SCHEDULE 14A
                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

                    Proxy Statement Pursuant to Section 14(a)
                     of the Securities Exchange Act of 1934

Filed by the Registrant [X] Filed by a party other than the Registrant [ ] Check
the appropriate box:

   [X]   Preliminary Proxy Statement
   [ ]   Confidential, for Use of the Commission Only (as permitted by Rule
         14a-6(e)(2))
   [ ]   Definitive Proxy Statement
   [ ]   Definitive Additional Materials
   [ ]   Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                               PIONEER OIL AND GAS
 - ---------------------------------------------------------------------------
                (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):
   [X]   No fee required
   [     ] 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:

               ------------------------------------------------------------
          (5) Total fee paid:

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

   [ ]   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:

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










                               PIONEER OIL AND GAS
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To the Shareholders:

Notice is hereby given that the Annual  Meeting of  Shareholders  of Pioneer Oil
and Gas (the "Company") will be held on Monday,  September 19, 2005, starting at
10:00 A.M.,  Mountain  Daylight  Time,  at the Company's  office,  1206 W. South
Jordan Parkway,  Unit B, South Jordan,  Utah 84095. The following matters are on
the agenda for the Meeting:

          1. To ratify the Board of  Directors  decision to effect a  1-for-2000
          reverse stock split and the  repurchase  of all  resulting  fractional
          shares,  followed  immediately by a 2000-for-1  forward stock split of
          the Company's common shares  (collectively,  the "Stock Splits"). As a
          result of the Stock  Splits,  (a) each  shareholder  owning fewer than
          2000 common shares of the Company  immediately before the Stock Splits
          will  receive  $1.50  in  cash,  without  interest,  for  each  of the
          Company's common shares owned by such shareholder immediately prior to
          the Stock Splits and will no longer be a  shareholder  of the Company;
          and (b) each shareholder owning 2000 or more common shares immediately
          before the Stock Splits (i) will receive 2000 Common  Shares after the
          Stock  Splits in  exchange  for each lot of 2000  Common  Shares  held
          before the Stock  Splits and (ii) any  additional  Common  Shares held
          other than in a 2000 share lot will be  cancelled  and  exchanged  for
          $1.50 in cash per share.  The Stock  Splits  will allow the Company to
          file a Form 15 with the  Securities and Exchange  Commission  (`SEC"),
          thereby  causing  the Company to no longer be subject to the Rules and
          Regulations  of  the  Securities  Act of  1934  and  particularly  the
          Sarbanes-Oxley  Act of 2002.  The Stock Splits is further  outlined in
          the Proxy Statement enclosed with this Notice

          2. To Elect the Board of Directors;

          3. To ratify  the  appointment  of Jones  Simkins  LLP  ("Jones"),  as
          independent auditors for the current fiscal year;

          4. To transact  any other  business  matters  that may  properly  come
          before the meeting or any adjournment or postponement thereof.

The Directors  have fixed the close of business on August 4, 2005, as the record
date for the determination of shareholders  entitled to notice of and to vote at
the meeting or any adjournment or postponement  thereof. A complete list of such
shareholders  will be available at the  corporate  office of the Company  during
normal  business  hours  and  shall  be  open  to the  examination  of any  such
shareholder for any purpose relevant to the Meeting.

A record of the Company's  activities  during the year ending September 30, 2004
and financial  statements for that year,  are in the Company's  annual report to
shareholders,  which  this year is  contained  within the Proxy  Statement  that
accompanies this notice.




NEITHER  THE  SECURITIES  AND  EXCHANGE  COMMISSION  NOR  ANY  STATE  SECURITIES
COMMISSION  HAS APPROVED OR  DISAPPROVED  OF THE STOCK  SPLITS,  PASSED UPON THE
MERITS OR FAIRNESS OF THE STOCK SPLITS,  OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE  DISCLOSURE IN THIS  DOCUMENT.  ANY  REPRESENTATION  TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The Company's Board of Directors carefully  considered the terms of the proposed
Stock  Splits and has  determined  that the Stock Splits are fair to, and in the
best  interests  of,  the  Company  and  its  shareholders  and  encourages  the
shareholders to vote in favor of the Stock Splits.

You are cordially  invited to attend the Meeting.  Any shareholder that does not
expect to attend the Meeting in person is requested to complete,  date, and sign
the enclosed form of Proxy and return it promptly to Pioneer Oil and Gas.  Thank
you for your cooperation.

BY ORDER OF THE BOARD OF DIRECTORS


DON J. COLTON, Chairman of the Board of Directors, and President

YOUR VOTE IS IMPORTANT TO PIONEER OIL AND GAS.  EVEN IF YOU EXPECT TO ATTEND THE
ANNUAL MEETING,  WE URGE YOU TO COMPLETE,  DATE, AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.  COMPLETING THE ENCLOSED PROXY WILL
NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON IF YOU DO ATTEND THE MEETING.








                               PIONEER OIL AND GAS
                          1206 W. South Jordan Parkway
                                     Unit B
                          South Jordan, Utah 84095-5512
                           ---------------------------

                                 PROXY STATEMENT

                         Annual Meeting of Stockholders
                           To Be Held on July 19, 2005
                          ----------------------------

                               GENERAL INFORMATION

This Proxy Statement is being  furnished to the  stockholders of Pioneer Oil and
Gas (the "Company"), in connection with the solicitation of proxies on behalf of
the Board of Directors of Pioneer Oil and Gas (the  "Directors")  for use at the
Company's 2005 Annual Meeting of  Stockholders  and any and all  adjournments or
continuations  thereof (the  "Meeting"),  to be held on Monday,  September 19th,
2005 for the purposes set forth under the next  paragraph.  These materials will
be first  mailed to  stockholders  on or about  August  4th,  2005.  This  Proxy
Statement (the "Proxy Statement") provides detailed information about a proposal
to be put  forth  before  the  shareholders  of  Pioneer  Oil  and  Gas,  a Utah
corporation,  (the "Company") to effect a 1-for-2000 reverse stock split and the
repurchase  of all  resulting  fractional  shares  at a price of $1.50 per share
before the reverse stock split,  followed  immediately  by a 2000-for-1  forward
stock split (together these are referred to as the "Stock Splits").

                            PURPOSE OF ANNUAL MEETING

At the Meeting, stockholders will be asked: (i) to ratify the Board of Directors
decision to effect a 1-for-2000  reverse  stock split and the  repurchase of all
resulting fractional shares,  followed immediately by a 2000-for-1 forward stock
split of the Company's common shares. As a result of the Stock Splits,  (a) each
shareholder  owning  fewer than 2000 common  shares of the  Company  immediately
before the Stock Splits will receive $1.50 in cash,  without interest,  for each
of the Company's  common shares owned by such shareholder  immediately  prior to
the Stock Splits and will no longer be a  shareholder  of the  Company;  and (b)
each shareholder  owning 2000 or more common shares immediately before the Stock
Splits will  receive  2000 Common  Shares after the Stock Splits in exchange for
each lot of 2000 Common  Shares held before the Stock Splits and any  additional
Common Shares held other than in a 2000 share lot will be canceled and exchanged
for $1.50 in cash per share.  The  effective  date of the Stock  Splits  will be
September 26, 2005. The Stock Splits is further  outlined in the Proxy Statement
enclosed with this Notice; (ii) to elect a Board of Directors to serve until the
next annual  meeting of the  stockholders,  or until their  successors  are duly
elected and  qualified;  (iii) to ratify the selection by the Directors of Jones
as  independent  auditors of the  Company  for the fiscal year ending  September
30th,  2005 ("Fiscal  2005");  and (iv) to transact  such other  business as may
properly come before the Meeting or any adjournment or postponement thereof.





We urge you to read this Proxy Statement carefully in its entirety including the
attached  Exhibits.  This Proxy Statement is first being mailed to the Company's
shareholders on or about August 4, 2005.

NEITHER  THE  SECURITIES  AND  EXCHANGE  COMMISSION  NOR  ANY  STATE  SECURITIES
COMMISSION  HAS APPROVED OR  DISAPPROVED  OF THE STOCK  SPLITS,  PASSED UPON THE
MERITS OR FAIRNESS OF THE STOCK SPLITS,  OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE  DISCLOSURE IN THIS  DOCUMENT.  ANY  REPRESENTATION  TO THE CONTRARY IS A
CRIMINAL OFFENSE.

NO PERSON IS AUTHORIZED TO GIVE ANY  INFORMATION  OR TO MAKE ANY  REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION  SHOULD  NOT BE RELIED  UPON AS  HAVING  BEEN  AUTHORIZED  BY THE
COMPANY.

                               SUMMARY TERM SHEET

The following is a summary of the material terms of the Stock Splits.  The Board
of Directors believe that Utah law does not require shareholder approval for the
Stock Splits,  only a Board of Directors  meeting is necessary to effectuate the
Stock Splits, however, the Board of Directors is asking for shareholder approval
to ratify the action of the Board of Directors  and the Company  plans to effect
the Stock Splits  regardless of whether a majority of the  outstanding  stock of
the  Company  votes in favor of the Stock  Splits as long as a  majority  of the
shares voting on the proposal  vote in favor of the Stock  Splits.  In addition,
Utah Code Section 16-10a-604(1)(a) allows the Company to pay the shareholders of
the Company in money the value of  fractional  shares.  The Proxy  Statement  is
being provided to shareholders  under Rule 13E-3 of the Securities  Exchange Act
of 1934.  While this  summary  describes  what we believe are the most  material
terms and conditions of the Stock Splits,  this Proxy Statement  contains a more
detailed  description  of such terms and  conditions.  We urge you to  carefully
review, in their entirety,  this Proxy Statement,  the attached Exhibits and the
documents incorporated by reference.

The Company does not plan presently on any material changes to the Company after
the Stock Splits.  Other than as described in this Proxy Statement,  neither the
Company,  nor its  management  has any current  plans or proposals to effect any
extraordinary  corporate  transaction  (such  as  a  merger,  reorganization  or
liquidation);  to sell or transfer any material  amount of the Company assets to
change the  composition of the management or to change  materially the Company's
capitalization;  to change the Company's dividend policy; or otherwise to effect
any material change in the Company's  corporate structure or business other than
has already been disclosed or in the normal course of business. The Company does
not  believe  there  will  be  material   differences   between  affiliated  and
unaffiliated  shareholders regarding the treatment under the Stock Splits except
if a  shareholder  has less  than  2000  common  shares,  those  shares  will be
purchased pursuant to the Stock Splits while an affiliated  shareholder may have
some shares acquired by the Stock Splits but the majority of the shares owned by
the affiliate will remain.


                                  OTHER MATTERS

Management does not intend to present,  and has no information as of the date of
preparation of this Proxy  Statement  that others will present,  any business at
the Meeting other than business  pertaining to matters  required to be set forth
in the Notice of Annual Meeting and Proxy Statement.  However,  if other matters
requiring the vote of the stockholders  properly come before the Meeting,  it is
the  intention of the persons  named in the  enclosed  proxy to vote the proxies
held by them in accordance with their best judgment on such matters.




                                  STOCK SPLITS

The Stock Splits will consist of the following steps: On September 26, 2005 (the
"Effective  Date") a 1-for-2000  reverse  stock split of the Common  Shares will
occur, as a result of which:


     Each holder of less than 2000 Common Shares  immediately before the reverse
     stock  split will  receive  from the  Company  cash in the amount of $1.50,
     without interest, for each Common Share held immediately before the reverse
     stock split and will no longer be a shareholder of the Company; and

     Each holder of 2000 or more Common Shares  immediately prior to the reverse
     stock split will receive one whole Common Share for each lot of 2000 Common
     Shares held by the shareholder  immediately  before the reverse stock split
     and will  receive  cash from the  Company  in the  amount of $1.50 for each
     Common  Share held  immediately  before  the  reverse  stock  split and not
     converted into one whole share.

     After  completion  of the  reverse  stock split and the  repurchase  of all
     resulting  fractional  shares, the Company will effect a 2000-for-1 forward
     stock split of the Common Shares  remaining  outstanding  after the reverse
     stock split. Each holder of 2000 or more Common Shares  immediately  before
     the reverse stock split will participate in the forward stock split,  which
     will result in such holder  holding a number of Common  Shares equal to the
     number of whole shares  remaining after the reverse stock split  multiplied
     by 2000.

Please see the sections of this Proxy Statement  entitled  "Effects of the Stock
Splits" and "Stock Splits  Proposal - Summary and Structure" for a more detailed
discussion of the Stock Splits.

                    PURPOSES AND REASONS FOR THE STOCK SPLITS

The Stock  Splits are  intended  to reduce  the number of record  holders of the
Common Shares below 300 and enable the Company to terminate the registration of,
or deregister,  the Common Shares under the Securities  Exchange Act of 1934, as
amended (the "Exchange Act").  Deregistration would eliminate the Company's duty
to file periodic  reports and Proxy  Statements with the Securities and Exchange
Commission (the "SEC"), and as a result, the Company would no longer be a public
reporting  company.  However,  the  Company  will  continue to be subject to the
general  anti-fraud  provisions of federal and applicable state securities laws.
The Company will also continue to trade electronically on the Pink Sheets(R) and
quotes will be able to be obtained at pinksheets.com.

The following are the principal reasons for the Stock Splits:

     Anticipated  annual cost savings of  approximately  $250,000 as a result of
     the  deregistration  of the Common  Shares and the related  elimination  of
     periodic reporting requirements,  including the cost savings resulting from
     no  longer  being  subject  to  the  public   company   provisions  of  the
     Sarbanes-Oxley Act of 2002, as amended (the  "Sarbanes-Oxley  Act") and the
     elimination  of other costs related to a Company  subject to the Securities
     Exchange Act of 1934 (the "Exchange Act");

     Additional  savings of management's and employees' time that will no longer
     be spent preparing the periodic reports required under the Exchange Act and
     complying with other provisions of the Exchange Act;

     Decreased  expenses  resulting  from no longer  being  required  to service
     holders with small positions in the Common Shares;




     The Stock Splits constitute the most expeditious, efficient, cost effective
     and fair method to convert the Company from a public reporting company to a
     privately-held,  non-  reporting  company  compared  to other  alternatives
     considered by the Board; and

     The fact that the Company has not realized  many of the  benefits  normally
     associated with being a public reporting company (such as access to capital
     markets,  active  trading  market and use of company  stock as currency for
     acquisitions).

Please see the sections of this Proxy Statement  entitled " Purpose of the Stock
Splits," " Effects of the Stock  Splits" and " Reasons for the Stock Splits" for
a more detailed discussion of the principal reasons for the Stock Splits.

                          FAIRNESS OF THE STOCK SPLITS

The Board has set $1.50 per pre-split Common Share (the  "Repurchase  Price") as
the cash  consideration to be paid by the Company in lieu of issuing  fractional
Common  Shares (i.e.,  less than one whole Common Share) in connection  with the
Stock  Splits.  The Board made this  determination  in good faith and received a
Valuation Opinion (the "Valuation  Opinion") prepared by Gate-Way Capital,  Inc.
("Gate-Way"),  an independent financial advisor. The Board also considered other
factors the Board deemed relevant,  as described in greater detail in this Proxy
Statement.

The  Valuation  Opinion  was  delivered  to the  Board to  assist  the  Board in
establishing the terms and conditions of the Stock Splits. The Valuation Opinion
states,  that based upon and subject to the factors  and  assumptions  set forth
therein as of April 30, 2005,  the fair market value of the Company with 100% of
the Company's  operations and assets is $8,468,420.  The opinion of Gate-Way was
based on the Company having  outstanding and issued  7,910,727 common shares and
on a fully  diluted  basis with all options  taken into account  8,330,727.  The
price of the stock based on Gate-Way's  opinion  before  dilution would be $1.07
and after dilution $1.03. Therefore, the Repurchase Price offered by the Company
is a premium of about 40% before dilution and about 45% after dilution.  This is
significant  premium  that the Company is willing to pay  primarily  because the
Company's common stock has been trading close to a $1.50.

A summary of the  Valuation  Opinion,  dated April 30, 2005, is attached to this
Proxy  Statement  as Exhibit A and a full text of the  Valuation  Opinion can be
found   on   the   SEC's    edgar   site   by   typing   in   Pioneer   Oil   at
http://www.sec.gov/edgar/searchedgar/companysearch.html,   and  then   accessing
Exhibit B filed  with the  Proxy  Statement.  We urge you to read the  Valuation
Opinion  in its  entirety.  Gate-Way  Capital,  Inc  ("Gate-Way")  provided  the
Valuation  Opinion to assist the Board in connection with its  consideration  of
the Stock Splits.

The Board believes that the Stock Splits are in the Company's best interests and
are  substantively and procedurally fair to both the affiliated and unaffiliated
holders of the Common  Shares,  including both those holders whose Common Shares
will be completely cashed out pursuant to the Stock Splits ("Unaffiliated Cashed
Out  Holders") and those who will continue to hold Common Shares after the Stock
Splits  that  are  not  affiliated  with  the  Company("Unaffiliated  Continuing
Holders").
 




The Board has reviewed and considered  the analyses and  conclusions of Gate-Way
contained  in the  Valuation  Opinion  and has  unanimously  approved  the Stock
Splits.  No voting is  necessary by the  shareholders  to  effectuate  the Stock
Splits,  however,  the Board of Directors  are seeking  shareholder  approval to
ratify the action of the Board of Directors.  The Board of Directors  intends to
effectuate  the  Stock  Splits  even if it does not  receive a  majority  of the
outstanding  stock of the Company voting in favor of the Stock Splits as long as
a majority of shares  voting on the proposal  vote in favor of the Stock Splits.
Please see the sections of this Proxy Statement  entitled "Fairness of the Stock
Splits,"   "Opinion  of  Gate-Way,"   "Background   of  the  Stock  Splits"  and
"Recommendation of the Board" for a more detailed discussion of the foregoing.

                           CERTAIN FEDERAL TAX ASPECTS

The Company will not  recognize any gain,  loss or deduction for federal  income
tax purposes as a result of the Stock Splits.

The Company's  shareholders will generally  recognize a gain or loss for federal
income tax purposes equal to the difference  between the amount of cash received
and the  shareholder's tax basis in the Common Shares that are exchanged for the
Repurchase Price in lieu of issuing fractional shares.

Please see the  section of this Proxy  Statement  entitled  "Federal  Income Tax
Consequences" for a more detailed discussion of the foregoing.

               UNAVAILABILITY OF APPRAISAL AND DISSENTER'S RIGHTS

A holder of Common Shares does not have under Utah law or the Company's Articles
of Incorporation or bylaws the right to assert  dissenters' rights if the holder
is against the transactions contemplated by the Stock Splits.

Please see the section of this Proxy Statement entitled "Proposed Stock Splits -
Unavailability  of  Appraisal  or  Dissenters'   Rights"  for  a  more  detailed
discussion of the foregoing.

                                     ESCHEAT

All unclaimed cash amounts payable to shareholders in lieu of issuing fractional
shares will be subject to applicable state laws regarding abandoned property.

Please see the section of this Proxy Statement entitled "Proposed Stock Splits -
Escheat Laws" for a more detailed discussion of the foregoing.

             CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

When used in this Proxy  Statement  the words or phrases  "will likely  result,"
"are  expected  to," "will  continue,"  "anticipate,"  "estimate,"  "project" or
similar expressions are intended to identify "forward-looking  statements". Such
statements  are  subject to certain  risks and  uncertainties  which could cause
actual  results to differ  materially  from  results  presently  anticipated  or
projected.  The Company  cautions  you not to place  undue  reliance on any such
forward-looking  statements,  which speak only as of the date made.  The Company
advises readers that the Company's actual results may differ materially from any
opinions or statements  expressed  with respect to future periods in any current
statements in this Proxy Statement or in our other filings with the SEC.





The Company does not undertake,  and specifically  disclaims any obligation,  to
publicly  release  the  result  of  any  revisions,  which  may be  made  to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.


                                TABLE OF CONTENTS


SUMMARY TERM SHEET                         
  Stock Splits Proposal   
  Purposes of and Reasons for the Stock Splits    
  Fairness of the Stock Splits                 
  Certain Federal Tax Aspects  
  Unavailability of Appraisal or Dissenters' Rights 
  Escheat                                               
  Cautionary Notice Regarding Forward-Looking Statements   
SPECIAL FACTORS                                   
  Purpose of the Stock Splits                           
  Reasons for the Stock Splits                                   
  Effects of the Stock Splits                                   
  Alternatives to the Stock Splits            
  Fairness of the Stock Splits                             
  Advantages of the Stock Splits                                    
  Disadvantages of the Stock Splits                                            
  Other Factors                                       
  Conclusion                                          
OPINION OF GATE-WAY                            
  Public Comparables Analysis                           
  Review of the Company's Market Performance                
  Conclusion                                                
  Engagement of Gate-Way                                        
QUORUM, VOTING RIGHTS AND OTHER MATTERS                         
  Proposal One: Ratification by the Shareholders of the Board's Proposal
  to Effect the Stock Splits                                      
  Proposal Two: Election of Directors      
  Board of Directors                                       
  Executive Officers                                                  
  Executive Compensation and Related Information                       
  Security Ownership of Certain Beneficial Owners and Management  
  Transactions with Related Parties 


                                                                

Proposal Three: Ratification of Appointment of Independent Public Accountants  
  Proposal Four: Other Business                                   
  Stockholder Proposals                                            
PROPOSED STOCK SPLITS                                          
  Summary and Structure                                          
  Cost of Stock Splits                                        
  Background of the Stock Splits                                    
  Recommendation of the Board                                  
  Potential Disadvantages of the Stock Splits to Shareholders  
  Share Certificates                                             
 Unavailability of Shareholders' Appraisal or Dissenters' Rights   
  Escheat Laws                                                                
  Regulatory Approvals                                                
INFORMATION ABOUT THE COMPANY                                       
  Description of Business                                                    
  Recent Developments                                                         
  Description of Securities                                         
  Market Price and Dividend Information                               
  Common Share Repurchase Information                               
  Available Information                                            
  Incorporation of Certain Documents by Reference 
  Legal Proceedings                                                 
FINANCIAL AND OTHER INFORMATION      
  Management's Discussion and Analysis or Plan of Operation      
  Certain Financial Effects of the Stock Splits 
                                                            
FINANCIAL STATEMENTS
EXHIBIT A - SUMMARY OF VALUATION OPINION
EXHIBIT B - FULL TEXT OF THE VALUATION OPINION



                                 SPECIAL FACTORS

                           PURPOSE OF THE STOCK SPLITS

The primary purpose of the Stock Splits is to terminate the Company's  status as
a public reporting company with the SEC. As a result of the Stock Splits and the
repurchase  of the resulting  fractional  shares from holders of fewer than 2000
shares,  the Company expects to have  approximately 200 holders of record of the
Common Shares,  which would enable the Company to terminate the  registration of
the Common Shares under the Exchange Act. If the Stock Splits are completed, the
Company intends to file with the SEC to terminate the registration of the Common
Shares. Upon deregistration,  the Common Shares would no longer be quoted on the
Bulletin  Board and trades in the Common  Shares would only be possible  through
privately  negotiated  transactions  or in the  Pink  Sheets(R)  (a  centralized
quotation   service  that  collects  and  publishes   market  maker  quotes  for
securities).



                          REASONS FOR THE STOCK SPLITS

Reduced Public Reporting  Expenses.  The Company incurs both direct and indirect
costs to comply  with the  filing  and  reporting  requirements  imposed  on the
Company as a public reporting company.  As described below, these costs include,
among other things,  management's  time spent  preparing  and  reviewing  public
filings and legal and accounting fees associated with the preparation and review
of such filings. Compliance costs have increased significantly with the adoption
and  implementation of the  Sarbanes-Oxley Act and related SEC and NASDAQ rules,
and it is expected  these costs to increase  further in the future.  For smaller
publicly traded companies,  such as the Company,  those costs represent a larger
portion of their revenues than for larger public companies.

Not all  Reporting  Costs will be  Eliminated.  The Company plans to continue to
provide   shareholders  with  annual  audited  financial  statements  and  Proxy
Statements  by US mail,  although  not  required  to do so. If  provided,  these
documents may not be as detailed,  or contain the same level of  disclosure,  as
those required of a public reporting company.

Reduced Costs of Expenses.  The Board believes that by deregistering  the Common
Shares and suspending the Company's  periodic  reporting  obligations  under the
Exchange  Act,  the  Company  will  realize  recurring  annual  cost  savings of
approximately  $250,000  in fees and  expenses  that that would be  incurred  to
comply with the Sarbanes-Oxley Act and associated  regulations.  These estimated
fees and expenses are described in greater detail below.

                           Estimated Cost Savings:
                           -----------------------

      Legal and transfer fees                   $ 5,000
      Printing, mailing and filing costs        $ 5,000
      Audit fees                               $ 15,000
      Internal personnel fees                 $ 225,000
                                               --------

      Total                                    $250,000
                                               ========

These  estimated  historical  cost savings  reflect,  among other things:  (i) a
reduction in audit and related fees; (ii) a reduction in legal and transfer fees
related to securities law compliance;  (iii) the elimination of filing costs and
expenses  associated  with  electronically  filing  periodic  reports  and other
documents (such as Proxy  Statements)  with the SEC on its Edgar database;  (iv)
the lower printing and mailing costs attributable to the reduction in the number
of shareholders  and the less complicated and extensive  disclosure  required by
the private  status;  (v) a reduction in management time spent on compliance and
disclosure matters attributable to Exchange Act filings;  (vi) the lower risk of
liability that is associated with non-reporting  company status;  (vii) the cost
savings due to the Company not being subject to the public company provisions of
the  Sarbanes-Oxley  Act,  primarily the 404 internal  audit controls that would
require the Company to hire additional  personnel to handle the responsibilities
that are  performed by one person in the  Company;  (viii) a reduction in direct
miscellaneous clerical and other expenses.




In addition to the foregoing annual estimated cost savings,  the consummation of
the Stock Splits and the  subsequent  deregistration  of the Common Shares would
also result in a significant  one-time cost savings of approximately  $75,000 in
fees and expenses  because the Company  would not be subject to the new internal
control audit  requirements  imposed by Section 404 of the  Sarbanes-Oxley  Act.
Preparing to comply with  Section 404 of the  Sarbanes-Oxley  Act would  require
significant  expenditures,  including  fees  to  third  parties  for  compliance
planning, assessment,  documentation and testing. Further, the Company would not
need to hire up to another four personnel in the accounting department to comply
with  Section 404.  The hiring of  additional  people is contained in the annual
cost savings set forth above. It would also require a significant  investment of
time by the management and employees of the Company.  These  estimated costs for
compliance with Section 404 are described in more detail below.

               Non-Recurring Sarbanes-Oxley Act Compliance Costs:
               --------------------------------------------------

      Third party planning, testing and documentation        $25,000
      Audit fees                                             $25,000
      Internal personnel expenses                            $25,000
                                                            --------

      Total                                                  $75,000
                                                            ========

The historical and  non-recurring  cost savings figures set forth above are only
estimates.  The actual  savings we realize  from going  private may be higher or
lower  than these  estimates.  The  estimates  are based upon the (i) actual and
estimated costs to the Company of the services and  disbursements in each of the
categories listed above that would be reflected on the financial  statements and
(ii) allocation to each category of management's estimates of the portion of the
expenses and  disbursements  believed to be solely or primarily  attributable to
the Company's public reporting company status.

In some  instances,  these cost savings  expectations  were based on  verifiable
assumptions.  For  example,  the  auditing  fees will be reduced if the  Company
ceases  to be a public  reporting  company  due to the  elimination  of fees for
interim services.

