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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-9743
ENRON OIL & GAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 47-0684736
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1400 SMITH STREET, HOUSTON, TEXAS 77002-7369
(Address of principal executive offices) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-853-6161
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 22, 1999.
TITLE OF EACH CLASS NUMBER OF SHARES
------------------ ----------------
Common Stock, $.01 par value 153,741,324 shares
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ENRON OIL & GAS COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income - Three Months Ended March 31, 1999 and 1998..............................3
Consolidated Balance Sheets - March 31, 1999 and December 31, 1998..........................................4
Consolidated Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998..........................5
Notes to Consolidated Financial Statements..................................................................6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................................................9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................................................17
ITEM 6. Exhibits and Reports on Form 8-K..............................................................17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
- ---------------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
NET OPERATING REVENUES
Natural Gas
Trade $ 117,267 $ 129,567
Associated Companies 12,843 23,023
Crude Oil, Condensate and Natural Gas Liquids
Trade 26,517 30,237
Associated Companies 1,036 2,739
Gains on Sales of Reserves and Related Assets and Other, Net 1,291 14,265
------------ ------------
TOTAL 158,954 199,831
OPERATING EXPENSES
Lease and Well 24,069 24,909
Exploration Costs 16,789 17,398
Dry Hole Costs 345 7,881
Impairment of Unproved Oil and Gas Properties 8,003 8,348
Depreciation, Depletion and Amortization 82,022 71,961
General and Administrative 23,635 16,554
Taxes Other Than Income 13,695 14,494
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TOTAL 168,558 161,545
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OPERATING INCOME (LOSS) (9,604) 38,286
OTHER INCOME (EXPENSE), NET 26,938 (970)
------------ ------------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 17,334 37,316
INTEREST EXPENSE, NET 14,267 9,110
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INCOME BEFORE INCOME TAXES 3,067 28,206
INCOME TAX PROVISION (BENEFIT) (1,999) 1,201
------------ ------------
NET INCOME $ 5,066 $ 27,005
============ ============
NET INCOME PER SHARE OF COMMON STOCK
Basic $ 0.03 $ 0.17
============ ============
Diluted $ 0.03 $ 0.17
============ ============
AVERAGE NUMBER OF COMMON SHARES
Basic 153,733 154,736
============ ============
Diluted 154,615 155,522
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 13,133 $ 6,303
Accounts Receivable
Trade 153,940 176,608
Associated Companies 14,867 16,980
Inventories 38,384 39,581
Other 7,337 6,878
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TOTAL 227,661 246,350
OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 4,903,390 4,814,425
Less: Accumulated Depreciation, Depletion and Amortization (2,222,074) (2,138,062)
------------ ------------
Net Oil and Gas Properties 2,681,316 2,676,363
OTHER ASSETS 81,258 95,382
------------ ------------
TOTAL ASSETS $ 2,990,235 $ 3,018,095
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Trade $ 131,287 $ 159,690
Associated Companies 44,934 46,597
Accrued Taxes Payable 15,469 20,087
Dividends Payable 4,721 4,710
Other 25,153 31,550
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TOTAL 221,564 262,634
LONG-TERM DEBT
Trade 1,170,518 942,779
Affiliate -- 200,000
OTHER LIABILITIES
Trade 22,395 21,516
Associated Companies 31,378 46,327
DEFERRED INCOME TAXES 256,519 260,337
DEFERRED REVENUE 3,148 4,198
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par, 320,000,000 Shares Authorized and
160,000,000 Shares Issued 201,600 201,600
Additional Paid In Capital 401,462 401,524
Unearned Compensation (4,578) (4,900)
Cumulative Foreign Currency Translation Adjustment (32,399) (35,848)
Retained Earnings 838,825 838,371
Common Stock Held in Treasury, 6,263,376 shares at
March 31, 1999 and 6,276,156 shares at December 31, 1998 (120,197) (120,443)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 1,284,713 1,280,304
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,990,235 $ 3,018,095
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
- ---------------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
Net Income $ 5,066 $ 27,005
Items Not Requiring (Providing) Cash
Depreciation, Depletion and Amortization 82,022 71,961
Impairment of Unproved Oil and Gas Properties 8,003 8,348
Deferred Income Taxes (4,099) 5,500
Other, Net 3,036 2,286
Exploration Costs 16,789 17,398
Dry Hole Costs 345 7,881
Gains on Sales of Reserves and Related Assets and Other, Net 1 (12,954)
Gain on Sale of Other Assets (27,991) --
Other, Net (9,094) (3,428)
Changes in Components of Working Capital and Other Liabilities
Accounts Receivable 23,730 38,955
Inventories 1,197 (2,315)
Accounts Payable (33,873) (36,896)
Accrued Taxes Payable (4,618) (9,411)
Other Liabilities (475) (6,780)
Other, Net (7,906) (5,141)
Amortization of Deferred Revenue -- (10,688)
Changes in Components of Working Capital Associated with
Investing and Financing Activities 16,977 20,167
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NET OPERATING CASH INFLOWS 69,110 111,888
INVESTING CASH FLOWS
Additions to Oil and Gas Properties (91,501) (117,503)
Exploration Costs (16,789) (17,398)
Dry Hole Costs (345) (7,881)
Proceeds from Sales of Reserves and Related Assets 88 3,303
Proceeds from Sale of Other Assets 39,700 --
Changes in Components of Working Capital Associated with
Investing Activities (16,977) (20,144)
Other, Net 254 (3,259)
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NET INVESTING CASH OUTFLOWS (85,570) (162,882)
FINANCING CASH FLOWS
Long-Term Debt
Trade 227,739 215,425
Affiliate (200,000) (157,500)
Dividends Paid (4,601) (4,633)
Treasury Stock Purchased -- (7,231)
Proceeds from Sales of Treasury Stock 184 755
Other, Net (32) (92)
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NET FINANCING CASH INFLOWS 23,290 46,724
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,830 (4,270)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,303 9,330
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,133 $ 5,060
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements of Enron Oil & Gas Company and
subsidiaries (the "Company") included herein have been prepared by
management without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial results for the interim periods. Certain
information and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. However,
management believes that the disclosures are adequate to make the
information presented not misleading. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain reclassifications have been made to prior period financial
statements to conform with the current presentation.
