ENRON CORP/OR/, S-3, 1999-07-23

ENRON CORP/OR/
S-3, 1999-07-23
PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------

ENRON CORP.
(Name of Registrant as specified in its charter)

<TABLE>
<S> <C>
OREGON 47-0255140
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>

REX R. ROGERS
ENRON CORP.
VICE PRESIDENT AND
ASSOCIATE GENERAL COUNSEL
1400 SMITH STREET
HOUSTON, TEXAS 77002
TELEPHONE: (713) 853-3069
FACSIMILE: (713) 646-5847

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices and agent for service)

Copies to:

<TABLE>
<S> <C>
MICHAEL P. FINCH GARY W. ORLOFF
VINSON & ELKINS L.L.P. BRACEWELL & PATTERSON, L.L.P.
2300 FIRST CITY TOWER, 1001 FANNIN 711 LOUISIANA, SUITE 2900
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
TELEPHONE: (713) 758-2128 TELEPHONE: (713) 221-1306
FACSIMILE: (713) 615-5282 FACSIMILE: (713) 221-2166
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

If any of the securities registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) NOTE(1) PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Exchangeable Notes due , 2002.. 11,500,000 $19.625 $225,687,500 $62,742
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes shares that the underwriters may purchase to cover over-allotments,
if any, and is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) (based on the average of the high
and low prices of the common stock of Enron Oil & Gas Company as reported in
the New York Stock Exchange composite transaction reporting system on July
19, 1999).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

- --------------------------------------------------------------------------------
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<PAGE> 2

The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securities, and it is
not soliciting an offer to buy these securities, in any state where the offer or
sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 23, 1999

10,000,000 Exchangeable Notes
[ENRON CORP. LOGO]

% Exchangeable Notes due , 2002

(To be Exchanged for Shares of Common Stock
of Enron Oil & Gas Company)
----------------------
Enron Corp. is offering 10,000,000 of its % Exchangeable Notes due
, 2002. The principal amount of each Exchangeable Note is $ ,
which is the closing sale price of the common stock of Enron Oil & Gas Company
on , 1999, as reported by the New York Stock Exchange. We will make
quarterly interest payments on the Exchangeable Notes equal to % per year. The
Exchangeable Notes are not subject to redemption, defeasance or a sinking fund
prior to maturity.

At the maturity of the Exchangeable Notes, we will exchange EOG common
stock owned by our company for your Exchangeable Notes. The number of shares of
EOG common stock that you will be entitled to receive in the exchange will be
not more than one share and not less than of a share,depending on the market
price of EOG common stock at maturity. Attached to this prospectus as Appendix A
is a prospectus of EOG covering the shares of EOG common stock which are to be
delivered to the holders of Exchangeable Notes at maturity.

Prior to this offering, there has been no public market for the
Exchangeable Notes. We will apply to list the Exchangeable Notes on the New York
Stock Exchange. On July 21, 1999, the last reported sale price of EOG common
stock on the NYSE was $20.00 per share.

Enron Oil & Gas Company is offering concurrently 27,000,000 shares of EOG
common stock in a separate public offering with a separate prospectus. The
underwriters in that offering have the option to purchase up to an additional
4,050,000 shares of EOG common stock from us solely to cover over-allotments.
This offering of Exchangeable Notes and the concurrent offering of EOG common
stock by EOG are not conditioned on each other.

Consider carefully the risk factors beginning on page 7 of this prospectus.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------

<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- --------
<S> <C> <C>
Initial price to public............................ $ $
Underwriting discount.............................. $ $
Proceeds, before expenses, to Enron................ $ $
</TABLE>

To the extent that the underwriters sell more than 10,000,000 Exchangeable
Notes, the underwriters have the option to purchase up to an additional
1,500,000 Exchangeable Notes from Enron Corp. at the initial price to public
less the underwriting discount.
----------------------
The underwriters expect to deliver the Exchangeable Notes against payment
in New York, New York on August , 1999.
GOLDMAN, SACHS & CO. BANC OF AMERICA SECURITIES LLC SALOMON SMITH BARNEY
----------------------
Prospectus dated , 1999.
<PAGE> 3

PROSPECTUS SUMMARY

This summary highlights selected information from this prospectus, but does
not contain all of the information that may be important to you. This prospectus
includes specific terms of this offering and information about our business and
financial data. We encourage you to read this prospectus in its entirety before
making an investment decision.

In this prospectus, we refer to Enron Corp. and subsidiaries as "Enron,"
"we," "us," or "our company." We refer to Enron Oil & Gas Company as "EOG."

ENRON CORP.

Headquartered in Houston, Texas, Enron Corp. provides products and services
related to natural gas, electricity and communications to wholesale and retail
customers. Our operations are conducted through our subsidiaries and affiliates,
which are principally engaged in:

- the transportation of natural gas through pipelines to markets throughout
the United States;

- the generation and transmission of electricity to markets in the
northwestern United States;

- the marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide;

- the development, construction and operation of power plants, pipelines
and other energy related assets worldwide;

- the exploration for and production of natural gas and crude oil in the
United States and internationally; and

- the delivery of high bandwidth communication applications throughout the
United States.

ENRON OIL & GAS COMPANY

Enron Oil & Gas Company is one of the largest independent exploration and
production companies in the United States. It explores for and produces natural
gas and oil in almost every major producing basin in the United States and
Canada and internationally in India and Trinidad and, to a lesser extent,
selected other areas. You can find more information about EOG in the prospectus
attached to this prospectus as Appendix A.

QUESTIONS AND ANSWERS ABOUT THE EXCHANGEABLE NOTES

WHAT ARE THE EXCHANGEABLE NOTES?

The Exchangeable Notes are % Exchangeable Notes due , 2002 issued
by Enron Corp. They:

- are our general senior unsecured obligations;

- rank equally with all of our general senior unsecured and unsubordinated
debt;

- will rank senior to any of our future subordinated obligations;

- will be effectively subordinated to the debt of our subsidiaries; and

- are mandatorily exchangeable for shares of EOG common stock at the
maturity of the Exchangeable Notes.

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<PAGE> 4

HOW MANY EXCHANGEABLE NOTES ARE WE OFFERING?

We are offering 10,000,000 Exchangeable Notes, at a purchase price of
$ each. As a result, we will receive approximately $ million from the
issuance of the Exchangeable Notes, after deducting expenses and the
underwriters' discount.

HOW DID WE DETERMINE THE PRICE OF EACH OF THE EXCHANGEABLE NOTES?

The price of each of the Exchangeable Notes equals the closing sale price
of EOG common stock on , 1999, as reported by the NYSE.

WHAT IS THE INTEREST RATE ON THE EXCHANGEABLE NOTES AND WHEN IS INTEREST PAID?

The Exchangeable Notes pay quarterly interest payments, equal to % per
year, on January 31, April 30, July 31 and October 31 of each year, beginning
, 1999.

WHAT DOES IT MEAN THAT THE EXCHANGEABLE NOTES ARE MANDATORILY EXCHANGEABLE?

On the maturity date of the Exchangeable Notes, which is , 2002
(unless the maturity date is accelerated), you will be required to exchange the
Exchangeable Notes that you own for EOG common stock owned by our company.

HOW MANY SHARES OF EOG COMMON STOCK WILL WE BE ENTITLED TO RECEIVE UPON
EXCHANGE?

The number of shares of EOG common stock that you will be entitled to
receive in exchange for each Exchangeable Note depends on the market price of
the EOG common stock at the maturity of the Exchangeable Notes. The EOG common
stock "market price" at maturity of the Exchangeable Notes is the average
closing price per share of EOG common stock for the 20 trading days immediately
prior to, but not including, the date of maturity of the Exchangeable Notes.
Generally,

- if the EOG common stock market price at maturity is greater than $ ,
you will be entitled to of a share of EOG common stock for each
Exchangeable Note exchanged;

- if the EOG common stock market price at maturity is between $ and
$ , you will be entitled to receive a fraction of a share of EOG
common stock per Exchangeable Note equal to $ divided by the EOG
common stock market price at maturity; and

- if the EOG common stock market price at maturity is less than or equal to
$ , you will be entitled to receive one share of EOG common stock per
Exchangeable Note.

The table below shows the number of shares of EOG common stock that you
would receive for each Exchangeable Note at a variety of hypothetical market
prices of EOG common stock at maturity and what the value of those shares would
be (measured at such market price). This table does not show every situation
that may occur, and you should not assume that the actual market price of EOG
common stock will be within the range of the hypothetical market prices shown in
the table.

<TABLE>
<CAPTION>
HYPOTHETICAL MARKET PRICE NUMBER OF SHARES OF EOG VALUE OF SHARES
PER SHARE OF EOG COMMON STOCK ISSUABLE RECEIVED AT MATURITY
COMMON STOCK AT MATURITY PER EXCHANGEABLE NOTE (BASED ON MARKET PRICE)
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
$ $
$ $
$ $
$ $
$ $
</TABLE>

-4-
<PAGE> 5

HOW DOES AN INVESTMENT IN THE EXCHANGEABLE NOTES COMPARE TO AN INVESTMENT IN EOG
COMMON STOCK?

The Exchangeable Notes will bear interest at % per year. This yield is
substantially higher than the 0.6% anticipated dividend yield of the EOG common
stock, based on the EOG common stock's current price of $ and EOG's current
quarterly dividend. However, the opportunity to share in increases in the price
of EOG common stock afforded by an investment in the Exchangeable Notes is less
than a corresponding investment in EOG common stock. This is because the amount
that a holder of Exchangeable Notes may receive at maturity of the Exchangeable
Notes will only exceed the price paid for the Exchangeable Notes if the price of
EOG common stock at maturity exceeds $ , which is % greater than the
current price of EOG common stock. In addition, upon exchange at maturity you
will receive only approximately % of any appreciation of the value of EOG
common stock in excess of $ . You will also not be entitled to any rights
with respect to the EOG common stock, such as voting or dividend rights, until
the exchange of EOG common stock for Exchangeable Notes at the maturity date.

The table below shows a comparison between an investment of $1,000 in
Exchangeable Notes or in EOG common stock at a variety of hypothetical market
prices of the EOG common stock at maturity of the Exchangeable Notes. The table
assumes that an investor in EOG common stock purchases shares for $ per
share (the closing price on , 1999) and receives an annual dividend of
$ per share.

<TABLE>
<CAPTION>
INVESTMENT IN EXCHANGEABLE NOTES INVESTMENT IN EOG COMMON STOCK
-------------------------------- -------------------------------
HYPOTHETICAL MARKET PRICE OF VALUE AT
MARKET PRICE EOG COMMON MATURITY OF THE
PER SHARE AT STOCK RECEIVED AT CUMULATIVE SHARES OF CUMULATIVE
MATURITY MATURITY INTEREST EOG COMMON STOCK DIVIDENDS
- ------------ ------------------ ----------- ----------------- -----------
<S> <C> <C> <C> <C>
$ $ $ $ $
$ $ $ $ $
$ $ $ $ $
$ $ $ $ $
$ $ $ $ $
</TABLE>

HOW ARE WE GOING TO USE THE PROCEEDS FROM THIS OFFERING?

We will use the net proceeds to repay existing indebtedness and for general
corporate purposes.

ARE THE EXCHANGEABLE NOTES REDEEMABLE?

No. The Notes will not be redeemable prior to maturity.

WILL THE EXCHANGEABLE NOTES BE TRADED ON ANY EXCHANGE?

Yes. We have applied to list the Exchangeable Notes on the NYSE.

WHAT IS THE RELATIONSHIP BETWEEN OUR COMPANY AND EOG?

We currently own 82,270,000, or approximately 53.5%, of the outstanding
shares of EOG common stock. On July 20, 1999, we and EOG announced an agreement
to exchange 62,270,000 shares of EOG common stock for all the stock of EOG's
subsidiary, EOGI-India, Inc. Prior to the Share Exchange, EOG will make an
indirect $600,000,000 cash capital contribution, plus certain intercompany
receivables, to EOGI-India, Inc. At the time of completion of this transaction,
this subsidiary will own, through subsidiaries, all of EOG's assets and
operations in India and China. We expect this transaction to be tax-free to EOG
and us. We refer to this transaction elsewhere in this prospectus as the Share
Exchange.

-5-
<PAGE> 6

require that the Share Exchange take place prior to August 31, 1999. We
currently expect the Share Exchange to close on or before August 31, 1999.
Consummation of this offering of Exchangeable Notes is conditioned upon the
prior completion of the Share Exchange.

Upon completion of the Share Exchange, all of the directors of EOG who are
affiliated with Enron Corp. will resign from the EOG board of directors.

For the complete terms of our agreement with EOG, please refer to the Share
Exchange Agreement between EOG and us filed as an exhibit to the registration
statement that includes this prospectus.

Assuming completion of the Share Exchange and the concurrent EOG common
stock offering, with the underwriters fully exercising their over-allotment
option, we would own approximately 13.4% of the outstanding shares of EOG common
stock, which includes the shares underlying the Exchangeable Notes.

-6-
<PAGE> 7

RISK FACTORS

You should carefully consider the risk factors described below. You should
also consider other information contained in this prospectus, including those
factors set forth in "Forward-Looking Statements" and in the documents
incorporated by reference.

YOU ARE REQUIRED TO EXCHANGE THE EXCHANGEABLE NOTES FOR EOG COMMON STOCK -- YOU
ARE TAKING THE RISK THAT THE VALUE OF THE EOG COMMON STOCK MAY DECLINE.

At the maturity of the Exchangeable Notes, you are obligated under their
terms to accept EOG common stock in exchange for the Exchangeable Notes that you
own. However, you cannot be sure that the market value of the EOG common stock
you receive in the exchange will be equal to or greater than the principal
amount of the Exchangeable Notes. If the price of the EOG common stock at
maturity is less than its price on the date of this prospectus, we will issue to
you shares of EOG common stock having an aggregate market value that will be
less than the principal amount of the Exchangeable Notes. Accordingly, you are
assuming the risk that the market value of the EOG common stock may decline, and
that the decline could be substantial.

LESS OPPORTUNITY FOR EQUITY APPRECIATION -- INVESTING IN THE EXCHANGEABLE NOTES
GIVES YOU LESS OPPORTUNITY TO BENEFIT FROM AN INCREASE IN THE VALUE OF THE EOG
COMMON STOCK THAN IF YOU HAD MADE A DIRECT INVESTMENT IN THE EOG COMMON STOCK.

Your opportunity to benefit from an increase in the market price of the EOG
common stock resulting from an investment in the Exchangeable Notes is less than
if you were to invest directly in the EOG common stock. This is because the
market value of the EOG common stock you receive for each Exchangeable Note you
own will only exceed the price paid for the Exchangeable Notes if the market
value of the EOG common stock is greater than $ on the maturity date.
This represents an approximately % increase in the price of the EOG common
stock over the current market price. In addition, you will only receive upon
exchange at maturity approximately % (the percentage equal to the offering
price of the Exchangeable Notes divided by $ ) of the appreciation in
the EOG common stock above $ .

TRADING PRICES MAY BE INFLUENCED BY MANY FACTORS -- NUMEROUS FACTORS, MANY OF
WHICH ARE BEYOND OUR CONTROL, WILL INFLUENCE THE VALUE OF THE EXCHANGEABLE NOTES
WE ARE OFFERING.

We expect that the market price of the EOG common stock on any day will
affect the value of the Exchangeable Notes more than any other factor. The
trading price of the EOG common stock may fluctuate significantly and experience
significant volatility. Some of the factors that may affect the trading price of
the EOG common stock and, therefore, the Exchangeable Notes include:

- the effect on EOG's operating results and prospects of its sale to us of
EOGI-India, Inc.

- the success of EOG's oil and gas exploration and development activities;

- prices for oil and natural gas;

- EOG's creditworthiness;

- economic, financial and political events that affect capital markets
generally and that may affect the market price of EOG common stock;

- sales of substantial amounts of EOG common stock in the market subsequent
to this offering and the concurrent EOG common stock offering or the
perception that such sales could occur;

- the dividend rate on EOG common stock;

-7-
<PAGE> 8

- interest and yield rates in the market generally; and

- the time remaining until the maturity of the Exchangeable Notes.

You can find more information about EOG and EOG common stock in the
prospectus attached hereto as Appendix A.

In addition to the above factors that could affect the market value of EOG
common stock, several factors could affect the market value of the Exchangeable
Notes, including changes in interest rates and any events that affect our
general creditworthiness and credit ratings.

The capital markets in general have experienced extreme volatility that
often has been unrelated to the operating performance of particular companies.
The fluctuations may adversely affect the trading prices of EOG common stock and
the Exchangeable Notes, regardless of our or EOG's actual operating performance
or creditworthiness.

These factors will influence the price you receive if you sell your
Exchangeable Notes prior to their maturity.

DILUTION OF EOG COMMON STOCK -- THE VALUE OF EOG COMMON STOCK YOU RECEIVE COULD
BE DILUTED AS A RESULT OF CERTAIN EVENTS WHICH MAY OCCUR PRIOR TO THE MATURITY
DATE.

We will adjust the number of shares of EOG common stock that you will
receive to reflect certain events arising from stock splits and combinations,
stock dividends and certain other actions that modify EOG's capital structure
prior to the maturity date. We will not, however, make adjustments for other
events, such as offerings of EOG common stock for cash or in connection with
acquisitions. Additional issuances of EOG common stock may materially and
adversely affect the price of EOG common stock and, because of the relationship
of the number of shares to be received upon exchange of the Exchangeable Notes
to the price of the EOG common stock, these other events may adversely affect
the trading price of the Exchangeable Notes.

NO PRIOR MARKET -- WE CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP
FOR THE EXCHANGEABLE NOTES.

We cannot predict how the Exchangeable Notes will trade in the public
market. We will apply to list the Exchangeable Notes on the NYSE, but we cannot
be sure that an active trading market for those securities will develop or, if
such a market does develop, whether it will continue. We also cannot be sure
there will be a sufficient number of holders of the Exchangeable Notes to
maintain the NYSE listing.

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS -- THE PROPER TREATMENT OF
EXCHANGEABLE NOTES FOR U.S. FEDERAL INCOME TAX PURPOSES IS UNCERTAIN.

No statutory, judicial or administrative authority directly addresses the
treatment of the Exchangeable Notes or instruments similar to the Exchangeable
Notes for United States federal income tax purposes. As a result, certain United
States federal income tax consequences of the purchase, ownership and
disposition of Exchangeable Notes are not entirely clear. See "Federal Income
Tax Considerations."

-8-
<PAGE> 9

NO RIGHTS ON EOG COMMON STOCK UNTIL MATURITY -- YOU WILL NOT BE ENTITLED TO ANY
VOTING OR DIVIDEND RIGHTS WITH RESPECT TO THE EOG COMMON STOCK UNTIL WE DELIVER
TO YOU SHARES OF EOG COMMON STOCK AT MATURITY OF THE EXCHANGEABLE NOTES.

Until we deliver shares of EOG common stock to you at the maturity of the
Exchangeable Notes, you will not be entitled to any rights with respect to the
shares of EOG common stock, including, among other things:

- voting rights;

- rights to respond to tender offers; and

- rights to receive any dividends or other distributions on the EOG common
stock.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. All statements other than statements of
historical facts contained in or incorporated by reference in this prospectus
are forward-looking statements. These statements include statements about our:

- future financial position;

- business strategy;

- budgets;

- reserve estimates;

- projected costs and plans; and

- objectives of management for future operations.

Although we believe our expectations reflected in the forward-looking
statements are based on reasonable assumptions, we cannot give you any assurance
that our expectations will be achieved. Important factors that could cause our
actual results to differ materially from our expectations reflected in the
forward-looking statements include, among other things:

- political developments in foreign countries;

- our ability to penetrate new retail natural gas and electricity markets
in the United States and in foreign jurisdictions;

- the timing and extent of deregulation of energy markets in the United
States and in foreign jurisdictions;

- other regulatory developments in the United States and in foreign
countries, including tax legislation and regulations;

- the extent of efforts by governments to privatize natural gas and
electric utilities and other industries;

- the timing and extent of changes in commodity prices for crude oil,
natural gas, electricity, foreign currencies and interest rates;

- the extent of success in acquiring oil and gas properties and
discovering, developing, producing and marketing reserves;

- the timing and success of efforts to develop international power,
pipeline, water and other infrastructure projects;

-9-
<PAGE> 10

- the ability of counterparties to financial risk management instruments
and other contracts with us to meet their financial commitments to us;

- our success in implementing our Year 2000 plan, the effectiveness of our
Year 2000 plan, and the Year 2000 readiness of third parties; and

- our ability to access the capital markets and equity markets during the
periods covered by the forward-looking statements, which will depend on
general market conditions and our ability to maintain or increase the
credit ratings for our unsecured senior long-term debt obligations.

We undertake no obligation to update or revise our forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed or incorporated by reference in this prospectus might not
occur.

All subsequent written or oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements above.

ENRON CORP.

- the transportation of natural gas through pipelines to markets throughout
the United States;

- the generation and transmission of electricity to markets in the
northwestern United States;

- the marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide;

- the development, construction and operation of power plants, pipelines
and other energy related assets worldwide;

- the exploration for and production of natural gas and crude oil in the
United States and internationally; and

- the delivery of high bandwidth communication applications throughout the
United States.

CORE BUSINESSES

Transportation and Distribution

Our transportation and distribution business is comprised of our North
American interstate natural gas transportation systems and our electricity
transmission and distribution operations in Oregon.

Interstate Transmission of Natural Gas. Included in our domestic interstate
natural gas pipeline operations are Northern Natural Gas Company, Transwestern
Pipeline Company and Florida Gas Transmission Company (indirectly 50% owned by
our company). Northern, Transwestern and Florida Gas are interstate pipelines
and are subject to the regulatory jurisdiction of the Federal Energy Regulatory
Commission. Each pipeline serves customers in a specific geographical area.
Northern serves the upper Midwest, Transwestern serves principally the
California market and pipeline interconnects on the east end of the Transwestern
system, and Florida Gas serves the State of Florida. In addition, we hold an
interest in Northern Border Partners, L.P., which owns a 70% interest in the
Northern Border Pipeline system. One of our

-10-
<PAGE> 11

subsidiaries operates the Northern Border Pipeline system, which transports gas
from Western Canada to delivery points in the midwestern United States.

Electricity Transmission and Distribution Operations. We conduct our
electric utility operations through our wholly-owned subsidiary, Portland
General Electric Company. Portland General is engaged in the generation,
purchase, transmission, distribution and sale of electricity in the State of
Oregon. Portland General also sells energy to wholesale customers throughout the
western United States. Portland General's Oregon service area is approximately
3,170 square miles. At June 30, 1999, Portland General served approximately
711,000 customers.

Wholesale Energy Operations and Services

Our wholesale energy operations and services businesses operate in North
America, Europe and evolving energy markets in developing countries. These
businesses provide integrated energy-related products and services to wholesale
customers worldwide. Wholesale energy operations and services can be categorized
into two business lines: (a) Commodity Sales and Services and (b) Energy Assets
and Investments.

Commodity Sales and Services. Our commodity sales and services operations
include:

- the purchase, sale, marketing and delivery of natural gas, electricity,
liquids and other commodities;

- the restructuring of existing long-term contracts; and

- the management of our commodity portfolios.

In addition, we provide risk management products and services to energy
customers that hedge movements in price and location-based price differentials.
Our risk management products and services are designed to provide stability to
customers in markets impacted by commodity price volatility. Also included in
this business is the management of certain operating assets that directly relate
to this business, including domestic intrastate pipeline and storage facilities.

Energy Assets and Investments. In the assets and investments business, we
manage and operate a large portfolio of assets related to natural gas,
electricity and communications and offer financing alternatives to customers.
Activities include developing, constructing, operating and managing a large
portfolio of energy assets, including power plants and natural gas pipelines. We
also provide capital to energy and communication customers seeking debt or
equity financing.

Retail Energy Services

Enron Energy Services is a nationwide provider of energy outsource products
to U.S. business customers. This includes sales of natural gas and electricity
and energy management services directly to commercial and industrial customers,
as well as investments in related businesses. Enron Energy Services provides
end-users with a broad range of energy products and services at competitive
prices. These products and services include energy tariff and information
management, demand-side services and financial services.

Exploration and Production

Our natural gas and crude oil exploration and production operations are
currently conducted by EOG. We currently own a majority of the outstanding
common stock of EOG. EOG is an independent (non-integrated) oil and gas company
engaged in the exploration for, and development, production and marketing of,
natural gas and crude oil primarily in major producing basins in the United
States, as well as in Canada, Trinidad and, to a lesser extent, selected other
international areas. At December 31, 1998, EOG's estimated net proved reserves
were

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<PAGE> 12

approximately 5.9 trillion cubic feet equivalent, including approximately 1.2
trillion cubic feet of proved undeveloped methane reserves in Big Piney deep
Paleozoic formations in Wyoming. At such date, approximately 53% of EOG's
reserves (on a natural gas equivalent basis) was located in the United States,
9% in Canada, 18% in Trinidad, 18% in India and 2% in other countries. EOG's
reserves were 89% natural gas and 11% crude oil and other.