Operational Flexibility.  Another reason for the Stock Splits is the operational
flexibility  that  completion of the Stock Splits and subsequent  deregistration
would provide.  The Board believes that ceasing to be a public reporting company
would enable management to focus more on the Company's  long-term growth without
the  distraction  of SEC  reporting  requirements  and other  aspects of being a
public company,  and that the Company will benefit if business  decisions can be
made with this added focus on long-term growth.

Benefits Normally  Associated with Public Reporting Company Status have not been
Realized.  A further  reason for the Stock  Splits is that the Company  does not
realize many of the benefits  normally  associated with being a public reporting
company. A typical advantage of being a public company comes from the ability to
use  company  stock,  as  opposed  to cash or  other  consideration,  to  effect
acquisitions.  Since the Company has been operating in the last few years with a
positive  cash  flow  there  has  not  been  an  attraction  to  use  stock  for
acquisitions.  Further,  due to the fact the  Company is small  compared to most
public companies the  opportunities  for doing a stock  acquisition are limited.
The Company has not previously  completed an acquisition  using stock and, given
the limited opportunities for such acquisitions,  it is not likely that it would
be able to do so in the future.




In addition,  public  companies  can obtain  financing by issuing  securities in
public  offerings.  The Company has  historically  had adequate capital or other
means of  obtaining  necessary  capital  and has not needed to obtain  financing
through public  offerings.

Conclusion.  In light of the  foregoing,  the Board  believes  the  benefits the
Company receives from  maintaining its status as a public reporting  company and
maintaining its small shareholder  accounts are substantially  outweighed by the
associated  costs. The Board believes that it is in the Company's best interests
to eliminate the administrative burden and costs associated with maintaining its
status as a public reporting company and its small shareholder accounts.

Reasons  for the  Forward  Stock  Split.  The  forward  stock  split  will occur
immediately  after the reverse  stock  split and the  repurchase  of  fractional
shares  resulting from the reverse split. The forward stock split is intended to
prevent the Common  Shares from  having an  unusually  high per share value that
would otherwise result from the reverse stock split, which would tend to further
decrease the liquidity of the Common Shares.

                           EFFECTS OF THE STOCK SPLITS

The Stock Splits are expected to  significantly  reduce the number of holders of
record of the Common Shares from  approximately  980 to approximately  200. Upon
the completion of the Stock Splits, the Company intends to apply with the SEC to
deregister  the Common  Shares under the  Exchange  Act as soon as  practicable.
After deregistration, the Common Shares will no longer be quoted on the Bulletin
Board.  The completion of the Stock Splits and the  termination of the Company's
reporting  obligations  under the Exchange  Act will cause the existing  limited
trading market for the Common Shares to be further reduced.

Effects  on the Common  Shares.  There will be no  differences  with  respect to
dividend,  voting, liquidation or other rights associated with the Common Shares
before and after the Stock Splits. The Common Shares acquired by the Company for
cash in lieu of issuing fractional shares will be retired.

Effects on All the Company Shareholders. All the Company shareholders:
         

     Will not have the  opportunity  to liquidate,  at a time and for a price of
     their  choosing,  the Common  Shares that are exchanged for cash in lieu of
     issuing fractional shares;

     Will not receive a fractional Common Share as a result of the Stock Splits,
     but will instead receive cash, in a taxable transaction, equal to $1.50 for
     each  Common  Share  held  immediately  before  the  Stock  Splits  that is
     exchanged  for cash in  accordance  with the  procedures  described in this
     Proxy Statement;



     Will not have to pay any brokerage commissions or other transaction fees in
     connection  with the exchange of Common  Shares for cash in lieu of issuing
     fractional shares; and

     Will not receive  any  interest  on cash  payments  owed as a result of the
     Stock Splits.

If you hold Common  Shares other than in multiples of 2000,  some of your Common
Shares  will be  exchanged  for cash in lieu of  issuing  fractional  shares  in
connection  with the Stock Splits.  You will receive a letter of  transmittal as
soon as  practicable  after  the  Stock  Splits  are  completed.  The  letter of
transmittal  will contain  instructions  on how to surrender your existing share
certificate(s)  to the  Transfer  Agent to receive  your cash  payment  and,  if
applicable,  a new share certificate  evidencing the number of Common Shares you
hold after the Stock Splits.  You will not receive your cash payment or your new
share certificate  until you surrender your outstanding share  certificate(s) to
the Transfer  Agent,  along with a completed  and executed copy of the letter of
transmittal.  Do not send your share  certificate(s) in with your Proxy.  Please
wait until you  receive  your  letter of  transmittal  to  surrender  your share
certificate(s) to the Transfer Agent.

For a discussion  of the federal  income tax  consequences  of the Stock Splits,
please see the  section of this Proxy  Statement  entitled  "Federal  Income Tax
Consequences."

Effects on  Unaffiliated  Cashed Out  Holders.  Unaffiliated  Cashed Out Holders
(i.e.,   holders  of  less  than  2000  Common  Shares  immediately  before  the
consummation of the Stock Splits) will have no further ownership interest in the
Company and will not be able to participate in future  earnings or growth of the
Company.

If you hold less than 2000 Common Shares,  but you would rather continue to hold
Common Shares after the Stock Splits and not be  completely  cashed out, you may
do so by taking either of the following actions far enough in advance so that it
is complete by the Effective Date:

     Purchase a sufficient  number of additional  Common  Shares,  to the extent
     available,  on the open  market and have them  registered  in your name and
     consolidated with your current record account,  if you are a record holder,
     or have them entered in your account with a nominee (such as your broker or
     bank) in which you hold your current  shares so that you hold at least 2000
     Common Shares in your record account immediately before the Effective Date.
     Due to the limited market in the Common Shares,  there is no assurance that
     you will be able to purchase  enough  Common Shares to remain a shareholder
     of the Company; or

     If  applicable,  consolidate  your  accounts so that you hold at least 2000
     Common Shares in one record account immediately before the Effective Date.

Effects on Unaffiliated Continuing Holders. If the Stock Splits are consummated,
Unaffiliated  Continuing  Holders  (i.e.,  holders of 2000 or more Common Shares
immediately before the Stock Splits):

     Will likely hold fewer Common  Shares after the Stock Splits than they held
     before the Stock Splits;




     Will  likely  experience  a change  in their  ownership  percentage  of the
     Company after completion of the Stock Splits;

     Will likely  experience  a further  reduction  in  liquidity  of the Common
     Shares; and

     Will have less publicly available information about the Company.

Upon the termination of the registration of the Common Shares under the Exchange
Act,  the Common  Shares will no longer be eligible  for trading or quotation on
any securities market or quotation system,  except the Pink Sheets(R).  In order
for  the  Common  Shares  to be  quoted  on the  Pink  Sheets(R),  one  or  more
broker-dealers  would need to act as market maker and sponsor the Common  Shares
on the Pink Sheets(R).  There can be no assurance that any broker-dealer will be
willing to act as a market maker in Common Shares after the Stock Splits.  There
is also no  assurance  that  you  will be able to sell  your  Common  Shares  or
purchase additional Common Shares after the Stock Splits.

If you hold  2000 or more  Common  Shares,  but you would  rather be  completely
cashed out in connection  with the Stock Splits and not remain a shareholder  of
the Company,  you may do so by selling a sufficient  number of Common  Shares in
the  open  market  so that you hold  less  than  2000  Common  Shares  as of the
Effective  Date. Any such sales should be made far enough in advance so they are
complete by the Effective  Date. Due to the limited market in the Common Shares,
there is no  assurance  that you will be able to sell  enough  Common  Shares to
reduce your holdings to less than 2000 Common Shares.

Effect on  Common  Shares  Held in Street  Name.  If you hold  Common  Shares in
"street  name," your  nominee  (such as your  broker or bank) may have  required
procedures  you must follow and you should contact your nominee to determine how
the Stock Splits will affect you.

Effects on the  Company.  If the number of  shareholders  falls  below 300,  the
Company  will  apply  to the SEC to  deregister  the  Common  Shares  as soon as
practicable  after completion of the Stock Splits.  Upon  deregistration  of the
Common Shares,  the Company's duty to file periodic reports with the SEC will be
suspended  and the Company will no longer be  classified  as a public  reporting
company.  In addition,  the Company will be relieved of the obligation to comply
with the  requirements  of the proxy rules under Section 14 of the Exchange Act.
The Company will continue to be subject to the general anti-fraud  provisions of
federal and applicable state securities laws.

Although we will no longer be required to file  periodic  reports  with the SEC,
the Company  currently  intends to continue to provide annual audited  financial
statements  and Proxy  Statements  to the Company's  shareholders.  Although the
Company  intends to continue to provide  these  documents  to the  shareholders,
there is no SEC requirement  that the Company do so, and there is no requirement
that the level of the Company's  disclosure in such  financial  statements or in
the Proxy  Statement  remain at the level  required by the  current  status as a
public reporting company. These documents may not be as detailed or extensive as
the information  currently being filed with the SEC and the financial statements
may not be  accompanied  by  management's  discussion  and  analysis in the same
detail.  It will be more difficult for shareholders to obtain  information about
the Company.




The Company estimates that it will save  approximately  $250,000 in annual costs
associated with not being a public company as well as additional cost savings in
time  spent by  management  and  employees  associated  with  the SEC  reporting
activities.  The Company also  anticipates a one time cost savings of $75,000 in
expenses  associated  with the  compliance  with  the  internal  controls  audit
requirements of Section 404 of the Sarbanes-Oxley Act. These anticipated savings
are discussed under the heading entitled  "Reasons for the Stock Splits -Reduced
Costs and Expenses" above.

The termination of the reporting  obligations under the Exchange Act will render
the Common Shares  ineligible  for listing or quotation on any stock exchange or
other automated  quotation system,  except the Pink Sheets(R).  As a result, the
Common  Shares  will no longer  trade on the  Bulletin  Board  and the  existing
limited  trading  market for the Common  Shares will likely be further  reduced.
This reduction or elimination may result in the Company having less  flexibility
in attracting and retaining  executives and other employees  since  equity-based
incentives (such as stock options) tend to be viewed as having less
value in a non-publicly traded company.

The Company has no current  plans to issue Common  Shares after the Stock Splits
other than  pursuant to the  Company's  Option  Plan  ("Option  Plan"),  but the
Company  reserves  the  right to do so at any time and from time to time at such
prices and on such terms as the Board  determines  to be in the  Company's  best
interests.  If in the future the Board  determines  that the  adoption  of a new
option plan would be beneficial to the Company, it may, in its discretion, adopt
such a plan. The exercise of options  granted under any newly adopted plan would
reduce the ownership  percentage of the Company's  shareholders at the time. The
Company will not be required to seek shareholder approval of new option plans or
other equity compensation plans. Holders of Common Shares do not currently have,
and will not have, any preemptive or other  preferential  rights to purchase any
of the Company's  equity  securities  that may issue in the future,  unless such
rights are specifically granted to such holders.

After  the  Stock  Splits  have  been   consummated,   the  Company  may,   from
time-to-time, repurchase Common Shares pursuant to privately negotiated sales or
other  transactions.  Whether or not the Company  purchases shares in the future
will depend on a number of factors, including the Company's financial condition,
operating  results and available  capital at the time. The Company presently has
plans to continue to  repurchase  up to 2,000,000  common  shares of the Company
stock  pursuant to the  approval  of the Board of  Directors.  If a  shareholder
desires to sell  their  shares in the  Company in the future  without a broker's
commission  they may call the  Company and find out if the Company is willing to
purchase the  shareholder's  shares at the prevailing  market value. The Company
makes no promise on whether it will purchase the shares,  however, all inquiries
regarding  the  sale of the  Company's  stock  will be  considered  based on the
financial condition of the Company and the price of the stock.

The  Company  expects  the  business  and  operations  to  continue  as they are
presently  conducted.  The executive  officers and directors of the Company will
not change due to the Stock Splits. The Company expects to realize time and cost
savings as a result of  terminating  its public company  status,  and intends to
invest those  savings in other areas of its business  operations.  Other than as
described in this Proxy Statement,  neither the Company,  nor its management has
any current plans or proposals to effect any extraordinary corporate transaction
(such as a merger,  reorganization  or  liquidation);  to sell or  transfer  any
material  amount  of  the  Company  assets  to  change  the  composition  of the
management or to change materially the Company's  capitalization;  to change the
Company's  dividend  policy;  or otherwise to effect any material  change in the
Company's  corporate structure or business other than has already been disclosed
or in the normal course of business.




Effects on the  Company's  Executive  Officers,  Directors and  Affiliates.  The
Company's  affiliates,  comprised of the executive  officers,  directors and any
shareholders  who own more than ten percent (10%) of the Common Shares,  will be
relieved from  complying with the stock  ownership  reporting  requirements  and
"short swing profit" trading  restrictions under Section 16 of the Exchange Act,
as well as many of the provisions of the Sarbanes-Oxley Act.

As is more thoroughly set forth under the heading entitled"  Security  Ownership
of Certain  Beneficial Owners and Management," the Company expects that upon the
completion  of the  Stock  Splits,  the  Common  Shares  beneficially  owned and
controlled  by the  Company's  executive  officers and  directors  will comprise
approximately  44.0% of the then  outstanding  Common  Shares,  as  compared  to
approximately  42.0% of the Common Shares  outstanding  immediately prior to the
Stock Splits.

                          ALTERNATIVES TO STOCK SPLITS

In  making  the  determination  to  proceed  with the  Stock  Splits,  the Board
considered the potential feasibility of the alternative  transactions  described
below but did not  consider  any  transactions  doing  away with  management  or
placing the Company up for sale: :

     Issuer Tender Offer.  The Board  considered  the  feasibility  of an issuer
     tender offer to repurchase Common Shares. The primary  disadvantage of this
     type of transaction is that, due to its voluntary nature, the Company would
     have no  assurance  that a  sufficient  number  of Common  Shares  would be
     tendered to sufficiently  reduce the number of the Company's  shareholders.
     In addition,  the rules governing  tender offers require equal treatment of
     all   shareholders,   including   pro  rata   acceptance   of  offers  from
     shareholders.  These  requirements  make it  difficult  to ensure  that the
     Company  would be able to reduce the number of the holders of record of the
     Common Shares enough to permit the Company to deregister the Common Shares,
     and the Company could repurchase  numerous Common Shares at a great expense
     and still be unable to deregister.  A tender offer would likely take longer
     to complete than the Stock Splits. As a result of these disadvantages,  the
     Board determined not to pursue this  alternative.  For the same reasons the
     Board rejected an odd-lot tender offer.

     Traditional  Stock  Repurchase  Program.  The Board also  considered a plan
     whereby the Company would periodically repurchase Common Shares on the open
     market at  then-current  market  prices.  The Board  rejected  this type of
     transaction since  repurchasing  enough shares in this manner to enable the
     Company to  deregister  the Common  Shares  would  likely  take an extended
     period of time, have no assurance of success and be of undeterminable cost.

     Cash Out Merger.  The  alternative  available to the Board,  which was most
     similar  to the  Stock  Splits,  was  coordinating  a  merger  with a shell
     corporation  and reissuing  stock to the  shareholders  of the newly merged
     entity. The share exchange would be such that shareholders owning less than
     2000  Common   Shares  prior  to  the  merger  would  be  cashed  out,  and
     shareholders  owning more than 2000 Common Shares would become shareholders
     in the newly merged entity. The Board of Directors concluded that the Stock
     Splits were a better alternative since they do not require the formation of
     a new  entity  and allow the  Company  to avoid the  regulatory  issues and
     approvals   associated   with  the  merger  of  the  Company  into  another
     corporation.




Maintaining the Status Quo or Selling Company. The Board considered  maintaining
the status quo. In that case,  the Company would  continue to incur the expenses
of being a public reporting company without enjoying the benefits  traditionally
associated with public company status.  The Board believes that  maintaining the
status quo is not in the best interests of the Company and its  shareholders and
rejected this  alternative.  The Company did not consider selling the Company or
changing its management  because these  alternatives did not apply to the reason
for the Stock Splits namely being released from the burdens of a fully reporting
company, particularly the requirements of the Sarbanes-Oxley Act.


                          FAIRNESS OF THE STOCK SPLITS

No  independent  committee  of the Board has  reviewed the fairness of the Stock
Splits.  Although  three out of four of the  directors  own Common  Shares,  the
1-for-2000  reverse  split  ratio and the  2000-for-1  forward  split ratio were
determined  without  regard  to  their  share  ownership.  As this  was the sole
potential conflict of interest and the directors will be treated  identically to
all  other  shareholders  in the Stock  Splits,  the Board did not feel that the
additional protections that may be afforded by an independent committee would be
significant.

The Split ratio was determined  because after review of the  shareholder's  list
the Company  determined  that it was a high  probability  that the Company would
have less than 300  shareholders.  After a 1 for 2000  reverse  stock  split the
Stock  Transfer  list showed the Company to have less than 100  shareholders  of
record if no shareholders with less than 2000 shares acquired  additional shares
to remain a shareholder prior to the split.


No unaffiliated  representative  acting solely on behalf of the shareholders for
the purpose of negotiating the terms of the transaction  proposal or preparing a
report  covering the fairness of the Stock Splits was retained by the Company or
by a majority of directors who are not employees of the Company. The Board views
the Valuation  Opinion,  and the other matters discussed in this Proxy Statement
as affording adequate procedural safeguards to unaffiliated shareholders without
the extraordinary expense of multiple financial or legal advisors.

The Company has not made any  provision in  connection  with the Stock Splits to
grant unaffiliated  shareholders  access to the Company's  corporate files or to
obtain counsel or appraisal services at the Company's  expense.  With respect to
unaffiliated  shareholders'  access to the Company's  corporate files, the Board
determined that this Proxy Statement,  together with the Company's other filings
with the SEC, provide adequate  information for unaffiliated  shareholders  with
respect to the Stock Splits.  The Board also considered the fact that under Utah
law, subject to certain  conditions,  shareholders  have the right to review the
Company's relevant books and records.

The Board did not consider  the steps  discussed  above  necessary to ensure the
fairness  of the Stock  Splits.  The Board  determined  that such steps would be
costly and would not provide any meaningful additional benefits. The Board noted
the fact that the  financial  advisor  engaged  by the  Company  considered  and
rendered  its  opinion as to the  fairness of the  consideration  payable in the
Stock Splits, from a financial point of view, to the Company's shareholders.

The Board believes that the transaction is substantively  and procedurally  fair
to affiliated and unaffiliated  shareholders,  notwithstanding the absence of an
unaffiliated   shareholder  approval   requirement,   independent  committee  or
unaffiliated representative.  After consideration of all aspects of the proposed
transaction as described above, all of the directors, including the director who
is not an employee of the Company, approved the Stock Splits.

The Board also believed the Stock Splits to be fair to unaffiliated shareholders
that are cashed out  because  they would be paid a price  higher  than  Gate-Way
determined  the fair market value of the  Company's  stock on a per share price.
Unaffiliated  shareholders  that are not cashed out would be treated the same as
affiliated  shareholders  and remain  shareholders  of the Company on an ongoing
basis. Unaffiliated shareholders would also have the ability to sell their stock
if they no longer chose to be a  shareholder  of the Company  prior to the Stock
Splits taking effect.  Unaffiliated  shareholders that remained with the Company
would benefit from the deregistration  process even though their shares would be
less  liquid  because  the  Company  would  not  have to incur  the  significant
compliance costs of the Sarbanes-Oxley Act and therefore, the Company would have
more time and funds to pursue other endeavors.





The Board  considered  the factors in support of and in  opposition to the Stock
Splits discussed below in reaching its conclusion as to the substantive fairness
of the Stock Splits.  The Board did not assign  specific weight to the following
factors but did place emphasis on the  opportunity for  unaffiliated  holders of
Common Shares who will have  fractional  shares  exchanged for cash to sell such
Common Shares at a premium and without brokerage fees or commissions, as well as
the  significant  cost and time  savings the Company is expected to realize from
deregistration of the Common Shares.

                         ADVANTAGES OF THE STOCK SPLITS

Opportunity for Shareholders to Sell Repurchased  Common Shares at a Premium and
Without Broker Fees or  Commissions.  The  Repurchase  Price of $1.50 per Common
Share  represents  (i) a premium based on Gate-Way's  opinion of the share price
before dilution of about 40% and after dilution of 45%. The price offered by the
Company is also a premium of 7.14% over the average  closing price of the Common
Shares on June 27, 2005 of a $1.40.  The Board reviewed the proposal made by the
Company's  management  that a $1.50 per share be  established  as the Repurchase
Price  for the  Common  Shares.  The  Board,  in the  exercise  of its  business
judgment,  adopted such recommendation since the Repurchase Price for the Common
Shares  represented fair  consideration at a premium to the current price of the
Common Shares while also being a significant  premium to the valuation  analysis
of  Gate-Way.  The  Board  believes  that  the  Repurchase  Price is fair to the
Company's  shareholders.  The Board determined that the Stock Splits are fair in
part because they provide Unaffiliated Cashed Out Holders with an opportunity to
liquidate all of their Common Shares, and for Unaffiliated Continuing Holders to
liquidate some Common  Shares,  without  paying  brokerage  commissions or other
transaction fees.

While  performing  its  analysis for the  Valuation  Opinion,  Gate-Way  Capital
selected the valuation  analyses it deemed most relevant  based on its knowledge
of the Company and the  Company's  expressed  intent to continue as an operating
entity and not liquidate.  Please see the section entitled "Opinion of Gate-Way"
for a discussion of these analyses.

The Board did not deem the Company's  liquidation  value material or relevant in
the  context of the Stock  Splits.  The Board did not  calculate  the  Company's
liquidation value, on a per share basis or otherwise. Although not calculated by
the  Board,  the  liquidation  value of the  Company  would  likely  reflect  an
arbitrarily  low  valuation,  and thus using  liquidation  value to help set the
Repurchase  Price  would have  supported  a price lower than the price the Board
believed would be appropriate in light of its desire to ensure that shareholders
who receive  cash in lieu of  fractional  shares  receive a fair price for their
Common Shares that are exchanged for cash in connection with the Stock Splits.

The Board believes that the Company's net book value per share does not properly
reflect the Company's  earnings  stream and cash flow,  two factors it considers
critical for a  meaningful  valuation  of the Common  Shares.  Net book value is
based upon the historical cost of a company's  assets and ignores the value of a
company  as a going  concern.  The value of items  such as a  positive  business
reputation,  a trained  workforce  and  established  customers  are  ignored  in
computing net book value.  The Board  believes that the proper  valuation of the
Company should be based on the Company's  historical and  prospective  operating
performance and Gate-Way's  analysis was based upon this premise.  The Company's
book value per Common Share based on its 10QSB filed for the period ending March
31, 2005 was $.53.  The Board  believes that the valuation of the Common Shares,
as determined  by Gate-Way,  as well as the market price of the Common Shares on
May 2, 2005 ($1.45 per share), are significantly greater than the book value per
Common Share.




Significant Cost and Time Savings for the Company.  By deregistering  the Common
Shares and suspending the Company's  periodic  reporting  obligations  under the
Exchange Act, the Company  expects to realize  recurring  annual cost savings of
approximately  $250,000 that it would have to expend in the future primarily for
Section 404, the internal controls audit of the Sarbanes-Oxley Act. In addition,
the Company expects to realize non-recurring savings of approximately $75,000 in
fees and expenses that would otherwise incur due to compliance with the internal
controls  audit  requirements  of Section  404 of the  Sarbanes-Oxley  Act.  The
termination of the Company's  reporting  obligations under the Exchange Act will
also eliminate the significant amount of time and effort previously  required of
management  to prepare  and review the  reports  required  to be filed under the
Exchange Act. Please see the section entitled "Reasons for the Stock Splits" for
a more detailed discussion of these cost savings.

Equal  Treatment of Affiliated and  Unaffiliated  Holders of Common Shares.  The
Stock Splits will not impact  affiliated  holders of Common  Shares  differently
than unaffiliated holders of Common Shares on the basis of affiliate status. The
sole  determining  factor as to whether a holder of Common  Shares will remain a
shareholder of the Company and how many Common Shares will be repurchased by the
Company in lieu of issuing  fractional shares as a result of the Stock Splits is
the number of Common Shares held by such holder  immediately  prior to the Stock
Splits.  Please see the section  entitled  "Stock Splits  Proposal - Summary and
Structure" for a more detailed discussion.

Minimum Effect on Voting Power. The Stock Splits will have minimum effect on the
voting power of the Company's shareholders.  The Common Shares are the Company's
only voting  shares and will  continue to be the  Company's  only voting  shares
after the Stock Splits. The voting and other rights currently held by the Common
Shares will not be affected  by the Stock  Splits.  The only effect of the Stock
Splits on the Company's voting power will be a change in the overall  percentage
of ownership of the Unaffiliated Continuing Holders.

No Material Change in Percentage  Ownership of Executive Officers and Directors.
Since only an estimated 400,000 out of 7,683,727  outstanding Common Shares will
be eliminated as a result of the Stock Splits,  the percentage  ownership of the
Unaffiliated  Continuing  Holders will be approximately the same as it was prior
to the Stock Splits.  For example,  the executive  officers and directors of the
Company  beneficially own approximately 28.87% of the outstanding Common Shares,
and will beneficially own approximately  30.33% of the outstanding Common Shares
following  completion  of the Stock  Splits.  All of the directors and executive
officers  that own  stock  currently  have  over  2000  shares  and will  remain
shareholders of the Company after completion of the Stock Splits. Please see the
section  entitled   "Security   Ownership  of  Certain   Beneficial  Owners  and
Management."

Potential  Ability to Control Decision to Remain a Holder of or Liquidate Common
Shares.  Another factor  considered by the Board in determining  the fairness of
the Stock Splits to the holders of the Common Shares is that current  holders of
fewer than 2000  Common  Shares can seek to remain  shareholders  of the Company
following  the Stock Splits by acquiring  additional  shares so that they own at
least 2000 Common Shares immediately before the Stock Splits. However, if enough
small  shareholders  decided to  acquire  shares to remain  shareholders  of the
Company,  the Company  would not be able to file a Form 15 and  deregister.  The
Company  believes the  likelihood  of this  happening is very remote and decided
that the  opportunity  to  deregister  the  Company  far  outweighed  any remote
possibility  that the Company  would have more than 300  shareholders  after the
Stock Splits.  Conversely,  stockholders that own 2000 or more Common Shares who
desire to  liquidate  their  shares in  connection  with the Stock Splits at the
premium price offered can seek to reduce their holdings to less than 2000 Common
Shares by  selling  shares  prior to the Stock  Splits.  The Board did not place
undue  emphasis on this factor due to the limited  trading market for the Common
Shares. Please see the section entitled "Effects of the Stock Splits."




                        DISADVANTAGES OF THE STOCK SPLITS

Substantial  or Complete  Reduction of the Market for Common  Shares.  After the
completion  of the Stock Splits and  deregistration  of the Common  Shares,  the
Company  anticipates  that the  public  market  for the  Common  Shares  will be
substantially reduced or altogether eliminated.  The Board, however,  considered
that  potential  trades in the Common  Shares could be  facilitated  by a market
maker in the Pink  Sheets(R)  following  deregistration.  Please see the section
entitled "Effects of the Stock Splits".

