<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 333-44785
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 2, 1998)
$150,000,000
[ENRON LOGO]
ENRON OIL & GAS COMPANY
6.65% Notes Due April 1, 2028
------------------------
Interest Payable April 1 and October 1
------------------------
The 6.65% Notes due April 1, 2028 (the "Notes") of Enron Oil & Gas Company
(the "Company") will bear interest from April 8, 1998 at the rate of 6.65% per
annum, payable on April 1 and October 1 of each year, beginning October 1, 1998.
The Notes may not be redeemed prior to maturity and will not be subject to any
sinking fund. See "Description of Notes."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================
Price to Underwriting Proceeds to
Public(1) Discount(2) the Company(3)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Per Note................................. 99.155% 0.875% 98.280%
- --------------------------------------------------------------------------------------------------------------
Total.................................... $148,732,500 $1,312,500 $147,420,000
==============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from April 8, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be
approximately $100,000.
------------------------
The Notes are offered subject to prior sale, when, as and if accepted by
the Underwriters. It is expected that delivery of the Notes will be made in
book-entry form through the facilities of the Depository Trust Company on or
about April 8, 1998, against payment therefor in immediately available funds.
------------------------
LEHMAN BROTHERS CHASE SECURITIES INC.
April 3, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH NOTES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
CAPITALIZATION
The following table sets forth the summary consolidated capitalization of
the Company and its consolidated subsidiaries as of December 31, 1997, and as
adjusted for the retirement on January 2, 1998 of $192,500,000 aggregate
principal amount of debt due to an affiliate, the retirement on February 13,
1998 of $20,000,000 aggregate principal amount of notes, the borrowing since
December 31, 1997 of $235,525,000 through the issuance of commercial paper and
bank debt, the borrowing on March 31, 1998 of $35,000,000 from an affiliate, and
the issuance of the Notes offered hereby. See "Use of Proceeds."
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt
Company:
Commercial paper and bank debt......................... $ 42,415 $ 130,620
Notes due 1998 (9.10%)................................. 20,000 --
Notes due 2004 (6.50%)................................. 100,000 100,000
Notes due 2006 (6.70%)................................. 150,000 150,000
Notes due 2007 (6.50%)................................. 100,000 100,000
Notes due 2028 (6.65%)................................. -- 150,000
Subsidiary companies:
Notes due 1998 (5.44%)................................. 16,000 16,000
Notes due 1998 (floating).............................. 15,000 15,000
Notes due 2001 (floating).............................. 105,000 105,000
Other.................................................. 360 360
Unamortized debt discount................................. -- (1,268)
Affiliate................................................. 192,500 35,000
---------- ----------
Total long-term debt.............................. 741,275 800,712
Shareholders' equity
Common stock.............................................. 201,600 201,600
Additional paid in capital................................ 402,877 402,877
Unearned compensation..................................... (4,694) (4,694)
Cumulative foreign currency translation................... (19,771) (19,771)
Retained earnings......................................... 800,709 800,709
Common stock held in treasury............................. (99,672) (99,672)
---------- ----------
Total shareholders' equity........................ 1,281,049 1,281,049
---------- ----------
Total capitalization............................ $2,022,324 $2,081,761
========== ==========
</TABLE>
S-2
<PAGE> 3
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby will be used to
retire commercial paper and bank debt borrowings. As of March 31, 1998, the
weighted average interest rate on the debt to be retired was approximately
6.27%.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................ 4.62 9.27 10.64 11.12 7.95
</TABLE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus (the "Prospectus"), which this Prospectus
Supplement accompanies, as the "Offered Debt Securities") supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made.
GENERAL
The Notes will be limited to $150,000,000 aggregate principal amount and
will mature on April 1, 2028. The Notes will be direct, unsecured obligations of
the Company and will rank equally with each other and with all other unsecured
and unsubordinated indebtedness of the Company from time to time. The Notes will
bear interest at the rate per annum shown on the cover page of this Prospectus
Supplement from April 8, 1998 or from the most recent interest payment date to
which interest has been paid or provided for, payable semi-annually on April 1
and October 1 of each year, commencing on October 1, 1998, to the person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the March 15 or September 15, as the case may be, next preceding
such interest payment date. Interest on the Notes will be computed on the basis
of a 360-day year consisting of twelve 30-day months.
The Notes may not be redeemed prior to maturity, and are not entitled to
any sinking fund. With certain exceptions and pursuant to certain requirements
set forth in the Indenture, the Company may discharge its obligations under the
Indenture with respect to the Notes as described under "Description of Debt
Securities - Discharge of Indenture" in the Prospectus. Prospective investors
are urged to consult their own advisors as to the tax consequences of any such
action.
BOOK-ENTRY ONLY SYSTEM
The Notes will be issuable only as registered securities and will be
represented by one certificate (the "Global Security") to be registered in the
name of the nominee of The Depository Trust Company ("DTC") or any successor
depositary (the "Depositary"). The Depositary will maintain the Notes in
denominations of $1,000 and integral multiples thereof through its book-entry
facilities. In accordance with its normal procedures, the Depositary will record
the interests of each Depositary participating firm ("Participant") in the
Notes, whether held for its own account or as a nominee for another person.
So long as the nominee of the Depositary is the registered owner of the
Notes, such nominee will be considered the sole owner or holder of the Notes for
all purposes under the Indenture and any applicable laws. Except as otherwise
provided below, a Beneficial Owner, as hereinafter defined, of interests in the
Notes will not be entitled to have the Notes represented by the Global Security
registered in their names, will not be entitled to receive a physical
certificate representing such ownership interest and will not be considered an
owner or holder of the Notes under the Indenture. A Beneficial Owner is the
person who has the right to sell, transfer or otherwise dispose of an interest
in the Notes and the right to receive the
S-3
<PAGE> 4
proceeds therefrom, as well as interest, principal and premium (if any) payable
in respect thereof. A Beneficial Owner's interest in the Notes will be recorded,
in integral multiples of $1,000, on the records of the Participant that
maintains such Beneficial Owner's account for such purpose. In turn, the
Participant's interest in such Notes will be recorded, in integral multiples of
$1,000, on the records of the Depositary. Therefore, the Beneficial Owner must
rely on the foregoing arrangements to evidence its interest in the Notes.
Beneficial ownership of the Notes may be transferred only by compliance with the
procedures of a Beneficial Owner's Participant (e.g, brokerage firm) and the
Depositary. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer or pledge beneficial interests in the
Global Security.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account the DTC interests in the Global Security is credited and only in
respect of such portion of the aggregate principal amount of Notes as to which
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC will exchange the Global
Security for certificated Notes, which it will distribute to its Participants in
accordance with its customary procedures.
The rights of ownership must be exercised through the Depositary and the
book-entry system. Notices that are to be given to registered owners by the
Company or the Trustee will be given only to the Depositary. It is expected that
the Depositary will forward the notices to the Participants by its usual
procedures, so that Participants may forward such notices to the Beneficial
Owners. Neither the Company nor the Trustee will have any responsibility or
obligation to assure that any notices are forwarded by the Depositary to any
Participant or by any Participant to the Beneficial Owners.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC was
created to hold securities of Participants and to facilitate the clearance and
settlement of securities transactions among Participants in such securities
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by DTC only through
Participants. The rules applicable to DTC and its Participants are on file with
the Securities and Exchange Commission.
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are subject to DTC's book-entry system, the Notes will trade
in DTC's Same-Day Funds Settlement system until maturity, and therefore DTC will
require that secondary trading activity in the Notes be settled in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Notes.
