Enron Oil & Gas Company
P. O. Box 1188
Houston, TX 7725101188
May 15, 1995
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, 1995
( )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 4362
Houston, Texas 77210-4362
(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, 1995.
Common Stock, $.01 Par Value 159,971,837 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, 1995 and 1994 3
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 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 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,
1995 1994
<S> <C> <C>
NET OPERATING REVENUES
Natural Gas
Associated Companies $ 69,597 $ 75,008
Trade 46,602 62,278
Crude Oil, Condensate and Natural Gas Liquids
Associated Companies 15,596 7,525
Trade 14,086 5,955
Gains on Sales of Reserves and Related Assets 5,605 6,001
Other 3,876 1,441
Total 155,362 158,208
OPERATING EXPENSES
Lease and Well 16,702 14,999
Exploration 11,277 9,231
Dry Hole 1,769 2,623
Impairment of Unproved Oil and Gas Properties 7,079 4,196
Depreciation, Depletion and Amortization 53,118 64,840
General and Administrative 12,773 13,417
Taxes Other Than Income 9,815 9,964
Total 112,533 119,270
OPERATING INCOME 42,829 38,938
OTHER INCOME (EXPENSE) (591) 2,303
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 42,238 41,241
INTEREST EXPENSE
Incurred
Affiliate 389 -
Other 4,061 3,646
Capitalized (1,712) (1,493)
Net Interest Expense 2,738 2,153
INCOME BEFORE INCOME TAXES 39,500 39,088
INCOME TAX PROVISION 9,875 8,830
NET INCOME $ 29,625 $ 30,258
EARNINGS PER SHARE OF COMMON STOCK $ .19 $ .19
AVERAGE NUMBER OF COMMON SHARES 159,972 159,840
</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,
1995 1994
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 15,305 $ 5,810
Accounts Receivable
Associated Companies 70,610 57,352
Trade 75,642 68,781
Inventories 16,054 15,731
Other 10,396 8,744
Total 188,007 156,418
OIL AND GAS PROPERTIES(Successful Efforts Method) 3,181,921 3,015,435
Less:Accumulated Depreciation, Depletion and Amortization(1,454,072) (1,330,624)
Net Oil and Gas Properties 1,727,849 1,684,811
OTHER ASSETS 75,542 20,638
TOTAL ASSETS $1,991,398 $1,861,867
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Associated Companies $ 12,045 $ 13,353
Trade 98,393 117,791
Accrued Taxes Payable 17,074 17,631
Dividends Payable 4,798 4,800
Current Maturities of Long-Term Debt 1,753 1,718
Other 8,978 9,308
Total 143,041 164,601
LONG-TERM DEBT
Affiliate 25,000 25,000
Other 173,207 165,337
OTHER LIABILITIES 15,157 10,035
REDEEMABLE PREFERRED STOCK 19,000 -
DEFERRED INCOME TAXES 285,028 269,292
DEFERRED REVENUE 263,896 184,183
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par,160,000,000 Shares Authorized
and Issued 201,600 201,600
Additional Paid In Capital 402,032 403,488
Cumulative Foreign Currency Translation Adjustment (14,861) (15,298)
Retained Earnings 478,637 453,810
Common Stock Held in Treasury, 14,873 shares at
March 31, 1995 and 9,173 shares at December 31, 1994 (339) (181)
Total Shareholders' Equity 1,067,069 1,043,419
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,991,398 $1,861,867
</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,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
Net Income $ 29,625 $ 30,258
Items Not Requiring (Providing) Cash
Depreciation, Depletion and Amortization 53,118 64,840
Impairment of Unproved Oil and Gas Properties 7,079 4,196
Deferred Income Taxes 4,801 3,714
Other, Net 322 (803)
Exploration Expenses 11,277 9,231
Dry Hole Expenses 1,769 2,623
Gains on Sales of Reserves and Related Assets (5,605) (6,001)
Other, Net (364) (150)
Changes in Components of Working Capital
and Other Liabilities
Accounts Receivable 15,975 8,137
Inventories (323) (649)
Accounts Payable (20,706) (16,675)
Accrued Taxes Payable (557) 365
Other Liabilities 5,108 1,598
Other, Net (1,982) (5,680)
Changes in Components of Working Capital Associated
with Investing and Financing Activities (2,973) 8,835
NET OPERATING CASH INFLOWS 96,564 103,839
INVESTING CASH FLOWS (Note 7)
Additions to Oil and Gas Properties (93,912) (88,527)
Exploration Expenses (11,277) (9,231)
Dry Hole Expenses (1,769) (2,623)
Proceeds from Sales of Reserves and Related Assets 26,504 6,713
Amortization of Deferred Revenue (10,687) (10,688)
Changes in Components of Working Capital Associated
with Investing Activities 7,197 (8,835)
Other, Net (502) (1,362)
NET INVESTING CASH OUTFLOWS (84,446) (114,553)
FINANCING CASH FLOWS (Note 7)
Long-Term Debt, Other 8,300 (30,000)
Dividends Paid (4,800) (4,795)
Treasury Stock Purchased (3,726) (891)
Proceeds from Sales of Treasury Stock 1,827 480
Changes in Components of Working Capital Associated
with Financing Activities (4,224) -
NET FINANCING CASH OUTFLOWS (2,623) (35,206)
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 9,495 (45,920)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,810 103,129
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,305 $ 57,209
</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 of Enron Oil & Gas
Company and subsidiaries (the "Company") included herein have
been prepared by management 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 consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
Certain reclassifications have been made to the consolidated
financial statements for 1994 to conform with the current
presentation.
