UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File Number 1-3423
ENRON CORP.
(Exact name of registrant as specified in its charter)
Delaware 47-0255140
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Enron Building
1400 Smith Street
Houston, Texas 77002
(Address of principal executive (Zip Code)
offices)
(713) 853-6161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at July 31, 1996
Common Stock, $.10 Par Value 253,684,038 shares
1 of 26
<PAGE>
ENRON CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Income - Three
Months Ended June 30, 1996 and 1995 and
Six Months Ended June 30, 1996 and 1995 3
Consolidated Balance Sheet - June 30, 1996
and December 31, 1995 4
Consolidated Statement of Cash Flows - Six
Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security
Holders 24
ITEM 6. Exhibits and Reports on Form 8-K 25
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $2,960,924 $2,149,346 $6,014,920 $4,453,295
Costs and Expenses
Cost of gas and other products 2,311,007 1,550,480 4,652,434 3,169,913
Operating expenses 280,846 269,866 577,627 492,324
Oil and gas exploration expenses 19,048 22,850 38,340 42,975
Depreciation, depletion and
amortization 110,029 102,844 229,459 210,240
Taxes, other than income taxes 32,257 26,280 69,677 57,010
2,753,187 1,972,320 5,567,537 3,972,462
Operating Income 207,737 177,026 447,383 480,833
Other Income and Deductions
Equity in earnings of
unconsolidated subsidiaries 40,366 12,527 71,305 27,727
Interest income 11,760 7,567 23,837 14,466
Other, net 5,051 33,327 137,640 78,863
Income Before Interest, Minority
Interests and Income Taxes 264,914 230,447 680,165 601,889
Interest and Related Charges, net 65,418 70,919 135,086 137,927
Dividends on Preferred Stock of
Subsidiaries 8,110 7,848 15,958 15,696
Minority Interests 22,935 13,451 38,074 23,282
Income Taxes 51,744 44,184 161,555 135,989
Net Income 116,707 94,045 329,492 288,995
Preferred Stock Dividends 3,981 3,809 7,967 7,628
Earnings on Common Stock $ 112,726 $ 90,236 $ 321,525 $ 281,367
Earnings Per Share of Common Stock
Primary $ 0.46 $ 0.37 $ 1.31 $ 1.16
Fully Diluted $ 0.43 $ 0.35 $ 1.22 $ 1.08
Average Number of Common Shares
Used in Primary Computation 246,340 244,018 245,190 243,605
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 133,002 $ 114,917
Trade receivables 1,156,393 1,115,709
Other receivables 368,122 310,790
Transportation and exchange gas receivable 203,373 149,659
Inventories 105,096 111,463
Assets from price risk management activities 899,379 579,749
Other 322,578 344,620
Total Current Assets 3,187,943 2,726,907
Investments and Other Assets
Investments in unconsolidated subsidiaries 1,449,011 1,216,474
Assets from price risk management activities 1,765,341 1,197,029
Other 1,438,085 1,230,090
Total Investments and Other Assets 4,652,437 3,643,593
Property, Plant and Equipment, at cost 10,959,498 11,107,181
Less accumulated depreciation, depletion
and amortization 4,172,095 4,238,746
Net Property, Plant and Equipment 6,787,403 6,868,435
Total Assets $14,627,783 $13,238,935
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,060,412 $ 1,020,599
Transportation and exchange gas payable 222,826 144,141
Accrued taxes 60,332 121,192
Accrued interest 54,520 51,692
Liabilities from price risk management
activities 748,192 708,353
Other 407,956 386,015
Total Current Liabilities 2,554,238 2,431,992
Long-Term Debt 3,329,796 3,064,839
Deferred Credits and Other Liabilities
Deferred income taxes 2,134,784 2,185,748
Deferred revenue 168,925 202,217
Liabilities from price risk management
activities 1,194,083 590,302
Other 696,183 673,223
Total 4,193,975 3,651,490
Minority Interests 604,160 548,648
Company-Obligated Preferred Stock of
Subsidiaries 391,750 376,750
Shareholders' Equity
Second preferred stock, cumulative, $1 par
value 137,218 137,550
Common stock, $0.10 par value 25,596 25,386
Additional paid in capital 1,904,215 1,791,151
Retained earnings 1,863,397 1,650,949
Cumulative foreign currency translation
adjustment (153,078) (153,563)
Common stock held in treasury (50,475) (92,642)
Other (including Flexible Equity Trust) (173,009) (193,615)
Total 3,553,864 3,165,216
Total Liabilities and Shareholders' Equity $14,627,783 $13,238,935
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities
Reconciliation of net income to net cash
provided by (used in) operating activities
Net income $ 329,492 $ 288,995
Depreciation, depletion and amortization 229,459 210,240
Oil and gas exploration expenses 38,340 42,975
Amortization of deferred contract
reformation costs 8,527 14,830
Deferred income taxes 125,971 95,570
Gain on sale of assets (159,958) (90,970)
Regulatory, litigation and other contingency
adjustments (18,497) (31,243)
Changes in components of working capital (136,971) (443,060)
Deferred contract reformation costs (7,801) (8,966)
Amortization of production payments (21,613) (21,494)
Net assets from price risk management
activities (244,322) (325,824)
Other, net (16,452) 60,175
Net Cash Provided by (Used in) Operating
Activities 126,175 (208,772)
Cash Flows From Investing Activities
Proceeds from sale of assets and investments 196,651 102,619
Additions to property, plant and equipment (272,655) (282,516)
Equity investments (279,256) (63,544)
Other, net (30,196) (27,139)
Net Cash Used in Investing Activities (385,456) (270,580)
Cash Flows From Financing Activities
Issuance of long-term debt 144,266 434,155
Net increase in short-term borrowings 257,838 424,595
Decrease in long-term debt (138,767) (244,779)
Acquisition of treasury stock (51,893) (24,247)
Issuance of treasury stock 77,622 25,472
Issuance of company-obligated preferred stock
of subsidiaries 15,000 -
Issuance of common stock 101,851 -
Dividends paid (137,082) (127,664)
Other, net 8,531 -
Net Cash Provided by Financing Activities 277,366 487,532
Increase in Cash and Cash Equivalents 18,085 8,180
Cash and Cash Equivalents, Beginning of Period 114,917 132,336
Cash and Cash Equivalents, End of Period $ 133,002 $ 140,516
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein
have been prepared by Enron Corp. (Enron) without audit
pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, these statements reflect
all adjustments (consisting only of normal recurring
entries) which are, in the opinion of management, necessary
for a fair statement of the financial results for the
interim periods. Certain information and notes normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
Enron believes that the disclosures are adequate to make the
information presented not misleading. These consolidated
financial statements should be read in conjunction with the
financial statements and the notes thereto incorporated into
Enron's Annual Report on Form 10-K for the year ended
December 31, 1995 (Form 10-K).
