LOUIS DREYFUS NATURAL GAS CORP, 424B2, 2000-06-16

LOUIS DREYFUS NATURAL GAS CORP
424B2, 2000-06-16
CRUDE PETROLEUM & NATURAL GAS

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<PAGE>
SUBJECT TO COMPLETION, DATED JUNE , 2000
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933. THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT
COMPLETE AND MAY BE CHANGED. WE WILL DELIVER TO PURCHASERS OF THESE SECURITIES A
FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. WE ARE NOT USING THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO OFFER TO SELL THESE SECURITIES OR TO SOLICIT
OFFERS TO BUY THESE SECURITIES IN ANY PLACE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 12, 1999)
FILE PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-21321

5,000,000 SHARES
[LOGO]
LOUIS DREYFUS NATURAL GAS CORP.
COMMON STOCK

---------------------------------------------------------

Of the 5,000,000 shares of common stock being offered, we are selling
3,000,000 shares of common stock and our selling shareholder is offering
2,000,000 shares. We will not receive any of the proceeds from the sale of
shares by the selling shareholder.

Our common stock is listed on the New York Stock Exchange under the symbol
"LD." The last reported sale price of the common stock on the New York Stock
Exchange on June , 2000, was $ per share.
--------------

INVESTING IN THE SHARES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE S-13.
-------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Louis Dreyfus Natural Gas (before expenses) $ $
Proceeds to Selling Shareholder $ $
</TABLE>

We have granted the underwriters a 30-day option to purchase up to 750,000
additional shares of common stock on the same terms and conditions as set forth
above to cover overallotments, if any.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the
shares to purchasers on or about , 2000.

--------------------------------------------------------------------------------

LEHMAN BROTHERS

SALOMON SMITH BARNEY

BANC OF AMERICA SECURITIES LLC

DAIN RAUSCHER WESSELS

PRUDENTIAL SECURITIES

, 2000
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.

------------------------

TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary......................................................................................... S-3
Risk Factors............................................................................................... S-13
Forward-Looking Statements................................................................................. S-18
Use of Proceeds............................................................................................ S-19
Capitalization............................................................................................. S-20
Price Range of Common Stock and Dividends.................................................................. S-21
Business and Properties.................................................................................... S-22
Management................................................................................................. S-33
Selling Shareholder........................................................................................ S-36
Underwriting............................................................................................... S-37
Legal Opinions............................................................................................. S-40
Experts.................................................................................................... S-40
Certain Definitions........................................................................................ S-40

PROSPECTUS
About this Prospectus...................................................................................... 2
Certain Forward-Looking Statements......................................................................... 3
Louis Dreyfus Natural Gas Corp............................................................................. 3
The Trusts................................................................................................. 3
Use of Proceeds............................................................................................ 4
Ratio of Earnings to Fixed Charges......................................................................... 4
Description of the Securities We May Offer................................................................. 5
Description of Common Stock................................................................................ 7
Description of Preferred Stock............................................................................. 8
Description of Debt Securities............................................................................. 9
Description of the Trust Preferred Securities.............................................................. 20
Description of the Trust Preferred Securities Guarantee.................................................... 25
Relationship among the Trust Preferred Securities, the Trust Preferred Securities Guarantee and the
Subordinated Debt Securities Held by the Trust........................................................... 28
Plan of Distribution....................................................................................... 28
Validity of Offered Securities............................................................................. 30
Experts.................................................................................................... 30
Where You Can Find More Information........................................................................ 30
Incorporation by Reference................................................................................. 31
</TABLE>

S-2
<PAGE>
PROSPECTUS SUMMARY

The following summary highlights selected information from this prospectus
supplement and the accompanying prospectus and may not contain all of the
information that is important to you. For a more complete understanding of this
offering, we encourage you to read this entire prospectus supplement, the
accompanying prospectus and the documents to which we have referred you. Certain
terms used in this prospectus supplement and the accompanying prospectus are
defined under the section "Certain Definitions."

ABOUT LOUIS DREYFUS NATURAL GAS

Louis Dreyfus Natural Gas is one of the largest independent natural gas
companies in the United States. We are engaged in the development, exploration,
acquisition, production and marketing of natural gas and crude oil in three core
areas: the Permian Region, the Mid-Continent Region and the Gulf Coast Region
(collectively, the "Core Areas"). By geographically concentrating our
operations, we achieve cost and marketing economies and a strong technical
knowledge of the geology and reservoir characteristics of producing formations
within our Core Areas. We grow our company through a blend of low-risk
development and high-impact exploration projects, and through strategic
acquisitions. Over the five years ended December 31, 1999, our proved reserves,
production and EBITDAX have grown at compound annual rates of 16%, 18% and 18%,
respectively. Natural gas comprised 88% of our 1.5 Tcfe proved reserve position
as of December 31, 1999.

In each of our Core Areas, we have developed significant geological,
geophysical and engineering expertise and established critical mass by
accumulating large acreage positions and seismic data. Our large-scale
development drilling program is sustained by an inventory of 1,575 identified
drilling locations on 1.4 million gross held-by-production acres at
December 31, 1999. Significant exploration drilling projects are conducted on
large acreage holdings supported by over 4,000 square miles of 3D seismic data.
In recent years our exploration efforts have concentrated on the Lower Wilcox
and Vicksburg Trends in South Texas, the shallow water off the coast of Texas
and the Morrow/Springer formation in the Texas Panhandle and Anadarko Basin in
western Oklahoma. Over the five-year period ended December 31, 1999, we added
767 Bcfe through our exploration and development drilling activities, including
revisions, replacing 164% of our production. In 1999, we replaced 175% of our
production through drilling at a cost of $.67 per Mcfe, including revisions,
with a drilling completion success rate of 92% on the 229 wells drilled during
the year.

With the expansion and success of our drilling program over the past five
years, we are able to maintain a disciplined approach to proved reserve
acquisitions. We pursue attractive acquisition opportunities to expand our
inventory of drilling locations and to realize operating and marketing synergies
within our Core Areas. Over the five-year period ended December 31, 1999, we
acquired 548 Bcfe of proved reserves at a cost of $.99 per Mcfe. Production
replacement through both proved reserve acquisitions and drilling activities was
278% during the same period.

By operating properties that contain over 80% of our proved reserves, we are
better able to control the selection, timing and costs of our exploration,
development and production activities. Our efforts to manage and reduce per unit
operating and overhead costs have led to a 15% decrease in such costs over the
past four years. With a low cost structure and high price realizations due to
volume aggregations in our Core Areas we believe our $1.59 per Mcfe operating
cash margin (oil and gas sales less operating and overhead costs) in 1999 was
among the highest reported by any peer company.

Our principal executive office is located at 14000 Quail Springs Parkway,
Suite 600, Oklahoma City, Oklahoma 73134, and our telephone number is
(405) 749-1300.

S-3
<PAGE>
BUSINESS STRATEGY

Our objective is to increase shareholder value by achieving consistent
growth in reserves, production, operating cash flow and earnings. We seek to
achieve this objective by implementing the following strategies:

DOMESTIC NATURAL GAS FOCUS. Since 1990 we have concentrated our drilling
and acquisition efforts on building a large domestic natural gas reserve
position. We believe the supply and demand fundamentals for domestic natural gas
are favorable for continued strength in natural gas prices in the future. Our
1.3 Tcf of proved natural gas reserves in the United States at the end of 1999
ranks us in the top 10 of all independent exploration and production companies.

TIGHT GEOGRAPHIC CONCENTRATION. We have focused our assets and operations
in Core Areas with mature producing basins characterized by multiple pay sands
and significant potential for discovering, developing and aggregating natural
gas reserves. This large, concentrated property base gives us the size to
achieve economies in both drilling and operating cost savings and in product
price improvements. We owned 2.5 million gross acres and interests in
approximately 9,400 wells at the end of 1999.

GROWTH THROUGH DRILLING. Our primary growth strategy is to execute a
balanced exploration and development drilling program. We believe that a
successful drilling program is superior to an acquisition growth strategy in
delivering consistent production and reserve additions. Our low risk development
drilling program has been an important source of production and reserve
additions and is concentrated in areas where multiple productive oil and gas
formations are likely to be encountered. Our expanded exploration activity
exposes us to significant production and reserve growth potential. We reduce
risk in our exploration drilling by utilizing our considerable knowledge base
and technical expertise gained as a result of:

- Extensive operating and drilling experience in our Core Areas;

- 32 geoscientists and reservior engineers averaging over 20 years of
experience;

- use of 3-D seismic analysis, computer aided mapping and reservoir
simulation modeling.

STRATEGIC ACQUISITIONS. We pursue attractive proved reserve acquisitions
which complement our other strategies. The following criteria are used to screen
acquisition opportunities:

- domestic natural gas reserves;

- geographic concentration in our Core Areas;

- additional exploration and development potential;

- high degree of operatorship.

These criteria combined with our technical and operating expertise allow us to
achieve operating synergies and to integrate acquisitions with minimal
incremental administrative cost. We acquired 548 Bcfe of proved reserves at an
average cost of $0.99 per Mcfe over the five-year period ending December 31,
1999. We believe these results compare favorably to industry averages.