2. Cash and Cash Equivalents at March 31, 1995 includes $4.7
million advanced to Enron Corp. under a promissory note, dated
January 1, 1993, at a fixed interest rate of 7%, which note
provides for the investment of funds temporarily surplus to the
Company. There were no advances outstanding at December 31,
1994.
3. Income Tax Provision for the three-month periods ended March
31, 1995 and 1994 includes a tax benefit of $5.1 million and $8.1
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,
1995 1994
Wellhead Natural Gas Revenues
Associated Companies (1)(2) $ 44.6 $ 89.4
Trade 35.1 48.2
Total $ 79.7 $137.6
Other Natural Gas Marketing Activities
Gross Revenues from:
Associated Companies $ 27.3 $ 44.6
Trade (3) 27.6 33.0
Total 54.9 77.6
Associated Costs from:
Associated Companies (1)(4)(5) $ 27.9 $ 53.0
Trade 16.4 18.9
Total 44.3 71.9
Net 10.6 5.7
Commodity Price Swap Gain(Loss)
Trading (6) $ 11.3 $ -
Non-Trading (7) 14.6 (6.0)
Total 25.9 (6.0)
Total $ 36.5 $ (.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,
1995 1994
Wellhead Crude Oil, Condensate and
Natural Gas Liquid Revenues
Associated Companies $ 15.2 $ 7.1
Trade 14.1 6.0
Total $ 29.3 $ 13.1
Other Crude Oil and Condensate Marketing
Activities
Commodity Price Hedging Gain(7) $ .4 $ .4
(1) Wellhead Natural Gas Revenues include $18.9 million and
$39.5 million for the three-month periods ended March 31,
1995 and 1994, 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 $3.8 million and $7.0 million for the three-month
periods ended March 31, 1995 and 1994, 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 for the three-month periods ended
March 31, 1995 and 1994 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 $6.7 million and $9.9 million for the three-month
periods ended March 31, 1995 and 1994, 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 associated with commodity price swap
transactions with an Enron Corp. affiliated company
designated for trading purposes. The Company has no open
trading positions at March 31, 1995.
(7) Represents gain or loss associated with commodity price swap
transactions primarily with Enron Corp. affiliated companies
based on NYMEX-related commodity 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. In March 1995, in a series of transactions with Enron Corp.
and an affiliate of Enron Corp., the Company exchanged all of its
fuel supply and purchase contracts and related price swap
agreements associated with a cogeneration facility (the "Cogen
Contracts") for certain natural gas price swap agreements of
equivalent value issued by the affiliate that are designated
as hedges (the "Swap Agreements"). Such Swap Agreements
were closed on March 31, 1995. As a result of the transactions,
the Company has been relieved of all performance obligations
associated with the Cogen Contracts. The Company 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 March 31, 1995. The net effect of this series of
transactions will result in increases in net operating revenues
and cash receipts for the Company during 1995 and 1996 of
approximately $13 million and $7 million, respectively, with
offsetting decreases in 1998 and 1999 versus those anticipated
under the Cogen Contracts. The total cash payments receivable
under the terms of the Swap Agreements, approximately $91
million at March 31, 1995, are presented in the accompanying balance
sheet as Accounts Receivable - Associated Companies for the
$36 million current portion and as Other Assets for the $55
million noncurrent portion. The corresponding total future revenue
is classified as Deferred Revenue.
6. In March 1995, a subsidiary of the Company issued to an
unrelated third party 19,000 shares of the subsidiary's non-
voting redeemable preferred stock, with a liquidation/redemption
value of $1,000 per share and dividends payable quarterly at an
annual rate of $70.00 per share, in exchange for certain oil and
gas properties. The mandatory redemption date of the preferred
stock is March 31, 2005; however, both parties have an option to
require the stock to be redeemed at any time on or subsequent to
March 31, 1997 for 633,333 shares of Enron Corp. common stock.