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Certain reclassifications have been made in the 1995
amounts to conform with the 1996 presentation.
"Enron" is used from time to time herein as a collective
reference to Enron Corp. and its subsidiaries and
affiliates. In material respects, the businesses of Enron
are conducted by the subsidiaries and affiliates whose
operations are managed by their respective officers.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes for the first half of 1996 and
1995 was $72.7 million and $6.8 million, respectively. Cash
paid for interest expense for the same periods, net of
amounts capitalized, was $142.2 million and $145.9 million,
respectively.
Changes in components of working capital are as follows
(in thousands):
<TABLE>
<CAPTION>
First Six Months
1996 1995
<S> <C> <C>
Receivables $(157,762) $ 481
Inventories 6,367 32,786
Prepayments 55,135 (58,873)
Payables 128,031 (137,831)
Accrued taxes (60,861) 477
Accrued interest 2,828 (5,770)
Other (110,709) (274,330)
$(136,971) $(443,060)
</TABLE>
3. LITIGATION AND CONTINGENCIES
As reported in the Form 10-K, in 1995, several parties
(the Plaintiffs) filed suit in Harris County District Court
in Houston, Texas against Intratex Gas Company (Intratex),
Houston Pipe Line Company and Panhandle Gas Company
(collectively, the Enron Defendants), each of which is a
wholly-owned subsidiary of Enron. The Plaintiffs were
either sellers or royalty owners under numerous gas purchase
contracts with Intratex, many of which have terminated.
Early in 1996, the case was severed by the Court into two
matters that will be tried (or otherwise resolved)
separately. In the first matter, the Plaintiffs allege that
the Enron Defendants committed fraud and negligent
misrepresentation in connection with the "Panhandle
program," a special marketing program established in the
early 1980s. In the second matter, the Plaintiffs allege
that Intratex violated state regulatory requirements and
certain gas purchase contracts by failing to take the
Plaintiffs' gas ratably with other producers' gas at certain
times between 1978 and 1988. The Court has certified a class
action with respect to these ratability claims. The Enron
Defendants deny the Plaintiffs' claims and have asserted
various affirmative defenses, including the statute of
limitations. The Enron Defendants believe they have strong
legal and factual defenses, and intend to vigorously contest
the claims brought in each matter. Although no assurances can
be given, Enron believes that the ultimate resolution of these
matters will not have a materially adverse effect on its
financial position or results of operations.
In October 1994, an explosion occurred at Enron's
methanol plant in Pasadena, Texas. Before the explosion, the
plant was producing approximately 420,000 gallons of
methanol per day, approximately half of which was being used
at Enron's MTBE plant. There were no fatalities or serious
injuries as a result of the explosion. The plant was placed
back into commercial operation in June 1995. Taking into
account business interruption and other insurance coverages,
Enron currently anticipates that the explosion did not and
will not have a materially adverse effect on its financial
position or results of operations.
In connection with a Power Purchase Agreement between
Dabhol Power Company, Enron's 80%-owned subsidiary, and the
Maharashtra State Electricity Board, Dabhol Power Company
has been developing Phase I of an electricity generating
power plant south of Bombay, State of Maharashtra, India
(the Project). On August 3, 1995, after construction had
begun, a new coalition government in the State of
Maharashtra announced the State government's intention to
terminate the Project, and construction ceased on August 8,
1995. Enron believes that such actions were in clear
violation of the contract and in response to these actions,
Dabhol Power Company commenced arbitration proceedings in
London against the State government for the actions it has
taken to terminate the Project. Dabhol Power Company seeks
to recover all of its construction and other expenses, in
addition to lost profits. In addition, Dabhol Power Company
has both orally and in writing communicated to the
Maharashtra State government its desire to go forward with
construction of the Project and its willingness to resolve
any outstanding issues. In January 1996, the Maharashtra
State government notified Dabhol Power Company in writing
that it had approved a restructured transaction (that
includes both Phase I and Phase II and that increases the
planned capacity of the facility by 435 megawatts to 2,450
megawatts) on terms that are acceptable to Enron. While the
parties are working together in good faith and Enron
anticipates construction to resume in the near future,
various approvals remain outstanding from government
agencies and lenders. Although the outcomes of the
arbitration and the renegotiation processes cannot be
predicted with certainty, based on currently available
information, Enron believes that the ultimate outcome of the
Project will not have a materially adverse effect on its
financial position.