As more fully discussed in Notes 1 and 14 to the consolidated financial
statements included in the Company's 1998 Annual Report on Form 10-K, the
Company engages in price risk management activities from time to time
primarily for non-trading and to a lesser extent for trading purposes.
Derivative financial instruments (primarily price swaps and costless
collars) are utilized for non-trading purposes to hedge the impact of
market fluctuations on natural gas and crude oil market prices. Hedge
accounting is utilized in non-trading activities when there is a high
degree of correlation between price movements in the derivative and the
item designated as being hedged. Gains and losses on derivative financial
instruments used for hedging purposes are recognized as revenue in the same
period as the hedged item. Gains and losses on hedging instruments that are
closed prior to maturity are deferred in the consolidated balance sheets.
In instances where the anticipated correlation of price movements does not
occur, hedge accounting is terminated and future changes in the value of
the derivative are recognized as gains or losses using the mark-to-market
method of accounting. Derivative and other financial instruments utilized
in connection with trading activities, primarily price swaps and call
options, are accounted for using the mark-to-market method, under which
changes in the market value of outstanding financial instruments are
recognized as gains or losses in the period of change. The cash flow impact
of derivative and other financial instruments used for non-trading and
trading purposes is reflected as cash flows from operating activities in
the consolidated statements of cash flows.
2. Natural gas revenues, trade for the three-month periods ended March 31,
1999 and 1998, are net of costs of natural gas purchased for sale related
to natural gas marketing activities of $8.4 million and $12.5 million,
respectively. Natural gas revenues, associated for the three-month periods
ended March 31, 1999 and 1998, are net of costs of natural gas purchased
for sale related to natural gas marketing activities of $13.1 million and
$12.4 million, respectively.
3. Income tax provision (benefit) for the three-month periods ended March 31,
1999 and 1998 includes tax benefits of $2.7 million and $1.3 million,
respectively, related to tight gas sand federal income tax credit
utilization. Additionally, the income tax provision for the three-month
period ended March 31, 1998 included benefits of $8.8 million related to
certain international costs and the resolution of certain domestic and
international issues.
The first quarter 1999 tax provision was computed using the actual
effective tax rate for the quarter rather than the estimated annual
effective tax rate. A reliable estimate of the annual effective tax rate
could not be made given the impact oil and gas price volatility had on the
estimate for the year. Income taxes for first quarter of 1998 were
calculated using the estimated annual effective tax rate.
4. The difference between the average number of common shares outstanding for
basic and diluted net income per share of common stock is due to the
assumed issuance of approximately 882,000 and 786,000 common shares
relating to employee stock options in the three-month periods ended March
31, 1999 and 1998, respectively.
6
<PAGE> 7
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. The Company's total comprehensive income was $8.5 million and $29.2 million
for the three-month periods ended March 31, 1999 and 1998, respectively.
The only adjustment made to net income in the periods was for foreign
currency translation gains of $3.4 million and $2.2 million for the
three-month periods ended March 31, 1999 and 1998, respectively.
6. SFAS No. 131 - "Disclosure about Segments of an Enterprise and Related
Information" established standards for reporting information about
operating segments in annual financial statements and requires selected
information in interim financial reports. Selected financial information is
reported below for the three-month periods ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ---------------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
NET OPERATING REVENUES
United States $ 106,892 $ 151,287
Canada 16,224 16,931
Trinidad 16,999 14,284
India 18,833 17,352
Other 6 (23)
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TOTAL $ 158,954 $ 199,831
============ ============
OPERATING INCOME (LOSS)
United States $ (18,514) $ 25,374
Canada 2,342 2,488
Trinidad 10,131 8,227
India 658 9,283
Other (4,221) (7,086)
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TOTAL (9,604) 38,286
RECONCILING ITEMS
Other Income (Expense), Net 26,938 (970)
Interest Expense, Net 14,267 9,110
------------ ------------
INCOME BEFORE INCOME TAXES $ 3,067 $ 28,206
============ ============
</TABLE>
7. As reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, Enron Oil & Gas India Ltd. ("EOGIL"), a wholly-owned
subsidiary of the Company, is a respondent in two public interest lawsuits
filed in the Delhi High Court, India. The first (the "Wadehra Action") was
brought by B. L. Wadehra, an Indian public interest lawyer, against the
Union of India, EOGIL, EOGIL co-participants in the Panna and Mukta fields,
Reliance Industries Limited ("Reliance") and Oil & Natural Gas Corporation
Limited ("ONGC"), and certain other respondents. ONGC is the Indian
national oil company and is wholly-owned by the Union of India. The second
suit (the "CPIL Action") was brought by the Centre for Public Interest
Litigation and the National Alliance of People's Movement against the Union
of India, the Central Bureau of Investigation, ONGC, Reliance and EOGIL.
