Edgar Filing: ST MARY LAND & EXPLORATION CO

Prospectus 08/28/02

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-88712

PROSPECTUS

[St. Mary Land & Exploration Company Logo]

St. Mary Land & Exploration Company

$100,000,000
5.75% Senior Convertible Notes Due 2022
and 3,846,153 Shares of Common Stock Issuable
Upon Conversion of the Notes

This prospectus relates to the offering for resale of $100,000,000
aggregate principal amount of our 5.75% Senior Convertible Notes due 2022 and
3,846,153 shares of our common stock issuable upon conversion of the notes. We
issued the notes in a private placement in March 2002 to qualified institutional
buyers under Rule 144A under the Securities Act of 1933. The selling
securityholders named in this prospectus may use this prospectus to offer and
sell their notes and/or the shares of common stock issuable upon conversion of
their notes. We will not receive any proceeds from sales of the notes or shares
of our common stock by the selling securityholders.

The notes and the shares of common stock may be offered for resale from
time to time by the selling securityholders at market prices prevailing at the
time of sale or at privately negotiated prices. The selling securityholders may
sell the notes or the shares of our common stock directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions.

Holders may convert the notes into shares of our common stock at any
time prior to maturity or their prior redemption or repurchase by us. The
conversion rate is approximately 38.4615 shares for each $1,000 principal amount
of notes, subject to adjustment. This is equivalent to a conversion price of
$26.00 per share. The notes will mature on March 15, 2022.

We will pay interest on the notes in cash on March 15 and September 15
of each year. The first interest payment will be made on September 15, 2002. The
notes bear interest at a fixed annual rate of 5.75%. We will also pay contingent
interest under certain circumstances.

We may redeem the notes at our option in whole or in part beginning on
March 20, 2007, at 100% of their principal amount plus accrued and unpaid
interest (including contingent interest) payable in cash. If a change in control
of St. Mary occurs, holders of the notes may require us to repurchase all or a
portion of their notes. Holders of the notes may also require us to repurchase
all or part of their notes on March 20, 2007, March 15, 2012 and March 15, 2017.

The notes are general unsecured obligations of St. Mary ranking on a
parity in right of payment with all our existing and future unsecured senior
indebtedness and our other general unsecured obligations, and senior in right of
payment to all our future subordinated indebtedness.

Our common stock is traded on the Nasdaq National Market under the
symbol "MARY." On August 27, 2002, the last sale price of the common stock, as
reported on the Nasdaq National Market, was $24.47 per share.

Investing in the securities offered hereby involves a high degree of
risk. See "Risk Factors" beginning on page 6.

Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is August 28, 2002.

You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. The selling securityholders are offering to sell, and
seeking offers to buy, the securities only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or any sale of the securities. In this prospectus, references to
"we," "us" and "our" refer to St. Mary Land & Exploration Company and its
subsidiaries.

TABLE OF CONTENTS

PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................6
USE OF PROCEEDS...............................................................17
DIVIDEND POLICY...............................................................17
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA.................................18
DESCRIPTION OF CREDIT FACILITY................................................21
DESCRIPTION OF NOTES..........................................................22
DESCRIPTION OF CAPITAL STOCK..................................................37
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.......................38
SELLING SECURITYHOLDERS.......................................................43
PLAN OF DISTRIBUTION..........................................................45
LEGAL MATTERS.................................................................48
INDEPENDENT PUBLIC ACCOUNTANTS................................................48
INDEPENDENT PETROLEUM ENGINEERS...............................................49
WHERE YOU CAN FIND MORE INFORMATION...........................................49
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS..............................50
GLOSSARY OF COMMON OIL AND GAS TERMS..........................................51

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission utilizing a "shelf" registration process
or continuous offering process. Under this shelf registration process, the
selling securityholders may, from time to time, sell the securities described in
this prospectus in one or more offerings. This prospectus provides you with a
general description of the securities which may be offered by the selling
securityholders. Each time a selling securityholder sells securities, the
selling security holder is required to provide you with this prospectus and, in
certain cases, a prospectus supplement containing specific information about the
selling security holder and the terms of the securities being offered. That
prospectus supplement may include additional risk factors or other special
considerations applicable to those securities. Any prospectus supplement may
also add, update, or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in that prospectus supplement.
You should read both this prospectus and any prospectus supplement together with
additional information described under "Where You Can Find More Information."

PROSPECTUS SUMMARY

This summary highlights information contained or incorporated by
reference in this prospectus. You should carefully read this entire prospectus
and the documents incorporated by reference, particularly the section entitled
"Risk Factors" beginning on page 6. When we use the terms "St. Mary," "we," "us"
or "our," we are referring to St. Mary Land & Exploration Company and its
subsidiaries, unless the context otherwise requires. The term "you" refers to a
prospective investor. We have included technical terms important to an
understanding of our business under "Glossary of Common Oil and Gas Terms."

The Company

St. Mary Land & Exploration Company is an independent energy
company engaged in the exploration, development, acquisition and production of
natural gas and crude oil. St. Mary was founded in 1908 and incorporated in
Delaware in 1915. Our operations are focused in the following five core
operating areas in the United States:

o the Mid-Continent region in western Oklahoma and northern Texas;

o the ArkLaTex region that spans northern Louisiana and portions of
eastern Texas, Arkansas and Mississippi;

o the onshore Gulf Coast and offshore Gulf of Mexico;

o the Williston Basin in eastern Montana and western North Dakota;
and

o the Permian Basin in eastern New Mexico and western Texas.

As of December 31, 2001, we had estimated proved reserves of
approximately 24 MMBbls of oil and 241 Bcf of natural gas, or a total of 383
BCFE, 86% of which were proved developed and 63% of which were natural gas, with
a PV-10 value of $364 million. For the year ended December 31, 2001, we produced
54.1 BCFE representing average daily production of 148.2 MMCFE per day. For the
six months ended June 30, 2002, we produced 27.4 BCFE representing average daily
production of 151.6 MMCFE per day.

To obtain more information about us, see "Where You Can Find More
Information."

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

Our principal offices are located at 1776 Lincoln Street, Suite 1100,
Denver, Colorado 80203, and our telephone number is (303) 861-8140.

The Offering

In March 2002, we completed a private placement of the notes offered
under this prospectus. We entered into a registration rights agreement with the
initial purchasers in the private placement under which we agreed, for the
benefit of the holders of the notes, to file a shelf registration statement with
the SEC with respect to resales of the notes and common stock issued upon the
conversion thereof. We also agreed to use our reasonable best efforts to cause
the shelf registration statement to be declared effective under the Securities
Act and to keep the shelf registration statement effective for a specified
period of time. This prospectus is a part of that shelf registration statement
and may be used from time to time by selling securityholders named in this
prospectus to sell the notes or common stock issued upon the conversion thereof.

Issuer.................................. St. Mary Land & Exploration Company

Notes Offered........................... $100 million principal amount of 5.75%
Senior Convertible Notes due 2022.

Maturity................................ March 15, 2022.

Ranking................................. The notes are general unsecured
obligations, ranking on a parity in
right of payment with all our existing
and future unsecured senior
indebtedness and our other general
unsecured obligations, and senior in
right of payment to all our future
subordinated indebtedness. The notes
are effectively subordinated to
borrowings under our bank credit
facility, which are secured
obligations. See "Description of Credit
Facility."

Interest................................ The notes bear interest at a fixed
annual rate of 5.75% to be paid in cash
every March 15 and September 15 of each
year, beginning on September 15, 2002.
Interest is computed on the basis of a
360-day year comprised of twelve 30-day
months.

Contingent Interest..................... In addition to the interest described
above under "-- Interest," we will pay
contingent interest to the holders of
the notes during any six-month period
from March 15 to September 14 and from
September 15 to March 14, as
appropriate, commencing with the
six-month period beginning September
15, 2002, if the average trading price
of the notes for the five trading days
ending on the second trading day
immediately preceding the beginning of
the relevant six-month period equals
120% or more of the principal amount of
the notes. The annual rate of
contingent interest payable in respect
of any six-month period will equal the
greater of (a) cash dividends, if any,
paid by us per share of our common
stock during that period multiplied by
the applicable conversion rate and
expressed as a percentage of the par
value of the notes and (b) a per annum
rate equal to 5.0% of our estimated per
annum borrowing rate for senior
non-convertible fixed-rate indebtedness
with a maturity date comparable to the
notes, but in no event may the rate of
contingent interest exceed a per annum
rate of 0.50%, in each case based on
the outstanding principal amount of the
notes. Contingent interest will be
computed on the basis of a 360-day year
comprised of twelve 30-day months.

Conversion Rights....................... You may convert your notes into shares
of our common stock at a conversion
rate of approximately 38.4615 shares of
common stock for each $1,000 principal
amount in notes. This is equivalent to
a conversion price of $26.00 per share.
The conversion price may be subject to
adjustment under certain circumstances.
In addition, we may from time to time
reduce the conversion price for a
period of no less than 20 days for
conversions occurring within that
period if we determine that such a
reduction would be in our best
interest. The notes will be convertible
at any time before the close of
business on the maturity date, unless
we have previously redeemed or
repurchased the notes. You may convert
your notes called for redemption or
submitted for repurchase up to and
including the close of business on the
second day immediately preceding the
date fixed for redemption or
repurchase, as the case may be.

Sinking Fund............................ None.

Optional Redemption..................... We may redeem some or all of the notes
at any time on or after March 20, 2007
at a redemption price of 100% of their
principal amount plus accrued and
unpaid interest (including contingent
interest) payable in cash.

Repurchase at Option of Noteholders..... You may require us to repurchase all or
part of your notes not previously
redeemed, repurchased or converted on
March 20, 2007, March 15, 2012 and
March 15, 2017, for a repurchase price
of 100% of their principal amount plus
accrued and unpaid interest (including
contingent interest). We may pay the
repurchase price:
o on March 20, 2007, in cash, in
shares of our common stock, or in
any combination of cash and shares
of our common stock, with the
shares of common stock to be
valued at a discount to the market
price at the time of repurchase;
and

o on March 15, 2012 and March 15,
2017, in cash only.

Change in Control....................... Upon the occurrence of a change in
control, as described in this
prospectus, and before the maturity or
redemption of the notes, you will have
the right to require us to repurchase
all or part of your notes at a price
equal to 100% of the principal amount
of the notes being repurchased, plus
accrued and unpaid interest (including
contingent interest) payable in cash.

Trading................................. We do not intend to apply for listing
or quotation of the notes. Although
the notes issued in the initial private
placement are eligible for trading in
the PORTAL market, notes sold using
this prospectus will no longer be
eligible for trading in the PORTAL
market. We have been informed by the
initial purchasers of the notes that
they intend to make a market in the
notes. The initial purchasers are not
obligated to do so, and they may cease
their market-making at any time without
notice.

Use of Proceeds......................... We will not receive any of the proceeds
from the sale by any selling
securityholder of the notes or the
common stock offered under this
prospectus.

Nasdaq National Market Symbol for
Common Stock............................ MARY

Taxation................................ By purchasing the notes, you agree, for
United States federal income tax
purposes, to treat the notes as
"contingent payment debt instruments"
and to be bound by our application of
the Treasury regulations that govern
contingent payment debt instruments,
including our determination that the
rate at which interest will be deemed
to accrue for federal income tax
purposes will be 10.00%, which is
comparable to the rate at which we
would borrow on a noncontingent,
nonconvertible borrowing. You should be
aware that, even if we do not pay any
contingent interest on the notes, you
will be required to include in your
gross income for United States federal
income tax purposes an amount of
interest significantly in excess of
regular cash interest regardless of
whether you use the cash or accrual
method of tax accounting. In addition,
you will recognize ordinary income upon
a conversion of a note into our common
stock equal to the amount, if any, by
which the value of the common stock
received on the conversion exceeds the
sum of the original purchase price of
your note and accrued but unpaid
interest. However, the proper United
States federal income tax treatment of
a holder of a note is uncertain in
various respects. If the agreed upon
treatment were successfully challenged
by the IRS, it might be determined
that, among other differences, you
should have accrued interest income at
a lower rate, should not have .
recognized income or gain upon the
conversion, and should not have
recognized ordinary income upon a
taxable disposition of a note. You are
strongly urged to consult your own tax
advisors with respect to the United
States federal, state, local and
foreign tax consequences of purchasing,
owning and disposing of the notes and
shares of common stock. See "Certain
United States Federal Income Tax
Considerations."

Risk Factors

An investment in the notes or shares of our common stock involves
significant risks. You should carefully consider all the information in this
prospectus. In particular, you should evaluate the specific risk factors set
forth under "Risk Factors" beginning on page 6.

Ratio of Earnings to Fixed Charges (unaudited)

The following table shows our unaudited ratio of earnings to fixed
charges for the periods shown. The ratio of earnings to fixed charges has been
computed by dividing earnings available for fixed charges (earnings from
continuing operations before income taxes) by fixed charges (interest expense
plus capitalized interest). Interest expense includes the portion of operating
rental expense that we believe is representative of the interest component of
rental expense.

Six Months Ended
June 30, Years Ended December 31,
------------------ ------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------ ------ ------ ------ ------
11.3 144.4 69.4 86.1 0.6 (6.7) 27.6

Earnings in 1999 and 1998 were inadequate to cover fixed charges, with
a deficiency of $0.6 million and $14.3 million, respectively. Our unaudited pro
forma ratio of earnings to fixed charges, which gives effect to our use of
proceeds from the issuance in March 2002 of $100 million total principal amount
of our 5.75% senior convertible notes due 2022 to repay outstanding debt under
our revolving credit facility and a five-year fixed rate-to-floating rate
interest swap entered into with respect to $50 million of the notes, would be
9.2 for the six months ended June 30, 2002 and 13.8 for the year ended December
31, 2001. The floating interest rate under the swap for each applicable
six-month period will be the London interbank offered rate plus 0.36%. For the
initial six-month calculation period this rate was 2.69%.

RISK FACTORS

An investment in the notes or shares of our common stock involves
significant risks. In addition to reviewing other information in this
prospectus, you should carefully consider the following factors before deciding
to purchase the notes or shares of our common stock.

Risks Related to Our Business

Oil and natural gas prices are volatile, and an extended decline in prices would
hurt our profitability and financial condition.

Our revenues, operating results, profitability, future rate of growth
and the carrying value of our oil and gas properties depend heavily on
prevailing market prices for oil and gas. We expect the markets for oil and gas
to continue to be volatile. Any substantial or extended decline in the price of
oil or gas would have a material adverse effect on our financial condition and
results of operations. It could reduce our cash flow and borrowing capacity, as
well as the value and the amount of our oil and gas reserves. Lower prices may
also reduce the amount of oil and gas that we can economically produce.

Historically, the markets for oil and gas have been volatile, and they
are likely to continue to be volatile. Wide fluctuations in oil and gas prices
may result from relatively minor changes in the supply of and demand for oil and
gas, market uncertainty and other factors that are beyond our control,
including:

o worldwide and domestic supplies of oil and natural gas;

o the ability of the members of the Organization of Petroleum
Exporting Countries to agree to and maintain oil price and
production controls;

o political instability or armed conflict in oil or gas producing
regions;

o the price and level of foreign imports;

o worldwide economic conditions;

o marketability of production;

o the level of consumer demand;

o the price, availability and acceptance of alternative fuels;

o the availability of pipeline capacity;

o weather conditions; and

o actions of federal, state, local and foreign authorities.

These external factors and the volatile nature of the energy markets make it
difficult to estimate future prices of oil and natural gas. Declines in oil and
gas prices would reduce our revenue and could also reduce the amount of oil and
gas that we can produce economically and, as a result, could have a material
adverse effect on our financial condition, results of operations and reserves.
Further, oil and gas prices do not necessarily move in tandem. Because
approximately 63% of our proved reserves were natural gas reserves as of
December 31, 2001, we are more susceptible to changes in natural gas prices.

A material portion of our production, revenues and cash flows are derived from
one field.

Production from the Judge Digby Field accounted for approximately 16%
of our total oil and gas production volumes during 2001. If the level of
production from this field substantially declines other than through normal
depletion over the expected reserve life, it could have a material adverse
impact on our overall production levels and our revenues.

Our future success depends on our ability to replace reserves that we produce.

Our future success depends on our ability to find, develop and acquire
oil and gas reserves that are economically recoverable. As of December 31, 2001,
our proved reserves would last approximately 7.1 years if produced constantly at
the 2001 rate of production. As a result, we must locate and develop or acquire
new oil and gas reserves to replace those being depleted by production. We must
do this even during periods of low oil and gas prices. Without successful
exploration or acquisition activities, our reserves, production and revenues
will decline rapidly. In addition, approximately 14% of our total estimated
proved reserves at December 31, 2001 were undeveloped. By their nature,
undeveloped reserves are less certain. Recovery of such reserves will require
significant capital expenditures and successful drilling operations. We cannot
assure you that we will be able to find and develop or acquire additional
reserves at an acceptable cost.

Our producing property acquisitions carry significant risks.