In the event of a tax deconsolidation between Enron Corp. and the
Company, the third party has the option to redeem the redeemable
preferred stock for 950,000 shares of the common stock of the
Company rather than for the Enron Corp. common stock. In
December 1994, the Company acquired 349,387 shares of Enron Corp.
common stock at a cost of approximately $10 million to be held in
anticipation of the possible future exchange. The cost of the
Enron Corp. common stock is included in Other Assets in the
accompanying balance sheet.
7. Gains on sales of certain oil and gas reserves and related
assets in the amount of $5.6 million and $6.0 million for the
three-month periods ended March 31, 1995 and 1994, respectively,
are required by current accounting guidelines to be removed from
Net Income in connection with determining Net Operating Cash
Inflows while the related proceeds are classified as Investing
Cash Flows. The Company believes the proceeds from the sales of
reserves and related assets should be considered in analyzing the
elements of operating cash flows. The current federal income tax
impact of these sales transactions was calculated by the Company
to be $6.0 million and $1.3 million for the three-month periods
ended March 31, 1995 and 1994, respectively, which entered into
the overall calculation of current federal income tax. The
Company believes that this current federal income tax impact
should also be considered in analyzing the elements of the cash
flow statement.
Noncash investing and financing activities for the three-
month period ended March 31, 1995 include the issuance by a
subsidiary of the Company of redeemable preferred stock with a
liquidation/redemption value of $19 million in exchange for
certain oil and gas properties (see Note 6). An approximate $7
million step-up in property basis was made relating to deferred
taxes associated with the difference between the tax and book
bases of the acquired properties as required by Statement of
Financial Accounting Standards No. 109 - "Accounting for Income
Taxes" for a nontaxable business combination.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Concluded)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. As reported in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, 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 6, 1994, Enron Corp.
was granted summary judgment, wherein the court ordered that
TransAmerican can take nothing on its claims against Enron Corp.
The trial, which was most recently set for September 12, 1994,
has been continued, and there is no current setting. 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.
9. In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121 -
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" (the "Standard"). The Standard
requires, among other things, that long-lived assets and certain
identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company is required to adopt the
Standard no later than the first quarter of 1996. While the
Company has not completed an evaluation of its total portfolio of
assets and cannot predict with certainty the effect of the adoption of
the Standard, based upon a preliminary evaluation it does not
anticipate that adoption of the Standard will have a materially
adverse effect on the financial condition or results of operations
of the Company.
<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, 1995 should be read in conjunction with the
consolidated financial statements of the Company and Notes
thereto.
Results of Operations
Three Months Ended March 31, 1995
vs. Three Months Ended March 31, 1994
In the first quarter of 1995, Enron Oil & Gas Company (the
"Company") realized net income of $29.6 million compared to net
income of $30.3 million for the same period in 1994. Net
operating revenues for the first quarter of 1995 were $155.4
million as compared to $158.2 million for the same period a year
ago.
Volume and price statistics are as follows:
1995 1994
Wellhead Volumes
Natural Gas (MMcf/d) (1) (3) 716 799
Crude Oil and Condensate (MBbl/d) (1) 18.1 10.8
Natural Gas Liquids (Mbbl/d) 2.5 0.7
Wellhead Average Prices
Natural Gas ($/Mcf) (2) (4) $ 1.24 $ 1.91
Crude Oil and Condensate ($/Bbl)(2) 16.40 12.83
Natural Gas Liquids ($/Bbl) 11.79 8.37
(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 for the three-month periods
ended March 31, 1995 and 1994 delivered under the
terms of volumetric production payment and exchange
agreements effective October 1, 1992, as amended.
(4) Includes an average equivalent wellhead value of
$.87/Mcf and $1.61/Mcf for the three-month periods
ended March 31, 1995 and 1994, respectively, for the
volumes described in note (3), net of transportation
costs.
First quarter 1995 average wellhead natural gas prices were
down approximately 35% from the same period in 1994 reducing net
operating revenues by approximately $44 million. A decrease of
10% in wellhead natural gas volumes from the first quarter of
1994 reduced net operating revenues by approximately $14 million.
The Company voluntarily curtailed its United States wellhead
natural gas delivered volumes by an average of approximately 150
MMcf per day during February and March of 1995 due to
significantly lower United States wellhead natural gas prices.
First quarter 1995 wellhead crude oil and condensate average
prices increased 28% adding approximately $6 million to net
operating revenues over the first quarter of 1994. Crude oil and
condensate wellhead volumes increased 68% adding approximately $8
million to net operating revenues compared to the same period a
year ago primarily reflecting new volumes on stream in India,
higher volumes in Trinidad and a 35% increase in United States
volumes.
