<PAGE>
Enron Oil & Gas Company
P. O. Box 1188
Houston, TX 7725101188
May 13, 1994
Securities and Exchange Commission
Washington, D.C.
Gentlemen:
Pursuant to the requirements of the Securities and Exchange Act of 1934, we are
transmitting herewith the attached Form 10-Q.
Sincerely,
/S/BEN B. BOYD
Ben B. Boyd
Vice President and Controller
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 1-9743
ENRON OIL & GAS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 47-0684736
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1400 Smith Street, P.O. Box 1188
Houston, Texas 77251-1188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 853-6161
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 April 30, 1994.
Common Stock, No Par Value 79,928,500 shares
Class Number of Shares
<PAGE>
ENRON OIL & GAS COMPANY
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income -
Three Months Ended March 31, 1994 and 1993 3
Consolidated Balance Sheets - March 31, 1994
and December 31, 1993 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 4. Results of Votes of Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
<S> <C> <C>
1994 1993
NET OPERATING REVENUES
Natural Gas
Associated Companies $ 75,008 $ 68,275
Trade 62,278 50,856
Crude Oil, Condensate and
Natural Gas Liquids
Associated Companies 7,525 12,949
Trade 5,955 3,229
Other 1,441 1,511
Total 152,207 136,820
OPERATING EXPENSES
Lease and Well 14,999 13,758
Exploration 9,231 5,991
Dry Hole 2,623 2,722
Impairment of Unproved Oil and Gas Properties 4,196 4,161
Depreciation, Depletion and Amortization 64,840 59,780
General and Administrative 13,417 10,955
Taxes Other Than Income 9,964 9,834
Total 119,270 107,201
OPERATING INCOME 32,937 29,619
OTHER INCOME 8,304 1,774
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 41,241 31,393
INTEREST EXPENSE
Incurred 3,646 3,689
Capitalized (1,493) (1,251)
Net Interest Expense 2,153 2,438
INCOME BEFORE INCOME TAXES 39,088 28,955
INCOME TAX PROVISION(BENEFIT) 8,830 (1,253)
NET INCOME $ 30,258 $ 30,208
EARNINGS PER SHARE OF COMMON STOCK $ .38 $ .38
AVERAGE NUMBER OF COMMON SHARES 79,920 80,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 57,209 $ 103,129
Accounts Receivable
Associated Companies 55,259 59,143
Trade 61,856 66,109
Inventories 14,731 14,082
Other 8,438 6,962
Total 197,493 249,425
OIL AND GAS PROPERTIES (Successful Efforts Method) 2,810,455 2,772,220
Less: Accumulated Depreciation, Depletion and Amortization (1,253,655) (1,226,175)
Net Oil and Gas Properties 1,556,800 1,546,045
OTHER ASSETS 17,379 15,692
TOTAL ASSETS $1,771,672 $1,811,162
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Associated Companies $ 22,466 $ 13,250
Trade 117,651 143,542
Accrued Taxes Payable 17,719 17,354
Dividends Payable 4,795 4,795
Current Maturities of Long-Term Debt - 30,000
Other 4,785 8,989
Total 167,416 217,930
LONG-TERM DEBT 153,000 153,000
OTHER LIABILITIES 9,907 9,477
DEFERRED INCOME TAXES 272,486 270,154
COMMITMENTS AND CONTINGENCIES (Note 8)
DEFERRED REVENUE 216,840 227,528
SHAREHOLDERS' EQUITY
Common Stock, No Par, 80,000,000 Shares Authorized and Issued 200,800 200,800
Additional Paid In Capital 417,119 417,531
Cumulative Foreign Currency Translation Adjustment (12,956) (6,855)
Retained Earnings 350,458 324,995
Common Stock Held in Treasury, 80,000 shares (3,398) (3,398)
Total Shareholders' Equity 952,023 933,073
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,771,672 $1,811,162
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
Net Income $ 30,258 $ 30,208
Items Not Requiring (Providing) Cash
Depreciation, Depletion and Amortization 64,840 59,780
Impairment of Unproved Oil and Gas Properties 4,196 4,161
Deferred Income Taxes 3,714 (1,678)