On March 29, 1996, Enron and two of its wholly-owned
subsidiaries filed suit in the state district court of
Harris County, Texas seeking a ruling that the Capacity
Reservation and Transportation Agreement (CRTA) dated
September 10, 1990 between Teesside Gas Transportation
Limited (TGTL), an Enron subsidiary, and the "CATS" parties
has terminated due to consistent material breaches of that
agreement by the CATS parties. The suit has been removed to
the federal district court in Houston, Texas. Proceedings
in the Houston lawsuit have been enjoined by an English
court and Enron is appealing the injunction. In April 1996,
TGTL, reserving its position under the lawsuit that the
contract had been terminated, notified the CATS parties in
accordance with the provisions of the CRTA that as a result
of their failure to provide the Transportation Service (as
defined in the contract) by April 1, 1996, the CRTA had
terminated. The CATS parties were to have provided
transportation under the CRTA to ship J-Block gas through
the Central Area Transmission System (CATS) pipeline, owned
by the CATS parties. In a separate lawsuit filed in the
English court, the CATS parties are suing TGTL and Enron (on
the basis of its guarantee of TGTL's obligations under the
CRTA) for allegedly failing to make quarterly "send-or-pay"
payments under the CRTA. TGTL has refused to make these
payments for the same reason that it terminated the CRTA:
the Transportation Service (as defined in the CRTA) has not
been available. Termination of the CRTA leads to
termination of the "J-Block Contracts". The "J-Block
Contracts" are long-term gas contracts that Enron entered
into in March 1993 with Phillips Petroleum Company United
Kingdom Limited, British Gas Exploration and Production
Limited and Agip (U.K.) Limited to purchase future gas
production from the J-Block field which is located in the
North Sea offshore the United Kingdom. Such agreements
provided for Enron to take or pay for the gas at a fixed
price (with possible escalations throughout the contract
period). The agreements provided that gas paid for, but not
taken, could be recovered in later contract years. In
September 1995, Enron announced that, in accordance with its
contractual rights, it had notified the J-Block sellers that
Enron's nominations for gas from the J-Block fields were
estimated to be zero from the first delivery date through
September 30, 1997. In addition, in accordance with its
contractual rights, Enron made no estimated nominations for
J-Block gas under the J-Block Contracts for the contract
year ending September 30, 1998. While not challenging these
actions, the J-Block sellers have, in a proceeding commenced
in English court on March 29, 1996, sought a declaration
that Enron should have agreed to a "Commissioning Date"
(which might trigger Enron's take-or-pay obligations) of
earlier than September 25, 1996, the date set forth in the
J-Block Contracts as the Commissioning Date in the absence of
an agreement by the parties on a earlier Commissioning Date.
Enron disagrees with the J-Block sellers' contention and is
contesting the issue in court. Trial on these matters is
scheduled to commence in the English court on October 1, 1996.
Enron continues to believe that there are many reasons for the
parties to resolve any contract issues commercially, but
efforts have not been successful to date. Although no
assurances can be given, based upon the foregoing and other
information currently available, Enron does not anticipate
that the ultimate outcome of the J-Block matter will have a
materially adverse effect on its financial position.
4. PROPOSED MERGER
Enron announced on July 22, 1996 that it had signed an
agreement to merge with Portland General Corporation (PGC)
in a stock-for-stock transaction. PGC is an electric
utility holding company, serving retail electric customers
in northwest Oregon as well as wholesale electricity
customers throughout the western United States. Enron
proposes to issue approximately 51 million common shares,
valued at approximately $2.1 billion, to shareholders of PGC
in a one for one exchange of shares, as a result of which
Enron will be the surviving corporation. Enron will
consolidate PGC's debt of $1.1 billion and account for the
transaction on a purchase accounting basis.
Under the terms of the proposed merger, Enron may
terminate the agreement if the average price of Enron common
stock during a certain period prior to the date of the
shareholder votes exceeds $47.25. PGC may terminate the
agreement if the average price of Enron common stock during
that period falls below $36.25. Termination fees may be
payable to each party through the date of the shareholder
votes under certain other circumstances. The merger is
conditioned, among other things, upon the approvals of each
company's shareholders and the completion of regulatory
procedures at the Oregon Public Utility Commission and the
Federal Energy Regulatory Commission. Regulatory procedures
are expected to be completed in less than twelve months.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENRON CORP. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Second Quarter 1996
vs. Second Quarter 1995
The following review of Enron's results of operations
should be read in conjunction with the Consolidated
Financial Statements.
CONSOLIDATED NET INCOME
Enron's second quarter 1996 net income increased to $117
million as compared to $94 million during the second quarter
of 1995. Net income in the second quarter of 1996 benefited
from strong performances in the transportation and operation
and international gas and power services segments. These
increases were partially offset by higher minority interests
and income taxes. Earnings per share rose to $0.46 in the
second quarter of 1996 from $0.37 in the same period in
1995.
INCOME BEFORE INTEREST, MINORITY INTERESTS AND INCOME TAXES
The following table presents income before interest,
minority interests and income taxes (IBIT) for each of
Enron's operating segments (in millions).
<TABLE>
<CAPTION>
Second Quarter Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $101 $ 69 $32
Domestic Gas and Power Services 52 47 5
International Gas and Power Services 39 24 15
Exploration and Production 77 84 (7)
Corporate and Other (4) 6 (10)
Total $265 $230 $35
</TABLE>
TRANSPORTATION AND OPERATION
The transportation and operation segment includes Enron's
interstate natural gas pipelines, construction of power,
pipeline and liquids projects, management and operation of
pipelines and clean fuels plants and Enron's investment in
crude oil marketing and transportation operations conducted
by EOTT Energy Partners, L.P. (EOTT) and liquids pipeline
operations. The segment's IBIT increased $32 million in the
second quarter of 1996 as compared to the same period in
1995. The following discussion analyzes the significant
changes in the various components of IBIT for the
transportation and operation segment.
REVENUES
Revenues of the transportation and operation segment
declined $2 million (1%) during the second quarter of 1996
as compared to the same period in 1995. Increased
engineering and construction revenues were offset by
decreased revenues related to gathering facilities sold in
1995 and the first quarter of 1996 and reduced sales revenue
at Northern Natural Gas Company (Northern Natural) as that
pipeline is now exclusively a transporter of natural gas.
