<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
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X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
[ ] 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 (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1400 SMITH STREET, HOUSTON, TEXAS 77002-7369
(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, 1998.
Common Stock, $.01 Par Value 154,864,907 shares
- --------------------------------------- -----------------------
CLASS NUMBER OF SHARES
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ENRON OIL & GAS COMPANY
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income and Comprehensive Income -
Three Months Ended March 31, 1998 and 1997 3
Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 4
Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
ITEM 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
- --------------------------------------------------------------------------------------------------------
1998 1997
<S> <C> <C>
NET OPERATING REVENUES
Natural Gas
Trade $ 129,567 $ 141,171
Associated Companies 23,023 (2,599)
Crude Oil, Condensate and Natural Gas Liquids
Trade 30,237 31,211
Associated Companies 2,739 9,681
Gains on Sales of Reserves and Related Assets and Other, Net 14,265 1,187
---------- ---------
TOTAL 199,831 180,651
OPERATING EXPENSES
Lease and Well 24,909 23,469
Exploration 17,398 15,483
Dry Hole 7,881 984
Impairment of Unproved Oil and Gas Properties 8,348 6,013
Depreciation, Depletion and Amortization 71,961 62,639
General and Administrative 16,554 13,607
Taxes Other Than Income 14,494 17,286
---------- ----------
TOTAL 161,545 139,481
OPERATING INCOME 38,286 41,170
OTHER INCOME (EXPENSE), NET (970) 1,256
---------- ----------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 37,316 42,426
INTEREST EXPENSE, NET 9,110 5,115
---------- ----------
INCOME BEFORE INCOME TAXES 28,206 37,311
INCOME TAX PROVISION 1,201 14,246
---------- ----------
NET INCOME 27,005 23,065
Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustment 2,157 (1,000)
---------- ----------
COMPREHENSIVE INCOME $ 29,162 $ 22,065
========== ==========
EARNINGS PER SHARE OF COMMON STOCK
Basic .17 .15
========== ==========
Diluted .17 .14
========== ==========
AVERAGE NUMBER OF COMMON SHARES
Basic 154,736 158,866
========== ==========
Diluted 155,522 159,790
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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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,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 5,060 $ 9,330
Accounts Receivable
Trade 209,565 185,979
Associated Companies 27,093 46,120
Inventories 34,355 32,040
Other 7,808 8,566
----------- -----------
TOTAL 283,881 282,035
OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 4,375,212 4,291,405
Less: Accumulated Depreciation, Depletion and Amortization (1,973,383) (1,904,198)
----------- -----------
Net Oil and Gas Properties 2,401,829 2,387,207
OTHER ASSETS 53,053 54,113
----------- -----------
TOTAL ASSETS $ 2,738,763 $ 2,723,355
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Trade $ 184,630 $ 198,109
Associated Companies 20,902 37,613
Accrued Taxes Payable 19,430 28,841
Dividends Payable 4,712 4,705
Other 16,102 21,729
----------- -----------
TOTAL 245,776 290,997
LONG-TERM DEBT
Trade 764,200 548,775
Affiliate 35,000 192,500
OTHER LIABILITIES
Trade 20,967 37,739
Associated Companies 62,050 44,699
DEFERRED INCOME TAXES 285,802 287,678
DEFERRED REVENUE 25,566 39,918
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par, 320,000,000 Shares Authorized and
160,000,000 Shares Issued 201,600 201,600
Additional Paid In Capital 402,786 402,877
Unearned Compensation (5,665) (4,694)
Cumulative Foreign Currency Translation Adjustment (17,614) (19,771)
Retained Earnings 823,074 800,709
Common Stock Held in Treasury, 5,199,753 shares at March 31, 1998
and 4,935,744 shares at December 31, 1997 (104,779) (99,672)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,299,402 1,281,049
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,738,763 $ 2,723,355
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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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,
- -----------------------------------------------------------------------------------------------------------------
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
Net Income $ 27,005 $ 23,065
Items Not Requiring (Providing) Cash
Depreciation, Depletion and Amortization 71,961 62,639
Impairment of Unproved Oil and Gas Properties 8,348 6,013
Deferred Income Taxes 5,500 5,589
Other, Net 2,286 (122)
Exploration Expenses 17,398 15,483