Following the Share Exchange and the consummation of the concurrent
offering of EOG common stock, assuming the underwriters fully exercise their
over-allotment option, we will own approximately 13.4% of the outstanding shares
of EOG common stock. As a result of the Share Exchange, we will be involved in
the exploration for and production of natural gas and crude oil primarily in
India and China through EOGI-India, Inc.

Communications

We are building a long-haul fiber-optic network on strategic routes
throughout the United States to create the nation's first Pure IPSM (Internet
Protocol) backbone known as the Enron Intelligent Network (EIN). The EIN, which
is enabled with intelligent messaging software, enhances our existing national
fiber-optic network to bring to market a reliable, bandwidth-on-demand platform
for delivering data, applications and streaming rich media to the desktop. Our
strategy is based on a business model that offers immediate national reach while
minimizing capital deployed through strategic alliances with industry technology
leaders whose presence, customer access, market share, and content enable our
company to efficiently enter this new, emerging marketplace.

RECENT DEVELOPMENTS

On July 13, 1999, we announced earnings results for the quarter ended June
30, 1999. For the second quarter of 1999, we generated after-tax earnings of
$0.54 per diluted share, compared to $0.42 for the second quarter of 1998. Our
total net income was $222 million in the second quarter of 1999 and $145 million
in the second quarter of 1998. Revenues for the second quarter were $9.7 billion
in 1999 and $6.6 billion in 1998. Also, we announced a two-for-one common stock
split that will be effective August 13, 1999, to shareholders of record as of
July 23, 1999.

On July 21, 1999, two stockholders of EOG filed separate lawsuits
purportedly on behalf of EOG against Enron Corp. and EOG's directors, alleging
that Enron Corp. and EOG's directors breached their fiduciary duties of good
faith and loyalty in approving the Share Exchange. The lawsuits seek to
temporarily and permanently enjoin the Share Exchange and seek compensatory
damages and costs and expenses, including reasonable attorneys' and experts'
fees. Enron Corp., EOG and the EOG directors believe the lawsuits are without
merit and intend to vigorously contest them.

-12-
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA OF ENRON CORP.

The following table presents the selected consolidated financial data of
our company. The data at December 31, 1998, 1997, 1996, 1995 and 1994 and for
the five years ended December 31, 1998 are derived from our audited financial
statements for those years. Selected unaudited financial data at March 31, 1999
and 1998 and for each of the three-month periods ended March 31, 1999 and 1998
reflect, in our opinion, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for
these periods. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of results to be expected for the full year.
The following data should be read in conjunction with the financial statements
and their related notes incorporated by reference in this prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................................... $ 7,632 $ 5,682 $31,260 $20,273 $13,289 $ 9,189 $ 8,984
Costs and expenses
Cost of gas, electricity and other products..... 6,300 4,559 26,381 17,311 10,478 6,733 6,517
Operating expenses.............................. 645 437 2,352 1,406 1,421 1,218 1,124
Oil and gas exploration expenses................ 25 34 121 102 89 79 84
Depreciation, depletion and amortization........ 215 182 827 600 474 432 441
Taxes, other than income taxes.................. 62 58 201 164 137 109 102
Contract restructuring charge................... -- -- -- 675 -- -- --
------- ------- ------- ------- ------- ------- -------
Total costs and expenses.................. 7,247 5,270 29,882 20,258 12,599 8,571 8,268
------- ------- ------- ------- ------- ------- -------
Operating income.................................. 385 412 1,378 15 690 618 716
Other income and deductions
Equity in earnings of unconsolidated
affiliates.................................... 68 44 97 216 215 86 112
Other, net...................................... 80 15 107 334 333 461 116
------- ------- ------- ------- ------- ------- -------
Income before interest, minority interests and
income taxes.................................... 533 471 1,582 565 1,238 1,165 944
Interest and related charges, net................. 175 133 550 401 274 284 273
Dividends on company-obligated preferred
securities of subsidiaries...................... 19 19 77 69 34 32 20
Minority interests................................ 33 25 77 80 75 44 31
Income tax expense (benefit)...................... 53 80 175 (90) 271 285 167
------- ------- ------- ------- ------- ------- -------
Net income before cumulative effect of accounting
charges......................................... 253 214 703 105 584 520 453
Cumulative effect of accounting charges, net of
tax............................................. (131) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income........................................ 122 214 703 105 584 520 453
Preferred stock dividends......................... 4 4 17 17 16 16 15
------- ------- ------- ------- ------- ------- -------
Earnings on common stock.......................... $ 118 $ 210 $ 686 $ 88 $ 568 $ 504 $ 438
======= ======= ======= ======= ======= ======= =======
Earnings per share of common stock
Basic
Before cumulative effect of accounting
changes..................................... $ 0.73 $ 0.69 $ 2.14 $ 0.32 $ 2.31 $ 2.07 $ 1.80
Cumulative effect of accounting changes....... (0.38) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Basic earnings per share...................... $ 0.35 $ 0.69 $ 2.14 $ 0.32 $ 2.31 $ 2.07 $ 1.80
======= ======= ======= ======= ======= ======= =======
Diluted
Before cumulative effect of accounting
changes..................................... $ 0.68 $ 0.65 $ 2.02 $ 0.32 $ 2.16 $ 1.94 $ 1.70
Cumulative effect of accounting changes....... (0.35) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Diluted earnings per share.................... $ 0.33 $ 0.65 $ 2.02 $ 0.32 $ 2.16 $ 1.94 $ 1.70
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets...................................... $32,699 $23,802 $29,350 $22,552 $16,137 $13,239 $11,966
Long-term debt.................................... 9,419 6,835 7,357 6,254 3,349 3,065 2,805
Minority interests................................ 2,125 1,153 2,143 1,147 755 549 290
Company-obligated preferred securities of
subsidiaries.................................... 1,001 993 1,001 993 592 377 377
Shareholders' equity.............................. 8,824 5,814 7,048 5,618 3,723 3,165 2,880
</TABLE>

-13-
<PAGE> 14

CAPITALIZATION

The following table sets forth our consolidated capitalization as of March
31, 1999 and as adjusted to give effect to the issuance on April 7, 1999 of
400,000,000 EUR (approximately $430,000,000) aggregate principal amount of Notes
due 2005, the issuance on May 24, 1999 of $500,000,000 aggregate principal
amount of Notes due 2019 and the issuance of the Exchangeable Notes offered by
this prospectus, and the use of the proceeds from the sale of the Exchangeable
Notes. See "Use of Proceeds."

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt
Notes payable............................................. $ -- $ --
Current maturities of long-term debt...................... -- --
------- -------
Total short-term debt............................. -- --
------- -------
Long-term debt

Enron:
Amount reclassified from short-term debt............... 1,862 747
Notes due 2001-2028 (6.40% to 9.88%)................... 3,343 3,343
Notes due 1999-2000 (floating)......................... 400 400
Other.................................................. 18 18
Notes due 2005 (4.38%)................................. -- 430
Notes due 2019 (7.38%)................................. -- 500
Exchangeable Notes due 2002............................ -- 200
Subsidiary companies:
Notes due 1999-2035 (4.60% to 12.00%).................. 2,685 2,685
Notes due 1999-2031 (floating)......................... 752 752
Other.................................................. 50 50
Enron:
Senior subordinated debentures due 2005-2012........... 350 350
Unamortized debt discount and premium..................... (41) (50)
------- -------
Total long-term debt.............................. 9,419 9,425
------- -------
Minority interests.......................................... 2,125 2,125
------- -------
Company-obligated preferred securities of subsidiaries...... 1,001 1,001
------- -------
Shareholders' equity
Convertible preferred stock............................... 1,131 1,131
Common stock.............................................. 6,249 6,249
Retained earnings......................................... 2,256 2,256
Cumulative foreign currency translation adjustment........ (711) (711)
Common stock held in treasury............................. (50) (50)
Other, including Flexible Equity Trust.................... (51) (51)
------- -------
Total shareholders' equity........................ 8,824 8,824
------- -------
Total capitalization.............................. $21,369 $21,375
======= =======
</TABLE>

USE OF PROCEEDS

We expect to receive approximately $ million in net proceeds from the
issuance of the Exchangeable Notes, or approximately $ million if the
underwriters fully exercise their over-allotment option, after deducting the
underwriting commission and estimated expenses payable by our company. We
currently anticipate using substantially all of the proceeds to repay existing
short-term debt that had a weighted average interest rate of % per year as
of , 1999.

-14-
<PAGE> 15

RATIO OF ENRON CORP.'S EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------
1999 1998 1997 1996 1995 1994
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 2.36 2.08 1.02 3.00 2.92 2.34
</TABLE>

PRICE RANGE OF EOG COMMON STOCK AND CASH DIVIDENDS

The following table sets forth, for the periods indicated, the high and low
sale prices per share for the EOG common stock, as reported on the NYSE, and the
amount of cash dividends paid per share.

<TABLE>
<CAPTION>
PRICE RANGE
---------------- CASH
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1997
First Quarter....................................... $27.00 $19.88 $0.03
Second Quarter...................................... 21.75 17.50 0.03
Third Quarter....................................... 25.06 17.69 0.03
Fourth Quarter...................................... 23.81 18.50 0.03
1998
First Quarter....................................... $24.13 $18.56 $0.03
Second Quarter...................................... 24.50 18.13 0.03
Third Quarter....................................... 20.69 11.75 0.03
Fourth Quarter...................................... 18.50 12.69 0.03
1999
First Quarter....................................... $18.44 $15.69 $0.03
Second Quarter...................................... 21.50 16.00 0.03
Third Quarter (through July 21, 1999)............... 21.44 19.25 --
</TABLE>

The last reported sale price of the EOG common stock on the NYSE on July
21, 1999 is set forth on the cover page of this prospectus. As of July 1, 1999,
there were approximately 430 record holders of EOG common stock, including
individual participants in security position listings. There are an estimated
20,000 beneficial owners of EOG common stock, including shares held in street
name.

EOG has declared a regular quarterly dividend of $0.03 per share on the EOG
common stock, payable July 30, 1999 to shareholders of record as of July 15,
1999. EOG has advised us that it expects to continue to pay dividends on its
common stock. However, any future dividend payments will depend on, among other
things, its financial condition, funds from operations, level of exploration,
exploitation and development expenditures and future business prospects.

RELATIONSHIP BETWEEN ENRON CORP. AND EOG

After the Share Exchange, our ownership of EOG will be reduced to
20,000,000 shares of common stock. We may not sell these remaining shares of EOG
common stock for a period of six months after the Share Exchange, except that we
may sell up to 4,050,000 shares of EOG common stock to satisfy the underwriters'
over-allotment option in the concurrent EOG common stock offering. Consummation
of the offering of the Exchangeable Notes is conditioned upon the prior
completion of the Share Exchange.

On the closing of the Share Exchange, the EOG board of directors will be
reduced to five members, and all of our officers and directors currently serving
as EOG directors will resign from

-15-
<PAGE> 16

the EOG board. EOG has the right to use the name "Enron Oil & Gas Company" for a
six month period after the Share Exchange.

We currently provide EOG with various services, such as maintenance of
employee benefit plans, provision of some telecommunications and computer
support services, lease of office space and the provision of some purchasing and
operating services and other corporate staff and support services. For up to one
year after the Share Exchange, EOG has the right to continue to use these
services. However, we expect EOG to transition away from using these services as
soon as reasonably convenient for both EOG and us.

EOG and Enron Corp. have in the past entered into material transactions and
agreements incident to our respective businesses. Such transactions and
agreements have related to, among other things, the purchase and sale of natural
gas and crude oil and hedging and trading activities. Those transactions and
agreements currently in place will continue after the Share Exchange, and we do
not expect any material changes to such transactions and agreements that would
not otherwise occur in a third party transaction. EOG and Enron Corp. may enter
into similar types of transactions and agreements in the future. We intend that
the terms of any future transactions and agreements between us and EOG will be
at least as favorable to us as could be obtained from other third parties.

For further detail of our relationship with EOG after the Share Exchange
and the status of specific intercompany agreements, please refer to the Share
Exchange Agreement filed as an exhibit to the registration statement that
includes this prospectus.

DESCRIPTION OF THE EXCHANGEABLE NOTES

The Exchangeable Notes will be issued under an indenture dated as of
November 1, 1985, as supplemented, between our company and Harris Trust and
Savings Bank, as the Trustee. We have filed a copy of the indenture as an
exhibit to the registration statement of which this prospectus is a part. We
have summarized the material provisions of the indenture below. This summary
does not restate the indenture in its entirety. We urge you to read the
indenture because it, and not this summary, defines your rights as holders of
the Exchangeable Notes.

GENERAL

The Exchangeable Notes will be our unsecured and unsubordinated senior
indebtedness. They will rank equally with all of our other general senior
unsecured and unsubordinated indebtedness. The indenture does not limit the
amount of debt securities that we can issue. In addition, the indenture provides
that debt securities may be issued under the indenture in series up to the
aggregate principal amount that may be authorized from time to time by our
company. The Exchangeable Notes will constitute a single series of debt
securities issued under the indenture. The aggregate number of Exchangeable
Notes to be issued will be 10,000,000 plus any additional Exchangeable Notes
issued in connection with the over-allotment option that we granted to the
underwriters. The Exchangeable Notes will mature on , 2002. The
indenture does not protect holders of the Exchangeable Notes in the event of a
highly leveraged transaction except as may be described under "Limitations on
Mortgages and Liens" below.

Each of the Exchangeable Notes will be issued with a principal amount of
$ . Each Exchangeable Note will bear interest at an annual rate of
% or approximately $ per year from the date the Exchangeable
Notes are issued, or from the most recent date on which interest has been paid
or provided for, until the Exchangeable Notes are exchanged at maturity. We will
pay interest on the Exchangeable Notes quarterly in arrears on January 31, April
30, July 31, and October 31, commencing , 1999, to the persons in
whose names the Exchangeable Notes are registered at the close of business on
the January 15, April 15, July 15 and October 15 immediately preceding such
interest payment date. However,

-16-
<PAGE> 17

interest payable at maturity will be payable to the person to whom the principal
is payable. Interest on the Exchangeable Notes will be computed on the basis of
a 360-day year of twelve 30-day months. If an interest payment date falls on a
day that is not a business day or that is a legal holiday on which the corporate
trust office of the trustee or banking institutions in the place of payment are
authorized or required to close, the interest payment to be made on such
interest payment date will be made on the next succeeding business day. In such
event, no additional interest will accrue as a result of the delayed payment.

MANDATORILY EXCHANGEABLE

At maturity, the Exchangeable Notes will be mandatorily exchanged by our
company into a number of shares of EOG common stock at the exchange rate. The
exchange rate is equal to:

(1) if the market price of EOG common stock at maturity of the Exchangeable
Notes is greater than or equal to $ , of a share of EOG
common stock per Exchangeable Note;

(2) if the market price of EOG common stock at maturity of the Exchangeable
Notes is less than $ but is greater than $ , a
fraction of a share of EOG common stock per Exchangeable Note equal to
$ divided by the market price of EOG common stock at
maturity of the Exchangeable Notes; and

(3) if the market price of EOG common stock at maturity of the Exchangeable
Notes is less than or equal to $ , one share of EOG common
stock per Exchangeable Note.

The exchange rate may be adjusted as described below under "Dilution
Adjustments."

The market price of the EOG common stock at maturity of the Exchangeable
Notes is defined under the indenture as the average closing price per share of
EOG common stock for the 20 trading days immediately prior to (but not
including) the date of maturity of the Exchangeable Notes.

The closing price of any security on any date of determination is defined
under the indenture as:

(1) the closing sale price (or, if no closing sale price is reported, the
last reported sale price) of such security (regular way) on the NYSE on
such date; or

(2) if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed;
or

(3) if such security is not so listed on a United States national or
regional securities exchange, as reported by the Nasdaq Stock Market;
or

(4) if such security is not so reported, the last quoted bid price for such
security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization; or

(5) if such security is not so quoted, the market value of such security on
such date as determined by a nationally recognized independent
investment banking firm retained by us for this purpose.

A trading day is defined under the indenture as a business day on which the
subject security:

(1) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of
business; and

(2) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary
market for the trading of such security.

-17-
<PAGE> 18

A business day is defined under the indenture as any day that is not a
Saturday, a Sunday or a day on which the NYSE, banking institutions or trust
companies in The City of New York are authorized or obligated by law or
executive order to close.

Interest on the Exchangeable Notes will be payable, and delivery of EOG
common stock in exchange for the Exchangeable Notes at their maturity will be
made upon surrender of such Exchangeable Notes, at the office or agency of our
company maintained for such purposes. Initially such office will be the
principal corporate trust office of the Trustee, currently 111 West Monroe,
Chicago, Illinois 60603 or at the Trustee's office maintained for such purpose
in New York, New York. However, the payment of interest may be made at our
option by check mailed to the persons in whose names the Exchangeable Notes are
registered at the close of business on the January 15, April 15, July 15 and
October 15 preceding the interest payment date.

The Exchangeable Notes will be transferrable. The holders will not be
assessed a service charge for any transfer except for any tax or governmental
charge payable in connection with the transfer.

The indenture does not restrict our ability to sell, pledge or convey the
EOG common stock that we own. In addition, no shares of EOG common stock will be
pledged or held in escrow for use at maturity of the Exchangeable Notes.
Consequently, in the event of a bankruptcy, insolvency or liquidation of our
company, the EOG common stock owned by our company will be subject to the claims
of our creditors. Holders of the Exchangeable Notes will not be entitled to any
rights with respect to the EOG common stock (including without limitation voting
rights and rights to receive any dividends or other distributions in respect of
the EOG common stock) until we deliver shares of EOG common stock to holders of
the Exchangeable Notes at maturity and the applicable record date, if any, for
the exercise of such rights occurs after such date.

DILUTION ADJUSTMENTS

The exchange rate is subject to adjustment if EOG:

(1) pays a stock dividend or makes a distribution with respect to EOG
common stock in shares of EOG common stock;

(2) subdivides or splits its outstanding shares of EOG common stock;

(3) combines the outstanding shares of EOG common stock into a smaller
number of shares;

(4) issues by reclassification of the outstanding shares of EOG common
stock any shares of common stock of EOG;

(5) issues rights or warrants to all holders of EOG common stock entitling
them to subscribe for or purchase shares of EOG common stock at a price
per share less than the market price of the EOG common stock, other
than rights to purchase EOG common stock pursuant to a plan for the
reinvestment of dividends or interest; or

(6) pays a dividend or makes a distribution to all holders of EOG common
stock of evidences of indebtedness or other assets, excluding any
dividends or distributions referred to in clause (1) above or any cash
dividends other than any extraordinary cash dividends, as defined
below, or issues to all holders of EOG common stock rights or warrants
to subscribe for or purchase any of its securities, other than those
referred to in clause (5) above.

In the case of the events referred to in clauses (1), (2), (3) and (4)
above, the exchange rate in effect immediately prior to such event will be
adjusted so that the holder of any Exchangeable Notes will thereafter be
entitled to receive, upon mandatory exchange of the
-18-
<PAGE> 19

Exchangeable Notes at maturity, the number of shares of EOG common stock that
such holder would have owned or been entitled to receive immediately following
any event described above had such Exchangeable Notes been exchanged immediately
prior to such event on any record date with respect to such event.

In the case of the event referred to in clause (5) above, the exchange rate
will be adjusted by multiplying the exchange rate in effect immediately prior to
the date of issuance of the rights or warrants referred to in clause (5) above,
by a fraction, the numerator of which will be the number of shares of EOG common
stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional shares of EOG
common stock offered for subscription or purchase pursuant to such rights or
warrants, and the denominator of which will be the number of shares of EOG
common stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional shares of EOG
common stock that the aggregate offering price of the total number of shares of
EOG common stock so offered for subscription or purchase pursuant to such rights
or warrants would purchase at the market price (determined as the average
closing price per share of EOG common stock for the 20 trading days immediately
prior to the date such rights or warrants are issued), which shall be determined
by multiplying such total number of shares by the exercise price of such rights
or warrants and dividing the product so obtained by such market price. To the
extent that shares of EOG common stock are not delivered after the expiration of
such rights or warrants, the exchange rate will be readjusted to the exchange
rate which would then be in effect had such adjustments for the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of EOG common stock actually delivered.

In the case of the event referred to in clause (6) above, the exchange rate
will be adjusted by multiplying the exchange rate in effect on the record date
by a fraction, the numerator of which will be the market price per share of the
EOG common stock on the record date for the determination of stockholders
entitled to receive the dividend or distribution referred to in clause (6) above
(such market price being determined as the average closing price per share of
EOG common stock for the 20 trading days immediately prior to such record date),
and the denominator of which will be such market price per share of EOG common
stock less the fair market value (as determined by our board of directors, whose
determination will be conclusive, and described in a resolution adopted with
respect thereto) as of such record date of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights or
warrants applicable to one share of EOG common stock.

The indenture defines an extraordinary cash dividend to mean, with respect
to any 365-day period, all cash dividends on the EOG common stock during such
period to the extent such dividends exceed on a per share basis 10% of the
average closing price of the EOG common stock over such period, less any such
dividends for which a prior adjustment to the exchange rate was previously made.

All adjustments to the exchange rate will be calculated to the nearer
1/10,000th of a share of EOG common stock (or if there is not a nearer
1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment in
the exchange rate will be required unless such adjustment would require an
increase or decrease of at least one percent in the exchange rate. However, any
adjustments which by reason of the foregoing are not required to be made will be
carried forward and taken into account in any subsequent adjustment.

In the event of:

(1) any consolidation or merger of EOG, or any surviving entity or
subsequent surviving entity of EOG, with or into another entity (other
than a merger or consolidation in which EOG is the continuing
corporation and in which the EOG common stock outstanding

-19-
<PAGE> 20

immediately prior to the merger or consolidation is not exchanged for
cash, securities or other property of EOG or another person);

(2) any sale, transfer, lease or conveyance to another person of the
property of EOG as an entirety or substantially as an entirety;

(3) any statutory exchange of securities of EOG with another person (other
than in connection with a merger or acquisition); or

(4) any liquidation, dissolution or winding up of EOG (the events described
in (1), (2), (3) and (4) being referred to as reorganization events),

the exchange rate used to determine the amount payable upon exchange at maturity
for each Exchangeable Note will be adjusted to provide that each holder of
Exchangeable Notes will receive at maturity cash in an amount equal to:

(a) if the transaction value, as defined below, is greater than or equal to
$ , multiplied by the transaction value;

(b) if the transaction value is less than $ but greater than
$ , $ ; and

The term transaction value means:

(1) for any cash received in any such reorganization event, the amount of
cash received per share of EOG common stock;

(2) for any property other than cash or securities received in any such
reorganization event, an amount equal to the market value at maturity
of such property received per share of EOG common stock as determined
by a nationally recognized independent investment banking firm retained
by us for this purpose; and

(3) for any securities received in any such reorganization event, an amount
equal to the average closing price per share of such securities for the
20 trading days immediately prior to maturity multiplied by the number
of such securities received for each share of EOG common stock.

Notwithstanding the foregoing, in lieu of delivering cash as provided
above, we may at our option deliver an equivalent value of securities or other
property received in such reorganization event, determined in accordance with
clause (2) or (3) above, as applicable. If we elect to deliver securities or
other property, holders of the Exchangeable Notes will be responsible for the
payment of any and all brokerage and other transaction costs upon the sale of
such securities or other property. The kind and amount of securities into which
the Exchangeable Notes will be exchangeable after consummation of such
transaction shall be subject to adjustment as described in the immediately
preceding paragraph following the date of consummation of such transaction.

We are required, within ten business days after we become aware of the
occurrence of an event that requires an adjustment to the exchange rate, to
provide written notice to the trustee for distribution to all holders of
Exchangeable Notes of the occurrence of such event and a statement in reasonable
detail setting forth the method by which the adjustment to the exchange rate was
determined and setting forth the revised exchange rate.

FRACTIONAL SHARES

No fractional shares of EOG common stock will be issued upon exchange of
the Exchangeable Notes for shares of EOG common stock. If more than one
Exchangeable Note is
-20-
<PAGE> 21

surrendered for exchange at one time by the same holder, the number of full
shares of EOG common stock which are to be delivered upon exchange will be
computed on the basis of the aggregate number of Exchangeable Notes so
surrendered at maturity. In lieu of any fractional share otherwise issuable in
respect of all Exchangeable Notes of any holder which are exchanged at maturity,
such holder will be entitled to receive an amount in cash equal to the value of
such fractional share at the market price of the EOG common stock at maturity.

DELIVERY OF SECURITIES UPON MATURITY

All shares of EOG common stock deliverable to holders of the Exchangeable
Notes upon maturity will be delivered to such holders, whenever practicable, in
a manner to assure same-day transfer of the securities to the holders and
otherwise in the manner customary for delivery of the securities. However, it
may not be possible under market practices prevailing at the maturity of the
Exchangeable Notes to transfer EOG common stock in a manner that assures
same-day transfer of the securities to holders of the Exchangeable Notes.
Accordingly, holders of the Exchangeable Notes may receive all or a portion of
the EOG common stock into which such Exchangeable Notes are exchangeable after
the date of maturity.

REDEMPTION

The Exchangeable Notes are not redeemable prior to maturity and do not
contain sinking fund or other mandatory redemption provisions. The Exchangeable
Notes are not subject to payment at the option of the holder prior to maturity.