COSTS AND EXPENSES
The cost of gas and other products sold by the
transportation and operation segment decreased by $12
million (87%) during the second quarter of 1996 compared to
the same period in 1995 primarily as a result of decreased
gas purchases by Northern Natural as that pipeline is now
exclusively a transporter of natural gas.
Operating expenses in the transportation and operation
segment declined $18 million (21%) during the second quarter
of 1996 as compared to the same period in 1995. The decline
primarily reflects lower operating expenses on the
interstate pipelines primarily as a result of favorable
resolution related to previously incurred environmental
costs, combined with reduced expenses related to gathering
facilities sold during 1995 and the first quarter of 1996.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased $10 million to $12 million in the second quarter
of 1996 as compared to the same period in 1995 primarily as
a result of higher earnings realized by EOTT as compared
with the 1995 period, which included a charge to reflect the
discontinuance of EOTT's West Coast processing and asphalt
marketing operations. The second quarter of 1995 also
included increased earnings from Trailblazer Pipeline due to
a settlement with a transportation customer.
Other income, net decreased $5 million to $7 million for
the second quarter of 1996 compared to the same period in
1995. The 1995 quarter included pre-tax earnings of $10
million related to the disposition of non-strategic
gathering facilities.
DOMESTIC GAS AND POWER SERVICES
Enron Capital & Trade Resources (ECT) conducts Enron's
energy commodity marketing, purchasing and financing
activities and the management of the portfolio of
commitments arising from these activities and can be
categorized into three business lines: Cash and Physical,
Risk Management and Finance. The domestic gas and power
services segment's IBIT for the second quarter of 1996
increased $5 million from the same period in 1995. The
following discussion analyzes the contributions to IBIT for
each of these business lines.
Statistics for ECT (including intercompany amounts) are
as follows:
<TABLE>
<CAPTION>
Second Quarter
1996 1995
<S> <C> <C>
Natural Gas and Crude Oil
Physical/Notional Quantities (BBtue/d) (1)
Firm (2) 6,838 5,632
Interruptible 1,907 2,280
Transport Volumes 595 353
Subtotal 9,340 8,265
Financial Settlements (Notional) 28,865 32,128
Total 38,205 40,393
Production Payments and Financings
Arranged (In Millions) $234.8 $47.6
Fixed Price Contract Originations
(TBtue) (3) 608 2,015
Electricity (Thousand Megawatt hours)
Owned Production 768 842
Transaction Volumes Marketed 11,008 1,603
<FN>
(1) Billion British thermal units equivalent per day.
(2) Commitments to deliver a specified volume of gas at a
fixed or market responsive price.
(3) Trillion British thermal units equivalent.
</TABLE>
The cash and physical operations include earnings from
physical contracts of one year or less involving marketing
and transportation of physical natural gas, liquids,
electricity and other commodities, earnings from the
management of ECT's contract portfolio and earnings related
to the physical assets of ECT. Also reported in this
business are the effects of actual settlements of ECT's long-
term physical and notional quantity-based contracts. The
cash and physical operations' earnings before overhead
expenses were $38 million in the second quarter of 1996 and
$28 million in the same period in 1995. The earnings from
this business unit increased in the second quarter of 1996
primarily due to increased earnings from the management of
ECT's portfolio of contracts. Earnings from natural gas
assets also increased in the second quarter of 1996 as
compared to the second quarter of 1995, while earnings from
the gas processing assets decreased.
The risk management operations consist of market
origination activity on new long-term contracts
(transactions greater than one year) and restructuring of
existing long-term contracts. Second quarter earnings
before overhead expenses from this unit were $22 million in
1996 compared to $49 million in 1995. Earnings from this
unit decreased primarily due to lower originations from long-
term contracts with utilities and independent power plants,
which were partially offset by increased originations in the
European and Canadian markets.
ECT's finance operations provide capital to customers
through various product offerings. The finance operations
had earnings before overhead expenses of $18 million in the
second quarter of 1996 as compared to a loss of $3 million
in 1995. The 1996 increase in earnings relates primarily to
the increased value of its equity investments.
ECT's overhead expenses such as rent, systems expenses
and other support group costs were $26 million in the second
quarter of 1996 and $27 million in the same period in 1995.
INTERNATIONAL GAS AND POWER SERVICES
The international segment includes earnings from the
development and promotion of natural gas pipeline and power
projects, commercial power generation activities outside of
North America and activities of Enron Global Power &
Pipelines L.L.C. The segment's second quarter IBIT
increased $15 million from 1995 to 1996. The following
discussion analyzes the significant changes in the segment's
results.
NET REVENUES
Revenues net of cost of sales for the international
segment decreased by $9 million in the second quarter of
1996 as compared with 1995. This decrease is primarily due
to the recognition in the second quarter of 1995 of revenues
of $12 million as a result of the satisfaction of Enron's
support obligations related to the formation of Enron Global
Power & Pipelines L.L.C. and revenues associated with
marketing operations transferred to the domestic gas and
power services segment beginning in January 1996. These
decreases were partially offset by revenues in the second
quarter of 1996 of $16 million from the promotion of a
portion of Enron's interest in its power assets at Teesside
in the United Kingdom, effectively bringing Enron's
ownership interest in the project to 35%.
COSTS AND EXPENSES
Operating expenses decreased $5 million in the second
quarter of 1996 compared with the same period in 1995 due to
the transfer of marketing operations to the domestic gas and
power services segment.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
improved from $11 million in the second quarter of 1995 to
$28 million in the same period in 1996 due primarily to
increased earnings from Enron's interests in Teesside and
other international power and pipeline projects.
