States and in many other countries
          where the Company may conduct business.  These laws prohibit practices
          in restraint of trade such as price fixing and boycotting suppliers or
          customers.  They also bar pricing  intended to run a competitor out of
          business;  disparaging,  misrepresenting,  or harassing a  competitor;
          stealing trade secrets; bribery; and kickbacks.

     B.   STRICTLY COMPLY WITH ALL SECURITIES LAWS

          In our role as a publicly  owned  company,  we must always be alert to
          and comply with the security laws and regulations of the United States
          and other countries.

Do Not Engage In Speculative or Insider Trading

Federal law and Company  policy  prohibits  officers,  Directors and  employees,
directly or indirectly  through  their  families or others,  from  purchasing or
selling   company  stock  while  in  the  possession  of  material,   non-public
information  concerning the Company. This same prohibition applies to trading in
the stock of other publicly held companies on the basis of material,  non-public
information.  To avoid even the appearance of  impropriety,  Company policy also
prohibits  officers,  Directors and employees  from trading  options on the open
market in Company stock under any circumstances.

Material,  non-public  information is any information  that could  reasonably be
expected to affect the price of a stock. If an officer,  director or employee is
considering  buying  or  selling a stock  because  of  inside  information  they
possess,  they  should  assume that such  information  is  material.  It is also
important  for the  officer,  director  or  employee to keep in mind that if any
trade they make becomes the subject of an investigation  by the government,  the
trade will be viewed after-the-fact with the benefit of hindsight.

Consequently, officers, Directors and employees should always carefully consider
how their trades would look from this perspective.

Two simple  rules can help protect you in this area:  (1) Do not use  non-public
information for personal gain. (2) Do not pass along such information to someone
else who has no need to know.

This  guidance also applies to the  securities of other  companies for which you
receive information in the course of your employment at the Company.

Be Timely and Accurate in All Public Reports

As a public company,  the Company must be fair and accurate in all reports filed
with the United States Securities and Exchange Commission.  Officers,  Directors
and management of the Company are  responsible for ensuring that all reports are
filed in a timely manner and that they fairly  present the  financial  condition
and operating results of the Company.

Securities  laws are  vigorously  enforced.  Violations  may  result  in  severe
penalties  including forced sales of parts of the business and significant fines
against the Company.  There may also be sanctions against  individual  employees
including substantial fines and prison sentences.

The principal  executive officer and principal financial Officer will certify to
the accuracy of reports filed with the SEC in accordance with the Sarbanes-Oxley
Act of 2002.  Officers and  Directors  who  knowingly  or  willingly  make false
certifications may be subject to criminal penalties or sanctions including fines
and imprisonment.

Avoid Conflicts of Interest

Our officers,  Directors and employees have an obligation to give their complete
loyalty to the best interests of the Company.  They should avoid any action that
may involve,  or may appear to involve, a conflict of interest with the Company.
Officers,  Directors  and  employees  should  not  have any  financial  or other
business  relationships  with  suppliers,  customers or  competitors  that might
impair, or even appear to impair, the independence of any judgment they may need
to make on behalf of the Company.

Here are Some Ways a Conflict of Interest Could Arise:

o    Employment  by a  competitor,  or potential  competitor,  regardless of the
     nature of the employment, while employed by the Company.

o    Acceptance of gifts, payment, or services from those seeking to do business
     with the Company.

o    Placement  of  business  with a firm  owned or  controlled  by an  officer,
     director or employee or his/her family.

o    Ownership of, or  substantial  interest in, a company that is a competitor,
     client or supplier.

o    Acting as a consultant to the Company, customer, client or supplier.

o    Seeking  the  services  or  advice of an  accountant  or  attorney  who has
     provided services to the Company.

Officers,  Directors and employees are under a continuing obligation to disclose
any  situation  that  presents  the  possibility  of a conflict or  disparity of
interest between the officer,  director or employee and the Company.  Disclosure
of any potential  conflict is the key to remaining in full  compliance with this
policy.

Compete Ethically and Fairly for Business Opportunities

We must comply with the laws and regulations  that pertain to the acquisition of
goods and  services.  We will  compete  fairly and  ethically  for all  business
opportunities.  In  circumstances  where  there is  reason to  believe  that the
release or receipt of non-public information is unauthorized,  do not attempt to
obtain and do not accept such information from any source.

If you are  involved  in  Company  transactions,  you must be  certain  that all
statements, communications, and representations are accurate and truthful.

Avoid Illegal and Questionable Gifts or Favors

The sale and  marketing of our products and services  should always be free from
even the perception that favorable treatment was sought,  received,  or given in
exchange  for the  furnishing  or  receipt  of  business  courtesies.  Officers,
Directors  and  employees of the Company  will neither give nor accept  business
courtesies that  constitute,  or could be reasonably  perceived as constituting,
unfair business inducements or that would violate law, regulation or policies of
the  Company,  or could  cause  embarrassment  to or reflect  negatively  on the
Company's reputation.