Dry Hole Expenses 7,881 984
Gains on Sales of Reserves and Related Assets and Other, Net (12,954) (206)
Other, Net (3,428) (3,357)
Changes in Components of Working Capital and Other Liabilities
Accounts Receivable 38,955 50,523
Inventories (2,315) (7,440)
Accounts Payable (36,896) (12,271)
Accrued Taxes Payable (9,411) 934
Other Liabilities (6,780) 2,760
Other, Net (5,141) (1,070)
Amortization of Deferred Revenue (10,688) (10,688)
Changes in Components of Working Capital Associated with
Investing and Financing Activities 20,167 2,495
----------- -----------
NET OPERATING CASH INFLOWS 111,888 135,331
INVESTING CASH FLOWS
Additions to Oil and Gas Properties (117,503) (136,170)
Exploration Expenses (17,398) (15,483)
Dry Hole Expenses (7,881) (984)
Proceeds from Sales of Reserves and Related Assets 3,303 2,982
Changes in Components of Working Capital Associated with
Investing Activities (20,144) (2,495)
Other, Net (3,259) (2,404)
----------- -----------
NET INVESTING CASH OUTFLOWS (162,882) (154,554)
FINANCING CASH FLOWS
Long-Term Debt
Trade 215,425 52,600
Affiliate (157,500) -
Dividends Paid (4,633) (4,784)
Treasury Stock Purchased (7,231) (34,078)
Proceeds from Sales of Treasury Stock 755 1,185
Other, Net (92) 266
----------- -----------
NET FINANCING CASH INFLOWS 46,724 15,189
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (4,270) (4,034)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,330 7,644
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,060 $ 3,610
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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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, 1997.
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 to prior period financial
statements to conform with the current presentation.
As more fully discussed in notes 1 and 13 to the consolidated financial
statements included in the Company's 1997 Annual Report on Form 10-K, the
Company engages in price risk management activities from time to time
primarily for non-trading and to a lesser extent for trading purposes.
Derivative financial instruments (primarily price swaps and costless
collars) are utilized for non-trading purposes to hedge the impact of
market fluctuations on natural gas and crude oil market prices. Hedge
accounting is utilized in non-trading activities when there is a high
degree of correlation between price movements in the derivative and the
item designated as being hedged. Gains and losses on derivative financial
instruments used for hedging purposes are recognized as revenue in the same
period as the hedged item. Gains and losses on hedging instruments that are
closed prior to maturity are deferred in the consolidated balance sheets.
In instances where the anticipated correlation of price movements does not
occur, hedge accounting is terminated and future changes in the value of
the derivative are recognized as gains or losses using the mark-to-market
method of accounting. Derivative and other financial instruments utilized
in connection with trading activities, primarily price swaps and call
options, are accounted for using the mark-to-market method, under which
changes in the market value of outstanding financial instruments are
recognized as gains or losses in the period of change. The cash flow impact
of derivative and other financial instruments used for non-trading and
trading purposes is reflected as cash flows from operating activities in
the consolidated statements of cash flows.
2. Natural gas revenues, trade for the three-month periods ended March 31,
1998 and 1997, is net of costs of natural gas purchased for sale related to
natural gas marketing activities of $12.5 million and $23.0 million,
respectively. Natural gas revenues, associated for the three-month periods
ended March 31, 1998 and 1997, is net of costs of natural gas purchased for
sale related to natural gas marketing activities of $12.4 million and $11.6
million, respectively.
3. Income tax provision for the three-month periods ended March 31, 1998 and
1997 includes tax benefits of $1.3 million and $3.2 million, respectively,
related to tight gas sand federal income tax credit utilization.
Additionally, the income tax provision for the three-month period ended
March 31, 1998 includes a benefit of $3.8 million from certain recently
incurred international costs and other benefits of $5.0 million from the
resolution of certain domestic and international issues.
4. The difference between the average number of common shares outstanding for
basic and diluted earnings per share of common stock is due to the assumed
issuance of common shares relating to employee stock options in each period
presented.