LIMITATIONS ON MORTGAGES AND LIENS

The indenture provides that so long as any of the Exchangeable Notes are
outstanding, we will not, and will not permit any of our subsidiaries to,
pledge, mortgage or hypothecate, or permit to exist, except in favor of our
company or any of our subsidiaries, any mortgage, pledge or other lien upon, any
principal properties described below at any time owned by our company, to secure
any indebtedness, unless effective provision is made so that outstanding
Exchangeable Notes will be equally and ratably secured with any and all such
indebtedness and with any other indebtedness similarly entitled to be equally
and ratably secured.

This restriction does not apply to prevent the creation or existence of:

(1) encumbrances on any property held or used by our company or a
subsidiary of our company in connection with the exploration for,
development of or production of other natural resources or synthetic
fuels;

(2) encumbrances on natural resources or synthetic fuels produced or
recovered from any property in which we own an interest;

(3) encumbrances on any property acquired before or after the date of the
indenture, created at the time of acquisition or within one year after
acquisition to secure all or a portion of the purchase price of the
acquisition, or existing on the acquired property on the date of
acquisition, so long as the encumbrance applies only to the acquired
property and fixed improvements to the acquired property;

(4) encumbrances on any property acquired before or after the date of the
indenture by any corporation that is or becomes a subsidiary after the
date of the indenture, so long as the encumbrance

- exists before the time the acquired entity becomes a subsidiary or is
created at the time the acquired entity becomes a subsidiary or within
one year after such time to secure all or a portion of the acquisition
price; and

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- applies only to the properties owned by the acquired entity at the
time it becomes a subsidiary or acquired after the acquisition by it
from sources other than our company or any of our other subsidiaries;

(5) pledges of current assets, in the ordinary course of business, to
secure current liabilities;

(6) deposits to secure public or statutory obligations;

(7) liens to secure indebtedness other than funded debt;

(8) encumbrances on any office, data processing or transportation
equipment;

(9) encumbrances created or assumed by our company or one of our
subsidiaries in connection with the issuance of debt securities the
interest on which is excludable from gross income of the holder of such
security in accordance with the Internal Revenue Code of 1986, as
amended, for the purpose of financing the acquisition or construction
of property to be used by our company or one of our subsidiaries;

(10) pledges or assignments of accounts receivable or conditional sales
contracts or chattel mortgages and evidences of indebtedness secured
thereby received in connection with the sale by our company or one of
our subsidiaries of goods or merchandise to customers; or

(11) other liens or encumbrances specified in the indenture.

However, we or our subsidiaries may issue, assume or guarantee indebtedness
secured by a mortgage that would otherwise be subject to the foregoing
restrictions in an aggregate amount which, together with all other indebtedness
secured by a mortgage which (if originally issued, assumed or guaranteed at such
time) would otherwise be subject to the foregoing restrictions (not including
secured indebtedness permitted under the foregoing exceptions), does not at the
time exceed 10% of the consolidated net tangible assets, defined as total assets
less (a) total current liabilities, excluding indebtedness due within 12 months,
and (b) goodwill, patents and trademarks, of our company as shown on the audited
consolidated financial statements of our company as of the end of the fiscal
year preceding the date of determination.

The holders of at least 50% in principal amount of the outstanding
Exchangeable Notes may waive compliance by our company with the covenant
described above.

The indenture defines the term subsidiary to mean a corporation of which we
own, directly or indirectly, all of the voting shares (that is, shares entitled
to vote for the election of directors, but excluding shares entitled to vote
only on the happening of some contingency unless such contingency has occurred).

The indenture defines the term principal property to mean any oil or gas
pipeline, gas processing plant or chemical plant located in the United States,
except any such property, pipeline or plant that in the opinion of our board of
directors is not of material importance to our total business. The term
principal property does not include any oil or gas property or the production or
any proceeds of production from an oil or gas producing property or the
production or any proceeds of production of gas processing plants or oil or gas
or petroleum products in any pipeline.

The term indebtedness, as applied to our company or any of our
subsidiaries, is defined to mean bonds, debentures, notes and other instruments
representing obligations created or assumed by any such corporation for the
repayment of money borrowed (other than unamortized debt discount or premium).
All indebtedness secured by a lien upon property owned by our company or any of
our subsidiaries and upon which indebtedness any such corporation customarily
pays interest, even though such corporation has not assumed or become liable for

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<PAGE> 23

the payment of such indebtedness, is also deemed to be indebtedness of any such
corporation. All indebtedness for money borrowed incurred by other persons which
is directly guaranteed as to payment of principal by our company or any of our
subsidiaries is for all purposes of the indenture deemed to be indebtedness of
any such corporation, but no other contingent obligation of any such corporation
in respect to indebtedness incurred by other persons is for any purpose deemed
indebtedness of such corporation.

The term indebtedness does not include:

(1) amounts which are payable only out of all or a portion of the natural
resources produced, derived or extracted from properties owned or
developed by such corporation;

(2) any amount representing capitalized lease obligations;

(3) any indebtedness incurred to finance natural resources or synthetic
fuel exploration or development, payable, with respect to principal and
interest, solely out of the proceeds of natural resources or synthetic
fuel to be produced, sold and/or delivered by our company or any of our
subsidiaries;

(4) indirect guarantees or other contingent obligations in connection with
the indebtedness of others, including agreements, contingent or
otherwise, with such other persons or with third persons with respect
to, or to permit or ensure the payment of, obligations of such other
persons, including without limitation, agreements to purchase or
repurchase obligations of such other persons, agreements to advance or
supply funds to or to invest in such other persons or agreements to pay
for property, products or services of such other persons and any demand
charge, throughput, take-or-pay, keep-well, make-whole, cash
deficiency, maintenance of working capital or earnings or similar
agreements; and

(5) any guarantees with respect to lease or other similar periodic payments
to be made by other persons.

The term funded debt as applied to any corporation means all indebtedness
incurred, created, assumed or guaranteed by such corporation, or upon which it
customarily pays interest charges, which matures, or is renewable by such
corporation to a date, more than one year after the date as of which funded debt
is being determined. However, the term funded debt will not include:

(1) indebtedness incurred in the ordinary course of business representing
borrowings, regardless of when payable, of such corporation from time
to time against, but not in excess of the face amount of, its
installment accounts receivable for the sale of appliances and
equipment sold in the regular course of business; or

(2) advances for construction and security deposits received by such
corporation in the ordinary course of business.

BOOK-ENTRY SYSTEM

It is expected that the Exchangeable Notes will be issued in the form of
one or more global securities deposited with The Depository Trust Company
("DTC") and registered in the name of a nominee of DTC.

DTC has advised us and the underwriters that it is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities of persons
who have accounts with DTC, otherwise known as participants, and to

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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 certificates. Such participants include securities brokers and dealers,
banks, trust companies and other clearing corporations. Indirect access to DTC's
book-entry system also is available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly. The rules applicable to DTC and
its participants are on file with the SEC.

Upon the issuance of a global security, DTC or its nominee will credit the
respective Exchangeable Notes represented by such global security to the
accounts of participants. The accounts to be credited initially shall be
designated by the underwriters. Ownership of beneficial interests in the global
securities will be limited to participants or persons that may hold interests
through participants.

So long as DTC or its nominee, is the registered owner of the Exchangeable
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Exchangeable Notes represented by such global security
for the purposes of receiving payment on the Exchangeable Notes, receiving
notices and for all other purposes under the indenture. Except as provided
below, owners of beneficial interests in a global security will not be entitled
to have Exchangeable Notes represented by such global security registered in
their names, will not receive or be entitled to receive physical delivery of
Exchangeable Notes in definitive form and will not be considered the owners or
holders of the Exchangeable Notes under the indenture.

The laws of some states require that certain persons take physical delivery
of securities in definitive form. Consequently, the ability to transfer
beneficial interests in a global security to such persons may be impaired.
Because DTC can only act on behalf of participants, who in turn act on behalf of
others, such as securities brokers and dealers, banks and trust companies
("indirect participants"), the ability of a person having a beneficial interest
in a global security to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be impaired by the lack of a physical certificate of such
interest.

Any payment of principal, premium or interest on Exchangeable Notes
registered in the name of DTC or its nominee represented by any such global
security will be made to DTC or its nominee, as the case may be, as the sole
registered owner of the global security representing the Exchangeable Notes.
Neither we, the trustee, any agent of ours or the trustee or any underwriter
will have any responsibility or liability for any aspect of DTC's records
relating to or payments made on account of beneficial ownership interests in a
global security representing any Exchangeable Notes, for maintaining,
supervising or reviewing any of DTC's records relating to such beneficial
ownership interests or for any action taken or omitted to be taken by DTC or any
participant.

We expect that DTC or its nominee, upon receipt of any payment of
principal, premium or interest, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such global security as shown on the records of DTC
or its nominee. We also expect that payments by participants to owners of
beneficial interests in a global security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name", and will
be the sole responsibility of such participants.

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A global security may not be transferred except as a whole by DTC to a
nominee of DTC, except as otherwise provided in the indenture. A global security
representing Exchangeable Notes is exchangeable only if:

(1) DTC notifies us that it is unwilling or unable to continue as
depositary for such global security or if at any time DTC ceases to be
a clearing agency registered under the Exchange Act and we fail to
appoint a successor depositary within 90 days;

(2) we determine that such global security will be exchangeable; or

(3) an event of default under the indenture occurs and continues or an
event which with the giving of notice or lapse of time or both would
constitute an event of default with respect to the Exchangeable Notes.

Any global security that is exchangeable pursuant to the preceding
paragraph will be exchangeable for certificates in definitive form representing
Exchangeable Notes issuable in such denominations and in such names as the
depositary holding such global security directs. Subject to the foregoing, the
global security is not exchangeable, except for a global security of like
denomination to be registered in the name of DTC or its nominee.

DTC has further advised us that management of DTC is aware that some
computer applications, systems, and the like for processing data that are
dependent upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000" problems. DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to security
holders, book-entry deliveries, and settlement of trades within DTC, continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which DTC reports is complete. Additionally, DTC's
plan includes a testing phase, which DTC expects to be completed within
appropriate time frames.

However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as the DTC's direct and indirect participants and third party vendors from
whom DTC licenses software and hardware, and third party vendors on whom DTC
relies for information or the provision of services, including telecommunication
and electrical utility service providers, among others. DTC has informed the
industry that it is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to: (1) impress upon them the importance
of such services being Year 2000 compliant; and (2) determine the extent of
their efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.

According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.

Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in global securities among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither we, the Trustee, any
underwriter nor any paying agent will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.

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<PAGE> 26

EVENTS OF DEFAULT

An event of default under the indenture with respect to the Exchangeable
Notes is defined as being:

(1) default for 30 days in payment of any installment of interest on the
Exchangeable Notes;

(2) default in the payment of any principal on the Exchangeable Notes at
their maturity;

(3) default in performance of any of our covenants or warranties in the
indenture for the benefit of the Exchangeable Notes that is not
remedied within 60 days after we receive written notice of the default
from the trustee or the holders of not less than 25% in principal
amount of the Exchangeable Notes then outstanding; and

(4) the bankruptcy, insolvency or reorganization of our company as
described in the indenture.

The indenture provides that if an event of default has occurred and is
continuing, either the trustee or the holders of not less than 25% in aggregate
principal amount of the then outstanding Exchangeable Notes may accelerate the
maturity of the Exchangeable Notes by declaring the principal of all the
Exchangeable Notes, together with accrued interest, to be due and payable
immediately. Generally, such declaration may be annulled by the holders of a
majority in principal amount of the Exchangeable Notes then outstanding. In
addition, past defaults may be waived by the holders of a majority in principal
amount of the Exchangeable Notes then outstanding as were entitled to declare
such default, except a default in the payment of the principal or interest on
the Exchangeable Notes or in respect of a covenant or provision of the indenture
which cannot be modified or amended without the approval of the holder of each
Exchangeable Note so affected.

The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during a default to act with the required standard of care,
to be indemnified by the holders of Exchangeable Notes before proceeding to
exercise any right or power under the indenture at the request of the holders of
the Exchangeable Notes. The indenture also provides that the holders of a
majority in principal amount of the outstanding Exchangeable Notes may 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 Exchangeable Notes.

We have agreed to file annually with the trustee a certificate as to the
absence of any default or specifying any default that exists.

SATISFACTION AND DISCHARGE

The indenture will be satisfied and discharged with respect to the
Exchangeable Notes when:

(1) either:

- all Exchangeable Notes previously authenticated and delivered have
been delivered to the trustee canceled or for cancellation; or

- all Exchangeable Notes not previously delivered to the trustee
canceled or for cancellation (a) have become due and payable or (b)
will become due and payable at their maturity within one year and we,
in the case of (a) or (b) above, have deposited with the trustee an
amount sufficient to pay and discharge the entire indebtedness of the
Exchangeable Notes for principal and interest to the date of such
deposit (in the case of the Exchangeable Notes which have become due
and payable), or to the maturity date, as the case may be;

(2) we have paid or caused to be paid all other sums payable under the
indenture by our company with respect to the Exchangeable Notes; and

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(3) we have delivered to the trustee an officer's certificate and an
opinion of counsel each stating that all conditions precedent to the
satisfaction and discharge of the Exchangeable Notes have been complied
with.

MODIFICATION, WAIVER AND MEETINGS

We and the trustee, with the consent of the holders of not less than 50% in
principal amount of the Exchangeable Notes then outstanding, may execute
supplemental indentures amending any provisions of the indenture or modifying
the rights of the holders of Exchangeable Notes. However, we may not, without
the consent of the holders of all outstanding Exchangeable Notes:

(1) change the final maturity of the principal of, or installment of
interest, if any, on, any Exchangeable Notes;

(2) reduce the principal amount of the Exchangeable Notes or the interest
on the Exchangeable Notes;

(3) change the maturity of or reduce the amount of any payment to be made
with respect to the Exchangeable Notes;

(4) change the currency in which the principal of or interest on the
Exchangeable Notes is denominated or payable;

(5) impair the right to institute suits for the enforcement of any payment
on or after the maturity of the Exchangeable Notes; or

(6) reduce the percentage in principal amount of the outstanding
Exchangeable Notes required to consent to the adoption of any
supplemental indenture, or any waiver of compliance with certain
provisions of the indenture.

The holders of a majority in aggregate principal amount of the outstanding
Exchangeable Notes may on behalf of all holders of the Exchangeable Notes waive
any past default under the indenture with respect to the Exchangeable Notes,
except a default in the payment of principal or interest or a covenant or
provision that cannot be modified or amended without the consent of the holders
of each outstanding Exchangeable Note, and waive compliance by our company with
certain other provisions of the indenture.

The indenture contains provisions for convening meetings of the holders of
the Exchangeable Notes. A meeting may be called at any time by the trustee, by
our company or the holders of at least 25% in aggregate principal amount of the
outstanding Exchangeable Notes. Any resolution passed or decision taken at any
meeting of holders of the Exchangeable Notes duly held in accordance with the
indenture will be binding on all holders of the Exchangeable Notes.

CONSOLIDATION, MERGER AND SALE OF ASSETS

We covenant that we will not merge or consolidate or sell or convey all or
substantially all of our assets unless the successor corporation is our company
or a domestic corporation which assumes our obligations under the Exchangeable
Notes and under the indenture, and after giving effect to the transaction we or
the successor corporation would not be in default under the indenture.

CONCERNING THE TRUSTEE

Harris Trust and Savings Bank is the trustee under the indenture. We
conduct other banking transactions with the trustee in the ordinary course of
business.

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GOVERNING LAW

The indenture and each Exchangeable Note will be deemed to be contracts
under the law of the State of Texas and for all purposes will be construed in
accordance with the law of such state.

SAME-DAY FUNDS SETTLEMENT SYSTEM AND PAYMENT

Settlement for the Exchangeable Notes will be made by the underwriters in
immediately available funds. All payments of principal and interest on the
global securities will be made by us in immediately available funds.

The Exchangeable Notes will trade in DTC's same-day funds settlement system
until maturity, and secondary market trading activity in the Exchangeable Notes
will therefore be required by DTC to settle in immediately available funds.

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax
consequences that may be relevant to a "U.S. person." A U.S. person is:

- a citizen or resident of the United States,

- a corporation or partnership created or organized under the laws of the
United States,

- an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or

- a trust which is subject to the supervision of a court within the United
States and the control of a United States person as described in Section
7701(a)(30) of the Internal Revenue Code of 1986

who is the beneficial owner of an Exchangeable Note (a "U.S. holder"). Vinson &
Elkins L.L.P., special tax counsel to our company, has advised us that the
conclusions of law expressed in the following summary represent the opinion of
Vinson & Elkins L.L.P. All references to "holders" (including U.S. holders) are
to beneficial owners of the Exchangeable Notes. This summary is based on U.S.
federal income tax laws, regulations, rulings and decisions in effect as of the
date of this prospectus (or, in the case of certain Treasury regulations in
proposed form, as of such date), all of which are subject to change at any time
(possibly with retroactive effect). Because such laws, regulations, rulings and
decisions are technical and complex, the discussion below necessarily represents
only a general summary.

This summary addresses the U.S. federal income tax consequences to U.S.
holders who are initial holders of the Exchangeable Notes, who purchase the
Exchangeable Notes at the offering price set forth on the cover page of this
prospectus and who will hold the Exchangeable Notes and, if applicable, the EOG
common stock as capital assets. This summary does not address all aspects of
federal income taxation that may be relevant to a particular U.S. holder in
light of the holder's individual investment circumstances or to certain types of
U.S. holders subject to special treatment under the U.S. federal income tax
laws, such as:

- dealers in securities or foreign currency;

- financial institutions;

- insurance companies;

- tax-exempt organizations; and

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- taxpayers holding the Exchangeable Notes as part of a "straddle,"
"hedge," "conversion transaction," "synthetic security," or other
integrated investment.

Moreover, this summary does not discuss the effect of any applicable state,
local or foreign tax laws.

No statutory, judicial or administrative authority directly addresses the
characterization of the Exchangeable Notes or instruments similar to the
Exchangeable Notes for U.S. federal income tax purposes. As a result,
significant aspects of the U.S. federal income tax consequences of an investment
in the Exchangeable Notes are not certain. We are not requesting a ruling from
the IRS with respect to the Exchangeable Notes, and we cannot assure you that
the IRS will agree with the conclusions in this summary. In addition, although
Vinson & Elkins L.L.P. has given its opinion confirming the conclusions of law
expressed in this summary, Vinson & Elkins L.L.P. has stated it could give no
opinion with respect to the specific tax consequences of owning or disposing of
Exchangeable Notes, including the characterization of Exchangeable Notes for
U.S. federal income tax purposes. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING
A TAX-EXEMPT INVESTOR) IN THE EXCHANGEABLE NOTES SHOULD CONSULT ITS OWN TAX
ADVISOR IN DETERMINING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE EXCHANGEABLE
NOTES, INCLUDING THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.

Pursuant to the terms of the indenture, we and every holder of an
Exchangeable Note will be obligated (in the absence of an administrative
determination or judicial ruling to the contrary) to characterize an
Exchangeable Note for all tax purposes as a forward purchase contract to
purchase EOG common stock at maturity (including as a result of acceleration or
otherwise). Under the terms of the forward contract:

- at the time of issuance of the Exchangeable Notes the holder deposits
irrevocably with our company a fixed amount of cash equal to the initial
price of the Exchangeable Notes to assure the fulfillment of the holder's
purchase obligation described in the third clause below;

- until maturity our company will be obligated to pay interest on the
deposit at a rate equal to the stated rate of interest on the
Exchangeable Notes as compensation to the holder for our use of the cash
deposit during the term of the Exchangeable Notes; and

- at maturity the cash deposit unconditionally and irrevocably will be
applied by our company in full satisfaction of the holder's obligation
under the forward purchase contract, and we will deliver to the holder
the number of shares of EOG common stock that the holder is entitled to
receive at the time pursuant to the terms of the Exchangeable Notes.

Consistent with the above characterization, (1) amounts paid to our company in
respect of the original issue of an Exchangeable Note will be treated as
allocable in their entirety to the amount of the cash deposit attributable to
such Exchangeable Note, and (2) amounts denominated as interest that are payable
with respect to the Exchangeable Notes will be characterized as interest payable
on the amount of such deposit, includible annually in the income of a U.S.
holder as interest income in accordance with the holder's method of accounting.
(Prospective investors should note that cash proceeds of this offering will not
be segregated by our company during the term of the Exchangeable Notes, but
instead will be commingled with our other assets and applied in a manner
consistent with the "Use of Proceeds" discussion above.)

Under the above characterization of the Exchangeable Notes, a U.S. holder's
tax basis in an Exchangeable Note generally will equal the holder's cost for
that Exchangeable Note. Upon the sale or other taxable disposition of an
Exchangeable Note, a U.S. holder generally will recognize gain or loss equal to
the difference between the amount realized on the sale or other taxable
disposition and the U.S. holder's tax basis in the Exchangeable Note. Such gain
or loss generally
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will be long-term capital gain or loss if the U.S. holder has held the
Exchangeable Note for more than one year at the time of disposition.

Under the above characterization of the Exchangeable Notes, if we deliver
EOG common stock at maturity, a U.S. holder will recognize no gain or loss on
the purchase of EOG common stock against application of the monies received by
our company in respect of the Exchangeable Notes. A U.S. holder will have a tax
basis in the EOG common stock equal to the U.S. holder's tax basis in the
Exchangeable Notes (less the portion of the tax basis of the Exchangeable Notes
allocable to any fractional share, as described in the next sentence). A U.S.
holder will recognize gain or loss (which will be short-term capital gain or
loss) with respect to cash received in lieu of fractional shares, in an amount
equal to the difference between the cash received and the portion of the basis
of the Exchangeable Notes allocable to fractional shares (based on the relative
number of fractional shares and full shares delivered to the holder).

Due to the absence of authority as to the proper characterization of the
Exchangeable Notes, we cannot assure you that the IRS will accept, or that a
court will uphold, the characterization and tax treatment described above. In
particular, the IRS could seek to analyze the federal income tax consequences of
owning an Exchangeable Note under Treasury regulations promulgated in June 1996
governing contingent payment debt instruments (the "Contingent Payment
Regulations"). The Contingent Payment Regulations apply to debt instruments
issued on or after August 13, 1996. The Contingent Payment Regulations are
complex, but very generally apply the original issue discount rules of the
Internal Revenue Code of 1986 to a contingent payment debt instrument by
requiring that original issue discount be accrued every year at a "comparable
yield" for the issuer of the instrument, determined at the time of issuance of
the obligation. In addition, the Contingent Payment Regulations require that a
projected payment schedule, which results in such a "comparable yield," be
determined, and that adjustments to income accruals be made to account for
differences between actual payments and projected amounts. To the extent that
the comparable yield as so determined exceeds the interest actually paid on a
contingent debt instrument, the owner of that instrument recognizes ordinary
interest income in excess of the cash the owner receives. In addition, any gain
realized on the sale, exchange or redemption of a contingent payment debt
instrument is treated as ordinary income. Any loss realized on such sale,
exchange or redemption is treated as an ordinary loss to the extent the U.S.
holder's original issue discount inclusions with respect to the obligation
exceed prior reversals of such inclusions required by the adjustment mechanism
described above. Any loss realized in excess of such amount generally is treated
as a capital loss.

If the IRS argued successfully that the Contingent Payment Regulations
applied to the Exchangeable Notes, then, among other matters:

- gain realized by a U.S. holder on the sale or other taxable disposition
of an Exchangeable Note generally would be characterized as ordinary
income, rather than as short- or long-term capital gain (depending on
whether the Exchangeable Note had been held for more than one year at the
time of such disposition), and

- a U.S. holder would recognize ordinary income, or ordinary or capital
loss (as the case may be, under the rules summarized above) on the
receipt of shares of EOG common stock, rather than capital gain or loss
upon the ultimate sale of such stock.

Even if the Contingent Payment Regulations do not apply to the Exchangeable
Notes, it is possible that the IRS could seek to characterize the Exchangeable
Notes in a manner that results in tax consequences to initial U.S. holders of
the Exchangeable Notes different from those reflected in the indenture and
described above.

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NON-UNITED STATES PERSONS

In the case of a holder of Exchangeable Notes that is not a U.S. person,
payments made with respect to the Exchangeable Notes should not be subject to
U.S. withholding tax, provided that such holder complies with applicable
certification requirements. Any capital gain realized upon the sale or other
disposition of the Exchangeable Notes by a holder that is not a U.S. person will
generally not be subject to U.S. federal income tax if:

- such gain is not effectively connected with a U.S. trade or business of
such holder and

- in the case of an individual, such individual is not present in the
United States for 183 days or more in the taxable year of the sale or
other disposition of the Exchangeable Notes or the gain is not
attributable to a fixed place of business maintained by such individual
in the United States.

BACKUP WITHHOLDING AND INFORMATION REPORTING

A holder of Exchangeable Notes may be subject to information reporting and
to backup withholding at a rate of 31% of certain amounts paid to the holder
unless such holder provides proof of an applicable exemption or a correct
taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules of the IRS. Any amounts withheld
under the backup withholding rules are not an additional tax and may be refunded
or credited against the U.S. holder's U.S. federal income tax liability,
provided the required information is furnished to the IRS.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and other reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms.