Petitioners in both the Wadehra Action and the CPIL Action allege various
improprieties in the award of the Panna and Mukta fields to EOGIL, Reliance
and ONGC, and seek the cancellation of the Production Sharing Contract for
the Panna and Mukta fields. The Union of India is vigorously disputing
these allegations. The Company believes that the public competitive bidding
process for the fields was fair and that the award of these fields to
EOGIL, Reliance and ONGC was proper. Following a series of hearings, the
Delhi High Court has entered an order dismissing both lawsuits. The India
Supreme Court has agreed to hear the plaintiffs' appeal of the decision of
the Delhi High Court. Although no assurances can be given, based on
currently available information the Company believes that the ultimate
resolution of these matters will not have a material adverse effect on its
financial condition or results of operations. There are various other suits
and claims against the Company that have arisen in the ordinary course of
business. However, management does not believe these suits and claims will
individually or in the aggregate have a material adverse effect on the
Company's financial condition or results of operations. The Company has
been named as a potentially responsible party in certain Comprehensive
Environmental Response Compensation and Liability Act proceedings. However,
management does not believe that any potential assessments resulting from
such proceedings will individually or in the aggregate have a materially
adverse effect on the financial condition or results of operations of the
Company.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONCLUDED)
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 - "Accounting for Derivative Instruments and Hedging Activities"
effective for fiscal years beginning after June 15, 1999. The statement
cannot be applied retroactively and must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired or substantively modified after
December 31, 1997.
The statement establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as either an
asset or liability measured at its fair value. The statement requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the statements of income and requires a
company to formally document, designate and assess the effectiveness of
transactions that receive hedge accounting treatment.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on
its financial statements and has not determined the timing of adoption.
Based on the Company's current level of derivative and hedging activities,
the Company does not expect the impact of adoption to be material.
9. During the first and second quarters of 1999, the Company sold its 3.2
million options to purchase common stock of Enron Corp. having a strike
price of $39.1875 per share. The Company sold 1.6 million options at an
average price of $24.81 ($64.00 Enron Corp. stock price equivalent),
realizing net proceeds of $40 million and a gain of $28 million pre-tax
($18 million after-tax) in the first quarter. Early in the second quarter,
the Company sold the remaining 1.6 million options at an average price of
$27.07 ($66.26 Enron Corp. stock price equivalent), realizing net proceeds
of $43 million and a gain of $32 million pre-tax ($21 million after-tax).
8
<PAGE> 9
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENRON OIL & GAS COMPANY
The following review of operations for the three-month periods ended March
31, 1999 and 1998 should be read in conjunction with the consolidated financial
statements of Enron Oil & Gas Company (the "Company") and Notes thereto.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 vs. Three Months Ended March 31, 1998
The Company generated first quarter net income of $5 million compared to
net income of $27 million for the first quarter of 1998. Net operating revenues
were $159 million as compared to $200 million for the first quarter of 1998.
Following is an explanation of the variances causing this reduction.
Wellhead volume and price statistics are summarized below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NATURAL GAS VOLUMES (MMCF PER DAY)(1)
United States 677 644(2)
Canada 104 101
------------ ------------
North America 781 745
Trinidad 152 109
India 71 47
------------ ------------
TOTAL 1,004 901
============ ============
AVERAGE NATURAL GAS PRICES ($/MCF)(3)
United States $ 1.62 $ 2.01(4)
Canada 1.39 1.39
North America Composite 1.58 1.93
Trinidad 1.06 1.09
India 1.96 2.70
COMPOSITE 1.53 1.86
CRUDE OIL/CONDENSATE VOLUMES (MBBL PER DAY)(1)
United States 13.1 12.6
Canada 2.7 2.7
------------ ------------
North America 15.8 15.3
Trinidad 2.8 2.8
India 7.1 4.2
------------ ------------
TOTAL 25.7 22.3
============ ============
AVERAGE CRUDE OIL/CONDENSATE PRICES ($/BBL)(3)
United States $ 11.31 $ 14.68
Canada 11.75 13.97
North America Composite 11.39 14.55
Trinidad 9.63 14.03
India 9.79 15.33
COMPOSITE 10.76 14.64
NATURAL GAS EQUIVALENT VOLUMES (MMCFE PER DAY)(5)
United States 771 735(2)
Canada 123 124
------------ ------------
North America 894 859
Trinidad 169 126
India 114 73
------------ ------------
TOTAL 1,177 1,058
============ ============
TOTAL BCFE(5) DELIVERIES 106 95(2)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Million cubic feet per day or thousand barrels per day, as
applicable.