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT decreased
to $77 million in the second quarter of 1996 from $84
million in the same period of 1995. Enron's exploration and
production activities are conducted by Enron Oil & Gas
Company (EOG). The following discussion analyzes the
significant changes in the segment's results.
Wellhead volume and price statistics (including
intercompany amounts) are as follows:
<TABLE>
<CAPTION>
Second Quarter
1996 1995
<S> <C> <C>
Natural Gas Volumes (MMcf/d) (1)
North America (2) 700 548
Trinidad 140 122
Total 840 670
Average Natural Gas Prices ($/Mcf)
North America (3) $1.72 $1.34
Trinidad 1.00 0.97
Composite 1.60 1.27
Crude Oil/Condensate Volumes (MBbl/d) (1)
North America 11.0 10.9
Trinidad 5.4 4.8
India 2.7 1.7
Total 19.1 17.4
Average Crude Oil/Condensate Prices ($/Bbl)
North America $20.62 $17.93
Trinidad 19.61 17.14
India 20.56 18.13
Composite 20.33 17.73
<FN>
(1) Million cubic feet per day or thousand barrels per day,
as applicable.
(2) Includes 48 MMcf per day for the three-month periods
ended June 30, 1996 and 1995 delivered under the terms of
a volumetric production payment agreement effective
October 1, 1992, as amended.
(3) Includes an average equivalent wellhead value of
$0.76/Mcf and $0.79/Mcf for the three-month periods ended
June 30, 1996 and 1995, respectively, for the volumes
described in note (2), net of transportation costs.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
increased $9 million (4%) during the second quarter of 1996
as compared to the same period in 1995. The variance
includes an increase of $47 million related to higher
wellhead prices and production volumes in the second quarter
of 1996 as compared with the second quarter of 1995. Second
quarter 1996 average wellhead natural gas prices were up 26%
from the comparable period in 1995 and wellhead natural gas
volumes increased 25%. The increase in North America
wellhead natural gas volumes was primarily the result of no
voluntary curtailments in 1996 due to the significant
increases in average wellhead natural gas prices realized.
Second quarter 1996 wellhead crude oil and condensate
average prices were up 15% from the second quarter of 1995,
and wellhead crude oil and condensate volumes increased 10%.
The increase in production-related revenues is partially
offset by a decrease in gains on sales of reserves and
related assets which totaled $18 million in the second
quarter of 1996 compared with $54 million in the same period
in 1995.
In addition, EOG recognized a gain of $11 million on
commodity price swap transactions in the second quarter of
1996 compared to $16 million during the second quarter of
1995. Gains related to hedges placed by Enron on open
commodity positions not hedged by EOG decreased from $11
million in the second quarter of 1995 to $3 million in the
same period in 1996.
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities increased $4 million (25%) from the
second quarter of 1995 compared to the same period in 1996
primarily due to higher average associated costs per Mcf.
Operating expenses for the exploration and production
segment increased $3 million (9%) during the second quarter
of 1996 as compared to the same period in 1995 primarily due
to continually expanding operations and increases in
production activity.
Oil and gas exploration expenses decreased $4 million
(17%) due primarily to decreased exploratory drilling
activities outside North America, higher success rates and
lower impairments in 1996 of unproved oil and gas
properties.
Depreciation, depletion and amortization (DD&A) expense
increased $10 million (21%), reflecting the increase in
production volumes noted earlier. The average DD&A rate in
the second quarter of 1996 was $0.67 per thousand cubic feet
equivalent (Mcfe) compared to $0.69 per Mcfe in the second
quarter of 1995.
Taxes other than income were $3 million higher in the
second quarter of 1996 compared to the same period in 1995
primarily reflecting lower applicable tax credits in
Trinidad and higher taxable United States revenue resulting
from higher wellhead volumes and average prices.
CORPORATE AND OTHER
The corporate and other segment realized a loss of $4
million in the second quarter of 1996 as compared to
earnings of $6 million in the second quarter of 1995. The
second quarter 1996 results include a $28 million gain from
the sale of 1.6 million EOG shares held by Enron Corp.,
partially offset by a $25 million reserve established for
litigation contingencies. The 1995 results include amounts
recognized following the further resolution of certain
litigation.
MINORITY INTERESTS
Minority interests increased to $23 million in the second
quarter of 1996 from $13 million in the comparable prior
period, primarily due to sales in December 1995 and the
first half of 1996 of 33.6 million shares of EOG common
stock held by Enron, which resulted in a reduction of
Enron's ownership interest in EOG from 80% to 59%.
INCOME TAXES
Income taxes increased during the second quarter of 1996
as compared to the second quarter of 1995 primarily as a
result of increased pretax income.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996
vs. Six Months Ended June 30, 1995
The following review of Enron's results of operations
should be read in conjunction with the Consolidated
Financial Statements.
CONSOLIDATED NET INCOME
Enron's net income for the first six months of 1996
increased to $329 million as compared to $289 million during
the same period in 1995. The $40 million increase in
consolidated net income reflects improved income before
interest, minority interests and income taxes for the
transportation and operation, domestic gas and power
services and international gas and power services segments.
This increase was partially offset by lower income before
interest, minority interests and income taxes for the
exploration and production and corporate and other segments
combined with increased minority interests and income taxes.
Earnings per share rose to $1.31 in the first six months of
1996 from $1.16 in the same period in 1995.
INCOME BEFORE INTEREST, MINORITY INTERESTS AND INCOME TAXES
The following table presents income before interest,
minority interests and income taxes (IBIT) for each of
Enron's operating segments (in millions).