S-4
<PAGE> 5
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, severally, and each of the Underwriters has severally
agreed to purchase, the principal amount of the Notes set forth opposite its
name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
----------- ------------
<S> <C>
Lehman Brothers Inc. ....................................... $ 90,000,000
Chase Securities Inc. ...................................... 60,000,000
------------
$150,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all the Notes if any are taken.
The Underwriters initially propose to offer the Notes directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain securities dealers at such price less a
concession not in excess of .500% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of .375% of the principal amount of the Notes to certain other dealers. After
the initial public offering the price and such concessions may be changed.
The Notes are a new issue of securities with no established trading market.
The Company does not intend to apply for listing of the Notes on a national
securities exchange. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in the Notes, but they are not obligated to
do so and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of or any trading market for the Notes.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Notes
than they are required to purchase from the Company in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the securities sold in the offering may be
reclaimed by the Underwriters if such Notes are repurchased by the Underwriters
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Notes, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected in the over-the-counter market or otherwise.
In the ordinary course of their respective businesses, the Underwriters or
their affiliates engage in or have provided investment banking, financial
advisory, and general financing and banking services to the Company, its
subsidiaries or affiliates in the past, for which they have received customary
compensation and expense reimbursement, and may do so again in the future.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Company by Vinson &
Elkins L.L.P. and for the Underwriters by Bracewell & Patterson, L.L.P.
Bracewell & Patterson, L.L.P. currently provides services to the Company and
certain of its subsidiaries and affiliates as outside counsel on matters
unrelated to the issuance of the Notes.
S-5
<PAGE> 6
PROSPECTUS
ENRON OIL & GAS COMPANY
DEBT SECURITIES
COMMON STOCK
------------------------
Enron Oil & Gas Company (the "Company") may offer from time to time its
unsecured debt securities consisting of notes, debentures or other evidences of
indebtedness (the "Debt Securities"). The Company and/or Enron Corp. (the
"Selling Stockholder") may also offer and sell from time to time shares of
Common Stock, par value $.01 per share, of the Company (the "Common Stock"). The
Debt Securities and the Common Stock are collectively referred to as the
"Securities". The aggregate initial offering price of the Debt Securities and
the Common Stock to be offered by the Company hereby will not exceed
$413,207,962, and the number of shares of Common Stock offered by the Selling
Stockholder hereby will not exceed 4,940,000. The Securities may be offered in
amounts, at prices and on terms to be determined in light of market conditions
at the time of sale and, to the extent required, set forth in a Prospectus
Supplement.
The Debt Securities may be offered as separate series. The terms of each
series of Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, maturity,
rate or rates and time or times of payment of any interest, any terms for
optional or mandatory redemption, which may include redemption at the option of
holders upon the occurrence of certain events, or payment of additional amounts
or any sinking fund provisions, and any other specific terms in connection with
the offering and sale of such series (the "Offered Debt Securities") will be set
forth in a Prospectus Supplement.
The Securities may be sold directly by the Company or the Selling
Stockholder to investors, through agents designated from time to time or to or
through underwriters or dealers. See "Plan of Distribution". If any underwriters
are involved in the sale of any Securities in respect of which this Prospectus
is being delivered, the names of such underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement. The Company will not receive any of the proceeds from the sale of
the Common Stock by the Selling Stockholder. Enron Corp. currently owns
approximately 55% of the outstanding Common Stock.
The Common Stock is listed on the New York Stock Exchange under the symbol
"EOG". On January 22, 1998 the last reported sale price of Common Stock on the
New York Stock Exchange Composite Tape was $20 5/16 per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 2, 1998
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the following Regional Offices of
the Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates, or from
the site maintained by the Commission on the Internet World Wide Web at
http://www.sec.gov. The Company's Common Stock is listed on the New York Stock
Exchange, Inc. ("NYSE"), and reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of the NYSE at
20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of Registration Statements on Form S-3
(collectively, together with all amendments and exhibits thereto, the
"Registration Statements") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in such Registration Statements, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statements and to the exhibits relating
thereto for further information with respect to the Company and the Securities
offered hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statements or otherwise filed
with the Commission or incorporated by reference herein are not necessarily
complete, and in each instance reference is made to the copy of such document so
filed for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June
30, 1997, and September 30, 1997, Current Reports on Form 8-K dated September
29, 1997 and December 1, 1997, and the description of the Common Stock contained
in the Registration Statement on Form 8-A declared effective on October 3, 1989,
are incorporated herein by reference.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities pursuant hereto shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such document. Any statement contained herein or in a document
all or a portion of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the request of any such person, a copy of any
or all of the foregoing documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into the documents that this Prospectus incorporates). Requests
should be directed to Secretary, Enron Oil & Gas Company, at its principal
executive offices, 1400 Smith Street, Houston, Texas 77002 (telephone:
713-853-6161).
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICES OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING, AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN
OF DISTRIBUTION."
2
<PAGE> 8
BUSINESS OF THE COMPANY
GENERAL
The Company, a Delaware corporation organized in 1985, is engaged, either
directly or through a marketing subsidiary with regard to domestic operations or
through various subsidiaries with regard to international operations, in the
exploration for, and the development, production and marketing of, natural gas
and crude oil primarily in major producing basins in the United States, as well
as in Canada, Trinidad and India and, to a lesser extent, selected other
international areas. At December 31, 1997, the Company's estimated net proved
natural gas reserves were 4,001 billion cubic feet ("Bcf"), including 1,180 Bcf
of proved undeveloped methane reserves in the Big Piney deep Paleozoic
formations in Wyoming, and estimated net proved crude oil, condensate and
natural gas liquids reserves were 78 million barrels. At such date,
approximately 67% of the Company's reserves (on a natural gas equivalent basis)
was located in the United States, 10% in Canada, 8% in Trinidad and 15% in
India.
Unless the context requires otherwise, as used in this Prospectus the
"Company" shall mean Enron Oil & Gas Company and its subsidiaries.
EXPLORATION AND PRODUCTION
NORTH AMERICA OPERATIONS
The Company's eight principal United States producing areas are the Big
Piney area of Wyoming, South Texas area, East Texas area, Offshore Gulf of
Mexico area, Canyon/Strawn Trend area of West Texas, Sand Tank and Pitchfork
Ranch areas of New Mexico and Vernal area of Utah. Properties in these areas
comprised approximately 82% of the Company's United States reserves (on a
natural gas equivalent basis) and 76% of the Company's United States net natural
gas deliverability as of December 31, 1997, and are substantially all operated
by the Company.
The Company's other United States natural gas and crude oil producing
properties are located primarily in other areas of Texas, Utah, New Mexico,
Oklahoma, Mississippi, California and Kansas.
At December 31, 1997, 94% of the Company's proved United States reserves
(on a natural gas equivalent basis), including the reserves in the Big Piney
deep Paleozoic formations, was natural gas and 6% was crude oil, condensate and
natural gas liquids. A substantial portion of the Company's United States
natural gas reserves is in long-lived fields with well-established production
histories. The Company believes that opportunities exist to increase production
in many of these fields through continued infill and other development drilling.
The Company also has natural gas and crude oil producing properties located
in Western Canada, primarily in the provinces of Alberta, Saskatchewan and
Manitoba.
OUTSIDE NORTH AMERICA OPERATIONS
The Company has producing operations offshore Trinidad and India and is
evaluating exploration and development opportunities in selected other
international areas.
MARKETING
Wellhead Marketing. The Company's North America wellhead natural gas
production is currently being sold on the spot market and under long-term
natural gas contracts at market responsive prices. In many instances, the
long-term contract prices closely approximate the prices received for natural
gas being sold on the spot market. Wellhead natural gas volumes from Trinidad
are sold at prices that are based on a fixed price schedule with annual
escalations. Under terms of a production sharing contract, natural gas volumes
in India are to be sold to the Government of India or its nominee at a price
linked to a basket of world market fuel oil quotations with floor and ceiling
limits. Approximately 15% of the Company's wellhead natural gas production is
currently being sold to pipeline and marketing subsidiaries of Enron Corp. The
Company believes that the
3
<PAGE> 9
terms of its transactions and agreements with Enron Corp. are and intends that
future such transactions and agreements will be at least as favorable to the
Company as could be obtained from third parties.