Our recent growth is due in part to, and our growth strategy relies in
part on, acquisitions of producing properties and exploration and production
companies. Successful acquisitions require an assessment of a number of factors
beyond our control. These factors include recoverable reserves, future oil and
gas prices, operating costs and potential environmental and other liabilities.
These assessments are inexact and their accuracy is inherently uncertain. In
connection with these assessments, we perform a review of the subject properties
that we believe is generally consistent with industry practices. However, such a
review will not reveal all existing or potential problems. In addition, our
review may not permit us to become sufficiently familiar with the properties to
fully assess their deficiencies and capabilities. We do not inspect every well.
Even when we do inspect a well, we may not always discover structural,
subsurface or environmental problems that may exist or arise.

In connection with our acquisitions, we are generally not entitled to
contractual indemnification for preclosing liabilities, including environmental
liabilities. Normally, we acquire interests in properties on an "as is" basis
with limited remedies for breaches of representations and warranties. In
addition, competition for producing oil and gas properties is intense and many
of our competitors have financial and other resources substantially greater than
those available to us. Therefore, we cannot assure you that we will be able to
acquire oil and gas properties that contain economically recoverable reserves or
that we will acquire such properties at acceptable prices.

Additionally, significant acquisitions can change the nature of our
operations and business depending upon the character of the acquired properties,
which may have substantially different operating and geological characteristics
or be in different geographic locations than our existing properties. While it
is our current intention to continue to concentrate on acquiring properties with
development, exploitation and exploration potential located in our five core
operating areas, we cannot assure you that in the future we will not decide to
pursue acquisitions or properties located in other geographic regions. To the
extent that such acquired properties are substantially different than our
existing properties, our ability to efficiently realize the economic benefits of
such transactions may be limited.

We may not be able to successfully integrate future property or corporate
acquisitions.

We seek to make selective niche acquisitions of oil and gas properties
and we will pursue corporate acquisitions that we believe will be accretive.
However, integrating acquired properties and businesses involves a number of
special risks. These risks include the possibility that management may be
distracted from normal business concerns by the need to integrate operations and
systems and in retaining and assimilating additional employees. Any of these or
other similar risks could lead to potential adverse short-term or long-term
effects on our operating results. We cannot assure you that we will be able to
obtain adequate funds for future property or corporate acquisitions,

successfully integrate our future property or corporate acquisitions or that we
will realize any of the anticipated benefits of the acquisitions.

Substantial capital is required to replace and grow reserves.

We make, and will continue to make, substantial expenditures to find,
acquire, develop and produce oil and natural gas reserves. Our capital
expenditures for oil and gas properties were $55.1 million for the six months
ended June 30, 2002, $182.9 million for 2001 and $125.2 million for 2000. We
have budgeted total capital expenditures of $164 million in 2002. With the net
proceeds from our issuance of the notes in March 2002, cash provided by
operating activities and borrowings under our credit facility, we believe we
will have sufficient cash to fund budgeted capital expenditures in 2002. If
additional development or attractive acquisition opportunities arise, we may
consider other forms of financing, including the public offering or private
placement of equity or debt securities. However, if oil and gas prices decrease
or we encounter operating difficulties that result in our cash flow from
operations being less than expected, we may have to reduce the capital we can
spend in future years, unless we raise additional funds through debt or equity
financing. We currently do not have any sources of additional financing other
than our credit facility. We cannot assure you that debt or equity financing,
cash generated by operations or borrowing capacity will be available to us on
acceptable terms to meet these requirements.

Future cash flows and the availability of financing will be subject to
a number of variables, such as:

o our success in locating and producing new reserves;

o the level of production from existing wells; and

o prices of oil and natural gas.

Issuing equity securities to satisfy our financing requirements could
cause substantial dilution to existing stockholders. Additional debt financing
could lead to:

o a substantial portion of our operating cash flow being dedicated
to the payment of principal and interest;

o us being more vulnerable to competitive pressures and economic
downturns; and

o restrictions on our operations.

If our revenues were to decrease due to lower oil and natural gas
prices, decreased production or other reasons, and if we could not obtain
capital through our credit facility or otherwise, our ability to execute our
development plans, replace our reserves or maintain production levels could be
greatly limited.

We may not be able to maintain a bank credit facility borrowing base that
adequately meets our anticipated financing needs.

We cannot assure you that the banks will agree to a borrowing base in
future redeterminations that is adequate for our anticipated financing needs.

If oil and gas prices decrease or exploration efforts are unsuccessful, we may
be required to take additional writedowns.

There is a risk that we will be required to write down the carrying
value of our oil and gas properties. This could occur when oil and gas prices
are low or if we have substantial downward adjustments to our estimated proved
reserves, increases in our estimates of development costs or deterioration in
our exploration results.

We follow the successful efforts accounting method. All property
acquisition costs and costs of exploratory and development wells are capitalized
when incurred, pending the determination of whether proved reserves have been
discovered. If proved reserves are not discovered with an exploratory well, the
costs of drilling the well are expensed. All geological and geophysical costs on
exploratory prospects are expensed as incurred. The capitalized costs of our oil
and gas properties, on a field-by-field basis, may not exceed the estimated
future net cash flows of that field. If capitalized costs exceed future net
revenues we write down the costs of each such field to our estimate of fair
market value. Unproved properties are evaluated at the lower of cost or fair
market value. This type of charge will not affect our cash flow from operating
activities, but it will reduce the book value of our stockholders' equity. We
review the carrying value of our properties quarterly, based on prices in effect
as of the end of each quarter or as of the time of reporting our results. Once
incurred, a writedown of oil and gas properties is not reversible at a later
date even if oil or gas prices increase. St. Mary incurred impairment and
abandonment charges on proved and unproved properties of $4.7 million, $6.3
million and $10.6 million in 2001, 2000 and 1999, respectively. St. Mary
incurred impairment and abandonment charges on proved and unproved properties of
$1.3 million in the six months ended June 30, 2002.

Information concerning our reserves and future net revenue estimates is
uncertain.

There are numerous uncertainties inherent in estimating quantities of
proved oil and natural gas reserves and their values, including many factors
beyond our control. Estimates of proved undeveloped reserves, which comprise a
significant portion of our reserves, are by their nature uncertain. The reserve
data included and incorporated by reference in this prospectus is estimated.
Although we believe these estimates are reasonable, actual production, revenues
and reserve expenditures will likely vary from estimates, and these variances
may be material.

Estimates of oil and natural gas reserves, by necessity, are
projections based on geologic and engineering data, and there are uncertainties
inherent in the interpretation of such data as well as the projection of future
rates of production and the timing of development expenditures. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and natural gas that are difficult to measure. The accuracy of any reserve
estimate is a function of the quality of available data, engineering and
geological interpretation and judgment. Estimates of economically recoverable
oil and natural gas reserves and future net cash flows necessarily depend upon a
number of variable factors and assumptions, such as historical production from
the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions governing future
oil and natural gas prices, future operating costs, severance and excise taxes,
development costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows may vary substantially.
Any significant variance in the assumptions could materially affect the
estimated quantity and value of the reserves. Actual production, revenues and
expenditures with respect to our reserves will likely vary from estimates, and
such variances may be material.

In addition, you should not construe PV-10 value as the current market
value of the estimated oil and natural gas reserves attributable to our
properties. We have based the PV-10 value on prices and costs as of the date of
the estimate, in accordance with applicable regulations, whereas actual future
prices and costs may be materially higher or lower. For example, values of our
reserves at December 31, 2001 were estimated starting with a calculated weighted
average sales price of $19.84 per barrel of oil (NYMEX) and $2.65 per MMBtu of
gas (Gulf Coast spot price), then adjusted for quality and basis differentials.
During 2001, our realized gas prices were as high as $7.86 per Mcf and as low as
$2.21 per Mcf. Many factors will affect actual future net cash flows, including:

o the amount and timing of actual production;

o supply and demand for oil and natural gas;

o curtailments or increases in consumption by natural gas
purchasers; and

o changes in governmental regulations or taxation.

The timing of the production of oil and natural gas properties and of
the related expenses affect the timing of actual future net cash flows from
proved reserves and, thus, their actual present value. In addition, the 10%
discount factor, which we are required to use to calculate PV-10 value for
reporting purposes, is not necessarily the most appropriate discount factor
given actual interest rates and risks to which our business or the oil and
natural gas industry in general are subject. As a result, our actual future net
cash flows could be materially different from the estimates included in this
prospectus.

Our industry is highly competitive.

Major oil companies, independent producers, and institutional and
individual investors are actively seeking oil and gas properties throughout the
world, along with the equipment, labor and materials required to operate
properties. Many of our competitors have financial and technological resources
vastly exceeding those available to us. Many oil and gas properties are sold in
a competitive bidding process in which we may lack technological information or
expertise available to other bidders. We cannot be sure that we will be
successful in acquiring and developing profitable properties in the face of this
competition.

Exploration and development drilling may not result in commercially productive
reserves.

Oil and gas drilling and production activities are subject to numerous
risks, including the risk that no commercially productive oil or natural gas
will be found. The cost of drilling and completing wells is often uncertain, and
oil and gas drilling and production activities may be shortened, delayed or
canceled as a result of a variety of factors, many of which are beyond our
control. These factors include:

o unexpected drilling conditions;

o pressure or irregularities in formations;

o equipment failures or accidents;

o adverse weather conditions;

o shortages in experienced labor;

o compliance with governmental requirements; and

o shortages or delays in the availability of drilling rigs and the
delivery of equipment.

The prevailing prices of oil and gas also affect the cost of and the
demand for drilling rigs, production equipment and related services.

We cannot assure you that the wells we drill will be productive or that
we will recover all or any portion of our investment in such wells. The seismic
data and other technologies we use do not allow us to know conclusively prior to
drilling a well that oil or gas is present or may be produced economically. The
cost of drilling, completing and operating a well is often uncertain, and cost
factors can adversely affect the economics of a project. Drilling activities can
result in dry wells or wells that are productive but do not produce sufficient
net revenues after operating and other costs to cover initial drilling costs.

Our future drilling activities may not be successful, nor can we be
sure that our overall drilling success rate or our drilling success rate for
activity within a particular area will not decline. Unsuccessful drilling
activities could have a material adverse effect on our results of operations and
financial condition. Also, we may not be able to obtain any options or lease
rights in potential drilling locations that we identify. Although we have
identified numerous potential drilling locations, we cannot be sure that we will
ever drill them or that we will produce oil or natural gas from them or any
other potential drilling locations.

Our business is subject to operating hazards that could result in substantial
losses.

Oil and gas operations are subject to many risks, including well
blowouts, craterings, explosions, uncontrollable flows of oil, natural gas or
well fluids, fires, formations with abnormal pressures, pipeline ruptures or
spills, pollution, releases of toxic gas and other environmental hazards and
risks. If any of these hazards occurs, we could sustain substantial losses as a
result of:

o injury or loss of life;

o severe damage to or destruction of property, natural resources and
equipment;

o pollution or other environmental damage;

o clean-up responsibilities;

o regulatory investigations and penalties; and/or

o suspension of operations.

In addition, we may be liable for environmental damage caused by
previous owners of property we own or lease. As a result, we may face
substantial liabilities to third parties or governmental entities, which could
reduce or eliminate funds available for exploration, development or acquisitions
or cause us to incur losses. An event that is not fully covered by insurance
could have a material adverse effect on our financial condition and results of
operations.

We maintain insurance against some, but not all, of these potential
risks and losses. We may elect not to obtain insurance if we believe that the
cost of available insurance is excessive relative to the risks presented. In
addition, pollution and environmental risks generally are not fully insurable.
If a significant accident or other event occurs and is not fully covered by
insurance, it could adversely affect us.

Other independent oil and gas companies' limited access to capital may change
our exploration and development plans.

Many independent oil and gas companies have limited access to the
capital necessary to finance their activities. As a result, some of the other
working interest owners of our wells may be unwilling or unable to pay their
share of the costs of projects as they become due. These problems could cause us
to change, suspend or terminate our drilling and development plans with respect
to the affected project.

Hedging transactions may limit our potential gains and involve other risks.

To manage our exposure to price risks in the marketing of our oil and
natural gas, we enter into commodity price risk management arrangements from
time to time with respect to a portion of our current or future production.
While intended to reduce the effects of volatile oil and natural gas prices,
these transactions may limit our potential gains if oil or natural gas prices
were to rise substantially over the price established by the hedge. In addition,
such transactions may expose us to the risk of financial loss in certain
circumstances, including instances in which:

o our production is less than expected;

o the counterparties to our futures contracts fail to perform under
the contracts; or

o a sudden, unexpected event materially impacts oil or natural gas
prices.

The terms of our hedging agreements may also require that we furnish
cash collateral, letters of credit or other forms of performance assurance in
the event that mark-to-market calculations result in settlement obligations by
us to the counterparties, which would encumber our liquidity and capital
resources.

Our industry is heavily regulated.

Federal, state and local authorities extensively regulate the oil and
gas industry. Legislation and regulations affecting the industry are under
constant review for amendment or expansion, raising the possibility of changes
that may affect, among other things, the pricing or marketing of oil and gas
production. Noncompliance with statutes and regulations may lead to substantial
penalties, and the overall regulatory burden on the industry increases the cost
of doing business and, in turn, decreases profitability. State and local
authorities regulate various aspects of oil and gas drilling and production
activities, including the drilling of wells (through permit and bonding
requirements), the spacing of wells, the unitization or pooling of oil and gas
properties, environmental matters, safety standards, the sharing of markets,
production limitations, plugging and abandonment, and restoration. Federal
authorities regulate many of these same activities for our drilling and
production operations in federal offshore waters. To cover the various
obligations of leaseholders in federal waters, federal authorities generally
require that leaseholders have substantial net worth or post bonds or other
acceptable assurances that such obligations will be met. The cost of these bonds
or other surety can be substantial, and we cannot assure you that we will be
able to obtain bonds or other surety in all cases. Under some circumstances,
federal authorities may require any of our operations on federal leases be
suspended or terminated. Any such suspension or termination could materially
adversely affect our financial condition and results of operations.

We must comply with complex environmental regulations.

Our operations are subject to complex and constantly changing
environmental laws and regulations adopted by federal, state and local
governmental authorities where we are engaged in exploration or production
operations. New laws or regulations, or changes to current requirements, could
have a material adverse effect on our business. We will continue to be subject
to uncertainty associated with new regulatory interpretations and inconsistent
interpretations between state and federal agencies. We could face significant
liabilities to the government and third parties for discharges of oil, natural
gas or other pollutants into the air, soil or water, and we could have to spend
substantial amounts on investigations, litigation and remediation. We cannot be
sure that existing environmental laws or regulations, as currently interpreted
or enforced, or as they may be interpreted, enforced or altered in the future,
will not materially adversely affect our results of operations and financial
condition. As a result, we may face material indemnity claims with respect to
properties we own or have owned.

Our business depends on transportation facilities owned by others.

The marketability of our oil and gas production depends in part on the
availability, proximity and capacity of pipeline systems owned by third parties.
The unavailability of or lack of available capacity on these systems and
facilities could result in the shut-in of producing wells or the delay or
discontinuance of development plans for properties. Although we have some
contractual control over the transportation of our product, material changes in
these business relationships could materially affect our operations. Federal and
state regulation of oil and gas production and transportation, tax and energy
policies, changes in supply and demand, pipeline pressures, damage to or
destruction of pipelines and general economic conditions could adversely affect
our ability to produce, gather and transport oil and natural gas.

We depend on key personnel.

Our success will continue to depend on the continued services of our
executive officers and a limited number of other senior management and technical
personnel with extensive experience and expertise in evaluating and analyzing
producing oil and gas properties and drilling prospects, maximizing production
from oil and gas properties and marketing oil and gas production. Loss of the
services of any of these people could have a material adverse effect on our
operations. We currently do not have employment agreements with our executive
officers other than Mark Hellerstein, our Chief Executive Officer. We do not
carry any key person life insurance policies.

Ownership of working interests, royalty interests and other interests by some of
our officers and a director may create conflicts of interest.

As a result of their prior employment with another company with which
St. Mary engaged in a number of transactions, Ronald D. Boone, the Executive
Vice President and Chief Operating Officer and a director of St. Mary, and two
other vice presidents of St. Mary own working interests and royalty interests in
many of St. Mary's properties, which were earned as part of the prior employer's
employee benefit programs. Those persons have no royalty participation in any
new St. Mary properties.

Mr. Boone also owns 50% of Princeton Resources Ltd. and has a 33%
interest in Baron Oil Corporation, entities that manage the oil and gas working
and royalty interests which he acquired as a result of his prior employment.
Although Mr. Boone does not manage these corporations, he may participate in any
investment decisions made by them.

In July 2000, St. Mary made an interest-free loan of $200,000 to Robert
T. Hanley at the time he was appointed Vice President - Business Development of
St. Mary. The loan was made to enable Mr. Hanley to purchase a residence in
Denver, Colorado in connection with St. Mary's relocation of Mr. Hanley to
Denver from Billings, Montana, where housing costs are substantially lower. Mr.
Hanley was previously Chief Financial Officer of Nance Petroleum Corporation, a
wholly owned subsidiary that St. Mary acquired in June 1999, which has its
principal offices in Billings.

The loan is secured by a deed of trust on the residence that Mr. Hanley
purchased in Denver. The loan is due and payable in full upon the earlier of
thirty days after a termination of employment or July 15, 2005. However, in
August 2002 Mr. Hanley informed St. Mary that he will repay the loan before it
is otherwise due, upon the completion of pending refinancing for the residence.