<TABLE>
<CAPTION>
Six Months Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $334 $250 $84
Domestic Gas and Power Services 150 98 52
International Gas and Power Services 79 75 4
Exploration and Production 107 143 (36)
Corporate and Other 10 36 (26)
Total $680 $602 $78
</TABLE>
TRANSPORTATION AND OPERATION
The transportation and operation segment realized an $84
million increase in IBIT for the first half of 1996 as
compared to the same period in 1995. The following
discussion analyzes the significant changes in the various
components of IBIT for the transportation and operation
segment.
REVENUES
Revenues of the transportation and operation segment
decreased $33 million (7%) during the first half of 1996 as
compared to the same period in 1995. The decrease in
revenues primarily reflects decreased revenues related to
gathering facilities sold in 1995 and the first half of 1996
and reduced sales revenue at Northern Natural as that
pipeline is now exclusively a transporter of natural gas.
COSTS AND EXPENSES
The cost of gas and other products sold by the
transportation and operation segment decreased by $13
million (72%) during the first half of 1996 compared to the
same period in 1995 primarily as a result of decreased gas
purchases by Northern Natural as that pipeline is now
exclusively a transporter of natural gas.
Operating expenses in the transportation and operation
segment declined by $37 million (21%) during the first half
of 1996 as compared to the same period in 1995. The decline
primarily reflects lower operating expenses on the
interstate pipelines primarily as a result of favorable
resolution related to previously incurred environmental
costs, combined with reduced expenses related to gathering
facilities sold during 1995 and the first quarter of 1996
and a decrease in amortization of deferred contract
reformation costs by Northern Natural.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased by $14 million to $21 million during the first
half of 1996 as compared to the same period in 1995,
reflecting increased earnings from EOTT as previously
discussed, partially offset by decreased earnings from
Trailblazer Partnership.
Other income, net increased $55 million to $118 million,
primarily due to gains related to the disposition of non-
strategic natural gas processing and gathering facilities.
DOMESTIC GAS AND POWER SERVICES
The domestic gas and power segment had a $52 million
increase in income before interest, minority interest and
income taxes for the six months ended June 30, 1996 as
compared to the same period in 1995. The following
discussion analyzes the contributions to IBIT for each of
these businesses.
Statistics for ECT (including intercompany amounts) are
as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Natural Gas and Crude Oil
Physical/Notional Quantities (BBtue/d) (1)
Firm (2) 6,594 5,499
Interruptible 1,844 2,197
Transport Volumes 504 525
Subtotal 8,942 8,221
Financial Settlements (Notional) 32,274 32,438
Total 41,216 40,659
Production Payments and Financings
Arranged (In Millions) $472.0 $ 103.5
Fixed Price Contract Originations
(TBtue) (3) 1,079 3,513
Electricity (Thousand Megawatt hours)
Owned Production 1,572 1,654
Transaction Volumes Marketed 20,876 2,321
<FN>
(1) Billion British thermal units equivalent per day.
(2) Commitments to deliver a specified volume of gas at a
fixed or market responsive price.
(3) Trillion British thermal units equivalent.
</TABLE>
The cash and physical operations' earnings before
overhead expenses were $130 million and $49 million in the
first six months of 1996 and 1995, respectively. The
earnings from this business unit increased in the first six
months of 1996 primarily due to earnings from higher margins
for natural gas and increased earnings from electricity
marketing. Earnings from the management of ECT's portfolio
of contracts also increased in 1996. These increases were
partially offset by a decrease in earnings from gas
processing.
Earnings before overhead expenses for the risk management
business were $60 million in the first six months of 1996
and $84 million in the same period in 1995. Earnings from
this unit decreased primarily due to lower originations from
long-term contracts with utilities and independent power
plants, which were partially offset by increased
originations for electricity and originations in the
European market.
ECT's finance operations had earnings before overhead
expenses of $14 million in the first six months of 1996
compared with $17 million for the same period in 1995. The
1996 earnings relate primarily to the increased value of its
equity investments, while 1995 includes earnings associated
with the restructuring of long-term gas supply contracts
with an independent power plant.
ECT's overhead expenses were $54 million in the first
half of 1996 and $52 million in the same period in 1995.
INTERNATIONAL GAS AND POWER SERVICES
The international segment's IBIT increased $4 million in
the first six months of 1996 compared to the same period in
1995. The following discussion analyzes the significant
changes in the segment's results.
NET REVENUES
Revenues net of cost of sales for the international
segment decreased by $38 million (37%)in the first half of
1996 as compared with 1995. The 1996 results included
revenues of approximately $16 million from the promotion of
Enron's interest in its power assets at Teesside in the
United Kingdom. Included in 1995 were $24 million from the
promotion of a portion of Enron's interest in its power
assets at Teesside and net revenues from the marketing
operations in Europe. In addition, revenues of $24 million
were recognized in the first half of 1995 as a result of the
satisfaction of Enron's support obligations related to the
formation of Enron Global Power & Pipelines L.L.C.
COSTS AND EXPENSES
Operating expenses decreased $9 million during the first
half of 1996 as compared to the first half of 1995 due to
the transfer of marketing operations to the domestic gas and
power services segment beginning in January 1996, partially
offset by increased international activities.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased $23 million to $46 million in the first half of
1996, primarily as a result of increased earnings from
Teesside and other international power and pipeline
projects.
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT decreased
to $107 million in the first half of 1996 from $143 million
in the same period of 1995. The following discussion
analyzes the significant changes in the segment's results.
Wellhead volume and price statistics (including
intercompany amounts) are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Natural Gas Volumes (MMcf/d)
North America (1) 708 584
Trinidad 136 109
Total 844 693
Average Natural Gas Prices ($/Mcf)
North America (2) $1.73 $1.31
Trinidad 1.00 0.97
Composite 1.61 1.25
Crude Oil/Condensate Volumes (MBbl/d)
North America 11.1 11.3
Trinidad 6.2 4.2
India 2.9 2.2
Total 20.2 17.7
Average Crude Oil/Condensate Prices ($/Bbl)
North America $19.50 $17.25
Trinidad 18.67 16.44
India 18.88 17.20
Composite 19.16 17.06
<FN>
(1) Includes 48 MMcf per day for the six-month periods ended
June 30, 1996 and 1995 delivered under the terms of a
volumetric production payment agreement effective October 1,
1992, as amended.