<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 approximately $37 million to net operating revenues
during the first quarter of 1995, an increase of approximately
$37 million from the same period in 1994. This increase
primarily results from a gain of $15 million on natural gas
commodity price hedging activities utilizing NYMEX-related
commodity market transactions in the first quarter of 1995 versus
a $6 million loss during 1994 and increased margins associated
with other natural gas marketing activities. 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, decreased $.69 per Mcf. The average
price received for these transactions decreased $.47 per Mcf.
Related other natural gas marketing volumes decreased 13%. The
Company realized an $11 million gain in the first quarter of 1995
related to certain NYMEX-related commodity market transactions
with an Enron Corp. affiliated company that were designated for
trading purposes in late 1994. All trading positions were closed
during the first quarter of 1995.
The impact of these other marketing activities, a
substantial portion of which serve as hedges of commodity price
risks for a portion of wellhead deliveries, were more than offset
by reductions in revenues associated with market responsive
prices for wellhead deliveries. (See Note 4 to Consolidated
Financial Statements).
In the first quarter of 1995, the Company exchanged existing
fuel supply and purchase contracts and related price swap
agreements associated with a cogeneration facility for certain
natural gas price swap agreements of equivalent value issued by
an Enron Corp. affiliated company. As a result of these
transactions, the Company will realize increases in net operating
revenues of approximately $13 million and $7 million in 1995 and
1996, respectively, with offsetting decreases in 1998 and 1999
versus that anticipated under the original contracts and
agreements. The Company did not realize any additional net
operating revenues in the first quarter of 1995 resulting from
such exchange.
During the first quarter of 1995, operating expenses of $113
million were $6 million lower than the $119 million incurred in
the first quarter of 1994. Lease and well expenses increased
approximately $2 million to $17 million primarily due to expanded
international operations. Exploration expenses increased $2
million to $11 million due to increased domestic and internationl
exploration activities. Lease impairments of $7 million in the
first quarter of 1995 were $3 million higher than the same period
in 1994 primarily due to impairments associated with certain
offshore leases. Depreciation, depletion and amortization
("DD&A") expense decreased $12 million to $53 million reflecting
a decrease in production volumes and a decrease in the average
DD&A rate from $.83 per thousand cubic feet equivalent ("Mcfe")
in the first quarter of 1994 to $.70 per Mcfe in the first
quarter of 1995. A portion of the DD&A rate decrease is
attributable to increased production from international operations,
with lower than average DD&A rates, versus that for North
American operations. The remainder of the decrease is primarily
due to an increase in the proportion of North American production
coming from lower cost fields, the disposition of higher cost
properties and increases in reserve estimates resulting primariy
from evolving production histories.
<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
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 $.09 per Mcfe,
averaging $1.26 per Mcfe during the first quarter of 1995
compared to $1.35 per Mcfe during the same period in 1994. This
decrease is primarily attributable to the reduction in the
average DD&A rate as noted above.
Income tax provision increased $1 million for first quarter
of 1995 as compared to the same period in 1994 primarily
resulting from a reduction in the federal income tax benefits
associated with tight gas sand federal income tax credits
utilized in the first quarter of 1995 as compared to 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, 1995 included funds generated from
operations, proceeds from the sale of selected oil and gas
reserves and related assets and commercial paper borrowings.
Primary cash outflows included funds used in operations,
exploration and development expenditures, dividends paid to the
Company's shareholders and repayment of commercial paper
maturities.
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, gains on sales of reserves and
related assets, certain other miscellaneous non-cash amounts,
except for amortization of deferred revenue, and exploration and
dry hole expenses and to include proceeds from sales of reserves
and related assets. The Company generated discretionary cash
flow of $129 million during the first three months of 1995, a 12%
increase over the $115 million generated for the same period in
1994, primarily reflecting an increase in proceeds from sales of
reserves and related assets partially offset by lower net
operating revenues.
Net operating cash flows of $97 million for the first three
months of 1995 decreased $7 million as compared to the same
period in 1994 primarily due to lower net operating revenues.
Based upon existing economic and market conditions, management
believes net operating cash flow and available financing
alternatives in 1995 will be sufficient to fund net investing and
other cash requirements of the Company for the remainder of the
year.
<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
Exploration and development expenditures totaled $126
million for the first three months of 1995 which was $26 million
higher than the amount expended during the same period in 1994,
reflecting an increasing emphasis on certain international
development drilling opportunities and a $19 million acquisition
of certain properties in the United States, which property
acquisition was for noncash consideration of redeemable preferred
stock of a subsidiary of the Company. An approximate $7 million
noncash step-up in property basis was made relating to deferred
taxes associated with the difference between the tax and book
bases of the acquired properties. (See Note 6 to Consolidated
Financial Statements).
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 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, 1995.
<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, 1995 By /S/ W. C. WILSON
W. C. Wilson
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 12, 1995 By /S/ BEN B. BOYD
Ben B. Boyd
Vice President and Controller
(Principal Accounting Officer)
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
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