Termination  of  Publicly   Available   Information  About  the  Company.   Upon
termination of the registration of the Common Shares under the Exchange Act, the
Company's  duty  to file  periodic  reports  with  the  SEC  will be  suspended.
Information  regarding the Company's  operations  and financial  results that is
currently  available to the general public and the investors will not be readily
available after  deregistration,  and investors  seeking  information  about the
Company will have to contact the Company  directly to receive such  information.
The Company may or may not provide investors with requested information that the
Company is not required by law to provide.  The Stock Splits will not affect the
right of Unaffiliated  Continuing Holders to obtain certain information from the
Company under Utah law.  Under Utah law, a  shareholder  has the right to make a
written  request to inspect a company's  books and records  (including,  without
limitation,  annual  financial  statements)  and receive  copies thereof for any
purpose reasonably related to such person's interest as a shareholder.

While the Board  realizes  and  acknowledges  that the  termination  of publicly
available  information may be disadvantageous to the Company  shareholders,  the
Board  believes  that the overall  benefits to the Company of no longer  being a
public reporting company  substantially  outweigh the  disadvantages  associated
with a lack of publicly  available  information  about the Company.  The Company
currently intends to continue to provide annual audited financial statements and
Proxy Statements to the Company's shareholders; however, these documents may not
be as detailed or extensive as the  information  currently  being filed with the
SEC. Although the Company intends to continue to provide these documents,  there
is no SEC requirement  that the Company does so or that it maintains the present
level of disclosure contained in such documents. Please see the section entitled
"Effects of the Stock Splits."

Possible  Decline in Price of the Common  Shares.  After the  completion  of the
Stock Splits,  the liquidity of the Common Shares will be significantly  reduced
or eliminated.  In addition,  the lack of publicly available financial and other
information  about the Company and the diminished  opportunity for the Company's
shareholders  to monitor the  management  of the Company due to the lack of such
public information may cause the Unaffiliated Continuing Holders to experience a
decrease  in the price at which they may sell their  Common  Shares.  Please see
"Disadvantages of the Stock Splits  -Substantial or Complete Reduction of Public
Sale  Opportunities"  and  "Disadvantages  of the Stock Splits - Termination  of
Publicly Available Information about the Company" above.




Inability to  Participate  in Future  Increases in Value of the Common Shares or
Payments of  Dividends.  Following  the Stock  Splits,  Unaffiliated  Cashed Out
Holders will have no further financial interest in the Company and will not have
the opportunity to participate in the potential appreciation in the value of, or
the payment of dividends on, the Common Shares.

                                  OTHER FACTORS

The Board concluded the factors set forth below to be either inapplicable or not
material to its assessment of the fairness of the Stock Splits.


     Firm  Offers.  The Company is not aware of any firm offers to purchase  the
     Company  that have been made during the past two  calendar  years or during
     the current calendar year.

     Prior Public  Offerings.  The Company has not made any underwritten  public
     offering  of the Common  Shares or any other  securities  since its initial
     public offering in 1981.

     Merger,  Consolidation or Other Extraordinary  Transaction.  The Company is
     not engaged in a merger or  consolidation  with  another  company or in any
     other extraordinary transaction, such as the sale or other transfer of all,
     or a  substantial  part,  of the  Company's  assets,  during  the  past two
     calendar years or during the current calendar year.

     Securities  Purchases.  There have not been any  purchases of the Company's
     Common  Shares  that would  enable the  holder to  exercise  control of the
     Company.

     Liquidation Value. The Company's  liquidation value was not deemed relevant
     because  the  Company  plans to  continue  to  operate  as a going  concern
     following the Stock Splits.

                                   CONCLUSION

The Board believes that all of the factors  mentioned above,  both favorable and
unfavorable, when viewed together support a conclusion that the Stock Splits are
substantively  fair to the Company's  shareholders,  including the  Unaffiliated
Cashed Out Holders and Unaffiliated Continuing Holders.

                               OPINION OF GATE-WAY

The Board retained  Gate-Way to provide an opinion on the value of the Company's
common shares ("Valuation  Opinion").  On April 30, 2005, Gate-Way delivered the
Valuation  Opinion to the Board.  The Valuation  Opinion states that, based upon
and subject to the factors and  assumptions  set forth  therein,  the Repurchase
Price to be paid to Unaffiliated Cashed Out Holders pursuant to the Stock Splits
is fair  from a  financial  point of view as of  April  30,  2005  since it is a
premium  of what  Gate-Way  considers  the  stock's  valuation  to be by 40-45%.
Gate-Way also presented to the Board a summary of the analyses  described  below
which is attached to this Proxy Statement as Exhibit A.


The factors and  assumptions  that  Gate-Way  used for  performing  its analysis
required that it looked at several  factors for  determining the cost of capital
for the Income  Approach  these same factors were used to identify 64 comparable
companies that were used in the Market Approach.  The material risk factors that
Gate-way  reviewed  were;  Management  Depth  and  Quality,  Importance  of  Key
Personnel,  Stability of Industry,  Product Line Diversification,  Customer Base
Diversification,  Supplier Diversification and Stability,  Quality and Abundance
of Resources,  Geographic Location,  Stability of Earnings, Earning Margins, and
Financial  Structure.  After  analyzing  these  various risk  factors,  Gate-Way
determined a cost of capital for the Income  Approach that was generally in line
with the oil and gas industry.  Other factors Gate-Way considered as part of its
report for valuation were as follows:

     1. The nature of the business and its history from its inception.

     2. The  economic  outlook in general and the  condition  and outlook of the
     specific industry.

     3. The book value of the stock and the financial condition of the business.

     4. The earnings capacity of the company.

     5. The dividend-paying capacity.

     6. Whether or not the enterprise has goodwill or intangible value.

     7. Sales of stock and the size of the block of stock to be valued.

     8. The  market  price of stocks of  corporations  engaged  in the same or a
     similar line of business  having their stocks actively traded in a free and
     open  market,  either on an  exchange  or  over-the-counter.  The  foremost
     valuation factor to be considered for an operating company generally is its
     earnings  capacity,  whereas the value of the  underlying  assets,  or book
     value, is more likely the most important financial measure for a holding or
     investment  company  formed  for the  purpose of owning the stocks of other
     companies, real estate or natural resources.

Other  considerations  to value  which are  situational  dependent  include  the
following, which were also incorporated into Gate-Way's analysis:

         Purpose of the valuation and what specifically, is being valued

         Quality and reliability of reported earnings

         Potential for synergy, if the firm is being appraised for acquisition
         or merger

         Imminence of retirement and health of principals and management

         Gross revenue, and its relationship to net earnings

         Cash flow and liquidity

         Condition of the accounting system and other records

         Cost of capital, risk, and inflation in the past and into the future

         Restrictive agreements

         Prior sales or valuations of the company

         Recent mergers or acquisitions of comparable companies






The Valuation Opinion was prepared for use by the Board and was from a financial
point of view,  Gate-Way's  opinion of the value of the Company.  By determining
the value of the Company, the Company's common shares could then be extrapolated
based on the number issued and outstanding  shares of the Company.  Gate-Way was
not  involved in  structuring  the Stock Splits and its opinion does not compare
the relative  merits of the Stock Splits with those of any other  transaction or
business  strategy  which were or might have been  available to or considered by
the  Company  or the  Board as  alternatives  to the Stock  Splits  and does not
address the underlying  business decision by the Board to proceed with or effect
the Stock Splits.  The Valuation  Opinion is solely for the  information  of the
valuation  of the Company and was  specifically  addressed  to the Board for its
determination  of a fair price of the  Company's  common  stock for the  reverse
stock split. The information used by Gate-Way for making its  determination  was
in large part provided by the Company and Gate-Way takes no  responsibility  for
the  underlying  data  presented in its report.  The Valuation  Opinion does not
constitute a  recommendation  to the Board as to how it should vote on the Stock
Splits. In furnishing the Valuation  Opinion,  Gate-Way did not admit that it is
an expert within the meaning of the term "expert" as used in the  Securities Act
of 1933 nor did it admit that its opinion serves as a report or valuation within
the meaning of the Securities  Act.  Gate-Way has valued other natural  resource
businesses in the past, but does not purport to be a guarantor of value.

The full text of the  Valuation  Opinion is  attached  as Exhibit B to the Proxy
Statement  that is filed with the SEC and is  incorporated  herein by reference.
You may view the full text of the Valuation  Opinion by typing in Pioneer Oil in
the   search    engine    after    accessing    the   SEC's    edgar   site   at
http://www.sec.gov/edgar/searchedgar/companysearch.html.  Once you have  reached
the filings for the Company enter the Proxy  Statement and then access Exhibit B
filed with the Proxy Statement.  The summary of the Valuation  Opinion set forth
in this  Proxy  Statement  and the  summary  attached  to hereto as Exhibit A is
qualified  in its  entirety  by  reference  to the  full  text of the  Valuation
Opinion.  Shareholders are urged to read the Valuation  Opinion carefully and in
its entirety for a discussion  of the  procedures  followed,  assumptions  made,
other matters considered and limits of the review by Gate-Way in connection with
the Valuation Opinion.

The Board selected  Gate-Way as its financial advisor because it is a recognized
financial  institution  consulting firm that has  substantial  experience in the
financial  institutions  industry and is  knowledgeable  and  familiar  with the
operations of the Company and its business. As part of its business, Gate-Way is
regularly  engaged in the valuation of businesses  and  securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted  securities,  private  placements and valuation for corporate and other
purposes, particularly those of mineral companies.

In rendering the  Valuation  Opinion,  Gate-Way  reviewed the terms of the Stock
Splits and also  reviewed  financial  and other  information  that was  publicly
available, or furnished to Gate-Way by the Company's management.  No projections
or forecasts  were  furnished  or provided to Gate-Way.  The Company did provide
Gate-Way with information related to its Central Utah acreage prospect. Gate-Way
also reviewed certain publicly available operational, financial and stock market
data  relating  to selected  public  companies  and  conducted  other  financial
studies, analyses and investigations as Gate-Way deemed necessary or appropriate
for  purposes  of  rendering  the  Valuation  Opinion,  as more  fully set forth
therein.  No limitations  were imposed by the Board of the Company upon Gate-Way
with  respect  to  the  investigations  made  or  procedures  followed  by it in
rendering its opinion.




Gate-Way assumed and relied upon, without independent verification, the accuracy
and  completeness  of all  financial  and other  information  that was  publicly
available,  supplied  or  otherwise  communicated  to it by or on  behalf of the
Company. Gate-Way further relied upon the assurances of the Company's management
that they are unaware of any facts that would make the  information  provided to
it incomplete or misleading.

Gate-Way was not requested to make, and did not make, an independent  evaluation
or appraisal of the assets, properties, facilities or liabilities (contingent or
otherwise)  of the Company,  and was not furnished  with any such  appraisals or
evaluations  other than the reserve study  furnished in the Company's Form 10KSB
filed for the period ending 9/30/2004.  Gate-Way's  opinion is necessarily based
upon financial, economic, market and other conditions and circumstances existing
and  disclosed  to Gate-Way  on the date of the  Valuation  Opinion.  Subsequent
developments  may affect the  conclusions  reached in the Valuation  Opinion and
Gate-Way has no obligation to update, revise or reaffirm the Valuation Opinion.

All of the factors and assumptions  which were used by Gate-Way are disclosed in
their full report.  Some of the most important were the three valuation  methods
used which were the Asset Based approach,  Market approach and Income  approach.
These are the valuations  methods approved by the IRS and are standard  industry
practice and are consistent with Internal Revenue Ruling 59-60.

The fair  market  value  determined  by  Gate-Way  was  based  primarily  on the
historical income of the Company, the historical market for the Company's stock,
the value of the Company as a going concern, and various risk factors such as no
replacement  people for key personnel and the wide swings in oil prices over the
last  four  years.  The  value of the  Company's  central  Utah  project  was an
important factor in valuation and the Company made it clear to Gate-Way that the
sale of these properties is an unusual event and it is unlikely that the Company
will find a similarly profitable leasing opportunity in the foreseeable future.

In preparing  the  Valuation  Opinion,  Gate-Way  conducted  the  following  two
principal analyses: (i) a comparison of the Company with certain publicly traded
companies deemed  comparable to the Company,  and (ii) a review of the Company's
historical earnings and financial statements and a projection of future earnings
using an appropriate Cost-of -Capital.

No company used in any analysis as a comparison is identical to the Company, and
they all differ in various ways. As a result,  Gate-Way  applied its  experience
and professional judgment in making such analyses.  Accordingly,  an analysis of
the results is not mathematical;  rather it involves complex  considerations and
judgments  concerning  differences  in  financial  characteristics,  performance
characteristics  and  trading  value of the  comparable  companies  to which the
Company is being compared.  The preparation of a valuation  opinion is a complex
process  and is not  necessarily  susceptible  to  partial  analyses  or summary
description.  In arriving at the  Valuation  Opinion,  Gate-Way  considered  the
results of all of its analyses as a whole and  weighted the market  approach 60%
and the income approach 40%. Gate-Way believes that the summary provided and the
analyses  described  above  must be  considered  as a whole  and that  selecting
portions of these analyses,  without  considering  all of them,  would create an
incomplete view of the process underlying its analyses and opinion.

The  following  is a summary of the  material  financial  analyses  performed by
Gate-Way in connection  with the  preparation  of the Valuation  Opinion.  These
summaries of financial  analyses alone do not constitute a complete  description
of the financial  analyses  Gate-Way  employed in reaching its conclusions.  The
order of analyses  described  does not represent  relative  importance or weight
given to those analyses by Gate-Way.  Except as otherwise  noted,  the following
quantitative  information,  to the extent  that it is based on market  data,  is
based on  market  data as it  existed  on or before  April  30,  2005 and is not
necessarily indicative of current market conditions.

                   PUBLIC COMPARABLES ANALYSIS/MARKET APPROACH

In  rendering  its  opinion,  Gate-Way  analyzed  the pricing  ratios of certain
comparable oil and gas companies that had sold at a certain price.  The analysis
included a comparison of such key financial  ratios as return on assets,  return
on investment  and P.E.  ratio before  extraordinary  items and such key pricing
ratios  as  current  ratio,  and  earnings  before  interest,  depreciation  and
amortization. Gate-Way reviewed and compared selected financial and stock market
information,  ratios and multiples of the Company to corresponding financial and
stock market  information,  ratios and  multiples  for a group of nine  selected
publicly-traded  oil and gas  companies  as set  forth in the  full  text of the
Valuation Opinion attached as Exhibit B filed with the SEC.



Gate-Way  considered the comparable  group comparison of the Market Approach and
analysis  as the most  appropriate  basis  for  determining  the  price  for the
repurchase  of the  Company's  stock and  weighted  60% of the price  using this
method.  Gate-Way stated that the weight given to the Market and Income approach
was based on the  professional  judgment and  experience  of its analyst and not
because of some system of prescribed  formulas.  The reason for giving a greater
allocation toward the Market approach over the Income approach was not disclosed
by the analyst  other than the asset  approach  relies on the selection of truly
comparable  companies  in the same  industry  which  is  challenging  since  few
companies  have the same  financial  structure,  cost  structure,  organization,
operational  processes,  product mixes, markets, etc. However, the approach does
provide valuable perspective about the market.

The Market Approach uses comparable companies in the same industry as defined by
a company's SIC or NAICS codes. Comparable data is extracted from public markets
and from various data bases containing historical  information for stock shares,
earnings per share,  equity price to annual sales, equity price to annual sales,
and equity price to annual sales or assets,  etc. The challenge with this method
is locating and  selecting  appropriate  similar or  comparable  companies.  Two
methods have been approved for the Market Approach namely the Guideline Publicly
Traded  Company Method and the  Comparative  Transaction  Method.  The Guideline
Publicly  Traded Company Method  ("GTPCM")  incorporates a best fit analysis and
encompasses  the  concept of  selecting  those  companies  that are deemed  most
comparable or similar to the Company.  Publicly held companies were used for the
comparable  analysis since  closely-held  companies have different  foundations,
both  financially  and  organizationally,  from those of most public  companies.
Gate-Way took  information  from 193  companies  identified in SIC 1311 the same
industrial  code as Pioneer Oil and Gas and  compared  the same with Pioneer Oil
and Gas.  Several of the 193  companies  in the sample were  deleted for various
reasons by Gate-Way with the Companies  most close to the Company  placed in the
following table that was in Gate-Way's report:





-------------------------------------------------------------------------------------------------------------------------------
                     Table: ADJUSTED COMPARISON SUMMARY WITH OTHER PUBLICLY TRADED COMPANIES
                                                           SIC 1311
                                                     Pioneer Oil and Gas
                                                        April 30, 2005

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

       DESCRIPTION                               PE                                              LONG
                                        STOCK    RATIO                                           TERM                          
                                       PRICE/    BEFORE    STOCK                                 DEBT/               
                                      SALES/     XTR       PRICE /    DIV     PAY OUT   CUR       TOT    RTRN ON     RTRN ON
                            BETA        SHARE     ITEMS    CASH FLOW  YIELD    RATIO     RATIO    EQTY     INVEST     ASSETS
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                             -1.03      1.53      16.09      9.25      0.00     0.00     5.05     0.00     20.02       12.65
Pioneer Oil and Gas
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------

Total SIC 1311 Sample
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                      MEAN    0.49      2.51      15.87      6.36      0.61     1.23     1.36     0.58      9.28       7.71
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                    MEDIAN   0.565      2.36      13.68      5.875     0.62      0         1      0.51      9.55       7.88
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                   MAXIMUM    1.92      5.08      40.00      13.00     1.09     8.12     5.05     2.07     20.02       16.04
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                   MINIMUM   -1.13      0.03       2.95      0.24      0.14     0.00     0.05     0.00      0.00       0.00
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                     RANGE    3.05      5.05      37.05      12.76     0.95     8.12       5      2.07     20.02       16.04
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                     STDEV   0.545      1.02       7.58      2.43      0.29     2.45     1.02     0.46      4.67       3.89
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                   COEFVAR   1.105      0.41       0.48      0.38      0.48     2.00     0.75     0.79      0.50       0.50
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
                    COUNTA     64        64         64        64        17       66       66       63        64         67
--------------------------- --------- ---------- --------- ---------- ------- --------- -------- ------- ----------- ----------
-------------------------------------------------------------------------------------------------------------------------------

Source:  C-E-I-R 10,000 - Data extracted as of 31 December 2004.
-------------------------------------------------------------------------------------------------------------------------------








The next table below presents  Gate-Way's results of Valuations using the Ratios
from the table above:




                                         Table: SUMMARY OF VALUATION RESULTS
                                                 C-E-I-R 10,000 Data
                                                 Pioneer Oil and Gas
                                                    April 30, 2005

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

                                                                                   
 
                            PER      CURRENTSHARES
       DESCRIPTION           SHARE                    MEAN         MEDIAN         HIGH         LOW          MEANS
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
Stock Price to Sales         0.199    7,911,727       2.51          2.36          5.08         0.03
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                    Ratios                            .499          .47          1.011         .006
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                 Valuation                           3,947,950     3,715,700     7,998,100      47,200       5,220,600
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
Price/Earnings               0.041   7,911,727       15.87         13.68         40.00         2.95
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                    Ratios                            .646          .557         1.629        0.120
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                 Valuation                        5,111,000        4,406,800    12,888,200     949,400       7,468,700
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
Price/Cash Flow             0.055    7,911,727        6.36         5.875         13.00         0.24
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                    Ratios                            0.35         0.323         0.715        0.013
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                 Valuation                           2,769,100     2,555,500     5,656,900     102,900       3,660,500
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------
                                                     3,942,700     3,559,300     8,847,700     366,500
                     MEANS
--------------------------- -------- ------------ ------------- ------------- ------------- ----------- ---------------




Gate-Way gave careful  consideration to the results of the analysis presented in
the Table above.  Gate-Way  stated in its report that "A comparison  between the
Company and  'similar'  companies in the same  industry  shows the Company to be
above  average   performance  wise."  Therefore,   Gate-Way  concluded  that  an
appropriate  value should lie somewhere between the Mean/Median and the High. An
average  of those  three  values  was used to  derive  the Grand  Means,  and by
comparison  Gate-Way  selected the two highest values,  which were then averaged
resulting in the selected value for this method. The derived values range from a
low of $366,500 to a high of  $8,847,700.  The selected  value using this method
was the mean between the three highest valuations or $7,179,000.

The  Comparative  Transaction  Method  compares  selected ratios from the actual
sales of other  companies in the same  industry.  Data to support this method is
generally found in a variety of databases  which contain key  information  about
similar companies  recently sold. That data is adjusted,  and selected financial
ratios  are  derived  from  which  values  can be  calculated  using th  subject
Company's  financial data. The challenge using this method is the identification
of truly similar  companies for the comparison,  since it is rare to find two or
more  companies that have the exact same  management,  product,  marketing,  and
financial structure,  etc. Comparative data was extracted from DoneDeals for the
Gate-Way  opinion.  The table below summarizes the nine  transactions  involving
companies used for comparing with Pioneer Oil and Gas. Of the nine transactions,
seven were sold by Private Companies and two by Public  companies.  Seven of the
nine sellers were U.S. companies,  and two were Canadian companies. A summary of
the Sellers Description and the Terms of the sale are presented below:



              Table: SUMMARY OF COMPARATIVE TRANSACTIONS - SIC 1311
                               DoneDeals Database
                               Pioneer Oil and Gas
                                 April 30, 2005





                                                                                                  
BUYER'S CITY                        PRIMARY SELLER (STATE)             SALE TYPE         BUS TYPE              CLOSE

Delray Beach, FL                    Graham Energy (NV)                 Stock             Private               6-Feb-02
Calgary, Alberta, Canada            Assure Oil and Gas Corp. (CANADA)  Stock             Private               1-Apr-02
New Orleans, LA                     Hail-Houston Oil Company (TX)      Stock             Private              15-Jan-02 
Calgary, Alberta, Canada            Westerra 2000 Inc. (ALBERTA)       Stock             Private               1-Apr-02
Benedict, KS                        STP Cherokee, Inc. (OK)            Stock             Private               7-Nov-02
Denver, CO                          Bravo Natural Reosurces, Inc. (OK) Stock             Private               6-Dec-02
Houston, TX                         EEX Corporation (TX)               Stock             Public               26-Nov-02
Denver, CO                          Matador Petroleum Corp (TX)        Stock             Public               27-Jun-03
Oklahoma City, OK                   Perkins Oil Enterprises, Inc. (KS) Stock             Private               6-Jun-03






The  Gate-Way  opinion  then  summarized  the  sales  transactions  of the  nine
companies and identified  valuation  ratios for  comparative  purposes under the
following tables:

         Table: SUMMARY OF EQUITY PRICES, REVENUES AND VALUATION RATIOS
                               DoneDeals Database
                               Pioneer Oil and Gas
                                 April 30, 2005




                                                        EQUITY                      EQUITY                               EQUITY
                                                        PRICE                       PRICE                                PRICE
PRIMARY SELLER          EQUITY PRICE     REVENUE        REVENUE        EBITDA       EBITDA          NET INCOME           NET INCOME
                                                                                              
Graham Energy            10,800,000          96,000     113            39,990       270                      4,000     2,700.00
Assure Oil and Gas        2,100,000          39,000      54           (90,000)      -23                   (141,000)    (14.89)
Hail-Houston Oil         94,600,000      36,000,000       3          (427,000)     -222                (17,400,000)     (5.44)
Westerra 2000             2,288,700         600,000       4           275,000         8                     13,000      176.05
STP Cherokee              6,110,000       1,800,000       3            81,900        75                   (208,500)    (29.30)
Bravo Natural Resources 119,000,000      17,466,670       7        12,266,670        10                  3,333,333      35.70
EEX Corporation         742,900,000     151,733,337       5                                             25,600,000      29.02
Matador Petroleum       407,700,000      59,900,000       7        40,100,000        10                 10,300,000      39.58
Perkins Oil Enterprises   3,040,000       5,520,000       1           506,400         6                    168,000      18.10
MEAN                    154,282,078      30,350,556      22         6,594,120        17                  2,407,648       328
MEDIAN                   10,800,000       5,520,000       5           178,450         9                     13,000        29
MAXIMUM                 742,900,000     151,733,337     113        40,100,000       270                 25,600,000   2,700.00
MINIMUM                   2,100,000          39,000       1          (427,000)     (222)               (17,400,000)    (29.00)
RANGE                   740,800,000     151,694,337     112        40,527,000       492                 43,000,000   2,729.00
STDEV                   256,704,131      49,944,688      38        14,198,353       134                 11,309,520     892.00
COEFVAR                     1.66            1.65        1.75          2.15         8.02                       4.70       2.72
SAMPSIZE                    9               9             9           9             8                           9        9




    Table: ADJUSTED SUMMARY OF EQUITY PRICES, REVENUES AND VALUATION RATIOS
                               DoneDeals Database
                              Pioneer Oil and Gas
                                 April 30, 2005




                                                            EQUITY                    EQUITY                               EQUITY
                                                            PRICE                     PRICE                                PRICE
PRIMARY SELLER             EQUITY PRICE         REVENUE     REVENUE       EBITDA      EBITDA        NET INCOME           NET INCOME
                                                                                                      
Hail-Houston Oil           94,600,000          36,000,000     3           (427,000)   (222)         (17,400,000)              (5)
Westerra 2000               2,288,700             600,000     4            275,000       8               13,000              176
STP Cherokee                6,110,000           1,800,000     3             81,900      75             (208,500)             (29)
Bravo Natural REsources   119,000,000          17,466,670     7         12,266,670      10            3,333,333               36
EEX Corporation           742,900,000         151,733,337     5                                      25,600,000               29
Matador Petroleum         407,700,000          59,900,000     7         40,100,000      10           10,300,000               40
Perkins Oil Enterprises     3,040,000           5,520,000     1            506,400       6              168,000               18

MEAN                      196,519,814          39,002,858     4          8,800,495     (19)           3,115,119               38
MEDIAN                     94,600,000          17,466,670     4            390,700       9              168,000               29
MAXIMUM                   742,900,000         151,733,337     7         40,100,000      75           25,600,000              176
MINIMUM                     2,288,700             600,000     1           (427,000)   (222)         (17,400,000)             (29)
RANGE                     740,611,300         151,133,337     6         40,527,000     296           43,000,000              205
STDEV                     280,161,088          54,156,578     2         16,089,189     103           12,958,043               66
COEFVAR                      1.43                1.39        0.55         1.83        -5.47            4.16                  1.75
SAMPSIZE                      7                   7           7            6            6               7                     7




             Table: SUMMARY OF COMPARATIVE TRANSACTIONS VALUATIONS
                              Pioneer Oil and Gas
                                 April 30, 2005



                                                                        

                          *      REVENUE          *             EBITDA          *              NET INCOME
DESCRIPTION                    $1,590,900.00                    $404,300.00                    $297,800.00
MEAN                      4    $6,363,600.00     22           $8,894,600.00     31           $9,231,800.00
MEDIAN                    4    $6,363,600.00     10           $4,043,000.00     32           $9,529,600.00
MAXIMUM                   7   $11,136,300.00     75          $30,322,500.00     40          $11,912,000.00
MINIMUM                   1    $1,590,900.00      6           $2,425,800.00     18           $5,360,400.00

MEAN                           $6,363,600.00                 $11,421,475.00                  $9,008,450.00

GRAND MEAN                     $8,931,175.00                  $8,931,175.00                  $8,931,175.00

* = Valuation Ratio used for calculation







Gate-Way's results using the Comparative Transactions Method was $8,931,200. The
Table  presented  below  considers  the  valuations  selected  from each  Market
Approach Method, and derives a single value for the Market Approach.