Because our common stock is listed on the New York, Chicago and Pacific
Stock Exchanges, our reports, proxy statements and other information can be
reviewed and copied at the offices of the New York Stock Exchange at 20 Broad
Street, New York, NY 10005, the offices of the Chicago Stock Exchange at 120
South LaSalle Street, Chicago, Illinois 60603, and the offices of the Pacific
Stock Exchange at 301 Pine Street, San Francisco, California 94014.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and 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 until we
sell all of the securities:

- Our Annual Report on Form 10-K for the year ended December 31, 1998;

- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
and

- Our Current Reports on Form 8-K, filed January 26, 1999 and March 18,
1999.

You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:

-31-
<PAGE> 32

Secretary Division, Enron Corp.
1400 Smith Street
Houston, Texas 77002
(713) 853-6161

YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION.

WE ARE NOT MAKING AN OFFER OF THE SECURITIES COVERED BY THIS PROSPECTUS
WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS OR IN ANY OTHER DOCUMENT INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE
DOCUMENTS.

LEGAL MATTERS

The validity of the Exchangeable Notes will be passed upon for our company
by James V. Derrick, Jr., Esq., Executive Vice President and General Counsel of
our company. Mr. Derrick owns substantially less than 1% of the outstanding
shares of our common stock. Certain tax matters with respect to the Exchangeable
Notes will be passed upon for our company by Vinson & Elkins L.L.P., Houston,
Texas. Certain legal matters will be passed upon for the underwriters by
Bracewell & Patterson, L.L.P., Houston, Texas. Bracewell & Patterson, L.L.P.
provides services to us and our affiliates on matters unrelated to this
offering.

EXPERTS

The consolidated financial statements included in our Current Report on
Form 8-K dated March 18, 1999 and the consolidated financial statements and
schedules included in our Annual Report on Form 10-K for the year ended December
31, 1998, 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 reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.

The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to our Annual Report on Form 10-K for the
year ended December 31, 1998, and the estimates from the reports of that firm
appearing in such Annual Report, are incorporated by reference in this
prospectus and registration statement on the authority of DeGolyer and
MacNaughton as experts in petroleum engineering and in giving the reports.

-32-
<PAGE> 33

UNDERWRITING

Enron Corp. and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the Exchangeable Notes being
offered. Subject to certain conditions, each underwriter has severally agreed to
purchase the number of Exchangeable Notes indicated in the following table.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER EXCHANGEABLE NOTES
----------- ------------------
<S> <C>
Goldman, Sachs & Co.........................................
Banc of America Securities LLC..............................
Salomon Smith Barney Inc....................................
----------
Total............................................. 10,000,000
==========
</TABLE>

If the underwriters sell more Exchangeable Notes than the total number set
forth in the table above, the underwriters have an option to buy up to an
additional 1,500,000 Exchangeable Notes from Enron Corp. to cover such sales.
They may exercise that option for 30 days. If any Exchangeable Notes are
purchased pursuant to this option, the underwriters will severally purchase
Exchangeable Notes in approximately the same proportion as set forth in the
table above.

The following table shows the per Exchangeable Note and total underwriting
discounts and commissions to be paid to the underwriters by Enron Corp. The
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional Exchangeable Notes.

<TABLE>
<CAPTION>
PAID BY ENRON
--------------------
NO FULL
EXERCISE EXERCISE
-------- --------
<S> <C> <C>
Per Exchangeable Note................................ $ $
Total................................................ $ $
</TABLE>

Exchangeable Notes sold by the underwriters to the public will initially be
offered at the initial price to public set forth on the cover of this
prospectus. Any Exchangeable Notes sold by the underwriters to securities
dealers may be sold at a discount of up to $ per Exchangeable Note from
the initial price to public. Any such securities dealers may resell any
Exchangeable Notes purchased from the underwriters to certain other brokers or
dealers at a discount of up to $ per Exchangeable Note from the initial
price to public. If all the Exchangeable Notes are not sold at the initial price
to public, the underwriters may change the offering price and the other selling
terms.

Enron Corp. and EOG and its directors and executive officers have agreed
with the underwriters not to offer, sell, contract to sell or otherwise dispose
of or hedge any shares of EOG common stock or securities convertible into or
exchangeable for shares of EOG common stock during the period from the date of
this prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. This
agreement does not apply to any existing employee benefit plans or the exercise
of stock options pursuant to EOG's stock option plan.

The Exchangeable Notes will be a new issue of securities with no
established trading market. We have applied to list the Exchangeable Notes on
the NYSE. The underwriters intend to make a market in the Exchangeable Notes,
subject to applicable laws and regulations. However, the underwriters are not
obligated to do so and any such market-making may be discontinued at

U-1
<PAGE> 34

any time at the sole discretion of the underwriters without notice. Accordingly,
we cannot give you any assurance as to the liquidity of such market.

In connection with the offering, the underwriters may purchase and sell
Exchangeable Notes and shares of EOG common stock in the open market. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of Exchangeable Notes than they are required to
purchase in the offering. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of Exchangeable Notes or EOG common stock while the offering is in
progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased units sold by
or for the account of that underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Exchangeable Notes or the EOG common stock. As a
result, the price of the Exchangeable Notes or the EOG common stock may be
higher than the prices that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.

We estimate that our total expenses of the offering of the Exchangeable
Notes, excluding underwriting discounts and commissions, will be approximately
$ .

We and EOG have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in respect
thereof.

The underwriters or their respective affiliates in the past have provided
investment banking and/or commercial banking services and other financial
services for us and our affiliates and have received compensation and expense
reimbursement for these services. The underwriters or their affiliates may in
the future provide investment banking and/or commercial banking services and
other financial services to us or our affiliates for which they will receive
compensation and expense reimbursement.

U-2
<PAGE> 35

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION. DATED JULY 23, 1999.

APPENDIX A

[ENRON LOGO]

ENRON OIL & GAS COMPANY

Common Stock

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

This prospectus relates to up to 11,500,000 shares of our common stock
which may be delivered by Enron Corp. upon mandatory exchange of the %
Exchangeable Notes due , 2002 of Enron Corp. This prospectus is
Appendix A to a prospectus of Enron Corp. covering the sale of the Exchangeable
Notes. We will not receive any of the proceeds from the sale of the Exchangeable
Notes or the delivery by Enron Corp. of its shares of our common stock upon
exchange of the Exchangeable Notes at maturity.

Enron Oil & Gas Company is offering 27,000,000 shares of its common stock.

The common stock is listed on the New York Stock Exchange under the symbol
"EOG". The last reported sale price of the common stock on July 21, 1999 was
$20.00 per share.

Enron Corp. is offering concurrently, in a separate public offering with a
separate prospectus 10,000,000 (11,500,000 if the underwriters in that offering
fully exercise their over-allotment option) Exchangeable Notes, which are
mandatorily exchangeable into shares of EOG common stock currently owned by
Enron Corp. This offering of EOG common stock and the concurrent offering of
Exchangeable Notes by Enron Corp. are not conditioned on each other.

Consider carefully the risk factors beginning on page 10 of this
prospectus.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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

Prospectus dated , 1999.
<PAGE> 36

ENRON OIL & GAS COMPANY

[MAPS]

*NATURAL GAS EQUIVALENT DAILY PRODUCTION AT DECEMBER 31, 1998.

OIL AND GAS TERMS

<TABLE>
<S> <C> <C>
When describing commodities
produced and sold: gas = natural gas
oil = crude oil
liquids = crude oil, condensate and natural gas liquids
When describing natural gas: Mcf = thousand cubic feet
MMcf = million cubic feet
Bcf = billion cubic feet
MMBtu = million British Thermal Units
When describing oil: Bbl = barrel
MBbl = thousand barrels
MMBbl = million barrels
When comparing oil to natural gas: 1 Bbl of oil = 6 Mcf of natural gas equivalent
Mcfe = thousand cubic feet equivalent
MMcfe = million cubic feet equivalent
Bcfe = billion cubic feet equivalent
</TABLE>

2
<PAGE> 37

PROSPECTUS SUMMARY

This summary highlights selected information we have included or
incorporated by reference in this prospectus. However, it does not contain all
information that may be important to you. More detailed information about this
offering, our business and our financial and operating data is contained
elsewhere in this prospectus. We encourage you to read this prospectus in its
entirety before making an investment decision.

In this prospectus, we refer to Enron Oil & Gas Company and its
subsidiaries as "we", "us", "our" or "EOG" unless the context clearly indicates
otherwise.

ABOUT EOG

EOG is one of the largest independent exploration and production companies
in the United States. We explore for and produce natural gas and oil in almost
every major producing basin in the United States and Canada and internationally
in India and Trinidad and, to a lesser extent, selected other areas.

SHARE EXCHANGE WITH ENRON CORP.

On July 20, 1999, EOG and Enron Corp. announced an agreement to exchange
62,270,000 shares of our common stock out of 82,270,000 shares currently owned
by Enron Corp. for all the stock of our subsidiary, EOGI-India, Inc. Prior to
the Share Exchange, we will make an indirect $600,000,000 cash capital
contribution, plus certain intercompany receivables, to EOGI-India, Inc. At the
time of completion of this transaction, this subsidiary will own, through
subsidiaries, all of our assets and operations in India and China. We expect
this transaction to be tax-free to Enron Corp. and us. We refer to this
transaction elsewhere in this prospectus as the Share Exchange. Some time after
the Share Exchange, we expect to change our corporate name to "EOG Resources,
Inc." and we will make appropriate changes to our subsidiaries' names. See
"Relationship with Enron Corp."

The completion of the Share Exchange is subject to specific conditions and
will occur on the later of August 31, 1999 and three days after all conditions
have been satisfied or waived. If prior to August 31, 1999 all conditions to the
Share Exchange have been satisfied or waived, we can require that the Share
Exchange take place prior to August 31, 1999. We currently expect the Share
Exchange to close on or before August 31, 1999. If we complete the Share
Exchange prior to this offering, we will use borrowed funds for the cash capital
contribution in connection with the Share Exchange, and we will repay a portion
of those borrowed funds with the net proceeds of this offering. If we complete
this offering on the same day as the Share Exchange, we will use the proceeds of
this offering to pay a portion of the capital contribution in connection with
the Share Exchange.

Upon completion of the Share Exchange, all of the directors of EOG who are
affiliated with Enron Corp. will resign from our Board of Directors.

For the complete terms of our agreement with Enron Corp., please refer to
the Share Exchange Agreement between Enron Corp. and us filed as an exhibit to
the registration statement that includes this prospectus.

EOG RESOURCES, INC.

As EOG Resources, Inc., our reserves and production will be predominantly
comprised of natural gas, and will be primarily located in North America. On a
pro forma basis, 77% of our total reserves will be located in, and 85% of our
production will be derived from, the United States or Canada, with natural gas
comprising 87% of total production, on a natural gas equivalent basis

3
<PAGE> 38

as of or for the year ended December 31, 1998.

After giving effect to the Share Exchange, at December 31, 1998, our
estimated total net proved reserves included:

- 4,294 Bcf of gas, including:

- 1,180 Bcf of proved undeveloped methane reserves in the Big Piney deep
Paleozoic formations in Wyoming and

- 61 MMBbl of liquids.

After giving effect to the Share Exchange, at December 31, 1998,

- 66% of our reserves (on a natural gas equivalent basis) was located in
the United States

- 11% in Canada and

- 23% in Trinidad.

After giving effect to the Share Exchange, for the year ended December 31,
1998 our delivered volumes (on a natural gas equivalent basis) were

- 282 Bcfe in the United States,

- 46 Bcfe in Canada and

- 57 Bcfe in Trinidad.

BUSINESS STRATEGY

Our strategy is to maximize the return on invested capital by achieving
operating and finding costs that are among the lowest in the industry. We are
focused on growing our domestic natural gas reserves and production by
concentrating our efforts in known North American reserve basins. We focus on
selected international opportunities where we can successfully apply our core
competencies in the exploitation of reserves. Our strategy is intended to
enhance the generation of cash flow and earnings from each unit of production on
a cost effective basis.

Our North American operations are organized into seven largely autonomous
business units, each focusing on a basin or basins, utilizing personnel who have
developed experience and expertise unique to the geology of the region, thereby
leveraging our knowledge and cost structure into enhanced returns on invested
capital.

We focus our drilling activity toward natural gas deliverability in
addition to natural gas reserve enhancement and to a lesser extent crude oil
exploitation. We also focus on the cost-effective utilization of advances in
technology associated with gathering, processing and interpretation of 3-D
seismic data, developing reservoir simulation models and drilling operations
through the use of new and/or improved drill bits, mud motors, mud additives,
formation logging techniques and reservoir fracturing methods. These advanced
technologies are used, as appropriate, throughout the company to reduce the
risks associated with all aspects of oil and gas reserve exploration,
exploitation and development.

We implement our strategy by emphasizing the drilling of internally
generated prospects in order to find and develop low cost reserves. We also make
selected tactical acquisitions that give us additional economies of scale or
land positions with significant additional prospects. Achieving and maintaining
the lowest possible operating cost structure are also important goals in the
implementation of our strategy.

Consistent with our desire to optimize the use of our assets, we also sell
selected oil and gas properties that for various reasons may no longer fit into
future operating plans or which we believe do not have sufficient future growth
potential. We do this when we believe the economic value to be obtained by
selling the properties and reserves in the ground is greater than what we would
obtain by holding the properties and producing the reserves over time. As a
result, we typically receive each year a varying but substantial level of
proceeds related to such sales. We use these proceeds for general corporate
purposes.
4
<PAGE> 39

RECENT DEVELOPMENTS

For the second quarter 1999, we reported net income of $20.6 million, or
$.13 per share, compared to net income of $13.3 million, or $.09 per share, for
the comparable period a year ago. Net of non-recurring items, our second quarter
1999 net income was $12.9 million, or $.08 per share. Net operating revenues for
second quarter 1999 were $187.2 million compared to $183.3 million for the
comparable period a year ago.

Our natural gas deliveries in second quarter 1999 increased six percent to
959 MMcf per day versus 1998 second quarter deliveries of 907 MMcf per day.
Crude oil and condensate deliveries totaled 24.5 MBbls per day in the second
quarter 1999, an increase of nine percent from deliveries of 22.4 MBbls per day
for the comparable period a year ago.

As a result of the change to our portfolio of assets subsequent to the
Share Exchange, we are currently re-evaluating our overall business. We expect
to complete this re-evaluation by the end of third quarter 1999. As a result of
this re-evaluation, some of our current projects may no longer be deemed central
to our business. In that case, we may incur non-cash charges in connection with
the disposition of such projects of up to approximately $75 million, after-tax.

We have received a commitment for a new credit facility of up to $1.3
billion, which may be used to fund the $600 million cash capital contribution
for the Share Exchange if it closes before this offering.

We have declared a regular quarterly dividend of $0.03 per share on the
common stock of EOG, payable July 30, 1999, to shareholders of record as of July
15, 1999.

On July 21, 1999, two stockholders of EOG filed separate lawsuits
purportedly on behalf of EOG against Enron Corp. and EOG's directors, alleging
that Enron Corp. and EOG's directors breached their fiduciary duties of good
faith and loyalty in approving the Share Exchange. The lawsuits seek to
temporarily and permanently enjoin the Share Exchange, compensatory damages and
costs and expenses, including reasonable attorneys' and experts' fees. EOG,
Enron Corp. and the EOG directors believe the lawsuits are without merit and
intend to vigorously contest them.

5
<PAGE> 40

[THIS PAGE INTENTIONALLY LEFT BLANK]

6
<PAGE> 41

SUMMARY OF HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

The following table sets forth our summary selected historical financial
and operating data as of and for each of the three years in the period ended
December 31, 1998 and the three-month periods ended March 31, 1998 and 1999 and
our pro forma financial and operating data as of and for the year ended December
31, 1998 and the three-month period ended March 31, 1999. This information
should be read in conjunction with our consolidated financial statements and the
related notes incorporated by reference in this prospectus (see "Where You Can
Find More Information") and our condensed consolidated pro forma financial
statements and the related notes included elsewhere in this prospectus.
Financial information for each of the three years in the period ended December
31, 1998 has been derived from audited financial statements. Financial
information for the three-month periods ended March 31, 1998 and 1999 has been
derived from unaudited financial statements. The interim data reflects all
adjustments which, in the opinion of our management, are necessary to present
fairly such information for the interim periods. Results of the three-month
periods are not necessarily indicative of the results expected for a full year
or any other interim period. The unaudited condensed consolidated pro forma
information is for informational purposes only, and does not necessarily
represent what our actual results of operations would have been had the Share
Exchange occurred on the dates indicated under "Unaudited Condensed Consolidated
Pro Forma Financial Information".

<TABLE>
<CAPTION>
PRO FORMA
THREE
PRO FORMA THREE MONTHS MONTHS
YEAR ENDED DECEMBER 31, YEAR ENDED ENDED MARCH 31, ENDED
---------------------------------- DECEMBER 31, --------------------- MARCH 31,
1996 1997 1998 1998 1998 1999 1999
-------- -------- -------- ------------ -------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues......... $730,648.. $783,501 $769,188 $696,351 $199,831 $158,954 $140,120
Operating expenses
Lease and well................ 76,618.. 96,064 98,868 87,750 24,909 24,069 19,788
Exploration costs............. 55,009.. 57,696 65,940 63,407 17,398 16,789 15,991
Dry hole costs................ 13,193 17,303 22,751 22,751 7,881 345 345
Impairment of unproved oil and
gas properties.............. 21,226 27,213 32,076 32,076 8,348 8,003 8,003
Depreciation, depletion and
amortization................ 251,278 278,179 315,106 305,786 71,961 82,022 79,120
General and administrative.... 56,405 54,415 69,010 57,968 16,554 23,635 13,142
Taxes other than income....... 48,089 59,856 51,776 45,161 14,494 13,695 11,473
-------- -------- -------- -------- -------- -------- --------
Total................... 521,818 590,726 655,527 614,899 161,545 168,558 147,862
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)........ 208,830 192,775 113,661 81,452 38,286 (9,604) (7,742)
Other income (expense), net.... (5,007) (1,588) (4,800) 5 (970) 26,938(1) 24,639(1)
Interest expense (net of
interest capitalized)......... 12,861 27,717 48,579 60,590 9,110 14,267 17,134
-------- -------- -------- -------- -------- -------- --------
Income before income taxes..... 190,962 163,470 60,282 20,867 28,206 3,067 (237)
Income tax provision
(benefit)(2).................. 50,954(3) 41,500(4) 4,111(5) (10,432)(5) 1,201(6) (1,999)(7) (2,047)(7)
-------- -------- -------- -------- -------- -------- --------
Net income..................... $140,008 $121,970 $ 56,171 $ 31,299 $ 27,005 $ 5,066 $ 1,810
======== ======== ======== ======== ======== ======== ========
Net income per share of common
stock
Basic......................... $ .88 $ .78 $ .36 $ .26 $ .17 $ .03 $ .02
======== ======== ======== ======== ======== ======== ========
Diluted....................... $ .87 $ .77 $ .36 $ .26 $ .17 $ .03 $ .02
======== ======== ======== ======== ======== ======== ========
Average number of common shares
Basic......................... 159,853 157,376 154,345 119,075 154,736 153,733 118,463
======== ======== ======== ======== ======== ======== ========
Diluted....................... 161,525 158,160 155,054 119,784 155,522 154,615 119,345
======== ======== ======== ======== ======== ======== ========
</TABLE>

7
<PAGE> 42

<TABLE>
<CAPTION>
PRO FORMA
AT DECEMBER 31, AT AT
------------------------------------ MARCH 31, MARCH 31,
1996 1997 1998 1999 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Oil and gas properties - net........................... $2,099,589 $2,387,207 $2,676,363 $2,681,316 $2,450,296
Total assets........................................... 2,458,353 2,723,355 3,018,095 2,990,235 2,677,789
Long-term debt
Trade................................................ 466,089 548,775 942,779 1,170,518 1,280,518
Affiliate............................................ - 192,500 200,000 - -
Deferred revenue....................................... 56,383 39,918 4,198 3,148 3,148
Shareholders' equity................................... 1,265,090 1,281,049 1,280,304 1,284,713 936,967
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS THREE
YEAR ENDED PRO FORMA ENDED MONTHS
DECEMBER 31, YEAR ENDED MARCH 31, ENDED
------------------------ DECEMBER 31, --------------- MARCH 31,
1996 1997 1998 1998 1998 1999 1999
------ ------ ------ ------------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Wellhead Volumes and Prices
Natural Gas Volumes (MMcf per day).............. 830 889 971 915 901 1,004 933
Average Natural Gas Prices ($/Mcf).............. $ 1.78 $ 2.07 $ 1.78 $ 1.74 $ 1.86 $ 1.53 $ 1.50
Crude/Condensate Volumes (MBbl per day)......... 19.6 19.9 24.7 19.6 22.3 25.7 18.6
Average Crude/Condensate Prices ($/Bbl)......... $20.60 $19.30 $12.66 $12.61 $14.64 $10.76 $11.12
</TABLE>

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

(1) Includes a gain of $28 million related to the sale of options held by EOG to
purchase 1.6 million shares of Enron Corp. common stock.

(2) Includes benefits of approximately $16 million, $12 million, $12 million,
$12 million, $1 million, $3 million and $3 million in the year ended
December 31, 1996, 1997, 1998 and 1998 (pro forma), and the three-month
period ended March 31, 1998, 1999 and 1999 (pro forma), respectively,
relating to tight gas sand federal income tax credits.

(3) Includes a benefit of $9 million primarily associated with a reassessment of
deferred tax requirements and the successful resolution on audit of Canadian
income taxes for certain prior years.

(4) Includes a benefit of $15 million primarily associated with the refiling of
certain Canadian tax returns and the sale of certain international assets
and subsidiaries.

(5) Includes a benefit of $2 million related to the final audit assessments of
India taxes for certain prior years, a benefit of $4 million related to
reduced deferred franchise taxes, and $4 million related to Venezuela
deferred tax benefits.

(6) Includes a benefit of $9 million related to certain international costs and
the resolution of certain domestic and international issues.

(7) Computed using the actual effective tax rate for the quarter rather than the
annual effective tax rate.

8
<PAGE> 43

SUMMARY OF HISTORICAL AND PRO FORMA OIL AND GAS RESERVE INFORMATION

The following table sets forth summary information with respect to EOG's
estimates of its net proved natural gas, crude oil, condensate and natural gas
liquids reserves at December 31, 1998. For additional information relating to
reserves, see "Business -- Oil and Gas Exploration and Production Properties and
Reserves".

<TABLE>
<CAPTION>
NATURAL GAS
EQUIVALENTS (BCFE)
GAS LIQUIDS -------------------------------
(BCF) (MBBL) DEVELOPED UNDEVELOPED TOTAL
----- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Net proved reserves at
December 31, 1998:
United States........................ 2,854(1) 36,827 1,628 1,446(1) 3,074(1)
Canada............................... 464 7,592 432 78 510
Trinidad............................. 976 16,204 312 762 1,074
India................................ 825 42,785 608 473 1,081
Other................................ 110 1,162 - 117 117
----- ------- ----- ----- -----
Total........................... 5,229 104,570 2,980 2,876 5,856
===== ======= ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
NATURAL GAS
EQUIVALENTS (BCFE)
GAS LIQUIDS -------------------------------
(BCF) (MBBL) DEVELOPED UNDEVELOPED TOTAL
------- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
PRO FORMA:
Net proved reserves at
December 31, 1998, as adjusted(2):
United States......................... 2,854(1) 36,827 1,628 1,446(1) 3,074(1)
Canada................................ 464 7,592 432 78 510
Trinidad.............................. 976 16,204 312 762 1,074
----- ------- ----- ----- -----
Total............................ 4,294 60,623 2,372 2,286 4,658
===== ======= ===== ===== =====
</TABLE>

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

(1) Includes 1,180 Bcf of methane reserves in the Big Piney deep Paleozoic
formations in Wyoming.

(2) Adjusted to reflect the effect of the Share Exchange.

9
<PAGE> 44

RISK FACTORS

In considering whether to purchase shares of our common stock, you should
carefully consider the risk factors described below and all the information we
have included or incorporated by reference in this prospectus. In addition,
please read "Cautionary Statement Regarding Forward-Looking Statements" on page
15 of this prospectus, where we describe uncertainties associated with our
business and the forward-looking statements included or incorporated by
reference in this prospectus.

A SUBSTANTIAL OR EXTENDED DECLINE IN OIL OR GAS PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON US.

Prices for natural gas and oil fluctuate widely. For example, natural gas
and oil prices declined significantly in 1998 and, for an extended period of
time, remained substantially below prices obtained in previous years. Since we
are primarily a natural gas company, we are more significantly affected by
changes in natural gas prices than changes in the prices for crude oil,
condensate or natural gas liquids. Among the factors that can cause these price
fluctuations are:

- the level of consumer demand,

- weather conditions,

- price and availability of alternative fuels,

- domestic drilling activity and

- overall economic conditions.