FINANCIAL FLEXIBILITY. We emphasize conservative capitalization in order to
maintain operating and financial flexibility to fund acquisitions and
exploration and development drilling. Additionally, we manage a portion of the
operating cash flow risk associated with decreases in prices of natural gas and
crude oil by entering into fixed-price contracts. Proceeds from this offering
will be used to repay the majority of the debt incurred in connection with the
Costilla Acquisition, leaving approximately $135 million of our revolving credit
facility undrawn, assuming a public offering price of $32.94 per share.

S-4
<PAGE>
RECENT EVENTS

COSTILLA ACQUISITION SUMMARY

On June 15, 2000, we acquired substantially all of the oil and gas
properties of Costilla Energy, Inc. for approximately $126 million. The acquired
properties are comprised of the following as of the acquisition date:

- 135 Bcfe of total proved reserves

- 117 Bcf of proved natural gas reserves (87% of total proved reserves)

- 99 Bcfe of proved developed reserves (74% of total proved reserves)

- 1,011 gross producing wells

- 607 net producing wells

- 564 operated wells (56% of total well count and representing approximately
80% of net daily production)

- 307,042 gross acres

- 165,039 net acres

- 44 MMcfe of average net daily production

The Costilla properties are primarily located within our three Core Areas. A
substantial portion of the total identified value is contained within fields in
which we have a significant ownership position, the largest being the SW Speaks
field in Lavaca County, Texas. Because of our knowledge base in these fields, we
have already identified significant exploration and development potential for
future reserve additions. Other Costilla acreage is primarily located adjacent
to where we are conducting an active drilling program and have enjoyed
considerable success. We expect that this acreage position will also make a
significant contribution to future reserve growth. We presently own
approximately 334 square miles of 3D seismic data covering portions of the
Costilla acreage, including acreage we expect to contribute to future reserve
additions.

We believe that the return on investment from these properties will greatly
benefit from operational synergies due to their close proximity to our existing
property base. We expect these synergies to result in lower operating costs,
improved commodity price realizations and substantially lower overhead costs
than had historically been incurred or realized by Costilla for these same
properties.

The purchase price for the Costilla Acquisition has been funded through
availability under our revolving bank credit facility. Proceeds from this
offering will be used to repay the majority of the debt incurred to fund the
acquisition. This will allow us to pursue our 2000 drilling program without
reducing our $210 million capital budget, and to invest an additional $8 million
during 2000 in drilling on the Costilla properties.

We have entered into two costless collars to hedge a portion of the
production from the acquisition. The first collar hedges 20 MMcf per day for
2001 at a floor price of $3.13 and a ceiling price of $4.25 per MMBtu. The
second collar hedges 20 MMcf per day in 2002 at a floor price of $2.84 and a
ceiling price of $3.94 per MMBtu. We may decide to hedge additional production
from the acquisition in the future.

UNAUDITED SELECTED PRO FORMA FINANCIAL AND OPERATING INFORMATION

Provided below is summary selected pro forma financial and operating data
which gives effect to the Costilla Acquisition, the offering of the 3,000,000
shares hereby and the use of proceeds from the offering to reduce debt. The
historical financial information for the periods indicated should be read in
conjunction with our consolidated financial statements and related notes and the
section "Management's Discussion and Analysis of Financial Condition and Results
of Operations"

S-5
<PAGE>
incorporated by reference in the accompanying prospectus. The summary historical
financial information as of and for the three months ended March 31, 2000 and
the pro forma financial information is unaudited. The historical results for the
three months ended March 31, 2000 and the pro forma financial results are not
necessarily indicative of our future performance.

The following unaudited pro forma income statement data, statement of cash
flows data and operating information for the three months ended March 31, 2000
and the year ended December 31, 1999 give effect to the Costilla Acquisition, as
adjusted for the offering of the 3,000,000 shares hereby and the use of proceeds
from the offering to reduce debt, as if they had occurred on January 1, 1999.
The pro forma balance sheet information gives effect to the Costilla
Acquisition, the offering and the use of proceeds to reduce debt as if they had
occurred on March 31, 2000. Proceeds from the offering are based on the issuance
of 3,000,000 shares at an assumed offering price of $32.94 per share, the
closing price of our common stock on June 14, 2000. This pro forma information
has been prepared pursuant to regulations prescribed by the Securities and
Exchange Commission. The unaudited pro forma income statement data, statement of
cash flows data and operating information do not consider the effects of any
operating synergies expected to be realized upon our taking control of the
Costilla properties.

PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
--------------------------- ---------------------------
PRO FORMA(1) PRO FORMA(1)
HISTORICAL AS ADJUSTED HISTORICAL AS ADJUSTED
------------ ------------- ------------ -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>

<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas sales....................................... $ 87,363 $ 98,083 $ 290,878 $ 331,108
Change in derivative fair value......................... (8,163) (8,163) (442) (442)
Other income............................................ 1,254 1,254 12,170 12,170
------------ ----------- ------------ -----------
Total revenues...................................... 80,454 91,174 302,606 342,836
------------ ----------- ------------ -----------
Operating costs......................................... 17,154 20,110 66,039 79,190
General and administrative.............................. 6,092 6,264 23,995 24,685
Exploration costs....................................... 3,243 3,243 14,258 14,258
Depreciation, depletion and amortization................ 30,258 34,670 117,080 138,935
Impairment(2)........................................... -- -- 4,877 4,877
Interest................................................ 9,426 9,986 40,667 42,906
------------ ----------- ------------ -----------
Total expenses...................................... 66,173 74,273 266,916 304,851
------------ ----------- ------------ -----------
Income before income taxes.............................. 14,281 16,901 35,690 37,985
Income taxes............................................ 5,426 6,422 14,276 15,148
------------ ----------- ------------ -----------
Net income.............................................. $ 8,855 $ 10,479 $ 21,414 $ 22,837
============ =========== ============ ===========
Net income per share--basic and diluted................. $ .22 $ .24 $ .53 $ .53
============ =========== ============ ===========
Weighted average number of common shares
Basic............................................... 40,235 43,235 40,153 43,153
Diluted............................................. 40,804 43,804 40,389 43,389
STATEMENT OF CASH FLOWS DATA:
Net cash provided by operating activities............... $ 51,740 $ 58,772 $ 181,556 $ 205,706
EBITDAX(3).............................................. 65,371 72,963 213,014 239,403
BALANCE SHEET DATA (AT END OF PERIOD):
Oil and gas properties, net............................. $ 1,135,480 $ 1,266,984 $ 1,104,804 n/a
Total assets............................................ 1,248,096 1,379,152 1,227,087 n/a
Long-term debt, including current portion............... 561,520 593,091 555,222 n/a
Stockholders' equity.................................... 486,777 580,262 498,782 n/a
</TABLE>

------------------------
(1) On June 15, 2000, we purchased substantially all of the oil and gas
properties of Costilla Energy, Inc. for approximately $126 million. The
acquisition will be accounted for using the purchase method of accounting.
The preceding pro forma information includes the following adjustments:

S-6
<PAGE>
INCOME STATEMENT DATA

- Our historical revenue and operating cost information presented above has
been adjusted for the historical direct revenues and operating expenses
attributable to the Costilla properties acquired.

- Our historical general and administrative costs have been adjusted to
reflect the incremental overhead costs expected to be incurred to manage
the Costilla properties.

- Our historical depreciation, depletion and amortization expense has been
adjusted to reflect the allocation of the purchase price to the Costilla
properties. Depreciation, depletion and amortization expense has been
calculated based on the units of production method.

- Our historical interest expense has been adjusted for the incremental debt
incurred to fund the Costilla acquisition, net of proceeds from the
offering.

- Our historical income taxes have been adjusted for the change in pro forma
net income at an effective income tax rate of 38%.

BALANCE SHEET INFORMATION

- Historical oil and gas properties and total assets have been adjusted for
the purchase price of the Costilla properties acquired.

- Historical long-term debt has been adjusted for the increase in
indebtedness advanced to fund the purchase price of the Costilla
properties, as reduced by the estimated net proceeds from the offering.

- Historical stockholders' equity has been adjusted for the effect of the
offering.

(2) The 1999 impairment charge resulted primarily from downward reserve
revisions for certain offshore properties.

(3) EBITDAX is defined as income (loss) before interest, income taxes,
depreciation, depletion and amortization, impairment and exploration costs.
We believe that EBITDAX is a financial measure commonly used in the oil and
gas industry as an indicator of a company's ability to service and incur
debt. However, EBITDAX should not be considered in isolation or as a
substitute for net income, cash flows provided by operating activities or
other data prepared in accordance with generally accepted accounting
principles, or as a measure of a company's profitability or liquidity.
EBITDAX measures as presented may not be comparable to other similarly
titled measures of other companies.