Maintain the Integrity of Consultants, Agents, and Representatives

Business  integrity is a key standard for the  selection  and retention of those
who represent the Company. Agents,  representatives and consultants must certify
their willingness to comply with the Company's  policies and procedures and must
never be retained to  circumvent  our values and  principles.  Paying  bribes or
kickbacks, engaging in industrial espionage, obtaining the proprietary data of a
third party without  authority,  or gaining inside  information or influence are
just a few examples of what could give us an unfair  competitive  advantage  and
could result in violations of law.

Protect Proprietary Information

Proprietary  Company  information  may not be disclosed to anyone without proper
authorization. Keep proprietary documents protected and secure. In the course of
normal business activities,  suppliers,  customers and competitors may sometimes
divulge to you information that is proprietary to their business.  Respect these
confidences.

Obtain and Use Company Assets Wisely

Personal use of Company  property  must always be in accordance  with  corporate
policy.  Proper  use  of  Company  property,  information  resources,  material,
facilities and equipment is your  responsibility.  Use and maintain these assets
with the utmost care and respect,  guarding  against waste and abuse,  and never
borrow or remove Company property without management's permission.

Follow the Law and Use Common Sense in Political Contributions and Activities

The Company  encourages its employees to become involved in civic affairs and to
participate in the political process.  Employees must understand,  however, that
their involvement and participation must be on an individual basis, on their own
time and at their own  expense.  In the United  States,  federal  law  prohibits
corporations  from donating  corporate  funds,  goods, or services,  directly or
indirectly,  to candidates for federal offices -- this includes  employees' work
time. Local and state laws also govern political contributions and activities as
they apply to their respective jurisdictions.

Board Committees

The Company shall establish an Audit Committee empowered to enforce this Code of
Ethics.  The Audit  Committee  will  report to the Board at least once each year
regarding  the  general  effectiveness  of the  Company's  Code of  Ethics,  the
Company's controls and reporting procedures and the Company's business conduct.

Disciplinary Measures

The Company shall  consistently  enforce its Code of Ethics and Business Conduct
through  appropriate  means  of  discipline.  Violations  of the  Code  shall be
promptly reported to the Audit Committee.  Pursuant to procedures adopted by it,
the Audit Committee shall determine whether violations of the Code have occurred
and, if so, shall  determine the  disciplinary  measures to be taken against any
employee or agent of the Company who has so violated the Code.

The disciplinary  measures,  which may be invoked at the discretion of the Audit
Committee,  include,  but are  not  limited  to,  counseling,  oral  or  written
reprimands, warnings, probation or suspension without pay, demotions, reductions
in salary, termination of employment and restitution.

Persons  subject to  disciplinary  measures  shall  include,  in addition to the
violator,  others involved in the wrongdoing such as (i) persons who fail to use
reasonable care to detect a violation,  (ii) persons who if requested to divulge
information  withhold  material  information  regarding a  violation,  and (iii)
supervisors  who  approve  or condone  the  violations  or attempt to  retaliate
against employees or agents for reporting violations or violators.



                                         APPENDIX F

                         GOVERNANCE & NOMINATING COMMITTEE CHARTER

ORGANIZATION AND FUNCTIONING

There  shall be a  committee  of the  Board to be  known as the  Governance  and
Nominating Committee (the "Committee").

1. Composition, Meetings, and Quorum
------------------------------------

The  Committee  shall  be  comprised  of at least  two  Directors  who  shall be
appointed  initially by the Board and thereafter by the Board after  considering
the recommendation of the Committee.  The Committee shall only include Directors
who  satisfy  the  independence  requirements  of the  Securities  and  Exchange
Commission  and AMEX.  The Board shall  designate one member of the Committee as
its  Chairman.  Members of the  Committee  shall serve until their  resignation,
retirement, removal by the Board or until their successors are appointed.

The  Committee  shall  meet at least two times per each year with  authority  to
convene additional meetings as circumstances  require.  The meetings may be held
by teleconference with the same authority as in-person  meetings.  A majority of
the members of the  Committee  shall  constitute  a quorum of the  Committee.  A
majority of the members in attendance  shall decide any question  brought before
any meeting of the Committee.  Voting or approval of matters may occur either in
person, or via teleconference, facsimile, or electronic mail.

2. Reporting
------------

The Secretary  shall keep minutes of its  proceedings.  The minutes of a meeting
shall be approved by the Committee at its next  meeting,  shall be available for
review by the entire  Board,  and shall be filed as  permanent  records with the
Secretary of the Company.

At each meeting of the Board following a meeting of the Committee,  the Chairman
of the Committee shall report to the full Board on the matters considered at the
last meeting of the Committee.