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<PAGE> 7
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. As reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, Enron Oil & Gas India Ltd. ("EOGIL"), a
wholly-owned subsidiary of the Company, is a respondent in two public
interest lawsuits filed in the Delhi High Court, India. The first (the
"Wadehra Action") was brought by B. L. Wadehra, an Indian public interest
lawyer, against the Union of India, EOGIL, EOGIL co-participants in the
Panna and Mukta fields, Reliance Industries Limited ("Reliance") and Oil
& Natural Gas Corporation Limited ("ONGC"), and certain other
respondents. ONGC is the Indian national oil company and is wholly-owned
by the Union of India. The second suit (the "CPIL Action") was brought by
the Centre for Public Interest Litigation and the National Alliance of
People's Movement against the Union of India, the Central Bureau of
Investigation, ONGC, Reliance and EOGIL. Petitioners in both the Wadehra
Action and the CPIL Action allege various improprieties in the award of
the Panna and Mukta fields to EOGIL, Reliance and ONGC, and seek the
cancellation of the Production Sharing Contract for the Panna and Mukta
fields. The Union of India is vigorously disputing these allegations. The
Company believes that the public competitive bidding process for the
fields was fair and that the award of these fields to EOGIL, Reliance and
ONGC was proper. Although no assurances can be given, based on currently
available information the Company believes that the claims made by the
petitioners in both actions are without merit, and that the ultimate
resolution of these matters will not have a material adverse effect on
its financial condition or results of operations. There are various other
suits and claims against the Company that have arisen in the ordinary
course of business. However, management does not believe these suits and
claims will individually or in the aggregate have a material adverse
effect on the Company's financial condition or results of operations. The
Company has been named as a potentially responsible party in certain
Comprehensive Environmental Response Compensation and Liability Act
proceedings. However, management does not believe that any potential
assessments resulting from such proceedings will individually or in the
aggregate have a materially adverse effect on the financial condition or
results of operations of the Company.
6. In April 1998, the Company issued, pursuant to a public offering, $150
million of 6.65% Notes due April 1, 2028.
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<PAGE> 8
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 periods ended March
31, 1998 and 1997 should be read in conjunction with the consolidated financial
statements of the Company and Notes thereto.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 vs. Three Months Ended March 31, 1997
In the first quarter of 1998, Enron Oil & Gas Company (the "Company")
generated net income of $27 million compared to net income of $23 million for
the first quarter of 1997. Net operating revenues for the first quarter of 1998
were $200 million as compared to $181 million for the first quarter of 1997.
Wellhead volume and price statistics are as follows:
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
NATURAL GAS VOLUMES (MMCF PER DAY)(1)
United States (2) 644 643
Canada 101 95
---- ---
North America 745 738
Trinidad 109 112
India 47 -
--- --
TOTAL 901 850
==== ====
AVERAGE NATURAL GAS PRICES ($/MCF)(3)
United States (4) $ 2.01 $ 2.71
Canada 1.39 1.71
North America Composite 1.93 2.58
Trinidad 1.09 1.04
India 2.70 -
COMPOSITE 1.86 2.38
CRUDE OIL/CONDENSATE VOLUMES (MBBL PER DAY)(1)
United States 12.6 10.7
Canada 2.7 2.4
---- ----
North America 15.3 13.1
Trinidad 2.8 3.7
India 4.2 2.8
---- ----
TOTAL 22.3 19.6
===== =====
AVERAGE CRUDE OIL/CONDENSATE PRICES ($/BBL)(3)
United States $14.68 $22.33
Canada 13.97 18.04
North America Composite 14.55 21.55
Trinidad 14.03 21.56
India 15.33 22.99
COMPOSITE 14.64 21.76
NATURAL GAS EQUIVALENT VOLUMES (MMCFE PER DAY)(5)
United States (2) 735 723
Canada 124 117
---- ----
North America 859 840
Trinidad 126 134
India 73 17
----- ---
TOTAL 1,058 991
===== ====
TOTAL BCFE(5) DELIVERIES 95 89
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</TABLE>
(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 March 31, 1998
and 1997 delivered under the terms of a volumetric production payment
agreement effective October 1, 1992, as amended.
(3) Dollars per thousand cubic feet or per barrel, as applicable.
(4) Includes an average equivalent wellhead value of $1.62/Mcf and $2.47/Mcf for
the three-month periods ended March 31, 1998 and 1997, respectively, for the
volumes described in note (2), net of transportation costs.
(5) Million cubic feet equivalent per day or billion cubic feet equivalent, as
applicable.
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PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
Wellhead revenues decreased 19% to $184 million in the first quarter of
1998 compared to $226 million in the first quarter of 1997 primarily due to
lower average wellhead prices for natural gas, crude oil and condensate and
natural gas liquids. First quarter 1998 average wellhead natural gas prices for
North America decreased approximately 25% from the comparable period in 1997
reducing net operating revenues by approximately $44 million. Average wellhead
crude oil and condensate prices were down by nearly 33% worldwide decreasing net
operating revenues by $14 million.