During 1995, 1996, 1997 and 1998, the high and low prices for natural gas and
oil on the twelve-month forward NYMEX strip were:

The average North America wellhead natural gas prices we received increased
43% from 1995 to 1996 and 15% from 1996 to 1997, while the average North America
wellhead natural gas prices we realized from 1997 to 1998 decreased by 15%.
Wellhead natural gas volumes from the Trinidad SECC Block are sold at prices
that are based on a fixed schedule with periodic escalations. No formal contract
has been entered into regarding future production of proved reserves from the
Trinidad U(a) Block. Due to the many uncertainties associated with the world
political environment, the availabilities of other world wide energy supplies
and the relative competitive relationships of the various energy sources in the
view of the consumers, we are unable to predict what changes may occur in
natural gas prices in the future.

We sell substantially all of our wellhead crude oil and condensate under
various terms and arrangements at market responsive prices. Crude oil and
condensate prices also have fluctuated during the last three years. Due to the
many uncertainties associated with the world political environment, the
availabilities of other worldwide energy supplies and the relative competitive
relationships of the various energy sources in the view of the consumers, the
level of consumer demand and the availability of alternative fuels, we are
unable to predict what changes may occur in crude oil and condensate prices in
the future.

Our cash flow and earnings depend to a great extent on the prevailing
prices for natural gas and oil. Prolonged or substantial declines in these
commodity prices may adversely affect our liquidity, the amount of cash flow
available for capital expenditures and our ability to maintain our credit
quality and access to the credit and capital markets.

OUR ABILITY TO SELL OUR OIL AND GAS PRODUCTION COULD BE MATERIALLY HARMED IF WE
FAIL TO OBTAIN ADEQUATE SERVICES SUCH AS TRANSPORTATION AND PROCESSING.

The sale of our oil and gas production depends on a number of factors
beyond our control, including the availability and capacity of transportation
and processing facilities. Our failure to obtain such services on acceptable
terms could materially harm our business.

10
<PAGE> 45

THE OIL AND GAS RESERVES DATA AND FUTURE NET REVENUES ESTIMATES WE REPORT ARE
UNCERTAIN.

Estimates of reserves by necessity are projections based on engineering
data, the projection of future rates of production and the timing of future
expenditures. Estimates of our proved oil and gas reserves and projected future
net revenues are based on reserve reports which we prepare and a portion of
which are reviewed by independent petroleum engineers. The process of estimating
oil and gas reserves requires substantial judgment on the part of the petroleum
engineers, resulting in imprecise determinations, particularly with respect to
new discoveries. Different reserve engineers may make different estimates of
reserve quantities and revenues attributable thereto based on the same data.
Future performance that deviates significantly from the reserve reports could
have a material adverse effect on us. The accuracy of any reserve estimate
depends on the quality of the available data as well as engineering and
geological interpretation and judgment. Results of drilling, testing and
production and changes in the assumptions regarding decline and production
rates, the ability to market oil and gas that is produced, oil and gas prices,
revenues, taxes, capital expenditures, operating expenses, geologic success and
quantities of recoverable oil and gas may vary substantially from those assumed
in the estimates, may result in revisions to such estimates and could materially
affect the estimated quantities and related value of reserves. The estimates of
future net revenues reflect oil and gas prices as of the date of estimation,
without escalation or reduction. Fluctuations in the price of natural gas and
oil have the effect of significantly altering reserve estimates as the economic
projections inherent in the estimates may reduce or increase the quantities of
recoverable reserves. There can be no assurance, however, that such prices will
be realized or that the estimated production volumes will be produced during the
periods indicated. Actual future production, natural gas and oil prices,
revenues, taxes, development expenditures, operating expenses and quantities of
recoverable natural gas and oil reserves most likely will vary from our
estimates.

IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.

The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent that we acquire additional
properties containing proved reserves, conduct successful exploration and
development activities or, through engineering studies, identify additional
behind-pipe zones or secondary recovery reserves, our proved reserves will
decline materially as reserves are produced. Future oil and gas production is,
therefore, highly dependent upon our level of success in acquiring or finding
additional reserves.

WE INCUR CERTAIN COSTS TO COMPLY WITH GOVERNMENT REGULATIONS, ESPECIALLY
REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION, AND COULD INCUR EVEN GREATER
COSTS IN THE FUTURE.

Our exploration, production and marketing operations are regulated
extensively at the federal, state and local levels, as well as by other
countries in which we do business. We have made and will continue to make
expenditures in our efforts to comply with the requirements of environmental and
other regulations. Further, the oil and gas regulatory environment could change
in ways that might substantially increase these costs.

Hydrocarbon-producing states regulate conservation practices and the
protection of correlative rights. These regulations affect our operations and
limit the quantity of hydrocarbons we may produce and sell. In addition, at the
U.S. federal level, the Federal Energy Regulatory Commission regulates
interstate transportation of natural gas under the Natural Gas Act. Other
regulated matters include marketing, pricing, transportation and valuation of
royalty payments.

As an owner or lessee and operator of oil and gas properties, we are
subject to various federal, state, local and foreign regulations relating to
discharge of materials into, and protection of, the environment. These
regulations may, among other things, impose liability on us for the cost of
pollution clean-up resulting from operations, subject us to liability for
pollution damages, and require suspen-

11
<PAGE> 46

sion or cessation of operations in affected areas. Changes in or additions to
regulations regarding the protection of the environment could hurt our business.

OUR INDUSTRY IS VERY COMPETITIVE.

The oil and gas industry is extremely competitive. This is especially true
with regard to exploration for, and exploitation and development of, new sources
of crude oil and natural gas. As an independent oil and gas company, we
frequently compete against other companies that are larger and financially
stronger in acquiring properties suitable for exploration, in contracting for
drilling equipment and other services and in securing trained personnel.

WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY
UNEXPECTED LIABILITIES.

Exploration for and production of oil and gas can be hazardous, involving
natural disasters and other unforeseen occurrences such as blowouts, cratering,
fires and loss of well control, which can damage or destroy wells or production
facilities, injure or kill people, and damage property and the environment.
Offshore operations are subject to usual marine perils, including hurricanes and
other adverse weather conditions, and governmental regulations as well as
interruption or termination by governmental authorities based on environmental
and other considerations. We maintain insurance against many, but not all,
potential losses or liabilities arising from our operations in accordance with
customary industry practices and in amounts that we believe to be prudent.
Losses and liabilities arising from such events could reduce our revenues and
increase our costs to the extent not covered by insurance.

The occurrence of any of the aforementioned events and any payments made as
a result of such events and the liabilities related thereto, would reduce the
funds available for exploration, drilling and production and could have a
material adverse effect on our financial position or results of operations.

OUR HEDGING ACTIVITIES MAY PREVENT US FROM BENEFITING FROM PRICE INCREASES AND
MAY EXPOSE US TO OTHER RISKS.

We engage in price risk management activities from time to time primarily
for non-trading and to a lesser extent for trading purposes. We use derivative
financial instruments (primarily price swaps and costless collars) for
non-trading purposes to hedge the impact of market fluctuations on natural gas
and crude oil market prices and net income and cash flow.

To the extent that we engage in hedging activities, we may be prevented
from realizing the benefits of price increases above the levels of the hedges.
In addition, we are subject to risks associated with differences in prices at
different locations, particularly where transportation constraints restrict our
ability to deliver oil and gas volumes to the delivery point to which the
hedging transaction is indexed.

Further, hedging contracts are subject to the risk that the other party may
prove unable or unwilling to perform its obligations under such contracts. Any
significant nonperformance could adversely affect us financially.

WHEN WE ACQUIRE OIL AND GAS PROPERTIES, OUR FAILURE TO FULLY IDENTIFY POTENTIAL
PROBLEMS, TO PROPERLY ESTIMATE RESERVES OR PRODUCTION RATES OR COSTS, OR TO
EFFECTIVELY INTEGRATE THE ACQUIRED OPERATIONS COULD SERIOUSLY HARM US.

We from time to time acquire oil and gas properties. When we do so, our
failure to fully identify potential problems, to properly estimate reserves or
production rates or costs, or to effectively integrate the acquired operations
could seriously harm us. Although we perform reviews of acquired properties that
we believe are consistent with industry practices, we do not review in depth
every individual property involved in each acquisition. Ordinarily we focus on
higher-value properties and sample the remainder. However, even a detailed
review of records and properties may not necessarily reveal existing or
potential problems, nor will it permit a buyer to become sufficiently familiar
with the properties to assess fully their deficiencies and potential.
Inspections may not always be

12
<PAGE> 47

performed on every well, and environmental problems, such as ground water
contamination, are not necessarily observable even when an inspection is
undertaken.

Even when problems are identified, we often assume environmental and other
risks and liabilities in connection with acquired properties. There are numerous
uncertainties inherent in estimating quantities of proved oil and gas reserves
and actual future production rates and associated costs with respect to acquired
properties. Actual results may vary substantially from those assumed in the
estimates. In addition, acquisitions may have adverse effects on our operating
results, particularly during the periods in which the operations of acquired
businesses are being integrated into our ongoing operations.

OUR NON-U.S. OPERATIONS ARE SUBJECT TO RISKS OF DOING BUSINESS ABROAD.

Our non-U.S. oil and natural gas exploration, exploitation, development and
production activities are subject to certain political and economic risks
including, among others:

- cancellation or renegotiation of contracts;

- disadvantages of competing against companies from countries that are not
subject to U.S. laws and regulations, including the Foreign Corrupt
Practices Act;

- changes in foreign laws or regulations;

- changes in tax laws;

- royalty and tax increases;

- retroactive tax claims;

- expropriation or nationalization of property;

- currency fluctuations;

- foreign exchange controls;

- import and export regulations;

- environmental controls;

- risks of loss due to civil strife, acts of war, guerilla activities and
insurrection; and

- other risks arising out of foreign governmental sovereignty over the
areas in which our operations are conducted.

Consequently, our non-U.S. exploration, exploitation, development and
production activities may be substantially affected by factors beyond our
control, any of which could materially adversely affect our financial position
or results of operations. Furthermore, in the event of a dispute arising from
non-U.S. operations, we may be subject to the exclusive jurisdiction of courts
outside the United States or may not be successful in subjecting non-U.S.
persons to the jurisdiction of the courts in the United States, which could
adversely affect the outcome of the dispute.

A DECLINE IN THE CONDITION OF THE CAPITAL MARKETS OR A SUBSTANTIAL RISE IN
INTEREST RATES COULD HARM US.

If the condition of the capital markets utilized by us to finance our
operations materially declines, we might not be able to finance our operations
on terms we consider acceptable. In addition, a substantial rise in interest
rates would decrease our net cash flows available for reinvestment.

OUR COMPUTER SYSTEMS OR OTHER ASSETS USED IN OUR OPERATIONS AND THOSE OF THIRD
PARTIES MAY NOT BE YEAR 2000 COMPLIANT, WHICH MAY CAUSE SYSTEM FAILURES AND
DISRUPTIONS IN OPERATIONS.

The inability of some computer programs and embedded computer chips to
distinguish between the year 1900 and the year 2000 poses a serious threat of
business disruption to any organization that uses computer technology and
computer chip technology in their business systems or equipment. Each major
business unit has been required to inventory and assess the risk associated with
hardware, software, telecommunications systems, office equipment, embedded chip
controls and systems, process control systems, facility control systems and
dependencies on external mission critical entities.

We presently believe that, with updates to software that are substantially
complete or well under way, conversions to new software

13
<PAGE> 48

and completion of efforts planned by each major business unit to update imbedded
microprocessors, the risk associated with year 2000 will be significantly
reduced. However, we are unable to assure that the consequences of year 2000
failures of systems maintained by us or by third parties will not materially
adversely impact our results of operations or financial condition. More detailed
information about the year 2000 risks and our efforts to address this issue is
contained in our Annual Report on Form 10-K for the year ended December 31,
1998, as amended by Amendment No. 1 on Form 10-K/A, and our Quarterly Report on
Form 10-Q for the three months ended March 31, 1999, both of which are
incorporated by reference into this prospectus.

14
<PAGE> 49

CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
statements other than statements of historical facts, including, among others,
statements regarding our future financial position, business strategy, budgets,
reserve information, projected levels of production, projected costs and plans
and objectives of management for future operations, are forward-looking
statements.

We typically use words such as "expect", "anticipate", "estimate",
"strategy", "intend", "plan" and "believe" or the negative of those terms or
other variations of them or by comparable terminology to identify our
forward-looking statements. In particular, statements, express or implied,
concerning future operating results or the ability to generate income or cash
flows are forward-looking statements.

Although we believe our expectations reflected in forward-looking
statements are based on reasonable assumptions, no assurance can be given that
these expectations will be achieved. Important factors that could cause actual
results to differ materially from the expectations reflected in the forward-
looking statements include, among others:

- timing and extent of changes in commodity prices for crude oil, natural
gas and related products and interest rates;

- extent of our success in discovering, developing, marketing and producing
reserves and in acquiring oil and gas properties;

- successful implementation of our Year 2000 Plan, the effectiveness of our
Year 2000 Plan, and the Year 2000 readiness of outside entities;

- political developments around the world; and

- financial market conditions.

Some of these factors are discussed under "Risk Factors" beginning on page
9 of this prospectus.

In light of these risks, uncertainties and assumptions, the events
anticipated by our forward-looking statements might not occur. We undertake no
obligation to update or revise our forward-looking statements, whether as a
result of new information, future events or otherwise.

USE OF PROCEEDS

We expect the net proceeds from the offering of common stock to be
approximately $ million after deducting discounts to the underwriters and
estimated expenses of the offering that we will pay. We expect to use the net
proceeds from the offering of common stock either to make a cash capital
contribution to our subsidiaries that conduct our India and China operations in
connection with the pending Share Exchange or, if the Share Exchange already has
taken place when the offering is completed, to repay a portion of the
indebtedness incurred to fund such capital contribution. The pending Share
Exchange with Enron Corp. is discussed in "Prospectus Summary -- Share Exchange
With Enron Corp." We will not receive any proceeds from the underwriters'
exercise of the over-allotment option.

15
<PAGE> 50

CAPITALIZATION

The following table sets forth as of March 31, 1999:

- Our actual capitalization;

- Our as-adjusted capitalization showing the effects of our receipt of the
estimated net proceeds from the sale of the shares we are selling in this
offering assuming that the net proceeds are used to repay outstanding
commercial paper and bank debt; and

- Our pro forma as-adjusted capitalization showing the effects of

- our receipt of the estimated net proceeds from the sale of the shares
we are selling in this offering; and

- our receipt of 62,270,000 shares of our common stock currently owned
by Enron Corp. in exchange for all the stock of our subsidiary,
EOGI-India, Inc. after we have made, indirectly, a $600,000,000 cash
capital contribution and a contribution of receivables due from
subsidiaries of EOGI-India, Inc. as of March 31, 1999, funded in part
from borrowings under a new credit facility.

The as-adjusted capitalization and the pro forma as-adjusted capitalization
assume that the net proceeds from the offering of the common stock are used to
make capital contributions to our subsidiaries that conduct our India and China
operations in connection with the pending Share Exchange. If the Share Exchange
has already taken place when the offering is completed, the net proceeds would
be used to repay a portion of the indebtedness incurred to fund such capital
contribution.

<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt
Company:
Commercial paper and bank debt............ $ 390,278 $ - $ 500,278
Notes due 2004 (6.50%).................... 100,000 100,000 100,000
Notes due 2006 (6.70%).................... 150,000 150,000 150,000
Notes due 2007 (6.50%).................... 100,000 100,000 100,000
Notes due 2008 (6.00%).................... 175,000 175,000 175,000
Notes due 2028 (6.65%).................... 150,000 150,000 150,000
Subsidiary companies:
Notes due 2001 (floating)................. 105,000 105,000 105,000
Other..................................... 240 240 240
---------- ---------- ----------
Total long-term debt................. 1,170,518 780,240 1,280,518
Shareholders' equity
Common stock................................. 201,600 201,870 201,870
Additional paid in capital................... 401,462 918,992 918,992
Unearned compensation........................ (4,578) (4,578) (4,578)
Cumulative foreign currency translation
adjustment................................ (32,399) (32,399) (32,399)
Retained earnings............................ 838,825 838,825 1,218,679
Common stock held in treasury................ (120,197) (120,197) (1,365,597)
---------- ---------- ----------
Total shareholders' equity........... 1,284,713 1,802,513 936,967
---------- ---------- ----------
Total capitalization................. $2,455,231 $2,582,753 $2,217,485
========== ========== ==========
</TABLE>

16
<PAGE> 51

PRICE RANGE OF COMMON STOCK AND CASH DIVIDENDS

The following table sets forth, for the periods indicated, the high and low
sales prices per share for our common stock, as reported on the New York Stock
Exchange Composite Tape, and the amount of cash dividends paid per share.

<TABLE>
<CAPTION>
PRICE RANGE
---------------- CASH
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1997
First Quarter....................................... $27.00 $19.88 $0.03
Second Quarter...................................... 21.75 17.50 0.03
Third Quarter....................................... 25.06 17.69 0.03
Fourth Quarter...................................... 23.81 18.50 0.03
1998
First Quarter....................................... $24.13 $18.56 $0.03
Second Quarter...................................... 24.50 18.13 0.03
Third Quarter....................................... 20.69 11.75 0.03
Fourth Quarter...................................... 18.50 12.69 0.03
1999
First Quarter....................................... $18.38 $15.69 $0.03
Second Quarter...................................... 21.50 16.00 0.03
Third Quarter(through July 21, 1999)................ 21.44 19.25 -
</TABLE>

As of July 1, 1999, there were approximately 430 record holders of our
common stock, including individual participants in security position listings.
There are an estimated 20,000 beneficial owners of our common stock, including
shares held in street name.

We have declared a regular quarterly dividend of $0.03 per share on our
common stock, payable July 30, 1999, to shareholders of record as of July 15,
1999. We currently intend to continue to pay quarterly cash dividends on the
outstanding shares of common stock. However, the determination of the amount of
future cash dividends, if any, to be declared and paid will depend upon, among
other things, our financial condition, funds from operations, level of
exploration, exploitation and development expenditure opportunities and future
business prospects of EOG.

17
<PAGE> 52

ENRON OIL & GAS COMPANY

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

The following unaudited condensed consolidated pro forma statements of
income for the year ended December 31, 1998 and the three months ended March 31,
1999, give effect to the offering and the Share Exchange as described below, as
though they occurred on January 1, 1998. The unaudited condensed consolidated
pro forma balance sheet at March 31, 1999 gives effect to the offering and the
Share Exchange as though they occurred on March 31, 1999.

The unaudited condensed consolidated pro forma statements of income and
balance sheet have been prepared based upon our historical consolidated
statements of income and balance sheet of EOG included in our Annual Report on
Form 10-K for the year ended December 31, 1998, as amended by Amendment No. 1 on
Form 10-K/A, and our Quarterly Report on Form 10-Q for the three months ended
March 31, 1999, both of which are incorporated by reference in this prospectus
and have been prepared based upon available information and assumptions that our
management believes are reasonable. The unaudited condensed consolidated pro
forma statements of income are for informational purposes only, and do not
necessarily represent what our actual results of operations would have been had
the offering and the Share Exchange occurred on January 1, 1998. The unaudited
condensed consolidated pro forma balance sheet is for informational purposes
only, and does not purport to represent our actual financial position had the
offering and the Share Exchange occurred on March 31, 1999. In addition, the
unaudited condensed consolidated pro forma financial statements are not
necessarily indicative of our future results of operations or financial position
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements of EOG and the related notes included in our Annual Report on Form
10-K for the year ended December 31, 1998, as amended by Amendment No. 1 on Form
10-K/A, and our Quarterly Report on Form 10-Q for the three months ended March
31, 1999, both of which are incorporated by reference in this prospectus.

18
<PAGE> 53

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
NET OPERATING REVENUES
Natural Gas
Trade......................................... $117,267 $(12,580)(a) $104,687
Associated Companies(h)....................... 12,843 12,843
Crude Oil, Condensate and Natural Gas Liquids
Trade......................................... 26,517 (6,254)(a) 20,263
Associated Companies(h)....................... 1,036 1,036
Gains on Sales of Reserves and Related Assets and
Other, Net.................................... 1,291 1,291
-------- -------- --------
Total.................................... 158,954 (18,834) 140,120
OPERATING EXPENSES
Lease and Well................................... 24,069 (4,281)(a) 19,788
Exploration Costs................................ 16,789 (798)(a) 15,991
Dry Hole Costs................................... 345 345
Impairment of Unproved Oil and Gas Properties.... 8,003 8,003
Depreciation, Depletion and Amortization......... 82,022 (2,902)(a) 79,120
General and Administrative....................... 23,635 (10,493)(a) 13,142
Taxes Other Than Income.......................... 13,695 (2,222)(a) 11,473
-------- -------- --------
Total.................................... 168,558 (20,696) 147,862
-------- -------- --------
OPERATING INCOME (LOSS)............................ (9,604) 1,862 (7,742)
OTHER INCOME (EXPENSE), NET........................ 26,938 (2,299)(a) 24,639
-------- -------- --------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES.... 17,334 (437) 16,897
INTEREST EXPENSE
Incurred
Trade......................................... 17,310 1,817(b) 19,127
Affiliate(h).................................. 117 117
Capitalized...................................... (3,160) 1,050(a) (2,110)
-------- -------- --------
Net Interest Expense.......................... 14,267 2,867 17,134
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES.................. 3,067 (3,304) (237)
INCOME TAX PROVISION (BENEFIT)..................... (1,999) 588(a) (2,047)
(636)(b)
-------- -------- --------
NET INCOME......................................... $ 5,066 $ (3,256) $ 1,810
======== ======== ========
NET INCOME PER SHARE OF COMMON STOCK
Basic............................................ $ 0.03 $ 0.02
======== ========
Diluted.......................................... $ 0.03 $ 0.02
======== ========
AVERAGE NUMBER OF COMMON SHARES
Basic............................................ 153,733 118,463
======== ========
Diluted.......................................... 154,615 119,345
======== ========
</TABLE>

The following notes are an integral part of these condensed consolidated pro
forma financial statements.

19
<PAGE> 54

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
NET OPERATING REVENUES
Natural Gas
Trade............................................ $558,376 $(48,722)(a) $509,654
Associated Companies(h).......................... 62,929 62,929
Crude Oil, Condensate and Natural Gas Liquids
Trade............................................ 120,366 (24,115)(a) 96,251
Associated Companies(h).......................... 9,266 9,266
Gains on Sales of Reserves and Related Assets and
Other, Net....................................... 18,251 18,251
-------- -------- --------
Total....................................... 769,188 (72,837) 696,351
OPERATING EXPENSES
Lease and Well...................................... 98,868 (11,118)(a) 87,750
Exploration Costs................................... 65,940 (2,533)(a) 63,407
Dry Hole Costs...................................... 22,751 22,751
Impairment of Unproved Oil and Gas Properties....... 32,076 32,076
Depreciation, Depletion and Amortization............ 315,106 (9,320)(a) 305,786
General and Administrative.......................... 69,010 (11,042)(a) 57,968
Taxes Other Than Income............................. 51,776 (6,615)(a) 45,161
-------- -------- --------
Total....................................... 655,527 (40,628) 614,899
-------- -------- --------
OPERATING INCOME...................................... 113,661 (32,209) 81,452
OTHER INCOME (EXPENSE), NET........................... (4,800) 4,805(a) 5
-------- -------- --------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES....... 108,861 (27,404) 81,457
INTEREST EXPENSE
Incurred
Trade............................................ 60,701 (99)(a) 68,734
8,132(b)
Affiliate(h)..................................... 589 589
Capitalized......................................... (12,711) 3,978(a) (8,733)
-------- -------- --------
Net Interest Expense............................. 48,579 12,011 60,590
-------- -------- --------
INCOME BEFORE INCOME TAXES............................ 60,282 (39,415) 20,867
INCOME TAX PROVISION (BENEFIT)........................ 4,111 (11,697)(a) (10,432)
(2,846)(b)
-------- -------- --------
NET INCOME............................................ $ 56,171 $(24,872) $ 31,299
======== ======== ========
NET INCOME PER SHARE OF COMMON STOCK
Basic............................................... $ 0.36 $ 0.26
======== ========
Diluted............................................. $ 0.36 $ 0.26
======== ========
AVERAGE NUMBER OF COMMON SHARES
Basic............................................... 154,345 119,075
======== ========
Diluted............................................. 155,054 119,784
======== ========
</TABLE>

The following notes are an integral part of these condensed consolidated pro
forma financial statements.