S-7
<PAGE>
PRO FORMA OPERATING DATA

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------------------- ---------------------------
HISTORICAL PRO FORMA(1) HISTORICAL PRO FORMA(1)
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
PRODUCTION:
Oil production (MBbls)..................................... 699 815 2,965 3,503
Natural gas production (MMcf).............................. 27,588 30,903 107,979 124,620
Equivalent production (MMcfe).............................. 31,782 35,793 125,769 145,638

AVERAGE SALES PRICE:
Oil price (per Bbl):
Wellhead price......................................... $ 27.10 $ 27.02 $ 17.32 $ 17.27
Effect of Fixed-Price Contracts(2)..................... (3.81) (3.26) (.56) (.47)
--------- ----------- ------------ -----------
Total.................................................. $ 23.29 $ 23.76 $ 16.76 $ 16.80
========= =========== ============ ===========
Natural gas price (per Mcf):
Wellhead price......................................... $ 2.52 $ 2.50 $ 2.20 $ 2.16
Effect of Fixed-Price Contracts(2)..................... .06 .05 .03 .02
--------- ----------- ------------ -----------
Total.................................................. $ 2.58 $ 2.55 $ 2.23 $ 2.18
========= =========== ============ ===========

Average sales price (per Mcfe)............................. $ 2.75 $ 2.74 $ 2.31 $ 2.27

OPERATING AND OVERHEAD COSTS (PER MCFE):
Lease operating expenses................................... $ .40 $ .42 $ .41 $ .42
Production taxes........................................... .14 .14 .12 .12
General and administrative................................. .19 .18 .19 .17
--------- ----------- ------------ -----------
Total...................................................... $ .73 $ .74 $ .72 $ .71
========= =========== ============ ===========

CASH OPERATING MARGIN (PER MCFE)........................... $ 2.02 $ 2.00 $ 1.59 $ 1.56
</TABLE>

------------------------

(1) On June 15, 2000, we purchased substantially all of the oil and gas
properties of Costilla Energy, Inc. for approximately $126 million. The pro
forma information presented above adjusts our historical operating
information for the historical operating information attributable to the
acquired Costilla properties for the corresponding periods. Our historical
general and administrative cost information has been adjusted to reflect the
incremental overhead costs expected to be incurred to manage the Costilla
properties.

(2) Effect of Fixed-Price Contracts represents the hedging results from our
Fixed-Price Contracts.

S-8
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock offered by Louis Dreyfus Natural
Gas........................................ 3,000,000 shares

Common stock offered by selling
shareholder................................ 2,000,000 shares

Total common stock offered................... 5,000,000 shares

Common stock to be outstanding after this
offering................................... 43,752,931 shares(1)

Use of proceeds.............................. To reduce debt under our revolving bank
credit facility incurred in connection with
the Costilla Acquisition. See "Use of
Proceeds."

New York Stock Exchange Symbol............... LD
</TABLE>

------------------------

(1) Does not include 750,000 shares of common stock that may be sold by us upon
exercise of the underwriters' overallotment option, 1,815,984 shares of
common stock reserved for issuance pursuant to outstanding stock options at
an average exercise price of $17.57 per share, and 1,247,837 shares of
common stock reserved for issuance pursuant to outstanding stock purchase
warrants at an average exercise price of $17.81 per share. In addition, an
aggregate of 411,145 shares are available to be granted under our Stock
Option Plan.

RISK FACTORS

You should consider carefully the "Risk Factors" beginning on page S-13 of
this prospectus supplement before making an investment in the common stock.

S-9
<PAGE>
SUMMARY FINANCIAL DATA

The following table presents a summary of our financial information for the
periods indicated. It should be read in conjunction with our consolidated
financial statements and related notes and the section "Management's Discussion
and Analysis of Financial Condition and Results of Operations" incorporated by
reference in the accompanying prospectus. The summary financial information as
of and for the three months ended March 31, 2000 and 1999, is unaudited. The
results for the three months ended March 31, 2000 are not necessarily indicative
of the results to be expected for the full year.

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
2000 1999 1999 1998 1997(4) 1996 1995
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Oil and gas sales............................ $ 87,363 $ 58,155 $ 290,878 $ 271,575 $ 222,016 $ 185,558 $ 163,366
Change in derivative fair value.............. (8,163) (2,975) (442) 17,346 -- -- --
Other income (loss).......................... 1,254 1,943 12,170 4,462 10,901 3,947 (418)
--------- --------- --------- --------- --------- --------- ---------
Total revenues............................. 80,454 57,123 302,606 293,383 232,917 189,505 162,948
--------- --------- --------- --------- --------- --------- ---------
Operating costs.............................. 17,154 15,593 66,039 66,295 49,169 44,615 35,352
General and administrative................... 6,092 5,815 23,995 25,971 18,855 16,325 16,631
Exploration costs............................ 3,243 3,939 14,258 34,543 8,956 4,965 --
Depreciation, depletion and amortization..... 30,258 28,130 117,080 131,408 79,325 65,278 57,796
Impairment(1)................................ -- -- 4,877 52,522 75,198 -- 15,694
Interest..................................... 9,426 10,014 40,667 40,849 28,737 26,822 21,736
--------- --------- --------- --------- --------- --------- ---------
Total expenses............................. 66,173 63,491 266,916 351,588 260,240 158,005 147,209
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
cumulative effect of accounting change..... 14,281 (6,368) 35,690 (58,205) (27,323) 31,500 15,739
Income taxes................................. 5,426 (2,547) 14,276 (13,924) (11,261) 10,398 4,722
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) before cumulative effect of
accounting change.......................... 8,855 (3,821) 21,414 (44,281) (16,062) 21,102 11,017
Cumulative effect of accounting change, net
of tax(2).................................. -- -- -- 964 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................ $ 8,855 $ (3,821) $ 21,414 $ (43,317) $ (16,062) $ 21,102 $ 11,017
========= ========= ========= ========= ========= ========= =========
Net income (loss) before cumulative effect of
accounting change per share................ $ .22 $ (.10) $ .53 $ (1.10) $ (.53) $ .76 $ .40
Cumulative effect of accounting change per
share(2)................................... -- -- -- .02 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share--basic and
diluted.................................... $ .22 $ (.10) $ .53 $ (1.08) $ (.53) $ .76 $ .40
========= ========= ========= ========= ========= ========= =========
Weighted average diluted common shares....... 40,804 40,110 40,389 40,107 30,233 27,810 27,804

STATEMENT OF CASH FLOWS DATA:
Net cash provided by operating activities.... $ 51,740 $ 32,958 $ 181,556 $ 147,438 $ 129,846 $ 101,761 $ 89,515
Net cash used in investing activities........ 62,930 54,069 167,662 215,274 216,603 150,857 171,540
Net cash provided by (used in) financing
activities................................. 6,776 19,412 (6,773) 64,837 84,546 55,261 80,629
EBITDAX(3)................................... 65,371 38,690 213,014 183,771 164,893 128,565 110,965

BALANCE SHEET DATA (AT END OF PERIOD):
Oil and gas properties, net.................. $1,135,480 $1,089,577 $1,104,804 $1,064,206 $1,077,091 $ 652,257 $ 584,900
Total assets................................. 1,248,096 1,269,942 1,227,087 1,283,808 1,210,954 733,613 634,937
Long-term debt, including current portion.... 561,520 618,440 555,222 596,844 563,344 343,907 314,760
Stockholders' equity(2)...................... 486,777 496,877 498,782 519,461 469,204 263,693 242,581
</TABLE>

------------------------------

(1) Impairment charges were recorded in 1995 in connection with the adoption of
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of." Substantially all of the 1997 impairment was
associated with the allocation of the purchase price to the properties
acquired in connection with our acquisition of American Exploration Company.
The 1998 impairment resulted primarily from a significant decline in oil
prices. The 1999 impairment resulted primarily from downward reserve
revisions for certain offshore properties.

(2) In 1998, we adopted SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities" which established new accounting and reporting
guidelines for derivative instruments and hedging activities. In addition to
the effect of this adoption on net income, stockholders' equity increased by
$93.3 million as a result of recognizing the fair value of our Fixed-

S-10
<PAGE>
Price Contracts in our balance sheet as of December 31, 1998 and
reclassifying deferred gains and losses from price risk management
activities to accumulated other comprehensive income.

(3) EBITDAX is defined as income (loss) before interest, income taxes,
depreciation, depletion and amortization, impairment, exploration costs and
change in derivative fair value. We believe that EBITDAX is a financial
measure commonly used in the oil and gas industry as an indicator of a
company's ability to service and incur debt. However, EBITDAX should not be
considered in isolation or as a substitute for net income, cash flows
provided by operating activities or other data prepared in accordance with
generally accepted accounting principles, or as a measure of a company's
profitability or liquidity. EBITDAX measures as presented may not be
comparable to other similarly titled measures of other companies.

(4) In October 1997, we closed an acquisition of American Exploration Company
which resulted in a significant increase in our size.