(2) Includes an average equivalent wellhead value of
$0.84/Mcf and $0.83/Mcf for the six-month periods ended
June 30, 1996 and 1995, respectively, for the volumes
described in note (1), net of transportation costs.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
decreased $12 million (3%) during the first half of 1996 as
compared to the same period in 1995. Although wellhead
natural gas prices and production volumes increased in the
first half of 1996 as compared to the previous year period,
this increase was more than offset by lower results from
commodity price swap transactions and a decrease in gains on
sales of oil and gas reserves and related assets. Average
wellhead natural gas prices for the first six months of 1996
were up 29% from the comparable period in 1995 and wellhead
natural gas volumes increased 22%. The increase in North
America wellhead natural gas volumes was primarily the
result of no voluntary curtailments during 1996 due to
significant increases realized in average wellhead natural
gas prices. Wellhead crude oil and condensate average
prices increased 12% over the first half of 1995 and crude
oil and condensate wellhead volumes increased 14% from the
comparable period a year ago. Gains on sales of reserves
and related assets totaled $20 million in the first six
months of 1996 compared with $59 million in the same period
in 1995.
EOG recognized a loss of $5 million on commodity price
swap transactions in the first half of 1996 compared to
gains of $42 million during the first half of 1995. Gains
related to hedges placed by Enron on open commodity
positions not hedged by EOG decreased from $27 million in
the first half of 1995 to $1 million in the same period in
1996. The 1996 on the close-out by EOG and Enron of their NYMEX-
related hedges of EOG's first half 1996 production, to
facilitate participation in anticipated wellhead natural gas
price upside. Deferred gains of approximately $13 million
related to the closing of hedges of EOG's second half 1996
production will be recognized during the remainder of 1996.
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities in the first half of 1996 decreased $4
million (10%) compared to the same period in 1995 due to
lower other natural gas marketing volumes, partially offset
by higher average associated costs per Mcf.
Operating expenses for the exploration and production
segment increased $6 million (11%) during the first half of
1996 as compared to the same period in 1995 primarily
reflecting continually expanding operations and increases in
production activity.
Oil and gas exploration expenses decreased $5 million
(11%) in the first half of 1996 as compared to the same
period in 1995, primarily due to lower impairment in 1996 of
unproved oil and gas properties.
DD&A expense increased $21 million (20%) primarily
reflecting the increase in production volumes noted earlier.
The average DD&A rate was $0.69 per Mcfe in both periods.
Taxes other than income were $5 million (28%) higher in
the first half of 1996 compared to the same period in 1995
primarily due to higher state severance taxes associated
with higher United States taxable wellhead revenues as well
as lower applicable tax credits in Trinidad in 1996.
CORPORATE AND OTHER
The corporate and other segment's IBIT decreased $26
million to $10 million in the first half of 1996 as compared
to the first half of 1995. The 1996 amount includes gains
of $45 million related to the sale of 2.6 million shares of
EOG stock held by Enron Corp., partially offset by a $25
million reserve established for litigation contingencies.
The 1995 results include amounts recognized following the
further resolution of certain litigation in 1995.
MINORITY INTERESTS
Minority interests increased to $38 million in the second
half of 1996 from $23 million in the comparable prior
period, primarily due to the sale in December 1995 and the
first half of 1996 of 33.6 million shares of EOG common
stock held by Enron.
INCOME TAXES
Income taxes increased during the first six months of
1996 as compared to the first six months of 1995 primarily
as a result of increased pretax income.
FINANCIAL CONDITION
Cash provided by operating activities totaled
approximately $126 million during the first half of 1996 as
compared to $209 million used during the same period last
year. The increase in cash provided by operating activities
reflects decreased working capital requirements.
Cash used in investing activities totaled $385 million
during the first half of 1996 as compared to $271 million
during the same period in 1995. The increase primarily
reflects higher equity investments primarily in Joint Energy
Development Investments (JEDI) and international power and
pipeline operations, partially offset by increased proceeds
from the sale of assets and investments.
Cash provided by financing activities totaled $277
million during the first half of 1996 as compared to $488
million during the same period in 1995. During the first
half of 1996, net issuances of short- and long-term debt
totaled $263 million. Proceeds from these issuances were
used primarily to fund capital and other expenditures and to
meet working capital requirements.
Enron is able to fund its normal working capital
requirements mainly through operations or, when necessary,
through the utilization of credit facilities and its ability
to sell commercial paper and accounts receivable.
Total capitalization at June 30, 1996 was $7.9 billion.
Debt as a percentage of total capitalization was 42.3% at
June 30, 1996 as compared to 42.8% at year-end 1995 and
42.1% at March 31, 1996. The decrease from year-end
primarily reflects increased retained earnings. Assuming
the mandatory conversion in late 1998 of 10.5 million
Exchangeable Notes into EOG shares held by Enron, the
proforma debt to capitalization percentage would be
approximately 40.2% at June 30, 1996.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes 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. Although Enron believes that its
expectations are based on reasonable assumptions, it can
give no assurance that its goals will be achieved. Important
factors that could cause actual results to differ materially
from those in the forward looking statements herein include
political developments in foreign countries, the pace of
deregulation of retail natural gas and electricity markets
in the United States, the timing and extent of changes in
commodity prices for crude oil, natural gas, electricity and
interest rates, the extent of EOG's success in acquiring oil
and gas properties and in discovering, developing and
producing reserves, the timing and success of Enron's
efforts to develop international power, pipeline and other
infrastructure projects and conditions of the capital
markets and equity markets during the periods covered by the
forward looking statements.