As a result of these transactions and relationships, conflicts of
interest may exist between these persons and us. Although these persons owe
fiduciary duties to our stockholders and to us, we cannot assure you that
conflicts of interest will always be resolved in our favor.

Risks Related to the Notes

We could incur substantial additional debt, which could negatively impact our
financial condition, results of operations and business prospects and prevent us
from fulfilling our obligations under the notes.

As of June 30, 2002, we had approximately $100 million in outstanding
indebtedness, which reflects the $100 million incurred in connection with the
issuance of the notes in March 2002. Our level of indebtedness could have
important consequences on our operations, including:

o making it more difficult for us to satisfy our obligations under
the notes or other debt and, if we fail to comply with the
requirements of any of our debt, possibly resulting in an event of
default;

o requiring us to dedicate a substantial portion of our cash flow
from operations to required payments on debt, thereby reducing the
availability of cash flow for working capital, capital
expenditures and other general business activities;

o limiting our ability to obtain additional financing in the future
for working capital, capital expenditures and other general
business activities;

o limiting our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;

o detracting from our ability to withstand successfully a downturn
in our business or the economy generally; and

o placing us at a competitive disadvantage against other less
leveraged competitors.

The occurrence of any one of these events could have a material adverse effect
on our business, financial condition, results of operations, prospects and
ability to satisfy our obligations under the notes.

The indenture under which the notes have been issued does not limit our
ability to incur additional debt. We may therefore incur additional debt,
including secured indebtedness under our bank credit facility or otherwise, in
order to make future acquisitions or to develop our properties. A higher level
of indebtedness increases the risk that we may default on our debt obligations.
We cannot assure you that we will be able to generate sufficient cash flow to
pay the interest on our debt or that future working capital, borrowings or
equity financing will be available to pay or refinance such debt.

In addition, our bank borrowing base is subject to periodic
redeterminations. We could be forced to repay a portion of our bank borrowings
due to redeterminations of our borrowing base. We cannot assure you that we will
have sufficient funds to make such repayments. If we do not have sufficient
funds and are otherwise unable to negotiate renewals of our borrowing or arrange
new financing, we may have to sell significant assets. Any such sale could have
a material adverse effect on our business and financial results.

Our obligations to the banks under the bank credit facility are secured whereas
the notes are unsecured.

Borrowings under our long-term revolving credit facility are secured by
a pledge of collateral in favor of the banks and guarantees by St. Mary's
subsidiaries. Such collateral consists primarily of security interests in the
oil and gas properties of St. Mary and its subsidiaries and in the capital stock
of St. Mary's subsidiaries. Accordingly, indebtedness to the banks under the
facility is secured and senior to the notes, which are unsecured.

We may not have sufficient cash to repurchase the notes upon a change in control
or at the option of the noteholders.

Upon the occurrence of certain change in control events and on the
March 20, 2007, March 15, 2012 or March 15, 2017 repurchase dates, holders of
the notes may require us to repurchase all or any part of their notes. We may
not have sufficient funds at such time to make the required repurchases of the
notes. Additionally, certain events that would constitute a "change in control"
(as defined in the indenture) would constitute an event of default under our
credit facility that would, if it should occur, permit the lenders to accelerate
the debt outstanding under our credit facility and that, in turn, would cause an
event of default under the indenture.

The source of funds for any required repurchase of the notes for cash
will be our available cash or cash generated from oil and gas operations or
other sources, including borrowings, sales of assets, sales of equity or funds
provided by a new controlling entity. We cannot assure you, however, that
sufficient funds would be available at such time to make any required cash
repurchases of the notes tendered and to make any required payments of debt
under our credit facility. Furthermore, using available cash to fund a required
repurchase may impair our ability to obtain additional financing in the future.
Any future credit agreements or other agreements relating to debt to which we
may become a party will most likely contain similar restrictions and provisions.

You should consider the negative United States federal income tax consequences
of owning the notes.

We and each holder agree in the indenture, for United States federal
income tax purposes, to treat the notes as "contingent payment debt instruments"
subject to the Treasury regulations that govern contingent payment debt
instruments. As a result, a holder will be required to include amounts in
income, as original issue discount, in advance of cash such holder receives on a
note, and to accrue interest on a constant yield to maturity basis at a rate
comparable to the rate at which we would borrow in a noncontingent,
nonconvertible borrowing (10.00%), even though the notes will have a
significantly lower yield to maturity. Therefore, a holder will recognize
taxable income significantly in excess of cash received while the notes are
outstanding. In addition, a holder will recognize ordinary income upon a sale,
exchange, conversion or redemption of the notes at a gain. In computing such
gain, the amount realized by a holder will include, in the case of a conversion,
the amount of cash and the fair market value of shares of common stock received.
Holders are urged to consult their own tax advisors as to the United States
federal, state and other tax consequences of acquiring, owning and disposing of
the notes and shares of common stock issued upon conversion of the notes. See
"Certain United States Federal Income Tax Considerations."

An active trading market for the notes may not develop or be sustained, which
could limit their market price or your ability to sell them for their inherent
value.

The notes are a new issue of securities for which there currently is no
active trading market. As a result, we cannot provide any assurances that an
active trading market for the notes will develop or be sustained or that you
will be able to sell your notes. The notes may trade at a discount from their
initial issuance price. Future trading prices of the notes will depend on many
factors, including prevailing interests rates, the market for similar
securities, general economic conditions and our financial condition, performance
and prospects. Historically, the market for convertible debt has been subject to
disruptions that have caused substantial fluctuations in the prices of the
securities. Accordingly, you may be required to bear the financial risk of an
investment in the notes for an indefinite period of time.

We do not intend to apply for listing or quotation of the notes.
Although the notes issued in the initial private placement are eligible for
trading in the PORTAL market, notes sold using this prospectus will no longer be
eligible for trading in the PORTAL market. We have been informed by the initial
purchasers of the notes that they intend to make a market in the notes. The
initial purchasers are not obligated to do so, and they may cease their
market-making at any time without notice. In addition, this market-making
activity will be subject to the limitations imposed by the Securities Act of
1933 and the Securities Exchange Act of 1934 and may be limited during the
effectiveness of a registration statement relating to the notes.

The price of our common stock and therefore the price of our notes may fluctuate
significantly, which may result in losses for investors.

We expect the price of our notes to fluctuate with the price of our
common stock. The market price of our common stock has been volatile. From
January 1, 2001 to August 27, 2002, the last sale price of our common stock
reported by the Nasdaq National Market ranged from a low of $14.79 per share to
a high of $34.63 per share. We expect our stock to continue to be subject to
fluctuations as a result of a variety of factors, including factors beyond our
control. These include:

o changes in oil and natural gas prices;

o variations in quarterly drilling, recompletions, acquisitions and
operating results;

o changes in financial estimates by securities analysts;

o changes in market valuations of comparable companies;

o additions or departures of key personnel; and

o future sales of common stock.

We may fail to meet expectations of our stockholders or of analysts at
some time in the future, and our stock price and the price of our notes could
decline as a result.

Risks Related to Our Common Stock

Our certificate of incorporation and bylaws have provisions that discourage
corporate takeovers and could prevent stockholders from realizing a premium on
their investment.

Provisions of our certificate of incorporation and bylaws may have the
effect of delaying or preventing a change of control. Among other things, the
certificate of incorporation does not provide for cumulative voting in the
election of the board of directors and the bylaws impose procedural requirements
on stockholders who wish to make nominations for the election of directors or
propose other actions at stockholders' meetings. These provisions, alone or in
combination with each other and with the shareholder rights plan described
below, may discourage transactions involving actual or potential changes of
control, including transactions that otherwise could involve payment of a
premium over prevailing market prices to stockholders for their common stock.

On July 15, 1999, our board of directors adopted a shareholder rights
plan. The plan is designed to enhance the board's ability to prevent an acquirer
from depriving stockholders of the long-term value of their investment and to
protect stockholders against attempts to acquire us by means of unfair or
abusive takeover tactics. If the board of directors decides in accordance with
its fiduciary obligations that the terms of a potential acquisition do not
reflect the long-term value of St. Mary, under the plan the board of directors
could allow the holder of each outstanding share of our common stock other than
those held by the potential acquirer to purchase one additional share of our
common stock with a market value of twice the exercise price. This prospective
dilution to a potential acquirer would make the acquisition impracticable unless
the terms were improved to the satisfaction of the board of directors. However,
the existence of the plan may impede a takeover not supported by our board,
including a takeover that may be desired by a majority of our stockholders or
involving a premium over the prevailing stock price.

Our shares that are eligible for future sale may have an adverse effect on the
price of our common stock.

At June 30, 2002, we had 27,857,141 shares of common stock outstanding.
Of the shares outstanding, approximately 26,971,409 shares were freely tradeable
without substantial restriction or the requirement of future registration under
the Securities Act. In addition, as of that date, options to purchase 2,806,468
shares were outstanding, of which 1,427,241 were exercisable. These options are
exercisable at prices ranging from $9.25 to $33.3125 per share. Sales of
substantial amounts of common stock, or a perception that such sales could
occur, and the existence of options or warrants to purchase shares of common
stock at prices that may be below the then current market price of the common
stock could adversely affect the market price of the common stock and could
impair our ability to raise capital through the sale of our equity securities.

Our Chairman of the Board and his extended family may be able to control us.

Thomas E. Congdon, our Chairman of the Board, and members of his
extended family currently own approximately 18% of the outstanding shares of our
common stock. While no formal or informal arrangements exist, these family
members may be inclined to act in concert with Mr. Congdon on matters related to
control of St. Mary, including for example the election of directors or response
to an unsolicited bid to acquire St. Mary. Accordingly, Mr. Congdon and his
extended family may be able to control or influence matters presented to our
stockholders.

We may not always pay dividends on our common stock.

Although we have paid cash dividends to stockholders every year since
1940 and we expect that our practice of paying dividends will continue, the
payment of future dividends remains in the discretion of the board of directors
and will continue to depend on our earnings, capital requirements, financial
condition and other factors. In addition, the payment of dividends is subject to
covenants in our bank credit facility, including the requirement that we

maintain certain levels of stockholders' equity. The board of directors may
determine in the future to reduce the current annual dividend rate of $0.10 per
share or discontinue altogether the payment of dividends.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the notes and
the underlying common stock offered by the selling securityholders under this
prospectus. We will pay the costs for the registration of those securities,
which we estimate to be approximately $60,000.

DIVIDEND POLICY

St. Mary has paid cash dividends to stockholders every year since 1940.
Annual dividends of $0.10 per share were paid in each of the years 1998 through
2001. We expect that our practice of paying dividends on our common stock will
continue, although the payment of future dividends will continue to depend on
our earnings, capital requirements, financial condition and other factors. In
addition, the payment of dividends is subject to covenants in our bank credit
facility, including the requirement that we maintain certain levels of
stockholders' equity. Dividends are currently paid on a semi-annual basis.
Dividends paid totaled $1,391,000 in the first six months of 2002, $2,795,000 in
2001 and $2,775,000 in 2000.

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth summary consolidated financial and other
data for St. Mary as of the dates and for the periods indicated. The financial
data presented for each of the three years ended December 31, 2001 was derived
from our audited consolidated financial statements. The financial data presented
for the six month periods ended June 30, 2002 and 2001 was derived from our
unaudited consolidated financial statements and in the opinion of management
include all adjustments, consisting of normal recurring accruals, necessary to
present fairly the data for such periods. You should read the following
information in conjunction with the historical consolidated financial statements
and the notes thereto incorporated by reference in this prospectus. See "Where
You Can Find More Information." All share and per share amounts reflect the
two-for-one stock split effected in the form of a stock dividend distributed in
September 2000.

Six Months Ended
June 30, Years Ended December 31,
------------------------- ----------------------------------------
2002 2001 2001 2000 1999
---------- ---------- ---------- ---------- ----------
(unaudited)
(In thousands, except per share data)
Statement of Operations Data:
Operating revenues:
Oil and gas production................. $87,290 $123,336 $203,973 $188,407 $73,387
Other.................................. 5,511 787 3,496 7,259 1,527
-------- -------- -------- -------- --------
Total operating revenues................. 92,801 124,123 207,469 195,666 74,914
-------- -------- -------- -------- --------
Operating expenses:
Oil and gas production................. 25,561 25,493 55,000 38,461 19,574
Depletion, depreciation &
amortization........................ 26,333 24,172 51,346 40,129 22,574
Exploration............................ 11,213 10,511 19,518 9,633 11,593
Impairment of proved properties........ -- 244 820 4,449 3,982
Abandonment and impairment of
unproved properties................. 1,319 1,074 3,865 1,841 6,616
General and administrative............. 6,156 7,557 11,762 11,166 9,172
Unrealized derivative loss (gain)...... (1,975) -- 1,573 -- --
Other.................................. 3,706 379 1,673 1,437 1,802
-------- -------- -------- -------- --------
Total operating expenses................. 72,313 69,430 145,557 107,116 75,313
-------- -------- -------- -------- --------
Income (loss) from operations............ 20,488 54,693 61,912 88,550 (399)
Non-operating (expense) income......... (1,190)(1) 300 376(1) 737 75
Income tax (expense) benefit............. (6,391) (20,366) (21,829) (33,667) 406
-------- -------- -------- -------- --------
Net income (loss)........................ $12,907 (2) $ 34,627 $ 40,459(2) $ 55,620 $ 82
======== ======== ======== ======== ========
Basic net income (loss) per share........ $ 0.46 (3) $ 1.23 $ 1.45(3) $ 2.00 $ --
======== ======== ======== ======== ========
Diluted net income (loss) per share...... $ 0.46 (3) $ 1.20 $ 1.42(3) $ 1.97 $ --
======== ======== ======== ======== ========
Cash dividends per share................. $ 0.05 $ 0.05 $ 0.10 $ 0.10 $ 0.10
Basic weighted average common
shares outstanding..................... 27,805 28,185 27,973 27,781 22,198
Diluted weighted average common
shares outstanding..................... 28,347 28,826 28,555 28,271 22,329

Statement of Cash Flows Data:
Net cash provided by (used in):
Operating activities................... $ 76,070 $ 72,874 $127,492 $ 92,267 $ 40,755
Investing activities................... (64,476) (54,007) (159,075) (112,868) (22,243)
Financing activities................... 32,146 (19,241) 29,080 13,025 (12,138)

Other Financial Data:
Capital and exploration
expenditures(4)..................... $ 55,115 $ 68,501 $182,863 $125,184 $ 91,184
EBITDA(5).............................. 46,821 78,865 113,258 128,679 22,175
Cash flow(6)........................... 48,745 75,768 129,123 119,876 37,199

As of
June 30, 2002
-------------
(unaudited)
(In thousands)
Balance Sheet Data:
Cash and cash equivalents......................$ 47,856
Working capital................................ 59,980
Total assets................................... 490,797
Total long-term debt........................... 99,554
Total stockholders' equity..................... 295,625
------------

(1) Interest expense included in non-operating (expense) income for the six
months ended June 30, 2002 and the year ended December 31, 2001 was
$1,470,000 and $90,000, respectively. Our unaudited pro forma interest
expense for those periods, which gives effect to the issuance in March 2002
of $100 million total principal amount of our 5.75% senior convertible notes
due 2022, the use of proceeds from the issuance of the notes to repay
outstanding debt under our revolving credit facility, and the five-year
fixed rate-to-floating rate interest swap entered into with respect to $50
million of the notes, would be $1,900,000 and $3,081,000, respectively. The
floating interest rate under the swap for each applicable six-month period
will be the London interbank offered rate plus 0.36%. For the initial
six-month calculation period this rate was 2.69%.

(2) Our unaudited pro forma net income, which gives effect to the transactions
discussed in footnote (1) above, would be $12,619,000 for the six months
ended June 30, 2002 and $38,433,000 for the year ended December 31, 2001.

(3) Our unaudited pro forma basic and diluted net income per share, which gives
effect to the transactions discussed in footnote (1) above, would be $0.45
and $0.45 for the six months ended June 30, 2002 and $1.37 and $1.35 for the
year ended December 31, 2001.

(4) Capital and exploration expenditures includes all cash and noncash
expenditures.

(5) EBITDA is defined as earnings before interest income and expense, income
taxes, depreciation, depletion and amortization. EBITDA is a financial
measure commonly used for our industry and provides additional information
as to our ability to meet fixed charges. EBITDA should not be considered in
isolation or as a substitute for net income, cash flow provided by operating
activities or other income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Because EBITDA excludes some, but not all, items
that affect net income and may vary among companies, the EBITDA presented
above may not be comparable to similarly titled measures of other companies.

(6) Cash flow represents cash flow from operating activities prior to changes in
operating assets and liabilities.

Ratio of Earnings to Fixed Charges (unaudited)

Earnings in 1999 and 1998 were inadequate to cover fixed charges, with
a deficiency of $0.6 million and $14.3 million, respectively. Our unaudited pro
forma ratio of earnings to fixed charges, which gives effect to our use of
proceeds from the issuance in March 2002 of $100 million total principal amount
of our 5.75% Senior Convertible Notes due 2022 to repay outstanding debt under
our revolving credit facility and a fixed-to-floating interest rate hedge
entered into with respect to $50 million of the notes, would be 9.2 for the six
months ended June 30, 2002 and 13.8 for the year ended December 31, 2001. The
floating interest rate under the swap for each applicable six-month period will
be the London interbank offered rate plus 0.36%. For the initial six-month
calculation period this rate was 2.69%.