20
<PAGE> 55

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AT MARCH 31, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
ADDITIONAL EXCHANGE OF
BORROWINGS TRANSFERRED
AND EQUITY SUBSIDIARIES OTHER
HISTORICAL ISSUANCE SHARES ADJUSTMENTS AS ADJUSTED
----------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents.................. $ 13,133 $105,400(b) $ (607,150)(d) $(13,355)(f) $ 8,678
517,800(c) (10,000)(e) 2,850(g)
Accounts Receivable
Trade.................................... 153,940 (66,899)(d) 87,041
Associated Companies(h).................. 14,867 14,867
Inventories................................ 38,384 (12,100)(d) 26,284
Other...................................... 7,337 (1,505)(d) 5,832
----------- -------- ----------- -------- -----------
Total................................ 227,661 623,200 (697,654) (10,505) 142,702
OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS
METHOD).................................... 4,903,390 (247,902)(d) 4,655,488
Less: Accumulated Depreciation, Depletion
and Amortization......................... (2,222,074) 16,882(d) (2,205,192)
----------- -------- ----------- -------- -----------
Net Oil and Gas Properties........... 2,681,316 (231,020) 2,450,296
OTHER ASSETS................................. 81,258 4,600(b) (1,067)(d) 84,791
----------- -------- ----------- -------- -----------
TOTAL ASSETS................................. $ 2,990,235 $627,800 $ (929,741) $(10,505) $ 2,677,789
=========== ======== =========== ======== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Trade.................................... $ 131,287 $ (42,103)(d) $ 89,184
Associated Companies(h).................. 44,934 (8,352)(f) 36,582
Accrued Taxes Payable...................... 15,469 (1,630)(d) 29(f) 13,868
Dividends Payable.......................... 4,721 4,721
Other...................................... 25,153 (9,090)(d) 1,000(g) 17,063
----------- -------- ----------- -------- -----------
Total................................ 221,564 (52,823) (7,323) 161,418
LONG-TERM DEBT - Trade....................... 1,170,518 110,000(b) 1,280,518
OTHER LIABILITIES
Trade...................................... 22,395 1,850(g) 24,245
Associated Companies(h).................... 31,378 (8,352)(f) 23,026
DEFERRED INCOME TAXES........................ 256,519 (11,568)(d) 3,516(f) 248,467
DEFERRED REVENUES............................ 3,148 3,148
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par, 320,000,000 Shares
Authorized and 160,000,000 Shares Issued
Historical and 187,000,000 Shares Pro
Forma.................................... 201,600 270(c) 201,870
Additional Paid In Capital................. 401,462 517,530(c) 918,992
Unearned Compensation...................... (4,578) (4,578)
Cumulative Foreign Currency Translation
Adjustment............................... (32,399) (32,399)
Retained Earnings.......................... 838,825 390,050(d) (196)(f) 1,218,679
(10,000)(e)
Common Stock Held in Treasury, 6,263,376
Shares Historical and 68,533,376 Shares
Pro Forma................................ (120,197) (1,245,400)(d) (1,365,597)
----------- -------- ----------- -------- -----------
Total Shareholders' Equity........... 1,284,713 517,800 (865,350) (196) 936,967
----------- -------- ----------- -------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $ 2,990,235 $627,800 $ (929,741) $(10,505) $ 2,677,789
=========== ======== =========== ======== ===========
</TABLE>

The following notes are an integral part of these condensed consolidated pro
forma financial statements.

21
<PAGE> 56

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS

The following pro forma adjustments give effect to the sale of 27,000,000
shares of our common stock in this offering, additional borrowings of $110.0
million under new revolving credit facilities and the Share Exchange (see note
(a)), as though these transactions occurred on January 1, 1998 for income
statement purposes, and give effect to these transactions as though they
occurred on March 31, 1999 for balance sheet purposes. Our historical results
were derived from our historical financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 1998, as amended by
Amendment No. 1 on Form 10-K/A, and our Quarterly Report on Form 10-Q for the
three months ended March 31, 1999, both of which are incorporated by reference
in this prospectus.

(a) To reflect the elimination of the historical results of operations of
EOGI-India, Inc., Enron Oil & Gas India Ltd., EOGI China Company, Enron
Oil & Gas China Ltd., EOGI-China, Inc. and Enron Oil & Gas China
International Ltd. (collectively referred to as the "Transferred
Subsidiaries"), all wholly owned subsidiaries of EOG. All of EOG's
interest in the common shares of each of the Transferred Subsidiaries
are to be transferred to Enron Corp. in exchange for 62,270,000 shares
of our common stock owned by Enron Corp. pursuant to a share exchange
agreement (the "Share Exchange").

(b) To reflect the borrowing of $110.0 million under a new revolving credit
facility. Borrowings are assumed to be at 6.0% per annum, plus the
amortization of total commitment fees of $4.6 million ($1.5 million for
1998 and $0.2 million for the three months ended March 31, 1999).
Commitment fees are deferred as "Other Assets" and are amortized over
the related commitment or loan period, as applicable.

(c) To reflect the net proceeds received from the offering of 27,000,000
shares of our common stock. The net proceeds amount is an estimate
based on an assumed offering price of $20.00 per share net of an
underwriting discount and offering costs of $0.82 per share. The actual
offering price may differ significantly from our estimate.

(d) To reflect the elimination of the balances of the Transferred
Subsidiaries and the receipt of 62,270,000 shares of our common stock
pursuant to the Share Exchange. The shares of our common stock received
are reflected at their estimated fair market value on the date of the
transfer and a gain is reflected for the difference between the fair
market value of our shares of common stock received and our historical
cost basis in the Transferred Subsidiaries. The estimated fair market
value is based on an assumed market price per share of $20.00. The
actual market price per share on the date of the Share Exchange may
differ significantly from our estimate. Prior to the Share Exchange EOG
contributed $600.0 million in the form of cash capital contributions
plus contributions of net intercompany accounts receivable of $170.3
million at March 31, 1999. The actual balance of net intercompany
accounts receivable on the date of the Share Exchange may differ
significantly from the balance at March 31, 1999. The Share Exchange is
in the form of a non-taxable exchange of shares; accordingly, no income
taxes have been provided with respect to the recognized gain.

(e) To reflect $10.0 million of transaction costs directly related to the
Share Exchange. As noted in footnote(d), the Share Exchange is in the
form of a non-taxable exchange of shares; accordingly, such transaction
costs are not deductible for income tax purposes.

(f) To reflect a net payment of $13.4 million from EOG to Enron Corp. to
settle amounts payable to Enron Corp. and other income tax related
issues, which were resolved as part of the Share Exchange and the
termination of the Tax Sharing Agreement, as amended, between EOG and
Enron Corp.

22
<PAGE> 57

(g) To reflect the payment by Enron Corp. of $1.9 million and the
assumption by EOG of a liability of the same amount related to certain
unvested benefit obligations under an Enron Corp. Cash Balance Plan and
the payment by Enron Corp. of $1.0 million and the assumption by EOG of
a liability of the same amount related to employee medical
reimbursement accounts concurrent with the loss of control of EOG by
Enron Corp.

(h) Associated companies and affiliate balances result from transactions
with Enron Corp., its subsidiaries or affiliates. If as a result of the
offering and the Share Exchange, Enron Corp.'s ownership of our common
stock declines to a level that Enron Corp. accounts for its investment
in EOG on the cost method, any balances with associated companies or
affiliates would be reclassified as trade.

23
<PAGE> 58

BUSINESS

GENERAL

Enron Oil & Gas Company, a Delaware corporation organized in 1985, together
with its subsidiaries, explores, develops, produces and markets, natural gas and
crude oil primarily in major producing basins in the United States, as well as
in Canada and Trinidad and, to a lesser extent, selected other international
areas. Our principal producing areas are further described under "Exploration
and Production" below. At December 31, 1998, our estimated net proved natural
gas reserves were 5,229 Bcf, including 1,180 Bcf of proved undeveloped methane
reserves in the Big Piney deep Paleozoic formations, and estimated net proved
crude oil, condensate and natural gas liquids reserves were 105 MMBbl. (See
"-- Oil and Gas Exploration and Production Properties and Resources".) After
giving effect to the Share Exchange, at December 31, 1998 our estimated net
proved reserves would have been 4,294 Bcf of gas and 61 MMBbl of oil. After
giving effect to the Share Exchange at December 31, 1998, 66% of our reserves,
on a natural gas equivalent basis, was located in the United States, 11% in
Canada and 23% in Trinidad.

BUSINESS STRATEGY

With respect to information on our working interest in wells or acreage,
"net" oil and
24
<PAGE> 59

gas wells or acreage are determined by multiplying "gross" oil and gas wells or
acreage by our working interest in the wells or acreage. Unless otherwise
defined, all references to wells are gross.

BUSINESS SEGMENTS

Our operations are all oil and gas exploration and production related. We
have not included a discussion of our India and China operations since they will
be transferred to Enron Corp. in connection with the Share Exchange.

EXPLORATION AND PRODUCTION

NORTH AMERICA OPERATIONS

United States. Our eight principal United States producing areas are the
Big Piney area of Wyoming, South Texas area, East Texas area, Offshore Gulf of
Mexico area, Canyon/ Strawn Trend area of West Texas, Sand Tank and Pitchfork
Ranch areas of New Mexico and Vernal area of Utah. Properties in these areas
represented approximately 81% of our United States reserves (on a natural gas
equivalent basis) and 82% of our United States net natural gas deliverability as
of December 31, 1998. We operate substantially all of these properties.

Our other United States oil and gas producing properties are located
primarily in other areas of Texas, Utah, New Mexico, Oklahoma, California,
Mississippi and Kansas.

At December 31, 1998, 93% of our proved United States reserves, including
the reserves in the Big Piney deep Paleozoic formations in Wyoming (on a natural
gas equivalent basis), was natural gas and 7% was crude oil, condensate and
natural gas liquids. A substantial portion of our United States natural gas
reserves is in long-lived fields with well-established production histories. We
believe that opportunities exist to increase production in many of these fields
through continued infill and other development drilling.

Big Piney Area. Our largest reserve accumulation is located in the Big
Piney area in Sublette and Lincoln counties in southwestern Wyoming. We are the
holder of the largest productive acreage base in this area, with approximately
280,000 net acres under lease directly within field limits. We operate
approximately 800 natural gas and crude oil wells in this area in which we own
an 85% average working interest. Deliveries from the area net to us averaged 118
MMcf per day of natural gas and 4.0 MBbl per day of crude oil, condensate, and
natural gas liquids in 1998. At December 31, 1998, natural gas deliverability
net to us was approximately 110 MMcf per day.

The current principal producing intervals are the Almy, Mesaverde and
Frontier formations. The Frontier formation, which occurs at 6,500 to 10,000
feet, contains approximately 64% of our Big Piney proved developed reserves. We
drilled 44 wells in the Big Piney area in 1998 and we plan to drill 50 wells
during 1999.

We have recorded as proved undeveloped reserves 1,180 Bcf of methane
contained, along with high concentrations of carbon dioxide as well as small
amounts of other gaseous substances, in the deep Wyoming Paleozoic (Madison)
formation located under acreage we hold by production in the Big Piney area. In
January 1999, we acquired certain adjacent Madison formation producing interests
that include the rights to an agreement covering the processing of natural gas
from such adjacent interests from the Madison formation through an existing
plant operated by another company in the industry.

South Texas Area. Our activities in South Texas are focused in the Lobo,
Wilcox and Frio producing horizons. The principal areas of activity are in the
Lobo and Wilcox Trends which occur primarily in Webb, Zapata and Duval counties,
as well as the Frio Trend in Matagorda County.

In Matagorda County, we completed two wells in 1998, each with a rate of 40
MMcf per day of natural gas and 2.0 MBbl per day of condensate. At December 31,
1998, we operated approximately 420 wells in the South Texas area, and
production is primarily from the Frio, Wilcox and Lobo sands at depths ranging
from 5,000 to 16,000 feet. We have approximately 273,000 net leasehold acres and
more than 40,000 net mineral fee

25
<PAGE> 60

acres in this area. Natural gas deliveries net to us averaged approximately 162
MMcf per day in 1998. At December 31, 1998, natural gas deliverability from this
area net to us was approximately 182 MMcf per day. We drilled 47 wells in the
South Texas area in 1998, acquired 758 square miles of new 3-D seismic and
leased 64,500 net acres. We plan to drill 54 wells in 1999 and plan to maintain
an active drilling program in South Texas for several years.

East Texas Area. Our activities in the East Texas area are primarily in the
Carthage field, located in Panola County, the North Milton field, located in
northern Harris County, and the Stowell/Big Hill area, located in Jefferson and
Chambers Counties.

The Carthage field production is primarily from the Cotton Valley, Travis
Peak and Pettit formations. At December 31, 1998, we held approximately 17,900
net acres under lease with an average 74% working interest in this area. We
drilled 29 wells in the Carthage area in 1998 and we anticipate drilling 15
wells in this area during 1999. We have continued our activity in the North
Milton area where we now operate 30 wells and hold a 100% working interest in
the acreage. We expect to drill three additional wells during 1999. We drilled
10 wells in the Stowell/Big Hill area in 1998, and we are continuing expansion
of the program in 1999. Net deliveries from the East Texas area averaged 56.4
MMcf per day of natural gas and 2.3 MBbl per day of crude oil, condensate and
natural gas liquids in 1998. At December 31, 1998, deliverability from the area
was approximately 80 MMcf per day of natural gas with 2.0 MBbl per day of crude
oil, condensate and natural gas liquids both net to us.

Offshore Gulf of Mexico Area. During 1998, we made a significant
acquisition on the Outer-Continental Shelf of the Gulf of Mexico, purchasing a
19% working interest in the Matagorda Island 623 field which increased our
natural gas deliveries, adding 55 MMcf per day net to us. Development of the
Eugene Island 135 discovery continued with a third development well increasing
our net field production to 17 MMcf per day and 760 barrels of condensate per
day. At December 31, 1998, we held an interest in 184 blocks in the Offshore
Gulf of Mexico area totaling approximately 544,000 net acres. Of these 184
blocks, located predominantly in federal waters offshore Texas and Louisiana, we
operate 127. Natural gas deliveries from this area averaged 116 MMcf per day
during 1998 net to us. A substantial portion of such deliveries was from
interests in the Matagorda Island and Mustang Island areas of offshore Texas
with significant volumes also coming from Eugene Island 135. During 1998, we
participated in the drilling of 10 wells (3.9 net wells) in the Gulf of Mexico.
In 1999, we anticipate participating in the drilling of four to six wells.

Canyon/Strawn Trend Area. Our activities in this area have been
concentrated in Crockett, Terrell and Val Verde Counties in Texas where we
drilled 21 natural gas wells during 1998. We hold approximately 66,000 net acres
and now operate approximately 350 natural gas wells in this area in which we own
a 90% average working interest. Production is from the Canyon sands and Strawn
limestone at depths from 5,500 to 12,500 feet. At December 31, 1998, natural gas
deliverability net to us was approximately 35 MMcf per day.

Sand Tank Area. The Sand Tank area located in Eddy County, New Mexico
produces from the Chester, Morrow, and Atoka formations. Natural gas deliveries
for 1998 averaged 16 MMcf per day and deliveries of crude oil, condensate and
natural gas liquids averaged .3 MBbl per day in 1998 both net to us. At year end
1998, deliverability, net to us, was approximately 15 MMcf per day of natural
gas and .2 MBbl per day of crude oil, condensate and natural gas liquids. We
hold 14,000 net acres and have an average working interest of approximately 60%.
In 1999, we plan to drill four wells in this stacked-pay area.

Pitchfork Ranch Area. The Pitchfork Ranch area located in Lea County, New
Mexico, produces primarily from the Bone Spring, Wolfcamp, Atoka and Morrow
formations. In 1998, deliveries net to us averaged 18 MMcf per day of natural
gas and approximately 2.0 MBbl per day of crude oil, condensate

26
<PAGE> 61

and natural gas liquids. At December 31, 1998, deliverability net to us was
approximately 21 MMcf per day of natural gas and 1.8 MBbl per day of crude oil,
condensate and natural gas liquids. We hold approximately 34,000 net acres and
are continuing to interpret a 3-D seismic survey shot over this entire area. We
expect to maintain a drilling program in this area in 1999.

Vernal Area. In the Vernal area, located primarily in Uintah County, Utah,
we operate approximately 305 producing wells and presently control approximately
77,000 net acres. In 1998, natural gas deliveries net to us from the Vernal area
averaged 21 MMcf per day. Deliverability at December 31, 1998, was approximately
26 MMcf per day. Production is from the Green River and Wasatch formations
located at depths between 4,500 and 8,000 feet. We have an average working
interest of approximately 60%. We anticipate numerous drilling opportunities
will be available in this area in 1999.

Canada. We are engaged in the exploration for and the exploitation,
development, production and marketing of natural gas, natural gas liquids and
crude oil in Western Canada, principally in the provinces of Alberta,
Saskatchewan, and Manitoba. We conduct operations from offices in Calgary,
Alberta, and produce natural gas and crude oil from five major areas. The
Sandhills area in southwestern Saskatchewan is the largest single natural gas
producing area in Canada for EOG. In 1998, we drilled 150 wells in the area and
we acquired additional acreage and wells in the area resulting in peak
deliverability of approximately 44 MMcf per day net to us at December 31, 1998.
We plan to drill approximately 223 wells during 1999. At the end of 1999, we
expect to realize 48 MMcf per day net deliverability. The Blackfoot area in
southeastern Alberta is our second largest natural gas producing area in Canada.
In 1998, we drilled 16 new wells and we performed numerous recompletions,
workovers and facility optimizations resulting in deliverability of
approximately 30 MMcf per day and 1.2 MBbl per day of crude oil and condensate
net to us at December 31, 1998. We plan to drill approximately 50 Blackfoot
wells during 1999. As a result, we expect the net deliverability from the
Blackfoot area to increase to 40 MMcf per day at the end of 1999. Total Canadian
natural gas deliverability net to us at December 31, 1998 was approximately 120
MMcf per day, and we held approximately 555,000 net undeveloped acres in Canada.
Total Canadian natural gas deliveries net to us for 1998 averaged approximately
105 MMcf per day.

OUTSIDE NORTH AMERICA OPERATIONS

We have producing operations offshore Trinidad, and are evaluating and
conducting exploration, exploitation and development in selected other
international areas.

Trinidad. In November 1992, we were awarded a 95% working interest
concession in the South East Coast Consortium Block offshore Trinidad,
encompassing three undeveloped fields, previously held by three government-owned
energy companies. We have developed the Kiskadee field. We are developing the
Ibis field and we anticipate that the Oilbird field will be developed over the
next several years. We are using existing surplus processing and transportation
capacity at the Pelican field facilities owned and operated by Trinidad and
Tobago government-owned companies to process and transport the production. We
are selling natural gas into the local market under a take-or-pay agreement with
the National Gas Company of Trinidad and Tobago. In 1998, deliveries net to us
averaged 139 MMcf per day of natural gas, which includes 24 MMcf per day of gas
balancing volumes relating to a field allocation agreement, and 3.0 MBbl per day
of crude oil and condensate.

In 1995, we were awarded the right to develop the modified U(a) block near
the South East Coast Consortium Block. We signed a production sharing contract
with the Government of Trinidad and Tobago in 1996. Under the contract we
committed to the acquisition of 3-D seismic data and the drilling of three
wells. The first well was drilled in 1998 and was successful, encountering over
400 feet of net pay, resulting in the largest exploration discovery in our
history. We estimate the gross proved reserves of the discovery to be over 600
billion cubic feet

27
<PAGE> 62

equivalent. We expect to drill two significant exploratory wells in 1999.

At December 31, 1998, we held approximately 144,000 net undeveloped acres
in Trinidad.

Venezuela. We were awarded exploration, exploitation and development rights
for a block offshore the eastern state of Sucre, Venezuela in early 1996. We
signed agreements with the government of Venezuela and other participants
associated with a concession awarded in the Gulf of Paria East. We hold an
initial 90% working interest in the joint venture and act as operator. We
drilled one exploratory well during 1998 and encountered hydrocarbons. We are
continuing to do additional evaluation work.

Other International. We continue to evaluate other selected conventional
natural gas and crude oil opportunities outside North America by pursuing other
exploitation opportunities in countries where indigenous natural gas and crude
oil reserves have been identified. We are also participating in discussions
concerning the potential for natural gas development opportunities in Mozambique
as well as other opportunities in Trinidad and other countries. (See
"Relationship with Enron Corp." for a further discussion of the relationship
between our company and Enron Corp. in the Mozambique project.)

MARKETING

Wellhead Marketing. We currently sell our North America wellhead natural
gas production on the spot market and under long-term natural gas contracts at
market responsive prices. In many instances, the long-term contract prices
closely approximate the prices received for natural gas being sold on the spot
market. We sell wellhead natural gas volumes from Trinidad at prices that are
based on a fixed price schedule with annual escalations. We currently sell
approximately 7% of our wellhead natural gas production to pipeline and
marketing subsidiaries of Enron Corp. We believe that the terms of our
transactions and agreements with Enron Corp. are at least as favorable to us as
could be obtained from third parties.

We sell substantially all of our wellhead crude oil and condensate under
various terms and arrangements at market responsive prices. We currently sell
approximately 1% of our wellhead crude oil and condensate production to
subsidiaries of Enron Corp.

Other Marketing. Enron Oil & Gas Marketing, Inc., one of our wholly-owned
subsidiaries, is a marketing company engaging in various marketing activities.
Both we and this subsidiary contract to provide, under short and long-term
agreements, natural gas to various purchasers and then aggregate the necessary
supplies for the sales with purchases from various sources including third-party
producers, marketing companies, pipelines or from our own production and arrange
for any necessary transportation to the points of delivery. In addition, this
subsidiary has purchased and constructed several small gathering systems in
order to facilitate its entry into the gathering business on a limited basis.
Both our company and this subsidiary use other short and long-term hedging and
trading mechanisms including sales and purchases utilizing NYMEX-related
commodity market transactions. These marketing activities have provided an
effective balance in managing a portion of our exposure to commodity price risks
for both natural gas and crude oil and condensate wellhead prices. (See
"-- Other Matters -- Risk Management".)

In September 1992, we sold a volumetric production payment for $326.8
million to a limited partnership. Delivery obligations were terminated in
December 1998. (See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Capital Resources and Liquidity -- Sale of
Volumetric Production Payment" included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as amended by Amendment No. 1 on Form 10-K/A,
which is incorporated by reference into this prospectus.)

In March 1995, in a series of transactions with Enron Corp., we exchanged
all of our fuel supply and purchase contracts and related price swap agreements
associated with a Texas City cogeneration plant (the "Cogen Contracts") for
certain natural gas price swap agreements (the "Swap Agreements") of equivalent
value. As a result of the trans-

28
<PAGE> 63

actions, we were relieved of all performance obligations associated with the
Cogen Contracts. We will realize net operating revenues and receive
corresponding cash payments of approximately $91 million during the period
extending through December 31, 1999, under the terms of the Swap Agreements. The
estimated fair value of the Swap Agreements was approximately $81 million at the
date the Swap Agreements were received. The net effect of this series of
transactions has resulted in increases in our net operating revenues and cash
receipts during 1995 and 1996 of approximately $13 million and $7 million,
respectively, with offsetting decreases in 1998 and 1999 versus that anticipated
under the Cogen Contracts.

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<PAGE> 64

WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES

The following table sets forth certain information regarding our wellhead
volumes of and average prices for natural gas per Mcf, crude oil and condensate,
and natural gas liquids per Bbl, and average lease and well expenses per Mcfe
delivered during each of the three years in the period ended December 31, 1998
and the three months ended March 31, 1998 and 1999:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
VOLUMES (PER DAY)
Natural Gas (MMcf)
United States(1)...................................... 608 657 671 644 677
Canada................................................ 98 101 105 101 104
Trinidad.............................................. 124 113 139 109 152
India................................................. - 18 56 47 71
------ ------ ------ ------ ------
Total............................................ 830 889 971 901 1,004
====== ====== ====== ====== ======
Crude Oil and Condensate (MBbl)
United States......................................... 9.2 11.7 14.0 12.6 13.1
Canada................................................ 2.4 2.5 2.6 2.7 2.7
Trinidad.............................................. 5.2 3.4 3.0 2.8 2.8
India................................................. 2.8 2.3 5.1 4.2 7.1
------ ------ ------ ------ ------
Total............................................ 19.6 19.9 24.7 22.3 25.7
====== ====== ====== ====== ======
Natural Gas Liquids (MBbl)
United States......................................... 1.3 2.6 2.9 2.7 2.6
Canada................................................ 1.2 1.3 1.0 1.1 0.4
------ ------ ------ ------ ------
Total............................................ 2.5 3.9 3.9 3.8 3.0
====== ====== ====== ====== ======
AVERAGE PRICES
Natural Gas ($/Mcf)
United States(2)...................................... $ 2.04 $ 2.32 $ 1.93 $ 2.01 $ 1.62
Canada................................................ 1.15 1.43 1.40 1.39 1.39
Trinidad.............................................. 1.00 1.05 1.06 1.09 1.06
India................................................. - 2.79 2.41 2.70 1.96
Composite........................................ 1.78 2.07 1.78 1.86 1.53
Crude Oil and Condensate ($/Bbl)
United States......................................... $21.88 $19.81 $12.84 $14.68 $11.31
Canada................................................ 18.01 17.16 11.82 13.97 11.75
Trinidad.............................................. 19.76 18.68 12.26 14.03 9.63
India................................................. 20.17 20.05 12.86 15.33 9.79
Composite........................................ 20.60 19.30 12.66 14.64 10.76
Natural Gas Liquids ($/Bbl)
United States......................................... $14.67 $12.76 $ 8.38 $ 9.49 $ 7.69
Canada................................................ 9.14 8.94 5.32 5.96 5.00
Composite........................................ 11.99 11.54 7.56 8.48 7.34
LEASE AND WELL EXPENSES ($/MCFE)
United States........................................... $ .19 $ .23 $ .22 $ .24 $ .20
Canada.................................................. .34 .39 .37 .40 .41
Trinidad................................................ .16 .16 .12 .15 .11
India................................................... .99 .64 .24 .31 .35
Composite........................................ .22 .26 .24 .26 .23
</TABLE>

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

(1) Includes 48 MMcf per day for the year ended December 31, 1996, 1997 and 1998
and for the three-month period ended March 31, 1998 delivered under the
terms of a volumetric production payment agreement effective October 1,
1992, as amended. Delivery obligations were terminated in December 1998.