Substantially all of the Company's wellhead crude oil and condensate is
sold under various terms and arrangements at market responsive prices.
Approximately 10% of the Company's wellhead crude oil and condensate production
is currently being sold to affiliated companies.
Other Marketing. Enron Oil & Gas Marketing, Inc. ("EOGM"), a wholly-owned
subsidiary of the Company, is a marketing company engaging in various marketing
activities. Both the Company and EOGM contract to provide, under short-term and
long-term agreements, natural gas to various purchasers and then aggregate the
necessary supplies for the sales with purchases from various sources including
third-party producers, marketing companies, pipelines or from the Company's own
production. In addition, EOGM has purchased and constructed several small
gathering systems in order to facilitate its entry into the gathering business
on a limited basis. Both the Company and EOGM utilize other short-term and
long-term hedging and trading mechanisms including sales, purchases, price swaps
and options utilizing NYMEX-related commodity market transactions. These
marketing activities have provided an effective balance in managing a portion of
the Company's exposure to commodity price risks for both natural gas and crude
oil and condensate wellhead prices.
USE OF PROCEEDS
The Company intends to apply any net proceeds it receives from the sale of
the Securities to its general funds to be used for general corporate purposes,
including in certain circumstances to retire outstanding indebtedness. Any
specific allocations of the proceeds to a particular purpose that have been made
at the date of any Prospectus Supplement will be described therein. The Company
will not receive any of the proceeds of the sale of Common Stock by the Selling
Stockholder.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..... 4.17 9.27 10.64 11.12 7.95 3.95
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus interest, net of amounts capitalized.
Fixed charges consist of interest on debt including amounts capitalized,
amortization of debt discount and issuance expense and that portion of rental
expense determined to be representative of interest.
4
<PAGE> 10
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate (the "Offered Debt Securities"). The particular
terms of the Offered Debt Securities and the extent, if any, to which such
general provisions may apply to the Offered Debt Securities will be described in
the Prospectus Supplement relating to such Offered Securities.
The Debt Securities will be unsecured obligations of the Company issued
under an Indenture (the "Indenture") between the Company and Chase Bank of
Texas, National Association (formerly named Texas Commerce Bank National
Association), as Trustee (the "Trustee"), dated as of September 1, 1991. The
following statements are summaries of certain provisions contained in the
Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. They do not purport to be complete
statements of all the terms and provisions of the Indenture, and reference is
hereby made to the Indenture for full and complete statements of such terms and
provisions, including the definitions of certain terms used herein. Wherever
reference is made in the following statements to a particular section of the
Indenture, such section shall be deemed to be incorporated in such statements as
a part thereof, and such statements are qualified in their entirety by such
reference. The italicized references below are to the section numbers in the
Indenture.
GENERAL
The Indenture does not limit the aggregate principal amount of unsecured
debentures, notes or other evidences of indebtedness of the Company which may be
issued thereunder from time to time in one or more series by the Company, and
the Company may in the future issue additional securities (in addition to the
Debt Securities) under the Indenture. At December 31, 1997, $350,000,000
principal amount of notes were outstanding under the Indenture. Reference is
made to the Prospectus Supplement for the following terms of the Offered Debt
Securities: (i) the title of the Offered Debt Securities; (ii) any limit upon
the aggregate principal amount of the Offered Debt Securities; (iii) the date or
dates on which the principal of the Offered Debt Securities is payable; (iv) the
rate or rates (which may be fixed or variable), or the method by which such rate
or rates shall be determined, at which the Offered Debt Securities shall bear
interest, if any, the date or dates from which such interest shall accrue, or
the method by which such date or dates shall be determined, the interest payment
dates on which such interest shall be payable and the regular record date for
the interest payable on any interest payment date; (v) the place or places where
the principal of (and premium, if any) and interest on Offered Debt Securities
shall be payable; (vi) the period or periods within which, the price or prices
at which and the terms and conditions upon which Offered Debt Securities may be
redeemed, in whole or in part, at the option of the Company, if the Company is
to have that option; (vii) the obligation, if any, and the option, if any, of
the Company to redeem, purchase or repay Offered Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of a holder thereof and
the period or periods within which, the price or prices at which and the terms
and conditions upon which Offered Debt Securities shall be redeemed, purchased
or repaid in whole or in part, pursuant to such obligation or option; (viii)
whether the Offered Debt Securities are to be issued in whole or in part in the
form of one or more permanent global securities and, if so, the identity of the
depositary for such permanent global securities; (ix) any trustees, paying
agents, transfer agents or registrars with respect to Offered Debt Securities;
and (x) any other term of the Offered Debt Securities (which term shall not be
inconsistent with the provisions of the Indenture. (Section 301.)
The Company will maintain in each place specified by the Company for
payment of any series of Offered Debt Securities an office or agency where
Offered Debt Securities of that series may be presented or surrendered for
payment, where Offered Debt Securities of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Offered Debt Securities of that series and the
Indenture may be served.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued only in fully registered form,
without coupons, in denominations of $1,000 or integral multiples
5
<PAGE> 11
thereof. (Section 302.) No service charge will be made for any transfer or
exchange of such Offered Debt Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
relation thereto. (Section 305.)
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount below their
principal amount. Special federal income tax, accounting and other
considerations applicable to any such Original Issue Discount Securities will be
described in any Prospectus Supplement relating thereto. "Original Issue
Discount Securities" means any security which provides for an amount less than
the principal amount thereof to be due and payable upon an Event of Default and
the continuation thereof. (Section 101.)
Unless otherwise indicated in a Prospectus Supplement, the covenants
contained in the Indenture and the Debt Securities would not necessarily afford
holders of the Debt Securities protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders.
PERMANENT GLOBAL DEBT SECURITIES
If any Offered Debt Securities are issuable in permanent global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such permanent global Debt Security
may exchange such interests for Debt Securities of such series and of like tenor
and principal amount in any authorized form and denomination. (Section 305.)
Principal of and any premium and interest on a permanent global Debt Security
will be payable in the manner described in the applicable Prospectus Supplement.
LIMITATIONS ON LIENS
The Indenture provides that so long as any of the securities issued under
the Indenture (including the Debt Securities) are outstanding, the Company will
not, and will not permit any Subsidiary to, create or suffer to exist, except in
favor of the Company or any Subsidiary, any Lien upon any Principal Property at
any time owned by it, to secure any Funded Debt of the Company or any
Subsidiary, unless effective provision is made whereby outstanding securities
issued under the Indenture (including the Debt Securities) will be equally and
ratably secured with any and all such Funded Debt and with any other
indebtedness similarly entitled to be equally and ratably secured. This
restriction does not apply to prevent the creation or existence of any: (a)
Acquisition Lien or Permitted Encumbrance; or (b) Lien created or assumed by the
Company or a Subsidiary in connection with the issuance of debt securities the
interest on which is excludable from gross income of the holder of such security
pursuant to the Internal Revenue Code of 1986, as amended, for the purpose of
financing, in whole or in part, the acquisition or construction of property or
assets to be used by the Company or a Subsidiary. In case the Company or any
Subsidiary shall propose to create or permit to exist a Lien on any Principal
Property at any time owned by it to secure any Funded Debt of the Company or any
Subsidiary, other than Funded Debt permitted to be secured under clauses (a) or
(b) above, the Company will prior thereto give written notice thereof to the
Trustee, and the Company will, or will cause such Subsidiary to, prior to or
simultaneously with such creation or permission to exist, by supplemental
indenture executed to the Trustee (or to the extent legally necessary to another
trustee or additional or separate trustee), in form satisfactory to the Trustee,
effectively secure all the securities issued under the Indenture equally and
ratably with such Funded Debt and any other indebtedness entitled to be equally
and ratably secured.