Summary Operating Data

The following table summarizes the average volumes of oil and gas
produced from properties in which St. Mary held an interest during the periods
indicated:

Six Months
Ended June 30, Years Ended December 31,
------------------------ --------------------------------------
2002 2001 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Operating Data:
Net production:
Oil (MBbls)................................ 1,378 1,203 2,434 2,398 1,383
Gas (MMcf)................................. 19,173 19,650 39,491 38,346 22,805
MMCFE...................................... 27,440 26,868 54,093 52,731 31,103
Average net daily production:
Oil (Bbls)................................. 7,612 6,647 6,667 6,551 3,790
Gas (Mcf).................................. 105,926 108,563 108,195 104,769 62,478
MCFE....................................... 151,600 148,445 148,199 144,075 85,216
Average sales price(1):
Oil (per Bbl).............................. $ 24.35 $ 24.92 $ 23.29 $ 23.53 $ 16.56
Gas (per Mcf).............................. $ 2.80 $ 4.75 $ 3.73 $ 3.44 $ 2.21
Additional per MCFE data:
Lease operating expense.................... $ 0.68 $ 0.65 $ 0.75 $ 0.48 $ 0.44
Transportation costs....................... $ 0.06 $ 0.04 $ 0.04 $ 0.04 $ 0.03
Production taxes........................... $ 0.19 $ 0.26 $ 0.23 $ 0.21 $ 0.16
General and administrative................. $ 0.22 $ 0.28 $ 0.22 $ 0.21 $ 0.29
Depreciation, depletion and
amortization........................... $ 0.96 $ 0.90 $ 0.95 $ 0.76 $ 0.73

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(1) Includes the effects of our hedging activities.

Summary Reserve Data

The following table sets forth summary information with respect to the
estimates of our proved oil and gas reserves for each of the years in the
three-year period ended December 31, 2001, as prepared by both Ryder Scott
Company, independent petroleum engineers, and us. For the periods presented,
Ryder Scott Company evaluated properties representing approximately 80% of our
total PV-10 value while we evaluated the remainder. The PV-10 values shown in
the following table are not intended to represent the current market value of
the estimated proved oil and gas reserves owned by St. Mary. Neither prices nor
costs have been escalated, but PV-10 values do include the effects of hedging
contracts. You should read the following table along with the section entitled
"Risk Factors -- Risks Related to Our Business -- Information concerning our
reserves and future net revenue estimates is uncertain."

As of December 31,
------------------------------------
2001 2000 1999
---------- ---------- ----------
Estimated Proved Reserves Data:
Oil (MBbls)......................... 23,669 20,950 18,900
Gas (MMcf).......................... 241,231 225,975 207,642
MMCFE............................... 383,247 351,673 321,042
PV-10 value (in thousands)(1)....... $ 363,795 $1,153,663 $ 351,016
Proved Developed Reserves........... 86% 87% 84%
Production Replacement.............. 166% 168% 541%
Reserve Life (years)(2)............. 7.1 6.7 10.3

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

(1) PV-10 value as of December 31, 2001 was calculated using prices in effect at
December 31, 2001 of $19.84 per barrel of oil (NYMEX) and $2.65 per MMBtu of
gas (Gulf Coast spot price). Both of these prices were then adjusted for
transportation and basis differentials and hedging. These prices were 26%
and 72% lower, respectively, than prices used to calculate PV-10 value as of
December 31, 2000.

(2) Reserve life represents the estimated proved reserves at the dates indicated
divided by actual production for the preceding 12-month period. The value as
of December 31, 1999 reflects the acquisition of King Ranch Energy in
December 1999.

DESCRIPTION OF CREDIT FACILITY

We have a long-term revolving credit facility with a bank group
consisting of Bank of America, Comerica Bank-Texas and Wells Fargo Bank West.
Under the facility, the maximum loan amount is $200 million. The amount actually
available from time to time depends on a borrowing base that the lenders
periodically redetermine based on the value of our oil and gas properties and
other assets. The stated total possible borrowing base was $160 million at June
30, 2002. However, since we pay commitment fees based on the unused portion of
the borrowing base we have limited the borrowing base which we have accepted to
correspond with our actual funding requirements. The accepted borrowing base was
$40 million at June 30, 2002. The facility has a maturity date of December 31,
2006 and includes a revolving period that matures on June 30, 2003, at which
time all outstanding borrowings convert to a term loan payable in quarterly
installments through the facility maturity date. We must comply with certain
covenants including maintenance of stockholders' equity at a specified level and
restrictions on additional indebtedness, sales of oil and gas properties,
activities outside our ordinary course of business and certain merger
transactions.

As of June 30, 2002, no balance was outstanding under this credit
agreement. Outstanding balances accrue interest at rates determined by our debt
to total capitalization ratio. In connection with the issuance of the notes in
March 2002, the credit facility was amended to provide that, during the
revolving period of the loan, loan balances will accrue interest at our option
of either (1) the higher of the federal funds rate plus 1/2% or the prime rate,
plus an additional 1/4% when our debt to total capitalization ratio is greater
than 50%, or (2) the London interbank offered rate plus (a) 1% when our debt to
total capitalization ratio is less than 30%, (b) 1 1/4% when our debt to

capitalization ratio is greater than or equal to 30% but less than 40%, (c) 1
3/8% when our debt to capitalization ratio is greater than or equal to 40% but
less than 50%, or (d) 1 5/8% when our debt to capitalization ratio is greater
than 50%. Our debt to total capitalization ratio as defined under the credit
agreement was 25.2% as of June 30, 2002. The weighted average interest rate paid
for 2001, including commitment fees paid on the unused portion of the borrowing
base, was 5.9%. The weighted average interest rate paid for the first six months
of 2002 on both the notes and borrowings under the facility was 4.2%, which
reflects the fixed rate-to-floating rate interest swap entered into with respect
to $50 million of the notes and commitment fees paid on the unused portion of
the borrowing base under the facility.

We used a portion of the net proceeds from the issuance of notes in
March 2002 to repay the $50 million in outstanding borrowings under the credit
facility at that time. Amounts repaid under the revolving loan provision of the
credit facility are available for reborrowing, subject to borrowing base
limitations, until June 30, 2003.

Borrowings under the facility are secured by a pledge of collateral in
favor of the banks and guarantees by St. Mary's subsidiaries. Such collateral
consists primarily of security interests in the oil and gas properties of St.
Mary and its subsidiaries and in the capital stock of St. Mary's subsidiaries.
Accordingly, indebtedness to the banks under the facility is secured and senior
to the notes, which are unsecured.

DESCRIPTION OF NOTES

We issued the notes under an indenture dated as of March 13, 2002
between us and Wells Fargo Bank West, N.A., as trustee. The following section
summarizes some, but not all, provisions of the indenture and the registration
rights agreement dated as of March 13, 2002 between us and Bear, Stearns &
Co. Inc., Banc of America Securities LLC, RBC Dain Rauscher Inc., A.G. Edwards
& Sons, Inc., McDonald Investments Inc. and Comerica Securities, Inc. We
urge you to read the indenture and the registration rights agreement in their
entirety because they, and not this description, define your rights as a holder
of the notes. Copies of the forms of indenture and registration rights agreement
are available to you upon request. In this section of the prospectus entitled
"Description of Notes," when we refer to "St. Mary," "we," "our," or "us," we
are referring to St. Mary Land & Exploration Company and not any of its
current or future subsidiaries.

Brief Description of the Notes

The notes:

o are limited to $100 million principal amount;

o bear interest at a rate of 5.75% per year;

o will bear contingent interest in the circumstances described under
"--Contingent Interest";

o are general unsecured obligations, ranking on a parity in right of
payment with all our existing and future senior indebtedness and
other general unsecured obligations, and senior in right of
payment with all our future subordinated indebtedness;

o are convertible into our common stock at a conversion price of
$26.00 per share, subject to adjustment as described below under
"-- Conversion of Notes";

o are redeemable at our option in whole or in part beginning on
March 20, 2007, at a repurchase price of 100% of their principal
amount plus accrued and unpaid interest (including contingent
interest) payable in cash;

o are subject to repurchase by us at your option if a change in
control occurs;

o are subject to repurchase by us at your option on March 20, 2007,
March 15, 2012 and March 15, 2017, for a repurchase price of 100%
of the principal amount of the notes plus accrued and unpaid
interest (including contingent interest), which we may pay:

o on March 20, 2007, in cash, in shares of our common stock, or
in any combination of cash and shares of our common stock
valued at a discount to the market price at the time of
purchase; and

o on March 15, 2012 and March 15, 2017, in cash only; and

o are due on March 15, 2022, unless earlier converted, redeemed by
us at our option or repurchased by us at your option.

We are not restricted from paying dividends, incurring debt, or issuing
or repurchasing our securities under the indenture. In addition, there are no
financial covenants in the indenture. You are not protected under the indenture
in the event of a highly leveraged transaction or a change in control of St.
Mary, except to the extent described under "-- Repurchase of Notes at Your
Option Upon a Change in Control."

Under the indenture, we agree, and by purchasing a beneficial interest
in the notes each holder of the notes is deemed to have agreed, among other
things, for United States federal income tax purposes, to treat the notes as
indebtedness that is subject to the regulations governing contingent payment
debt instruments, and, for purposes of those regulations, to treat the fair
market value of any stock received upon any conversion of the notes as a
contingent payment, and the discussion herein assumes that such treatment is
correct. However, the characterization of instruments such as the notes and the
application of such regulations is uncertain in several respects. See "Certain
United States Federal Income Tax Considerations -- Classification of the Notes."

We will maintain an office in New York City where the notes may be
presented for registration, transfer, exchange or conversion. This office is
currently the office of the trustee.

Interest

The notes bear interest from March 13, 2002 at the annual rate of
5.75%. We will also pay contingent interest on the notes in the circumstances
described below under "-- Contingent Interest." We will pay interest on the
notes on March 15 and September 15 of each year, beginning September 15, 2002,
subject to limited exceptions if the notes are redeemed, repurchased or
converted prior to the interest payment date. The record dates for the payment
of interest will be March 1 and September 1. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.

We will pay interest (including contingent interest) in cash on:

o the global notes to Depository Trust Company, or DTC, by wire
transfer of immediately available funds;

o any certificated notes having an aggregate principal amount of
$2,000,000 or less either by check mailed to the holders of these
notes or by wire transfer of immediately available funds; and

o any certificated notes having an aggregate principal amount of
more than $2,000,000 by wire transfer of immediately available
funds at the election of the holders of these notes.

References to interest include any additional interest payable under
the circumstances described below under "-- Registration Rights."

Contingent Interest

In addition to the interest described above under "-- Interest," we
will pay contingent interest, subject to the accrual and record date provisions
described above, to the holders of notes during any six-month period from March

15 to September 14 and from September 15 to March 14, as appropriate, commencing
with the six-month period beginning September 15, 2002, if the average trading
price, as described below, of the notes for the five trading days ending on the
second trading day immediately preceding the beginning of the relevant six-month
period equals 120% or more of the principal amount of the notes.

The "trading price" of the notes on any date of determination means the
average of the secondary market bid quotations per notes obtained by us for
$10,000,000 principal amount of the notes at approximately 3:30 p.m., New York
City time, on such determination date from three independent nationally
recognized securities dealers we select, provided that if at least three such
bids cannot reasonably be obtained by us, but two such bids are obtained, then
the average of the two bids shall be used, and if only one such bid can
reasonably be obtained by us, this one bid shall be used. If we cannot
reasonably obtain at least one bid for $10,000,000 principal amount of the notes
from a nationally recognized securities dealer or if, in our reasonable
judgment, the bid quotations are not indicative of the secondary market value of
the notes, then the trading price of the notes will equal (a) the
then-applicable conversion rate of the notes multiplied by (b) the sale price of
our common stock on such determination date.

The annual rate of contingent interest payable in respect of any
six-month period will equal the greater of (i) cash dividends, if any, paid by
us per share of our common stock during that period multiplied by the applicable
conversion rate and expressed as a percentage of the par value of the notes; or
(ii) a per annum rate equal to 5.0% of our estimated per annum borrowing rate
for senior non-convertible fixed-rate indebtedness with a maturity date
comparable to the notes, but in no event may the rate of contingent interest
exceed a per annum rate of 0.50%, in each case based on the outstanding
principal amount of the notes. Contingent interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.

Upon determination that holders of notes will be entitled to receive
contingent interest during any relevant six-month period, on or prior to the
start of the relevant six-month period, we will issue a press release and
publish information with respect to any contingent interest on our website.

We will pay contingent interest, if any, in the same manner as we will
pay interest described above under "-- Interest," and your obligations in
respect of the payment of contingent interest in connection with the conversion
of any notes will also be the same as described below under "-- Conversion of
Notes."

Conversion of Notes

General Conversion Rights

You have the right, at your option, to convert your notes into shares
of our common stock at any time prior to maturity, unless previously redeemed or
purchased, at the conversion price of $26.00 per share, subject to the
adjustments described below under the caption "-- Adjustments to the Conversion
Price." You may convert the notes in denominations of $1,000 and multiples of
$1,000.

Conversion Procedures

Except as described below, we will not make any payment or other
adjustment for accrued and unpaid interest (including contingent interest) on
the notes or dividends on any common stock issued upon conversion of the notes.
If you submit your notes for conversion between a record date for an interest
payment and the opening of business on the next interest payment date (except
for notes or portions of notes called for redemption on a redemption date
occurring during the period from the close of business on a record date and
ending on the opening of business on the first business day after the next
interest payment date, or if this interest payment date is not a business day,
the second business day after the interest payment date), you must pay funds
equal to the interest payable on the principal amount to be converted.

We will not issue fractional shares of common stock upon conversion of
notes. Instead, we will pay a cash amount based upon the closing market price of
the common stock on the last trading day prior to the date of conversion. If the
notes are called for redemption or are subject to repurchase following a change
in control or on specific dates, your conversion rights on the notes called for
redemption or so subject to repurchase will expire at the close of business on

the second business day before the redemption date or repurchase date, as the
case may be, unless we default in the payment of the redemption price or
repurchase price. If you have submitted your notes for repurchase upon a change
in control or on specific dates, you may only convert your notes if you withdraw
your election in accordance with the indenture.

Adjustments to the Conversion Price

The conversion price will be adjusted upon the occurrence of:

(1) the issuance of shares of our common stock as a dividend or
distribution on our common stock;

(2) the subdivision or combination of our outstanding common
stock;

(3) the issuance to all or substantially all holders of our common
stock of rights or warrants entitling them for a period of not more
than 60 days to subscribe for or purchase our common stock, or
securities convertible into our common stock, at a price per share or a
conversion price per share less than the then current market price per
share, provided that the conversion price will be readjusted to the
extent that such rights or warrants are not exercised prior to the
expiration;

(4) the distribution to all or substantially all holders of our
common stock of shares of our capital stock, evidences of indebtedness
or other non-cash assets or rights or warrants, excluding (x)
dividends, distributions and rights or warrants referred to in clause
(1) or (3) above and (y) dividends or distributions exclusively in cash
referred to in clause (5) below;

(5) the distribution to all or substantially all holders of our
common stock of all-cash distributions in an aggregate amount that
together with (x) any cash and the fair market value of any other
consideration payable in respect of any tender offer by us or any of
our subsidiaries for our common stock consummated within the preceding
12 months not triggering a conversion price adjustment and (y) all
other all-cash distributions to all or substantially all holders of our
common stock made within the preceding 12 months not triggering a
conversion price adjustment exceeds an amount equal to 10% of our
market capitalization on the business day immediately preceding the day
on which we declare such distribution; and

(6) the purchase of our common stock pursuant to a tender offer
made by us or any of our subsidiaries to the extent that the same
involves aggregate consideration that together with (x) any cash and
the fair market value of any other consideration payable in respect of
any tender offer by us or any of our subsidiaries for our common stock
consummated within the preceding 12 months not triggering a conversion
price adjustment and (y) all-cash distributions to all or substantially
all holders of our common stock made within the preceding 12 months not
triggering a conversion price adjustment, exceeds an amount equal to
10% of our market capitalization on the expiration date of such tender
offer.

In the event of:

o any reclassification of our common stock, or

o a consolidation, merger or combination involving St. Mary, or

o a sale or conveyance to another person of the property and assets
of St. Mary as an entirety or substantially as an entirety,

in which holders of our outstanding common stock would be entitled to receive
stock, other securities, other property, assets or cash for their common stock,
holders of notes will generally be entitled to convert their notes into the same
type of consideration received by common stock holders immediately prior to one
of these types of events.

You may, in some circumstances, be deemed to have received a
distribution or dividend subject to United States federal income tax as a result
of an adjustment or the nonoccurrence of an adjustment to the conversion price.

We are permitted to reduce the conversion price of the notes by any
amount for a period of at least 20 days if our board of directors determines
that such reduction would be in the best interest of St. Mary. We are required
to give at least 15 days' prior notice of any reduction in the conversion price.
Any conversions prior to the effective time of any reduction by us of the
conversion price will remain at the unreduced conversion price. We may also
reduce the conversion price to avoid or diminish income tax to holders of our
common stock in connection with a dividend or distribution of stock or similar
event.