The Committee shall prepare and,  through its Chair,  submit periodic reports of
the  Committee's  work and findings to the Board;  the  Committee  shall include
recommendations for Board actions when appropriate.

3. Authority
------------

The Committee  shall have the authority to retain special  legal,  accounting or
other consultants to advise the Committee. The Committee may request any officer
or employee of the Company or any outside  counsel or  consultants  to meet with
any members of the Committee.

4. Staff
--------

The Corporate  Secretary,  Assistant  Secretary,  or his or her assistant  shall
provide the Committee such staff support as it may require.

STATEMENT OF PURPOSE

The  Committee's   goal  is  to  provide   guidance  to  and  oversight  of  the
Corporation's  governance  and to assure that the  composition,  practices,  and
operation of the Board contribute to value creation and effective representation
of Teton Corporation's stockholders.

SPECIFIC DUTIES AND RESPONSIBILITIES

The Committee has the following  specific duties,  in addition to any additional
similar  matters which may be referred to the Committee from time to time by the
full Board or the Chairman or which the Committee raises on its own initiative:

1. Recommend Nominees for Election as Directors
-----------------------------------------------

The Committee  shall  recommend to the Board the Director  nominees for the next
annual meeting of  stockholders  and persons to fill vacancies in the Board that
occur between meetings of stockholders. In carrying out this responsibility, the
Committee shall:

(a)  Establish  qualifications,  desired background,  and selection criteria for
     members of the Board in accordance with relevant law and AMEX rules.

(b)  Consider nominees submitted to the Board by stockholders; and

(c)  Prior to  recommending a nominee for election,  determine that the election
     of the nominee as a Director  would  effectively  further the  policies set
     forth in the Governance Guidelines.

The Committee  shall have the sole  authority to retain and terminate any search
firm used to  identify  director  candidates  and shall have sole  authority  to
approve such search firm's fees and other retention  terms.  The Committee shall
also have  authority to obtain advice and  assistance  from internal or external
legal, accounting or other advisors.

2. Recommend Appointments to Board Committees
---------------------------------------------

The Committee shall annually evaluate and make recommendations to the full Board
concerning  the number and  accountability  of Board  Committees,  and Committee
assignments to the Board the Directors. The Committee shall consider the desired
qualifications  for  membership  on  each  Committee,  the  availability  of the
Director to meet the time  commitment  required for membership on the particular
committee and the extent to which there should be a policy of periodic  rotation
of Committee members.

3. Monitor and Evaluate Governance Guidelines and Committee Charter
-------------------------------------------------------------------

The  Committee  shall review and reassess the adequacy of this Charter  annually
and  recommend  any proposed  changes to the Board for  approval.  The Committee
shall annually review the Governance Guidelines for the purposes of: Determining
whether the Guidelines are being effectively adhered to and implemented;  Ensure
that the Guidelines are  appropriate  for the Company and comply with applicable
laws, regulations and listing standards;  and Recommending any desirable changes
in the  Guidelines  to the Board.  The  Committee  shall  monitor  and  evaluate
annually how effectively the Board and the Company have implemented the policies
and principles of the governance  guidelines.  In addition,  the Committee shall
consider  any other  corporate  governance  issues that may arise,  from time to
time, and develop appropriate recommendations to the Board.

BOARD OF DIRECTORS

Guidelines for Selection of Director Nominees

To discharge its duties in identifying and evaluating Directors for selection to
the  Board  and  its  committees,  the  Committee  shall  evaluate  the  overall
composition of the Board as well as the qualifications of each candidate. In its
evaluation  process,  the  Committee  shall  take  into  account  the  following
guidelines:

Criteria:
--------

1. Decisions for nominating candidates shall be based on merit,  qualifications,
performance,  competency,  and the corporation's business needs and shall comply
with the corporation's anti-discrimination policies and federal, state and local
laws.

2. A majority of the entire Board shall be composed of independent Directors, as
defined by the Securities and Exchange Commission and AMEX.

3.  The  composition  of the  entire  Board  shall be taken  into  account  when
evaluating  individual  Directors,  including:  the diversity of experience  and
background represented on the Board; the need for financial, business, academic,
public and other expertise on the Board and its  committees;  and the desire for
Directors  working   cooperatively  to  represent  the  best  interests  of  the
corporation, its stockholders and employees.

4.  Candidates  shall be  individuals of the highest  professional  and personal
ethics and values and who  possess  significant  experience  or skills that will
benefit the corporation and assist in discharging their duties as Directors.

5.  Candidates  shall be free of conflicts of interest that would interfere with
their  ability to  discharge  their  duties as a director  or would  violate any
applicable law or regulation.

6. Candidates shall be willing and able to devote sufficient time to effectively
carry out their duties; their service on other boards of public companies should
be limited to a reasonable number.