(2) Includes 48 MMcf per day for the three-month period ended March 31,
1998 delivered under the terms of a volumetric production payment.
Delivery obligations were terminated in December 1998.
(3) Dollars per thousand cubic feet or per barrel, as applicable.
(4) Includes an average equivalent wellhead value of $1.62/Mcf for the
three-month period ended March 31, 1998 for the volumes described in
note (2), net of transportation costs.
(5) Million cubic feet equivalent per day or billion cubic feet
equivalent, as applicable.
9
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PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
Wellhead revenues decreased approximately 10% to $165 million in the first
quarter of 1999 compared to $184 million in the first quarter of 1998, primarily
due to lower average wellhead prices worldwide for natural gas, crude oil and
condensate and natural gas liquids, partially offset by increased deliveries of
natural gas and crude oil and condensate. During the first quarter of 1999, the
Company produced over 1.0 billion cubic feet per day of natural gas versus 901
MMcf per day in the first quarter of 1998. Deliveries of crude oil, condensate
and natural gas liquids averaged 28.7 MBbl per day compared to 26.1 MBbl per day
in the first quarter of 1998.
Average wellhead natural gas prices for the first quarter of 1999 were
approximately 18% lower than the comparable period of 1998 reducing net
operating revenues by approximately $30 million. Average wellhead crude oil and
condensate prices were down by 27% worldwide, decreasing net operating revenues
by $9 million. First quarter 1999 wellhead natural gas deliveries were
approximately 11% higher than the comparable period in 1998 increasing net
operating revenues by $17 million. Natural gas deliveries in North America
increased 5% from the prior year period primarily due to the third quarter 1998
acquisition of producing properties in the Gulf of Mexico and increased
deliveries in East Texas. Natural gas deliveries in India increased 51% to 71
MMcf per day due to continuing development activities in the Tapti and Panna
fields. Natural gas deliveries in Trinidad were 39% higher due to increased
demand and additional gas balancing volumes related to a field allocation
agreement. Wellhead crude oil and condensate deliveries were 15% higher than the
prior year period increasing net operating revenues by $4 million, primarily
attributable to a 68% increase in India. Deliveries from the Panna and Mukta
fields increased to 7.1 MBbl per day compared to 4.2 MBbl per day in the prior
year period. Deliveries of crude oil and condensate in North America were up
approximately 4% primarily in the West Texas and South Texas regions.
Other marketing activities associated with sales and purchases of natural
gas, natural gas and crude oil price hedging and trading transactions, and 1998
margins related to the volumetric production payment decreased net operating
revenues by $8 million compared to a $2 million revenue increase in the first
quarter of 1998. This variance was primarily due to a $3 million revenue
decrease in 1999 from natural gas hedging contracts closed in prior periods,
(See Note 14 to the Consolidated Financial Statements in the Company's 1998
Annual Report on Form 10-K) as compared to a $5 million revenue increase related
to natural gas hedging and trading activities in the first quarter of 1998.
Gains on sales of reserves and related assets and other, net totaled
$1 million in the first quarter of 1999 compared to a net gain of $14 million in
the comparable prior year period. The Company had no material sales of reserves
and related assets in the quarter.
Operating expenses of $169 million for the first quarter of 1999 were
approximately $7 million higher than the first quarter of 1998. Depreciation,
depletion and amortization ("DD&A") expense increased approximately $10 million
compared to the prior year period, primarily reflecting increased worldwide
production volumes and a higher per-unit rate in North America. Exploration
and dry hole costs were $8 million lower than the first quarter of 1998
primarily due to decreased exploratory drilling and other exploration activities
in North America and improved success on wildcat drilling prospects. General and
administrative expenses were $7 million higher than the prior year period
primarily due to expanded operations and settlement of certain commercial
disputes with third parties. Lease and well expenses were reduced by $.8 million
and taxes other than income were also down $.8 million primarily due to lower
state severance taxes associated with decreased wellhead revenues in the United
States.
Net interest expense increased $5 million as compared to the first quarter
of 1998 reflecting a higher level of long-term debt due to expanded worldwide
operations and decreased cash flows resulting from the above mentioned decrease
in wellhead prices.
The per-unit operating costs of the Company for lease and well, DD&A,
general and administrative, interest expense and taxes other than income
averaged $1.49 per Mcfe during the first quarter of 1999 compared to $1.44 per
Mcfe in 1998. This increase is primarily due to a higher per-unit rate of
general and administrative expense, interest expense and DD&A expense, partially
offset by a lower per-unit rate of lease and well expense and taxes other than
income.
Other income (expense), net for the first quarter of 1999 included a $28
million pre-tax gain on the sale of 1.6 million of its options to purchase Enron
Corp. common stock (See Note 9 to the Consolidated Financial Statements included
herein).
10
<PAGE> 11
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
Income tax benefit for the first quarter of 1999 was $2 million compared to
a $1 million income tax provision for the comparable period in 1998. The
decrease in income taxes was primarily due to lower pre-tax income partially
offset by inclusion of approximately $9 million in tax benefits in first quarter
of 1998 related to certain international costs and the resolution of certain
domestic and international issues.