No adjustment in the conversion price will be required unless it would
result in a change in the conversion price of at least one percent. Any
adjustment not made will be taken into account in subsequent adjustments. Except
as stated above, we will not adjust the conversion price for the issuance of our
common stock or any securities convertible into or exchangeable for our common
stock or the right to purchase our common stock or such convertible or
exchangeable securities.

Optional Redemption by St. Mary

We may redeem the notes in whole or from time to time in part on or
after March 20, 2007, on at least 20 days', and no more than 60 days', notice at
a redemption price equal to 100% of their principal amount, plus accrued and
unpaid interest (including contingent interest) to, but excluding, the
redemption date. If the redemption date is an interest payment date, interest
will be paid to the record holder on the relevant record date.

If fewer than all of the notes are to be redeemed, the trustee will
select the notes to be redeemed on a pro rata basis. If any note is to be
redeemed in part only, a new note in principal amount equal to the unredeemed
principal portion will be issued. If a portion of your notes is selected for
partial redemption and you convert a portion of your notes, the converted
portion will be deemed to be of the portion selected for redemption.

No sinking fund is provided for the notes.

Repurchase of Notes at Your Option Upon a Change in Control

In the event of a change in control, you will have the right to require
us to repurchase all or any part of your notes after the occurrence of a change
in control at a repurchase price equal to 100% of their principal amount plus
accrued and unpaid interest (including contingent interest) up to, but
excluding, the repurchase date payable in cash. Notes submitted for repurchase
must be in $1,000 or multiples of $1,000 principal amount.

We shall mail to the trustee and to each holder a written notice of the
change in control within 10 business days after the occurrence of a change in
control. This notice shall state among other things:

o the terms and conditions of the change in control;

o the change in control repurchase date;

o the procedures required for exercise of the change in control
repurchase feature; and

o the holder's right to require St. Mary to repurchase the notes.

You must deliver written notice of your exercise of this repurchase
right to a paying agent at any time prior to the close of business on the
business day prior to the change in control repurchase date. The written notice
must specify the notes for which the repurchase right is being exercised. If you
wish to withdraw this election, you must provide a written notice of withdrawal
to the paying agent at any time prior to the close of business on the business
day prior to the change in control repurchase date.

A change in control will be deemed to have occurred if any of the
following occurs:

o as a result of any transaction or series of transactions any
"person" or "group" becomes the "beneficial owner," directly or
indirectly, of shares of voting stock of St. Mary representing 50%

or more of the total voting power of all outstanding classes of
voting stock of St. Mary or has the power, directly or indirectly,
to elect a majority of the members of the board of directors of
St. Mary;

o St. Mary consolidates with, or merges with or into, another person
or St. Mary sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of the assets of
St. Mary, or any person consolidates with, or merges with or into,
St. Mary, in any such event other than pursuant to a transaction
in which the persons that "beneficially owned," directly or
indirectly, shares of voting stock of St. Mary immediately prior
to such transaction "beneficially own," directly or indirectly,
shares of voting stock of St. Mary, representing at least a
majority of the total voting power of all outstanding classes of
voting stock of the surviving or transferee person; or

o a liquidation or dissolution of St. Mary.

However, a change in control will not be deemed to have occurred if the
last sale price of our common stock for any five trading days within (x) the
period of ten consecutive trading days immediately after the later of the change
in control or the public announcement of the change in control, in the case of a
change in control resulting solely from a change in control under the first
bullet point above, or (y) the period of ten consecutive trading days
immediately preceding the change in control, in the case of a change in control
under the second and third bullet points above, is at least equal to 105% of the
conversion price in effect on such day. For purposes of this change in control
definition:

o "person" or "group" have the meanings given to them for purposes
of Sections 13(d) and 14(d) of the Exchange Act or any successor
provisions, and the term "group" includes any group acting for the
purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act, or any
successor provision;

o a "beneficial owner" will be determined in accordance with Rule
13d-3 under the Exchange Act, as in effect on the date of the
indenture, except that the number of shares of voting stock of St.
Mary will be deemed to include, in addition to all outstanding
shares of voting stock of St. Mary and unissued shares deemed to
be held by the "person" or "group" or other person with respect to
which the change in control determination is being made, all
unissued shares deemed to be held by all other persons;

o "beneficially owned" has a meaning correlative to that of
beneficial owner;

o "unissued shares" means shares of voting stock not outstanding
that are subject to options, warrants, rights to purchase or
conversion privileges exercisable within 60 days of the date of
determination of a change in control; and

o "voting stock" means any class or classes of capital stock
pursuant to which the holders of capital stock under ordinary
circumstances have the power to vote in the election of the board
of directors, managers or trustees of any person or other persons
performing similar functions irrespective of whether or not, at
the time, capital stock of any other class or classes shall have,
or might have, voting power by reason of the happening of any
contingency.

The term "all or substantially all" as used in the definition of change
in control will likely be interpreted under applicable state law and will be
dependent upon particular facts and circumstances. There may be a degree of
uncertainty in interpreting this phrase. As a result, we cannot assure you how a
court would interpret this phrase under applicable law if you elect to exercise
your rights following the occurrence of a transaction which you believe
constitutes a transfer of "all or substantially all" of our assets.

We will under the indenture:

o comply with the provisions of Rule 13e-4 and Rule 14e-1, if
applicable, under the Exchange Act;

o file a Schedule TO or any successor or similar schedule if
required under the Exchange Act; and

o otherwise comply with all federal and state securities laws in
connection with any requirement by us to repurchase the notes upon
a change in control.

This change in control repurchase feature may make more difficult or
discourage a takeover of St. Mary and the removal of incumbent management.
However, we are not aware of any specific effort to accumulate shares of our
common stock or to obtain control of us by means of a merger, tender offer,
solicitation or otherwise. In addition, the change in control repurchase feature
is not part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the change in control repurchase feature is a result of
negotiations between us and the initial purchasers.

We could, in the future, enter into certain transactions, including
recapitalizations, that would not constitute a change in control but would
increase the amount of debt outstanding or otherwise adversely affect a holder.
Neither we nor our subsidiaries are prohibited from incurring debt under the
indenture. The incurrence of significant amounts of additional debt could
adversely affect our ability to service our debt, including the notes.

If a change in control were to occur, we may not have sufficient funds
to pay the change in control repurchase price for the notes tendered by holders.
In addition, we may in the future incur debt that has similar change in control
provisions that permit holders of this debt to accelerate or require us to
repurchase this debt upon the occurrence of events similar to a change in
control. Our failure to repurchase the notes upon a change in control will
result in an event of default under the indenture.

Repurchase of Notes at Your Option on Specific Dates

You will have the right to require us to repurchase the notes on March
20, 2007, March 15, 2012 and March 15, 2017. We will be required to repurchase
any outstanding note for which you deliver a written repurchase notice to the
paying agent. This notice must be delivered during the period beginning at any
time from the opening of business on the date that is 20 business days prior to
the repurchase date until the close of business on the repurchase date. If the
repurchase notice is given and withdrawn during the period, we will not be
obligated to repurchase the related notes. Our repurchase obligation will be
subject to certain additional conditions. Also, our ability to satisfy our
repurchase obligations may be affected by the factors described in "Risk
Factors" under the caption "We may not have sufficient cash to repurchase the
notes upon a change in control or at the option of the noteholders."

The repurchase price payable will be equal to 100% of the principal
amount plus accrued and unpaid interest (including contingent interest) through
the repurchase date.

On March 15, 2012 and March 15, 2017, we must pay the repurchase price
in cash.

On March 20, 2007, we may, at our option, elect to pay the repurchase
price in cash, in shares of our common stock valued at a discount to the market
price at the time of repurchase, or in any combination thereof. For a discussion
of the tax treatment of a holder receiving cash, shares of common stock or any
combination thereof, see "Certain United States Federal Income Tax
Considerations -- Sale, Exchange, Conversion or Redemption."

We will be required to give notice on a date not less than 20 business
days prior to each repurchase date to all holders by issuing a press release for
publication on the PR Newswire or an equivalent newswire service, and with a
prompt notice by mail to the holders at their addresses shown in the register of
the registrar, and to beneficial owners as required by applicable law, stating
among other things:

o whether we will pay the repurchase price of the notes in cash, in
shares of our common stock, or in any combination thereof,
specifying the percentages of each;

o if we elect to pay in shares of our common stock, the method of
calculating the market price of the common stock; and

o the procedures that holders must follow to require us to
repurchase their notes.

Your notice electing to require us to repurchase your notes must state:

o if certificated notes have been issued, the note certificate
numbers, or if not certificated, your notice must comply with
appropriate DTC procedures;

o the portion of the principal amount at maturity of notes to be
repurchased, in multiples of $1,000;

o that the notes are to be repurchased by us pursuant to the
applicable provisions of the indenture; and

o in the event we elect, pursuant to the notice that we are required
to give, to pay the repurchase price in shares of common stock, in
whole or in part, but the repurchase price is ultimately to be
paid to the holder entirely in cash because any of the conditions
to payment of the repurchase price or portion of the repurchase
price in shares of common stock is not satisfied prior to the
close of business on the repurchase date, as described below,
whether the holder elects (x) to withdraw the repurchase notice as
to some or all of the notes to which it relates, or (y) to receive
cash in respect of the entire repurchase price for all notes or
portions of notes subject to such repurchase notice.

If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder will be deemed to
have elected to receive cash in respect of the entire repurchase price for all
notes subject to the repurchase notice in these circumstances. For a discussion
of the tax treatment of a holder receiving cash instead of shares of common
stock, see "Certain United States Federal Income Tax Considerations -- Sale,
Exchange, Conversion or Redemption."

You may withdraw any repurchase notice by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
repurchase date. The notice of withdrawal must state:

o the principal amount at maturity of the withdrawn notes;

o if certificated notes have been issued, the certificate numbers of
the withdrawn notes, or, if not certificated, your notice must
comply with appropriate DTC procedures; and

o the principal amount at maturity, if any, which remains subject to
the repurchase notice.

If we elect to pay the repurchase price, in whole or in part, in shares
of common stock, the number of shares to be delivered by us will be equal to the
portion of the repurchase price to be paid in common stock divided by (i) 95% of
the market price of one share of common stock as determined by us in our
repurchase notice if we elect to pay 33% or less of the repurchase price in
shares of our common stock or (ii) 93% of the market price of one share of
common stock as determined by us in our repurchase notice if we elect to pay
more than 33% of the repurchase price in shares of our common stock. We will pay
cash based on the market price for all fractional shares in the event we elect
to deliver shares of common stock in payment, in whole or in part, of the
repurchase price. If we elect to pay the repurchase price, in whole or in part,
in shares of common stock, each holder will receive the same proportion of
shares of common stock and cash for all notes repurchased.

The "market price" means the average of the sale prices of the common
stock for the fifteen-trading-day period ending on the third business day prior
to the applicable repurchase date (if the third business day prior to the
applicable repurchase date is a trading day, or, if not, then on the last
trading day prior to), appropriately adjusted to take into account the
occurrence, during the period commencing on the first of such trading days
during such fifteen-trading-day period and ending on such repurchase date, of
certain events that would result in an adjustment of the conversion rate with
respect to the common stock.

The "sale price" of the common stock on any date means the closing sale
price per share of common stock (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average ask prices) on such date as reported
in composite transactions for the principal United States securities exchange on

which the common stock is traded or, if the common stock is not listed on a
United States national or regional securities exchange, as reported by the
Nasdaq System.

Because the market price of the common stock is determined prior to the
applicable repurchase date, holders of notes bear the market risk with respect
to the value of the common stock to be received from the date such market price
is determined to such repurchase date. We may pay the repurchase price or any
portion of the repurchase price in shares of common stock only if the
information necessary to calculate the market price is published in a daily
newspaper of national circulation.

Upon determination of the actual number of shares of common stock in
accordance with the foregoing provisions, we will publish such information on
our website or through such other public medium as we may use at that time.

Our right to repurchase notes, in whole or in part, with shares of
common stock is subject to our satisfying various conditions, including:

o the registration of the shares of common stock under the
Securities Act and the Exchange Act, if required; and

o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration.

If such conditions are not satisfied with respect to a holder prior to
the close of business on the repurchase date, we will pay the repurchase price
of the notes of the holder entirely in cash. We may not change the form or
components or percentages of components of consideration to be paid for the
notes once we have given the notice that we are required to give to holders of
notes, except as described in the first sentence of this paragraph.

Our ability to repurchase notes with cash may be limited by the terms
of our then-existing borrowing agreements. The indenture will prohibit us from
repurchasing notes for cash in connection with the holders' repurchase right if
any event of default under the indenture has occurred and is continuing, except
a default in the payment of the repurchase price with respect to the notes.

A holder must either effect book-entry transfer or deliver the note,
together with necessary endorsements, to the office of the paying agent after
delivery of the repurchase notice to receive payment of the repurchase price.
You will receive payment in cash on the repurchase date or the time of
book-entry transfer or the delivery of the note. If the paying agent holds money
or securities sufficient to pay the repurchase price of the note on the business
day following the repurchase date, then:

o the note will cease to be outstanding;

o interest will cease to accrue; and

o all other rights of the holder will terminate.

This will be the case whether or not book-entry transfer of the note is made or
whether or not the note is delivered to the paying agent.

We will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act that may be applicable at the time. We will
file a Schedule TO or any other schedule required in connection with any offer
by us to repurchase the notes at your option.

Events of Default

Each of the following will constitute an event of default under the
indenture:

o failure to pay principal on any note when due;

o failure to pay any interest (including contingent interest) on any
note when due, if such failure continues for 30 days;

o failure of St. Mary to perform any other covenant required of us
in the indenture, if such failure continues for 60 days after
written notice has been given by the trustee, or the holders of at
least 25% in aggregate principal amount of the outstanding notes;

o a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any indebtedness of St. Mary or any of its subsidiaries for money
borrowed whether such indebtedness now exists, or is created after
the date of the indenture, which default involves the failure to
pay principal of or any premium or interest on such indebtedness
when such indebtedness becomes due and payable at the stated
maturity thereof, and such default shall continue after any
applicable grace period, or results in the acceleration of such
indebtedness prior to its stated maturity, and, in each case, the
principal amount of any such indebtedness, together with the
principal amount of any other such indebtedness so unpaid at its
stated maturity or the stated maturity of which has been so
accelerated, aggregates $10 million or more;

o failure by St. Mary or any of its subsidiaries to pay final
judgments aggregating in excess of $10 million, which judgments
are not paid, discharged or stayed for a period of 60 days; and

o certain events in bankruptcy, insolvency or reorganization of St.
Mary or any of its subsidiaries.

If an event of default, other than an event of default described in the
sixth bullet point above, occurs and is continuing, either the trustee or the
holders of at least 25% in aggregate principal amount of the outstanding notes
may declare the principal amount of the notes to be due and payable immediately.
If an event of default described in the sixth bullet point above occurs, the
principal amount of the notes will automatically become immediately due and
payable.

After any such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of the
notes may, under certain circumstances, rescind and annul such acceleration if
all events of default, other than the non-payment of accelerated principal, have
been cured or waived.

Subject to the trustee's duties in the case of an event of default, the
trustee will not be obligated to exercise any of its rights or powers at the
request of the holders, unless the holders have offered to the trustee
reasonable indemnity. Subject to the trustee's indemnification, the holders of a
majority in aggregate principal amount of the outstanding notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee with respect to the notes.

No holder will have any right to institute any proceeding under the
indenture, or for the appointment of a receiver or a trustee, or for any other
remedy under the indenture unless:

o the holder has previously given to the trustee written notice of a
continuing event of default with respect to the notes;

o the holders of at least 25% in aggregate principal amount of the
outstanding notes have made a written request and have offered
reasonable indemnity to the trustee to institute such proceeding
as trustee; and

o the trustee has failed to institute such proceeding, and has not
received from the holders of a majority in aggregate principal
amount of the outstanding notes a direction inconsistent with such
request within 60 days after such notice, request and offer.

However, these limitations do not apply to a suit instituted by a holder for the
enforcement of payment of the principal of or any premium or interest on any
note or the right to convert the note on or after the applicable due date.

We are required to furnish to the trustee, on an annual basis, a
statement by our officers as to whether or not St. Mary, to the officer's
knowledge, is in default in the performance or observance of any of the terms,
provisions and conditions of the indenture. If so, such statement will specify
any known defaults.

Modification and Waiver

We and the trustee may make modifications and amendments to the
indenture with the consent of the holders of a majority in aggregate principal
amount of the outstanding notes.

However, neither we nor the trustee may make any modification or
amendment without the consent of the holder of each outstanding note who is
affected by the modification or amendment if such modification or amendment
would do any of the following:

o change the maturity of the principal of or any installment of
interest (including contingent interest) on any note;

o reduce the principal amount of, or any premium or interest
(including contingent interest) on, any note;

o reduce the amount of principal payable upon acceleration of the
maturity of any note;

o change the place or currency of payment of principal of, or any
premium or interest (including contingent interest) on, any note;

o impair the right to institute suit for the enforcement of any
payment on, or with respect to, any note;

o adversely affect the right of holders to convert notes other than
as provided in or under the indenture;

o reduce the percentage in principal amount of outstanding notes,
the consent of whose holders is required for modification or
amendment of the indenture;

o reduce the percentage in principal amount of outstanding notes
necessary for waiver of compliance with certain provisions of the
indenture or for waiver of certain defaults; or

o modify such provisions with respect to modification and waiver.