(2) Includes an average equivalent wellhead value of $1.17, $1.73 and $1.53 per
Mcf for the year ended December 31, 1996, 1997 and 1998 and of $1.62 per Mcf
for the three-month period ended March 31, 1998, respectively, for the
volumes described in note (1), net of transportation costs.

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<PAGE> 65

COMPETITION

We actively compete for reserve acquisitions and exploration/exploitation
leases, licenses and concessions, frequently against companies with
substantially larger financial and other resources. To the extent our
exploration budget is lower than that of certain of our competitors, we may be
disadvantaged in effectively competing for certain reserves, leases, licenses
and concessions. Competitive factors include price, contract terms, and quality
of service, including pipeline connection times and distribution efficiencies.
In addition, we face competition from other producers and suppliers, including
competition from other world wide energy supplies, such as natural gas from
Canada.

OTHER MATTERS

Risk Management. We engage in price risk management activities from time to
time primarily for non-trading and to a lesser extent for trading purposes. We
use derivative financial instruments (primarily price swaps and costless
collars) for non-trading purposes to hedge the impact of market fluctuations of
natural gas and crude oil market prices on net income and cash flow.

At December 31, 1998, we had outstanding crude oil commodity price swap
transactions, designated as hedges, covering approximately 700 MBbl of crude oil
and condensate for 1999. The fair value of the positions was a net revenue
increase of $4 million at December 31, 1998.

At December 31, 1998, based on the portion of our anticipated natural gas
volumes for 1999 for which prices have not, in effect, been hedged using
NYMEX-related commodity market transactions and long-term marketing contracts,
our net income and after-tax cash flow sensitivity to changing natural gas
prices is approximately $18 million for each $.10 per Mcf change in average
wellhead natural gas prices. While we are not affected as significantly by
changing crude oil prices for those volumes not otherwise hedged, our net income
and cash flow sensitivity is approximately $6 million for $1.00 per barrel
change in average wellhead crude oil prices.

Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption. United
States federal tax law provides a tax credit for production of certain fuels
produced from nonconventional sources (including natural gas produced from tight
formations), subject to a number of limitations. Fuels qualifying for the credit
must be produced from a well drilled or a facility placed in service after
November 5, 1990 and before January 1, 1993, and must be sold before January 1,
2003.

The credit, which is currently approximately $.52 per MMBtu of natural gas,
is computed by reference to the price of crude oil, and is phased out as the
price of crude oil exceeds $23.50 in 1980 dollars (adjusted for inflation) with
complete phaseout if such price exceeds $29.50 in 1980 dollars (similarly
adjusted). Under this formula, the commencement of phaseout would be triggered
if the average price for crude oil rose above approximately $49 per barrel in
current dollars. Significant benefits from the tax credit have accrued and
continue to accrue to us since a portion (and in some cases a substantial
portion) of our natural gas production from wells drilled after November 5,
1990, and before January 1, 1993, on our leases in several of our significant
producing areas qualify for this tax credit.

Natural gas production from wells spudded or completed after May 24, 1989
and before September 1, 1996 in tight formations in Texas qualifies for a
ten-year exemption, ending August 31, 2001, from severance taxes, subject to
certain limitations. In 1995, the drilling qualification period was extended
from September 1996 through August 2002, and the tax exemption was modified in a
somewhat reduced form. In 1998, the drilling qualification period was extended
eight years through August 2010.

31
<PAGE> 66

OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES

The following table sets forth our net proved and proved developed reserves
at December 31 for each of the four years in the period ended December 31, 1998,
and the changes in the net proved reserves for each of the three years in the
period then ended as estimated by our engineering staff. See "Risk Factors--The
oil and gas reserves data and future net revenues estimates we report are
uncertain".

NET PROVED AND PROVED DEVELOPED RESERVE SUMMARY

<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL
------------- ------ -------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas(Bcf)
Net proved reserves at December 31, 1995........ 2,654.1(1) 313.9 245.5 75.0 - 3,288.5
Revisions of previous estimates............... 3.6 (2.9) 79.6 - - 80.3
Purchases in place............................ 100.6 0.9 - - - 101.5
Extensions, discoveries and other additions... 256.8 49.2 90.7 124.6 - 521.3
Sales in place................................ (58.4) (4.3) - - - (62.7)
Production.................................... (210.2) (35.9) (45.6) - - (291.7)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1996........ 2,746.5(1) 320.9 370.2 199.6 - 3,637.2
Revisions of previous estimates............... (50.8) (1.5) (0.4) 25.1 - (27.6)
Purchases in place............................ 60.0 67.6 - - - 127.6
Extensions, discoveries and other additions... 275.9 37.8 - 253.5 7.7 574.9
Sales in place................................ (17.7) (0.4) - - - (18.1)
Production.................................... (229.1) (37.0) (41.0) (6.6) - (313.7)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1997........ 2,784.8(1) 387.4 328.8 471.6 7.7 3,980.3
Revisions of previous estimates............... (55.9) (2.5) 4.7 32.3 (0.4) (21.8)
Purchases in place............................ 123.0 54.9 - - - 177.9
Extensions, discoveries and other additions... 272.8 62.9 693.8 340.9 103.0 1,473.4
Sales in place................................ (37.5) - - - - (37.5)
Production.................................... (233.8) (38.5) (50.9) (20.2) - (343.4)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1998........ 2,853.4(1) 464.2 976.4 824.6 110.3 5,228.9
======= ====== ======= ======= ===== =======
Liquids (MBbl)(2)
Net proved reserves at December 31, 1995........ 25,399 6,585 6,870 11,542 - 50,396
Revisions of previous estimates............... 339 191 1,835 - - 2,365
Purchases in place............................ 312 2 - - - 314
Extensions, discoveries and other additions... 7,103 2,116 1,388 275 - 10,882
Sales in place................................ (447) (121) - - - (568)
Production.................................... (3,830) (1,321) (1,925) (1,026) - (8,102)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1996........ 28,876 7,452 8,168 10,791 - 55,287
Revisions of previous estimates............... 3,515 225 (31) 19 - 3,728
Purchases in place............................ 127 1,123 - - - 1,250
Extensions, discoveries and other additions... 6,037 1,590 - 20,123 - 27,750
Sales in place................................ (1,683) - - - - (1,683)
Production.................................... (5,223) (1,384) (1,236) (838) - (8,681)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1997........ 31,649 9,006 6,901 30,095 - 77,651
Revisions of previous estimates............... (152) (504) (1,049) 3,063 73 1,431
Purchases in place............................ 3,104 - - - - 3,104
Extensions, discoveries and other additions... 9,396 448 11,429 11,501 1,089 33,863
Sales in place................................ (1,039) - - - - (1,039)
Production.................................... (6,131) (1,358) (1,077) (1,874) - (10,440)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1998........ 36,827 7,592 16,204 42,785 1,162 104,570
======= ====== ======= ======= ===== =======
</TABLE>

(Table continued on following page)

32
<PAGE> 67

<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL
------------- ------ -------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Bcf Equivalent (Bcfe)
Net proved reserves at December 31, 1995........ 2,806.6(1) 353.3 286.7 144.3 - 3,590.9
Revisions of previous estimates............... 5.7 (1.8) 90.6 - - 94.5
Purchases in place............................ 102.5 0.9 - - - 103.4
Extensions, discoveries and other additions... 299.4 61.9 99.0 126.2 - 586.5
Sales in place................................ (61.0) (5.1) - - - (66.1)
Production.................................... (233.1) (43.9) (57.1) (6.2) - (340.3)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1996........ 2,920.1(1) 365.3 419.2 264.3 - 3,968.9
Revisions of previous estimates............... (29.8) (0.1) (0.5) 25.2 - (5.2)
Purchases in place............................ 60.7 74.4 - - - 135.1
Extensions, discoveries and other additions... 312.1 47.4 - 374.2 7.7 741.4
Sales in place................................ (27.7) (0.4) - - - (28.1)
Production.................................... (260.4) (45.3) (48.5) (11.7) - (365.9)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1997........ 2,975.0(1) 441.3 370.2 652.0 7.7 4,446.2
Revisions of previous estimates............... (57.0) (5.5) (1.7) 50.8 - (13.4)
Purchases in place............................ 141.6 54.9 - - - 196.5
Extensions, discoveries and other additions... 329.2 65.6 762.4 409.9 109.5 1,676.6
Sales in place................................ (43.7) - - - - (43.7)
Production.................................... (270.6) (46.6) (57.3) (31.4) - (405.9)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1998........ 3,074.5(1) 509.7 1,073.6 1,081.3 117.2 5,856.3
======= ====== ======= ======= ===== =======
Net proved developed reserves at
Natural Gas (Bcf)
December 31, 1995............................. 1,218.1 310.1 233.9 - - 1,762.1
December 31, 1996............................. 1,325.7 319.5 370.2 124.6 - 2,140.0
December 31, 1997............................. 1,349.0 370.9 328.8 286.6 - 2,335.3
December 31, 1998............................. 1,429.7 387.4 283.0 407.4 - 2,507.5
Liquids(MBbl)(2)
December 31, 1995............................. 19,977 6,505 5,607 11,542 - 43,631
December 31, 1996............................. 24,868 7,452 8,168 10,791 - 51,279
December 31, 1997............................. 27,707 8,885 6,901 23,322 - 66,815
December 31, 1998............................. 33,045 7,465 4,782 33,472 - 78,764
Bcf Equivalents
December 31, 1995............................. 1,338.0 349.1 267.5 69.3 - 2,023.9
December 31, 1996............................. 1,474.9 364.2 419.2 189.3 - 2,447.6
December 31, 1997............................. 1,515.3 424.2 370.2 426.5 - 2,736.2
December 31, 1998............................. 1,628.0 432.1 311.7 608.2 - 2,980.0
</TABLE>

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

(1) Includes 1,180 Bcf of proved undeveloped methane reserves contained, along
with high concentrations of carbon dioxide and other gases, in deep
Paleozoic (Madison) formations in the Big Piney area of Wyoming.

(2) Includes crude oil, condensate and natural gas liquids.

33
<PAGE> 68

Acreage. The following table summarizes our developed and undeveloped
acreage at December 31, 1998. Excluded is acreage in which our interest is
limited to owned royalty, overriding royalty and other similar interests.

<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED TOTAL
--------------------- --------------------- ---------------------
GROSS NET GROSS NET GROSS NET
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
United States
California............. 21,324 16,747 821,738 748,238 843,062 764,985
Texas.................. 413,305 220,075 637,850 513,807 1,051,155 733,882
Offshore Gulf of
Mexico.............. 283,571 126,306 564,775 417,827 848,346 544,133
Wyoming................ 153,597 116,092 324,531 251,792 478,128 367,884
Oklahoma............... 188,963 104,633 122,848 87,264 311,811 191,897
Montana................ 119,686 1,651 146,013 103,779 265,699 105,430
New Mexico............. 71,945 35,091 106,133 64,232 178,078 99,323
Utah................... 74,454 50,311 40,873 27,205 115,327 77,516
Mississippi............ 5,144 5,052 43,174 42,950 48,318 48,002
Kansas................. 17,339 15,489 6,747 4,009 24,086 19,498
Colorado............... 20,619 1,233 30,908 13,618 51,527 14,851
Louisiana.............. 6,285 5,429 6,520 3,767 12,805 9,196
Arkansas............... 8,522 1,319 2,457 2,010 10,979 3,329
Other.................. 5,247 984 1,015 795 6,262 1,779
--------- --------- --------- --------- --------- ---------
Total.......... 1,390,001 700,412 2,855,582 2,281,293 4,245,583 2,981,705
Canada
Saskatchewan........... 251,805 235,121 288,834 283,732 540,639 518,853
Alberta................ 372,612 243,225 336,713 243,971 709,325 487,196
Manitoba............... 11,743 9,954 23,730 21,966 35,473 31,920
British Columbia....... 656 164 8,755 5,553 9,411 5,717
--------- --------- --------- --------- --------- ---------
Total Canada...... 636,816 488,464 658,032 555,222 1,294,848 1,043,686
Other International
China.................. 5,000 5,000 1,844,531 1,844,531 1,849,531 1,849,531
Venezuela.............. - - 268,413 241,572 268,413 241,572
India.................. 98,300 29,490 564,307 169,292 662,607 198,782
France................. - - 168,032 168,032 168,032 168,032
Trinidad............... 4,200 3,990 147,233 143,490 151,433 147,480
--------- --------- --------- --------- --------- ---------
Total Other
International... 107,500 38,480 2,992,516 2,566,917 3,100,016 2,605,397
--------- --------- --------- --------- --------- ---------
Total.......... 2,134,317 1,227,356 6,506,130 5,403,432 8,640,447 6,630,788
========= ========= ========= ========= ========= =========
</TABLE>

Producing Well Summary. The following table reflects the Company's
ownership in gas and oil wells located in Texas, the Gulf of Mexico, Oklahoma,
New Mexico, Utah, Wyoming, and various other states, Canada, Trinidad, India and
China at December 31, 1998.

<TABLE>
<CAPTION>
PRODUCTIVE WELLS
EXCLUDING INDIA
PRODUCTIVE WELLS AND CHINA
---------------- ----------------
GROSS* NET GROSS* NET
------- ------ ------- ------
<S> <C> <C> <C> <C>
Gas.................................................. 5,253 3,788 5,241 3,784
Oil.................................................. 897 506 831 486
----- ----- ----- -----
Total...................................... 6,150 4,294 6,072 4,270
===== ===== ===== =====
</TABLE>

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

* Gross gas and oil wells include 255 with multiple completions.

34
<PAGE> 69

DRILLING AND ACQUISITION ACTIVITIES

During the years ended December 31, 1996, 1997 and 1998, we spent
approximately $599 million, $693 million and $769 million, respectively, for
exploratory and development drilling and acquisition of leases and producing
properties. We drilled, participated in the drilling of or acquired wells as set
out in the table below for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ --------------
1996 1997 1998 1999
-------------- -------------- -------------- --------------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Development Wells Completed
North America
Gas.......................... 396 325.04 467 352.90 478 402.80 64 46.94
Oil.......................... 80 57.46 94 74.85 38 34.98 6 3.96
Dry.......................... 80 68.77 101 80.01 79 62.16 26 23.60
--- ------ --- ------ --- ------ --- ------
Total................... 556 451.27 662 507.76 595 499.94 96 74.50
Outside North America
Gas.......................... - - 12 3.60 - - 5 2.20
Oil.......................... 1 .30 6 1.80 21 6.30 3 .90
Dry.......................... - - - - - - - -
--- ------ --- ------ --- ------ --- ------
Total................... 1 .30 18 5.40 21 6.30 8 3.10
--- ------ --- ------ --- ------ --- ------
Total Development....... 557 451.57 680 513.16 616 506.24 104 77.60
--- ------ --- ------ --- ------ --- ------
Exploratory Wells Completed
North America
Gas.......................... 14 10.36 8 5.12 5 4.40 4 3.05
Oil.......................... 1 .78 - - 6 5.50 - -
Dry.......................... 26 19.00 12 7.53 22 15.70 2 1.32
--- ------ --- ------ --- ------ --- ------
Total................... 41 30.14 20 12.65 33 25.60 6 4.37
Outside North America
Gas.......................... - - - - 1 1.00 - -
Oil.......................... - - - - 1 .90 - -
Dry.......................... 1 .50 - - - - - -
--- ------ --- ------ --- ------ --- ------
Total................... 1 .50 - - 2 1.90 - -
--- ------ --- ------ --- ------ --- ------
Total Exploratory....... 42 30.64 20 12.65 35 27.50 - -
--- ------ --- ------ --- ------ --- ------
Total................... 599 482.21 700 525.81 651 533.74 110 81.97
Wells in Progress at end of
period.......................... 87 61.08 44 36.39 28 15.73 29 19.47
--- ------ --- ------ --- ------ --- ------
Total................... 686 543.29 744 562.20 679 549.47 139 101.44
=== ====== === ====== === ====== === ======
Wells Acquired
Gas.......................... 350 148.20* 227 82.45* 333 317.23* 22 2.13*
Oil.......................... 5 .65 48 20.50* - 1.70* 2 .67
--- ------ --- ------ --- ------ --- ------
Total................... 355 148.85 275 102.95 333 318.93 24 2.80
=== ====== === ====== === ====== === ======
</TABLE>

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

* Includes the acquisition of additional interests in certain wells in which we
previously acquired an interest.

All of our drilling activities are conducted on a contract basis with
independent drilling contractors. We own no drilling equipment.

35
<PAGE> 70

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of EOG (upon the closing of the Share
Exchange with Enron Corp.) and their names and ages are as follows (all
positions are with EOG unless otherwise noted):

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Fred C. Ackman........................ 68 Director
Edward Randall, III................... 72 Director
Frank G. Wisner....................... 61 Director
Forrest E. Hoglund.................... 66 Chairman of the Board; Director
Mark G. Papa.......................... 52 President and Chief Executive Officer;
Director
Edmund P. Segner, III................. 45 Vice Chairman and Chief of Staff
Loren M. Leiker....................... 45 Executive Vice President, Exploration
Gary L. Thomas........................ 49 Executive Vice President, North
American Operations
Barry Hunsaker, Jr. .................. 49 Senior Vice President and General
Counsel
Walter C. Wilson...................... 56 Senior Vice President and Chief
Financial Officer
</TABLE>

Mr. Ackman has been a director since 1989. He also has been a consultant to
the oil and gas industry for over six years and has interests in ranching and
investments.

Mr. Randall has been a director since 1990, and his principal occupation is
investments. Mr. Randall also is a director of KN Energy, Inc. and PaineWebber
Group Inc.

Mr. Wisner has been a director since 1997. He also has served as Vice
Chairman of American International Group Inc. since 1997 following his
retirement as U.S. Ambassador to India. American International Group Inc. is an
insurance company, which provides insurance to companies investing in foreign
operations. Mr. Wisner's more than 35-year career with the U.S. State
Department, primarily in Africa, Asia and Washington, D.C., included serving as
U.S. Ambassador to the Philippines, Egypt and Zambia.

Forrest E. Hoglund joined EOG as Chairman of the Board and Director in
September 1987. He also served as Chief Executive Officer of EOG until September
1998 and served as President from May 1990 until December 1996. Mr. Hoglund is
an advisory director of Chase Bank of Texas, National Association. Mr. Hoglund
expects to retire by August 31, 1999 and, therefore, may or may not be a
director or executive officer of EOG at the time of the closing of this
offering.

Mark G. Papa was elected President and Chief Executive Officer and Director
of EOG in September 1998, President and Chief Operating Officer in September
1997, President in December 1996 and was President North America Operations from
February 1994 to September 1998. From May 1986 through January 1994, Mr. Papa
served as Senior Vice President - Operations. Mr. Papa joined Belco Petroleum
Corporation, a predecessor of EOG, in 1981.

Edmund P. Segner, III became Vice Chairman and Chief of Staff of EOG in
September 1997. Mr. Segner was a director of EOG from January 1997 to October
1997. Mr. Segner joined Enron Corp. in 1988 and was Executive Vice President and
Chief of Staff.

36
<PAGE> 71

Loren M. Leiker joined EOG in April 1989 and has been Executive Vice
President, Exploration since May 1998. Mr. Leiker was previously Senior Vice
President, Exploration of EOG.

Gary L. Thomas was elected Executive Vice President, North American
Operations in May 1998. He was previously Senior Vice President and General
Manager of EOG's Midland Division. Mr. Thomas joined a predecessor of EOG in
July 1978.

Barry Hunsaker, Jr. has been Senior Vice President and General Counsel
since he joined EOG in May 1996. Prior to joining EOG, Mr. Hunsaker was a
partner in the law firm of Vinson & Elkins L.L.P.
Walter C. Wilson joined EOG in November 1987 and has been Senior Vice
President and Chief Financial Officer since May 1991.

THE SELLING STOCKHOLDER

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP AFTER STOCK OFFERING
BEFORE STOCK OFFERING AND SHARE EXCHANGE(1)(2)
------------------------ SHARES TO ------------------------
SELLING STOCKHOLDER SHARES PERCENTAGE BE SOLD(1) SHARES PERCENTAGE
- ------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Enron Corp. 82,270,000 53.5% 4,050,000 15,950,000 13.4%
</TABLE>

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

(1) Assumes the exercise of the over-allotment option in full, and the transfer
by Enron Corp. of 62,270,000 shares of our common stock to us in connection
with the Share Exchange.

(2) Concurrently with this offering, Enron Corp. is offering Exchangeable Notes,
which are mandatorily exchangeable into no more than 10,000,000 shares of
our common stock (no more than 11,500,000 shares if the over-allotment
option to the underwriters in the Exchangeable Notes offering is exercised
in full) owned by Enron Corp. Following consummation of the Exchangeable
Notes offering, the shares that may be delivered upon exchange therefor will
continue to be beneficially owned by Enron Corp. until such time as they are
delivered at maturity of the Exchangeable Notes. If the underwriters'
over-allotment options in this offering and the Exchangeable Notes offering
are exercised in full and the maximum number of shares of common stock are
delivered at maturity of the Exchangeable Notes, Enron Corp. will
beneficially own 4,450,000 shares of our common stock or approximately 3.8%
of the outstanding shares.

The registration related to our common stock covered by the over-allotment
option and our common stock deliverable upon exchange of the Exchangeable Notes
is being provided pursuant to the terms of a stock restriction and registration
agreement with Enron Corp., under which we have agreed that, upon the request of
Enron Corp. (or certain assignees), we will register under the Securities Act
and applicable state securities laws the sale of our common stock owned by Enron
Corp. Our obligation is subject to certain limitations relating to a minimum
amount of our common stock required for registration, the timing of registration
and other similar matters. We are obligated to pay all expenses incidental to
such registration, excluding underwriters' discounts and commissions and certain
legal fees and expenses.

RELATIONSHIP WITH ENRON CORP.

After the Share Exchange, Enron Corp.'s ownership of EOG will be reduced to
20,000,000 shares of common stock. Enron Corp. may not sell these remaining
shares of EOG common stock for a period of six months after the Share Exchange.
However, Enron Corp. may sell up to 4,050,000 shares of our common stock to
satisfy the underwriters' over-allotment option in this offering and may sell
convertible securities that would be mandatorily exchangeable into a maximum of
10,000,000 of its remaining EOG shares

37
<PAGE> 72

(11,500,000 if the underwriters' over-allotment option in that offering is
exercised in full). (See "The Selling Stockholder".) Enron Corp.'s sale of these
convertible securities is discussed further in "Concurrent Offering".

On closing of the Share Exchange, the EOG board of directors will be
reduced to five, and all of Enron Corp.'s officers and directors currently
serving as EOG directors will resign from the EOG board. We have the right to
use the name "Enron Oil & Gas Company" for the period of six months after the
Share Exchange. However, some time soon after the Share Exchange, we expect to
change our corporate name to "EOG Resources, Inc." We will also change the names
of our subsidiaries to reflect our new corporate name.

Enron Corp. currently provides us with various services, such as
maintenance of employee benefit plans, provision of some telecommunications and
computer support services, lease of office space and the provision of some
purchasing and operating services and other corporate staff and support
services. After the Share Exchange, we have the right to continue to use these
services for a period of up to one year. However, we expect to transition away
from using these services as soon as reasonably convenient for both Enron Corp.
and us. EOG believes that it has obtained these services at substantially market
terms, and, therefore, we expect that our costs to obtain these services from
third parties will not materially change.

EOG and Enron Corp. have in the past entered into material transactions and
agreements incident to their respective businesses. Such transactions and
agreements have related to, among other things, the purchase and sale of natural
gas and crude oil and hedging and trading activities. Those transactions and
agreements currently in place will continue after the Share Exchange, and we do
not expect any material changes to such transactions and agreements that would
not otherwise occur in a third party transaction. EOG and Enron Corp. may enter
into similar types of transactions and agreements in the future. We intend that
the terms of any future transactions and agreements between us and Enron Corp.
will be at least as favorable to us as could be obtained from other third
parties.

After the completion of the Share Exchange, we and Enron Corp. can compete
anywhere in the world, including India and China. In certain areas of the world,
affiliate rules may have prevented us from having exploration opportunities
while Enron Corp. owned a majority of our common stock. After the Share
Exchange, those rules will no longer restrict us.

EOG and Enron Corp. have entered into an agreement regarding the manner in
which they will share the burdens and benefits of the integrated project under
joint development in Mozambique. The agreement provides generally that our
interest in this project will be 20% of the combined ownership interest of EOG
and Enron Corp. This agreement will continue in place after the Share Exchange.

For further detail of our relationship with Enron Corp. after the Share
Exchange and the status of specific intercompany agreements, please refer to the
Share Exchange Agreement filed as an exhibit to the registration statement that
includes this prospectus.