The first quarter 1999 tax provision was computed using the actual
effective tax rate for the quarter rather than the estimated annual effective
tax rate. A reliable estimate of the annual effective tax rate could not be made
given the impact oil and gas price volatility had on the estimate for the year.
Income taxes for first quarter of 1998 were calculated using the estimated
annual effective tax rate.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of cash during the three-month period ended
March 31, 1999 included funds generated from operations, proceeds from the sale
of a portion of its options to purchase Enron Corp. common stock and proceeds
from new borrowings. Primary cash outflows included funds used in operations,
exploration and development expenditures, dividends paid to Company shareholders
and the repayment of debt.
Net operating cash flows of $69 million for the first quarter of 1999
decreased approximately $43 million as compared to the first quarter of 1998
primarily reflecting lower operating revenues, higher interest expense and cash
operating expenses and increased current income taxes.
Net investing cash outflows of approximately $86 million for the first
quarter of 1999 decreased by $77 million versus the comparable prior year period
due primarily to reduced exploration and development expenditures and proceeds
related to the sale of a portion of its options to purchase Enron Corp. common
stock. Changes in Components of Working Capital Associated with Investing
Activities included changes in accounts payable associated with the accrual of
exploration and development expenditures and changes in inventories which
represent materials and equipment used in drilling and related activities.
Exploration and development expenditures for the three-month periods ended
March 31, 1999 and 1998 were as follows (in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
United States $ 83 $ 109
Canada 12 11
------ ------
North America 95 120
Trinidad 1 2
India 10 14
Other 3 7
------ ------
TOTAL $ 109 $ 143
====== ======
- --------------------------------------------------------------------------------
</TABLE>
Exploration and development expenditures of $109 million for the first
three months of 1999 were $34 million lower than the prior year period due
primarily to a reduced level of service industry cost as well as reduced
spending on the North America drilling program as a result of the current
natural gas and crude oil price environment. Reduced drilling expenditures were
partially offset by the acquisition of producing properties in the Big Piney
area.
The level of exploration and development expenditures will vary in future
periods depending on energy market conditions and other related economic
factors. The Company has significant flexibility with respect to financing
alternatives and the ability to adjust its exploration and development
expenditure budget as circumstances warrant. There are no material continuing
commitments associated with expenditure plans.
Cash provided by financing activities was $23 million for the first quarter
of 1999 versus $47 million for the comparable prior year period. Financing
activities for 1999 included the net issuance of $28 million of long-term debt
primarily to fund exploration and development activities and to pay cash
dividends. There were no share repurchases in the first quarter of 1999,
compared to $7 million of repurchases in the prior year period. Based upon
existing economic and market conditions, management believes net operating cash
flow and available financing alternatives will be sufficient to fund net
investing and other cash requirements of the Company for the foreseeable future.
11
<PAGE> 12
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
YEAR 2000
The Year 2000 problem generally results from the use in computer hardware
and software of two digits rather than four digits to define the applicable
year. When computer systems must process dates both before and after January 1,
2000, two-digit year "fields" may create processing ambiguities that can cause
errors and system failures. For example, a date represented by "00" may be
interpreted as referring to the year 1900, instead of 2000.
The effects of the Year 2000 problem can be exacerbated by the
interdependence of computer and telecommunications systems in the United States
and throughout the world. This interdependence can affect the Company and its
suppliers, trading partners, and customers, as well as governments of countries
around the world where the Company does business.
State of Readiness
The Company Board of Directors has been briefed about the Year 2000
problem. The Board has adopted a Year 2000 Project (the "Project") aimed at
preventing the Company's mission-critical functions from being impaired due to
the Year 2000 problem. "Mission-critical" functions are those critical functions
whose loss would cause an immediate stoppage of or significant impairment to
core business processes (a core business process is one of material importance
to the Company business).
Implementation of the Project is directly supervised by a Year 2000
Oversight Committee, made up of four senior executives of the Company and its
affiliates. Each operating division of the Company is implementing procedures
specific to it that are part of the overall Project. The Company also has
engaged certain outside consultants, technicians and other external resources to
aid in formulating and implementing the Project.
The Company is actively implementing the Project, which will be modified as
events warrant. Under the Project, the Company will continue to inventory
mission-critical computer hardware and software systems and embedded
microprocessors (microprocessors with date-related functions, contained in a
wide variety of devices), and software; assess the effects of Year 2000 problems
on the mission-critical functions of the Company; remedy systems, software and
embedded microprocessors in an effort to avoid material disruptions or other
material adverse effects on mission-critical functions, processes and systems;
verify and test the mission-critical systems to which remediation efforts have
been applied; and attempt to mitigate those mission-critical aspects of the Year
2000 problem that are not remediated by January 1, 2000, including the
development of contingency plans to cope with the mission-critical consequences
of Year 2000 problems that have not been identified or remediated by that date.
The Project recognizes that the computer, telecommunications, and other
systems ("Outside Systems") of outside entities ("Outside Entities") have the
potential for major, mission-critical, adverse effects on the conduct of Company
business. The Company does not have control of these Outside Entities or Outside
Systems. (In some cases, Outside Entities are U.S., state and local governmental
organizations, foreign governments or businesses located in foreign countries.)