Holders of a majority in aggregate principal amount of the outstanding
notes may waive, on behalf of the holders of all of the notes, compliance by us
with respect to certain restrictive provisions of the indenture.

Generally, the holders of not less than a majority of the aggregate
principal amount of the outstanding notes may, on behalf of all holders of the
notes, waive any past default or event of default unless:

o we fail to pay principal, premium or interest (including
contingent interest) on any note when due;

o we fail to convert any note into common stock; or

o we fail to comply with any of the provisions of the indenture that
would require the consent of the holder of each outstanding note
affected.

Any notes held by us or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with us
shall be disregarded (from both the numerator and denominator) for purposes of

determining whether the holders of a majority in principal amount of the
outstanding notes have consented to a modification, amendment or waiver of the
terms of the indenture.

Consolidation, Merger and Sale of Assets

We may not consolidate with or merge into any other person, in a
transaction in which we are not the surviving corporation, or convey, transfer
or lease our properties and assets substantially as an entirety to any successor
person, unless:

o the successor person, if any, is a corporation, limited liability
company, partnership, trust or other entity organized and existing
under the laws of the United States, or any state of the United
States (which may be a subsidiary of a foreign entity), and
assumes our obligations on the notes and under the indenture; and

o immediately after giving effect to the transaction, no default or
event of default shall have occurred and be continuing.

Registration Rights

We entered into a registration rights agreement with the initial
purchasers of the notes for the benefit of the holders of the notes and the
shares of common stock issuable upon conversion of the notes. The following
summarizes some, but not all, of the registration rights provided in the
registration rights agreement and the notes. You should refer to the
registration rights agreement and the notes for a full description of the
registration rights.

Under the terms of the registration rights agreement we have filed a
shelf registration statement, of which this prospectus forms a part, covering
resales by holders of the notes and the shares of common stock issuable upon
conversion of the notes, referred to as "registrable securities." We agreed to
use our reasonable best efforts to have the shelf registration statement
declared effective by September 9, 2002, and to use our reasonable best efforts
to keep it effective until the earliest of:

o two years after the filing date;

o the date when all registrable securities shall have been
registered under the Securities Act and disposed of; and

o the date on which all registrable securities are eligible to be
sold to the public pursuant to Rule 144(k) under the Securities
Act.

We will mail a notice of registration statement and selling
securityholder election and questionnaire to each holder to obtain certain
information regarding the holder for inclusion in the prospectus. To be named as
selling securityholders in the related prospectus at the time of effectiveness,
holders must complete and deliver the questionnaire within 20 business days of
the date of the notice. Holders that do not complete and deliver the
questionnaire in a timely manner will not be named as selling securityholders in
the prospectus and therefore will not be permitted to sell any of their
securities pursuant to the shelf registration statement.

We will:

o provide to each holder for whom the shelf registration statement
was filed copies of the prospectus that is a part of the shelf
registration statement;

o notify each such holder when the shelf registration statement has
become effective; and

o take certain other actions as are required to permit unrestricted
resales of the registrable securities.

A holder of registrable securities that sells registrable securities
pursuant to the shelf registration statement generally will be required to
provide information about itself and the specifics of the sale, be named as a
selling securityholder in the related prospectus and deliver a prospectus to
purchasers, be subject to the relevant civil liability provisions under the
Securities Act in connection with such sales and be bound by the provisions of
the registration rights agreement which are applicable to such holder (including
certain indemnification rights and obligations).

Each holder must notify us not later than three business days prior to
any proposed sale by that holder pursuant to the shelf registration statement.
This notice will be effective for five business days. We may suspend the
holder's use of the prospectus for a period not to exceed 45 days in any 90-day
period, and not to exceed an aggregate of 90 days in any 360-day period, if:

o the prospectus would, in our judgment, contain a material
misstatement or omission as a result of an event that has occurred
and is continuing; and

o we reasonably determine that the disclosure of this material
non-public information would have a material adverse effect on
us and our subsidiaries taken as a whole.

However, if the disclosure relates to a previously undisclosed proposed
or pending material business transaction, the disclosure of which would impede
our ability to consummate such transaction, we may extend the suspension period
from 45 days to 60 days. Each holder, by its acceptance of the notes, agrees to
hold any communication by us in response to a notice of proposed sale in
confidence.

Upon the initial sale of registrable securities, each selling
securityholder will be required to deliver a notice of such sale, in
substantially the form attached to the notice of registration statement and
selling securityholder election and questionnaire, to the trustee and us. The
notice will, among other things:

o identify the sale as a transfer pursuant to the shelf registration
statement;

o certify that the prospectus delivery requirements, if any, of the
Securities Act have been complied with; and

o certify that the selling securityholder and the aggregate
principal amount of notes or number of shares of common stock,
as the case may be, owned by such holder are identified in the
related prospectus in accordance with the applicable rules and
regulations under the Securities Act.

If the shelf registration statement ceases to be effective or fails to
be usable in connection with resales of notes and the common stock issuable upon
the conversion of the notes in accordance with and during the periods specified
in the registration rights agreement and we do not cure the shelf registration
statement within five business days by a post-effective amendment or a report
filed pursuant to the Exchange Act, or if applicable, we do not terminate the
suspension period, described above, by the 45th or 60th day, as the case may be
(a "registration default"), additional interest as liquidated damages will
accrue on the notes and underlying common stock that are registrable securities
over and above the rate set forth in the title of the notes, from and including
the date following the registration default but excluding the day on which all
registration defaults have been cured. Additional interest will be paid
semiannually in arrears, with the first semiannual payment due on the first
interest payment date, as applicable, following the date on which such
additional interest begins to accrue, and will accrue at a rate per year equal
to an additional 0.25% of the principal amount to and including the 90th day
following such registration default, increasing to 0.50% at the end of such
90-day period. In no event will liquidated damages accrue at a rate per year
exceeding 0.50%.

We will have no other liabilities for monetary damages with respect to
our registration obligations. With respect to each holder, our obligations to
pay additional interest remain in effect only so long as the notes and the
common stock issuable upon the conversion of the notes held by the holder are
"registrable securities" within the meaning of the registration rights
agreement.

Satisfaction and Discharge

We may, at our option, satisfy and discharge our obligations under the
indenture while notes remain outstanding if (1) all outstanding notes will
become due and payable at their scheduled maturity within one year or (2) all
outstanding notes are scheduled for redemption within one year, and, in either
case, we have deposited with the trustee an amount sufficient to pay and
discharge all outstanding notes on the date of their scheduled maturity or the
scheduled date of redemption.

Transfer and Exchange

We have initially appointed the trustee as security registrar, paying
agent and conversion agent, acting through its corporate trust office. We
reserve the right to:

o vary or terminate the appointment of the security registrar,
paying agent or conversion agent;

o appoint additional paying agents or conversion agents; or

o approve any change in the office through which any security
registrar or any paying agent or conversion agent acts.

Repurchase and Cancellation

All notes surrendered for payment, redemption, registration of transfer
or exchange or conversion shall, if surrendered to any person other than the
trustee, be delivered to the trustee. All notes delivered to the trustee shall
be cancelled promptly by the trustee. No notes shall be authenticated in
exchange for any notes cancelled as provided in the indenture.

We may, to the extent permitted by law, repurchase notes in the open
market or by tender offer at any price or by private agreement. Any notes
repurchased by us, to the extent permitted by law, may be reissued or resold or
may, at our option, be surrendered to the trustee for cancellation. Any notes
surrendered for cancellation may not be reissued or resold and will be promptly
cancelled.

Replacement of Notes

We will replace mutilated, destroyed, stolen or lost notes at your
expense upon delivery to the trustee of the mutilated notes, or evidence of the
loss, theft or destruction of the notes satisfactory to us and the trustee. In
the case of a lost, stolen or destroyed note, indemnity satisfactory to the
trustee and us may be required at the expense of the holder of such note before
a replacement note will be issued.

Governing Law

The indenture and the notes are governed by, and construed in
accordance with, the law of the State of New York, without regard to conflicts
of laws principles.

Concerning the Trustee

Wells Fargo Bank West, N.A. serves as the trustee under the indenture.
The trustee is permitted to deal with St. Mary and any affiliate of St. Mary
with the same rights as if it were not trustee. However, under the Trust
Indenture Act, if the trustee acquires any conflicting interest and there exists
a default with respect to the notes, the trustee must eliminate such conflicts
or resign.

The holders of a majority in principal amount of all outstanding notes
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy or power available to the trustee. However, any such
direction may not conflict with any law or the indenture, may not be unduly
prejudicial to the rights of another holder or the trustee and may not involve
the trustee in personal liability.

Book-Entry, Delivery and Form

The notes were originally issued in the form of two global securities.
The global securities have been deposited with the trustee as custodian for DTC
and registered in the name of a nominee of DTC. Except as set forth below, the
global securities may be transferred, in whole and not in part only to DTC or
another nominee of DTC. You may hold your beneficial interests in the global
securities directly through DTC if you have an account with DTC or indirectly
through organizations which have accounts with DTC. Notes in definitive
certificated form (called "certificated securities") will be issued only in
certain limited circumstances described below.

DTC has advised us that it is:

o a limited purpose trust company organized under the laws of the
State of New York;

o a member of the Federal Reserve System;

o a "clearing corporation" within the meaning of the New York
Uniform Commercial Code; and

o a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act.

DTC was created to hold securities of institutions that have accounts
with DTC (called "participants") and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, which may include the
initial purchasers, banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's book-entry system is also available to
others such as banks, brokers, dealers and trust companies (called, the
"indirect participants") that clear through or maintain a custodial relationship
with a participant, whether directly or indirectly.

Pursuant to procedures established by DTC, upon the deposit of the
global securities with DTC, DTC credited, on its book-entry registration and
transfer system, the principal amount of notes represented by such global
securities to the accounts of participants. The accounts to be credited were
designated by the initial purchasers. Ownership of beneficial interests in the
global securities is limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the global securities
is shown on, and the transfer of those ownership interests will be effected only
through, records maintained by DTC (with respect to participants' interests),
the participants and the indirect participants. The laws of some jurisdictions
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. These limits and laws may impair the ability to
transfer or pledge beneficial interests in the global securities.

Beneficial owners of interests in global securities who desire to
convert their interests into common stock should contact their brokers or other
participants or indirect participants through whom they hold such beneficial
interests to obtain information on procedures, including proper forms and
cut-off times, for submitting requests for conversion.

So long as DTC, or its nominee, is the registered owner or holder of a
global security, DTC or its nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by the global security for all
purposes under the indenture and the notes. In addition, no beneficial owner of
an interest in a global security will be able to transfer that interest except
in accordance with the applicable procedures of DTC. Except as set forth below,
as an owner of a beneficial interest in the global security, you will not be
entitled to have the notes represented by the global security registered in your
name, will not receive or be entitled to receive physical delivery of
certificated securities and will not be considered to be the owner or holder of
any notes under the global security. We understand that under existing industry
practice, if an owner of a beneficial interest in the global security desires to
take any action that DTC, as the holder of the global security, is entitled to
take, DTC would authorize the participants to take such action, and the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.

We will make payments of principal of, premium, if any, and interest on
the notes represented by the global security registered in the name of and held
by DTC or its nominee to DTC or its nominee, as the case may be, as the
registered owner and holder of the global security. Neither we, the trustee nor
any paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.

We expect that DTC or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest on the global security, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global security
as shown on the records of DTC or its nominee. We also expect that payments by
participants or indirect participants to owners of beneficial interests in the
global security held through such participants or indirect participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We will not have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the global
security for any note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between DTC and its participants or indirect participants or the
relationship between such participants or indirect participants and the owners
of beneficial interests in the global security owning through such participants.

Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.

DTC has advised us that it will take any action permitted to be taken
by a holder of notes only at the direction of one or more participants to whose
account the DTC interests in the global security is credited and only in respect
of such portion of the aggregate principal amount of notes as to which such
participant or participants has or have given such direction. However, if DTC
notifies us that they are unwilling to be a depository for the global security
or ceases to be a clearing agency or there is an event of default under the
notes, DTC will exchange the global security for certificated securities which
it will distribute to its participants and which will be legended, if required.

Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the global security among participants of
DTC, they are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither we nor
the trustee will have any responsibility or liability for the performance by DTC
or the participants or indirect participants of their respective obligations
under the rules and procedures governing their respective operations.

DESCRIPTION OF CAPITAL STOCK

We are authorized to issue 100,000,000 shares of common stock, $.01 par
value per share. At June 30, 2002, there were 27,857,141 shares of common stock
outstanding.

Common Stock

Holders of shares of common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. There
are no cumulative voting rights with respect to the election of directors.
Accordingly, the holders of a majority of the outstanding shares of common stock
will be able to elect our entire board of directors. Holders of common stock
have no preemptive rights and are entitled to such dividends as may be declared
by the board of directors out of legally available funds. The common stock is
not entitled to any sinking fund, redemption or conversion provisions. If St.
Mary liquidates, dissolves or winds up its business, the holders of common stock
will be entitled to share ratably in our net assets remaining after the payment
of all creditors. When issued, the shares of common stock will be fully paid and
non-assessable. The transfer agent and registrar for the common stock is
Computershare Trust Company, Inc.

Anti-Takeover Matters

Provisions of our certificate of incorporation and bylaws may have the
effect of delaying, deferring or preventing a change in control of St. Mary.
Among other things, the certificate of incorporation does not provide for
cumulative voting in the election of directors and the bylaws impose certain
procedural requirements on stockholders who wish to make nominations for the
election of directors or propose other actions at stockholders' meetings.

These provisions, alone or in combination with each other and with the
shareholder rights plan described below, may discourage transactions involving
actual or potential changes in control of St. Mary, including transactions that
otherwise could involve payment of a premium over prevailing market prices to
holders of common stock.

On July 15, 1999, the board of directors adopted a shareholder rights
plan. The rights plan is designed to enhance the board's ability to prevent an
acquirer from depriving stockholders of the long-term value of their investment
and to protect stockholders against attempts to acquire St. Mary by means of
unfair or abusive takeover tactics that have been prevalent in many unsolicited
takeover attempts.

Under the rights plan, the rights are exercisable at a price of $100.00
per share. The rights attach to and trade with the common stock. The rights will
expire December 31, 2009. The rights may be redeemed by St. Mary at $0.001 per
right prior to ten business days after a person or group has accumulated 20% or
more of the common stock.

If a person or group acquired 20% of our common stock, the rights would
then be modified to represent the right to receive, for the exercise price,
common stock having a value worth twice the exercise price. If St. Mary were
involved in a merger or other business combination at any time after a person or
group has acquired 20% or more of our common stock, the rights would be modified
so as to entitle a holder to buy a number of shares of common stock of the
acquiring entity having a market value of twice the exercise price of each
right. In either case, all rights held or acquired by a person or group holding
20% or more of our shares would be void.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

General

In the opinion of Ballard Spahr Andrews & Ingersoll, LLP, the
following is a summary of the material United States federal income tax
consequences relevant to holders of notes. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including retroactive changes in effective dates) or possible differing
interpretations. Except where noted, the discussion below deals only with notes
held as capital assets by U.S. Holders (as defined below). In addition, the
discussion does not purport to deal with persons in special tax situations, such
as banks or other financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, traders in securities
that elect to use a mark-to-market method of accounting for securities holdings,
tax-exempt entities, expatriates, Non-U.S. Holders (as defined below), persons
holding notes in a tax-deferred or tax-advantaged account, persons holding notes
as a hedge against currency or interest rate risks, as a position in a
"straddle" or as part of a "hedging" or "conversion" transaction for tax
purposes, or U.S. Holders (as defined below) whose functional currency for tax
purposes is not the U.S. dollar.

We do not address all of the tax consequences that may be relevant to a
U.S. Holder (as defined below). In particular, we do not address:

o the United States federal income tax consequences to shareholders
in, or partners or beneficiaries of, an entity that is a holder of
notes;

o the United States federal estate, gift or alternative minimum tax
consequences of the purchase, ownership or disposition of notes;

o any state, local or foreign tax consequences of the purchase,
ownership or disposition of notes; or

o any United States federal, state, local or foreign tax
consequences of owning or disposing of the common stock.

A U.S. Holder is a beneficial owner of the notes who or which is:

o a citizen or individual resident of the United States, as defined
in Section 7701(b) of the Internal Revenue Code of 1986, as
amended (the "Code");

o a corporation, including any entity treated as a corporation for
United States federal income tax purposes, created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;

o an estate if its income is subject to United States federal income
taxation regardless of its source; or

o a trust if (1) a United States court can exercise primary
supervision over its administration and (2) one or more United
States persons have the authority to control all of its
substantial decisions.

A Non-U.S. Holder is a holder of notes other than a U.S. Holder.

No statutory, administrative or judicial authority directly addresses
the treatment of the notes or instruments similar to the notes for United States
federal income tax purposes. No rulings have been sought or are expected to be
sought from the Internal Revenue Service with respect to any of the United
States federal income tax consequences discussed below, and no assurance can be
given that the IRS will not take contrary positions. As a result, no assurance
can be given that the IRS will agree with the tax characterizations and the tax
consequences described below.

WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES AND THE COMMON STOCK IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS.

Classification of the Notes

Pursuant to the terms of the indenture, we and each holder of a note
agree, for United States federal income tax purposes, to treat the notes as
"contingent payment debt instruments" and to be bound by the application of the
Treasury regulations governing contingent payment debt instruments (the "CPDI
regulations"), in the manner described below, and the remainder of this
discussion assumes that the notes will be treated so. The IRS has reserved the
right to treat the contingent payments as a separate investment position if the
principal purpose of structuring the notes with contingent payments is to
achieve a result that is unreasonable. A result can be considered unreasonable
if it is expected to have a significant effect on the issuer's tax liability and
achieves a result that would not be obtainable if the note and contingency were
separate. As a result, no assurance can be given that the IRS will not assert
that the notes should be treated in a different manner. Such an alternative
characterization could affect the amount, timing and character of income, gain
or loss of an investment in the notes. In particular, it might be determined
that a holder should have accrued interest income at a lower rate, should not
have recognized income or gain upon the conversion, and should have recognized
capital gain upon a taxable disposition of its note.

Accrual of Interest on the Notes

Pursuant to the CPDI regulations, U.S. Holders of the notes will be
required to accrue interest income on the notes, in the amounts described below,
regardless of whether the U.S. Holder uses the cash or accrual method of tax

accounting. Accordingly, U.S. Holders will likely be required to include
interest in taxable income in each year in excess of the accruals on the notes
for non-tax purposes and in excess of both the stated fixed interest and any
contingent interest payments actually received in that year.

The CPDI regulations provide that a U.S. Holder must accrue an amount
of ordinary interest income, as original issue discount for United States
federal income tax purposes, for each accrual period prior to and including the
maturity date of the notes that equals:

(1) the product of (i) the adjusted issue price (as defined
below) of the notes as of the beginning of the accrual period; and (ii)
the comparable yield to maturity (as defined below) of the notes,
adjusted for the length of the accrual period;

(2) divided by the number of days in the accrual period; and

(3) multiplied by the number of days during the accrual period
that the U.S. Holder held the notes.

The "daily portions" of interest income are the amounts of interest ratably
allocated to each day in an accrual period.

A note's issue price is the first price at which a substantial amount
of the notes is sold to the public, excluding sales to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a note is its issue
price increased by any interest income previously accrued, determined without
regard to any adjustments to interest accruals described below, and decreased by
the amount of any noncontingent payment and the projected amount of any
contingent payment previously made with respect to the notes.

The term "comparable yield" means the annual yield we would pay, as of
the initial issue date, on a fixed rate, nonconvertible debt security with no
contingent payments, but with terms and conditions otherwise comparable to those
of the notes. We have calculated and intend to treat the comparable yield for
the notes as 10.00%, compounded semiannually. The projected payment schedule (as
defined below) that we have constructed is based upon this comparable yield. It
is possible that the IRS could challenge the comparable yield and projected
payment schedule. The yield, if redetermined as a result of such a challenge,
could be greater or less than the comparable yield provided by us, and the
projected payment schedule could differ materially from the projected payment
schedule we have provided. In such case, the taxable income of a holder arising
from the ownership (e.g., taxable interest income or original issue discount),
sale, exchange, conversion or redemption of a note could be increased or
decreased.

The CPDI regulations require that we provide to U.S. Holders, solely
for United States federal income tax purposes, a schedule of the projected
amounts of payments on the notes. This schedule must produce the comparable
yield. The projected payment schedule includes payments of noncontingent cash
interest, estimates for certain payments of contingent interest, and an estimate
for a payment at maturity. A published ruling of the IRS requires the estimated
payment at maturity to be based on a projected exercise of the conversion
privilege.

U.S. Holders may obtain the comparable yield and the schedule of
projected payments by submitting a written request for such information to St.
Mary Land & Exploration Company, 1776 Lincoln Street, Suite 1100, Denver,
Colorado 80203, Attention: Vice President-- Finance.

Pursuant to the terms of the indenture, you agree, for United States
federal income tax purposes, to use the comparable yield and the schedule of
projected payments in determining interest accruals, and the adjustments thereto
described below in respect of the notes.

Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Code.

THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S
INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE NOTES FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR
REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE NOTES.

Adjustments to Interest Accruals on the Notes

If, during any taxable year, a U.S. Holder receives actual payments
with respect to the notes that in the aggregate exceed the total amount of
projected payments for that taxable year, the U.S. Holder will incur a "net
positive adjustment" under the CPDI regulations equal to the amount of such
excess. The U.S. Holder will treat a "net positive adjustment" as additional
interest income for the taxable year. For this purpose, the payments in a
taxable year include the fair market value of property (including our common
stock) received in that year.

If a U.S. Holder receives in a taxable year actual payments with
respect to the notes that in the aggregate were less than the amount of
projected payments for that taxable year, the U.S. Holder will incur a "net
negative adjustment" under the CPDI regulations equal to the amount of such
deficit. This adjustment will (a) reduce the U.S. Holder's interest income on
the notes for that taxable year, and (b) to the extent of any excess after the
application of (a), give rise to an ordinary loss to the extent of the U.S.
Holder's interest income on the notes during prior taxable years, reduced to the
extent such interest was offset by prior net negative adjustments. If any amount
of the net negative adjustment is not absorbed by these adjustments, it is
carried forward as a negative adjustment to the following year and is deemed
made on the first day of such taxable year. If the note holder has a negative
adjustment carryforward in a taxable year in which the note is sold, exchange or
retired, the carryforward is applied to reduce the amount realized on the sale,
exchange, or retirement.

Sale, Exchange, Conversion or Redemption

Generally, the sale, exchange, redemption or other disposition of a
note will result in taxable gain or loss to a U.S. Holder. In addition, as
required by the published IRS ruling described above, our calculation of the
comparable yield and the schedule of projected payments for the notes includes
the receipt of stock upon conversion as a contingent payment with respect to the
notes. Accordingly, we intend to treat, and you agree to treat, the receipt of
our common stock upon the conversion of a note, or upon your exercise of a
repurchase option that we elect to satisfy in common stock, as a contingent
payment under the CPDI regulations. As described above, you agree to be bound by
our determination of the comparable yield and the schedule of projected
payments. Under this treatment, a conversion or such a repurchase will also
result in taxable gain or loss to the U.S. Holder. The amount of gain or loss on
a taxable sale, exchange, conversion, redemption, repurchase or other
disposition will be equal to the difference between (a) the amount of cash plus
the fair market value of any other property received by the U.S. Holder,
including the fair market value of any of our common stock received, and (b) the
U.S. Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax basis
in a note will generally be equal to the U.S. Holder's original purchase price
for the note, increased by any interest income previously accrued by the U.S.
Holder (determined without regard to any adjustments to contingent interest
accruals described above), and decreased by the amount of any noncontingent
payment and the projected amount of any contingent payment previously made on
the notes to the U.S. Holder. Gain recognized upon a sale, exchange, conversion,
redemption or repurchase of a note will generally be treated as ordinary
interest income; any loss generally will be ordinary loss to the extent of
interest previously included in income, and thereafter, capital loss (which will
be long-term if the note is held for more than one year). The deductibility of
net capital losses by individuals and corporations is subject to limitations.

Your tax basis in common stock received upon conversion of a note or
upon your exercise of a repurchase option that we elect to satisfy in common
stock will, consistent with the treatment of such events as taxable
transactions, equal the then fair market value of such common stock. Your
holding period for the common stock will accordingly commence on the day
immediately following the date of conversion or repurchase.

Purchasers of Notes at a Price Other Than the Adjusted Issue Price

If you purchase a note in the secondary market for an amount that
differs from the adjusted issue price of the note at the time of such purchase,
you will be required to accrue interest income on the note in accordance with

the comparable yield (as described above, 10.00%, compounded semiannually) even
if market conditions have changed since the date of issuance. You must
reasonably determine whether the difference between the purchase price for a
note and the adjusted issue price of a note is attributable to a change in
expectations as to the contingent amounts potentially payable in respect of the
notes, a change in interest rates since the notes were issued, or both, and
allocate the difference accordingly between the daily portions of interest and
the projected payments over the remaining term of the notes.

Adjustments attributable to a change in interest rates will cause, as
the case may be, a "positive adjustment" or a "negative adjustment" to the
amount of interest you include in income. If the purchase price of a note is
less than its adjusted issue price because of a higher current yield for a
comparable debt instrument, a positive adjustment will result and the amount of
interest you accrue will increase. If the purchase price is more than the
adjusted issue price of a note because of a lower current yield for a comparable
debt instrument, a negative adjustment will result and the amount of interest
you accrue will decrease.

Adjustments attributable to a change in expectations as to the
contingent payments that are projected in respect of the note will cause, as the
case may be, a "positive adjustment" or a "negative adjustment" to your basis in
the notes but will not affect the adjusted issue price of the notes in
determining interest for subsequent accrual periods. Adjustments allocated to
the contingent payments (which in this case includes the receipt of stock upon
conversion) are taken into account as basis adjustments only when the contingent
payments are made.

Certain United States holders will receive Forms 1099-OID reporting
interest accruals on their note. Those forms will not, however, reflect the
effect of any positive or negative adjustments resulting from your purchase of a
note in the secondary market at a price that differs from its adjusted issue
price on date of the purchase. You are urged to consult your tax advisor as to
whether, and how, such adjustments should be made to the amounts reported on any
Form 1099-OID.

Constructive Dividends

If at any time we make a distribution of property to our shareholders
that would be taxable to the shareholders as a dividend for federal income tax
purposes and, in accordance with the anti-dilution provisions of the notes, the
conversion rate of the notes is increased, such increase may be deemed to be the
payment of a taxable dividend to holders of the notes.

For example, an increase in the conversion rate in the event of
distributions of our evidences of indebtedness or our assets or an increase in
the event of an extraordinary cash dividend will generally result in deemed
dividend treatment to holders of the notes, but generally an increase in the
event of stock dividends or the distribution of rights to subscribe for common
stock will not.

Backup Withholding Tax and Information Reporting

In general, if you are a noncorporate U.S. Holder, we are required to
report to the IRS all payments of principal, and interest on and any
constructive distribution with respect to the notes, including amounts accruing
under the rules for contingent payment debt instruments. In addition, we are
required to report to the IRS any payment of proceeds of the sale of the notes
before maturity. Additionally, United States federal backup withholding tax will
apply at the rate of 30% (29% during 2004 and 2005, 28% during the years 2006
through 2010, and 31% thereafter) to any payments, if you fail to provide an
accurate taxpayer identification number, or you are notified by the IRS that you
have failed to report all interest and dividends required to be shown on your
federal income tax returns.

SELLING SECURITYHOLDERS

We originally issued the notes in a private placement in March 2002.
The notes were resold by the initial purchasers in transactions exempt from the
registration requirements of the Securities Act to persons reasonably believed
by the initial purchasers to be "qualified institutional buyers" as defined by
Rule 144A under the Securities Act. The selling securityholders may from time to
time offer and sell pursuant to this prospectus any or all of the notes listed
below and the shares of common stock issued upon conversion of such notes. When
we refer to the "selling securityholders" in this prospectus, we mean those
persons listed in the table below, as well as the pledgees, donees, assignees,
transferees, successors and others who later hold any of the selling
securityholders' interests.

The table below sets forth the name of each selling securityholder, the
principal amount at maturity of notes that each selling securityholder may offer
under this prospectus and the number of shares of common stock into which such
notes are convertible. Unless set forth below, to our knowledge, none of the
selling securityholders has, or within the past three years has had, any
material relationship with us or any of our affiliates or beneficially owns in
excess of 1% of the outstanding common stock.

The principal amounts of the notes provided in the table below is based
on information provided to us by each of the selling securityholders through
August 27, 2002 and the percentages are based on $100,000,000 principal amount
at maturity of notes outstanding. The number of shares of common stock that may
be sold is calculated based on the current conversion price of $26.00 per share,
or a conversion rate of approximately 38.4615 shares of common stock per $1,000
principal amount at maturity of the notes.

Since the date on which each selling securityholder provided this
information, each selling securityholder identified below may have sold,
transferred or otherwise disposed of all or a portion of their notes in a
transaction exempt from the registration requirements of the Securities Act.
Information concerning the selling securityholders may change from time to time
and any changed information will be set forth in supplements to this prospectus
to the extent required. In addition, the conversion ratio, and therefore the
number of shares of our common stock issuable upon conversion of the notes, is
subject to adjustment. Accordingly, the number of shares of common stock
issuable upon conversion of the notes may increase or decrease.

The selling securityholders may from time to time offer and sell any or
all of the securities under this prospectus. Because the selling securityholders
are not obligated to sell the notes or the shares of common stock issuable upon
conversion of the notes, we cannot estimate the amount of the notes or how many
shares of common stock that the selling securityholders will hold upon
consummation of any such sales.

Aggregate Principal Number of Shares Percentage of
Amount at Maturity Percentage of Common Stock Shares of
of Notes That of Notes That May be Common Stock
May be Sold Outstanding Sold(1) Outstanding(2)
----------- ----------- ------- --------------
Name
----

Alexandra Global Investment Fund 1, Ltd. $2,000,000 2.00% 76,923 *
Alpine Associates $3,400,000 3.40% 130,769 *
Alpine Partners, L.P. $450,000 * 17,307 *
Bear, Stearns & Co. Inc. (3) $2,150,000 2.15% 82,692 *
CALAMOS(R)Market Neutral Fund --
CALAMOS(R)Investment Trust $2,500,000 2.50% 96,153 *
Cobra Fund U.S.A., L.P. $225,000 * 8,653 *
Cobra Master Fund, Ltd. $1,275,000 1.28% 49,038 *
Commerzbank AG $9,500,000 9.50% 365,384 1.29%
Context Convertible Arbitrage Fund, LP $275,000 * 10,576 *
Deutsche Bank Securities Inc. $15,750,000 15.75% 605,769 2.13%
JP Morgan Securities Inc. (4) $6,450,000 6.45% 248,076 *
Man Convertible Bond Master Fund, Ltd. $7,140,000 7.14% 274,615 *
McMahan Securities Co. L.P. $1,725,000 1.73% 66,346 *
KBC Financial Products USA Inc. $1,500,000 1.50% 57,692 *
Nomura Securities International Inc. (5) $5,000,000 5.00% 192,307 *
Quattro Fund, Ltd. $5,250,000 5.25% 201,923 *
St. Thomas Trading, Ltd. $11,860,000 11.86% 456,153 1.61%
RAM Trading Inc. $3,850,000 3.85% 148,076 *
The Northwestern Mutual Life Insurance
Company (General Account) $3,000,000 3.00% 115,384 *
The Northwestern Mutual Life Insurance
Company (Group Annuity Separate
Account) $500,000 * 19,230 *
TQA Master Fund Ltd. $2,000,000 2.00% 76,923 *
TQA Master Plus Fund Ltd. $1,500,000 1.50% 57,692 *
WPG Convertible Arbitrage Overseas
Masters Fund, LP $1,500,000 1.50% 57,692 *
Zazove Hedged Convertible Fund L.P. $1,000,000 1.00% 38,461 *
Zurich Institutional Benchmarks
Management c/o Quattro Global
Capital, LLC $1,250,000 1.25% 48,076 *
Zurich Institutional Benchmarks Master
Fund Ltd. c/o SSI Investment
Management Inc. $500,000 * 19,230 *
Zurich Institutional Benchmarks Master
Fund Ltd. c/o Zazove Associates LLC $1,000,000 1.00% 38,461 *
----------- ------- --------- ------
$92,550,000 92.55% 3,559,601 11.33%
All other holders of notes or future
transferees, pledges, donees, assignees
or successors of any such holders (6)(7) $7,450,000 7.45% 286,552(8) 0.82%
----------- ------- --------- ------
Total $100,000,000 100.00% 3,846,153 12.15%
============ ======= ========= ======

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

* Less than one percent (1%).

(1) Assumes conversion of all of the holder's notes at a conversion price of
$26.00 per share, or a conversion rate of approximately 38.4615 shares of
common stock per $1,000 principal amount at maturity of the notes. This
conversion rate is subject to adjustment, however, as described under
"Description of the Notes - Conversion of Notes." As a result, the number
of shares of common stock issuable upon conversion of the notes may
increase or decrease in the future. Under the indenture for the notes,
fractional shares will not be issued upon any conversion. In lieu thereof
cash will be paid based on the current market price of the stock on the
trading day immediately before the conversion date.

(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act, using 27,857,141
shares of common stock outstanding as of June 30, 2002. In calculating this
amount for each holder, we treated as outstanding the number of shares of
common stock issuable upon conversion of all that holder's notes, but we
did not assume conversion of any other holder's notes.

(3) The holder was one of the initial purchasers of the notes in the private
placement of the notes completed in March 2002. The notes were resold by
the initial purchasers pursuant to Rule 144A under the Securities Act, and
we entered into a registration rights agreement with the initial purchasers
for the benefit of the holders of the notes and shares of common stock
issuable upon conversion of the notes. We have been informed by the initial
purchasers that they intend to make a market in the notes. The initial
purchasers are not obligated to do so, and they may cease their market
making at any time without notice. In addition, this market making activity
will be subject to limitations imposed by the Securities Act and the
Securities Exchange Act and may be limited during the effectiveness of a
registration statement relating to the notes.