First quarter 1998 wellhead natural gas volumes were approximately 6%
higher than the comparable period in 1997, increasing net operating revenues by
$13 million. This increase was primarily due to 47 MMcf per day from the Tapti
and Panna fields in India which had not commenced production in the first
quarter of 1997. Wellhead crude oil and condensate volumes were higher than the
prior year period increasing net operating revenues by approximately $5 million
as North America production increased 17% and production from the Panna and
Mukta fields in India was up by 50%.
Other marketing activities associated with sales and purchases of natural
gas, natural gas and crude oil price hedging and trading transactions and
margins related to the volumetric production payment increased net operating
revenue by $2 million during the first quarter of 1998, compared to a $46
million reduction in the first quarter of 1997.
Gains on sale of reserves and related assets and other, net totaled $14
million in the first quarter of 1998 compared to $1 million in the comparable
period of 1997. Included in 1998 are $27 million in gains on the sale of
producing properties in South Texas and other revenues of $1 million partially
offset by nonrecurring charges of $14 million associated with the costs of
terminating certain physical natural gas contracts.
During the first quarter of 1998, operating expenses of $162 million were
approximately $22 million higher than in the first quarter of 1997.
Depreciation, depletion and amortization expense ("DD&A") increased by $9
million reflecting increased production volumes in North America and India and a
higher per unit rate of $.76 per thousand cubic feet equivalent ("Mcfe")
compared to $.70 in the first quarter of 1997. Dry hole expense increased by $7
million as a result of increased exploratory drilling activity in North America.
First quarter 1998 exploration expenses were up $2 million due to increased
exploration activity in North America, primarily offshore Gulf of Mexico.
The per unit operating costs of the Company for lease and well, DD&A,
general and administrative, interest expense, and taxes other than income
averaged $1.44 per Mcfe during the first quarter of 1998 compared to $1.37 per
Mcfe during the first quarter of 1997. This increase is primarily due to a
higher per unit rate of DD&A expense and increased interest expense associated
with expanded worldwide operations and stock repurchases.
Income tax provision decreased $13 million for the first quarter of 1998 as
compared to the first quarter of 1997 primarily due to lower income before
income tax, a $3.8 million benefit associated with certain recently incurred
international costs and approximately $5.0 million of other benefits from
resolution of certain domestic and international issues.
Federal income taxes accrued in interim periods are calculated using the
estimated annual effective income tax rate.
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PART I. FINANCIAL INFORMATION - (CONCLUDED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONCLUDED)
ENRON OIL & GAS COMPANY
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of cash during the three months ended March
31, 1998, included funds generated from operations and proceeds from new
borrowings. Primary cash outflows included funds used in operations, exploration
and development expenditures, common stock repurchases, dividends paid to
Company shareholders and the repayment of debt.
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. The Company generated discretionary cash flow of $124 million during
the first three months of 1998 compared to $110 million generated for the
comparable period in 1997 primarily due to increased cash operating revenues and
lower current income taxes partially offset by higher interest expense.
Net operating cash flows of $112 million for the first three months of 1998
decreased approximately $23 million as compared to the first three months of
1997 primarily reflecting increased working capital requirements for operating
activities. Based upon existing economic and market conditions, management
believes net operating cash flow and available financing alternatives in 1998
will be sufficient to fund net investing and other cash requirements of the
Company for the remainder of the year.
Exploration and development expenditures for the first three months of 1998
and 1997 are as follows (in millions):
- -------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------
NORTH AMERICA $ 120 $ 115
OUTSIDE NORTH AMERICA
India 13 26
Other 10 12
----- -----
TOTAL $ 143 $ 153
===== =====
- -------------------------------------------------------------------------------
Exploration and development expenditures of $143 million for the first
three months of 1998 were $10 million lower than expenditures in the first three
months of 1997 primarily due to lower expenditures in India due to the
completion of production facilities in 1997. Expenditures in North America were
$5 million higher than the prior year period due to increased exploratory and
developmental drilling activities.
During the quarter ended March 31, 1998, the Company closed a sale of South
Texas reserves and related assets and received the proceeds on April 2, 1998.
The proceeds from this sale were approximately $46 million for proved reserves
of 31 Bcfe. Early in the second quarter of 1998, the Company completed the
purchase of properties in the East Texas area for approximately $27 million with
approximately 27 Bcfe of proved reserves.