S-11
<PAGE>
SUMMARY OPERATING AND RESERVE DATA

The following table shows certain summary information with respect to
production and sales of oil and gas and related costs and estimates of our
proved reserves. We have prepared our estimates of proved reserves, the future
net revenues and the discounted present value. These estimates have been
reviewed and reported on by Ryder Scott Company, our independent petroleum
engineers. See "Business and Properties" and "Risk Factors."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCTION:
Oil production (MBbls).................... 699 742 2,965 3,430 2,088 1,849 1,695
Natural gas production (MMcf)............. 27,588 25,468 107,979 101,066 71,731 63,910 51,264
Equivalent production (MMcfe)............. 31,782 29,922 125,769 121,647 84,262 75,004 61,434
Percent of oil production hedged by
Fixed-Price
Contracts (%)........................... 72% 0% 19% 16% 33% 67% 86%
Percent of gas production hedged by
Fixed-Price Contracts (%)............... 29% 35% 55% 50% 60% 51% 62%
AVERAGE SALES PRICE:
Oil price (per Bbl):
Wellhead price.......................... $ 27.10 $ 11.09 $ 17.32 $ 12.42 $ 19.48 $ 21.29 $ 17.09
Effect of Fixed-Price Contracts(1)...... (3.81) -- (.56) .63 .38 (1.73) .64
--------- --------- --------- --------- --------- --------- ---------
Total................................... $ 23.29 $ 11.09 $ 16.76 $ 13.05 $ 19.86 $ 19.56 $ 17.73
========= ========= ========= ========= ========= ========= =========
Natural gas price (per Mcf):
Wellhead price.......................... $ 2.52 $ 1.67 $ 2.20 $ 2.03 $ 2.59 $ 2.32 $ 2.15
Effect of Fixed-Price Contracts(1)...... .06 .29 .03 .21 (.07) .02 .45
--------- --------- --------- --------- --------- --------- ---------
Total................................. $ 2.58 $ 1.96 $ 2.23 $ 2.24 $ 2.52 $ 2.34 $ 2.60
========= ========= ========= ========= ========= ========= =========
Average sales price (per Mcfe)............ $ 2.75 $ 1.94 $ 2.31 $ 2.23 $ 2.63 $ 2.47 $ 2.66
OPERATING AND OVERHEAD COSTS (PER MCFE):
Lease operating expenses.................. $ .40 $ .43 $ .41 $ .44 $ .45 $ .47 $ .47
Production taxes.......................... .14 .09 .12 .11 .14 .12 .11
General and administrative................ .19 .19 .19 .21 .22 .22 .27
--------- --------- --------- --------- --------- --------- ---------
Total..................................... $ .73 $ .71 $ .72 $ .76 $ .81 $ .81 $ .85
========= ========= ========= ========= ========= ========= =========
CASH OPERATING MARGIN (PER MCFE).......... $ 2.02 $ 1.23 $ 1.59 $ 1.47 $ 1.82 $ 1.66 $ 1.81
OTHER:
Depreciation, depletion and
amortization--oil and gas
properties(2)........................... $ .92 $ .89 $ .89 $ 1.04 $ .88 $ .82 $ .88
Reserve Replacement Cost(3)(4)............ n/a n/a .70 .85 1.81 .71 .70
ESTIMATED NET PROVED RESERVES (AS OF THE
RESPECTIVE YEAR-END):
Natural gas (MMcf)........................ n/a n/a 1,294,029 1,193,666 1,028,752 849,199 753,919
Oil (MBbls)............................... n/a n/a 28,372 24,416 29,109 23,497 20,360
Total (MMcfe)............................. n/a n/a 1,464,258 1,340,161 1,203,405 990,179 876,076
Reserve Replacement Ratio(4).............. n/a n/a 207% 219% 396% 254% 430%
Reserve Life (in years)(4)................ n/a n/a 11.6 11.0 10.7 13.2 14.3
Estimated Future Net Revenues
(MM$)(4)(5)............................. n/a n/a $ 2,136.0 $ 1,676.8 $ 1,926.0 $ 2,643.8 $ 1,092.4
Present Value (MM$)(4)(5)................. n/a n/a $ 1,049.7 $ 811.1 $ 1,002.6 $ 1,303.7 $ 524.4
</TABLE>

------------------------------

(1) Effect of Fixed-Price Contracts represents the realized hedging results from
our Fixed-Price Contracts.

(2) Does not include impairments.

(3) Amounts for 1997 include the allocated purchase price of our acquisition of
American Exploration Company.

(4) See "Certain Definitions."

(5) The prices used in calculating Estimated Future Net Revenues and the Present
Value do not consider our Fixed-Price Contracts for the corresponding
volumes and production periods. Estimated Future Net Revenues and the
Present Value give no effect to federal or state income taxes attributable
to estimated future net revenues. See "Business and Properties--Reserves."

S-12
<PAGE>
RISK FACTORS

Before you buy any shares of common stock offered by this prospectus
supplement and the accompanying prospectus you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors, together with all of the other information in this
prospectus supplement, the accompanying prospectus and the documents that are
incorporated by reference, before you decide to purchase any shares.

A SUBSTANTIAL DECREASE IN OIL AND NATURAL GAS PRICES WOULD HAVE A MATERIAL
IMPACT ON US

Our future financial condition and results of operations are dependent upon
the prices we receive for our oil and natural gas production. Oil and natural
gas prices historically have been volatile and likely will continue to be
volatile in the future. This price volatility also affects our common stock
price. Natural gas prices affect us more than oil prices because most of our
production and reserves are natural gas. In 1999, we received gas prices at the
wellhead ranging from $1.59 to $2.93 per Mcf and in the first three months of
2000, we received gas prices ranging from $2.27 to $2.66 per Mcf. We cannot
predict oil and natural gas prices and prices may decline in the future. The
following factors have an influence on oil and natural gas prices:

- relatively minor changes in the supply of and demand for oil and natural
gas;

- weather conditions;

- market uncertainty;

- domestic and foreign governmental regulations;

- the availability and cost of alternative fuel sources;

- the domestic and foreign supply of oil and natural gas;

- the price of foreign oil and natural gas;

- political conditions in oil and natural gas producing regions, including
the Middle East; and

- overall economic conditions.

OUR HEDGING ACTIVITIES MAY PREVENT US FROM TAKING FULL ADVANTAGE OF INCREASES IN
OIL AND NATURAL GAS PRICES AND MAY EXPOSE US TO OTHER RISKS INVOLVED WITH
HEDGING

We have entered into Fixed-Price Contracts covering a significant portion of
our anticipated future production from existing proved oil and natural gas
reserves and may enter into similar hedging arrangements in the future. For the
years ended December 31, 1999 and 1998, Fixed-Price Contracts hedged 55% and
50%, respectively, of our natural gas production and 19% and 16%, respectively,
of our oil production. For the three months ended March 31, 2000, these
contracts hedged 29% of our natural gas production and 72% of our crude oil
production. As of March 31, 2000, Fixed-Price Contracts hedged 174 Bcfe of our
natural gas and oil expected to be produced in future periods, representing 12%
of our estimated proved reserves at December 31, 1999. Since March 31, 2000, we
have hedged an additional 16 Bcfe of production. Our Fixed-Price Contracts are
generally designed to set a minimum price that we will receive for a set volume
of production of natural gas or crude oil during a set period of time. These
arrangements reduce our risk to declining oil and natural gas prices, but also
limit our ability to benefit from any price increases to the extent prices are
higher than the prices in our Fixed-Price Contracts. If we do not produce enough
oil or natural gas to satisfy the set volumes of the Fixed-Price Contracts, we
would be required to satisfy our requirements under the Fixed-Price Contracts on
potentially unfavorable terms without the ability to offset that risk through
sales of comparable quantities of our own production.

S-13
<PAGE>
Our Fixed-Price Contracts also are subject to the risk that the other party
to the agreement may be unwilling or unable to satisfy its obligations under the
Fixed-Price Contract. In the case of a default and cancellation or termination
of a Fixed-Price Contract by the other party to the agreement, a greater portion
of our oil and natural gas production would be subject to market prices, which,
if the price of oil or natural gas is low, could have an adverse effect on our
future operating results. In addition, the associated carrying value of the
canceled or terminated contract would be removed from our balance sheet.

We are also required to post margin in the form of bank letters of credit or
treasury bills under certain of our Fixed-Price Contracts. In some cases the
amount of margin is fixed and in other cases the amount changes as the market
value of the respective contract changes, or if certain financial tests are not
met. If natural gas prices rise, or if we fail to meet the financial tests
contained in certain of our Fixed-Price Contracts, margin requirements could
increase significantly. We believe that we will be able to meet margin
requirements through credit lines that we have or may obtain in the future. If
we are unable to meet our margin requirements, we could be forced to terminate a
contract and be required to pay damages to the other parties to the contract.
The damages generally approximate the cost the other party would incur in
replacing the contract.

ESTIMATING OUR RESERVES, FUTURE NET CASH FLOWS AND FAIR VALUE OF FIXED-PRICE
CONTRACTS IS DIFFICULT TO DO WITH ANY CERTAINTY

There are numerous uncertainties inherent in estimating quantities of proved
oil and natural gas reserves and their values, including many factors beyond our
control. The reserve data included or incorporated by reference in this
prospectus supplement and accompanying prospectus represent only estimates.
Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be measured in an exact manner.
The accuracy of any reserve estimate is a function of the quality of available
data, the precision of the engineering and geological interpretation, and
judgment. As a result, estimates of different engineers often vary. The
estimates of reserves, future cash flows and present value are based on various
assumptions, including those prescribed by the Securities and Exchange
Commission, and are inherently imprecise. Actual future production, cash flows,
taxes, development expenditures, operating expenses and quantities of
recoverable oil and natural gas reserves may vary substantially from our
estimates. Also, the use of a 10% discount factor for reporting purposes may not
necessarily represent the most appropriate discount factor, given actual
interest rates and risks to which our business or the oil and natural gas
industry in general are subject.

Quantities of proved reserves are estimated based on economic conditions,
including oil and natural gas prices in existence at the date of assessment. Our
reserves and future cash flows may be subject to revisions, based upon changes
in economic conditions, including oil and natural gas prices, as well as due to
production results, results of future development, performance of the other
parties under our Fixed-Price Contracts, operating and development costs, and
other factors. Downward revisions of our reserves could have an adverse affect
on our financial condition and operating results.