(4) The holder also beneficially owns 18,615 shares of St. Mary common stock.

(5) The holder also beneficially owns 419 shares of St. Mary common stock.

(6) Information about other selling securityholders will be set forth in
prospectus supplements, if required.

(7) Assumes that any other holders of the notes or any future pledgees, donees,
assignees, transferees or successors of or from any other such holders of
the notes, do not beneficially own any shares of common stock other than
the common stock issuable upon conversion of the notes at the initial
conversion rate.

(8) Reflects certain rounding differences.

PLAN OF DISTRIBUTION

The selling securityholders may offer and sell from time to time the
securities covered by this prospectus. We will not receive any of the proceeds
from resales of the notes or the shares of common stock by the selling
securityholders.

In connection with the original issuance of the notes in March 2002, we
entered into a registration rights agreement with the initial purchasers of the
notes. Securities may only be offered or sold under this prospectus pursuant to
the terms of the registration rights agreement. However, selling securityholders
may resell all or a portion of the securities in open market transactions in
reliance upon Rule 144 or Rule 144A under the Securities Act, provided they meet
the criteria and conform to the requirements of one of these rules.

We are registering the notes and shares of common stock covered by this
prospectus to permit holders to conduct public secondary trading of these
securities from time to time after the date of this prospectus. We have agreed,
among other things, to bear all expenses, other than underwriting discounts and
selling commissions, in connection with the registration and sale of the notes
and the shares of common stock covered by this prospectus.

The selling securityholders may sell all or a portion of the notes and
shares of common stock beneficially owned by them and offered hereby from time
to time:

o directly; or

o through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or concessions
from the selling securityholders and/or from the purchasers of the
notes and shares of common stock for whom they may act as agent.

The notes and the shares of common stock may be sold from time to time
in one or more transactions at:

o fixed prices, which may be changed;

o prevailing market prices at the time of sale;

o varying prices determined at the time of sale; or

o negotiated prices.

These prices will be determined by the holders of the securities or by agreement
between these holders and underwriters or dealers who may receive fees or
commissions in connection with the sale. The aggregate proceeds to the selling
securityholders from the sale of the notes or shares of common stock offered by
them hereby will be the purchase price of the notes or shares of common stock
less discounts and commissions, if any.

The sales described in the preceding paragraph may be effected in transactions:

o on any national securities exchange or quotation service on which
the notes or shares of common stock may be listed or quoted at the
time of sale, including the Nasdaq National Market in the case of
the shares of common stock;

o in the over-the counter market;

o in transactions otherwise than on such exchanges or services or in
the over-the-counter market; or

o through the writing of options.

These transactions may involve crosses or block transactions. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.

In connection with sales of the notes and shares of common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
notes and shares of common stock in the course of hedging their positions and
deliver notes and shares of common stock to close out such short positions. The
selling securityholders may also sell the notes and shares of common stock short
and deliver the notes and shares of common stock to close out short positions,
or loan or pledge notes and shares of common stock to broker-dealers that in
turn may sell the notes and shares of common stock.

To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the shares of common
stock by the selling securityholders. Selling securityholders may not sell any,
or may not sell all, of the notes and the shares of common stock offered by them
pursuant to this prospectus. In addition, we cannot assure you that a selling
securityholder will not transfer, devise or gift the notes and the shares of
common stock by other means not described in this prospectus. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than pursuant to this prospectus.

The outstanding shares of common stock are listed for trading on the
Nasdaq National Market under the symbol "MARY."

The selling securityholders and any broker and any broker-dealers,
agents or underwriters that participate with the selling securityholders in the
distribution of the notes or the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act. In this case, any
commissions received by these broker-dealers, agents or underwriters and any
profit on the resale of the notes or the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act. In addition, any profits realized by the selling securityholders
may be deemed to be underwriting discounts and commissions under the Securities
Act. To the extent the selling securityholders may be deemed to be underwriters,
the selling securityholders may be subject to statutory liabilities, including,
but not limited to, liability under Sections 11, 12 and 17 of the Securities Act
and Rule 10b-5 under the Exchange Act.

Because the selling securityholders may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act, they will be subject
to the prospectus delivery requirements of the Securities Act. At any time a
particular offer of the securities is made, a revised prospectus or prospectus
supplement, if required, will be distributed which will disclose:

o the name of the selling securityholders and any participating
underwriters, broker-dealers or agents;

o the aggregate amount and type of securities being offered;

o the price at which the securities were sold and other material
terms of the offering;

o any discounts, commissions, concessions or other items
constituting compensation from the selling securityholders and any
discounts, commissions or concessions allowed or reallowed or paid
to dealers; and

o that the participating broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated in this prospectus by reference.

The prospectus supplement or a post-effective amendment will be filed with the
Securities and Exchange Commission to reflect the disclosure of additional
information with respect to the distribution of the securities. In addition, if
we receive notice from a selling securityholder that a donee or pledgee intends
to sell more than 500 shares of our common stock, a supplement to this
prospectus will be filed.

The notes were originally issued by us in a private placement in March
2002. The notes were resold by the initial purchasers in transactions exempt
from the registration requirements of the Securities Act to persons reasonably
believed by the initial purchasers to be "qualified institutional buyers," as
defined in Rule 144A under the Securities Act. Under the registration rights
agreement, we have agreed to indemnify the initial purchasers and each selling
securityholder, and each selling securityholder has agreed to indemnify us
against specified liabilities arising under the Securities Act. The selling
securityholders may also agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the securities against some
liabilities, including liabilities that arise under the Securities Act.

The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may regulate the timing of
purchases and sales of any of the notes and the underlying shares of common
stock by the selling securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the notes and the underlying shares of common stock to
engage in market-making activities with respect to the particular notes and the
underlying shares of common stock being distributed for a period of up to five
business days prior to the commencement of distribution. This may affect the
marketability of the notes and the underlying shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the notes and the underlying shares of common stock.

Under the registration rights agreement, we must use our reasonable
best efforts to keep the registration statement of which this prospectus is a
part effective until the earlier of:

o two years after the date of filing of the shelf registration
statement; or

o such shorter period, from the date of filing of the shelf
registration statement until either (i) the sale pursuant to the
shelf registration statement of the registrable securities or (ii)
the expiration of the holding period applicable to the registrable
securities held by holders of the notes that are not affiliates of
St. Mary under Rule 144(k) under the Securities Act.

Our obligation to keep the registration statement to which this
prospectus relates effective is subject to specified, permitted exceptions set
forth in the registration rights agreement. In these cases, we may prohibit
offers and sales of the notes and shares of common stock pursuant to the
registration statement to which this prospectus relates.

We may suspend the use of this prospectus if we learn of any event that
causes this prospectus to include an untrue statement of a material fact
required to be stated in the prospectus or necessary to make the statements in
the prospectus not misleading in light of the circumstances then existing. If
this type of event occurs, a prospectus supplement or post-effective amendment,
if required, will be distributed to each selling securityholder. Each selling
securityholder has agreed not to trade securities from the time the selling
securityholder receives notice from us of this type of event until the selling
securityholder receives a prospectus supplement or amendment. This time period
will not exceed 90 days in a 360-day period.

There are no contractual arrangements between or among any of the
selling securityholders and St. Mary with regard to the sale of the securities,
and no professional underwriter in its capacity as such will be acting for the
selling securityholders.

LEGAL MATTERS

The validity of the securities offered hereby and certain United States
federal income tax considerations with respect to the notes have been passed
upon for us by Ballard Spahr Andrews & Ingersoll, LLP, Denver, Colorado.

INDEPENDENT PUBLIC ACCOUNTANTS

The consolidated financial statements as of December 31, 2001 and 2000
and for each of the three years in the period ended December 31, 2001,
incorporated by reference in this prospectus and elsewhere in the registration
statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference in reliance upon the authority of said firm as experts
in giving such report.

Although we obtained the consent of Arthur Andersen LLP to the
incorporation by reference in this prospectus and elsewhere in the registration
statement of their report included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 (as amended on Form 10-K/A filed with the
SEC on March 25, 2002), after reasonable efforts we have not been able to obtain
the consent of Arthur Andersen LLP to the incorporation by reference in this
prospectus and elsewhere in the registration statement of their report included
in our Annual Report on Form 10-K/A No. 2 for the fiscal year ended December 31,
2001 filed with the SEC on August 28, 2002. Therefore, in reliance on Rule 437a
under the Securities Act we did not file a consent of Arthur Andersen LLP with
our Annual Report on Form 10-K/A No. 2 for the fiscal year ended December 31,
2001. As a result, you will not be able to recover against Arthur Andersen LLP
under Section 11 of the Securities Act for any untrue statement of a material
fact contained in the financial statements audited by Arthur Andersen LLP or any
omission to state a material fact required to be stated therein. In addition,
due to the significant decline in size of Arthur Andersen LLP and the likelihood
that they will cease operating after having been found guilty in June 2002 of
federal obstruction of justice charges arising from the U.S. government's
investigation of Enron, you are unlikely to be able to exercise any effective
remedies against or collect judgments from Arthur Andersen LLP.

INDEPENDENT PETROLEUM ENGINEERS

The estimated reserve evaluations and related calculations of Ryder
Scott Company, L.P., independent petroleum engineering consultants, included and
incorporated by reference in this prospectus have been included and incorporated
by reference herein in reliance upon the authority of said firm as experts in
petroleum engineering.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any document we file at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330 to obtain further information on the public reference room. The
SEC maintains an internet site at http://www.sec.gov that contains reports,
proxy and information statements, and other information regarding issuers,
including us, that file documents with the SEC electronically. You also can find
more information about us by visiting our web site at http://www.stmaryland.com.
Web site materials are not part of this prospectus.

This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC with respect to the securities offered under this prospectus.
This prospectus does not contain all the information that is in the registration
statement. We omitted certain parts of the registration statement as allowed by
the SEC. We refer you to the registration statement and its exhibits for further
information about us and the securities offered by the selling securityholders.

The SEC allows us to "incorporate by reference" in this prospectus the
information that we file with it, which means that we can disclose important
information to you by referring to those documents. The information incorporated
by reference is an important part of this prospectus, and the information that
we file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed:

o Annual Report on Form 10-K for the fiscal year ended December
31, 2001 (as amended on Form 10-K/A filed with the SEC on
March 25, 2002 and on Form 10-K/A No. 2 filed with the SEC on
August 28, 2002);

o Quarterly Reports on Form 10-Q for the quarters ended March 31,
2002 and June 30, 2002;

o Current Reports on Form 8-K filed with the SEC on February 7,
2002, February 22, 2002, March 6, 2002, March 8, 2002, March
21, 2002, April 30, 2002, May 10, 2002, May 30, 2002, June 5,
2002, July 9, 2002, August 8, 2002 (as amended on Form 8-K/A
filed with the SEC on August 9, 2002), August 15, 2002 and
August 28, 2002 (in each case, except for information
furnished pursuant to Item 9 thereof); and

o The description of our common stock that is contained in our
registration statement on Form 8-A filed November 18, 1992,
including any amendment or report filed for the purpose of
updating the description (including the information concerning
our shareholder rights plan set forth under Part II Item 5 of
our Quarterly Report on Form 10-Q/A-3 filed with the SEC on
November 12, 1999).

We will provide to each person, including any beneficial owner, to whom
a prospectus is delivered a copy of any or all of the information that has been
incorporated by reference in the prospectus but not delivered with the
prospectus (except for exhibits not specifically incorporated by reference in
the information), upon written or oral request and at no cost to the requester.
Any requests should be made to:

St. Mary Land & Exploration Company
Attention: Richard C. Norris, Vice President-Finance
1776 Lincoln Street, Suite 1100
Denver, Colorado 80203
(303) 861-8140

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains or incorporates by reference "forward-looking
statements" within the meaning of securities laws. These forward-looking
statements are subject to a number of risks and uncertainties, many of which are
beyond our control. All statements other than statements of historical facts
included or incorporated by reference in this prospectus, including the
statements about our strategy, future operations, financial position, estimated
revenues, projected costs, prospects, plans and objectives of management are
forward-looking statements. When used or incorporated by reference in this
prospectus, the words "will," "believe," "anticipate," "intend," "estimate,"
"expect," "project" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words. All forward-looking statements speak only as of the date
on which they were made. Although we may from time to time voluntarily update or
revise publicly our forward-looking statements, whether as a result of new
information, future events or otherwise, we disclaim any commitment to do so
except as required by securities laws. Although we believe that our plans,
intentions and expectations reflected in or suggested by the forward-looking
statements we make or incorporate by reference in this prospectus are
reasonable, we cannot assure you that such plans, intentions or expectations
will be achieved. These cautionary statements qualify all forward-looking
statements attributable to us or persons acting on our behalf.

GLOSSARY OF COMMON OIL AND GAS TERMS

The following are definitions of terms commonly used in the oil and
natural gas industry and this document.

Unless otherwise indicated in this document, natural gas volumes are
stated at the legal pressure base of the state or area in which the reserves are
located at 60 degrees Fahrenheit. As used in this document, the following terms
have the following specific meanings: "Mcf" means thousand cubic feet, "MMcf"
means million cubic feet, "Bcf" means billion cubic feet, "Tcf" means trillion
cubic feet, "Btu" means British Thermal Unit, or the quantity of heat required
to raise the temperature of one pound of water by one degree Fahrenheit, and
"MMBtu" means million British thermal units.

2-D seismic or 2-D data. Seismic data that are acquired and processed
to yield a two-dimensional cross-section of the subsurface.

3-D seismic or 3-D data. Seismic data that are acquired and processed
to yield a three-dimensional picture of the subsurface.

Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used
herein in reference to oil or other liquid hydrocarbons.

Bcf. Billion cubic feet, used herein in reference to natural gas.

BCFE. Billion cubic feet of gas equivalent. Gas equivalents are
determined using the ratio of six Mcf of gas (including gas liquids) to one Bbl
of oil.

BOE. Barrels of oil equivalent. Oil equivalents are determined using
the ratio of six Mcf of gas (including gas liquids) to one Bbl of oil.

Development well. A well drilled within the proved area of an oil or
gas reservoir to the depth of a stratigraphic horizon known to be productive in
an attempt to recover proved undeveloped reserves.

Dry hole. A well found to be incapable of producing either oil or gas
in sufficient quantities to justify completion as an oil or gas well.

Estimated proved reserves. The estimated quantities of oil, gas and gas
liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions.

Exploratory well. A well drilled to find and produce oil or gas in an
unproved area, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir, or to extend a known reservoir.

Fee land. The most extensive interest that can be owned in land,
including surface and mineral (including oil and gas) rights.

Finding cost. Expressed in dollars per BOE. Finding costs are
calculated by dividing the amount of total capital expenditures for oil and gas
activities by the amount of estimated proved reserves added during the same
period (including the effect on proved reserves of reserve revisions).

Gross acres. An acre in which a working interest is owned.

Gross well. A well in which a working interest is owned.

Hydraulic fracturing. A procedure to stimulate production by forcing a
mixture of fluid and proppant (usually sand) into the formation under high
pressure. This creates artificial fractures in the reservoir rock, which
increases permeability and porosity.

MBbl. One thousand barrels of oil or other liquid hydrocarbons.

MMBbl. One million barrels of oil or other liquid hydrocarbons.

MBOE. One thousand barrels of oil equivalent.

MMBOE. One million barrels of oil equivalent.

Mcf. One thousand cubic feet.

MCFE. One thousand cubic feet of gas equivalent. Gas equivalents are
determined using the ratio of six Mcf of gas (including gas liquids) to one Bbl
of oil.

MMcf. One million cubic feet.

MMCFE. One million cubic feet of gas equivalent. Gas equivalents are
determined using the ratio of six Mcf of gas (including gas liquids) to one Bbl
of oil.

MMBtu. One million British Thermal Units. A British Thermal Unit is the
heat required to raise the temperature of a one-pound mass of water one degree
Fahrenheit.

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

Net asset value per share. The result of the fair market value of total
assets less total liabilities, divided by the total number of outstanding shares
of common stock.

PV-10 value. The present value of estimated future gross revenue to be
generated from the production of estimated proved reserves, net of estimated
production and future development costs, using prices and costs in effect as of
the date indicated (unless such prices or costs are subject to change pursuant
to contractual provisions), without giving effect to non-property related
expenses such as general and administrative expenses, debt service and future
income tax expenses or to depreciation, depletion and amortization, discounted
using an annual discount rate of 10%.

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

Proved developed reserves. Reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.

Proved undeveloped reserves. Reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a relatively
major expenditure is required for recompletion.

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

Reserve life. Expressed in years, represents the estimated proved
reserves at a specified date divided by production for the preceding 12-month
period.

Royalty. The interest paid to the owner of mineral rights expressed as
a percentage of gross income from oil and gas produced and sold unencumbered by
expenses.

Royalty interest. An interest in an oil and gas property entitling the
owner to shares of oil and gas production free of costs of exploration,
development and production. Royalty interests are approximate and are subject to
adjustment.

Undeveloped acreage. Lease acreage on which wells have not been drilled
or completed to a point that would permit the production of commercial
quantities of oil and gas, regardless of whether such acreage contains estimated
proved reserves.

Working interest. The operating interest that gives the owner the right
to drill, produce and conduct operating activities on the property and to share
in the production.