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.
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 the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
such expectations will be achieved. Important factors that could cause actual
results to differ materially from those in the forward looking statements herein
include, but are not limited to, the timing and extent of changes in commodity
prices for crude oil, natural gas and related products and interest rates, the
extent of the Company's success in discovering, developing and producing
reserves and in acquiring oil and gas properties, political developments around
the world and conditions of the capital and equity markets during the periods
covered by the forward looking statements.
-10-
<PAGE> 11
PART II. OTHER INFORMATION
ENRON OIL & GAS COMPANY
ITEM 1. Legal Proceedings
See Part 1, Item 1, Note 5 to Consolidated Financial Statements which is
incorporated herein by reference.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Enron Oil & Gas Company was held on May
5, 1998 in Houston, Texas, for the purpose of electing a board of directors and
ratifying 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) Each of the directors nominated by the Board and listed in the proxy
statement was elected with votes as follows:
Shares Shares
Nominee For Withheld
------- ----- --------
Fred C. Ackman 138,527,237 240,841
James V. Derrick, Jr. 138,412,917 355,161
Ken L. Harrison 138,532,356 235,722
Forrest E. Hoglund 138,443,960 324,118
Kenneth L. Lay 138,441,930 326,148
Edward Randall, III 138,522,009 246,069
Jeffery K. Skilling 138,439,228 328,850
Frank G. Wisner 138,521,665 246,413
(b) The appointment of Arthur Andersen LLP, independent public
accountants, as auditors for the year ending December 31, 1998 was
approved by the following vote: 138,583,230 shares for; 99,687
shares against; and 85,161 shares abstaining.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
Current Report on Form 8-K filed on April 17, 1998 to report the
sale on April 8, 1998 of $150 million principal amount of 6.65%
notes due April 1, 2028 pursuant to an underwritten public
offering.
-11-
<PAGE> 12
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 15, 1998 By /S/ W. C. WILSON
-----------------------
W. C. Wilson
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 1998 By /S/ BEN B. BOYD
-------------------------
Ben B. Boyd
Vice President and Controller
(Principal Accounting Officer)
-12-
<PAGE> 13
EXHIBIT INDEX
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 12
ENRON OIL & GAS COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
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MARCH 31,1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR
FIXED CHARGES:
Net Income $ 27,005 $121,970 $140,008 $142,118 $147,998 $138,025
Less: Capitalized Interest
Expense (3,295) (13,706) (9,136) (6,490) (6,124) (5,457)
Add: Fixed Charges 12,405 41,423 21,997 18,414 14,613 15,378
Income Tax Provision(Benefit) 1,201 41,500 50,954 41,936 5,937 (25,752)
-------- -------- -------- -------- -------- --------
EARNINGS AVAILABLE $ 37,316 $191,187 $203,823 $195,978 $162,424 $122,194
======== ======== ======== ======== ======== ========
FIXED CHARGES:
Interest Expense 9,047 27,369 12,370 11,310 8,135 9,921
Capitalized Interest 3,295 13,706 9,136 6,490 6,124 5,457
Rental Expense Representative of
Interest Factor 63 348 491 614 354 -
-------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES $ 12,405 $ 41,423 $ 21,997 $ 18,414 $ 14,613 $ 15,378
======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO
FIXED CHARGES 3.01 4.62 9.27 10.64 11.12 7.95
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,060
<SECURITIES> 0
<RECEIVABLES> 236,658
<ALLOWANCES> 0
<INVENTORY> 34,355
<CURRENT-ASSETS> 283,881
<PP&E> 4,375,212
<DEPRECIATION> (1,973,383)
<TOTAL-ASSETS> 2,738,763
<CURRENT-LIABILITIES> 245,776
<BONDS> 0
0
0
<COMMON> 201,600
<OTHER-SE> 1,097,802
<TOTAL-LIABILITY-AND-EQUITY> 2,738,763
<SALES> 185,566
<TOTAL-REVENUES> 199,831
<CGS> 0
<TOTAL-COSTS> 161,545
<OTHER-EXPENSES> 970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,110
<INCOME-PRETAX> 28,206
<INCOME-TAX> 1,201
<INCOME-CONTINUING> 27,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,005
<EPS-PRIMARY> 0.17<F1>
<EPS-DILUTED> 0.17
<FN>
<F1>BASIC
</FN>
</TABLE>