However, the Project includes an ongoing process of identifying and contacting
Outside Entities whose systems in the Company's judgment have, or may have, a
substantial effect on the Company's ability to continue to conduct the
mission-critical aspects of Company business without disruption from Year 2000
problems. The Project envisions the Company making an attempt to inventory and
assess the extent to which these Outside Systems may not be "Year 2000 ready" or
"Year 2000 compatible". The Company will attempt reasonably to coordinate with
these Outside Entities in an ongoing effort to obtain assurance that the Outside
Systems that are mission-critical will be Year 2000 compatible well before
January 1, 2000. Consequently, the Company will work with Outside Entities in a
reasonable attempt to inventory, assess, analyze, convert (where necessary),
test, and develop contingency plans for connections to these mission-critical
Outside Systems and to ascertain the extent to which they are, or can be made to
be, Year 2000 ready and compatible with the Company's remediation of its own
mission-critical systems.
12
<PAGE> 13
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
As of March 1999, the Company is at various stages in implementation of the
Project, as shown in the following tables. Any notation of "complete" conveys
the fact only that the initial iteration of this phase has been substantially
completed. All dates are only relevant for the initial iteration of the
applicable stage of the Project.
YEAR 2000 PROJECT READINESS
<TABLE>
<CAPTION>
Inventory Assessment Analysis Conversion Testing Y2K-Ready Contingency Plan
--------- ---------- -------- ---------- ------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mission-Critical C C C IP IP IP IP
Internal Items
Mission-Critical C IP IP IP IP IP IP
Outside Entities
</TABLE>
Legend: C = Complete IP = In Process
YEAR 2000 PROJECT ESTIMATED COMPLETION DATES
<TABLE>
<CAPTION>
Inventory Assessment Analysis Conversion Testing Y2K-Ready Contingency Plan
--------- ---------- -------- ---------- ------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mission-Critical 12/98 3/99 3/99 6/99 9/99 9/99 9/99
Internal Items
Mission-Critical 3/99 6/99 6/99 9/99 9/99 9/99 9/99
Outside Entities
</TABLE>
It is important to recognize that the processes of inventorying, assessing,
analyzing, converting (where necessary), testing, and developing contingency
plans for mission-critical items in anticipation of the Year 2000 event may be
iterative processes, requiring a repeat of some or all of these processes as the
Company learns more about the Year 2000 problem and its effects on internal
business information systems and on Outside Systems, and about the effects of
embedded microprocessors on systems and business operations. The Company
anticipates that it will continue with these processes through January 1, 2000
and on into the Year 2000 in order to assess and remediate problems that
reasonably can be identified only after the start of the new century.
The Project envisions verification and validation of certain
mission-critical facilities and functions by independent consultants. These
consultants will participate to varying degrees in many or all of the stages,
including the inventory, assessment, and testing phases. Currently, the Company
is utilizing Raytheon Engineers & Constructors, Inc. to assist Company personnel
in the inventory and assessment phases of onshore and offshore and domestic and
international operations.
Costs to Address Year 2000 Issues
The Company has not incurred material historical costs for Year 2000
awareness, inventory, assessment, analysis, conversion, testing, or contingency
planning and anticipates that any future costs for these purposes, including
those for implementing Year 2000 contingency plans, are not likely to be
material.
Although management believes that its estimates are reasonable, there can
be no assurance, for the reasons stated in the "Summary" section below, that the
actual costs of implementing the Project will not differ materially from the
estimated costs or that the Company will not be materially adversely affected by
Year 2000 issues.
Year 2000 Risk Factors
Regulatory requirements. Certain of the Company's operations are regulated
by governmental authorities. The Company expects to satisfy these regulatory
authority requirements for achieving Year 2000 readiness. If the Company's
reasonable expectations in this regard are in error, and if a regulatory
authority should order the temporary cessation of operations in one or more of
these areas, the adverse effect on the Company could be material. Outside
Entities may face similar problems that materially adversely affect the Company.
13
<PAGE> 14
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
Shortage of Resources. Between now and 2000 it is anticipated that there
will be increased competition for people with technical and managerial skills
necessary to deal with the Year 2000 problem. While the Company is taking
substantial precautions to recruit and retain sufficient people skilled in
dealing with the Year 2000 problem, and has hired consultants who bring
additional skilled people to deal with the Year 2000 problem, the Company could
face shortages of skilled personnel or other resources, such as particular
microprocessors or components containing Year 2000 ready microprocessors, and
these shortages might delay or otherwise impair the Company's ability to assure
that its mission-critical systems are Year 2000 ready. Outside Entities could
face similar problems that materially adversely affect the Company. The Company
believes that the possible impact of the shortage of skilled people and
resources is not, and will not be, unique to the Company.
Potential Shortcomings. The Company estimates that mission-critical
systems, domestic and international, will be Year 2000-ready substantially
before January 1, 2000. However, there is no assurance that the Project will
succeed in accomplishing its purpose, or that unforeseen circumstances will not
arise during implementation of the Project that would materially adversely
affect the Company.