                  Table: OPINION OF VALUE FOR MARKET APPROACH
                              Pioneer Oil and Gas
                                 April 30, 2005


                  Publicly Traded Companies           $7,179,000
                  Comparative Transaction Companies   $8,931,200

                  OPINION OF VALUE - MARKET APPROACH  $8,055,100


                                INCOME APPROACH

The Income  Approach  is a  discounted  earnings  method used to  calculate  the
present value of a Company's future earnings potential. The earnings are derived
using statistical  projection models of the Company's adjusted historical Income
Statements.  Gate-Way in its opinion stated that this method is highly  regarded
by the  Valuation  community  as an  excellent  method for deriving the Sales or
Equity Price of an on-going business.  It permits the use of various definitions
of earnings  including Net Earnings,  Earnings Before Taxes,  and Net Cash Flow.
The  determination  of value then is based on the  present  value of a stream of
benefits,  or earnings,  into the future,  plus a Terminal Value that represents
the Company's  residual value into the future at the end of the earnings stream.
The  strengths of this method are that it considers  the  Company's  operational
processes and profits based on historical experience.  Its major weakness though
is that it relies on the selection of an appropriate  Cost of Capital  expressed
as Discount and  Capitalization  rates, on an appropriately  selected  long-term
growth rate,  and on accurate  projections  of earnings  throughout the analysis
period.  Hence,  variances  from those  selections and actual rates and earnings
will  result  in  differences  between  derived  and  actual  values,  and those
differences may be material.

Using this method,  Gate-Way  determined Pioneer Oil and Gas to have a long term
sustainable  growth after taxes of 6.0%.  With the  exception of 2005,  Revenues
were derived from five-year historical  information  (2000-2004).  Expenses were
determined using a ration of revenues to expenses over the same period.  General
and Administrative  expenses for fiscal year 2005 were set as the same as fiscal
year 2004, and then were inflated at 2.0% per year for the next five years.  The
resulting  Net Income  derived by  Gate-Way  was used in the  Discounted  Future
Earnings model presented in the Table below.

For their report,  Gate-Way considered 2005 as the base year.  Financial results
were  available for the first half of the year, and an estimate was made for the
second half. Also, unusual income from the sale of acreage from the Central Utah
Overthrust was included into the 2005 results.  Projected  Revenues and Expenses
for the  subsequent  five years were made as  described  above,  and the present
value of that earnings  stream was  calculated  using the long term  sustainable
growth number of 6.0%.



                    Table: PROJECTED FUTURE EARNINGS SUMMARY
                              Pioneer Oil and Gas
                                 April 30, 2005



                                                                                                

REVENUES ($s)                                               2005         2006         2007         2008         2009         2010
Oil and gas sales                          0.56          955,000    1,694,280    2,237,424    2,875,824    3,609,480    4,438,459
Royalty revenue                            0.30          850,000      907,650    1,198,620    1,540,620    1,933,650    2,377,746
Production Operations (OGRR)                           1,805,000    2,601,930    3,436,044    4,416,444    5,543,130    6,816,205
Operational reimbursements                 0.00                0            0            0            0            0            0
Project/lease sales income                 0.14        5,860,263      423,570      559,356      718,956      902,370    1,109,615
TOTAL REVENUES                             1.00        7,665,263    3,025,500    3,995,400    5,135,400    6,445,500    7,925,820
EXPENSES
Cost of Operations f(OGRR)                 0.44          794,899    1,145,857    1,513,190    1,944,946    2,441,124    3,001,770
General& Admin *                           0.02          346,970      353,909      360,988      368,207      375,571      383,083
Exploration Costs f(OGRR)                  0.13          238,525      343,837      454,062      583,619      732,507      900,740
Lease rentals                              0.20           55,000       83,154      109,811      141,143      177,150      217,836
Total Expenses                                         1,435,394    1,926,757    2,438,051    3,037,915    3,726,352    4,503,428
EBITDA                                                 6,229,869    1,098,743    1,557,349    2,097,485    2,719,148    3,422,392
Depre.,Deple,Amort. f(OGRR)                0.08          623,184      245,973      324,825      417,507      524,018      644,368
TOTAL OPERATING EXP                                    2,058,578    2,172,729    2,762,876    3,455,422    4,250,370    5,147,796
EBIT (OPERATING PROFIT)                                5,606,684      852,771    1,232,524    1,679,978    2,195,130    2,778,024
Other Income (Expenses)
Interest Income                            0.01           76,653       30,255       39,954       51,354       64,455       79,258
Interest Expenses                         (0.01)         (76,653)     (30,255)     (39,954)     (51,354)     (64,455)     (79,258)
Other Income (Expenses)                    0.01           76,653       30,255       39,954       51,354       64,455       79,258
Total Other Income                                        76,653       30,255       39,954       51,354       64,455       79,258
Earnings Before Taxes                                  5,683,337      883,026    1,272,478    1,731,332    2,259,585    2,857,282
Estimated Federal Taxes(1)                             1,932,334      300,229      432,643      588,653      768,259      971,476
Estimated Utah Corporate Taxes(2)                        187,550       29,140       41,992       57,134       74,566       94,290
NET INCOME                                             3,563,452      553,657      797,844    1,085,545    1,416,760    1,791,516





(1) 2004  Corporate  Income Tax Rates for 'C'  Corporations  - Does not consider
dividends or other deductions.
                                                                                                 
34% Tax bracket                            0.34          113,900      113,900      113,900      113,900      113,900      113,900
Plus 34% of earnings over 335,000                      1,818,434      186,329      318,743      474,753      654,359      857,576
Total estimated Federal Tax                            1,932,334      300,229      432,643      588,653      768,259      971,476
(2) 2005 Utah Flat Corporate Tax rate - 5%
5% Flat Corporate Tax Rate                 0.05          187,550       29,140       41,992       57,134       74,566       94,290
Total Estimated Taxes                                  2,119,885      329,369      474,634      645,787      842,825    1,065,766










               Table: PRESENT VALUE OF DISCOUNTED FUTURE EARNINGS
                              Pioneer Oil and Gas
                                 April 30, 2005



                                                                                              
DESCRIPTION                       VALUES      Projected    Projected   Projected   Projected    Projected   Projected   Projected
                                              30-Apr-05        2006        2007         2008        2009        2010    Term Val
Net Income ($s)                                3,563,452     553,657     797,844    1,085,545   1,416,760   1,791,516   1,791,516
                                                   0           1           2            3           4           5            5
Discount Factor                                 1.000000    0.795482    0.632791     0.503374    0.400425    0.318530    0.318530
PV of Discounted Earnings       6,193,137.00   3,563,452     440,424     504,868      546,435     567,305     570,652



Terminal Value                  1,791,516.00 <=The 11th year of operations, or 
                                               5th complete years past the 
                                               Valuation Date.
Capitalization of               9,089,376.00 <=Result from dividing by the After
 Terminal Value                            -tax Capitalization Rate shown below.
PV of Capitalized               2,895,242.00 <-Result of multiplying times the 
 Terminal Value                             After-tax Discount Rate shown below.
Total Present Value             9,088,379.00

AFTER TAX COST OF CAPITAL
Discount Rate                                25.71%
Capitalization Rate                          19.71%
Long-term Sustainable Growth                 6.00%


The Table  presented  below  summarizes the results of the  Discounted  Earnings
Method  presented in the Table shown above.  This method resulted in a valuation
of  $9,088,379.  Inherent in this  valuation  are all of the assets and expenses
used  to  produce  earnings  and  profits  including  lease  rights,  buildings,
furniture,  fixtures,  and equipment,  management,  depreciation,  interest, and
taxes, etc.

                      Table: DISCOUNTED EARNINGS VALUATION
                              Pioneer Oil and Gas
                                 April 30, 2005


DESCRIPTION                                      VALUATION
Present Value of Earnings Stream                 $6,193,137
Present Value of Terminal Value                  $2,895,242
OPINION OF VALUE - Discounted Earnings Method    $9,088,379

Gate-Way  determined  that the Income  Approach and the Market Approach were the
best  methods to value the  Company  since both  methods  look at the value of a
company on an on going  basis.  Another  method such as the Asset method is used
more often if a company is  contemplating  liquidation.  Because Pioneer Oil and
Gas will  continue  its  operations  Gate-Way  determined  the Income and Market
Approach to be the two best methods to use.




The  Income  Approach  was  weighted  40%  and the  Market  Approach  60%  under
Gate-Way's  valuation  and the two methods were added  together to arrive at the
value of the Company of $8,468,420. Gate-Way did not use any quantifiable method
for using the Market  Approach 60% and the Income  Approach 40% but gave greater
weight to the Market Approach because it did not rely on future  projections and
Gate-Way was able to identify 64 companies to make its  comparable  analysis and
therefore,  believed the Market  Approach to be a little more  reliable than the
Income Approach. Since the evaluation was based on the Company having issued and
outstanding  common stock of 7,910,727  common  shares and  8,330,727 on a fully
diluted  basis,  the value of the  Company's  stock using  Gate-Way's  Valuation
Opinion is $1.07 and $1.03 on a fully diluted basis.

The  Repurchase  Price  offered by the  Company is a premium of about 45% before
dilution and about 40% on a fully diluted  basis.  This is  significant  premium
that the Company is willing to pay primarily  because the Company's common stock
has been trading close to a $1.50.

                        REVIEW OF THE COMPANY PERFORMANCE

Gate-Way  reviewed the trading  prices of the  Company's  Common  Shares and the
Company has reviewed the prices for the period of April 1, 2004,  through  March
31, 2005, as quoted by the Bulletin Board in determining  the Repurchase  Price.
The following  table sets forth the high and low closing  prices for the Company
Common  Shares for each quarter of the period from April 1, 2004  through  March
31, 2005.

      Quarter Ended                  High Close         Low Close
      -------------                  ----------          ---------


      June 30, 2004                       $.85            $.61
      September 30, 2004                 $2.00            $.65
      December 31, 2004                  $1.05            $.75
      March 31, 2005                     $1.96            $.82

    Period Of                        High Close        Low Close
      ---------                      ----------         ---------

      April 1, 2005 to
      May 2, 2005                        $1.72           $1.45


                           Latest Price                 Closing Price
                           ------------                 -------------

      May 3, 2005            $1.45                        $1.45


Gate-Way  did not  place a lot of weight on the  market  price of the  Company's
stock since it believed the market and income  approach to be better  methods in
determining  the value of the  Company's  common  stock.  However,  the  Company
believed that even though the price of the Company's  stock was relatively  high
in light of  Gate-Way's  opinion  it did not want to make the  Repurchase  Price
lower than the market price and therefore, set the price at $1.50.




                                   CONCLUSION

The Board of Directors  adopted the analysis of Gate-Way as a valid  opinion for
determining  the worth of the company  since  Gate-Way's  opinion had taken into
account  the value of the  Company  as a going  concern  and the price  given by
Gate-Way was greater than the Company's net book value. Based upon the foregoing
analyses and the  assumptions  and  limitations set forth in full in the text of
the Valuation Opinion, the Company is of the opinion that, as of the date of the
Valuation  Opinion,  that the  Repurchase  Price of $1.50 per Common Share to be
paid by the Company in lieu of issuing  fractional shares in connection with the
Stock  Splits is fair to the  Unaffiliated  Cashed Out Holders and  Unaffiliated
Continuing  Holders  from a  financial  point of view since it is a  substantial
premium over the value of what  Gate-Way  determined  the value of the Company's
common  stock.  The Board decided on the price of a $1.50 per share because that
was the price that the Company's stock has been trading close to during the last
couple of months.  The price of a $1.50 is fair to the  Unaffiliated  Continuing
Holders  since it allows the  Company to no longer be subject to the  compliance
costs of the  Sarbanes-Oxley  Act and the  Company  can use the  funds  saved by
investing in other endeavors.



                             ENGAGEMENT OF GATE-WAY

The Company has agreed to pay Gate-Way a fee of $8,500 and to reimburse Gate-Way
for its reasonable out-of-pocket expenses related to its engagement,  whether or
not the Stock Splits are consummated. No compensation received or to be received
by  Gate-Way  is  based  on  or is  contingent  on  the  results  of  Gate-Way's
engagement.  There are no other current arrangements to compensate Gate-Way, its
affiliates  or  unaffiliated  representatives  for any services  rendered to the
Company,  its  executive  officers,  directors or  affiliates.  Gate-Way has not
previously  provided financial  institution  consulting services to the Company.
None of  Gate-Way's  employees  who  worked  on the  engagement  has  any  known
financial  interest in the assets or equity of the Company or the outcome of the
engagement.

                     QUORUM, VOTING RIGHTS AND OTHER MATTERS

The Company  presently has one class of capital stock,  common stock,  $.001 par
value,  of which  7,683,727  shares were issued and  outstanding at the close of
business  on  August  4th,  2005.  Only  shareholders  of record at the close of
business  on August  4th,  2005 will be entitled to notice of and to vote at the
meeting.  The presence at the meeting in person or by proxy of a majority of the
shares  entitled  to a vote shall  constitute  a quorum for the  transaction  of
business. All voting is non-cumulative.

The Directors  know of no other  matters,  which are likely to be brought before
the Meeting. If any other matters properly come before the Meeting, however, the
person named in the enclosed proxy, or that person's duly constituted substitute
acting at the Meeting,  will be  authorized  to vote or otherwise act thereon in
accordance  with such matters.  If the enclosed  proxy is properly  executed and
returned prior to voting at the Meeting,  the shares represented thereby will be
voted in accordance  with the  instructions  marked  thereon.  In the absence of
instructions,  executed  proxies  will be voted  "FOR" the  items  listed in the
Notice.  The Directors  recommend a vote "FOR" each of the proposals.  Directors
are elected by a plurality of the common stock represented at the meeting.




In accordance with Utah State law, certain  corporate  actions,  generally,  may
create  shareholder's  rights of dissent and  entitlement to payment of the fair
market  value of shares  held.  However,  none of the  proposals  at the  Annual
Meeting creates such shareholder dissenters' rights.

Any stockholder executing a proxy has the power to revoke such proxy at any time
prior to its  exercise.  A proxy may be revoked  prior to exercise by (i) filing
with the  Company a written  revocation  of the  proxy,  (ii)  appearing  at the
Meeting and casting a vote  contrary to that  indicated  on the proxy,  or (iii)
submitting a duly executed proxy bearing a latter date.

The cost of preparing, printing, assembling and mailing this Proxy Statement and
other material  furnished to stockholders in connection with the solicitation of
proxies will be borne by the Company. In addition to the solicitation of proxies
by use of mails,  officers,  directors,  employees and agents of the Company may
solicit  proxies by written  communication,  telephone  or personal  call.  Such
persons are to receive no special compensation for any solicitation  activities.
The Company will reimburse banks, brokers and other persons holding common stock
in their names,  or those of their  nominees,  for their  expenses in forwarding
proxy solicitation materials to beneficial owners of common stock.

The  Company  will  appoint  one or more  inspectors  of  election to act at the
Meeting and report the results.  Prior to the Meeting,  each inspector will sign
an oath to perform his duties in an impartial  manner and  according to the best
of his ability.  Inspectors will ascertain the number of shares  outstanding and
the voting power of each,  determine the shares  represented  at the Meeting and
the  validity of proxies and ballots,  count all votes and ballots,  and perform
certain other duties as required by law.  Inspectors will tabulate the number of
votes cast for or withheld in the election of directors, and the number of votes
cast for or  against  all  other  proposals,  including  abstentions  and  other
non-votes.

The required quorum necessary to transact  business at the Meeting is a majority
of the  issued  common  stock  outstanding  on the record  date.  If a quorum is
present,  a  plurality  of the  votes  cast for  directors  will  determine  the
directors  elected and the approval of each proposal at the Meeting requires the
affirmative  vote of a  majority  of the  common  stock  actually  voted on such
proposal  except on the Stock  Splits the Board would  request a majority of the
total and issued and  outstanding  shares ratify their action.  Abstentions  and
broker  non-votes  will be counted to  determine if a quorum is present but will
not otherwise affect the voting on any proposal.


PROPOSAL ONE: RATIFICATION BY THE SHAREHOLDERS OF THE BOARD'S PROPOSAL TO EFFECT
THE STOCK SPLITS

To ratify the Board of Directors  decision for a 1-for-2000  reverse stock split
and the repurchase of all resulting fractional shares, followed immediately by a
2000-for-1  forward stock split of the Company's  common shares.  As a result of
the Stock Splits,  (a) each shareholder  owning fewer than 2000 common shares of
the Company  immediately  before the Stock  Splits will  receive  $1.50 in cash,
without  interest,  for  each  of the  Company's  common  shares  owned  by such
shareholder  immediately  prior to the  Stock  Splits  and will no  longer  be a
shareholder of the Company;  and (b) each shareholder owning 2000 or more common
shares  immediately  before the Stock Splits (i) will receive 2000 Common Shares
after the Stock  Splits in  exchange  for each lot of 2000  Common  Shares  held
before the Stock Splits and (ii) any additional Common Shares held other than in
a 2000 share lot will be canceled and exchanged for $1.50 in cash per share. The
effective  date for the reverse stock split will be on September  26, 2005,  and
the  forward  split  shall  follow  as soon  thereafter  the  completion  of all
transactions  necessary for the reverse stock split. The Stock Splits will allow
the  Company  to file a Form 15 with  the  Securities  and  Exchange  Commission
(`SEC"),  thereby  causing  the Company to no longer be subject to the Rules and
Regulations of the Securities Act of 1934 and  particularly  the  Sarbanes-Oxley
Act of 2002.

                   THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN
                           FAVOR OF THE STOCK SPLITS.




                       PROPOSAL TWO: ELECTION OF DIRECTORS

A Board of four directors is to be elected at the Meeting.  The nominees are the
present directors, all of whom are standing for re-election. No director nominee
has declined the nomination or is unable or unfit to serve.  Under the Bylaws of
the  Company,  the  Company  must have a minimum of three and a maximum of seven
directors.  Each director serves until the next annual  shareholders  meeting or
until a  successor  is duly  elected.  Don J.  Colton  and Gregg B.  Colton  are
brothers and John O.  Anderson is their uncle.  The  following  table sets forth
information  about  the  nominees  and  lists  their  ages as of the date of the
meeting.



         Name           Age      Position(s) Held            Director Since

Don J. Colton           59      Director, CEO, President      October 1980
                                    and Treasurer
Gregg B. Colton         52      Director, Vice President      October 1980
                                    and Secretary

John O. Anderson        62      Director                      January 1988

Lynn Woodbury           42      Director                         July 2505


Don J. Colton serves as the Company's  President,  Treasurer and Chairman of its
Board of Directors.  Since the Company's  inception in October 1980,  Mr. Colton
has served as the  Company's  President  and has been involved in all aspects of
the business  including  exploration,  acquisition  and development of producing
properties.  From 1979 to 1981,  Mr.  Colton was Chief  Financial  Officer and a
member of the Board of Directors of Drilling  Research  Laboratory  in Salt Lake
City, Utah. The Drilling Research  Laboratory is a subsidiary of Terra Tek, Inc.
and prior to his involvement with the Drilling Research  Laboratory,  Mr. Colton
was  Manager of Special  Projects  for Terra Tek.  Mr.  Colton  received a BS in
Physics  from  Brigham  Young  University  in  1970  and a  Master  of  Business
Administration from the University of Utah in 1974.

Gregg B. Colton  serves as the  Company's  Vice  President,  Secretary,  General
Counsel and a member of the Board of  Directors.  Mr.  Colton has been  employed
with the Company  since it actually  commenced  business in 1981.  Mr. Colton is
involved in handling  the  contracts,  sales of oil and gas  products  and legal
problems  of the  Company  along  with the day to day  decision  making  for the
Company with the Company's  President.  From 1981 to 1984, Mr. Colton was also a
partner in the law firm of Cannon, Hansen & Wilkinson. Mr. Colton is a member of
the  Utah  State  Bar  and a real  estate  broker.  He is also a  member  of the
Corporate  Counsel and Business Law sections for the Utah State Bar. Mr.  Colton
earned  his BA from  the  University  of Utah in 1976 and a Juris  Doctor  and a
Master of Business Administration from Brigham Young University in 1981.



John O.  Anderson  serves as the  Company's  Office  Manager  along with being a
member of the Board of Directors. Mr. Anderson as Office Manager handles the day
to day accounting for the Company along with handling the  procurement of office
supplies.  The Company has employed Mr. Anderson since 1981 and prior to joining
the  Company he worked in land  investments.  Mr.  Anderson  received  his BS in
Zoology in 1968 from the University of California.

Lynn  Woodbury  is the  independent  director  on the  audit  committee  for the
Company.  Ms.  Woodbury has been  employed as the  Controller  of  International
Petroleum LLC, a Salt Lake based exploration  company since 1999 and handles all
phases of accounting,  tax returns and internal control structure.  Prior to her
employment with International  Petroleum LLC, Ms. Woodbury was self-employed and
provided tax planning and compliance  services for clients from  1996-1999.  Ms.
Woodbury was employed by Kevin R.  Huntington,  JD, CPA, PC from  1986-1996  and
worked in the accounting,  tax and management services.  Ms. Woodbury has been a
licensed  Certified Public  Accountant since 1994 and graduated in 1985 from BYU
with a BS in accounting.


The Company does not have a nominating committee but all members of the Board of
Directors  are involved in the  consideration  of any  directors.  The Company's
Audit  Committee has the  responsibility  of assisting with the selection of the
independent auditors, approving all audit and non-audit services, reviewing with
management  and the  independent  auditors the Company's  financial  statements,
significant  accounting and financial  policies and  practices,  audit scope and
adequacy of internal audit and control systems. The Audit Committee is comprised
of Lynn Woodbury,  presently the sole member of the committee. Ms. Woodbury will
meet each quarter to review the  financial  statements  of the Company  prior to
submission  with the SEC. Ms.  Woodbury,  a CPA, is  considered  an  independent
director in accordance  with the National  Association  of  Securities  Dealer's
listing standards and serves as the Chairman and designated financial expert for
the audit  committee.  All members of the Audit  Committee  are able to read and
understand fundamental financial statements.

THE BOARD OF  DIRECTORS  RECOMMENDS  A VOTE "FOR" THE ELECTION OF THE MEMBERS OF
THE BOARD OF DIRECTORS

                               BOARD OF DIRECTORS

The Board of Directors  held a total of four Board of Directors  meeting  during
the fiscal year ending  September 30, 2004.  All  directors  attended all of the
meetings  of the  Board  of  Directors.  The  Board  of  Directors  has an audit
committee  comprised  of  Ms.  Woodbury,  but  does  not  have a  nominating  or
compensation  committee or a committee  that  performs  similar  functions.  The
reason for no nominating  committee is because all members of the Board weigh in
on any Board  recommendations  and the Company  has only added one Board  member
within the last 10 years.

The Company's  directors hold office until the end of their  respective terms or
until their  successors  have been duly elected and  qualified.  Presently,  the
Board of  Directors  does not receive any cash  compensation  for serving on the
Board who are  employees.  Lynn  Woodbury,  the only Board member that is not an
employee is paid $1,000 per quarter for serving on the Board of  Directors.  The
employees  on the  Board  have  received  60,000  options  under  the  Company's
incentive stock option plan to acquire the Company's  common stock at a price of
$.20 per share until August 9, 2011. The options were granted to these employees
when the share price of the Company's common stock was $.20 or below.

At the  annual  shareholders  meeting  in 1991,  the  shareholders  approved  an
amendment  to the  Company's  Articles of  Incorporation,  limiting the personal
liability  of  directors  to the  Company  and its  shareholders,  to the extent
allowed by Utah law.  In effect,  the  shareholders  approved  the  adoption  of
statutory provisions,  which permit a Utah corporation to eliminate the personal
liability of directors for monetary damages for breach of fiduciary duty.




         The Company's executive officers are appointed by the Board of
Directors and serve at the discretion of the Board.

                        EXECUTIVE OFFICERS AND MANAGEMENT

         The following table sets forth (i) the names of the executive officers,
(ii) their ages as of the Record Date and (iii) the capacities in which they
serve the Company:

         Name          Age       Position(s)                  Officer Since

Don J. Colton          59     President/Treasurer                1980
Gregg B. Colton        52     Vice President/Secretary           1980

Note: Don J. Colton and Gregg B. Colton are brothers.

Section  16(a) of the  Securities  and Exchange Act of 1934  requires  officers,
directors,  and persons who own more than ten percent of a registered class of a
company's equity securities to file initial reports of beneficial  ownership and
to report  changes in  ownership of those  securities  with the  Securities  and
Exchange  Commission.  They are also required to furnish the Company with copies
of all Section 16(a) forms they file.

To the Company's  knowledge,  based solely on review of the applicable copies of
the forms  required  to be filed  with the SEC that have been  furnished  to the
Company,  the Company has determined that the pertinent officers,  directors and
principal   shareholders  have  complied  with  all  applicable   Section  16(a)
requirements  since the Company  became  subject to  Securities  Exchange Act of
1934. The Company  voluntarily became subject to the Securities  Exchange Act of
1934 on February 26th, 2000.

                 EXECUTIVE COMPENSATION AND RELATED INFORMATION

The following Summary  Compensation Table sets forth all cash compensation paid,
distributed or accrued for services, including salary and bonus amounts rendered
in all capacities for the Company's CEO during the fiscal years ended, September
30, 2004,  2003,  and 2002.  All other tables  required to be reported have been
omitted as there has been no  compensation  awarded to, earned by or paid to any
of the executives of the Company that is required to be reported other than what
is stated below:





                           SUMMARY COMPENSATION TABLE

Name and                  Amount of                           Fiscal
Principal Position        Compensation                        Year Ended

Don J. Colton, CEO          $94,879(1)                          2004
Don J. Colton, CEO          $90,504(1)                          2003
Don J. Colton, CEO          $90,504(1)                          2002

          (1) The amount of  compensation  included  in the table above for each
          fiscal  year does not  include  amounts  paid by the  Company  for the
          Company's  Employee  Stock  Ownership  Plan.  Under the Employee Stock
          Ownership Plan 15% of the employees compensation for salary or bonuses
          is paid on behalf of the employee for Company  stock in the  Company's
          Employee  Stock  Ownership  Plan for fiscal year 2004.  All  full-time
          employees of the Company  participate in the Employee Stock  Ownership
          Plan on the same terms and  conditions as  management.  For the fiscal
          years shown above 15% of the compensation  amount was paid towards the
          Employee  Stock  Ownership  Plan in the form of Company stock for 2004
          and 2003 and 10% in fiscal year 2002.

The Board of Directors  reviews and sets  compensation  levels of the  executive
officers of the Company by evaluating their respective performance in light of a
number of factors,  including the Board's  assessment of the  performance of the
Company,  as well as the range of compensation paid by the Company in comparison
to the  range of  compensation  paid by  similar  oil and gas  companies  in the
western  United States.  The board weighs other  factors,  such as the officer's
performance relative to the continued acquisition of favorable  properties,  and
relative to the Company's financial performance.

The Company's executive  compensation policy continues to look at three variable
elements: base salary, stock awards and option grants. The policy factors, which
determine  the setting of these  compensation  elements,  are  largely  aimed at
attracting  and  retaining  executives  considered  essential  to the  Company's
long-term success.

The granting of stock and/or options is designed as an incentive to increasingly
focus management's interests in closer alignment with interests of shareholders.
The  Company's  executive   compensation  policy  seeks  to  engender  committed
leadership  and  strategic  management  to  favorably  posture  the  Company for
continued  growth,  stability and strength of  shareholder  equity.  All options
granted  currently  to  directors,  officers  and  employees  of the Company are
pursuant to an  incentive  stock  option plan  approved by  shareholders  of the
Company.