Other, Net (803) (127)
Exploration Expenses 9,231 5,991
Dry Hole Expenses 2,623 2,722
Gains on Sales of Oil and Gas Properties (6,001) (14)
Other, Net (150) 63
Changes in Components of Working Capital
and Other Liabilities
Accounts Receivable 8,137 (10,647)
Inventories (649) 1,150
Accounts Payable (16,675) (12,775)
Accrued Taxes Payable 365 2,406
Other Liabilities 1,598 1,663
Other, Net (5,680) (42,577)
Changes in Components of Working Capital Associated
with Investing Activities 8,835 29,736
NET OPERATING CASH INFLOWS 103,839 70,062
INVESTING CASH FLOWS
Additions to Oil and Gas Properties (88,527) (91,386)
Exploration Expenses (9,231) (5,991)
Dry Hole Expenses (2,623) (2,722)
Proceeds from Property Sales 6,713 421
Amortization of Deferred Revenue (10,688) (23,192)
Changes in Components of Working Capital Associated
with Investing Activities (8,835) (29,736)
Other, Net (1,362) (2,502)
NET INVESTING CASH OUTFLOWS (114,553) (155,108)
FINANCING CASH FLOWS
Long-Term Debt (30,000) -
Dividends Paid (4,795) (4,800)
Treasury Stock Purchased (891) (6,266)
Proceeds from Sales of Treasury Stock 480 3,355
NET FINANCING CASH OUTFLOWS (35,206) (7,711)
DECREASE IN CASH AND CASH EQUIVALENTS (45,920) (92,757)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 103,129 132,618
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,209 $ 39,861
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been prepared by
management of Enron Oil & Gas Company (the "Company") without audit pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation 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. However,
management 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
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
Certain reclassifications have been made to the consolidated financial
statements for 1993 to conform with the current presentation.
2. Cash and Cash Equivalents at March 31, 1994 includes $43.1 million advanced
to Enron Corp. under a promissory note, effective January 1, 1993, at a fixed
interest rate of 7%, which note provides for the investment of funds temporarily
surplus to the Company.
3. Income Tax Provision(Benefit) for the three-month periods ended March 31,
1994 and 1993 includes a tax benefit of $8.1 million and $13.9 million,
respectively, related to tight gas sand federal income tax credit utilization.
4. Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating
Revenues
Natural Gas Net Operating Revenues are comprised of the following (in
millions):
Three Months Ended
March 31,
1994 1993
Wellhead Natural Gas Revenues
Associated Companies (1)(2) $ 89.4 $ 75.9
Trade 48.2 35.9
Total $137.6 $111.8
Other Natural Gas Marketing Activities
Gross Revenues from:
Associated Companies $ 44.6 $ 34.8
Trade (3) 33.0 30.6
Total 77.6 65.4
Associated Costs from:
Associated Companies (1)(4) 53.0 42.4
Trade 18.9 15.9
Total (5) 71.9 58.3
Net 5.7 7.1
Commodity Price Hedging (6) (6.0) .2
Total $ (.3) $ 7.3
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crude Oil, Condensate and Natural Gas Liquids, Net Operating Revenues are
comprised of the following (in millions):
Three Months Ended
March 31,
1994 1993
Wellhead Crude Oil, Condensate and
Natural Gas Liquid Revenues
Associated Companies $ 7.1 $ 13.0
Trade 6.0 3.2
Total $ 13.1 $ 16.2
Other Crude Oil Marketing Activities
Commodity Price Hedging (6) $ .4 $ -
(1) Wellhead Natural Gas Revenues include $39.5 million and $29.5 million for
the three-month periods ended March 31, 1994 and 1993, respectively,
associated with deliveries by Enron Oil & Gas Company to Enron Oil & Gas
Marketing, Inc., a wholly-owned subsidiary, reflected as a cost in Other
Natural Gas Marketing Activities - Associated Costs.