The fair value of our Fixed-Price Contracts is estimated based on market
prices of natural gas and crude oil for the periods covered by the contracts,
many of which last for several years, as well as our estimate of counterparty
performance and credit risk. The terms and conditions of our fixed price
physical delivery contracts and certain financial swaps are uniquely tailored to
our circumstances. Also, the determination of market prices for natural gas
beyond a five-year horizon is subject to significant judgment and estimation. As
a result, the fair value of our Fixed-Price Contracts as reflected in our
financial statements does not necessarily represent the value a third party
would pay to assume our positions.

S-14
<PAGE>
WE MAY INCUR ADDITIONAL WRITE-DOWNS OF THE CARRYING VALUES OF OUR PROPERTIES

Accounting rules require that we review periodically the carrying value of
our oil and gas properties for possible impairment. Based on specific market
factors and circumstances at the time of prospective impairment reviews, and the
continuing evaluation of development plans, production data, economics and other
factors, we may be required to write down the carrying value of oil and gas
properties. A write-down constitutes a charge to earnings, but does not impact
our cash flows from operating activities. We incurred impairment charges
totaling $4.9 million in 1999 and $52.5 million in 1998. Future impairment
charges may occur which would have a material adverse effect on our net income
in the period taken, but would not affect our cash flows.

OUR FUTURE PERFORMANCE DEPENDS UPON OUR ABILITY TO FIND OR ACQUIRE ADDITIONAL
OIL AND NATURAL GAS RESERVES THAT ARE ECONOMICALLY RECOVERABLE

Unless we successfully replace the reserves that we produce, our reserves
will decline, resulting eventually in a decrease in oil and natural gas
production and lower revenues and cash flows from operations. We historically
have succeeded in replacing reserves through drilling and acquisitions. We may
not be able to continue to replace reserves at acceptable costs. The business of
exploring for, developing or acquiring reserves is capital intensive. We may not
be able to make the necessary capital investment to maintain or expand our oil
and natural gas reserves if cash flows from operations are reduced, due to lower
oil and natural gas prices or otherwise, or if external sources of capital
become limited or unavailable. In addition, our drilling activities are subject
to numerous risks, including the risk that no commercially productive oil or gas
reserves will be encountered. Exploratory drilling involves more risk than
development drilling because exploratory drilling is designed to test formations
for which proved reserves have not been discovered.

We are continually identifying and evaluating acquisition opportunities. We
cannot assure you that we will successfully consummate any future acquisition,
that we will be able to acquire producing oil and natural gas properties that
contain economically recoverable reserves or that any future acquisition will be
profitably integrated into our operations.

OPERATIONAL RISKS IN OUR BUSINESS ARE NUMEROUS AND COULD MATERIALLY IMPACT US

Our operations involve operational risks and uncertainties associated with
drilling for, and production and transportation of, oil and natural gas, all of
which can affect our operating results. Our operations may be materially
curtailed, delayed or canceled as a result of numerous factors, including:

- the presence of unanticipated pressure or irregularities in formations;

- accidents;

- title problems;

- weather conditions;

- compliance with governmental requirements; and

- shortages or delays in the delivery of equipment.

Also, our ability to market oil and natural gas production depends upon
numerous factors, many of which are beyond our control, including:

- capacity and availability of oil and natural gas systems and pipelines;

- effect of federal and state production and transportation regulations; and

- changes in supply of and demand for oil and natural gas.

S-15
<PAGE>
WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE MATERIALLY IMPACTED
BY UNINSURED LOSSES

Our operations are subject to the risks inherent in the oil and natural gas
industry, including the risks of fire, explosions, blow-outs, pipe failure,
abnormally pressured formations and environmental accidents, such as oil spills,
gas leaks, salt water spills and leaks, ruptures or discharges of toxic gases.
If any of these risks occur in our operations, we could experience substantial
losses due to:

- injury or loss of life;

- severe damage to or destruction of property, natural resources and
equipment;

- pollution or other environmental damage;

- clean-up responsibilities;

- regulatory investigation and penalties; and

- other losses resulting in suspension of our operations.

In accordance with customary industry practice, we maintain insurance
against some, but not all, of the risks described above. The occurrence of an
uninsured loss could have a material adverse effect on our financial condition
or results of operations.

GOVERNMENTAL REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS

Our business is subject to certain federal, state and local laws and
regulations on taxation, the exploration for and development, production and
marketing of oil and natural gas, and environmental and safety matters. Many
regulations require drilling permits and govern the spacing of wells, rates of
production, prevention of waste and other matters. These regulations have
increased the costs of our operations. In addition, these or future regulations
could limit the total number of wells drilled or the allowable production from
successful wells which could limit our revenues.

In addition, we own operated and non-operated working interests in various
oil and natural gas leases in the Gulf of Mexico which were granted by the
federal government and administered by the federal agency, Minerals Management
Service, or MMS. These leases require compliance with detailed and extensive MMS
regulations relating to exploration, development, and production specifications
of offshore production facilities, and regulations governing the plugging and
abandoning of offshore wells and the removal of all production facilities. If
deemed to be a threat or harm to the environment, the MMS also may require any
company operating on federal leases to suspend or terminate activities in the
affected area.

Laws and regulations relating to our business frequently change, and future
laws and regulations, including changes to existing laws and regulations, could
adversely affect our business.

ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT OUR BUSINESS

In the event of a release of oil, gas or other pollutants from our
operations into the environment, we could incur liability for personal injuries,
property damage, cleanup costs and governmental fines. We could potentially
discharge these materials into the environment in any of the following ways:

- from a well or drilling equipment at a drill site;

- leakage from gathering systems, pipelines, transportation facilities and
storage tanks;

- damage to oil and natural gas wells resulting from accidents during normal
operations; and

- blowouts, cratering and explosions.

S-16
<PAGE>
In addition, because we acquire interests in properties that have been
operated in the past by others, we may be liable for environmental damage,
including historical contamination, caused by such former operators. In
connection with our acquisition of the Costilla properties, although we did not
explicitly assume responsibility for any environmental liabilities relating to
the acquired properties arising prior to the effective date of the purchase,
third parties could assert that we are responsible for pre-effective date
liabilities by virtue of our ownership of the properties and the seller is not
obligated to indemnify us. Additional liabilities could also arise from
continuing violations or contamination not discovered during our assessment of
the acquired properties.

In addition, as a result of our acquisition of American Exploration Company
in 1997, the Company is one of numerous defendants in a lawsuit pending in
Hidalgo County, Texas alleging $60 million in property damage and lost profits
and seeking remediation as a result of hydrocarbon contamination of the
groundwater within the City of McAllen, Texas. The plaintiffs' experts produced
reports that asserted the Company's gas wells and pipeline facilities were a
significant contributor to the contamination, although our investigation into
the matter has not found any leaks or spills from our facilities. Because the
results of litigation are inherently unpredictable, we cannot assure you that
the ultimate outcome of this lawsuit will not have a material adverse effect of
the Company.

COMPETITION IN THE OIL AND GAS INDUSTRY IS STRONG AND CAN HARM OUR BUSINESS

The oil and gas industry is highly competitive. We compete in the areas of
proved reserve and undeveloped acreage acquisitions and the development,
production and marketing of oil and natural gas, as well as contracting for
equipment and recruiting and retaining qualified employees. Our competitors
include major oil and natural gas companies, other independent oil and natural
gas concerns, natural gas marketing companies, and individual producers and
operators. Many of our competitors have financial and other resources which
substantially exceed those which are available to us. Competition in the regions
in which we own properties may result in occasional shortages or unavailability
of drilling rigs and other equipment used in drilling activities, as well as
limited availability of and access to pipelines. Competitive circumstances could
result in curtailment of activities, increased costs, delays or losses in
production or revenues, or cause interests in oil and natural gas leases to
lapse.

TWO PURCHASERS OF OUR OIL AND NATURAL GAS PRODUCTION ACCOUNTED FOR APPROXIMATELY
31% OF OUR TOTAL REVENUE IN 1999

Our oil and natural gas is sold at the wellhead under contracts with various
purchasers. However, approximately thirty one percent of our revenues from these
sales in 1999 came from two purchasers. Although alternative purchasers are
available to purchase our production at prices substantially similar to the
price we receive from our current major customers, the loss of one or both of
our major purchasers could have a material adverse effect on our operations and
financial condition.

WE ARE CONTROLLED BY A SINGLE SHAREHOLDER; PLEDGE OF SHARES

S.A. Louis Dreyfus et Cie beneficially owns approximately 51% of our
outstanding common stock and will continue to own 43% after this offering. As a
result of its ownership, S.A. Louis Dreyfus et Cie has the effective ability to
elect all of our directors and to control our business and affairs, including
decisions with respect to the acquisition or disposition of assets, the future
issuance of our common stock or other securities, dividend policy and decisions
with respect to our drilling, operating and acquisition expenditure plans. There
are no agreements that would prevent S.A. Louis Dreyfus et Cie from acquiring
additional shares of our common stock. S.A. Louis Dreyfus et Cie's ability to
prevent or effect a change in control could have an adverse effect on the market
price for our common stock. Approximately one-half of the shares owned by S.A.
Louis Dreyfus et Cie are required to be pledged to a judgment creditor of one of
its subsidiaries pending the outcome of an appeal of the

S-17
<PAGE>
judgment. This appeal is not expected to be completed until 2001. The judgment
occurred in a Texas state court and is unrelated to Louis Dreyfus Natural Gas.
The sale of all or a portion of these shares could result in a change in control
of Louis Dreyfus Natural Gas. See "Selling Shareholder."