         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the Company's Common Stock by each person or group that is known by
the  Company  to be the  beneficial  owner  of more  than  five  percent  of its
outstanding Common Stock, each director of the Company, each person named in the
Summary  Compensation  Table,  and all directors  and executive  officers of the
Company as a group as  September  30,  2004.  Unless  otherwise  indicated,  the
Company believes that the persons named in the table below, based on information
furnished by such owners,  have sole voting and investment power with respect to
the Common Stock beneficially owned by them, where applicable.

Title of   Name and Address of           Amount and Nature        Percent
 Class     Beneficial Owner              of Beneficial Owner      of Class

Common   Don J. Colton                      910,596(1)             10.93%
         2172 E Gambel Oak Drive
         Sandy, Utah 84092

Common   Gregg B. Colton                    916,543(1)             11.0%
         10026 Ridge Gate Circle
         Sandy, Utah 84092

Common   John O. Anderson                   553,990(1)              6.65%
         7462 S Parkridge Circle
         Salt Lake City, Utah 84121

Common   Lynn Woodbury                            0                    0%
         1206 W. South Jordan Parkway
         Unit B
         South Jordan, Utah 84095

Common   Pioneer Employee Stock           1,145,916(2)             13.76%
         Ownership Plan
         1206 W. South Jordan Parkway
         Unit B
         South Jordan, Utah 84095

All Directors and Officers as a Group
(3 Persons)                               2,381,129                28.58%

     (1) Includes currently  exercisable options to purchase common stock in the
     Company as long as the person is serving as a director  and employee of the
     Company.  Each of the persons  listed  under this  footnote  has options to
     purchase 120,000 shares of the Company's Common Stock.

     (2)  Persons  listed  above  have their  vested  shares  under the  Pioneer
     Employee Stock  Ownership Plan included under their name. Don J. Colton and
     Gregg B. Colton as Trustees of the Pioneer  Employee  Stock  Ownership Plan
     have  the  right  to vote all the  shares  of the  Plan at any  shareholder
     meeting of the Company.  The shares listed above under the Pioneer Employee
     Stock Ownership Plan include shares of employees  vested that are not Board
     members along with shares that have not vested yet.

The  Company  currently  has no  arrangements,  which may  result in a change of
control.

                        TRANSACTIONS WITH RELATED PARTIES

The  Board  of  Directors  approved  several  years  ago a  resolution  to allow
employees of the Company to purchase 25% of any oil and gas  producing  property
acquired by the Company at the same time as the Company  acquires the  property.
The  resolution  required  that the employees pay for 25% of the cost of the oil
and gas properties at the same time the Company purchased the properties. In the
event, the Company is unable to fund the total cost of any producing  properties
the  employees  of the Company may  purchase the amount the Company is unable to
fund even if it exceeds 25%. The employees also have the right to acquire 25% of
any non-producing oil and gas leases acquired by the Company on similar terms as
those for producing properties.




The Company also leases  office  space that is owned by the Board of  Directors.
The office space is leased to the Company on terms  reasonable for the same kind
of office space in the area that it is located. The office space is 1,950 square
feet with an unfinished basement of approximately 975 square feet.

PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

Jones Simkins LLP served as the independent  accountants for the Company for the
year ended September 30, 2004. There have been no disagreements during the three
fiscal years ended  September 30, 2004, 2003 and 2002, or at any other time with
Company's present or former  independent public  accountants.  Management of the
Company  intends to  continue  with its  selection  of Jones for the fiscal year
ending  September  30,  2005.  A  representative  of Jones is not expected to be
present at the Meeting.

THE  BOARD  OF  DIRECTORS  RECOMMENDS  A  VOTE  "FOR"  THE  RATIFICATION  OF THE
APPOINTMENT OF JONES SIMKINS LLP AS THE COMPANY'S ACCOUNTANTS.

                          PROPOSAL FOUR: OTHER BUSINESS

The Company has not received any shareholder  proposals for this Annual Meeting.
The Board of  Directors  knows of no other  business,  other than stated in this
Proxy Statement,  to be presented for the action at the Annual Meeting. If other
business is properly presented at the Meeting,  however, which was not known, or
did not become  known to the Board a  reasonable  time before the  solicitation,
then the person  designated  in the  enclosed  Proxy will vote,  or refrain from
voting, in accordance with his best judgment.

                              STOCKHOLDER PROPOSALS

Stockholders may submit proposals on matters  appropriate for stockholder action
at the Company's annual meetings consistent with regulations adopted by the SEC.
For such  proposals to be considered  for  inclusion in the Proxy  Statement and
form of proxy relating to the 2005 annual meeting,  they must be received by the
Company not later than  September 30, 2004 or such later date as the Company may
specify in its SEC filings.  Such proposals should be addressed to the Company's
office at 1206 W. South Jordan Parkway, Unit B, South Jordan, Utah 84095-5512

                              PROPOSED STOCK SPLITS

Summary and Structure

The Board  has  authorized  the  Stock  Splits  that  will  take  place  without
shareholder  vote since under Utah law  shareholder  vote is not  required for a
reverse stock split or for the repurchase of fractional shares. The Stock Splits
consist of two steps. First, the Company will conduct a 1-for-2000 reverse stock
split of the Common Shares.  In the reverse  split,  (i) each lot of 2000 Common
Shares held by a  shareholder  of the Company prior to the reverse split will be
converted  into one whole  Common  Share after the reverse  split;  and (ii) any
Common Shares held by a  shareholder  other than in a 2000 share lot will not be
converted  into a whole share and will be canceled  and  exchanged  for $1.50 in
cash per  share.  After the  reverse  split is  completed,  it will be  followed
immediately by a 2000-for-1 forward stock split of the Common Shares, which will
convert each whole Common Share issued in connection with the reverse split into
2000 Common Shares. The Stock Splits are intended to take effect on the
Effective Date.




Generally,  the effects of the Stock Splits can be  illustrated by the following
examples:

Shareholder A holds 1500 Common  Shares in a single record  account and holds no
other Common Shares,  Shareholder  A's 1500 Common Shares will be converted into
the right to receive  $2,250 in cash (1500 x $1.50).  If Shareholder A wanted to
continue  to be a  shareholder  after the Stock  Splits,  he could  purchase  an
additional  500 Common  Shares far enough in advance of the Stock Splits so that
the purchase is complete by the Effective Date.

Shareholder B holds 200 shares in a brokerage  account and holds no other Common
Shares the Company  intends for the Stock Splits to treat  shareholders  holding
Common  Shares  through a nominee the same as those  holding  shares in a record
account.  Nominees  will be  instructed  to effect  the Stock  Splits  for their
beneficial  owners. If this occurs,  Shareholder B will entitled to receive $300
in cash (200 X $1.50).  However,  nominees  may have  different  procedures  and
shareholders holding shares in street name should contact their
nominee to determine how the Stock Splits will affect them.

Shareholder C holds 3000 Common  Shares in a single record  account and holds no
other shares After the reverse stock split,  Shareholder C would have 1.5 Common
Shares  (3000/4000 = 1.5). He will receive one whole Common Share and instead of
receiving  a  fractional  share he will be entitled  to receive  $1,500  (1000 x
$1.50). In the forward stock split his whole Common Share will be converted into
2000 Common Shares (1 x 2000). After completion of the Stock Splits, Shareholder
C will hold 2000 Common Shares and will be entitled to receive $1,500.

Shareholder  D holds 3000 shares in each of two separate  record  accounts for a
total of 6,000 Common Shares. After the reverse stock split,  Shareholder D will
hold one whole Common Share in each separate  record account  (3,000/2000  =1.5)
and will be  entitled  to  receive  $1500  (1000X$1.50)  in cash in each  record
account in lieu of being issued a  fractional  share.  In the forward  split his
shares will be  converted  into 2000 Common  Shares (1 x 2000) in each  account.
After the  completion of the Stock  Splits,  Shareholder D will hold 4000 Common
Shares and will be entitled to receive $3,000.

Shareholder E holds 5000 Common Shares in a brokerage account and holds no other
shares. The Company intends for shareholders  holding shares through nominees to
be treated the same as record holders and expects that  Shareholder E would hold
two whole Common Shares after the reverse split  (5000/2000 = 2.50) and would be
entitled  to  receive  $1500 in cash (1000 x $1.50).  Shareholder  E's two whole
Common Shares would be converted  into 4000 Common Shares in the forward  split.
After the  completion of the Stock Splits,  Shareholder E would hold 4000 Common
Shares and would be entitled to receive $1,500.




Husband and Wife each hold 1500 Common  Shares in separate  record  accounts and
hold 1500 shares  jointly in another  record  account  and own no other  shares.
Shares held in joint accounts will not be added to shares held  individually  in
determining  whether a  shareholder  will receive whole shares after the reverse
split.  In this  situation,  Husband  and Wife will each be  entitled to receive
$2,250  each for the shares held in their  individual  record  accounts  (1500 x
$1.50).  Further,  they will be entitled to receive $2,250 for the Common Shares
held in their joint  account.  Husband and Wife will hold no Common Shares after
the Stock  Splits.  If Husband and Wife  wished to  continue to be  shareholders
after the Stock Splits,  they could transfer a sufficient  number of shares from
one account into another so that at least 2000 Common Shares (or
a multiple thereof) are held in one account.

The Board has set the Repurchase  Price at $1.50 per pre-split Common Share. The
Board made this  determination in good faith,  based upon the Valuation  Opinion
and other factors the Board deemed  relevant.  Please see the sections  entitled
"Reasons for the Stock  Splits,"  "Opinion of Gate-Way" and  "Background  of the
Stock Splits." The Company  currently  estimates that  shareholders will receive
payment for their Common  Shares that are  exchanged for cash in lieu of issuing
fractional  shares within  approximately  four weeks after the Effective Date as
long as they  timely  return  their stock  certificates  to the  Transfer  Agent
pursuant to the terms of the transmittal letter.

The Stock Splits are considered a "going-private" transaction as defined in Rule
13e-3  promulgated under the Exchange Act because they are intended to terminate
the  registration  of the Common  Shares and  suspend the  Company's  filing and
reporting  obligations  under the  Exchange  Act. In  connection  with the Stock
Splits,  the Company has filed,  as required by the  Exchange  Act, a Rule 13e-3
Transaction  Statement on Schedule  13E-3 (the  "Schedule  13E-3") with the SEC.
Please see the section entitled "Available Information."

The Stock Splits have become  effective  by the Board  action of  approving  the
Stock  Splits.  However,  the Board of  Directors  desire that a majority of the
issued and outstanding  shares of the Company ratify the Board's decision on the
Stock Splits and  therefore,  has asked for the  shareholder  vote regarding the
Stock Splits.




                              COST OF STOCK SPLITS

The repurchase of fractional  Common Shares in connection  with the Stock Splits
is estimated to cost approximately  $640,000. The Company intends to finance the
Stock Splits and  repurchase  of  fractional  shares by using cash on hand.  The
following  is an  estimate  of the total  costs  expected  to be incurred by The
Company in connection with the Stock Splits and the  solicitation of Proxies for
the Annual Meeting.  Final costs may be higher or lower than the estimates shown
below.

      Item                                           Approximate Cost
      ----                                           ----------------

      Repurchase of Fractional Common Shares               $600,000
      Legal fees                                         $    3,500
      Gate-Way fees                                      $    8,500
      Accounting fees                                    $    5,000
      Filing fees                                        $    2,500
      Printing, mailing new stock certificates
      and transfer costs                                 $   20,500
                                                         ----------

      Total                                                $640,000
                                                         ==========


                         BACKGROUND OF THE STOCK SPLITS

During the past several months after the passage of the Sarbanes-Oxley  Act, the
members of the Board as a group  considered the advantages and  disadvantages of
remaining a SEC reporting company or converting to a privately held institution.
There was not a particular Board member that initiated the discussion other than
all Board  members that are  employees of the Company were  frustrated  with the
Sarbanes Oxley Act that imposed more of their time as additional sections of the
Act were to be implemented.  All of the employees that were Board members,  John
O.  Anderson,  Don J.  Colton  and  Gregg B.  Colton  decided  individually  and
collectively that it made no sense for a Company as small as Pioneer Oil and Gas
with only four employees to be subject to the requirements of the Sarbanes Oxley
Act. The Board has considered many factors,  which are discussed throughout this
Proxy  Statement.  Ultimately,  the  Board  concluded  that  the  advantages  of
remaining  a SEC  reporting  company no longer  outweigh  the costs the  Company
incurs  as  a  publicly  traded  corporation,   particularly  in  light  of  the
requirements that the  Sarbanes-Oxley  Act imposed upon public  companies.  As a
result,  the Board  approved the Stock Splits and prepared this Proxy  Statement
disclosing the reasons for the Stock Splits.  The Board  determined to undertake
the Stock  Splits at this time since the Company  decided it had enough  working
capital to pay for the cost of the Stock Splits.


Costs Associated with SEC  Regulations.  Because the Company is an SEC reporting
company,  it is  obligated  to prepare and file  periodic  reports with the SEC,
including  annual  reports on Form  10-KSB,  quarterly  reports on Form  10-QSB,
current  reports on Form 8-K and Proxy  Statements  and  related  materials.  In
addition,  the  Company's  officers and  directors  are required to file reports
under  the  Exchange  Act's   transaction  and  short  swing  profit   reporting
requirements for affiliates of the Company.

The costs  associated  with these  reports and other  filing  obligations  are a
significant  corporate  overhead  expense.  The Company  realizes that the costs
associated  with SEC reporting have been increasing in recent years and believes
that the costs will continue to increase  significantly.  The  principal  reason
behind  these   increases  in   compliance   costs  is  the   enactment  of  the
Sarbanes-Oxley  Act and  related  rules and  regulations  adopted by the SEC. In
addition to compliance costs and expenses,  compliance with existing and new SEC
reporting  requirements,  internal  control  audit  requirements  and  other SEC
regulatory requirements divert the time and resources of the Company.

The Company  estimates that it in the future the Company will pay  approximately
$250,000  per year as a result  of being a public  company,  which it would  not
incur as a private  company.  These costs do not include the time and  resources
that  management of the Company spends in  preparation  of periodic  reports and
compliance with reporting obligations.  Further, the Company anticipates that in
order to complete the documentation and testing of internal controls required by
Section 404 of the  Sarbanes-Oxley  Act, it would incur an additional  estimated
$75,000 for fiscal year 2005 alone. In addition,  legal expenses associated with
SEC compliance and disclosure rules and regulations have increased and will most
likely continue to increase.  The time demanded of the Company's management with
respect to these SEC  compliance  requirements  takes away time,  which could be
focused  on  business  matters  that  bear a  more  direct  relationship  to the
Company's operations and profitability. Please see the section entitled "Reasons
for the Stock Split" above.




Advantages of a Public Corporation.  Considering the significant increase in SEC
compliance costs that the Company has incurred and will incur in the future, the
Board analyzed the advantages of the Company  remaining a SEC reporting  company
to determine if the advantages  outweighed  the costs.  One advantage to being a
public company is that it may facilitate a more active trading market.  However,
trading  reports on the Company's  Common Shares  reflect that the Common Shares
have a limited trading volume. As a result, the Company's limited trading market
has not allowed the  Company's  shareholders  to recognize  the primary  benefit
which should be available to shareholders of a publicly traded company, which is
the ability to buy and sell stock in a liquid market.

Another  potential  advantage  of being a  publicly  traded  institution  is the
ability to access public markets to raise additional  capital.  Since becoming a
fully  reporting  public  company in 2000,  the Company has not needed to access
public markets to raise capital and,  accordingly,  the Company has not made any
additional  public  offerings  of  Common  Shares or any  other  securities.  In
addition,  the Company has not used its Common Shares to acquire other companies
because the  Company has found that its  opportunities  for  acquisitions  using
stock are limited or are not  attractive.  The Company does not  anticipate  the
need for a large amount of capital for  acquisitions or expansions in the future
and the Company  estimates that any  anticipated  expansion can be  accomplished
through controlled growth or by using otherwise  available capital. As a result,
the Company does not foresee the need to access public markets.

Shareholders  of public  corporations  also have greater  access to  information
about the entity. As discussed above, the SEC requires that reporting  companies
comply with increasing stringent reporting and auditing requirements.  There are
several benefits to this type of SEC oversight and mandated disclosure; however,
it is accompanied by substantial  expense.  Not only does SEC compliance  divert
the time and resources of the  Company's  management  and  financial  staff from
other  business,  it also results in increased  legal,  auditing and  accounting
costs which the Company anticipates will continue to rise in the future.

Smaller publicly traded institutions,  such as the Company, have more difficulty
absorbing  these costs and  resource  allocations  than larger  publicly  traded
institutions since they represent a larger portion of the Company's revenues.

Background  of the Board's  Recommendation.  The idea of reducing the  Company's
number of shareholders and  deregistering  as an Exchange Act reporting  company
has been discussed by the Board members  informally since the  implementation of
the  Sarbanes-Oxley  Act. At that time, the Board and  management  held informal
discussions with the Company's  independent auditor regarding the expected costs
and procedures involved in compliance with the internal auditing requirements of
Section 404 of the  Sarbanes-Oxley  Act.  The  Company's  outside  auditor  then
estimated that the Company would incur  approximately  three times the amount of
auditing and accounting costs the Company  presently incurs along with having to
hire additional  employees to separate the  responsibilities  of what one person
presently is doing for the Company.  The Company's  auditor informed  management
that in order to comply with Section 404,  procedures and controls would need to
be implemented at the beginning of the 2005 fiscal year, and additional expenses
would begin to accrue at that time. The Company's  auditor  advised the Board to
deregister as soon as the Company had available  working capital to do so. Gregg
Colton also spoke with an employee of the SEC who asked not to be identified and
stated  that it did not make sense for a Company the size of Pioneer Oil and Gas
to be fully reporting because the cost outweighed the benefits.




After these meetings,  the Board and management began discussions  regarding the
possibility of the Company  deregistering  as an Exchange Act reporting  company
and some of the advantages and  disadvantages  of engaging in a "going  private"
transaction.  The Board and management  discussed  whether the Company was truly
reaping  the  benefits  typically  available  to a publicly  traded  company and
discussed  whether reducing the number of shareholders  and  deregistering as an
Exchange Act reporting company might be a good use of its excess capital. At the
Board's request,  management began to analyze potential compliance costs and out
of pocket expenses associated with remaining a SEC reporting company.

After  these  meetings,   management  investigated  other  alternatives  besides
deregistering,  however,  deregistering appeared the most favorable direction to
proceed  from its review.  See  "Alternatives  to Stock  Splits."  The Board and
management discussed the price to be paid to the shareholders in lieu of issuing
fractional   shares  in  connection   with  the  reverse  stock  split  and  the
desirability of a forward split  immediately  following a reverse split to avoid
an unusually high per share value for the Common Shares after the reverse split.
The Board determined that a subsequent forward split was desirable. Also at this
meeting  the Board  authorized  management  to contact  Gate-Way  regarding  the
possibility of obtaining a Valuation  Opinion  regarding the price to be paid to
the  shareholders  who would  receive  cash in lieu of  fractional  shares.  The
Company did not consult with another valuation company or another attorney other
than Gregg B. Colton. The Company used Gate-Way based on a recommendation by the
Company's auditors to Don J. Colton, the President.


The Board selected  Gate-Way as its financial advisor because it is a recognized
financial  institution  consulting firm that has  substantial  experience in the
financial  institutions  industry and is  knowledgeable  and  familiar  with the
operations of the Company and its business. As part of its business, Gate-Way is
regularly  engaged in the valuation of businesses  and  securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted  securities,  private  placements and valuation for corporate and other
purposes, particularly those of mineral companies.

Management  and the Board have met to address  the  question  as to whether  the
Stock Splits are a fair transaction to affiliated and unaffiliated shareholders.
A separate discussion was conducted with respect to those shareholders who would
receive  whole  Common  Shares  in the  reverse  split  and  participate  in the
subsequent  forward split and those shareholders who would receive only cash and
no longer  continue  to be  shareholders  of the  Company.  After  weighing  the
advantages and  disadvantages of the Stock Splits to unaffiliated  shareholders,
the Board also  considered  whether other  procedures  should be  implemented to
assure fairness to unaffiliated shareholders.

The Board determined that the fairness to unaffiliated  shareholders depended in
part on the per share price to be paid in lieu of issuing  fractional shares. At
this point, Gate-Way discussed its valuation analysis with respect to the Common
Shares.  It presented the Board with information  regarding (i) trading history,
including  volume and  prices,  of the Common  Shares,  and (ii) a review of the
market  performance and trading  history of companies  comparable to the Company
and (iii) the value of the Company using an income  approach.  At the end of its
presentation,  Gate-Way  presented  that a per share purchase price of $1.07 per
Common Share in lieu of issuing fractional shares would be fair to the Company's
shareholders.  The information  presented to the Board by Gate-Way regarding its
financial  analysis  is  described  more fully  under the  heading  "Opinion  of
Gate-Way." However, since the price of the stock was trading significantly above
$1.07, the Board of Directors  unanimously concluded that a price of a $1.50 was
fair based on  Gate-Way's  Valuation  Opinion  that was  adopted by the Board of
Directors.  The price of a $1.50 was  determined  to be a fair price because the
stock was trading close to a $1.50 at the time of the Board's  determination  of
the price to be paid Unaffiliated Cashed Out Holders.

Finally,  the Board  reviewed  analyses  prepared by  management  regarding  the
anticipated  financial  impact  of the  Stock  Splits.  Specifically,  the Board
considered  the total number of Common  Shares which would be exchanged for cash
in the Stock  Splits  and  considered  its  resulting  impact  on the  financial
condition of the Company.  The Board  determined that a reverse stock split of 1
for 2000 would have the best chance of insuring  that the Company  would be able
to deregister  since Atlas Stock  Transfer,  the Company's  stock transfer agent
showed several split ratios and that less than 100 shareholders  would remain of
record if all shareholders holding 2000 or less shares were cashed out.





The Board reviewed the Valuation Opinion and considered whether a premium should
be paid for shares that will be exchanged for cash in lieu of issuing fractional
shares.  After considering other factors described in this Proxy Statement,  the
Board  concluded that the Company's  shareholders  should receive $1.50 for each
Common Share held  immediately  prior to the Stock Splits that is not  converted
into a whole Common Share in the reverse split.  In determining  the price to be
paid in lieu of issuing fractional shares, the Board particularly focused on the
fact that the Stock Splits is not a voluntary transaction for shareholders,  and
a higher premium was justified when considering that factor along with the other
analyses.  The  Board  concluded  that  this  price  is  a  fair  price  to  all
unaffiliated shareholders since it was close to the market price being traded by
the stock and it was a premium  over the  price  set by  Gate-Way.  The  matters
considered  at the May 2, 2005 Board  meeting are more fully  discussed  in this
Proxy Statement at "Fairness of this Stock Splits" and "Opinion of Gate-Way."

On May  2,  2005,  the  Board  held a  regular  meeting  attended  by all of the
directors.  At this meeting,  the Board reviewed the per share price of $1.50 to
be paid to the shareholders in lieu of issuing  fractional shares and once again
considered  the  advantages  and  disadvantages  of the  Stock  Splits.  At this
meeting,  the Board  unanimously voted to approve the Stock Splits and the price
per share to be paid in lieu of issuing  fractional  shares and to recommend the
approval of the Stock Splits by the Company's shareholders.

                           RECOMMENDATION OF THE BOARD

The Board has  unanimously  determined  that the  Stock  Splits  are in the best
interest of the Company and are fair to the  Company's  shareholders.  The Board
unanimously  recommends  that the  shareholders  vote "FOR" the  approval of the
Stock Splits.

                   POTENTIAL DISADVANTAGES TO THE SHAREHOLDERS

As is more thoroughly  described in the section entitled  "Disadvantages  of the
Stock Splits" above,  potential  disadvantages  to the Company and  Unaffiliated
Continuing  Holders  include  decreased  availability  of information  about the
Company and decreased  liquidity of the Common  Shares.  If the Stock Splits are
completed,  the Company  intends to  terminate  the  registration  of the Common
Shares  under the  Exchange  Act.  As a result,  the  Company  will no longer be
subject  to the  filing and  reporting  requirements  of the  Exchange  Act.  In
addition,  the liquidity of the Common Shares will be adversely  affected by the
lack  of   publicly   available   information   about  the   Company   following
deregistration  of the Common  Shares.  Decreased  liquidity may have an adverse
effect on the market value of the Common Shares.

                               SHARE CERTIFICATES

The Company has appointed the Transfer  Agent to act as exchange  agent to carry
out the exchange of existing  share  certificates  for cash  payments in lieu of
issuing  fractional shares and, if applicable,  new share  certificates.  On the
Effective  Date, all share  certificates  evidencing  ownership of Common Shares
held by shareholders who will have fractional shares  repurchased will be deemed
canceled without further action by the shareholders or the Company.  Thereafter,
such certificates will represent only the right to receive cash in the amount of
$1.50 per  pre-split  Common  Share for  repurchased  fractional  shares and, if
applicable,  the right to receive a new  certificate for Common Shares issued in
the forward stock split. The Common Shares acquired by the Company in connection
with the Stock Splits will be retired.




The Transfer  Agent will furnish the Company's  shareholders  with the necessary
materials  and  instructions  to surrender  their  Common  Share  certificate(s)
promptly  following the Effective  Date. The letter of transmittal  will explain
how the certificates are to be surrendered.  Shareholders must complete and sign
the  letter of  transmittal  and  return  it with  their  certificate(s)  to the
Transfer  Agent as instructed  before they can receive any cash payments  and/or
new share certificates to which they are entitled. Do not send your certificates
to us,  and do not send them to the  Transfer  Agent  until you have  received a
transmittal letter and followed the instructions therein.

No service  charges will be payable by the Company's  shareholders in connection
with the  exchange  of  certificates  or the  payment of cash in lieu of issuing
fractional shares. The Company will pay all expenses of the Stock Splits.

                         FEDERAL INCOME TAX CONSEQUENCES

The Company has summarized below the material federal income tax consequences to
the Company and to holders of Common  Shares  resulting  from the Stock  Splits.
This summary is based on the provisions of the Internal Revenue Code of 1986, as
amended  (the  "Code"),  the  Treasury  Department  Regulations  (the  "Treasury
Regulations") issued pursuant thereto, and published rulings and court decisions
in effect  as of the date  hereof,  all of which are  subject  to  change.  This
summary  does  not  take  into  account   possible   changes  in  such  laws  or
interpretations, including amendments to the Code, applicable statutes, Treasury
Regulations  and  proposed  Treasury  Regulations  or  changes  in  judicial  or
administrative  rulings.  Some of those changes may have retroactive  effect. No
assurance  can be given that any such  changes  will not  adversely  affect this
summary. This summary is not binding on the Internal Revenue Service.

This  summary does not address all aspects of the  possible  federal  income tax
consequences of the Stock Splits and is not intended as tax advice to any person
or  entity.  In  particular,  this  summary  does not  consider  the  individual
investment  circumstances of holders of Common Shares,  nor does it consider the
particular rules applicable to Annual  categories of holders (such as tax exempt
entities,  life insurance companies,  regulated investment companies and foreign
taxpayers) or holders who hold,  have held, or will hold,  Common Shares as part
of a straddle, hedging or conversion transaction. In addition, this summary does
not address  any  consequences  of the Stock  Splits  under any state,  local or
foreign tax laws.