(2) Includes $7.0 million and $15.5 million for the three-month periods ended
March 31, 1994 and 1993, respectively, associated with the equivalent
wellhead value of volumes delivered under the terms of a volumetric
production payment agreement effective October 1, 1992, as amended, net of
transportation.
(3) Includes $10.7 million and $23.2 million for the three-month periods ended
March 31, 1994 and 1993, respectively, associated with the amortization of
deferred revenues under the terms of volumetric production payment and
exchange agreements effective October 1, 1992, as amended.
(4) Includes the effect of a price swap agreement with a third party which in
effect fixes the price of certain purchases.
(5) Includes $9.9 million and $20.0 million for the three-month periods ended
March 31, 1994 and 1993, respectively, for volumes delivered under
volumetric production payment and exchange agreements effective October 1,
1992, as amended, including equivalent wellhead value, any applicable
transportation costs and exchange differentials.
(6) Represents gain or loss associated with commodity futures transactions
primarily with Enron Corp. affiliated companies based on NYMEX prices in
effect on dates of execution, less customary transaction fees. These
transactions serve as price hedges for a portion of wellhead sales.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Gains on sales of certain oil and gas properties in the amount of $6.0
million and $14,000 are required to be removed from Net Income in connection
with determining Net Operating Cash Inflows while the related proceeds are
classified as investing cash flows for the three-month periods ended March 31,
1994 and 1993, respectively. However, current accounting guidelines will not
permit the relevant federal income tax impact of these transactions to be
reclassified to investing cash flows. The current federal income tax impact of
these sales transactions was calculated by the Company to be $1.3 million and
$.1 million for the three-month periods ended March 31, 1994 and 1993,
respectively, which entered into the overall calculation of current federal
income tax. The Company believes that this federal income tax impact should be
considered in analyzing the elements of the cash flow statement.
6. In March 1994, the Company replaced an existing credit agreement with a
Revolving Credit Agreement dated as of March 11, 1994, among the Company and the
banks named therein (the "Credit Agreement"). The Credit Agreement provides for
aggregate borrowings of up to $100 million, with provisions for increases, at
the option of the Company, up to $300 million. Advances under the Credit
Agreement bear interest, at the option of the Company, based on a base rate,
an adjusted CD rate or an Eurodollar rate. Each advance under the Credit
Agreement matures on a date selected by the Company at the time of the advance,
but in no event after January 15, 1998. There were no advances outstanding
under the Credit Agreement at March 31, 1994.
7. In March 1994, a subsidiary of the Company received two advances
aggregating $31 million under a credit agreement dated as of March 8, 1994,
between the subsidiary and a financial institution. The credit agreement
provides for aggregate borrowings of up to $75 million. One of the advances is
in the amount of $16 million, bears interest at a fixed rate of 4.52% and is
due in 1998. The other advance is in the amount of $15 million, bears interest
at a floating rate that resets quarterly equal to 84% of the London Interbank
Bid Rate which is 1/8 of 1% less than the London Interbank Offered Rate and is
due in 1998. Both advances are collateralized with a letter of credit issued
by a bank on behalf of the subsidiary and guaranteed by the Company. The
advances were used to partially repay a promissory note payable to a bank by
the subsidiary.