Cascading Effect. The Company is taking reasonable steps to identify,
assess, and, where appropriate, to replace devices that contain embedded
microprocessors. Despite these reasonable efforts, the Company anticipates that
it will not be able to find and remediate all embedded microprocessors in all
systems. Further, it is anticipated that Outside Entities also will not be able
to find and remediate all embedded microprocessors in their systems. Some of the
embedded microprocessors that fail to operate or that produce anomalous results
may create system disruptions or failures. Some of these disruptions or failures
may spread from the systems in which they are located to other systems causing
adverse effects upon the Company's ability to maintain safe operations, to serve
its customers and otherwise to fulfill certain contractual and other legal
obligations. The embedded microprocessor problem is widely recognized as one of
the more difficult aspects of the Year 2000 problem across industries and
throughout the world. The possible adverse impact of the embedded microprocessor
problem is not, and will not be, unique to the Company.
Third parties. The Company cannot assure that suppliers upon which it
depends for essential goods and services will convert and test their
mission-critical systems and processes in a timely manner. Failure or delay by
all or some of these entities, including the U.S. and state or local governments
and foreign governments, could create substantial disruptions having a material
adverse effect on Company business.
Contingency Plans
As part of the Project, the Company is developing contingency plans that
deal with, among others, two primary aspects of the Year 2000 problem: (1) that
the Company, despite its good-faith, reasonable efforts, may not have
satisfactorily remediated all internal, mission-critical systems; and (2) that
Outside Systems may not be Year 2000 ready, despite the Company's good-faith,
reasonable efforts to work with Outside Entities. These contingency plans are
being designed to mitigate the disruptions or other adverse effects resulting
from Year 2000 incompatibilities regarding these mission-critical functions or
systems, and to facilitate the early identification and remediation of
mission-critical Year 2000 problems that first manifest themselves after January
1, 2000.
These contingency plans will contemplate an assessment of all
mission-critical internal information technology systems and internal
operational systems that use computer-based controls. This process will be
pursued continuously into the Year 2000 as circumstances require. Further, the
Company will in that time frame assess any mission-critical disruptions due to
Year 2000-related failures that are external to the Company.
These contingency plans include the creation, as deemed reasonably
appropriate, of teams that will be standing by on the eve of the new millennium,
prepared to respond rapidly and otherwise as necessary to mission-critical Year
2000-related problems as soon as they become known. The composition of teams
that are assigned to deal with Year 2000 problems will vary according to the
nature, mission-criticality, and location of the problem. Because the Company
operates internationally, some of its Year 2000 contingency teams will be
located at mission-critical facilities overseas.
14
<PAGE> 15
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ENRON OIL & GAS COMPANY
Worst Case Scenario
The Securities and Exchange Commission requires that public companies must
forecast the most reasonably likely worst case Year 2000 scenario, assuming that
the Company's Year 2000 plan is not effective. Analysis of the most reasonably
likely worst case Year 2000 scenarios the Company may face leads to
contemplation of the following possibilities which, though considered highly
unlikely, must be included in any consideration of worst cases: widespread
failure of electrical, natural gas, and similar supplies by utilities serving
the Company domestically and internationally; widespread disruption of the
services of communications common carriers domestically and internationally;
similar disruption to means and modes of transportation for the Company and its
employees, contractors, suppliers, and customers; significant disruption to the
Company's ability to gain access to, and continue working in, office buildings
and other facilities; the failure of substantial numbers of mission-critical
hardware and software computer systems, including both internal business systems
and systems (such as those with embedded microprocessors) controlling
operational facilities such as electrical generation, transmission, and
distribution systems and crude oil and natural gas plants and pipelines,
domestically and internationally; and the failure, domestically and
internationally, of Outside Systems, the effects of which would have a
cumulative material adverse impact on the Company's mission-critical systems.
Among other things, the Company could face substantial claims by customers for
loss of revenues due to supply interruptions, inability to fulfill contractual
obligations, inability to account for certain revenues or obligations or to bill
or pay customers accurately and on a timely basis, and increased expenses
associated with litigation, stabilization of operations following
mission-critical failures, and the execution of contingency plans. The Company
could also experience an inability by customers, traders, and others to pay, on
a timely basis or at all, obligations owed to the Company. Under these
circumstances, the adverse effect on the Company, and the diminution of Company
revenues, could be material, although not quantifiable at this time. Further in
this scenario, the cumulative effect of these failures could have a substantial
adverse effect on the economy, domestically and internationally. The adverse
effect on the Company, and the diminution of Company revenues, from a domestic
or global recession or depression also could be material, although not
quantifiable at this time.
The Company will continue to monitor business conditions with the aim of
assessing and quantifying material adverse effects, if any, that result or may
result from the Year 2000 problem.