This  summary  assumes  that  you are one of the  following:  (i) a  citizen  or
resident of the United States, (ii) a domestic corporation, (iii) an estate, the
income of which is subject to United States federal income tax regardless of its
source,  or  (iv) a  trust,  if a  United  States  court  can  exercise  primary
supervision  over  the  trust's  administration  and one or more  United  States
persons are authorized to control all substantial  decisions of the trust.  This
summary also  assumes  that you have held and will  continue to hold your Common
Shares as capital assets for federal income tax purposes.

Management   believes   the  Stock   Splits   will  be  treated  as  a  tax-free
"recapitalization"  for federal income tax purposes.  This treatment will result
in no material federal income tax consequences to the Company.  However, you may
not qualify for tax free  "recapitalization"  treatment  for federal  income tax
purposes,  depending on whether you are receiving  cash,  stock or both cash and
stock pursuant to the Stock Splits.




You should consult your tax advisor as to the particular federal,  state, local,
foreign, and other tax consequences applicable to your specific circumstances.

Federal Income Tax Consequences to Unaffiliated Continuing Holders Not Receiving
Cash. If you (i) continue to hold Common Shares directly  immediately  after the
Stock Splits and (ii) you receive no cash as a result of the Stock  Splits,  you
will not recognize  any gain or loss in the Stock Splits,  and you will have the
same  adjusted tax basis and holding  period in your Common Shares as you had in
such Common Shares immediately prior to the Stock Splits.

Federal Income Tax  Consequences to Holders  Receiving Cash. If you receive cash
in  exchange  for  Common  Shares  as a result  of the  Stock  Splits,  your tax
consequence will depend on whether,  in addition to receiving cash, you retain a
portion  of  your  Common  Shares  or a  person  or  entity  related  to you (as
determined by the Code) continues to hold Common Shares immediately

                               AFTER STOCK SPLITS

If you receive  cash, do not continue to hold directly any Common Shares and are
not  related  to any  person or entity  who or which  continues  to hold  Common
Shares, you will recognize capital gain or loss. The amount of this capital gain
or loss will equal the  difference  between the cash you receive for your Common
Shares and your aggregate adjusted tax basis in such Common Shares.

If you receive cash and either (a) retain a portion of your Common Shares or (b)
do not continue to hold  directly any Common  Shares but are related to a person
or entity who or which continues to hold Common Shares (in which case you may be
treated as owning  constructively the Common Shares owned by such related person
or entity),  your receipt of cash may be treated (i) first, as ordinary  taxable
dividend   income  to  the  extent  of  your  ratable  share  of  the  Company's
undistributed earnings and profits, (ii) second, as a tax-free return of capital
to the extent of your aggregate  adjusted tax basis in your Common  Shares,  and
(iii) then, the remainder as capital gain.

If you fall into the category described in the immediately  preceding paragraph,
your tax  treatment  will depend upon whether your receipt of cash either (i) is
"not essentially  equivalent to a dividend" or (ii) constitutes a "substantially
disproportionate  redemption of stock," as described  below.  If your receipt of
cash meets either of these two tests, your receipt of cash will result solely in
capital  gain or loss.  If your  receipt of cash cannot meet either of these two
tests,  your  tax  consequences  will  be  those  described  in the  immediately
preceding paragraph.

"Not  Essentially   Equivalent  to  a  Dividend."  You  will  satisfy  the  "not
essentially   equivalent   to  a  dividend"   test  if  the  reduction  in  your
proportionate  interest in the Company  resulting  from the Stock Splits (taking
into  account for this  purpose the Common  Shares  owned by persons or entities
related to you) is considered a  "meaningful  reduction"  given your  particular
facts and  circumstances.  The Internal  Revenue  Service has ruled that a small
reduction by a minority stockholder whose relative stock interest is minimal and
who exercises no control over the affairs of the  corporation  will satisfy this
test.

"Substantially  Disproportionate  Redemption  of Stock." Your receipt of cash in
the Stock Splits will be a "substantially  disproportionate redemption of stock"
for you if the  percentage  of Common  Shares  owned by you (and by  persons  or
entities related to you) immediately after the Stock Splits is (i) less than 50%
of all Common  Shares and (b) less than 80% of the  percentage  of Common Shares
owned by you (and by persons or entities related to you) immediately  before the
Stock Splits.




If you or a person or entity  related to you will continue to hold Common Shares
after the  Stock  Splits,  you  should  consult  with  your own tax  advisor  to
determine your particular tax consequences.

Capital Gain and Loss. For individuals,  net capital gain (defined  generally as
your total  capital gains in excess of capital  losses for the year)  recognized
upon the sale of  capital  assets  that  have  been held for more than 12 months
generally  will be subject to tax at a rate not to exceed 15%.  Net capital gain
recognized  from the sale of capital assets that have been held for 12 months or
less will  continue to be subject to tax at ordinary  income tax rates.  Capital
gain  recognized  by a corporate  taxpayer will continue to be subject to tax at
the ordinary income tax rates applicable to corporations.  There are limitations
on the deductibility of capital losses.

Annual Rate for Certain Dividends.  In general,  dividends are taxed at ordinary
income  rates.  However,  you may  qualify  for a 15%  rate  of tax on any  cash
received in the Stock Splits that is treated as a dividend as  described  above,
if (i) you are an individual or other non-corporate  stockholder;  (ii) you have
held the Common  Shares of the Company  with  respect to which the  dividend was
received  for more than 60 days  during the  120-day  period  beginning  60 days
before the  ex-dividend  date, as determined  under the Code; and (iii) you were
not obligated during such period (pursuant to a short sale or otherwise) to make
related payments with respect to positions in  substantially  similar or related
property.  You should consult with your tax advisor  regarding your  eligibility
for such lower tax rates on dividend income.

Backup  Withholding.  Holders of Common Shares will be required to provide their
social security or other taxpayer identification numbers (or, in some instances,
additional  information)  to the  Transfer  Agent in  connection  with the Stock
Splits to avoid backup withholding  requirements that might otherwise apply. The
letter of transmittal  will require each holder of Common Shares to deliver such
information  when the Common Share  certificates  are surrendered  following the
Effective  Date of the Stock  Splits.  Failure to provide such  information  may
result in backup withholding.

As explained  above, the amounts paid to you as a result of the Stock Splits may
result in dividend income,  capital gain income, or some combination of dividend
and capital gain income to you depending on your individual circumstances.

               UNAVAILABILITY OF APPRAISAL AND DISSENTER'S RIGHTS

No appraisal or  dissenters'  rights are  available  under Utah law or under the
Company's  Articles of  Incorporation.  Other  rights or actions may exist under
Utah  law or  federal  and  state  securities  laws  for  shareholders  who  can
demonstrate that they have been damaged by the Stock Splits.




                                  ESCHEAT LAWS

The  unclaimed  property  and  escheat  laws of each  state  provide  that under
circumstances  defined  in  that  state's  statutes,  holders  of  unclaimed  or
abandoned  property must surrender that property to the state.  Shareholders who
are entitled to receive cash in lieu of fractional shares in connection with the
Stock Splits whose  addresses are unknown to the Company or who do not surrender
their share  certificates  and request payment of the Repurchase Price generally
will have a period of years from the  Effective  Date in which to claim the cash
payment to which they are entitled.  For example,  with respect to  shareholders
whose last known addresses,  as shown by the records of the Company, are in Utah
the period is five years. Following the expiration of that five-year period, the
relevant  provisions  of the Utah  Revised  Code  would  likely  cause  the cash
payments to escheat to the State of Utah. For  shareholders  who reside in other
states or whose last known  addresses,  as shown by the records of the  Company,
are in states  other than Utah,  such states may have  abandoned  property  laws
which call for such state to obtain either (i) custodial  possession of property
that has been  unclaimed  until the owner  reclaims  it or (ii)  escheat of such
property to the state. Under the laws of such other jurisdictions,  the "holding
period" or the time period which must elapse before the property is deemed to be
abandoned may be shorter or longer than five years. If the Company does not have
an address for a  shareholder,  then the unclaimed  cash payment would be turned
over to the Company's state of  incorporation,  the State of Utah, in accordance
with its escheat laws.

                             REGULATORY REQUIREMENTS

The Company is not aware of any material  governmental  or  regulatory  approval
required for  completion of the Stock  Splits,  other than  compliance  with the
relevant federal and state securities laws and Utah corporate laws.

                          INFORMATION ABOUT THE COMPANY

                             DESCRIPTION OF BUSINESS

The Company has focused  its  efforts  over the years in  acquiring  oil and gas
properties from other companies,  selling  producing wells and acquiring new oil
and gas leases for the purpose of  exploring  for oil and gas.  Leases have also
been  acquired  over the years for the purpose of reselling  them at a profit to
other oil and gas companies.

Most of the  Company's  present  production  from  oil and  gas  properties  was
acquired  from large oil  companies  selling  properties  they  considered to be
marginal  producers.  The Company has found that it can operate these properties
at a profit.  Presently,  the Company  operates 9 producing oil and gas wells in
Utah and Wyoming.

The Company also owns an interest in several  non-operated oil and gas wells and
overriding royalty interests in oil and gas wells located in Utah,  Colorado and
Wyoming.  Primary among these  overriding  royalty  interests is the Hunter Mesa
Unit and Grass Mesa Unit in Garfield County,  Colorado. The Company's overriding
royalty interest  although less than a half of a percent in both the Hunter Mesa
Unit and the Grass Mesa Unit accounts for the majority of the Company's  royalty
income since the Units contain  several  hundred  wells.  An overriding  royalty
interest is an interest in a well that receives a percentage  of the  production
from a well without paying any operation expenses.




The Company over the last few years has focused most of its exploration  efforts
in the Rocky Mountain area, and in acquiring  leasehold positions in trend areas
of  existing  production.  Prior to leasing an area a  geological  review of the
prospective  area is made by the Company's  staff to determine the potential for
oil and gas. If an area is  determined  to have promise the Company will attempt
to acquire oil and gas leases over the  prospective  area. The Company will then
acquire  geophysical  data  (generally  seismic  and  gravity  data) to  further
evaluate the area.  After the  evaluation of the  geophysical  data, if the area
appears to contain  significant  accumulations  of oil and gas in the  Company's
opinion  for the area,  the Company  will  market a drilling  program to outside
investors  covering  the  Company's  leases or sell the leases  with the Company
retaining an overriding royalty interest.  Significant  accumulations  cannot be
quantified because it depends on many factors such as how much it costs to drill
and complete wells in a certain area, how close the wells are to pipelines, what
the price of oil or gas is, how accessible the area is, whether the project is a
developmental or wildcat project,  what the cost of oil and gas leases are in an
area,  the type of return  investors  are seeking at that time in the  different
exploration   areas,   and  many  other   geological,   geophysical   and  other
considerations.

When the  Company  markets a drilling  program it sells a portion of its oil and
gas leases over the  prospect  area along with  obtaining a drilling  commitment
from the parties  purchasing  the leases to drill a well on the prospect area. A
drilling  program will  generally  allow the Company to recoup its investment in
the area with the Company also retaining an ongoing  interest in new wells to be
drilled in the area.

The Company markets its drilling programs to other industry  partners.  Drilling
programs have been marketed by placing ads in industry journals, attending trade
shows and by traveling to the office of prospective  partners.  In the past, the
Company has sold drilling programs to major oil companies and large independents
and occasionally to individuals.

The  Company  was  organized  on October 16, 1980 under the laws of the State of
Utah.  The Company's  principal  place of business is located at 1206 West South
Jordan Parkway,  Unit B, South Jordan, Utah 84095-5512.  The Company's telephone
number is (801)  566-3000 and the  Company's fax number is (801)  446-5500.  The
Company has primarily been engaged in the acquisition and exploration of oil and
gas properties in Utah, Wyoming, Colorado and Nevada.

                              RECENT DEVELOPMENTS:

During the last year,  the Company has been focusing on obtaining  prospects for
the  exploration  of oil and gas and  continuing  the  operations of its current
producing oil and gas  properties.  During the last fiscal year ended  September
30th,  2004, and to the present the Company has been acquiring  acreage with its
partner International  Petroleum LLC ("International") in the Central Utah trend
near the  discovery of  Wolverine  Gas & Oil Corp.  ("Wolverine").  The Covenant
field discovered by Wolverine has been reported to have produced 265,000 barrels
of oil  between  May 2004 and March  2005.  The Company has owned a 37.5% in the
acreage  being  acquired  from the  outset  with its  employees  paying  for and
acquiring 12.5% of the acreage from the outset ("See  Transactions  With Related
Parties")  and  International  paying  for and  acquiring  50% from  the  outset
(Collectively  the group is referred to as the "Trend  Partnership").  The total
acreage  acquired  by the Trend  Partnership  during the last 12 months  exceeds
100,000  acres  with  approximately   50,000  acres  already  sold  to  a  major
independent and another 35,000 acres that the major independent has the right to
acquire. The Company has retained a 1.75% overriding royalty interest on all the
acreage sold in the Central Utah Trend



For the fiscal year ending  September  30, 2004,  the Company has  increased the
amount of  undeveloped  oil and gas leases it holds from  59,018  gross acres on
9/30/03 to 109,933  gross  acres on 9/30/04  primarily  due to the  purchase  of
acreage in Central Utah.

The Company has also sold its remaining 13,189.16 acres in the overpressured gas
play within the last 12 months and retained a carried working interest to casing
point of 10% on the first two wells  drilled in the  13,189.16  acre block.  The
Company is  currently  marketing  a 27,000  acre  block  that is in the  deepest
structural  position of the  overpressured  gas area and  approximately 12 miles
North of the 13,189.16 acreage block.

The Company drilled the Yankee Mine West #1 well within the last few months with
the well being  deemed a dry hole.  The  Company and its partner on the well are
looking at the possibility of shooting seismic over the prospect before drilling
another well.

The Company has sold a drilling prospect in the Emigrant Gap Prospect in Natrona
County, Wyoming, and its Able Spring Prospect in Nye County, Nevada. The Company
expects that one of the  prospects  will be drilled  prior to December 31, 2005.
The Company retained an 18.75% working interest and a 15.0% net revenue interest
on the acreage in the Emigrant Gap, Yankee Mine and Able Spring Prospects.

The  Company  has been  involved  in a 3D  seismic  project  in Texas  that will
continue  to cause the  Company  to expend  funds  during  the  current  year in
prospective  drilling on prospects  identified on 3D seismic. The Company owns a
1.65%  working  interest  in the 3D  seismic  venture in Texas and  already  has
drilled  six wells on the 3D  seismic  venture.  One of the  wells is  producing
another  one  appears to be a  producer,  and the other four wells have been dry
holes.

                           DESCRIPTION OF SECURITIES.

Qualification.  The  following  statements  constitute  brief  summaries  of the
Company's Articles of Incorporation and Bylaws. Such summaries do not purport to
be fully  complete and are qualified in their  entirety by reference to the full
text of the Articles of Incorporation and Bylaws of the Company.

Common Stock. The Company's  Articles of Incorporation  authorize it to issue up
to 50,000,000  (fifty  million)  Shares of its Common  Stock,  which carry a par
value of $0.001 per Share.

Liquidation  Rights.  Upon liquidation or dissolution,  each outstanding  Common
Share will be  entitled to share  equally in the assets of the  Company  legally
available for the  distribution to  shareholders  after the payment of all debts
and other liabilities.

Dividend Rights. There are no limitations or restrictions upon the rights of the
Board of  Directors  to declare  dividends  out of any funds  legally  available
therefor.  The Company has not paid dividends to date and it is not  anticipated
that  any  dividends  will be paid  in the  foreseeable  future.  The  Board  of
Directors  initially  will  follow a policy of  retaining  earnings,  if any, to
finance  the  future  growth  of  the  Company  or  repurchase   Company  stock.
Accordingly,   future   dividends,   if  any,  will  depend  upon,  among  other
considerations,  the  Company's  need  for  working  capital  and its  financial
conditions at the time.




Voting Rights.  Holders of Common Shares of the Company are entitled to cast one
vote for each share held at all shareholders meetings for all purposes.

Other Rights.  Common Shares are not redeemable,  have no conversion  rights and
carry no  preemptive  or other  rights to  subscribe  to or purchase  additional
Common Shares in the event of a subsequent offering.

Transfer  Agent.  The Company's  transfer  agent is Atlas Stock  Transfer  whose
address is 5899 South State  Street,  Murray,  Utah 84107.  The phone  number of
Atlas Stock Transfer is (801) 266-7151.

The Securities and Exchange  Commission has adopted Rule 15g-9 which established
the definition of a "penny stock", for the purposes relevant to the Company,  as
any equity  security  that has a market  price of less than $5.00 per share,  or
with an  exercise  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  For any  transaction  involving a penny stock,  unless exempt,  the
rules  require:  (i) that  broker  or  dealer  approve a  person's  account  for
transactions  in penny stocks;  and, (ii) the broker or dealer  receive from the
investor a written agreement to the transaction,  setting forth the identity and
quantity  of the penny  stock to be  purchased.  In order to  approve a person's
account for  transactions in penny stocks,  the broker or dealer must (i) obtain
financial  information and investment  experience  objectives of the person; and
(ii) make a reasonable determination that the transaction(s) in penny stocks are
suitable for that person and the person has sufficient  knowledge and experience
in financial  matters to be capable of evaluating the risks of  transactions  in
penny stocks.  The broker or dealer must also deliver,  prior to any transaction
in a penny stock, a disclosure  schedule prepared by the Commission  relating to
the penny stock market,  which, in highlighted form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed,  written  agreement from the investors prior
to the transaction.  Disclosure also has to be made about the risks of investing
in penny stocks in both public offerings and in secondary  trading and about the
commissions  payable to both the  broker-dealer  and registered  representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in case of fraud  in penny  stock  transaction.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stocks  held in the  account  and  information  on the  limited  market in penny
stocks.




                     MARKET PRICE AND DIVIDEND INFORMATION.

The Company is listed on the over-the-counter  market on the NASDAQ OTC Bulletin
Board and after the  Stock  Splits if it trades it will  trade  only on the Pink
Sheets(R).  The range of high and low closing bid  information for the shares of
the Company's  stock for the last two complete  fiscal years, as reported by the
OTC  Bulletin  Board  National  Quotation  Bureau,  is  set  forth  below.  Such
quotations  represent  prices  between  dealers,  do not include  retail markup,
markdown or commission, and do not represent actual transactions.

Year Ended September 30, 2004                  High             Low
-----------------------------                  ----            ----

First Quarter                                  $.85            $.61
Second Quarter                                $2.00            $.60
Third Quarter                                 $1.05            $.75
Fourth Quarter                                $1.96            $.82


Year Ended September 30, 2003                  High             Low
-----------------------------                  ----            ----

First Quarter                                  $.36            $.27
Second Quarter                                  .45             .21
Third Quarter                                   .43             .25
Fourth Quarter                                  .47             .16



As of September 30, 2004 the Company had issued and outstanding 7,910,727 common
shares held by approximately 980 holders of record.

There have been no cash  dividends  declared by the Company since its inception.
Further, there are no restrictions that would limit the Company's ability to pay
dividends on its common equity or that would be likely to do so in the future.

The Company has no plans to register any of its securities  under the Securities
Act for sale by  security  holders.  There is no public  offering  of equity and
there is no proposed public offering of equity.




                       COMMON SHARE REPURCHASE INFORMATION

The following table provides  information  regarding the Company's  Common Share
repurchases during the periods indicated:

                                              Price Range      Weighted Average
Quarter Ended         Number Repurchased      High    Low      Price Per Share

Fiscal 2003
December 31, 2002     None                    N/A     N/A          N/A
March 31, 2003        None                    N/A     N/A          N/A
June 30, 2003         None                    N/A     N/A          N/A
September 30, 2003    None                    N/A     N/A          N/A

Fiscal 2004
December 31, 2003        200                 $.37    $.37         $.37
March 31, 2004        46,999                 $.45    $.45         $.45
June 30, 2004          1,400                 $.45    $.45         $.45
September 30, 2004       200                 $.45    $.45         $.45

Fiscal 2005
December 31, 2004      1,092                 $.82    $.75         $.80
March 31, 2005       229,505                $1.65   $1.36        $1.49
to present

The Company  plans to  continue to buy Common  Shares in the Company as it deems
feasible  from  time to time  and  management  is  authorized  by the  Board  of
Directors to purchase up to 2,000,000  shares of the Company's  Common Shares on
terms and conditions  determined by management.  Anyone  desiring to sell Common
Shares is encouraged to contact the Company to inquire whether the Company would
purchase  their shares  without a  commission.  The Company  makes no promise of
repurchasing a shareholder's stock, other than as outlined for the Stock Splits,
at a given time since any decision  will be based upon the  Company's  financial
condition and working  capital  requirements  along with the market price of the
stock taken into consideration.

                              AVAILABLE INFORMATION

The Stock Splits will constitute a  "going-private"  transaction for purposes of
Rule 13e-3 of the Exchange Act. As a result,  the Company has filed the Schedule
13E-3, which contains  additional  information about the Company.  Copies of the
Schedule 13E-3,  along with the full text of the Valuation Opinion are available
for inspection and copying at the Company's  principal  executive offices during
regular  business  hours by any  interested  shareholder  of the  Company,  or a
representative  who has been so designated in writing,  and may be inspected and
copied, or obtained by written request addressed to Pioneer Oil and Gas, 1206 W.
South Jordan Parkway, Unit B, South Jordan, Utah 84095.

The Company is currently subject to the information requirements of the Exchange
Act and files periodic reports,  proxy statements and other information with the
SEC  relating  to its  business,  financial  and other  matters.  Copies of such
reports, proxy statements and other information,  as well as the Schedule 13E-3,
may  be  copied  (at  prescribed  rates)  at  the  public  reference  facilities
maintained by the SEC at Room 1024,  450 Fifth Street,  N.W.,  Judiciary  Plaza,
Washington,  D.C.  20549.  For further  information  concerning the SEC's public
reference  rooms,  you  may  call  the  SEC  at  1-800-SEC-0330.  Some  of  this
information  may also be  accessed  on the  World  Wide Web  through  the  SEC's
internet address at www.sec.gov.


                

The Company will provide  without charge upon the written or oral request of any
person to whom this Proxy  Statement is delivered,  by first class mail or other
equally prompt means within one business day of receipt of such request,  a copy
of any and all  information  that has been  incorporated  by reference,  without
exhibits  unless such exhibits are also  incorporated by reference in this Proxy
Statement.  You may obtain a copy of these documents and any amendments  thereto
by written  request  addressed  to  Pioneer  Oil and Gas,  1206 W. South  Jordan
Parkway, Unit B, South Jordan, Utah 84095.

                               LEGAL PROCEEDINGS.

The  Company  may become or is subject to  investigations,  claims,  or lawsuits
ensuing  out  of the  conduct  of  its  business,  including  those  related  to
environmental  safety and health,  commercial  transactions  etc. The Company is
currently not aware of any such items,  which it believes  could have a material
adverse affect on its financial position.

                         FINANCIAL AND OTHER INFORMATION

         The audited financial statements regarding the Company for the fiscal
year ended September 30, 2004, are presented in the Appendix following the Proxy
Statement. A summary of selected financial data, and the information contained
in the disclosures entitled " Management's Discussion and Analysis of Financial
Condition and Results of Operations", are presented below.

            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS -2004 Compared to 2003

Total  revenue for fiscal year 2004 was  $1,918,272 as compared to total revenue
for fiscal year 2003 of $1,929,279.  Total oil and gas sales (including  royalty
revenue)  increased 33 percent from  $1,360,985 to $1,805,077.  This increase in
oil and gas revenue was  primarily  due to higher  product  prices and increased
production  from our  Hunter  Mesa and Grassy  Mesa  units.  Average  gas prices
increased  22% from $4.08 MCF  (2003) to $4.97 MCF  (2004).  Average  oil prices
increased  22  percent  from  $26.43  per barrel in 2003 to $32.31 per barrel in
2004.

Project and lease sales income  decreased  from  $566,365 in 2003 to $113,195 in
2004. The Company sold  two-thirds of its  overpressured  gas project and a 3500
acre  coalbed  methane  lease  block in 2003.  Sales of leases  near Vernal Utah
accounted for most of the project and lease sales in 2004. Total revenue for the
company  declined  slightly  due to lower  project and lease  sales  income even
though oil and gas revenues increased significantly.




Costs of operations increased from $632,264 to $679,132.  This item includes all
well  operating  expenses and any amounts paid to employees  and other  interest
owners for their interest in producing  properties.  Increased  disbursements to
interest owners due to higher product prices accounted for most of the increase.

General  and  administrative  costs  increased  from  $316,259 in fiscal 2003 to
$346,970 in fiscal 2004 primarily due to higher payroll costs.

In fiscal 2004 loss on assets sold or abandoned  decreased  from $355,459 to $0.
The write-off of some of the Company's producing assets in Wyoming during fiscal
2003 accounted for the difference.

The  Company's  total   stockholders'   equity   increased  from  $1,034,808  to
$1,533,335.  Net income  increased  from  $177,413  in 2003 to $492,344 in 2004.
Earnings per share increased from $.02 in fiscal 2003 to $.06 in fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

Historically the Company has funded operations  primarily from earnings and bank
borrowing.  As of  September  30,  2004  the  Company  had  working  capital  of
$1,151,486 and an unused line of credit with Zions Bank for $750,000.  This line
of  credit  is  collateralized  by all of the  companies  operated  oil  and gas
properties.  The line of credit bears interest at prime rate plus 1.0%. The line
of credit with Zions Bank matured on December  31,  2003,  and was renewed for a
two-year  period  ending  December 31, 2005.  As of September 30, 2003 and as of
September 30, 2004, the amount on the credit line was $0 and $0 respectively.

During fiscal 2004 cash provided by operating activities was $274,903 while cash
used for investing activities was for $133,255. There was a net increase in cash
of $119,563,  as cash increased from $371,527 to $491,090.  The increase in cash
for operating  activities was primarily the result of a drilling advance for our
Yankee Mine Well in Nevada.

OIL AND GAS PROPERTIES

The Company,  as of the date of this filing, is the owner of several oil and gas
properties  located  throughout the Rocky Mountain Region.  The Company operates
four properties in Utah, three in Wyoming and one in Colorado.  The standardized
measure of  discounted  future net cash flows  (before  income taxes) of all the
Company's properties as of September 30, 2004 was $5,405,530.

INCOME TAXES

As of September 30, 2004,  the Company had net operating  loss carry forwards of
approximately  $1,164,000.  The present net operating loss  carry-forward of the
Company  will begin to expire in the year 2012.  If  substantial  changes in the
Company's  ownership  should  occur there would be an annual  limitation  of the
amount of NOL  carry  forward,  which  could be  utilized.  Also,  the  ultimate
realization of these carry forwards is due, in part, on the tax law in effect at
the time and future events that cannot be  determined.  The Company  anticipates
that it will use its NOL during the  current  year and then start  having to pay
income tax.




                    CERTAIN FINANCIAL EFFECTS OF STOCK SPLITS

The  Company  does not  expect  the  Stock  Splits  or the use of  approximately
$640,000 to complete the Stock  Splits  (which  includes  payments to be made to
shareholders who have fractional  shares  repurchased and professional  fees and
other expenses  related to the  transaction) to have any material adverse effect
on the Company's capitalization,  liquidity, results of operations or cash flow.
Please refer to the section entitled "Quorum,  Voting Rights and Other Matters".
The Company expects to finance the Stock Splits with cash on hand.