FORWARD-LOOKING STATEMENTS

All statements made or incorporated by reference in this prospectus
supplement other than purely historical information are "forward-looking
statements" within the meaning of the federal securities laws. These statements
reflect our current expectations and are based on our historical operating
trends, proved reserve and Fixed-Price Contract positions and other currently
available information. Forward-looking statements include statements regarding
our future drilling plans and objectives and related exploration and development
budgets and number and location of planned wells and statements regarding the
quality of our properties and potential reserve and production levels. These
statements may be preceded by or followed by or otherwise include the words
"believes", "expects", "anticipates", "intends", "plans", "estimates",
"projects", or similar expressions or statements that certain events "will" or
"may" occur. These statements assume that no significant changes will occur in
the operating environment for our oil and gas properties and that there will be
no material acquisitions or divestitures except as otherwise described.

The forward-looking statements are subject to all the risks and
uncertainties incident to the acquisition, exploration, development and
marketing of oil and natural gas reserves, including the risks described under
"Risk Factors" above. We may also make material acquisitions or divestitures,
modify our Fixed-Price Contract positions or enter into financing transactions.
None of these events can be predicted with certainty and are not taken into
consideration in the forward-looking statements.

Statements concerning Fixed-Price Contract, interest rate swap and other
financial instrument fair values and their estimated contribution to our future
results of operations are based upon market information as of a specific date.
This market information is often a function of significant judgment and
estimation. Further, market prices for oil and gas and market interest rates are
subject to significant volatility.

For all of these reasons, our actual results may vary materially from the
forward-looking statements and there is no assurance that the assumptions we
have used are necessarily the most likely. We will not update any
forward-looking statements to reflect events or circumstances occurring after
the date the statement is made.

S-18
<PAGE>
USE OF PROCEEDS

We expect the net proceeds from the offering of 3,000,000 shares of common
stock sold by us to be approximately $93.5 million assuming a pubic offering
price of $32.94 per share, after deducting discounts to the underwriters and
estimated expenses of this offering that we will pay. If the underwriters
exercise in full their option to purchase additional shares, estimated net
proceeds that we will receive from the offering will increase to approximately
$117.0 million. We will not receive any proceeds from the sale of the 2,000,000
shares of common stock by the selling shareholder.

We plan to use the net proceeds from the offering to repay a majority of the
long-term debt borrowed under our revolving bank credit facility in connection
with the Costilla Acquisition. The offering will enable us to aggressively
pursue our $210 million capital expenditure program without curtailment, and to
invest an additional $8 million during 2000 in drilling activity on the Costilla
properties. As of March 31, 2000, the outstanding balance under our revolving
credit facility was $256 million, with an average interest rate of 6.6%.
Including the effect of interest rate swaps which hedge a portion of the
interest rate exposure attributable to this facility, the effective interest
rate was 6.0%. Our revolving credit facility has a final maturity of
October 14, 2002.

S-19
<PAGE>
CAPITALIZATION

The following table presents at March 31, 2000 our historical
capitalization, the pro forma effects of the Costilla Acquisition, and as
adjusted to give effect to this offering of 3,000,000 shares of common stock by
us and the application of the estimated net proceeds from this offering as
presented in "Use of Proceeds."

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and related notes incorporated by reference in the
accompanying prospectus.
<TABLE>
<CAPTION>
MARCH 31, 2000
------------------------------------------
<S> <C> <C> <C>
HISTORICAL PRO PRO FORMA
PRO FORMA FORMA AS ADJUSTED(2)
------------ ------------ ------------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt..................................... $ -- $ -- $ --
Long-term debt:
Bank revolving credit facility.................................... 255,600 381,104 287,171
Other bank debt................................................... 6,300 6,300 6,300
6 7/8% Senior Notes Due 2007, net of discount..................... 199,064 199,064 199,064
9 1/4% Senior Subordinated Notes Due 2004, net of discount........ 100,556 100,556 100,556
------------ ------------ ------------
Total long-term debt................................................ 561,520 687,024 593,091
------------ ------------ ------------
Stockholders' equity:
Common stock(1)................................................... 405 405 435
Additional paid-in capital........................................ 425,493 425,493 518,948
Retained earnings................................................. 37,004 37,004 37,004
Accumulated other comprehensive income(3)......................... 24,484 24,484 24,484
Treasury stock, at cost, 32,139 common shares..................... (609) (609) (609)
------------ ------------ ------------
Total stockholders' equity.......................................... 486,777 486,777 580,262
------------ ------------ ------------
Total capitalization.................................................. $ 1,048,297 $ 1,173,801 $ 1,173,353
============ ============ ============
</TABLE>

------------------------

(1) There were 40,519,504 shares of common stock issued and outstanding on
March 31, 2000, and 43,519,504 shares outstanding after giving effect to
this offering. The number of shares of common stock outstanding excludes
(a) 750,000 shares of common stock that may be sold by us upon exercise of
the underwriters' overallotment option, (b) 2,044,801 shares of common stock
reserved for issuance upon exercise of outstanding options granted under our
Stock Option Plan, at an average exercise price of $17.47 per share, and
(c) 1,247,837 shares of common stock reserved for issuance upon exercise of
outstanding stock purchase warrants, at an average exercise price of $17.81
per share. In addition, an aggregate of 431,145 shares are available to be
granted under our Stock Option Plan.

(2) Reflects the issuance of 3,000,000 shares of common stock by us at an
assumed public offering price of $32.94 per share, resulting in estimated
net proceeds of $93,485,000, of which $30,000 (equal to the par value of the
shares issued) is reflected in common stock and $93,455,000 is reflected in
additional paid-in capital. Also reflects the application of the net
proceeds to repay a majority of the debt incurred under the bank revolving
credit facility to fund the Costilla Acquisition.

(3) Accumulated other comprehensive income is primarily comprised of deferred
gains from Fixed-Price Contracts which were monetized prior to maturity,
shown net of deferred income tax effects.

S-20
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS

Our common stock is listed on the New York Stock Exchange and traded under
the symbol "LD." As of March 1, 2000, we estimate there were approximately
10,000 beneficial owners of our common stock. The high and low sales prices for
our common stock, as reported in the New York Stock Exchange composite
transactions for the periods indicated, were as follows:

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1998:
First Quarter................................................................................ $ 20.13 $ 16.50
Second Quarter............................................................................... 20.63 15.50
Third Quarter................................................................................ 19.00 10.50
Fourth Quarter............................................................................... 16.44 12.00

1999:
First Quarter................................................................................ 15.75 11.06
Second Quarter............................................................................... 22.00 14.25
Third Quarter................................................................................ 23.31 18.88
Fourth Quarter............................................................................... 21.50 16.00

2000
First Quarter................................................................................ 34.00 15.75
Second Quarter (through June 14)............................................................. 33.75 24.00
</TABLE>

We have not paid dividends, cash or otherwise, subsequent to the date of our
initial public offering of common stock in November 1993. Certain provisions of
the indenture agreement for our 9 1/4% Senior Subordinated Notes due 2004
restrict our ability to declare or pay cash dividends unless certain financial
ratios are maintained. Although it is not currently anticipated that any cash
dividends will be paid on the common stock in the foreseeable future, the Board
of Directors may review our dividend policy from time to time. In determining
whether to declare dividends and the amount of dividends to be declared, the
Board will consider relevant factors, including our earnings, capital needs and
general financial condition.

S-21
<PAGE>
BUSINESS AND PROPERTIES

GENERAL

Our principal executive office is located at 14000 Quail Springs Parkway,
Suite 600, Oklahoma City, Oklahoma 73134, and our telephone number is
(405) 749-1300.

BUSINESS STRATEGY

S-22
<PAGE>
future. Our 1.3 Tcf of proved natural gas reserves in the United States at the
end of 1999 ranks us in the top 10 of all independent exploration and production
companies.

- Extensive operating and drilling experience in our Core Areas;

- 32 geoscientists and reservior engineers averaging over 20 years of
experience;

- use of 3-D seismic analysis, computer aided mapping and reservoir
simulation modeling.

STRATEGIC ACQUISITIONS. We pursue attractive proved reserve acquisitions
which complement our other strategies. The following criteria are used to screen
acquisition opportunities:

- domestic natural gas reserves;

- geographic concentration in our Core Areas;

- additional exploration and development potential;

- high degree of operatorship.

FINANCIAL FLEXIBILITY. We emphasize conservative capitalization in order to
maintain operating and financial flexibility to fund acquisitions and
exploration and development drilling. Additionally, we manage a portion of the
operating cash flow risk associated with decreases in prices of natural gas and
crude oil by entering into fixed-price contracts. Proceeds from this offering
will be used to reduce debt incurred in connection with the Costilla
Acquisition, leaving approximately $135 million of our revolving credit facility
undrawn, assuming a public offering price of $32.94 per share.

PROPERTIES

Our oil and gas acquisition, exploration and development activities are
conducted mainly in our Core Areas:

- the Permian Region of West Texas, Southeast New Mexico and the San Juan
Basin;

- the Mid-Continent Region of Oklahoma, Kansas, the Panhandle of Texas, East
Texas, Southwest Arkansas and North Louisiana; and

- the Gulf Coast Region which includes South Texas and Offshore Gulf of
Mexico.