Notwithstanding the foregoing, the Company or a Subsidiary may issue,
assume or guarantee Funded Debt secured by a Lien which would otherwise be
subject to the foregoing restrictions in an aggregate amount which, together
with all other Funded Debt of the Company or a Subsidiary secured by a Lien
which (if originally issued, assumed or guaranteed at such time) would otherwise
be subject to the foregoing restrictions (not including Funded Debt permitted to
be secured under the foregoing exception), does not at the time exceed 10% of
the Consolidated Net Tangible Assets of the Company, as shown on the audited
consolidated financial statements of the Company as of the end of the fiscal
year preceding the date of determination. (Section 1007.)
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<PAGE> 12
The holder of more than 50% in principal amount of the outstanding
securities issued under the Indenture (including the Debt Securities) may waive
compliance by the Company with the covenant contained in Section 1007 of the
Indenture (and certain other covenants of the Company). (Section 1009.)
The Indenture defines the term "Subsidiary" to mean a corporation more than
50% of the outstanding voting stock of which is owned, directly or indirectly,
by the Company or by one or more other Subsidiaries, or by the Company and one
or more other Subsidiaries. The term "Principal Property" is defined to mean any
property interest in oil and gas reserves located in the United States or
offshore the United States and owned by the Company or any Subsidiary and which
is capable of producing crude oil, condensate, natural gas, natural gas liquids
or other similar hydrocarbon substances in paying quantities, the net book value
of which property interest exceeds two (2) percent of Consolidated Net Tangible
Assets, except any such property interest or interests that in the opinion of
the Board of Directors is not of material importance to the total business
conducted by the Company and its Subsidiaries as a whole. Without limitation,
the term "Principal Property" shall not include (i) accounts receivable and
other obligations of any obligor under a contract for the sale, exploration,
production, drilling, development, processing or transportation of crude oil,
condensate, natural gas, natural gas liquids or other similar hydrocarbon
substances by the Company or any of its Subsidiaries, and all related rights of
the Company or any of its Subsidiaries, and all guarantees, insurance, letters
of credit and other agreements or arrangements of whatever character supporting
or securing payment of such receivables or obligations, or (ii) the production
or any proceeds from production of crude oil, condensate, natural gas, natural
gas liquids or other similar hydrocarbon substances. (Section 101.)
The term "indebtedness," as applied to the Company or any Subsidiaries, is
defined to mean bonds, debentures, notes and other instruments representing
obligations created or assumed by any such corporation for the repayment of
money borrowed (other than unamortized debt discount or premium). All
indebtedness secured by a Lien upon property owned by the Company or any
Subsidiary and upon which indebtedness any such corporation customarily pays
interest, although any such corporation has not assumed or become liable for the
payment of such indebtedness, is also deemed to be indebtedness of any such
corporation. All indebtedness for money borrowed, incurred by other persons,
which is directly guaranteed as to payment of principal by the Company or any
Subsidiary is for all purposes of the Indenture deemed to be indebtedness of any
such corporation, but no other contingent obligation of any such corporation in
respect of indebtedness incurred by other persons is for any purpose deemed
indebtedness of such corporation. Indebtedness of the Company or any Subsidiary
does not include (i) any amount representing capitalized lease obligations; (ii)
indirect guarantees or other contingent obligations in connection with the
indebtedness of others, including agreements, contingent or otherwise, with such
persons or with third persons, with respect to, or to permit or ensure the
payment of, obligations of such other persons, including, without limitation,
agreements to purchase or repurchase obligations of such other persons, to
advance or supply funds to or to invest in such other persons, or agreements to
pay for property, products or services of such other persons (whether or not
conferred, delivered or rendered), and any demand charge, throughput,
take-or-pay, keep-well, make-whole, cash deficiency, maintenance of working
capital or earnings or similar agreements; and (iii) any guarantees with respect
to lease or other similar periodic payments to be made by other persons.
(Section 101.)
The term "Funded Debt" as applied to the Company or any Subsidiary is
defined to mean all indebtedness incurred, created, assumed or guaranteed by the
Company or any Subsidiary, or upon which such corporation customarily pays
interest charges, which matures, or is renewable by such corporation to a date,
more than one year after the date as of which Funded Debt is being determined.
(Section 101.)
"Lien" is defined to mean any mortgage, pledge, lien, security interest or
similar charge or encumbrance. (Section 101.) "Acquisition Lien" is defined to
mean any (i) Lien upon any property acquired before or after the date of the
Indenture, created at the time of acquisition or within one year thereafter to
secure all or a portion of the purchase price thereof, or existing thereon at
the date of acquisition, whether or not assumed by the Company or any
Subsidiary, provided that any such Lien applies only to the property so acquired
and fixed improvements thereon, (ii) Lien upon any property acquired before or
after the date of the Indenture by any corporation that is or becomes a
Subsidiary after the date of the Indenture ("Acquired Entity"), provided that
any such Lien (1) shall either (A) exist prior to the time the Acquired Entity
becomes a Subsidiary or (B) be created at the time the Acquired Entity becomes a
Subsidiary or within one year thereafter to secure all or a
7
<PAGE> 13
portion of the acquisition price thereof and (2) shall only apply to those
properties owned by the Acquired Entity at the time it becomes a subsidiary or
thereafter acquired by it from sources other than the Company or any other
Subsidiary, and (iii) any extension, renewal or refunding, in whole or in part,
of any Lien permitted by clause (i) or (ii) above, if limited to the same
property or any portion thereof subject to, and securing not more than the
amount secured by, the Lien extended, renewed or refunded. (Section 101.)
"Permitted Encumbrance" is defined to mean any (a) Lien reserved in any
oil, gas or other mineral lease for rent, royalty or delay rental under such
lease and for compliance with the terms of such lease; (b) Lien for any
judgments or attachments in an aggregate amount not in excess of $10,000,000, or
Lien for any judgment or attachment the execution or enforcement of which has
been stayed or which has been appealed and secured, if necessary, by the filing
of an appeal bond; (c) sale or other transfer of crude oil, condensate, natural
gas, natural gas liquids or other similar hydrocarbon substances in place, or
the future production thereof, for a period of time until, or in an amount such
that, the transferee will realize therefrom a specified amount (however
determined) of money or a specified amount of such crude oil, condensate,
natural gas, natural gas liquids or other similar hydrocarbon substances or the
sale or other transfer of any other interest in property of the character
commonly referred to as a "production payment," "overriding royalty," "net
profits interest," "royalty" or similar burden on any oil and gas property or
mineral interest owned by the Company or any Subsidiary; (d) Lien consisting of
or reserved in any (i) grant or conveyance in the nature of a farm-out or
conditional assignment to the Company or any Subsidiary entered into in the
ordinary course of business to secure any undertaking of the Company or any
Subsidiary in such grant or conveyance, (ii) interest of an assignee in any
proved undeveloped lease or proved undeveloped portion of any producing property
transferred to such assignee for the purpose of the development of such lease or
property, (iii) unitization or pooling agreement or declaration, (iv) contract
for the sale, purchase, exchange or processing of production, or (v) operating
agreement, area of mutual interest agreement and other agreements which are
customary in the oil and gas business and which agreements do not materially
detract from the value, or materially impair the use of, the properties affected
thereby; (e) Lien arising out of any forward contract, futures contract, swap
agreement or other commodities contract entered into by the Company or any
Subsidiary; (f) Lien on any oil and gas property of the Company or any
Subsidiary thereof, or on production therefrom, to secure any liability of the
Company or such Subsidiary for all or part of the Development Cost for such
property under any joint operating, drilling or similar agreement for
exploration, drilling or development of such property, or any renewal or
extension of such Lien; or (g) certain other Liens as described in the
Indenture. (Section 101.)