If the Stock  Splits are  completed,  shareholders  who receive  cash in lieu of
fractional shares will receive cash in the amount of $1.50 per Common Share held
immediately  prior to the Stock Splits.  The repurchase of the fractional Common
Shares  resulting  from the Stock  Splits  is  estimated  to cost  approximately
$640,000  and would  reduce the number of record  holders of Common  Shares from
approximately 980 to 200.

The Company expects that as a result of the Reverse/Forward Stock Splits and the
cashing out of fractional  Common Shares held by  shareholder  after the reverse
stock split:

The  Company's  shareholders'  equity  will  change  as of March  31,  2005 from
$3,747,166 to $3,147,166.
     
The Company is providing the following pro forma information showing the effects
on  the  Company's  balance  sheet,   statement  of  operations,   statement  of
stockholders  equity  and  selected  financial  data  if the  Stock  Splits  are
effective  assuming  they had  occurred  on March  31,  2005 the last  available
quarterly statement.




                           PIONEER OIL AND GAS

                             BALANCE SHEETS
                             (unaudited)
                             March 31, 2005


                                 Assets                                             Pro-Forma               Actual
                                                                                After Stock Purchase
                                                                                                    
Current assets:

Cash                                                                           $       402,119           1,002,119

Marketable securities, available for sale                                               36,039              36,039

Accounts receivable                                                                    203,553             203,553

Resale leases, at lower of cost or market                                            2,540,349           2,540,349



Total current assets                                                                 3,182,060           3,782,060


Property and equipment, net                                                            656,873             656,873

Other assets                                                                             2,230               2,230

                                                                               $     3,841,163           4,441,163
                                                                                ==============      ==============     

                  Liabilities and Stockholders' Equity


Current liabilities:

Accounts payable                                                               $        50,492              50,492

Accrued expenses                                                                        28,781              28,781

Income taxes payable                                                                   176,000             176,000



Total current liabilities                                                              255,273             255,273

Deferred income tax                                                                    278,000             278,000

Asset retirement obligation                                                            160,724             160,724



Total liabilities                                                                      693,997             693,997


Commitments and contingencies

Stockholders' equity:

Common stock, par value $.001 per share,

  50,000,000 shares authorized; 7,510,802

  and 7,910,802 shares issued and outstanding,

  respectively                                                                           7,510               7,910

Additional paid-in capital                                                           1,871,134           2,470,734

Stock subscription receivable                                                         (184,570)           (184,570)

Accumulated other comprehensive income                                                  36,039              36,039

Retained earnings                                                                    1,417,053           1,417,053



Total stockholders' equity                                                           3,147,166           3,747,166

                                                                               $     3,841,163           4,441,163
                                                                                ==============      ==============






                               PIONEER OIL AND GAS
                            STATEMENTS OF OPERATIONS


                                                                                       Six Months Ended               Year Ended

                                                                                             March 31,                September 30,

                                                                                     2005             2004               2004

                                                                                  Pro-Forma        Pro-Forma          Pro-Forma
                                                                                  ------------     ------------       ------------
                                                                                                                  
Revenue:


Oil and gas sales                                                             $        530,079          409,530            954,970

Royalty revenue                                                                        498,743          338,262            850,107

Operational reimbursements                                                               3,000            3,000                  -

Project and lease sales income                                                       2,260,528           18,750            113,195

                                                                                     3,292,350          769,542          1,918,272
Costs and expenses:

Cost of operations                                                                     381,325          322,247            679,132

General and administrative expenses                                                    198,425          180,911            346,970

Exploration costs                                                                      137,328           91,279            208,309

Lease rentals                                                                           18,430           33,960             54,083

Depreciation, depletion and amortization                                                46,186           54,866             87,770

                                                                                       781,694          683,263          1,376,264

Income from operations                                                               2,510,656           86,279            542,008

Other income (expense):

Interest income                                                                              -                -             15,287

Interest expense                                                                        (1,267)               -             (3,059)

Other income                                                                           105,838           21,506             19,629

                                                                                       104,571           21,506             31,857

Income before provision for income taxes                                             2,615,227          107,785            573,865

Provision for income taxes                                                             454,000                -                  -

Net income before cumulative effect of a change in
accounting principle                                                                 2,161,227          107,785            573,865

Cumulative effect of a change in accounting principle - asset
retirement obligation                                                                       -                -             (81,521)

Net income                                                                   $       2,161,227          107,785            492,344
                                                                                  ============      ===========        ===========

Earnings per share:
Basic
Income before cumulative effect of accounting change                         $             .29              .01                .08
Loss from cumulative effect of change in accounting principle                                -                -               (.01)

                                                                             $             .29              .01                .07
                                                                                  ============      ===========        ===========

Diluted

Income before cumulative effect of accounting change                         $             .28              .01                .08

Loss from cumulative effect of change in accounting principle                                -                -               (.01)

                                                                             $             .28              .01                .07
                                                                                  ============      ===========        ===========

Weighted average common shares:

Basic                                                                                7,512,000        7,450,000          7,531,000
                                                                                  ============      ===========        ===========

Diluted                                                                              7,859,000        7,450,000          7,531,000
                                                                                  ============      ===========        ===========







                               PIONEER OIL AND GAS

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                   Six Months Ended March 31, 2005 (Pro-Forma)

                                                                                        Accumulated

                                                            Additional   Stock          Other

                                             Common Stock   Paid-in      Subscription   Comprehensive  Retained

                                         Shares    Amount   Capital      Receivable     Income         Earnings        Total
                                         =================  ===========  ============   ============== ========      ===========

                                                                                              
Balance at September 30, 2004 (audited)  7,912,819 $ 7,912  $ 2,473,256  $ (203,659)      $        -    $(744,174)   $ 1,533,335

Payments on stock subscription
receivable                                       -       -            -      19,089                -           -          19,089


Unrealized holding gain on marketable
securities                                       -       -            -           -           36,039           -          36,039


Purchase and retirement of common
stock                                       (2,017)     (2)      (2,522)          -                -           -          (2,524)


Purchase and retirement of common
stock (pro-forma)                         (400,000)   (400)    (599,600)          -                -           -        (600,000)


Net income                                        -      -            -           -                -    2,161,227      2,161,227



Balance at March 31, 2005 (pro-forma)    7,510,802 $ 7,510  $ 1,871,134  $ (184,570)      $   36,039  $ 1,417,053  $   3,147,166
                                         =================   ===========  =============   ============  ==========    ==========









   PIONEER OIL AND GAS
          SELECTED FINANCIAL DATA






                                         Three Months Ended                Six Months Ended               Year Ended
                                              March 31,                        March 31,                 September 30,
                                    
                                        2005             2004             2005             2004               2004
                                    --------------  ---------------  ---------------  ---------------  --------------------
                                                                                        
                                    
Ratio of earnings to
  fixed charges:                      3,464 to 1          (a)           2,065 to 1          (a)              189 to 1
                                    ==============  ===============  ===============  ===============  ====================
                                    ==============  ===============  ===============  ===============  ====================


NOTE:  The pro-forma ratio of earnings to fixed charges would be the same as the actual
              presented above.

(a)  No ratios are presented for the three and six months ended March 31, 2004 as there were no
      fixed charges.



                                                  March 31,
                                                    2005
                                                --------------
                                                --------------

Pro-Forma Book value per share:              $       .42
                                                ==============
                                                ==============








         
THE COMPANY  UNDERTAKES  TO PROMPTLY  FURNISH  (WITHOUT  CHARGE EXCEPT AS TO THE
EXHIBITS IF REQUESTED THAT INCLUDE  ARTICLES OF  INCORPORATION,  BYLAWS,  LETTER
FROM PETROLEUM ENGINEER AND FINANCING  AGREEMENTS WITH ZIONS BANK) A COPY OF ITS
FORM 10-KSB FILED PREVIOUSLY WITH THE SECURITIES AND EXCHANGE COMMISSION, TO ANY
SHAREHOLDER  OF RECORD UPON  WRITTEN  REQUEST,  WHICH SHALL ALSO  INCLUDE A GOOD
FAITH REPRESENTATION THAT, AS OF MAY 31, 2005, THE PERSON MAKING THE REQUEST WAS
THE  BENEFICIAL  OWNER OF COMMON  STOCK OF THE  COMPANY  ENTITLED TO VOTE AT THE
ANNUAL MEETING.  The Form 10-KSB filed by the Company with the SEC can be viewed
in its entirety at Securities and Exchange website  www.sec.gov by searching the
Edgar Archives with the keywords "Pioneer Oil and Gas".

BY ORDER OF THE BOARD OF DIRECTORS:

By:      Don J. Colton
         Chairman of the Board of Directors,
         and President

         PIONEER OIL AND GAS



                              PIONEER OIL AND GAS

                              FINANCIAL STATEMENTS
                                            
                          September 30, 2004 and 2003





                               PIONEER OIL AND GAS

                              FINANCIAL STATEMENTS

                           September 30, 2004 and 2003



                                                    INDEX

                                                                     Page

         Independent Auditors' Report                                F-2

         Statements of Operations                                    F-3

         Balance Sheets                                              F-4

         Statements of Stockholders' Equity                          F-5

         Statements of Cash Flows                                    F-6

         Notes to Financial Statements                               F-7

         Supplementary Schedules on Oil and Gas Operations           F-17








                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and
Stockholders of Pioneer Oil and Gas


We have  audited the  accompanying  balance  sheets of Pioneer Oil and Gas as of
September  30,  2004  and  2003,  and  the  related  statements  of  operations,
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
as established by the Auditing Standards Board (United States) and in accordance
with the auditing  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.  The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our audit
included  consideration of internal control over financial  reporting as a basis
for designing audit  procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an  opinion  on the  effectiveness  of the
Company's internal control over financial  reporting.  Accordingly we express no
such  opinion.  An audit also  includes  examining,  on a test  basis,  evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management,  as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Pioneer Oil and Gas as of
September 30,  2004 and 2003,  and the  results of its  operations  and its cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.



JONES SIMKINS, P.C.
Logan, Utah
November 18, 2004


                                      F-2





                                                    PIONEER OIL AND GAS
                                                 STATEMENTS OF OPERATIONS
                                          Years Ended September 30, 2004 and 2003

                                                                                            2004                 2003
                                                                                                       
                                                                                       -----------------    -----------------
Revenue:
Oil and gas sales                                                                   $          954,970              963,244
Royalty revenue                                                                                850,107              397,741
Operational reimbursements                                                                           -                1,929
Project and lease sales income                                                                 113,195              566,365
                                                                                      -----------------    -----------------

                                                                                             1,918,272            1,929,279
                                                                                      -----------------    -----------------

Costs and expenses:
Cost of operations                                                                             679,132              632,264
General and administrative expenses                                                            346,970              316,259
Exploration costs                                                                              208,309              248,753
Lease rentals                                                                                   54,083               57,395
Depreciation, depletion and amortization                                                        87,770              141,019
                                                                                      -----------------    -----------------

                                                                                             1,376,264            1,395,690
                                                                                      -----------------    -----------------

Income from operations                                                                         542,008              533,589
                                                                                      -----------------    -----------------

Other income (expense):
Loss on assets sold or abandoned                                                                     -             (355,459)
Interest income                                                                                 15,287               15,518
Interest expense                                                                                (3,059)             (23,476)
Other                                                                                           19,629                7,241
                                                                                      -----------------    -----------------

                                                                                                31,857             (356,176)
                                                                                      -----------------    -----------------

Income before provision for income taxes                                                       573,865              177,413

Provision for income taxes                                                                           -                    -
                                                                                      -----------------    -----------------

Net income before cumulative effect of a change in
  accounting principle                                                                         573,865              177,413

Cumulative effect of a change in accounting principle - asset
  retirement obligation                                                                        (81,521)                   -
                                                                                      -----------------    -----------------

Net income                                                                          $          492,344              177,413
                                                                                      =================    =================

Net income per common share - basic and diluted:
Income before cumulative effect of accounting change                                $              .07                  .02
Loss from cumulative effect of change in accounting principle                                     (.01)                   -
                                                                                      -----------------    -----------------

                                                                                    $              .06                  .02
                                                                                      =================    =================

Weighted average common shares - basic and diluted                                           7,931,000            7,962,000
                                                                                      =================    =================

                 See accompanying notes to financial statements

                                       F-3








                                                  PIONEER OIL AND GAS
                                                    BALANCE SHEETS
                                              September 30, 2004 and 2003


                                                                                     2004                   2003
                                                                              -------------------    -------------------
                                                                                                
                                 Assets

Current assets:
Cash                                                                        $            491,090                371,527
Accounts receivable                                                                      301,450                149,793
Resale leases, at lower of cost or market                                              1,052,292                219,677
                                                                              -------------------    -------------------

Total current assets                                                                   1,844,832                740,997

Property and equipment, net                                                              537,969                438,881
Other assets                                                                               2,230                  2,230
                                                                              -------------------    -------------------

                                                                            $          2,385,031              1,182,108
                                                                              ===================    ===================

                  Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable                                                            $            108,208                122,093
Accrued expenses                                                                          28,565                 25,207
Advances on drilling costs                                                               556,573                      -
                                                                              -------------------    -------------------

Total current liabilities                                                                693,346                147,300
                                                                              -------------------    -------------------

Asset retirement obligation                                                              158,350                      -
                                                                              -------------------    -------------------

Commitments and contingencies

Stockholders' equity:
Common stock, par value $.001 per share,
  50,000,000 shares authorized; 7,912,819 and
  7,961,618 shares issued and outstanding, respectively                                    7,912                  7,961
Additional paid-in capital                                                             2,473,256              2,495,292
Stock subscription receivable                                                           (203,659)              (231,927)
Accumulated deficit                                                                     (744,174)            (1,236,518)
                                                                              -------------------    -------------------

Total stockholders' equity                                                             1,533,335              1,034,808
                                                                              -------------------    -------------------

                                                                            $          2,385,031              1,182,108
                                                                              ===================    ===================


                 See accompanying notes to financial statements

                                       F-4







                                                                             
                                                                                            
                                     Common Stock           Additional    Stock
                                    --------------------     Paid-in      Subscription     Accumulated
                                    Shares       Amount      Capital      Receivable       Deficit           Total
                                    ---------    -------   ------------   ------------   -------------   ------------
                                    ---------    -------   ------------   ------------   -------------   ------------
                                                                                     

Balance at October 1, 2002          7,961,618    $ 7,961   $  2,495,292   $   (258,219)  $  (1,413,931)  $    831,103

Payments on stock subscription
  receivable                                -          -              -         26,292               -         26,292

Net income                                  -          -              -              -         177,413        177,413
                                    ---------     -------   ------------   ------------   -------------   ------------
                                    ---------     -------   ------------   ------------   -------------   ------------

Balance at September 30, 2003       7,961,618      7,961      2,495,292       (231,927)     (1,236,518)     1,034,808

Payments on stock subscription
  receivable                                -          -              -         28,268               -         28,268

Purchase and retirement of common
  stock                               (48,799)       (49)       (22,036)             -               -        (22,085)

Net income                                  -          -              -              -         492,344        492,344
                                    ---------    -------   ------------   ------------   -------------   ------------
                                    ---------    -------   ------------   ------------   -------------   ------------

Balance at September 30, 2004       7,912,819    $ 7,912   $  2,473,256   $   (203,659)  $    (744,174)  $  1,533,335
                                    =========    =======   ============   ============   =============   ============
                                    =========    =======   ============   ============   =============   ============


                 See accompanying notes to financial statements

                                       F-5







                               PIONEER OIL AND GAS
                            STATEMENTS OF CASH FLOWS
                     Years Ended September 30, 2004 and 2003


                                                                                           2004                 2003
                                                                                     -----------------    -----------------
                                                                                                                          
Cash flows from operating activities:
Net income                                                                         $          492,344              177,413
Adjustments to reconcile net income to net cash
  provided by operating activities:
Loss on assets sold, abandoned, and dry hole costs                                             19,984              355,459
Depreciation, depletion and amortization                                                       87,770              141,019
Accretion expense                                                                               4,609
Cumulative effect of change in accounting principle                                            81,521                    -
Employee benefit plan expense                                                                  41,772               41,396
Interest income                                                                               (13,504)             (15,104)
(Increase) decrease in:
Accounts receivable                                                                          (151,657)             (28,620)
Resale leases                                                                                (833,982)             308,131
Other assets                                                                                        -                 (230)
Increase (decrease) in:
Accounts payable                                                                              (13,885)              (6,334)
Accrued expenses                                                                                3,358               (5,745)
Advances on drilling costs                                                                    556,573                    -
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Net cash provided by operating activities                                                     274,903              967,385
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Cash flows from investing activities:
Acquisition of property and equipment                                                        (133,255)             (32,158)
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Net cash used in investing activities                                                        (133,255)             (32,158)
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Cash flow from financing activities:
Decrease in note payable                                                                            -             (654,158)
Purchase of common stock                                                                      (22,085)                   -
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Net cash used in financing activities                                                         (22,085)            (654,158)
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Net increase in cash                                                                          119,563              281,069

Cash, beginning of year                                                                       371,527               90,458
                                                                                     -----------------    -----------------
                                                                                     -----------------    -----------------

Cash, end of year                                                                  $          491,090              371,527
                                                                                     =================    =================
                                                                                     =================    =================

                 See accompanying notes to financial statements

                                       F-6


                               PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003




Note 1 - Organization and Summary of Significant Accounting Policies

Organization

The Company is incorporated under the laws of the state of Utah and is primarily
engaged in the business of acquiring,  developing, producing and selling oil and
gas properties to companies located in the continental United States.

Cash and Cash Equivalents

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  investments  with  a  maturity  of  three  months  or  less  to be  cash
equivalents.

Concentration of Credit Risk

The Company  maintains its cash in bank deposit  accounts,  which, at times, may
exceed federally  insured limits.  The Company has not experienced any losses in
such accounts.  The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.

Resale Leases

The Company  capitalizes  the costs of acquiring oil and gas leaseholds held for
resale,  including lease bonuses and any advance rentals required at the time of
assignment of the lease to the Company.  Advance  rentals paid after  assignment
are charged to expense as carrying  costs in the period  incurred.  Costs of oil
and gas leases  held for  resale  are valued at lower of cost or net  realizable
value and  included in current  assets since they could be sold within one year,
although the holding  period of individual  leases may be in excess of one year.
The cost of oil and gas leases sold is determined  on a specific  identification
basis.

Oil and Gas Producing Activities

The Company utilizes the successful efforts method of accounting for its oil and
gas  producing  activities.   Under  this  method,  all  costs  associated  with
productive  exploratory wells and productive or nonproductive  development wells
are capitalized while the costs of nonproductive exploratory wells are expensed.

                                      F-7



                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003


Note 1 - Organization and Summary of Significant Accounting Policies (continued)

Oil and Gas Producing Activities (continued)

If an exploratory well finds oil and gas reserves, but a determination that such
reserves  can be  classified  as  proved is not made  after  one year  following
completion  of  drilling,  the costs of  drilling  are  charged  to  operations.
Indirect exploratory expenditures,  including geophysical costs and annual lease
rentals are  expensed as  incurred.  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

experience of successful drillings and average holding period. 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  units-of-production  method.  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 resultant  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.

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  has  been  assessed
individually.  If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.

Property and Equipment

Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  is provided  using the  straight-line  method  over the  estimated
useful  lives of the  assets.  Expenditures  for  maintenance  and  repairs  are
expensed when incurred and  betterments are  capitalized.  When assets are sold,
retired  or  otherwise   disposed  of  the  applicable   costs  and  accumulated
depreciation,  depletion and amortization are removed from the accounts, and the
resulting gain or loss is reflected in operations.

                                       F-8

                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003



Note 1 - Organization and Summary of Significant Accounting Policies (continued)

Income Taxes

Deferred income taxes arise from temporary differences resulting from income and
expense items  reported for financial  accounting  and tax purposes in different
periods.  Deferred taxes are classified as current or non-current,  depending on
the classification of the assets and liabilities to which they relate.  Deferred
taxes  arising from  temporary  differences  that are not related to an asset or
liability are classified as current or  non-current  depending on the periods in
which the temporary  differences are expected to reverse.  Temporary differences
result  primarily from net operating  loss  carryforwards,  intangible  drilling
costs and depletion.

Earnings Per Share

The  computation  of basic  earnings  per common  share is based on the weighted
average number of shares outstanding during each year.

The  computation  of diluted  earnings per common share is based on the weighted
average  number of shares  outstanding  during  the year plus the  common  stock
equivalents  which would arise from the  exercise of stock  options and warrants
outstanding  using the treasury  stock  method and the average  market price per
share during the year.  Common stock equivalents are not included in the diluted
earnings per share calculation when their effect is antidilutive.

Stock-Based Compensation

The  Company   accounts  for  stock  options  granted  to  employees  under  the
recognition  and  measurement  principles of APB Opinion No. 25,  Accounting for
Stock  Issued to  Employees,  and related  Interpretations,  and has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been  recognized in the financial  statements,  as all options  granted
under  those plans had an  exercise  price  equal to or greater  than the market
value of the  underlying  common stock on the date of grant.  Had the  Company's
options  been  determined  based  on the  fair  value  method,  the  results  of
operations  would have  remained  unchanged  as all options were vested in prior
years.

Revenue Recognition

Revenue is recognized from oil sales at such time as the oil is delivered to the
buyer.  Revenue is  recognized  from gas sales when the gas passes  through  the
pipeline  at the  well  head.  Revenue  from  overriding  royalty  interests  is
recognized when earned.

The Company does not have any gas balancing arrangements.

                                      F-9


                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003


Note 1 - Organization and Summary of Significant Accounting Policies (continued)

Use of Estimates in the Preparation of Financial Statements

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  management to make  estimates and  assumptions
primarily related to oil and gas property  reserves and prices,  that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses  during the  reporting  period.  Actual  results  could
differ from those estimates.





Note 2 - Property and Equipment

Property and equipment consists of the following:
                                                                                           September 30,
                                                                                     2004                2003
                                                                                             
                                                             
         Oil and gas properties (successful efforts method)                  $      1,987,099          1,914,635
         Capitalized asset retirement cost                                            116,376               -
         Office furniture and equipment                                               139,360            133,321

                                                                                    2,242,835          2,047,956

         Less accumulated depreciation, depletion and
           amortization                                                            (1,704,866)        (1,609,075)

                                                                             $        537,969            438,881




                                      F-10


                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003


Note 3 - Asset Retirement Obligation

The Company has an obligation  to plug and abandon  certain oil and gas wells it
owns. Accordingly, a liability has been established equal to the obligation.

Following is a reconciliation of the aggregate  retirement  liability associated
with the Company's obligation to plug and abandon its oil and gas properties:

                                                                 2004

         Balance at beginning of year                    $          -
         Initial amount recorded for ARO                      116,376
         Cumulative effect of accounting change                37,365
         Additional obligations incurred                            -
         Revisions of estimate                                      -
         Accretion expense                                      4,609

         Balance at end of year                      $        158,350


Note 4 - Cumulative Effect of Change In Accounting Principle

The  Company  has  adopted  the  provisions  of SFAS 143  "Accounting  for Asset
Retirement  Obligations"  which requires  entities to record the fair value of a
legal liability for an asset retirement  obligation in the period in which it is
incurred.  The Company has recognized a liability  based on the present value of
the estimated  costs  related to its  obligation to plug and abandon the oil and
gas wells it owns. The Company has also  capitalized  the costs of the liability
through  increasing  the  carrying  amount  of its oil and gas  properties.  The
liability  is accreted  to its  estimated  present  value each  period,  and the
capitalized cost is amortizated over the useful life of the related asset.  Upon
settlement  of the  liability,  the Company will settle the  obligation  for its
recorded amount or incur a gain or loss upon settlement.

The effect of adopting SFAS 143 is recorded as the cumulative effect of a change
in accounting principle as follows:

         Amortization                                  $         44,156
         Accretion of asset retirement obligation                37,365

         Cumulative effect of change                   $         81,521
        
                                      F-11


                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003

Note 5 - Note Payable

The Company has a bank  revolving  line-of-credit  agreement,  which  allows the
Company to borrow a maximum amount of $750,000. This agreement bears interest at
the bank's prime rate plus 1 percent and is secured by accounts  receivable  and
producing properties. The line-of-credit matures on December 31, 2005 and had no
outstanding  balance at September  30, 2004 and 2003.  Also, as of September 30,
2004, $20,000 of the $750,000 was reserved for an outstanding letter of credit.


Note 6 - Stock Subscription Receivable

The stock subscription  receivable consists of a six percent receivable due from
the Company's  ESOP. The receivable is reduced every six months by the amount of
the  obligation  owed by the Company to the ESOP,  less  interest (see Note 12).
During the years  ended  September  30, 2004 and 2003,  the  Company  recognized
$13,504 and $15,104 of interest income related to this note.


Note 7 - Income Taxes

The  provision  for income  taxes  differs  from the amount  computed at federal
statutory rates as follows:
 
                                                       Years Ended
                                                      September 30,
                                                   2004                2003

Income tax provision at statutory rate       $  160,000              45,000
Change in valuation allowance                  (160,000)            (45,000)
                                               --------            --------
                                           $          -                   -   
                                               ========            ========

                                      F-12


                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003

Note 7 - Income Taxes (continued)

Deferred tax assets (liabilities) are comprised of the following:
 
                                                       September 30, 
                                                 2004                2003
                                               -------             ------
 Intangible drilling costs and depletion     $ 129,000             15,000
 Net operating loss carryforwards              396,000            696,000
 Asset Retirement Obligation                    31,000               -
 AMT credit carryforward                         -                  5,000
                                               -------            -------
                                               556,000            716,000
                                               -------            -------
 Valuation allowance                          (556,000)          (716,000)

                                         $          -                   -    
                                              ========           ========

A valuation  allowance has been recorded for the full amount of the deferred tax
asset because it is more likely than not that the deferred tax asset will not be
realized.

As of September 30, 2004,  the Company had net operating loss  carryforwards  of
approximately  $1,164,000.  These  carryforwards  begin to  expire  in 2012.  If
substantial  changes in the Company's  ownership  should occur there would be an
annual  limitation  of the amount of NOL  carryforward  which could be utilized.
Also, the ultimate  realization of these  carryforwards  is due, in part, on the
tax law in effect at the time and future events that cannot be determined.


Note 8 - Sales to Major Customers

The Company had sales to major  customers  during the years ended  September 30,
2004 and 2003, which exceeded ten percent of total sales as follows:

                                            September 30,
                                             2004                2003
                                           -------            -------
         Company A                   $     788,000            115,000
         Company B                         434,000            420,000
         Company C                         207,000            414,000
         Company D                           -                134,000

                                      F-13



                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003

Note 9 - Related Party Transactions

The Company  acts as the operator  for several oil and gas  properties  in which
employees,  officers and other related and  unrelated  parties have a working or
royalty interest.  At September 30, 2004 and 2003 there was $14,016 and $17,917,
respectively,  included in accounts payable due to officers as a result of these
activities.  Also at  September  30,  2004 and 2003  there was  $26,673  and $0,
respectively,  included in accounts  receivable due from officers as a result of
these  activities.  The Company also is the general  manager in certain  limited
partnerships  and the operator for certain joint ventures formed for the purpose
of oil and gas exploration and development.

The Company  leases its office space from certain  officers of the Company.  The
lease requires monthly rental payments of $2,500 plus all expenses pertaining to
the office space and expires in September  2005.  Future  minimum lease payments
for the next year are $30,000.  Rent expense for the years ended  September  30,
2004 and 2003 was approximately $30,000 each year.