Summary
The Company has a plan to deal with the Year 2000 challenge and believes
that it will be able to achieve substantial Year 2000 readiness with respect to
the mission critical systems that it controls. From a forward-looking
perspective, the extent and magnitude of the Year 2000 problem as it will affect
the Company, both before and for some period after January 1, 2000, are
difficult to predict or quantify for a number of reasons. Among these are: the
difficulty of locating "embedded" microprocessors that may be in a great variety
of mission-critical hardware used for process or flow control, environmental,
transportation, access, communications, and other systems; the difficulty of
inventorying, assessing, remediating, verifying and testing, Outside Systems
connected, and vital, to the Company's computer, telecommunications, or other
mission-critical systems; the difficulty of locating all mission-critical
software (computer code) that is not Year 2000 compatible; and the
unavailability of certain necessary internal or external resources, including
but not limited to trained hardware and software engineers, technicians, and
other personnel to perform adequate remediation, verification, and testing of
mission-critical Company systems or Outside Systems. Year 2000 costs are
difficult to estimate accurately because of unanticipated vendor delays,
technical difficulties, the impact of tests of Outside Systems, and similar
events. There can be no assurance for example that all Outside Systems with a
mission-critical impact will be adequately remediated so that they are Year 2000
ready by January 1, 2000, or by some earlier date, so as not to create a
material disruption to the Company's business. If, despite reasonable efforts
under the Year 2000 Project, there are mission-critical Year 2000-related
failures that create substantial disruptions to Company business, the adverse
impact on the Company could be material. Additionally, Year 2000 costs are
difficult to estimate accurately because of unanticipated vendor delays,
technical difficulties, the impact of tests of Outside Systems and similar
events. Moreover, despite the Company's belief that costs for implementing the
Project will not be material, the estimated costs of implementing the Project do
not take into account the costs, if any, that might be incurred as a result of
Year 2000-related failures that occur despite implementation of the Project.
15
<PAGE> 16
PART I. FINANCIAL INFORMATION - (CONCLUDED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONCLUDED)
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
such expectations will be achieved. Important factors that could cause actual
results to differ materially from those in the forward looking statements herein
include, but are not limited to, the timing and extent of changes in commodity
prices for crude oil, natural gas and related products and interest rates; the
extent of the Company's success in discovering, developing, marketing and
producing reserves and in acquiring oil and gas properties; the Company's
success in implementing its Year 2000 Plan, the effectiveness of the Company's
Year 2000 Plan, and the Year 2000 readiness of Outside Entities; political
developments around the world and conditions of the capital and equity markets
during the periods covered by the forward looking statements.
16
<PAGE> 17
PART II. OTHER INFORMATION
ENRON OIL & GAS COMPANY
ITEM 1. Legal Proceedings
See Part 1, Item 1, Note 7 to Consolidated Financial Statements which is
incorporated herein by reference.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the period ended March 31, 1999.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENRON OIL & GAS COMPANY
(Registrant)
Date: April 26, 1999 By /s/ W. C. WILSON
--------------------------------
W. C. Wilson
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 12
ENRON OIL & GAS COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR
FIXED CHARGES:
Net Income $ 5,066 $ 56,171 $ 121,970 $ 140,008 $ 142,118 $ 147,998
Less: Capitalized Interest Expense (3,160) (12,711) (13,706) (9,136) (6,490) (6,124)
Add: Fixed Charges 17,427 61,290 41,423 21,997 18,414 14,613
Income Tax Provision(Benefit) (1,999) 4,111 41,500 50,954 41,936 5,937
---------- ---------- ---------- ---------- ---------- ----------
EARNINGS AVAILABLE $ 17,334 $ 108,861 $ 191,187 $ 203,823 $ 195,978 $ 162,424
========== ========== ========== ========== ========== ==========
FIXED CHARGES:
Interest Expense $ 14,267 $ 48,463 $ 27,369 $ 12,370 $ 11,310 $ 8,135
Capitalized Interest 3,160 12,711 13,706 9,136 6,490 6,124
Rental Expense Representative of
Interest Factor -- 116 348 491 614 354
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FIXED CHARGES $ 17,427 $ 61,290 $ 41,423 $ 21,997 $ 18,414 $ 14,613
========== ========== ========== ========== ========== ==========
RATIO OF EARNINGS TO
FIXED CHARGES --(1) 1.78 4.62 9.27 10.64 11.12
</TABLE>
- -------------------------------------------------------------------------------
(1) For the three-month period ended March 31, 1999, fixed charges exceeded
earnings available by $93 thousand.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,133
<SECURITIES> 0
<RECEIVABLES> 168,807
<ALLOWANCES> 0
<INVENTORY> 38,384
<CURRENT-ASSETS> 227,661
<PP&E> 4,903,390
<DEPRECIATION> (2,222,074)
<TOTAL-ASSETS> 2,990,235
<CURRENT-LIABILITIES> 221,564
<BONDS> 0
0
0
<COMMON> 201,600
<OTHER-SE> 1,083,113
<TOTAL-LIABILITY-AND-EQUITY> 2,990,235
<SALES> 157,663
<TOTAL-REVENUES> 158,954
<CGS> 0
<TOTAL-COSTS> 168,558
<OTHER-EXPENSES> (26,938)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,267
<INCOME-PRETAX> 3,067
<INCOME-TAX> (1,999)
<INCOME-CONTINUING> 5,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,066
<EPS-PRIMARY> 0.03<F1>
<EPS-DILUTED> 0.03
<FN>
<F1>BASIC
</FN>
</TABLE>