8. As reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, TransAmerican Natural Gas Corporation ("TransAmerican") has
filed a petition against the Company and Enron Corp. alleging breach of
contract, tortious interference with contract, misappropriation of trade
secrets and violation of state antitrust laws. The petition, as amended, seeks
actual damages of $100 million plus exemplary damages of $300 million. The
Company has answered the petition and is actively defending the matter; in
addition, the Company has filed counterclaims against TransAmerican and its
sole shareholder, John R. Stanley, alleging fraud, negligent misrepresentation
and breach of state antitrust laws. On April 1, 1994, Enron Corp. was granted
summary judgment, wherein the court ordered that TransAmerican can take nothing
on its claims against Enron Corp. Trial, originally set for February 7, 1994,
is now set for September 12, 1994. Although no assurances can be given, the
Company believes that the claims made by TransAmerican are totally without
merit, that the ultimate resolution of the matter will not have a materially
adverse effect on its financial condition or results of operations, and that
such ultimate resolution could result in a recovery to the Company.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Concluded)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. On May 3, 1994, the shareholders of the Company approved a resolution
submitted by the Board of Directors that would, contingent upon the Board of
Directors of the Company declaring, on or before May 3, 1995, a stock split of
either two-for-one or three-for-two, amend the Restated Certificate of
Incorporation of the Company to increase the total number of authorized shares
of the common stock of the Company from 80 million to 160 million shares in the
event of a two-for-one stock split or to 120 million shares in the event of a
three-for-two stock split. Subsequently and also on May 3, 1994, the Board of
Directors declared a two-for-one split of the Company's common stock to be
effected as a non-taxable dividend of one share for each share outstanding.
Shares will be issued on June 15, 1994 to shareholders of record as of May 31,
1994. All per share amounts referenced herein are reflected on a pre-split
basis. An amendment to the Restated Certificate of Incorporation of the Company
to increase the total number of authorized shares of the common stock of the
Company from 80 million to 160 million shares will be filed with the Secretary
of State of Delaware.
10. Significant items of other income are detailed below (in millions):
Three Months Ended
March 31,
1994 1993
Gains on Sales of Oil and Gas Properties $ 6.0 $ -
Interest Income 1.5 1.2
Other, Net 0.8 0.6
Total $ 8.3 $ 1.8
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENRON OIL & GAS COMPANY
The following review of operations for the three-month period ended March 31,
1994 should be read in conjunction with the consolidated financial statements of
the Company and Notes thereto.
Results of Operations
Three Months Ended March 31, 1994
vs. Three Months Ended March 31, 1993
In the first quarter of 1994, Enron Oil & Gas Company (the "Company")
realized net income of $30.3 million compared to net income of $30.2 million for
the same period in 1993. Net operating revenues for the first quarter of 1994
were $152.2 million as compared to $136.8 million for the same period a year
ago.
Volume and price statistics are as follows:
1994 1993
Wellhead Volumes
Natural Gas (MMcf/d) (1) (3) 799 705
Crude Oil and Condensate (MBbl/d) (1) 10.8 9.7
Natural Gas Liquids (MBbl/d) 0.7 0.7
Wellhead Average Prices
Natural Gas ($/Mcf) (2) (4) $ 1.91 $ 1.76
Crude Oil and Condensate ($/Bbl) (2) 12.83 17.56
Natural Gas Liquids ($/Bbl) 8.37 12.37
Other Natural Gas Marketing
Volumes (MMcf/d) (3) 341 289
Average Gross Revenue ($/Mcf) 2.53 $ 2.52
Associated Costs ($/Mcf) (5) 2.35 2.25
Margin ($/Mcf) $ 0.18 $ 0.27
(1) Million cubic feet per day or thousand barrels per day, as
applicable.
(2) Dollars per thousand cubic feet or per barrel, as applicable.
(3) Includes 48 MMcf per day and 103 MMcf per day for the three-month
periods ended March 31, 1994 and 1993, respectively, delivered
under the terms of volumetric production payment agreements
effective October 1, 1992, as amended.
(4) Includes an average equivalent wellhead value of $1.61/Mcf and
$1.67/Mcf for the three-month periods ended March 31, 1994 and
1993, respectively, for the volumes described in note (3), net
of transportation costs.
(5) Including transportation and exchange differentials.
First quarter 1994 average wellhead natural gas prices were up
approximately 9% from the same period in 1993 resulting in an approximate $11
million increase in net operating revenues. An increase of 13% in wellhead
natural gas volumes over the first quarter of 1993 added approximately $15
million to net operating revenues. First quarter wellhead crude oil and
condensate average prices declined 27% reducing net operating revenues by about
$5 million. Crude oil and condensate wellhead volumes increased 11% adding
approximately $2 million to net operating revenue compared to the same period
a year ago.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON OIL & GAS COMPANY
Other marketing activities associated with sales and purchases of natural
gas, natural gas price swap transactions, other commodity price hedging of
natural gas and crude oil and condensate prices utilizing NYMEX related
commodity market transactions, and margins relating to the volumetric
production payment added $.1 million to net operating revenues during the
first quarter of 1994, a decrease of $7.2 million from the same period in 1993.