The Company has a stock subscription receivable from the ESOP (see Note 6).


Note 10 - Supplemental Disclosures of Cash Flow Information

During the year ended September 30, 2004:

o The Company recorded an asset retirement  obligation and increased oil and gas
properties in the amount of $116,376.

o The  Company  transferred  property  from  Leases  for  Resale  to  Developing
Properties in the amount of $1,367.

Operations   reflect   actual   amounts  paid  for  interest  and  income  taxes
approximately as follows:

                                            September 30,
                                       2004               2003
                                     ------             -------
         Interest            $        3,000              23,000
         Income taxes                     -                   -


Note 11 - Fair Value of Financial Instruments

The Company's financial instruments consist of cash, receivables, payables and a
note payable. The carrying amount of cash, receivables and payables approximates
fair value because of the short-term  nature of these items. The carrying amount
of the note  payable  approximates  fair  value as the note  bears  interest  at
floating market interest rates.

                                      F-14


                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003

Note 12 - Stock Options

The Company has granted  stock  options to the members of the Board of Directors
and the  officers  and  employees  of the  Company  to  purchase  shares  of the
Company's  common  stock.  The  exercise  price of the options is equal to or in
excess of the fair market  value of the stock on the date of grant.  All options
were granted and vested prior to 2003.

Information related to these options at September 30, 2004 is as follows:

                       Outstanding                         Exercisable 
-------------------------------------------------    -------------------------- 
                            Weighted
                            Average
                            Remaining   Weighted                    Weighted
                            Contractual Average                     Average
Exercise      Number        Life        Exercise     Number         Exercise
Price         Outstanding  (Years)      Price        Exercisable    Price

$.20            420,000      6.9         $.20         420,000        $.20
====            =======      ===         ====         =======        ====

Employee Stock Ownership Plan

The Company has adopted a  noncontributory  employee stock ownership plan (ESOP)
covering all full-time employees who have met certain service  requirements.  It
provides for discretionary  contributions by the Company as determined  annually
by the Board of Directors, up to the maximum amount permitted under the Internal
Revenue Code. The plan has received IRS approval under Section 401(A) and 501(A)
of the Internal  Revenue Code.  Pension  expense  charged to operations  for the
years ended  September  30, 2004 and 2003 was $41,772 and $41,396  respectively.
All  outstanding  shares  held by the ESOP are  included in the  calculation  of
earnings per share.


Note 13 - Commitments and Contingencies

Limited Partnerships

The Company has an immaterial interest in a limited partnership drilling program
and  acts as the  general  partner.  As the  general  partner,  the  Company  is
contingently   liable  for  any  obligations  of  the  partnership  and  may  be
contingently  liable  for  claims  generally  incidental  to the  conduct of its
business as general  partner.  As of September 30, 2004, the Company was unaware
of any such obligations or claims arising from this partnership.


                                      F-15

                              PIONEER OIL AND GAS
                          NOTES TO FINANCIAL STATEMENTS
                           September 30, 2004 and 2003

Note 13 - Commitments and Contingencies (continued)

Employment Agreements

The Company  has entered  into  severance  pay  agreements  with  employees  and
officers of the Company who also serve as board members.  Under the terms of the
agreements,  a board member who is terminated shall receive  severance pay equal
to the amount such board  member  received in salary and bonus for the two years
prior to termination.

Litigation

The  Company  may  become or is subject to  investigations,  claims or  lawsuits
ensuing  out  of the  conduct  of  its  business,  including  those  related  to
environmental safety and health,  commercial  transactions,  etc. The Company is
currently  not aware of any such item,  which it believes  could have a material
adverse affect on its financial position.

Letter of Credit

The  Company  has  a  $20,000  letter-of-credit  related  to  its  oil  and  gas
operations.  The  letter-of-credit  was issued in connection  with the Company's
line-of-credit (see Note 5).

                                      F-16


                               PIONEER OIL AND GAS
                      SCHEDULE OF SUPPLEMENTARY INFORMATION
                            ON OIL AND GAS OPERATIONS
                           September 30, 2004 and 2003





The  information  on the  Company's  oil and gas  operations  as  shown  in this
schedule  is  based  on the  successful  efforts  method  of  accounting  and is
presented in conformity  with the  disclosure  requirements  of the Statement of
Financial  Accounting  Standards No. 69 "Disclosures about Oil and Gas Producing
Activities."





         Capitalized Costs Relating to Oil and Gas Producing Activities
                                                                                         September 30,

                                                                                     2004                2003
                                                                                               
Proved oil and gas properties and related equipment                          $      1,763,802          1,763,802
Unproved oil and gas properties                                                       223,298            150,833 

         Subtotal                                                                   1,987,099          1,914,635

Accumulated depreciation, depletion and amortization
 and valuation allowances                                                          (1,553,389)        (1,483,991)

                                                                             $        433,710            430,644




Costs  Incurred  in  Oil  and  Gas  Acquisition,   Exploration  and  Development
Activities


                                                                                           September 30,
                                                                                     2004                2003
                                                                                                 
Acquisition of properties:
        Proved                                                               $          -                   -
        Unproved                                                             $          -                   -
Exploration costs                                                            $          -                   -
Development costs                                                            $         91,081             96,272



                                      F-17



                               PIONEER OIL AND GAS
                      SCHEDULE OF SUPPLEMENTARY INFORMATION
                            ON OIL AND GAS OPERATIONS
                           September 30, 2004 and 2003




                 Results of Operations for Producing Activities

                                                                                            Years Ended
                                                                                           September 30,
                                                                                     2004                2003
                                                                                           
Oil and gas - sales                                                          $      1,805,077          1,360,985
Production costs net of reimbursements                                               (733,215)          (687,730)
Exploration costs                                                                    (208,309)          (248,753)
Depreciation, depletion and amortization
   and valuation provisions                                                           (69,397)          (136,726)

Net income before income taxes                                                        794,156            287,776

Income tax provision                                                                 (270,000)           (98,000)

Results of operations from producing activities
 (excluding corporate overhead and interest costs)                           $        524,156            189,776




                                      F-18


                               PIONEER OIL AND GAS
                      SCHEDULE OF SUPPLEMENTARY INFORMATION
                            ON OIL AND GAS OPERATIONS
                           September 30, 2004 and 2003

                    Reserve Quantity Information (Unaudited)
                    ---------------------------------------

The estimated  quantities of proved oil and gas reserves  disclosed in the table
below are based upon on appraisal  of the proved  developed  properties  by Fall
Line Energy, Inc. Such estimates are inherently  imprecise and may be subject to
substantial revisions.

All quantities shown in the table are proved developed  reserves and are located
within the United States.






                                                                            Years Ended September 30,
                                                                         2004                      2003
                                                                    Oil          Gas          Oil          Gas
                                                                  (bbls)        (mcf)       (bbls)        (mcf)
                                                                                               
Proved developed and undeveloped reserves:
  Beginning of year                                               116,486      879,320      118,572      774,733
  Revision in previous estimates                                   (9,212)     682,220       13,841       53,677
  Discoveries and extensions                                         -            -            -         214,708
  Purchase in place                                                  -            -            -           -
  Production                                                      (13,618)    (180,329)     (15,927)    (163,798)
  Sales in place                                                     -            -            -            -   

  End of year                                                      93,656    1,381,211      116,486      879,320

Proved developed reserves:
  Beginning of year                                               116,486      879,320      118,572      774,733
  End of year                                                      93,656    1,381,211      116,486      879,320




                                      F-19




                              PIONEER OIL AND GAS
                      SCHEDULE OF SUPPLEMENTARY INFORMATION
                            ON OIL AND GAS OPERATIONS
                           September 30, 2004 and 2003

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
Relating to Proved Oil and Gas Reserves (Unaudited)


 
                                                                                           Years Ended
                                                                                           September 30,
                                                                                     2004                2003
                                                                                               
Future cash inflows                                                        $       10,409,000          7,340,000
Future production and development costs                                            (2,586,000)        (1,905,000)
Future income tax expenses                                                         (2,660,000)        (1,848,000)

                                                                                    5,163,000          3,587,000
 
10% annual discount for estimated timing of cash flows                             (1,953,000)        (1,415,000)

Standardized measure of discounted future net cash flows                   $        3,210,000          2,172,000



The preceding  table sets forth the estimated  future net cash flows and related
present  value,  discounted  at a 10% annual  rate,  from the  Company's  proved
reserves of oil,  condense and gas. The estimated future net revenue is computed
by applying the year end prices of oil and gas (including price changes that are
fixed and determinable) and current costs of development production to estimated
future production  assuming  continuation of existing economic  conditions.  The
values expressed are estimates only, without actual long-term production to base
the  production  flows,  and may not  reflect  realizable  values or fair market
values of the oil and gas ultimately extracted and recovered.  The ultimate year
of realization is also subject to  accessibility  of petroleum  reserves and the
ability of the Company to market the products.

                                      F-20


                              PIONEER OIL AND GAS
                      SCHEDULE OF SUPPLEMENTARY INFORMATION
                            ON OIL AND GAS OPERATIONS
                           September 30, 2004 and 2003

                     Changes in the Standardized Measure of
                    Discounted Future Cash Flows (Unaudited)



                                                                                           Years Ended   
                                                                                           September 30,
                                                                                     2004                2003 
                                                                                               

Balance, beginning of year                                                   $      2,172,000            877,000
Sales of oil and gas produced net of production costs                                (839,000)          (539,000)
Net changes in prices and production costs                                          1,424,000         (1,186,000)
Extensions and discoveries, less related costs                                          -                876,000
Purchase and sales of minerals in place                                                 -                   -
Revisions of estimated development costs                                                -                   -
Revisions of previous quantity estimate                                               771,000            351,000
Accretion of discount                                                                 217,000             88,000
Net changes in income taxes                                                          (535,000)          (667,000)

Balance, end of year                                                         $      3,210,000          2,172,000


                                      F-21



                                                                         

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                      ____
                           --------------------------

                                   FORM 10-QSB
                           

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                          OF THE SECURITIES ACT OF 1934

                  For the quarterly period ended March 31, 2005

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
                           

                         Commission file number 0-30472

                               PIONEER OIL AND GAS
             Incorporated pursuant to the Laws of the State of Utah

                           

        Internal Revenue Service - Employer Identification No. 87-0365907

                      1206 W. South Jordan Parkway, Unit B
                          South Jordan, Utah 84095-5512

                           

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X__            No ___
                      

The total number of shares of the registrant's Common Stock, $.001 par value,
outstanding on March 31, 2005, was 7,910,802.
















                          PART I. FINANCIAL INFORMATION

           ITEM 1. FINANCIAL STATEMENTS FOR SECOND FISCAL QUARTER 2005
                          PERIOD ENDING MARCH 31, 2005





















                               PIONEER OIL AND GAS
                                  Balance Sheet
                                 March 31, 2005
                                   (unaudited)
                                                                           
       Assets
Current assets:
       Cash                                                                 $  1,002,119
       Marketable securities, available for sale                                  36,039
       Accounts receivable                                                       203,553
       Resale leases, at lower of cost or market                               2,540,349
                                                                             -----------

                  Total current assets                                         3,782,060

Property and equipment - net (successful efforts method)                         656,873
Other assets                                                                       2,230
                                                                             -----------

                                                                            $  4,441,163
                                                                             ===========

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

       Liabilities and Stockholders' Equity 

Current liabilities:
       Accounts payable                                                     $     50,492
       Accrued expenses                                                           28,781
       Income taxes payable                                                      176,000
                                                                             -----------

                  Total current liabilities                                      255,273

Deferred income tax                                                              278,000
Asset retirement obligation                                                      160,724
                                                                             -----------

                  Total Liabilities                                              693,997
                                                                             -----------

Commitments and contingencies                                                       -

Stockholders' equity:
       Common stock, par value $.001 per share, authorized
         50,000,000 shares: 7,910,802 shares issued and
         outstanding                                                               7,910
       Additional paid-in capital                                              2,470,734
       Stock subscription receivable                                           (184,570)
       Unrealized holding gain                                                    36,039
       Retained earnings                                                       1,417,053
                                                                             -----------

                  Total stockholder's equity                                   3,747,166
                                                                             -----------

                                                                            $  4,441,163
                                                                             ===========




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










                               PIONEER OIL AND GAS
                             Statement of Operations
                           Six Months Ended March 31,
                                   (unaudited)


                                                                                 2005            2004
                                                                             -----------      -----------
                                                                                              
Revenue:
       Oil and gas sales                                                    $    530,079          409,530
       Royalty Revenue                                                           498,743          338,262
       Operational reimbursements                                                  3,000            3,000
       Project and lease sales income                                          2,260,528           18,750
                                                                             -----------      -----------

                                                                               3,292,350          769,542
                                                                             -----------      -----------

Costs and expenses:
       Cost of operations                                                        381,325          322,247
       General and administrative expenses                                       198,425          180,911
       Exploration costs                                                         137,328           91,279
       Lease rentals                                                              18,430           33,960
       Depreciation, depletion and amortization                                   46,186           54,866
                                                                             -----------      -----------

                                                                                 781,694          683,263
                                                                             -----------      -----------

                  Income from operations                                       2,510,656           86,279
                                                                             -----------      -----------

Other income (expense):
       Interest expense                                                          (1,267)            -
       Other income                                                              105,838           21,506
                                                                             -----------      -----------

                  Net other income                                               104,571           21,506
                                                                             -----------      -----------

                  Income before provision
                   for income taxes                                            2,615,227          107,785
       Provision for income taxes                                                454,000            -    
                                                                             -----------      -----------

                  Net Income                                                $  2,161,227          107,785
                                                                             ===========      ===========


Earnings per share:
       Basic                                                                $        .27              .01
                                                                             ===========      ===========
       Diluted                                                              $        .26              .01
                                                                            ============      ===========

Weighted average common shares:
        Basic                                                                  7,912,000        7,950,000
                                                                             ===========      ===========
        Diluted                                                                8,259,000        7,950,000
                                                                             ===========      ===========


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






                               PIONEER OIL AND GAS
                             Statement of Operations
                          Three Months Ended March 31,
                                   (unaudited)


                                                                                 2005            2004
                                                                             -----------      -----------
                                                                                         
Revenue:
       Oil and gas sales                                                    $    226,996          205,977
       Royalty Revenue                                                           293,380          159,993
       Operational reimbursements                                                  1,500            1,500
       Project and lease sales income                                          2,260,528                - 
                                                                             -----------      -----------

                                                                               2,782,404          367,470
                                                                             -----------      -----------

Costs and expenses:
       Cost of operations                                                        238,345          140,341
       General and administrative expenses                                       111,341          101,448
       Exploration costs                                                          80,096           46,036
       Lease rentals                                                               6,013            5,193
       Depreciation, depletion and amortization                                   23,093           37,433
                                                                            ------------      -----------

                                                                                 458,888          330,451
                                                                            ------------      -----------

                  Income from operations                                       2,323,516           37,019
                                                                               ---------      -----------

Other income (expense):
       Interest expense                                                            (677)                -
       Other income                                                               21,550            8,058
                                                                            ------------      -----------

                  Net other income                                                20,873            8,058
                                                                            ------------      -----------

                  Income before provision
                   for income taxes                                            2,344,389           45,077
       Provision for income taxes                                                454,000                -    
                                                                            ------------      -----------

                  Net Income                                                $  1,890,389           45,077
                                                                               =========      ===========


Earnings per share:
       Basic                                                                $        .24              .01
                                                                            ============      ===========
       Diluted                                                              $        .23              .01
                                                                            ============      ===========

Weighted average common shares:
       Basic                                                                   7,912,000        7,938,000
                                                                            ============      ===========
       Diluted                                                                 8,281,000        7,938,000
                                                                            ============      ===========

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









                               PIONEER OIL AND GAS
                             Statement of Cash Flows
                           Six Months Ended March 31,
                                   (unaudited)

                                                                                 2005             2004
                                                                             -----------      -----------
                                                                                         
Cash flows from operating activities:
       Net income                                                           $  2,161,227          107,785
       Adjustments to reconcile net income to net cash
         provided by (used in) operating activities:
           Loss on assets sold, abandoned, and dry hold costs                    112,321                -
           Depreciation, depletion and amortization                               46,186           54,866
           Employee benefit plan expense                                          25,199           20,698
           Interest income                                                        (6,110)          (6,958)
           Deferred income taxes                                                 278,000                -
          Accretion expense                                                        2,374                -
           (Increase) decrease in:
               Accounts receivable                                                97,897           (7,003)
               Resale leases                                                  (1,488,057)        (130,568)
               Other assets                                                            -              230
           Increase (decrease) in:
               Accounts payable                                                  (57,716)         (83,954)
               Accrued expenses                                                      216            2,173
               Income taxes payable                                              176,000                -
               Advances on drilling costs                                       (556,573)               -    
                                                                            ------------      -----------

                  Net cash provided by (used in)
                  operating activities                                           790,964           42,731
                                                                            ------------      -----------

Cash flows from investing activities:
       Acquisition of property and equipment                                    (277,411)         (25,423)
                                                                            ------------      -----------

                  Net cash used in investing activities                         (277,411)         (25,423)
                                                                            ------------      -----------

Cash flow from financing activities:
       Acquisition and retirement of Common Stock                                 (2,524)         (21,314)
                                                                            ------------      -----------

                          Net cash provided by(used in) financing activities      (2,524)         (21,314)
                                                                            ------------      -----------

                  Net increase (decrease) in cash                                511,029          (89,468)

Cash, beginning of year                                                          491,090          371,527
                                                                            ------------      -----------
Cash, end of second quarter                                                 $  1,002,119          282,059
                                                                            ============      ===========




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





                               PIONEER OIL AND GAS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         Six Months Ended March 31, 2005
                                   (Unaudited)


NOTE 1 - UNAUDITED INTERIM INFORMATION

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information  and with the  instructions to Form 10-QSB and Regulation
SB.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the three and six months  ended March 31, 2005
are not necessarily  indicative of the results that may be expected for the year
ending  September  30, 2005.  For further  information,  refer to the  financial
statements  and footnotes  thereto  included in the Company's Form 10KSB for the
year ended September 30, 2004.

     (1) The unaudited financial  statements include the accounts of Pioneer Oil
     and Gas and include all adjustments  (consisting of normal recurring items)
     which are, in the opinion of  management,  necessary to present  fairly the
     financial  position as of March 31, 2005 and the results of operations  for
     the three and six months  ended  March 31, 2005 and 2004 and the cash flows
     for the six months ended March 31, 2005 and 2004. The results of operations
     for the three and six  months  ended  March  31,  2005 are not  necessarily
     indicative of the results to be expected for the entire year.

     (2) Earnings per common  share is based on the weighted  average  number of
     shares outstanding during the period.

     (3) During the six months ended March 31, 2005,  the Company  generated net
     income sufficient to utilize all of the NOL carryforwards. In addition, the
     Company recorded a provision for income taxes of $454,000, which included a
     current liability of $176,000 and a deferred liability of $278,000.

NOTE 2 - MARKETABLE SECURITIES

During  the six  months  ended  March 31,  2005,  the  Company  sold  marketable
securities with no cost basis for approximately  $78,000.  The gain on this sale
is  included  in "other  income" in the  statement  of  operations.  The Company
continues to hold approximately 144,000 shares of these securities with a market
value at March 31, 2005 of $36,039.

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

During the six months ended March 31, 2005,  the Company  recorded an unrealized
holding gain on marketable securities of $36,039.






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

                         (Period Ending March 31, 2005)
                            Unaudited financial data

The discussion and analysis  contained herein should be read in conjunction with
the  preceding  financial  statements  and  the  information  contained  in  the
Company's 10KSB.  Except for the historical  information  contained herein,  the
matters  discussed in this 10 QSB contain forward looking  statements within the
meaning of Section 27a of the  Securities  Act of 1933, as amended,  and Section
21e of the  Securities  Exchange  Act of 1934,  as  amended,  that are  based on
management's  beliefs and  assumptions,  current  expectations,  estimates,  and
projections.  Statements  that  are  not  historical  facts,  including  without
limitation  statements  which are preceded by,  followed by or include the words
"believes,"  "anticipates,"  "plans,"  "expects,"  "may,"  "should,"  or similar
expressions  are  forward-looking  statements.  Many of the  factors  that  will
determine the company's  future results are beyond the ability of the Company to
control or predict. These statements are subject to risks and uncertainties and,
therefore, actual results may differ materially. All subsequent written and oral
forward-looking statements attributable to the Company, or persons acting on its
behalf,   are  expressed   qualified  in  their  entirety  by  these  cautionary
statements.  The Company disclaims any obligation to update any  forward-looking
statements whether as a result of new information, future events or otherwise.

Important  factors  that may  include,  but are not  limited  to:  the risk of a
significant  natural  disaster,  the inability of the Company to insure  against
certain risks, fluctuations in commodity prices, the inherent limitations in the
ability to estimate oil and gas reserves,  changing government  regulations,  as
well as general  market  conditions,  competition  and pricing,  and other risks
detailed  from time to time in the  Company's  SEC reports,  copies of which are
available upon request from the Company.

   Results of Operations -

Total Revenue for the second fiscal quarter  increased 657 percent from $367,470
in fiscal 2004 to $2,782,404 in fiscal 2005. For the six-month  period  revenues
increased 328 percent from $769,542 to $3,292,350.  The increase in revenues for
both the  three-month  period and the  six-month  period were due  primarily  to
substantial  lease  sales.  The Company  sold the  remainder  of its Uinta Basin
Overpressured  Gas prospect  and the first phase of its central  Utah play.  The
company  anticipates  receiving  substantially  higher  revenues  and profits in
fiscal  2005 and early  fiscal  2006 than is normal;  these are  expected  to be
unusual and  associated  with the central  Utah play and not to be expected on a
continuing basis.

Project and lease sales income for the six-month  period  increased from $18,750
for fiscal 2004 to $2,260,528  for 2005, all of the income in fiscal 2005 coming
in the second quarter. As mentioned above this income was from the sales of some
of our Utah properties.

Total oil and gas sales (including  royalty revenue)  increased from $365,970 to
$520,376 in the second quarter and from $747,792 to $1,028,822 for the six-month
period.  These  increases  were due  primarily to increased  oil and gas prices.
Average oil prices for the quarter increased from $30.47 bbl to $42.17 bbl while
gas prices  increased  from $5.06 MCF to $6.16 MCF.  For the  six-month  period,
average  oil  prices  increased  from  $28.48 bbl to $36.45 bbl while gas prices
increased from $4.58 to $6.03.




Costs of  operations  increased  from  $140,341 to $238,345  for the quarter and
increased  from $322,247 to $381,325 for the six-month  period  primarily due to
higher payments to working interest partners due to higher product prices.

General and administrative  expenses increased from $101,448 to $111,341 for the
quarter and increased from $180,911 to $198,425 for the six-month period.

The Company's  net income for the second  quarter  (fiscal 2005) was  $1,890,389
compared to net income of $45,077 for the second fiscal  quarter  2004.  For the
six-month  period  (fiscal  2005) the  Company  posted net income of  $2,161,227
compared to a net income of $107,785 for fiscal 2004.

   Liquidity and Capital Resources

During the first six-months of fiscal 2005 cash provided by operating activities
was $790,964 and cash used in investing activities required $277,411.  Financing
activities used $2,524 in cash.

Cash used in  operating  activities  was  primarily  for the  purchase of resale
leases of $1,488,057.  Cash used in investing  activities increased from $25,423
(fiscal 2004) to $277,411 (fiscal 2005).

         ITEM 3. CONTROLS AND PROCEDURE

Within the 90 days prior to this report, we carried out an evaluation, under the
supervision and with the  participation  of management,  including our principal
financial  officer,  of the  effectiveness  of the design and  operation  of our
disclosure controls and procedures  pursuant to Exchange Act Rule 13a-14.  Based
upon that evaluation,  the principal  executive and principal  financial officer
concluded  that our  disclosure  controls and procedures are effective in timely
alerting  them to material  information  relating to the Company  required to be
included in our periodic SEC filings.  There have been no significant changes in
internal controls or in other factors that could  significantly  affect internal
controls subsequent to the date of our most recent evaluation.




                           PART II. OTHER INFORMATION

Item 1 - Legal Proceedings

          The Company  may become or is subject to  investigations,  claims,  or
          lawsuits  ensuing out of the conduct of its business,  including those
          related to environmental  safety and health,  commercial  transactions
          etc.  The Company is currently  not aware of any such items,  which it
          believes  could  have a  material  adverse  affect  on  its  financial
          position.

Item 2 - Changes in Securities

         None.

Item 3 - Defaults Upon Senior Securities

         None.

Item 4 - Submission of Matters to a Vote of Security Holders

          The Company has filed forms SC 13E3 and Pre 14A for the  intention  of
          going private in order to reduce  compliance costs associated with new
          public company rules.  The SEC is currently  reviewing  these filings.
          The Company  intends to submit some of these  matters to a vote of the
          security holders as outlined in these filings.

Item 5 - Other Information

         None.

Item 6 - Exhibits and Reports on Form 8-K

Exhibit No.                     Description

      31      Certification  of the Chief Executive  Officer and Chief Financial
          Officer  pursuant to Rule 13a-14 of the Securities and Exchange Act of
          1934,  as  amended,   as  adopted  pursuant  to  Section  302  of  the
          Sarbanes-Oxley Act of 2002.

      32      Certification  of the Chief Executive  Officer and Chief Financial
          Officer  pursuant  to 18 U.S.C.  Section  1350 as adopted  pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002.

                REPORTS ON FORM 8-K

     (b) The  registrant  filed an 8K on February 8, 2005  regarding its central
     Utah project and the results of its Yankee well;  and an 8K on February 23,
     2005  regarding  the sale of a portion of the central  Utah project and the
     remainder  of its  Uinta  Basin  Overpressured  Gas  Prospect.  No other 8K
     filings were made during the quarter  ending March 31, 2005.  However,  the
     registrant  also  filed  an  important  8K on May  5,  2005  regarding  the
     registrant   seeking  to  go  private  by  purchasing   the  stock  of  all
     shareholders  with  less  than  2000  shares.  Details  can be found in the
     registrant's SC 13E3 and Pre 14A filings.

          SIGNATURES

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

                                             Pioneer Oil and Gas


Dated:   May 13, 2005                       /s/ Don J. Colton
                                          -------------------------------
                                          President and Chief Executive Officer




Exhibit 31

                      CERTIFICATION PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

         I, Don J. Colton, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Pioneer Oil and Gas.

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

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

4. I am responsible for  establishing  and maintaining  disclosure  controls and
procedures  (as  defined  in  Exchange  Act Rules  13a-14  and  15d-14)  for the
registrant and have:

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

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

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

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

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

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


 DATE: May 13, 2005


                                            /s/ Don J. Colton
                                            -----------------------
                                            Don J. Colton, President






Exhibit 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the filing of the  Quarterly  Report of Pioneer Oil and Gas
(the  "Company")  on Form  10-QSB  for the  period  ended  March  31,  2005 (the
"Report"),  I, Don J. Colton,  Chief Executive Officer of the Company,  certify,
pursuant  to 18  U.S.C.  ss.  1350,  as  adopted  pursuant  to  ss.  906  of the
Sarbanes-Oxley Act of 2002, that:

     (i) The Report fully complies with the requirements of section 13(a) of the
     Securities Exchange Act of 1934; and

     (ii) The  information  contained  in the  Report  fairly  presents,  in all
     material respects, the financial condition and results of operations of the
     Company.


/s/ Don J. Colton
-------------------------
Don J. Colton
Chief Executive Officer
May 13, 2005