S-23
<PAGE>
Proved reserves as of December 31, 1999 consisted of 28 MMBbls of oil and 1.3
Tcf of natural gas, totaling 1.5 Tcfe. At year end, we had ownership interests
in approximately 9,400 producing wells. We operate 3,400 of these wells which
contain 83% of our total proved reserves. Net daily production during 1999 was
8.1 MBbls of oil and 295.8 MMcf of natural gas, or 344.6 MMcfe. We drilled 213
developmental oil and gas wells, 196 of which were completed as commercial
producers, and 16 exploratory wells, 14 of which were successfully completed,
during 1999.

We have allocated $210 million for our 2000 drilling program, subject to
revision based upon oil and gas prices, proved reserve acquisitions and other
factors. Approximately $50 million of this total, or 24%, has been allocated to
exploration activities and $160 million, or 76%, has been allocated to
development activities. We expect that this will result in the drilling of about
350 wells, including 20 exploratory wells and 330 development wells.

The proceeds from the offering will be used to reduce the majority of the
indebtedness incurred in connection with the Costilla Acquisition, enabling us
to aggressively pursue our $210 million capital expenditure program without
curtailment. We also intend to invest an additional $8 million during 2000 in
drilling activity on the Costilla properties. See "Use of Proceeds."

CORE AREAS

The following table sets forth certain information regarding our activities
in each of our principal producing areas as of December 31, 1999.

CORE AREAS

<TABLE>
<CAPTION>
MID- GULF
PERMIAN CONTINENT COAST OTHER TOTAL
--------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
PROPERTY STATISTICS:
Proved reserves (Bcfe).................................. 706 461 252 45 1,464
Percent of total proved reserves........................ 48% 32% 17% 3% 100%
Gross producing wells................................... 4,295 3,446 663 992 9,396
Net producing wells..................................... 1,959 1,089 198 163 3,409
Gross acreage........................................... 731,491 918,567 340,083 531,955 2,522,096
Net acreage............................................. 367,559 414,438 180,859 133,997 1,096,853
Potential drill sites................................... 850 400 75 250 1,575
1999 RESULTS:
Gross wells drilled..................................... 148 44 26 11 229
Gross successful wells.................................. 142 33 24 11 210
Drilling success........................................ 96% 75% 92% 100% 92%
Production (Bcfe)....................................... 39.9 39.3 43.8 2.8 125.8
Average net daily production (MMcfe).................... 109.4 107.6 119.9 7.7 344.6
Lease operating expense per Mcfe........................ $ .46 $ .43 $ .33 $ .51 $ .41
2000 DRILLING BUDGET (MM$):
Development............................................. $ 55 $ 38 $ 67 $ -- $ 160
Exploration............................................. 3 3 44 -- 50
--------- --------- --------- --------- ----------
Total................................................... $ 58 $ 41 $ 111 $ -- $ 210
========= ========= ========= ========= ==========
</TABLE>

PERMIAN REGION

We are actively involved in development and exploration activities in
several areas within the Permian Region. These areas include the Sonora Area and
the Delaware Basin of Southeast New Mexico, among others. Our properties in the
Permian Region contain 706 Bcfe of proved reserves, nearly one-half of our total
reserve base, in 4,295 wells. We drilled 148 wells in the Permian Region in

S-24
<PAGE>
1999 and daily production averaged 109 MMcfe per day. We have identified 850
undrilled locations in this region of which 310 have been assigned proved
undeveloped reserves. Plans for this region in 2000 include the drilling of more
than 250 wells and a total investment of $58 million, including acreage and
seismic acquisition.

SONORA AREA

The Sonora area is located in the West Texas counties of Schleicher,
Crockett, Sutton and Edwards. It is comprised of five fields: Sawyer, Shurley
Ranch, MMW, Aldwell Ranch and Whitehead, which are located on the northeast side
of the Val Verde Basin of West Central Texas. We have an average 88% working
interest in 1,785 wells, most of which we operate. Production is predominately
from the Canyon and the Strawn formations ranging in depths from 2,500 to 9,000
feet.

CANYON FORMATION. Natural gas in the Canyon formation is stratigraphically
trapped in lenticular sandstone reservoirs and the typical Sonora Area well
encounters numerous such reservoirs over the formation's gross thickness of
approximately 1,500 feet. The Canyon reservoirs tend to be discontinuous and to
exhibit low porosity and permeability, characteristics which reduce the area
that can be effectively drained by a single well. These characteristics have
encouraged operators in the area to undertake Canyon infill drilling programs.
Initial wells were drilled on 640 acre drilling units, but well performance
characteristics have indicated that denser well spacing is necessary for
effective drainage. We continue to drill infill wells in these units and, in
some areas, fields are now developed on 40 acre spacing.

STRAWN FORMATION. The Strawn formation, a shallow-marine, fossiliferous
limestone, produces natural gas from fractures and irregularly distributed
porosity trends draped across anticlinal features. Original field development
took place on 640 acre units, with subsequent infill programs downsizing some
areas to 80 acre density. Testing of the Strawn formation in Sonora wells, for
which the primary drilling objective was the Canyon formation, has been an
attractive play for us because the Strawn lies less than 1,000 feet below the
Canyon formation. Because of the closeness in depth, the incremental cost to
evaluate the Strawn formation has been relatively minor. The Strawn production
is generally commingled with the Canyon production stream.

We have maintained an aggressive development drilling program in the Sonora
Area since 1993, having drilled 707 Canyon and Strawn wells with only 23 dry
holes. The 1999 drilling program resulted in the drilling of 127 wells, 124 of
which were completed as commercial producers. We plan to drill approximately 150
wells in Sonora during 2000, the majority of which are relatively low risk
locations. We have identified over 575 potential locations on our acreage, of
which 266 have been assigned proved undeveloped reserves. Subject to further
study and drilling results, we believe additional proved reserves will
ultimately be attributed to many of the other locations. In addition to infill
drilling potential, many of our producing wells in the Sonora Area have
recompletion possibilities in existing wellbores.

SOUTHEAST NEW MEXICO

We are also active in southeastern New Mexico in the Delaware Basin, where
the primary objectives are the Morrow and Wolfcamp carbonate. The Morrow sands
are deposited in fluvial channels which trend from northwest to southeast. The
Wolfcamp carbonate in our area of interest is deposited in deep water alluvial
fans along a major reef complex and is primarily oil production. These
reservoirs exhibit excellent porosity and permeability at depths between 10,000
and 15,000 feet. These objectives also lend themselves to the use of modern
technology and computer aided mapping. It is anticipated that approximately 10
wells will be drilled for these objectives in 2000.

S-25
<PAGE>
MID-CONTINENT REGION

We have been actively involved in the Mid-Continent Region for more than
15 years, having acquired substantial acreage and proved reserve positions in
the area through multiple synergistic acquisitions. We operate approximately
1,260 wells in the Mid-Continent Region. Our properties are located in and along
the northern shelf of the Anadarko Basin in western Oklahoma, in the deeper
Anadarko Basin in the Texas Panhandle, and in Kansas. This region also includes
properties in the Smackover Trend in Southern Arkansas and the Oak Hill field in
East Texas. Development of our Mid-Continent Region properties began in the late
1970's. Production is predominately natural gas from productive formations of
Pennsylvanian and Pre-Pennsylvanian age rock. Productive depths range from 3,000
to 17,000 feet. Pre-Pennsylvanian reservoirs include the Chester, Mississippi
and Hunton formations, with greater production from these formations occurring
in highly fractured carbonate intervals. Pennsylvanian reservoirs include the
Granite Wash, Red Fork, Atoka, Morrow and Springer sandstones. The stratigraphic
nature of these reservoirs frequently provides for multiple targets in the same
wellbores. Spacing in these formations is generally on 640 acres with extensive
increased density drilling having occurred over the last 15 years. Two primary
areas of focus in the Mid-Continent are the Watonga-Chickasha Trend and the
Tuttle field in central Oklahoma.

We have pursued an active low-risk infill drilling program in the
Mid-Continent area over the past five years, including the drilling of 44 wells
in 1999. Average net daily production was 108 MMcfe per day for this region in
1999. We have ownership in 3,446 wells with proved reserves of 461 Bcfe. We have
identified 400 undrilled locations in the Mid-Continent Region, of which 148
have been assigned proved undeveloped reserves. We plan to drill approximately
60 wells in this area during 2000, with the primary development focus being the
higher potential Morrow/Springer sand subcrop in the Watonga-Chickasha Trend.

WATONGA-CHICKASHA TREND

These Morrow/Springer sands, located in central Oklahoma, were deposited as
bars and channels along an ancient coast line more than 350 miles long. These
sands exhibit excellent porosity and permeability at depths of 10,000 to 13,000
feet. Multiple objectives of up to a dozen sands have allowed increased drilling
from one well per 640 acres to as many as four wells per 640 acres. The majority
of the wells drilled in this trend are lower risk development wells. We plan to
drill four exploratory tests seeking to discover new bars or channels and
approximately 40 development wells during 2000.

SMACKOVER TREND

Our operations in the Smackover Trend of Southwestern Arkansas are focused
primarily in the Midway field, which is operated by us. The Midway field is
located in Lafayette County, Arkansas and produces oil from the Smackover
formation at an average depth of 6,500 feet. We own an average of 79% working
interest in this mature waterflood unit.