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture provides that, with the consent of
the holders of more than 50% in principal amount of all outstanding securities
issued under the Indenture (the "Indenture Securities") (including, where
applicable, the Debt Securities) affected thereby, the Company and the Trustee
may enter into a supplemental indenture for the purpose of adding to, changing
or eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the holders of Indenture Securities. Notwithstanding the
foregoing, the consent of the holder of each outstanding Indenture Security
affected thereby will be required to: (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Indenture
Security, or reduce the principal amount thereof or the rate of interest thereon
or any premium payable upon the redemption thereof, or change any Place of
Payment where, or change the coin or currency in which, any Indenture Security
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date); (b) reduce the percentage in principal amount of the outstanding
Indenture Securities of any series, the consent of whose holders is required for
any supplemental indenture or for any waiver provided for in the Indenture; or
(c) with certain exceptions, modify any of the provisions of the section of the
Indenture which concern waiver of past defaults, waiver of certain covenants or
consent to supplemental indentures, except to increase the percentage of
principal amount of Indenture Securities of any series, the holders of which are
required to effect such waiver or consent or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each outstanding Indenture Security affected thereby. The
Indenture provides that a supplemental indenture which changes or eliminates any
covenant or other provision of the Indenture which has expressly been
8
<PAGE> 14
included solely for the benefit of one or more particular series of Indenture
Securities, or which modifies the rights of the holders of Indenture Securities
of such series with respect to such covenant or other provision shall be deemed
not to affect the rights under the Indenture of the holder of Indenture
Securities of any other series. (Section 902.)
EVENTS OF DEFAULT AND RIGHTS UPON DEFAULT
Under the Indenture, the term "Event of Default" with respect to any series
of Indenture Securities, means any one of the following events which shall have
occurred and is continuing: (a) default in the payment of any interest upon any
Indenture Security of that series when it becomes due and payable or default in
the payment of any mandatory sinking fund payment provided for by the terms of
any series of Indenture Securities, and continuance of such default for a period
of 30 days; (b) default in the payment of the principal of (or premium, if any,
on) any Indenture Security of that series at its Maturity; (c) default in the
performance, or breach, of any covenant or warranty of the Company in the
Indenture (other than a covenant or warranty a default in whose performance or
whose breach is otherwise specifically dealt with in the Indenture or which has
been expressly included in the Indenture solely for the benefit of one or more
series of Indenture Securities other than that series), and continuance of such
default or breach for 60 days after there has been given to the Company by the
Trustee, or to the Company and the Trustee by the holders of at least 25% in
principal amount of all outstanding Indenture Securities, a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Indenture; or (d) certain
events involving the Company in bankruptcy, receivership or other insolvency
proceedings or an assignment for the benefit of creditors (Section 501.)
If an Event of Default described in clause (a) or (b) in the foregoing
paragraph has occurred and is continuing with respect to Indenture Securities of
any series, the Indenture provides that the Trustee or the holders of not less
than 25% in principal amount of the outstanding Indenture Securities of that
series may declare the principal amount of all of the Indenture Securities of
that series to be due and payable immediately, and upon any such declaration
such principal amount shall become immediately due and payable. If an Event of
Default described in clause (c) or (d) of the foregoing paragraph occurs and is
continuing, the Trustee or the holders of not less that 25% in principal amount
of all of the Indenture Securities then outstanding may declare the principal
amount of all of the Indenture Securities to be due and payable immediately, and
upon any such declaration such principal amount shall become immediately due and
payable. (Section 502.)
A default under other indebtedness of the Company is not an Event of
Default under the Indenture, and an Event of Default under one series of
Indenture Securities will not necessarily be an Event of Default under another
series.
At any time after such a declaration of acceleration with respect to
Indenture Securities of any series (or of all series, as the case may be) has
been made and before judgment or decree for payment of the money due has been
obtained by the Trustee, the holders of a majority in principal amount of the
outstanding Indenture Securities of that series (or of all series, as the case
may be) may rescind and annul such declaration and its consequences, if subject
to certain conditions, all Events of Default with respect to Indenture
Securities of that series (or of all series, as the case may be), other than the
non-payment of the principal of the Indenture Securities due solely by such
declaration of acceleration, have been cured or waived and all payments due
(other than by acceleration) have been paid or deposited with the Trustee.
(Section 502.) With certain exceptions, the holders of not less than a majority
in principal amount of the outstanding Indenture Securities of any series, on
behalf of the holders of all the Indenture Securities of such series, may waive
any past default described in clause (a) or (b) of the first paragraph of this
heading "Events of Default and Rights Upon Default" (or, in the case of a
default described in clause (c) or (d) of such paragraph, the holders of a
majority in principal amount of all outstanding Indenture Securities may waive
any such past default), and its consequences, except a default (a) in the
payment of the principal of (or premium, if any) or interest on any Indenture
Security, or (b) in respect to a covenant or provision of the Indenture which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Indenture Security of such series affected. (Section
513.)
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<PAGE> 15
The holders of not less than a majority in principal amount of the
Indenture Securities of any series at the time outstanding are empowered under
the terms of the Indenture, subject to certain limitations, to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (Section
512.)
The Indenture further provides that no holder of an Indenture Security of
any series may enforce the Indenture except in the case of failure by the
Trustee to act for 60 days after notice of a continuing Event of Default with
respect to the Indenture Securities of that series and after request by the
holders of not less than 25% in principal amount of the outstanding Indenture
Securities of such series and the offer to the Trustee of reasonable indemnity,
but this provision will not prevent a holder of any Indenture Security from
enforcing the payment of the principal of, and interest on, such holder's
Indenture Security. (Section 507 and 508.)
The Indenture requires that the Company deliver to the Trustee, within 120
days after the end of each fiscal year, an Officers' Certificate, stating
whether to the best knowledge of the signers thereof the Company is in default
in the performance and observance of certain of the terms of the Indenture, and
if so, specifying each such default and the nature and status thereof of which
the signers may have knowledge. (Section 1008.)
DISCHARGE OF INDENTURE
With certain exceptions, the Company may discharge its obligations under
the Indenture with respect to any series of Indenture Securities by (i) paying
or causing to be paid the principal of (and premium, if any) and interest on all
the Indenture Securities of such series outstanding, as and when the same shall
become due and payable; (ii) delivering to the Trustee all outstanding Indenture
Securities of such series for cancellation; or (iii) entering into an agreement
in form and substance satisfactory to the Company and the Trustee providing for
the creation of an escrow fund and depositing in trust with the Trustee, as
escrow agent of such fund, sufficient funds in cash and/or Eligible Obligations
and/or U.S. Government Obligations, maturing as to principal and interest in
such amounts and at such times, as will be sufficient to pay at the Stated
Maturity or Redemption Date all such Indenture Securities of such series not
previously delivered to the Trustee for cancellation, including principal (and
premium, if any) and interest to the Stated Maturity or Redemption Date.
(Section 401.)
The Indenture defines "Eligible Obligations" to mean interest bearing
obligations as a result of the deposit of which the Indenture Securities are
rated in the highest generic long-term debt rating category assigned to legally
defeased debt by one or more nationally recognized rating agencies. (Section
101).