This decrease primarily results from shrinking margins associated with
amortization of volumetric production payment deferred revenues due to
increases in market responsive natural gas prices associated with volumes
supplying these dispositions and a decrease in delivered volumes due to the
rescheduling of deliveries under the terms of the volumetric production payment
agreement, as amended, and losses on natural gas commodity price hedging
activities utilizing NYMEX related commodity market transactions. The average
associated costs of natural gas marketing, price swap and volumetric production
payment transactions, including, where appropriate, average wellhead value,
transportation costs and exchange differentials, increased $.10 per Mcf. The
average price received for these transactions did not vary substantially from
the same period last year.
The net reduction in benefits from these other marketing activities, a
substantial portion of which serve as hedges of commodity price risks for a
portion of wellhead deliveries, are more than offset by an increase in revenues
associated with market responsive price increases for wellhead natural gas
deliveries, as noted above. If the stronger market responsive pricing
environment continues, the incremental benefits realized by the Company in prior
years from these other marketing activities will continue to be reduced.
However, in such circumstances the Company will continue to realize more
significant benefits from the improved pricing related to wellhead deliveries.
(See Note 4 to Consolidated Financial Statements). Since December 31, 1993, the
Company has reduced the level of wellhead natural gas volumes for which it had
previously locked in prices using various commodity price hedging mechanisms
from about two-thirds to approximately one-half of its anticipated wellhead
natural gas volumes for the year 1994.
During the first quarter of 1994, operating expenses of $119 million were
$12 million higher than the $107 million incurred in the first quarter of 1993.
Lease and well expenses increased approximately $1 million to $15 million and
exploration expenses increased $3 million to $9 million primarily due to
expanded international operations. Dry hole expenses and impairments of
unproved oil and gas properties decreased slightly from the same period last
year. Depreciation, depletion and amortization ("DD&A") expense increased $5
million to $65 million reflecting an increase in production volumes and a
decrease in the average DD&A rate from $.87 per thousand cubic feet equivalent
("Mcfe") in the first quarter of 1993 to $.83 per Mcfe in the first quarter of
1994. The DD&A rate decrease is primarily due to production from international
operations at an average DD&A rate signficantly less than the North American
operations average DD&A rate. General and administrative expenses increased $2
million to $13 million in the first quarter 1994 primarily due to overall
higher costs associated with certain employee related expenses.
The Company reduced its total per unit operating costs for lease and well
expense, DD&A, general and administrative expense, interest expense, and taxes
other than income by $.05 per Mcfe, averaging $1.35 per Mcfe during the first
quarter of 1994 compared to $1.40 per Mcfe during the same period in 1993. This
decrease is primarily attributable to the reduction in the average DD&A rate as
noted above.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON OIL & GAS COMPANY
Other income for the first quarter of 1994 includes $6 million in gains
associated with the routine sale of oil and gas properties that do not fit the
overall growth strategy of the Company as compared to $14,000 of gains for
similar sales recorded in the first quarter of 1993. The Company expects to
continue the sale of similar properties from time to time. Net interest expense
of $2 million decreased slightly from the first quarter of 1993.
Income tax provision (benefit) for the first quarters of 1994 and 1993
includes a provision of approximately $9 million and a benefit of approximately
$1 million, respectively. The difference results primarily from a reduction in
the federal income tax benefits associated with tight gas sand federal income
tax credits utilized in the first quarter of 1994 as compared to the first
quarter of 1993 along with the significant increase in income before income
taxes during the first quarter of 1994.
Federal income taxes accrued in interim periods are calculated using the
estimated annual effective income tax rate method.