<PAGE>
PART II. OTHER INFORMATION
ENRON CORP. AND SUBSIDIARIES
ITEM 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Enron Corp. was
held on May 7, 1996 in Houston, Texas, for the purpose of
electing a board of directors and approving the appointment
of auditors. Proxies for the meeting were solicited
pursuant to Section 14(a) of the Securities Exchange Act of
1934 and there was no solicitation in opposition to
management's solicitations.
(a) All of management's nominees for directors as listed in
the proxy statement were elected with the following vote:
<TABLE>
<CAPTION>
Nominee Shares FOR Shares WITHHELD
<S> <C> <C>
Robert A. Belfer 228,052,563 2,191,868
Norman P. Blake, Jr. 228,292,017 1,952,414
John H. Duncan 228,262,062 1,982,369
Joe H. Foy 228,249,994 1,994,437
Wendy L. Gramm 228,159,037 2,085,394
Robert K. Jaedicke 228,254,036 1,990,395
Richard D. Kinder 228,245,066 1,999,365
Kenneth L. Lay 228,266,203 1,978,228
Charles A. LeMaistre 228,156,986 2,087,445
John A. Urquhart 228,268,245 1,976,186
John Wakeham 228,135,249 2,109,182
Charls E. Walker 228,158,585 2,085,846
Herbert S. Winokur, Jr. 228,242,389 2,002,042
</TABLE>
(b) The appointment of Arthur Andersen LLP as independent
auditor was approved by the following vote:
<TABLE>
<CAPTION>
Shares FOR Shares AGAINST Shares ABSTAINING
<C> <C> <C>
227,148,059 1,861,640 1,234,732
</TABLE>
<PAGE>
PART II. OTHER INFORMATION - (Concluded)
ENRON CORP. AND SUBSIDIARIES
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 11 Calculation of Earnings Per Share
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
ENRON CORP.
(Registrant)
Date: August 13, 1996 By: Jack I. Tompkins
Jack I. Tompkins
Senior Vice President and
Chief Information, Administrative
and Accounting Officer
(Principal Accounting Officer)
Exhibit 11
<TABLE>
ENRON CORP. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Earnings on common stock
Net income $116,707 $ 94,045 $329,492 $288,995
Preferred stock dividends (3,981) (3,809) (7,967) (7,628)
$112,726 $ 90,236 $321,525 $281,367
Average number of common shares
outstanding 246,340 244,018 245,190 243,605
Primary earnings per share of
common stock $ 0.46 $ 0.37 $ 1.31 $ 1.16
Fully Diluted Earnings Per Share
Adjusted earnings on common stock
Net income $116,707 $ 94,045 $329,492 $288,995
Preferred stock dividends (3,981) (3,809) (7,967) (7,628)
Add back:
Dividends on convertible
preferred stock 3,981 3,809 7,967 7,628
$116,707 $ 94,045 $329,492 $288,995
Average number of common shares
outstanding on a fully diluted basis
Average number of common shares
outstanding 246,340 244,018 245,190 243,605
Additional shares issuable upon:
Conversion of preferred stock 18,750 19,060 18,760 19,103
Exercise of stock options reduced by the
number of shares which could have been
purchased with the proceeds from
exercise of such options 5,608 4,890 5,594 4,890
270,698 267,968 269,544 267,598
Fully diluted earnings per share of
common stock $ 0.43 $ 0.35 $ 1.22 $ 1.08
</TABLE>
Exhibit 12
<TABLE>
ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(In Thousands)
(Unaudited)
<CAPTION>
Six Months
Ended Year Ended December 31,
6/30/96 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $329,492 $ 519,694 $ 453,410 $332,522 $328,800 $232,146
Less:
Undistributed earnings and
losses of less than 50% owned
affiliates (6,571) (13,505) (9,453) (20,232) (32,526) (8,890)
Capitalized interest of
nonregulated companies (2,893) (8,315) (9,007) (25,434) (66,401) (36,537)
Add:
Fixed charges (1) 210,703 435,681 487,258 471,278 452,014 454,607
Minority interest 29,565 27,260 29,600 27,605 17,632 7,210
Income tax expense 170,478 310,264 190,081 148,104 88,630 105,859
Total $730,774 $1,271,079 $1,141,889 $933,843 $788,149 $754,395
Fixed Charges
Interest expense (1) $194,315 $ 385,995 $ 444,768 $436,211 $430,406 $425,945
Rental expense representative
of interest factor 16,388 49,686 42,490 35,067 21,608 28,662
Total $210,703 $ 435,681 $ 487,258 $471,278 $452,014 $454,607
Ratio of earnings to fixed charges 3.47 2.92 2.34 1.98 1.74 1.66
<FN>
(1) Amounts exclude costs incurred on sales of accounts receivables.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 133,002
<SECURITIES> 0
<RECEIVABLES> 1,524,515
<ALLOWANCES> 0
<INVENTORY> 105,096
<CURRENT-ASSETS> 3,187,943
<PP&E> 10,959,498
<DEPRECIATION> 4,172,095
<TOTAL-ASSETS> 14,627,783
<CURRENT-LIABILITIES> 2,554,238
<BONDS> 3,329,796
0
137,218
<COMMON> 25,596
<OTHER-SE> 3,391,050
<TOTAL-LIABILITY-AND-EQUITY> 14,627,783
<SALES> 4,286,169
<TOTAL-REVENUES> 6,014,920
<CGS> 4,652,434
<TOTAL-COSTS> 5,567,537
<OTHER-EXPENSES> (232,782)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,086
<INCOME-PRETAX> 491,047
<INCOME-TAX> 161,555
<INCOME-CONTINUING> 329,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329,492
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.22
</TABLE>