7.  Candidates  shall have the desire to represent and evaluate the interests of
the corporation as a whole.

8. In conducting this assessment, the Committee considers diversity, age, skill,
and such other  factors as it deems  appropriate  given the current needs of the
Board and the  Company,  to  maintain a balance of  knowledge,  experience,  and
capability.

9. Any other criteria as determined by the Committee.


PROXY                                                                      PROXY



                                  TETON PETROLEUM COMPANY

                    PROXY FOR ANNUAL MEETING TO BE HELD ON JULY 16, 2004
                THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned  hereby appoints H. Howard Cooper,  as proxy,  with the power to
appoint his substitute,  to represent and to vote all the shares of Common Stock
of Teton  Petroleum  Company (the  "Company"),  which the  undersigned  would be
entitled to vote, at the Company's  Annual Meeting of Stockholders to be held on
July  16,  2004  and at any  adjournments  thereof,  subject  to the  directions
indicated on the reverse side hereof.

In their discretion,  the proxy is authorized to vote upon any other matter that
may properly come before the meeting or any adjournments thereof.

THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE  SPECIFICATIONS  MADE, BUT IF NO
CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.

IMPORTANT--This proxy must be signed and dated on the reverse side.



THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!

Dear Stockholder:

We cordially  invite you to attend the Annual Meeting of  Stockholders  of Teton
Petroleum  Company  to be held at The  Pinnacle  Club,  located at 555 17th St.,
Suite 3700, Denver, Colorado 80202 on July 16, 2004 at 9:30 AM (local time).

Please read the Proxy  Statement,  which  describes  the  proposals and presents
other important information,  and complete,  sign and return your proxy promptly
in the enclosed envelope.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL

1. Election of Directors    --      For    Withhold
      Nominees:
---------------

      H. Howard Cooper              [_]      [_]
      Thomas F. Conroy              [_]      [_]
      Karl F. Arleth                [_]      [_]
      James F. Woodcock             [_]      [_]
      John T. Connor, Jr.           [_]      [_]

(Except nominee(s) written above)

                                                For     Against        Abstain
2. To consider and act upon a proposal          [_]       [_]            [_]
to ratify the Board's selection of Ehrhardt
Keefe Steiner & Hottman PC as the
Company's independent auditors
for the fiscal year ending December 31, 2004

3. To approve the sale of the Company's         [_]       [_]            [_]
indirect equity interest in the Siberian-Texan Joint
Stock Company Goloil ("Goloil"), which
constitutes substantially all of the Company's
assets within the meaning of Section 271 of
the Delaware General Corporation Law,
to the Open-Joint Stock Oil and Gas
Company RussNeft ("RussNeft"), the owner
of the remaining interests in Goloil;
all as set forth in the Share Sale and Purchase Contract
dated April 20, 2004, between Goltech Petroleum LLC,
our wholly owned subsidiary and 35.30% owner of
Goloil, and RussNeft

4. To approve the issuance of common stock      [_]       [_]            [_]
or securities convertible into or exercisable for
common stock (which may be issuable, exercisable
or convertible below the then current market value
of the common stock) which could result in an increase
in outstanding shares of common stock of 20% or more

5. To approve the 2004 Non-Employee Stock       [_]       [_]            [_]
Compensation Plan

6. To transact such other business              [_]       [_]            [_]
as may properly come before the Annual Meeting
and any adjournment or postponement thereof


Dated:________________, 2004

Signature
--------------------------------------------------------------------------------

Name (printed)
--------------------------------------------------------------------------------

Title
--------------------------------------------------------------------------------
Important:  Please sign exactly as name  appears on this proxy.  When signing as
attorney,  executor, trustee, guardian, corporate officer, etc., please indicate
full title.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE


                               VOTE BY TELEPHONE OR INTERNET
                                QUICK *** EASY *** IMMEDIATE

TETON PETROLEUM COMPANY

o    You can now vote your shares  electronically  through  the  Internet or the
     telephone.
o    This eliminates the need to return the proxy card.
o    Your  electronic  vote  authorizes the named proxies to vote your shares in
     the same  manner as if you marked,  signed,  dated and  returned  the proxy
     card.

TO VOTE YOUR PROXY BY INTERNET
www.computershare.com/us/proxy

Have your  proxy card in hand when you  access  the above  website.  You will be
prompted to enter the company number,  proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.

TO VOTE YOUR PROXY BY MAIL

Mark,  sign and date your  proxy  card  above,  detach  it and  return it in the
postage-paid envelope provided.

TO VOTE YOUR PROXY BY PHONE
1-800-728-8841

Use any  touch-tone  telephone to vote your proxy.  Have your proxy card in hand
when you call.  You will be prompted to enter the company  number,  proxy number
and account number. Follow the voting instructions to vote your shares.

                PLEASE DO NOT RETURN THE ABOVE CARD IF VOTING ELECTRONICALLY