38
<PAGE> 73

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Our authorized capital stock consists of 10,000,000 shares of preferred
stock, par value $.01 per share, none of which are outstanding, and 320,000,000
shares of common stock, $.01 par value, of which 153,896,229 shares were
outstanding as of July 1, 1999. Following the Share Exchange and the offering,
there will be 35,270,000 fewer shares of common stock outstanding. The following
description of our capital stock summarizes the material terms and provisions of
these securities. For the complete terms of our common stock and preferred
stock, please refer to our restated certificate of incorporation and bylaws that
are incorporated by reference into the registration statement that includes this
prospectus.

PREFERRED STOCK

Our board of directors is authorized, subject to any limitations prescribed
by law, to provide for the issuance of the shares of preferred stock in series,
by filing a certificate pursuant to the applicable laws of the State of Delaware
to establish from time to time the number of shares to be included in each such
series, and to fix the powers, designations, preferences, and relative,
participating, optional or other rights, if any, of the shares of each such
series and any qualifications, limitations, or restrictions thereof, all without
stockholder approval. Any future issuance of preferred stock, while providing
desired flexibility in connection with acquisitions and other corporate
purposes, could adversely affect the voting power or other rights of holders of
common stock and the likelihood that such holders will receive dividend payments
and payments upon liquidation, and could have the effect of delaying, deferring
or preventing a change of control of EOG.

COMMON STOCK

Our common stock possesses ordinary voting rights for the election of
directors and in respect to other corporate matters, each share being entitled
to one vote. There are no cumulative voting rights, meaning that the holders of
a majority of the shares voting for the election of directors can elect all the
directors if they choose to do so. Our common stock carries no preemptive rights
and is not convertible, redeemable or assessable, or entitled to the benefits of
any sinking fund. The holders of our common stock are entitled to dividends in
such amounts and at such times as may be declared by the board of directors out
of legally available funds.

Upon liquidation or dissolution, holders of common stock are entitled to
share ratably in all net assets available for distribution to stockholders after
payment of any corporate debts and any liquidation preference established for
any preferred stock. All outstanding shares of common stock are duly authorized,
validly issued, fully paid and nonassessable.

LISTING

Our common stock is listed on the New York Stock Exchange.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar of our common stock is First Chicago Trust
Company of New York, Jersey City, New Jersey.

LIMITATION ON DIRECTORS' LIABILITY

Delaware corporation law authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such laws,
directors are accountable to corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their duty
of care. The Delaware laws enable corporations to limit available relief to
equitable remedies such as injunction or rescission. Our restated certificate of
incorporation limits the liability of our directors to EOG or its stockholders
(in their capacity as directors

39
<PAGE> 74

but not in their capacity as officers) to the fullest extent permitted by the
Delaware law. Specifically, our directors will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director, except
for liability

- for any breach of the director's duty of loyalty to the company or its
stockholders,

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,

- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law, or

- for any transaction from which the director derived an improper personal
benefit.

This provision in our restated certificate of incorporation may have the
effect of reducing the likelihood of derivative litigation against directors,
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited us and our stockholders.

40
<PAGE> 75

LEGAL MATTERS

The validity of our common stock deliverable upon exchange of the
Exchangeable Notes will be passed upon for EOG by Barry Hunsaker, Jr., Esq.,
Senior Vice President and General Counsel, and for the underwriters by Bracewell
& Patterson, L.L.P. Certain other matters will be passed on for EOG by Fulbright
& Jaworski L.L.P. Certain matters will be passed upon for Enron Corp. by Vinson
& Elkins L.L.P. Mr. Hunsaker owns substantially less than 1% of the outstanding
shares of our common stock. Bracewell & Patterson, L.L.P. provides services to
us and our affiliates on matters unrelated to the offering of the common stock.

EXPERTS

The consolidated financial statements and schedule included in our Annual
Report on Form 10-K for the year ended December 31, 1998 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 herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.

The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to our Annual Report on Form 10-K for the
year ended December 31, 1998, and the estimates from the reports of that firm
appearing in such Annual Report, are incorporated by reference herein on the
authority of said firm as experts in petroleum engineering in giving such
reports.

PLAN OF DISTRIBUTION

This prospectus relates to up to 11,500,000 shares of EOG common stock that
may be delivered by Enron Corp. pursuant to its offering of Exchangeable Notes
and is Appendix A to the Enron Corp. Exchangeable Notes prospectus. At maturity
of the Exchangeable Notes, the principal amount of each note will be mandatorily
exchanged by Enron Corp. for shares of EOG common stock. For a description of
the Exchangeable Notes, see "Description of the Exchangeable Notes" in the Enron
Corp. Exchangeable Notes prospectus.

We, our directors and executive officers and Enron Corp. have agreed with
the underwriters not to offer, sell, contract to sell or otherwise dispose of or
hedge any shares of our common stock or securities convertible into or
exchangeable for shares of our common stock during the period from the date of
this prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. This
agreement does not apply to any existing employee benefit plans or the exercise
of stock options pursuant to our stock option plan.

In connection with the distribution of the Exchangeable Notes, we and Enron
Corp. have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect thereof.

41
<PAGE> 76

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms located at:

- 450 Fifth Street, N.W.
Washington, D.C. 20549;

- Seven World Trade Center
New York, New York 10048; and

- Northwest Atrium Center
500 West Madison Street
Chicago, Illinois 60661.

Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms and their copy charges.

Our common stock has been listed and traded on the New York Stock Exchange
since 1989. Accordingly, you may inspect the information we file with the SEC at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and 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 and 15(d) of the Securities Exchange Act of 1934
until we sell all of the common stock:

- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as amended by Amendment No. 1 on Form 10-K/A; and

- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.

You may request a copy of these filings, excluding exhibits, at no cost by
writing or telephoning Angus H. Davis, Corporate Secretary, at our principal
executive office, which is:

Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
(713) 853-6161

YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION.

42
<PAGE> 77

===============================================================================

No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Cautionary Statement Regarding
Forward-Looking Statements.......... 15
Use of Proceeds....................... 15
Capitalization........................ 16
Price Range of Common Stock and Cash
Dividends........................... 17
Unaudited Condensed Consolidated Pro
Forma Financial Information......... 18
Business.............................. 24
Management............................ 36
The Selling Stockholder............... 37
Relationship with Enron Corp. ........ 37
Description of Capital Stock.......... 39
Legal Matters......................... 41
Experts............................... 41
Plan of Distribution.................. 41
Where You Can Find More
Information......................... 42
</TABLE>

[ENRON LOGO]
ENRON OIL & GAS COMPANY
Common Stock
-----------------------

PROSPECTUS

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

===============================================================================
<PAGE> 78

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered, other than the underwriting
discounts and commissions. All amounts shown are estimates except the SEC
registration fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $62,742
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
NYSE listing fees........................................... *
Printing and engraving fees................................. *
Trustee's fees and expenses................................. *
Miscellaneous............................................... *
-------
Total............................................. $ *
=======
</TABLE>

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

* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Enron Charter contains provisions under which Enron will indemnify, to
the fullest extent permitted by law, persons who are made a party to an action
or proceeding by virtue of the fact that the individual is or was a director,
officer, or, in certain circumstances, an employee or agent, of Enron or another
corporation at Enron's request. The Oregon Business Corporation Act generally
permits such indemnification to the extent that the individual acted in good
faith and in a manner which he reasonably believed to be in the best interest of
or not opposed to the corporation or, with respect to criminal matters, if the
individual had no reasonable cause to believe his or her conduct was unlawful.
In addition, the Enron Charter contains a provision that eliminates the personal
liability of a director to the corporation or its shareholders for monetary
damages for conduct as a director, except for liability of a director (1) for
breach of the duty of loyalty, (2) for actions or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) for the
payment of improper dividends or redemptions, or (4) for any transaction from
which the director derived an improper personal benefit.

Enron has purchased liability insurance policies covering its directors and
officers to provide protection where Enron cannot legally indemnify a director
or officer and where a claim arises under the Employee Retirement Income
Security Act of 1974 against a director or officer based on an alleged breach of
fiduciary duty or other wrongful act.

II-1
<PAGE> 79

ITEM 16. EXHIBITS.

<TABLE>
<C> <S>
*1.01 Form of Underwriting Agreement.
3.01 Amended and Restated Articles of Incorporation of Enron
(Annex E to the Proxy Statement/Prospectus included in
Enron's Registration Statement on Form S-4 -- File No.
333-13791).
3.02 Articles of Merger of Enron Oregon Corp., an Oregon
corporation, and Enron Corp., a Delaware corporation
(Exhibit 3.02 to Post-Effective Amendment No. 1 to Enron's
Registration Statement on Form S-3 -- File No. 33-60417).
3.03 Articles of Merger of Enron Corp., an Oregon corporation,
and Portland General Corporation, an Oregon corporation
(Exhibit 3.03 to Post-Effective Amendment No. 1 to Enron's
Registration Statement on Form S-3 -- File No. 33-60417).
3.04 Bylaws of Enron (Exhibit 3.04 to Post-Effective Amendment
No. 1 to Enron's Registration Statement on Form S-3 -- File
No. 33-60417).
3.05 Form of Series Designation for the Enron Convertible
Preferred Stock (Annex F to the Proxy Statement/Prospectus
included in Enron's Registration Statement on Form
S-4 -- File No. 333-13791).
3.06 Form of Series Designation for the Enron 9.142% Preferred
Stock (Annex G to the Proxy Statement/Prospectus included in
Enron's Registration Statement on Form S-4 -- File No.
333-13791).
3.07 Form of Series Designation for the Enron Series A Junior
Voting Convertible Preferred Stock (Exhibit 3.07 to Enron's
Registration Statement on Form S-3 -- Form 333-44133).
3.08 Statement of Resolutions Establishing a Series of Preferred
Stock of Enron Corp. -- Mandatorily Convertible Single Reset
Preferred Stock, Series A (Exhibit 4.01 to Enron's Form 8-K
filed on January 26, 1999).
3.09 Statement of Resolutions Establishing a Series of Preferred
Stock of Enron Corp. -- Mandatorily Convertible Single Reset
Preferred Stock, Series B (Exhibit 4.02 to Enron's Form 8-K
filed on January 26, 1999).
4.01 Indenture dated November 1, 1985 between Enron and the
Trustee (Form T-3 Application for Qualification of
Indentures under the Trust Indenture Act of 1939, File No.
22-14390, filed on October 24, 1985).
4.02 First Supplemental Indenture dated as of December 1, 1995,
between Enron and the Trustee (Exhibit 4(b) to Enron's
Registration Statement on Form S-3 filed on November 8,
1995).
4.03 Supplemental Indenture, dated as of May 8, 1997, by and
among Enron Corp., Enron Oregon Corp. and Harris Trust and
Savings Bank, as Trustee (Exhibit 4.02 to Post-Effective
Amendment No. 1 to Enron's Registration Statement on Form
S-3, File No. 33-60417).
4.04 Form of Supplemental Indenture, dated as of September 1,
1997, between Enron Corp. and Harris Trust and Savings Bank,
as Trustee (Exhibit 4.03 to Enron's Registration Statement
on Form S-3, File No. 333-35549).
*4.05 Form of supplemental indenture relating to the Exchangeable
Notes.
*4.06 Form of Exchangeable Note (included in Exhibit 4.05).
*5.01 Opinion of James V. Derrick, Jr., Esq., Senior Vice
President and General Counsel of Enron Corp.
*8.01 Opinion of Vinson & Elkins L.L.P. as to certain tax matters.
10.01 Share Exchange Agreement dated as of July 19, 1999 between
Enron Corp. and Enron Oil & Gas Company (Exhibit 2 to Enron
Oil & Gas Company's Registration Statement on Form S-3, File
No. 333-83533).
12.01 Statement and Computation Showing the Ratio of Earnings to
Fixed Charges.
</TABLE>

II-2
<PAGE> 80
<TABLE>
<C> <S>
23.01 Consent of Arthur Andersen LLP.
23.02 Consent of DeGolyer and MacNaughton.
*23.03 Consent of James V. Derrick, Jr., Esq. (included in Exhibit
5.01 above).
*23.04 Consent of Vinson & Elkins L.L.P. (included in Exhibit 8.01
above).
24 Powers of Attorney of certain directors of Enron Corp.
25 Form T-1, Statement of Eligibility under the Trust Indenture
Act of 1939 of Harris Trust and Savings Bank.
</TABLE>

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

* To be filed by amendment.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 81

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Enron certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement or
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Houston and State of Texas, on the 23rd day of July,
1999.

ENRON CORP.

By: /s/ RICHARD A. CAUSEY
------------------------------------
(Richard A. Causey)
Executive Vice President and
Chief Accounting Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed below by the following
persons in the capacities with Enron indicated and on the 23rd day of July,
1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KENNETH L. LAY Chairman of the Board, Chief Executive
- ----------------------------------------------------- Officer and Director (Principal Executive
(Kenneth L. Lay) Officer)

/s/ RICHARD A. CAUSEY Executive Vice President and Chief
- ----------------------------------------------------- Accounting Officer (Principal Accounting
(Richard A. Causey) Officer)

/s/ ANDREW S. FASTOW Executive Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial Officer)
(Andrew S. Fastow)

* Director
- -----------------------------------------------------
(Robert A. Belfer)

* Director
- -----------------------------------------------------
(Norman P. Blake, Jr.)

* Director
- -----------------------------------------------------
(Ronnie C. Chan)

* Director
- -----------------------------------------------------
(John H. Duncan)

* Director
- -----------------------------------------------------
(Joe H. Foy)

* Director
- -----------------------------------------------------
(Wendy L. Gramm)

* Director
- -----------------------------------------------------
(Ken L. Harrison)

* Director
- -----------------------------------------------------
(Robert K. Jaedicke)
</TABLE>

II-4
<PAGE> 82

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

* Director
- -----------------------------------------------------
(Charles A. LeMaistre)

Director
- -----------------------------------------------------
(Rebecca P. Mark)

* Director
- -----------------------------------------------------
(John Mendelsohn)

Director
- -----------------------------------------------------
(Jerome J. Meyer)

* Director and President and Chief Operating
- ----------------------------------------------------- Officer
(Jeffrey K. Skilling)

Director
- -----------------------------------------------------
(John A. Urquhart)

* Director
- -----------------------------------------------------
(John Wakeham)

Director
- -----------------------------------------------------
(Herbert S. Winokur, Jr.)

*By: REBECCA C. CARTER
------------------------------------------------
(Rebecca C. Carter)
(Attorney-in-fact for persons indicated)
</TABLE>

II-5
<PAGE> 83

INDEX TO EXHIBITS

II-6
<PAGE> 84
<TABLE>
<C> <S>
23.01 Consent of Arthur Andersen LLP.
23.02 Consent of DeGolyer and MacNaughton.
*23.03 Consent of James V. Derrick, Jr., Esq. (included in Exhibit
5.01 above).
*23.04 Consent of Vinson & Elkins L.L.P. (included in Exhibit 8.01
above).
24 Powers of Attorney of certain directors of Enron Corp.
25 Form T-1, Statement of Eligibility under the Trust Indenture
Act of 1939 of Harris Trust and Savings Bank.
</TABLE>

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

* To be filed by amendment.

II-7

<PAGE> 1
EXHIBIT 12.01

ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(Dollars in Millions)
(Unauditied)

<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
------------------------------------------------------------
3/31/99 1998 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net Income $ 253 $ 703 $ 105 $ 584 $ 520 $ 453
Less:
Undistributed earnings and
losses of less than 50%
owned affiliates -- (44) (89) (39) (14) (9)
Capitalized interest of
nonregulated companies (14) (66) (16) (10) (8) (9)
Add:
Fixed charges(1) 245 809 674 454 436 487
Minority interest 32 77 80 75 27 30
Income tax expense 62 204 (65) 297 310 190
----- ------- ----- ------- ------- -------
Total $ 578 $ 1,683 $ 689 $ 1,361 $ 1,271 $ 1,142
===== ======= ===== ======= ======= =======

Fixed Charges
Interest expense(1) $ 229 $ 760 $ 624 $ 404 $ 386 $ 445
Rental expense representative
of interest factor 16 49 50 50 50 42
----- ------- ----- ------- ------- -------
Total $ 245 $ 809 $ 674 $ 454 $ 436 $ 487
===== ======= ===== ======= ======= =======

Ratio of earnings to fixed charges 2.36 2.08 1.02 3.00 2.92 2.34
===== ======= ===== ======= ======= =======
</TABLE>
- ----------------
(1) Amounts exclude costs incurred on sales of accounts receivables.

<PAGE> 1

EXHIBIT 23.01

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report on the consolidated
financial statements of Enron Corp. and subsidiaries dated March 5, 1999,
included in Enron Corp.'s Form 10-K, for the year ended December 31, 1998, and
to all references to our Firm included in this registration statement.

/s/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Houston, Texas
July 23, 1999

<PAGE> 1

EXHIBIT 23.02

July 23, 1999

Enron Corp.
1400 Smith Street
Houston, Texas 77002

Gentlemen:

In connection with the Registration Statement on Form S-3 (the
Registration Statement), to be filed with the Securities and Exchange
Commission on or about July 23, 1999, by Enron Corp., DeGolyer and MacNaughton
(the firm) hereby consents to the incorporation in said Registration Statement
of the references to the firm and to the opinions delivered to Enron Oil & Gas
Company (the Company) regarding the comparison of estimates prepared by the
firm with those furnished to it by the Company of the proved oil, condensate,
natural gas liquids, and natural gas reserves of certain selected properties
owned by the Company. The opinions are contained in the firm's letter reports
dated January 17, 1997, January 13, 1998, and January 11, 1999, for estimates,
as of December 31, 1996, December 31, 1997, and December 31, 1998,
respectively. The opinions are referred to in the section "Oil and Gas
Exploration and Production Properties and Reserves - Reserve Information" in
Enron Corp.'s Annual Report on Form 10-K for the year ended December 31, 1998,
and in Note 18 to the Enron Corp. consolidated financial statements included in
Enron Corp.'s Form 10-K for the year ended December 31, 1998. DeGolyer and
MacNaughton also consents to the incorporation by reference in the Registration
Statement of the firm's letter report, dated January 11, 1999, addressed to the
Company, which is included as Exhibit 23.03 to Enron Corp.'s Annual Report on
Form 10-K for the year ended December 31, 1998. DeGolyer and MacNaughton also
consent to the references to the firm in the section "Experts" in the
Prospectus that is part of the Registration Statement.

Very truly yours,

/s/ DeGOLYER AND MacNAUGHTON
--------------------------------
DeGOLYER AND MacNAUGHTON

<PAGE> 1
EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Corp., an Oregon corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company common stock, the undersigned
officer or director of the Company hereby constitutes and appoints Kenneth L.
Lay, Richard A. Causey, Andrew S. Fastow, Peggy B. Menchaca and Rebecca C.
Carter, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name, place and stead, in any and all capacities, to sign, execute and file
a registration statement on Form S-3 relating to such securities to be filed
with the Securities and Exchange Commission, together with all amendments
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises in order
to effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereto set his/her hand this
23rd day of July, 1999.

/s/ ROBERT A. BELFER /s/ CHARLES A. LeMAISTRE
- ---------------------------- ----------------------------
Robert A. Belfer Charles A. LeMaistre

/s/ NORMAN P. BLAKE, JR.
- ----------------------------
Norman P. Blake, Jr.

/s/ RONNIE C. CHAN /s/ JOHN MENDELSOHN
- ---------------------------- ----------------------------
Ronnie C. Chan John Mendelsohn

/s/ JOHN H. DUNCAN
- ----------------------------
John H. Duncan

/s/ JOE H. FOY /s/ JEFFREY K. SKILLING
- ---------------------------- ----------------------------
Joe H. Foy Jeffrey K. Skilling

/s/ WENDY L. GRAMM
- ----------------------------
Wendy L. Gramm

/s/ KEN L. HARRISON /s/ JOHN WAKEHAM
- ---------------------------- ----------------------------
Ken L. Harrison John Wakeham

/s/ ROBERT K. JAEDICKE
- ----------------------------
Robert K. Jaedicke

/s/ KENNETH L. LAY
- ----------------------------
Kenneth L. Lay

<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1

Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee

Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2)
---------------

HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)

Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)

111 West Monroe Street; Chicago, Illinois 60603
(Address of principal executive offices)

Daryl L. Pomykala; Harris Trust and Savings Bank;
111 West Monroe Street; Chicago, Illinois, 60603
312/461-7458
(Name, address and telephone number for agent for service)

ENRON CORP.
(Name of obligor)

Oregon
(State of Incorporation)

47-0255140
(I.R.S. Employer Identification Number)

1400 Smith Street
Houston, Texas 77002
(Address of principal executive offices)

Debt Securities
(Title of Indenture Securities)

<PAGE> 2

1. GENERAL INFORMATION. Furnish the following information as to the
Trustee:

(a) Name and address of each examining or supervising authority to
which it is subject.

Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of Governors
of the Federal Reserve System, Washington, D.C.

(b) Whether it is authorized to exercise corporate trust powers.

Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.

2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the
Trustee, describe each such affiliation.

The Obligor is not an affiliate of the Trustee.

3. thru 15.

NO RESPONSE NECESSARY

16. LIST OF EXHIBITS.

1. A copy of the articles of association of the Trustee is now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.

A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as
now in effect and includes the authority of the Trustee to
commence business and to exercise corporate trust powers was filed
in connection with the Registration Statement of Louisville Gas
and Electric Company, File No. 2-44295, and is incorporated herein
by reference.

2. A copy of the existing by-laws of the Trustee.

A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of C-Cube Microsystems,
Inc.; File No. 33-97166, and is incorporated herein by reference.

3. The consents of the Trustee required by Section 321(b) of the Act.

(included as Exhibit A on page 2 of this statement)

4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.

(included as Exhibit B on page 3 of this statement)

<PAGE> 3
SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 22nd day of July, 1999.

HARRIS TRUST AND SAVINGS BANK

By: /s/ DARYL L. POMYKALA
----------------------------------------
Daryl L. Pomykala
Assistant Vice President

EXHIBIT A

The consents of the Trustee required by Section 321(b) of the Act.

Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.

HARRIS TRUST AND SAVINGS BANK

By: /s/ DARYL L. POMYKALA
----------------------------------------
Daryl L. Pomykala
Assistant Vice President

<PAGE> 4

EXHIBIT B

Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of March 31, 1999, as published in accordance with a
call made by the State Banking Authority and by the Federal Reserve Bank of the
Seventh Reserve District.

[HARRIS BANK LOGO]

Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603

of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on March 31, 1999, a state banking institution organized and operating
under the banking laws of this State and a member of the Federal Reserve System.
Published in accordance with a call made by the Commissioner of Banks and Trust
Companies of the State of Illinois and by the Federal Reserve Bank of this
District.

Bank's Transit Number 71000288

<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin ........................ $ 1,237,336
Interest bearing balances .................................................. $ 137,061
Securities:...............................................................................
a. Held-to-maturity securities .......................................................... $ 0
b. Available-for-sale securities ........................................................ $ 5,455,837
Federal funds sold and securities purchased under agreements to resell ................... $ 87,250
Loans and lease financing receivables:
Loans and leases, net of unearned income ................................... $ 9,500,293
LESS: Allowance for loan and lease losses ................................. $ 109,979
-----------

Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b) ....................................................... $ 9,390,314
Assets held in trading accounts .......................................................... $ 161,168
Premises and fixed assets (including capitalized leases) ................................. $ 255,438
Other real estate owned .................................................................. $ 243
Investments in unconsolidated subsidiaries and associated companies ...................... $ 75
Customer's liability to this bank on acceptances outstanding ............................. $ 40,869
Intangible assets ........................................................................ $ 254,549
Other assets ............................................................................. $ 1,183,465
----------- -----------

TOTAL ASSETS ............................................................................. $18,203,605
=========== ===========
</TABLE>

<PAGE> 5

<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices ......................................................................... $ 9,099,851
Non-interest bearing ............................................................... $ 2,743,074
Interest bearing ................................................................... $ 6,356,777
In foreign offices, Edge and Agreement subsidiaries, and IBF's .............................. $ 1,822,400
Non-interest bearing ............................................................... $ 26,371
Interest bearing ................................................................... $ 1,796,029
Federal funds purchased and securities sold under agreements to repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased & securities sold under agreements to repurchase ......................... $ 3,354,582
Trading Liabilities .............................................................................. 96,517
Other borrowed money: ............................................................................
a. With remaining maturity of one year or less .................................................. $ 1,681,346
b. With remaining maturity of more than one year................................................. $ 0
Bank's liability on acceptances executed and outstanding ......................................... $ 40,869
Subordinated notes and debentures ................................................................ $ 225,000
Other liabilities ................................................................................ $ 390,234
------------ ------------

TOTAL LIABILITIES ................................................................................ $ 16,890,799
============ ============
EQUITY CAPITAL
Common stock ..................................................................................... $ 100,000
Surplus .......................................................................................... $ 608,510
a. Undivided profits and capital reserves ....................................................... $ 616,084
b. Net unrealized holding gains (losses) on available-for-sale securities ....................... ($ 11,788)
------------ ------------

TOTAL EQUITY CAPITAL ............................................................................. $ 1,312,806
============ ============

Total liabilities, limited-life preferred stock, and equity capital .............................. $ 18,203,605
============ ============
</TABLE>

I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.

PAMELA PIAROWSKI
4/30/99

We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.

EDWARD W. LYMAN,
ALAN G. McNALLY,
JAMES J. GLASSER
Directors.