For federal income tax purposes, there is a substantial risk that a legal
defeasance of a series of Indenture Securities by the deposit of cash, Eligible
Obligations, or U.S. Government Obligations in a trust would be characterized by
the Internal Revenue Service or a court as a taxable exchange by the holders of
the Indenture Securities of that series for either (i) an issue of obligations
of the defeasance trust or (ii) a direct interest in the cash and/or Eligible
Obligations and/or U.S. Government Obligations held in the defeasance trust. If
the defeasance were so characterized, then a holder of an Indenture Security of
the series defeased would be: (i) required to recognize gain or loss (which
would be capital gain or loss if the Indenture Securities were held as a capital
asset) at the time of the defeasance as if the Indenture Security had been sold
at such time for an amount equal to the amount of cash and the fair market value
of the Eligible Obligations and/or U.S. Government Obligations held in the
defeasance trust; (ii) required to include in income in each taxable year the
interest and any original issue discount or gain or loss attributable to either
such defeasance trust obligations or such securities, as the case may be; and
(iii) subject to the market discount provisions of the Internal Revenue Code as
they may pertain to such defeasance trust obligations or such securities. As a
result, a holder of an Indenture Security may be required to pay taxes on any
such gain or income even though such holder may not have received any cash
therefrom. Prospective investors are urged to consult their own advisors as to
the tax consequences of an actual or legal defeasance, including the
applicability and effect of tax laws other than Federal income tax law.
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<PAGE> 16
CONCERNING THE TRUSTEE
Chase Bank of Texas, National Association (formerly named Texas Commerce
Bank National Association), 712 Main Street, Houston, Texas 77002, is the
Trustee under the Indenture. Such bank may from time to time also act as a
depository of funds for, make loans to, and perform other services for, the
Company, or its affiliates in the normal course of business. Forrest E. Hoglund,
Chairman of the Board and Chief Executive Officer, and a Director of the
Company, is also an advisory director of Chase Bank of Texas, National
Association.
The holders of a majority in principal amount of the outstanding securities
issued under the Indenture will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that if an Event
of Default occurs (and is not cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of such person's own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of securities issued under the Indenture,
unless such holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture. The Trustee may resign at any
time or may be removed by the Company. If the Trustee resigns, is removed or
becomes incapable of acting as Trustee or if a vacancy occurs in the office of
the Trustee for any cause, a successor Trustee shall be appointed in accordance
with the provisions of the Indenture.
If the Trustee shall have or acquire any "conflicting interest" within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and the Indenture. (Section 608.) The
Trust Indenture Act also contains certain limitations on the right of the
Trustee, as a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received by it in respect of such
claims, as security or otherwise. (Section 613.)
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<PAGE> 17
THE SELLING STOCKHOLDER
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL OWNERSHIP(1) SHARES CLASS TO
----------------------- SHARES TO TO BE OWNED BE OWNED
SELLING STOCKHOLDER SHARES PERCENTAGE BE SOLD AFTER SALE(2) AFTER SALE(1)
------------------- --------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Enron Corp................. 85,080,000(2) 54.9% 4,940,000(3) 80,140,000(3) 51.7%(3)
</TABLE>
- ---------------
(1) All percentages set forth in the table and the footnotes are based upon the
155,064,256 shares of Common Stock outstanding on December 31, 1997.
(2) Enron Corp. has previously issued certain Exchangeable Notes, which at
maturity may be exchanged for no more than 10,500,000 shares of Common Stock
owned by Enron Corp., subject to adjustment under certain circumstances and
to Enron Corp.'s option to pay an amount in cash in lieu of such mandatory
exchange. The shares that may be delivered upon exchange therefor are
beneficially owned by Enron Corp. until such time, if any, as they are
delivered at maturity of the Exchangeable Notes. If no additional shares of
Common Stock are either sold or bought by Enron Corp. and the maximum number
of shares of Common Stock are delivered at maturity of the Exchangeable
Notes, Enron Corp. will beneficially own 74,580,000 shares of Common Stock
or approximately 48.1% of the outstanding shares.
(3) Enron Corp. may sell hereunder from time to time a number of shares of
Common Stock totaling up to an aggregate of no greater than 4,940,000
shares. If the maximum number of shares of Common Stock are sold hereunder,
no additional shares of Common Stock are bought by Enron Corp. and the
Exchangeable Notes have not matured, Enron Corp. would own approximately
51.7% of the outstanding shares after such sale.
12
<PAGE> 18
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
Ownership of Common Stock. Enron Corp. owns approximately 55% of the
outstanding shares of Common Stock of the Company. Through its ability to elect
all of the directors of the Company, Enron Corp. generally has the ability to
control matters relating to the management and policies of the Company,
including determinations with respect to acquisition or disposition of Company
assets, the Company's exploration, development, and operating expenditure plans,
future issuances of Common Stock or other securities of the Company and
dividends payable on the Common Stock.
Conflicts of Interest. The nature of the respective businesses of the
Company and Enron Corp. and its other affiliates ("Enron") is such as to give
rise to conflicts of interest between the companies from time to time. Conflicts
may arise, for example, with respect to transactions involving purchases, sales
and transportation of natural gas and other business dealings between the
Company and Enron, potential acquisitions of businesses or crude oil and natural
gas properties or the payment of dividends by the Company. In connection with
its finance and trading business conducted by its subsidiaries, Enron Capital &
Trade Resources Corp. ("ECT") and Enron International Capital & Trade Corp.
("EICT"), Enron provides or arranges financing for others, including exploration
and production companies, some of which compete with the Company. Enron may make
investments in the debt or equity of such companies, may make loans secured by
crude oil and natural gas properties or securities of crude oil and natural gas
companies, may acquire production payments or may receive interests in crude oil
and natural gas properties as equity components of lending transactions. As a
result of its finance and trading business, Enron may also acquire crude oil and
natural gas properties or companies upon foreclosure of secured loans or as part
of a borrower's rearrangement of its obligations. Enron also has interests in
entities such as Joint Energy Development Investments Limited Partnership, which
makes debt and equity investments in energy-related businesses, including
exploration and production companies. The acquisition, exploration, development
and production activities of entities in which Enron has interests may directly
or indirectly compete with the Company's business.
Business Opportunity Agreement. Enron Corp. and the Company have entered
into an Equity Participation and Business Opportunity Agreement (the "Business
Opportunity Agreement") that defines certain obligations that Enron owes to the
Company and relieves Enron from certain obligations to the Company that it might
otherwise have, including the obligation to offer certain business opportunities
to the Company. Enron has advised the Company that, although it believes that it
has conducted its business in a manner that is consistent with its duties as a
majority shareholder of the Company, it was motivated to enter into the Business
Opportunity Agreement because of the difficulty of determining the applicability
of the law relating to duties that Enron may owe to the Company in connection
with Enron's finance and trading business and because of Enron's desire to have
more flexibility in pursuing business opportunities identified by or developed
solely by Enron personnel. The Business Opportunity Agreement was approved by
the board of directors of the Company after it was approved unanimously by a
special committee of the board of directors consisting of the Company's
independent directors. The special committee retained its own legal and
financial advisers in connection with its evaluation of Enron's proposal, and
the Business Opportunity Agreement as executed reflects significant concessions
on Enron's part resulting from its negotiations with members of the special
committee.
The Business Opportunity Agreement provides generally that, so long as such
activities are conducted in compliance with the Business Opportunity Agreement
in all material respects, Enron may pursue business opportunities independently
of the Company. The Business Opportunity Agreement contains an acknowledgment by
the Company that Enron's finance and trading business may result in the
acquisition by Enron of oil and gas properties or companies and that in certain
cases Enron or entities in which Enron has an interest may acquire such assets
pursuant to bidding or auction processes in which the Company is also a bidder.