Capital Resources and Liquidity
The Company's primary sources of cash during the three months ended
March 31, 1994 were funds generated from operations, proceeds from the sale of
certain oil and gas properties and issuance of new debt. Primary cash outflows
consisted of funds used in operations, exploration and development expenditures,
repayment of debt, and dividends paid to the Company's shareholders.
Discretionary cash flow, a frequently used measure of performance for
exploration and production companies, is derived by adjusting net income to
eliminate the effects of depreciation, depletion and amortization, impairment of
unproved oil and gas properties, deferred income taxes, property sales net of
income tax, certain other miscellaneous non-cash amounts, except for
amortization of deferred revenue, and exploration and dry hole expenses. The
Company generated discretionary cash flow of $109 million during the first
three months of 1994, an 8% increase over the $101 million generated for the
same period in 1993, primarily reflecting an increase in net operating revenues
partially reduced by an increase in current federal income taxes as discussed
above.
Net operating cash flows of $104 million for the first three months of
1994 increased $34 million as compared to the same period in 1993 primarily due
to the increase in discretionary cash flow discussed above and an increase in
cash flow associated with a reduction in working capital requirements. Based
upon existing economic and market conditions, management believes net operating
cash flow and available financing alternatives in 1994 will be sufficient to
fund net investing and other cash requirements of the Company for the remainder
of the year.
Exploration and development expenditures totaled $100 million for the
first three months of 1994 which was essentially equal to the amount expended
during the same period in 1993 reflecting a continuing emphasis on domestic
drilling activity as well as an increasing emphasis on certain international
development drilling opportunities.
<PAGE>
PART I. FINANCIAL INFORMATION - (Concluded)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded)
ENRON OIL & GAS COMPANY
During the first quarter of 1994, the Company was part of a consortium
selected to negotiate for offshore development and operating rights to certain
fields off the west coast of India. Two of the fields are oil fields with
current production and the third is a large undeveloped gas field. The
Company's working interest ownership is expected to be approximately 30
percent, and the Company will operate the joint venture. The consortium is
working with the Indian government to finalize the production sharing contract
and joint operating and product sales agreements.
The level of exploration and development expenditures will vary in future
periods depending on energy market conditions and other related economic
factors. The Company has significant flexibility with respect to financing
alternatives and the ability to adjust its exploration and development
expenditure budget as circumstances warrant. There are no material continuing
commitments associated with expenditure plans.
<PAGE>
PART II. OTHER INFORMATION
ENRON OIL & GAS COMPANY
ITEM 4. Results of Votes of Security Holders
The annual meeting of shareholders of Enron Oil & Gas Company was held on
May 3, 1994. The matter voted upon, other than the election of directors and
procedure items, was as follows:
The shareholders of the Company approved by an affirmative vote of
76,732,439 shares and negative vote of 8,198 shares, with 12,494 shares
abstaining, a resolution submitted by the Board of Directors that would,
contingent upon the Board of Directors of the Company declaring, on or before
May 3, 1995, a stock split of either two-for-one or three-for-two, amend the
Restated Certificate of Incorporation of the Company to increase the total
number of authorized shares of the common stock of the Company from 80 million
to 160 million shares in the event of a two-for-one stock split or to 120
million shares in the event of a three-for-two stock split. Subsequently and
also on May 3, 1994, the Board of Directors declared a two-for-one split of the
Company's common stock to be effected as a non-taxable dividend of one share
for each share outstanding. Shares will be issued on June 15, 1994 to
shareholders of record as of May 31, 1994. An amendment to the Restated
Certificate of Incorporation of the Company to increase the total number of
authorized shares of the common stock of the Company from 80 million to 160
million shares will be filed with the Secretary of State of Delaware.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the quarterly period ended March 31, 1994.
<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 OIL & GAS COMPANY
(Registrant)
Date: May 12, 1994 By /S/ W. C. WILSON
W. C. Wilson
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 12, 1994 By /S/ BEN B. BOYD
Ben B. Boyd
Vice President and Controller
(Principal Accounting Officer)