In the Business Opportunity Agreement, the Company acknowledges and agrees that
such activities may have an impact on the Company or the price it pays for
properties or securities it purchases from others, that Enron or entities in
which it has an interest may acquire direct or indirect interests in oil and gas
properties or
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companies as a result of such activities, may own, operate and control any such
assets in connection therewith, and may acquire additional oil and gas
properties or companies or pursue opportunities related thereto in connection
therewith, in each case without any duty to offer all or any portion of such
assets or opportunities to the Company. The Business Opportunity Agreement
contains an acknowledgment and agreement by the Company that, to the extent that
a court might hold that the conduct of such activity is a breach of a duty to
the Company (and without admitting that the conduct of such activity is such a
breach of duty), the Company waives any and all claims and causes of action that
it may have to claim that the conduct of such activity is a breach of a duty to
the Company.
The Business Opportunity Agreement contains certain restrictions on the
conduct of Enron's business. It also provides that, except with respect to
business opportunities pursued jointly by Enron and the Company and except as
otherwise agreed to between Enron and the Company, Enron's business will be
conducted through the use of its own personnel and assets and not with the use
of any personnel or assets of the Company. Thus, without the consent of the
Company, the finance and trading business conducted by ECT, EICT or other Enron
entities may only involve business opportunities identified by or presented to
ECT personnel, EICT personnel or other Enron personnel and developed and pursued
solely through the use of the personnel and assets of ECT, EICT or other Enron
entities. Enron has agreed that, so long as it controls the Company, it will not
pursue any business opportunity a majority of the value of which involves oil
and gas properties if the opportunity is first presented to an officer or
director of Enron who is also an officer or director of the Company at the time
such opportunity is presented, unless Enron first offers such opportunity to the
Company. The Business Opportunity Agreement states that its provisions relate
exclusively to the duties that Enron owes the Company and that nothing in the
Business Opportunity Agreement affects the fiduciary or other duties owed to the
Company by any individual director or officer of the Company in his or her
capacity as such. In this connection, Enron has agreed that its representatives
on the Board of Directors of the Company will not, for the purpose of enabling
Enron to pursue an opportunity in the oil and gas business, vote in such a
manner as to effectively prevent, prohibit or restrict the Company from pursuing
such opportunity.
In consideration for the Company's agreements in the Business Opportunity
Agreement, Enron provided valuable consideration to the Company, including
options to purchase common stock of Enron that will give the Company the
opportunity to participate in future appreciation in value of Enron, including
any appreciation in value resulting from activities that the Company has agreed
to permit Enron and its subsidiaries to pursue. Enron granted the Company ten
year options to purchase 3,200,000 shares of Enron common stock at $39.1875 per
share, the closing price per share on the date that the Company's Board of
Directors approved the Business Opportunity Agreement. The options vest in
accordance with a schedule that provides that 25% vested immediately, 15% vest
on the anniversary of the Business Opportunity Agreement in 1998 and 10% vest
each anniversary thereafter until all of the options are vested. Vesting will be
accelerated in the event of a change of control of the Company. For such
purposes a "change of control" means that (a) Enron no longer owns capital stock
of the Company representing at least 35% of the voting power for the election of
directors and (b) a majority of the members of the board of directors of the
Company consists of persons who are not officers or directors of Enron or any
affiliate of Enron other than the Company. The Business Opportunity Agreement
also included (i) an agreement to replace the existing services agreement, under
which Enron provides certain services to the Company, with a new services
agreement under which the Company's payments to Enron will be reduced by $2.8
million per year for certain of the services provided, (ii) an agreement by
Enron relieving the Company of the obligation to bear the costs of any
registration of sales by Enron of shares of Common Stock of the Company, (iii)
an agreement by Enron to pay the costs of registration of the Company's sales of
Enron common stock acquired upon exercise of the options granted in the Business
Opportunity Agreement, (iv) an agreement that if Enron takes any action that
results in the loss by the Company of its status as an "independent producer"
under the Internal Revenue Code, Enron will pay the Company each year through
2006 the lesser of (a) $1 million and (b) an amount which, after payment of
applicable taxes, will compensate the Company for the additional income tax
liability resulting from the loss of independent producer status, (v) an
agreement that if Enron requests that the Company relocate its offices, and if
the Company agrees to do so, Enron will pay the Company's moving expenses,
including expenses of building out or refurbishing the space in its new offices
and expenses of removing and reinstalling the Company's telecommunications and
information systems facilities and (vi) an agreement by Enron to
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<PAGE> 20
reimburse the Company for the costs and expenses of legal and financial
consultants retained to assist the special committee in connection with the
Business Opportunity Agreement. In addition, pursuant to the Business
Opportunity Agreement Enron agreed to cause its subsidiary, Houston Pipe Line
Company, to enter into various agreements with the Company rearranging certain
existing contractual arrangements between them, and Enron and the Company
entered into a licensing agreement covering the Enron name and mark and
recognizing that the EOG and EOGI names and marks belong to the Company. In the
Business Opportunity Agreement Enron and the Company also entered into
agreements in principle regarding the manner in which they will share the
burdens and benefits of the integrated projects under joint development by Enron
and the Company in Qatar, Mozambique and Uzbekistan. The agreements in principle
provide generally that the Company's interests in these projects will be 20%,
20% and 80%, respectively, of the combined ownership interest of the Company and
Enron.
The Business Opportunity Agreement also contains provisions that give Enron
the right to maintain its equity interest in the Company at certain levels. It
provides that if the Company issues additional shares of its capital stock Enron
will have the right to purchase additional shares of capital stock of the
Company as follows: (i) if Enron owns a majority interest, Enron will have the
right to purchase sufficient shares to permit it to retain its majority
interest; (ii) if Enron does not own a majority interest but accounts for the
assets and operations of the Company on a consolidated basis for financial
reporting purposes Enron will have the right to purchase sufficient shares to
permit it to continue to account for the Company on a consolidated basis; and
(iii) if Enron accounts for the assets and operations of the Company using the
equity method for financial reporting purposes Enron will have the right to
purchase sufficient shares to permit it to continue to account for the Company
using the equity method. Any such purchase by Enron will be for cash at 97% of
the average closing price per share over a specified 20 day period (reflecting a
3% private placement discount).
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<PAGE> 21
DESCRIPTION OF COMMON STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000 shares
of Preferred Stock, par value $.01 per share (the "Preferred Stock"), none of
which are outstanding, and 320,000,000 shares of Common Stock, $.01 par value,
of which 155,064,256 shares were outstanding on December 31, 1997. The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the Restated Certificate of Incorporation of the
Company, as amended, a copy of which is filed as an exhibit to the Registration
Statements of which this Prospectus is a part.
The Board of Directors of the Company is authorized, subject to any
limitations prescribed by law, to provide for the issuance of the shares of
Preferred Stock in series, by filing a certificate pursuant to the applicable
laws of the State of Delaware to establish from time to time the number of
shares to be included in each such series, and to fix the powers, designations,
preferences, and relative, participating, optional or other rights, if any, of
the shares of each such series and any qualifications, limitations, or
restrictions thereof, all without stockholder approval. Any future issuance of
Preferred Stock, while providing desired flexibility in connection with
acquisitions and other corporate purposes, could adversely affect the voting
power or other rights of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation, and could
have the effect of delaying, deferring or preventing a change of control of the
Company.
The Common Stock possesses ordinary voting rights for the election of
directors and in respect to other corporate matters, each share being entitled
to one vote. There are no cumulative voting rights, meaning that the holders of
a majority of the shares voting for the election of directors can elect all the
directors if they choose to do so. The Common Stock carries no preemptive rights
and is not convertible, redeemable or assessable, or entitled to the benefits of
any sinking fund. The holders of Common Stock are entitled to dividends in such
amounts and at such times as may be declared by the Board of Directors out of
funds legally available therefor.
Upon liquidation or dissolution, holders of Common Stock are entitled to
share ratably in all net assets available for distribution to stockholders after
payment of any corporate debts and any liquidation preference established for
the Preferred Stock. All outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable.
The transfer agent and registrar of the Common Stock is First Chicago Trust
Company of New York, Jersey City, New Jersey.
LIMITATION ON DIRECTORS' LIABILITY
Delaware corporation law authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such laws,
directors are accountable to corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their duty
of care. The Delaware laws enable corporations to limit available relief to
equitable remedies such as injunction or rescission. The Restated Certificate of
Incorporation, as amended, of the Company limits the liability of directors of
the Company to the Company or its stockholders (in their capacity as directors
but not in their capacity as officers) to the fullest extent permitted by the
Delaware law. Specifically, directors of the Company will not be personally
liable for monetary damages for breach of a director's fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law,
or (iv) for any transaction from which the director derived an improper personal
benefit.
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<PAGE> 22
This provision in the Restated Certificate of Incorporation may have the
effect of reducing the likelihood of derivative litigation against directors,
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited the Company and its stockholders.
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<PAGE> 23
PLAN OF DISTRIBUTION
The Company and/or the Selling Stockholder may sell the Securities offered
hereby (i) through underwriters, brokers, dealers or agents; or (ii) directly to
purchasers. In addition, the Selling Stockholder may sell any shares of Common
Stock offered hereby from time to time in transactions (including block
transactions in which the Selling Stockholder is the seller) on the NYSE or any
other exchange on which the Common Stock may be traded, or in the
over-the-counter market. The Selling Stockholder may also sell shares of Common
Stock in special offerings, exchange distributions or secondary distributions in
accordance with the rules of the NYSE or such other exchange, in negotiated
transactions, including through the writing of call options or the purchase of
put options on shares of the Common Stock (whether such options are listed on an
options exchange or otherwise), pursuant to Rule 144, or otherwise. The Selling
Stockholder may effect such transactions by selling shares of the Common Stock
to or through underwriters, dealers, brokers or agents. Such underwriters,
dealers, brokers or agents may sell such shares to institutional purchasers in
one or more transactions (including block transactions) on the NYSE or
otherwise. Any sales of the Securities may be made at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. If required in connection with a particular offering of
Securities, a Prospectus Supplement with respect to such offering of Securities
will set forth the terms of the offering of the Securities, including the name
or names of any underwriters, dealers, brokers or agents, the purchase price of
the Securities and the proceeds to the Company and/or the Selling Stockholder
from such sale, any delayed delivery arrangements, any underwriting discounts
and commissions and other items constituting underwriters' compensation, any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. In
connection with the sale of the Securities, underwriters, brokers, dealers or
agents may be deemed to have received compensation from the Company or the
Selling Stockholder in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of the Securities for whom they may act
as agent or to whom they may sell as principal. Underwriters or agents may sell
the Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters or
commissions from the purchasers for whom they may act as agent. The Securities
may be offered to the public either through underwriting syndicates represented
by one or more managing underwriters or directly by one or more firms acting as
underwriters. The underwriter or underwriters with respect to a particular
underwritten offering of Securities will be named in the Prospectus Supplement
relating to such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Securities
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Securities offered if any are purchased.
In connection with an offering, the underwriters may purchase and sell the
securities offered in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the underwriters in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the securities offered;
and short positions created by the underwriters involve the sale by the
underwriters of a greater number of securities than they are required to
purchase from the Company in the offering. The underwriters may also impose a
penalty bid, whereby selling concessions allowed to broker-dealers in respect of
the securities sold in the offering may be reclaimed by the underwriters if such
securities are repurchased by the underwriters in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the securities offered, which may be higher than the price that
might otherwise prevail in the open market; and these activities, if commenced,
may be discontinued at any time. These transactions may be effected in the
over-the-counter market or otherwise.
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<PAGE> 24
If dealers are utilized in the sale of Securities, the Company and/or the
Selling Stockholder will sell such Securities to the dealers as principals. The
dealers may then resell such Securities to the public at varying prices to be
determined by such dealers at the time of resale. To the extent required, the
names of dealers or brokers acting as dealers and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
The Securities may be sold directly by the Company and/or the Selling
Stockholder or through agents designated by the Company and/or the Selling
Stockholder from time to time. To the extent required, any agent involved in the
offer or sale of the Securities in respect to which this Prospectus is delivered
will be named, and any commissions payable by the Company and/or the Selling
Stockholder to such agent will be set forth, in the Prospectus Supplement
relating thereto. Unless otherwise indicated in the Prospectus Supplement, any
such agent will be acting on a best efforts basis for the period of its
appointment.
If so indicated in the Prospectus Supplement, the Company and/or the
Selling Stockholder will authorize agents, underwriters, brokers or dealers to
solicit offers from certain types of institutions to purchase Securities from
the Company and/or the Selling Stockholder at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
The Securities (other than the Common Stock), when first issued, will have
no established trading market. Any underwriters or agents to or through whom
Securities are sold by the Company or the Selling Stockholder for public
offering and sale may make a market in such Securities, but such underwriters or
agents will not be obligated to do so and may discontinue any market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for any such Securities.
Agents, brokers, dealers and underwriters may be entitled under agreements
with the Company and/or the Selling Stockholder to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which such agents,
brokers, dealers or underwriters may be required to make in respect thereof.
Agents, brokers, dealers and underwriters may be customers of, engage in
transactions with or perform services for the Company or the Selling Stockholder
in the ordinary course of business.
VALIDITY OF SECURITIES
The validity of the Securities offered hereby will be passed upon for the
Company by Barry Hunsaker, Jr., Esq., Senior Vice President and General Counsel
of the Company, and for the Underwriters by Bracewell & Patterson, L.L.P. Mr.
Hunsaker owns substantially less than 1% of the outstanding shares of Common
Stock. Bracewell & Patterson, L.L.P. provides services to the Company and to
Enron Corp. and certain of its subsidiaries and affiliates on matters unrelated
to the offering of the Securities.
EXPERTS
The consolidated financial statements and schedule included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, and the estimates from the reports of that
firm appearing in such Annual Report, are incorporated by reference herein on
the authority of said firm as experts in petroleum engineering and in giving
such reports.
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======================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representation other than those contained in the
Prospectus or this Prospectus Supplement in connection with the offer made by
the Prospectus and this Prospectus Supplement and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or the Underwriters. Neither the delivery of the Prospectus or
this Prospectus Supplement nor any sale made thereunder or hereunder shall under
any circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof. The Prospectus and this Prospectus
Supplement do not constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
---------------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Capitalization......................... S-2
Use of Proceeds........................ S-3
Ratio of Earnings to Fixed Charges..... S-3
Description of Notes................... S-3
Underwriting........................... S-5
Validity of the Notes.................. S-5
Prospectus
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Business of the Company ............... 3
Use of Proceeds........................ 4
Ratios of Earnings to Fixed Charges.... 4
Description of Debt Securities......... 5
The Selling Stockholder................ 12
Relationship Between the Company and
Enron Corp........................... 13
Description of Common Stock............ 16
Plan of Distribution................... 18
Validity of Securities................. 19
Experts................................ 19
</TABLE>
======================================================
======================================================
$150,000,000
ENRON OIL & GAS COMPANY
[ENRON LOGO]
6.65% Notes due April 1, 2028
---------------------
PROSPECTUS SUPPLEMENT
April 3, 1998
---------------------
LEHMAN BROTHERS
CHASE SECURITIES INC.
======================================================