GULF COAST REGION

We have been active in the Gulf Coast Region since our initial entry through
an acquisition in 1991. Development drilling on these acquired properties began
in 1992 and continued into 1999. Presently, we are actively involved in an
exploration and development program in South Texas and offshore in the Gulf of
Mexico. Our properties in this region number approximately 663 wells and include
252 Bcfe of proved reserves. We drilled 26 wells in the Gulf Coast Region during
1999 and daily production averaged 120 MMcfe per day. We have identified 75
undrilled locations in this region of which 38 have been assigned proved
undeveloped reserves. Plans for this region in 2000 include the drilling of more
than 40 wells and a total investment of $111 million, including acreage and
seismic acquisition.

S-26
<PAGE>
LAVACA COUNTY AREA

We began our involvement in Lavaca County, Texas, in 1996 to explore and
drill primarily for the Lower Wilcox formation. Secondary targets include the
shallower Upper Wilcox, Miocene, Frio and Yegua targets. Working interests in
these projects, including the Yoakum Gorge and S.W. Speaks projects, initially
ranged from 25% to 35%. Subsequent acquisitions in 1997 and 1998 have more than
doubled our interests in these projects. We have additionally expanded our
position in the Wilcox trend further to the east to include the Provident City
field.

We now hold working interests ranging from 30% to 87.5% in 60,000 gross
acres in Lavaca County, Texas. Since this project began, we have participated in
50 Lower Wilcox wells, over 90% of which have successfully been completed as
producers. Approximately 200 square miles of high-fold 3D seismic data was
obtained in 1996 and 1997 which continues to be evaluated. An additional 50
square miles of 3D seismic was shot on the South Borchers prospect in late 1998
which is a southern extension to existing data. We also participated in a
60-plus square mile 3D shoot to the west of our current acreage holdings in
1999. The target zones are the Lower Wilcox sands from 10,000 to 17,000 feet and
the shallow Miocene, Frio, Yegua and Upper Wilcox sands ranging in depth from
3,500 to 8,000 feet.

Our Lower Wilcox drilling program in 1999 resulted in the successful
completion of 17 wells, including four exploratory tests. The Lower Wilcox sands
are part of an ancient deltaic system deposited across an unstable muddy
continental shelf. The rapid subsidence of the underlying beds allowed
accumulation of massive Wilcox sand packages with a high degree of structural
complexity. These deep structures present higher risk but have significant
potential, ranging up to 100 Bcf per field. Production rates for wells drilled
in this program have ranged as high as 30 MMcfe per day. Drilling plans for 2000
include approximately 20 Lower Wilcox wells in the Yoakum Gorge area, of which
five are expected to be exploratory.

WILCOX TREND

As an extension to our Wilcox success in Lavaca County, we acquired
leasehold positions in Zapata, Goliad and DeWitt Counties. In the En Seguido
field located in Zapata County, we drilled the Laura Lopez #1 and #2 wells,
which are currently producing at rates of 16 MMcf and 32 MMcf of natural gas per
day, respectively. We have an average working interest of approximately 40% in
these two wells. In total, we own approximately 5,300 gross acres in the En
Sequido area with working interests ranging from 38% to 100% and we plan to
drill five wells in 2000. We also plan to drill exploratory tests in 2000 on
three new prospects, the Comitas, Fandango and Loma Vieja prospects using our
500 square miles of 3D seismic information. Our working interests range from 75%
to 100% in these projects.

In Goliad County, we acquired approximately 3,100 gross acres in two
prospects, the Cologne and Swickheimer prospects. Our working interests in these
prospects range from 37% to 54%. Two successful exploratory tests in the Lower
Wilcox have been drilled and are undergoing completion. A third well is planned
for the second half of 2000.

VICKSBURG TREND

In South Texas, the late Oligocene Vicksburg formation is a prolific
producer from shelf-edge delta sand reservoirs. The depositional environments
responsible for these sands include delta flanks and their associated shore
zones, strand plains and barrier systems. The extensively growth-faulted
Vicksburg deltas within the Rio Grande embayment contain numerous anticlinal and
fault closures and structural/stratigraphic combination trapping situations.
During 1999, we acquired approximately 7,900 gross acres in the Tabasco prospect
located in Hidalgo County with a net working interest of 75% and in early 2000
acquired approximately 1,300 gross acres in the Lopez Ranch prospect in Brooks
County, with a net working interest of 50%. An exploratory test for the
Vicksburg sand in the Tabasco prospect

S-27
<PAGE>
is currently drilling. An exploratory test in the Lopez Ranch prospect is
planned for the second half of 2000.

OFFSHORE AREA

We own working interests in twelve operated and eight outside-operated oil
and gas production platforms and 148,000 acres, and own over three thousand
square miles of 3D seismic data in the Gulf of Mexico. Average net daily
production from our offshore properties was 51 MMcfe per day in 1999.

TEXAS STATE WATERS. We own an average 79% working interest in more than
38,000 gross acres in the Texas State Waters area. In addition, we have acquired
3,000 square miles of 3D seismic data in this offshore area. High-quality 3D
seismic information for the Texas State Waters previously was unavailable due to
the inability of vessels towing seismic cables to operate in less than 60 feet
of water without damaging the seismic equipment. The advent of ocean-bottom
cabling has made the acquisition of high-quality 3D seismic information
economically feasible. We have identified several exploration prospects in the
shallow waters offshore in the Gulf of Mexico. We are currently seeking
participations from industry partners to limit our exposure in any one prospect
to a 50% working interest.

EAST CAMERON BLOCK 328. East Cameron Block 328 is located in federal
waters, offshore Louisiana, in approximately 240 feet of water. The block is on
the flank of a large salt feature with multiple sands located in several fault
blocks. Production is from the Trim A, Trim S and the HB-1 sands. The platform
produced 9 MMcfe per day during 1999.

HIGH ISLAND 45. High Island Block 45 is located in shallow federal waters,
offshore Texas. We are the operator and own an 83% working interest in this
block which produces from the Lower Miocene sands at an approximate depth of
11,000 feet. This platform averaged net daily production of 11 MMcfe during
1999. We acquired additional interest in this block during 1999.

RESERVES

The following table shows the estimated net quantities of our proved and
proved developed reserves as of December 31 for each year presented and the
Estimated Future Net Revenues and Present Values attributable to total proved
reserves at such dates.

S-28
<PAGE>
PROVED RESERVES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------

<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PRICE DATA)
<S> <C> <C> <C> <C> <C>
ESTIMATED PROVED RESERVES:
Natural gas (Bcf)....................................... 1,294.0 1,193.7 1,028.8 849.2 753.9
Oil (MMBbls)............................................ 28.4 24.4 29.1 23.5 20.4
Total (Bcfe)............................................ 1,464.3 1,340.2 1,203.4 990.2 876.1
Estimated Future Net Revenues........................... $ 2,136.0 $ 1,676.8 $ 1,926.0 $ 2,643.8 $ 1,092.4
Present Value........................................... $ 1,049.7 $ 811.1 $ 1,002.6 $ 1,303.7 $ 524.4

ESTIMATED PROVED DEVELOPED RESERVES:
Natural gas (Bcf)....................................... 1,064.7 1,026.8 899.2 709.7 630.6
Oil (MMBbls)............................................ 23.9 20.7 24.3 17.9 14.8
Total (Bcfe)............................................ 1,208.4 1,151.2 1,045.1 817.1 719.6

YEAR-END PRICES USED IN ESTIMATING FUTURE NET REVENUES:
Natural gas (per Mcf)................................... $ 2.19 $ 2.07 $ 2.49 $ 3.82 $ 2.02
Oil (per Bbl)........................................... $ 24.36 $ 9.46 $ 16.76 $ 24.70 $ 17.82
</TABLE>

No estimates of our proved reserves comparable to those included herein have
been included in reports to any federal agency other than the Securities and
Exchange Commission.

Our estimated proved reserves as of December 31, 1999 are based upon studies
prepared by our staff of engineers and reviewed by Ryder Scott Company,
independent petroleum engineers. Estimated recoverable proved reserves have been
determined without regard to any economic benefit that may be derived from our
Fixed-Price Contracts. Such calculations were prepared using standard geological
and engineering methods generally accepted by the petroleum industry and in
accordance with Securities and Exchange Commission guidelines. The Estimated
Future Net Revenues and Present Value were based on the engineers' production
volume estimates as of December 31, 1999. The amounts shown do not give effect
to indirect expenses such as general and administrative expenses, debt service
and future income tax expense or to depletion, depreciation and amortization.

We estimate that if all other factors (including the estimated quantities of
economically recoverable reserves) were held constant, a $1.00 per Bbl change in
oil prices and a $.10 per Mcf change in gas prices from those used in
calculating the Present Value would change such Present Value by $14 million and
$57 million, respectively, as of December 31, 1999.

The prices used in calculating the Estimated Future Net Revenues
attributable to proved reserves do not consider our Fixed-Price Contracts for
the corresponding volumes and production periods. These prices are on average
higher than spot market prices at December 31, 1999. If such Fixed-Price
Contract pricing were used at December 31, 1999, the Estimated Future Net
Revenues and the Present Value attributable to proved reserves would be
$2.2 billion and $1.1 billion, respectively.

There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing of development
expenditures, including many factors beyond our control. The reserve information
shown above is estimated. Reserve engineering is a subjective process of
estimating underground accumulations of oil and gas that cannot be measured in
an exact manner, and the accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. As a result, estimates of different engineers often vary. In addition,
results of drilling, testing and production subsequent to the date of an
estimate may justify revision of such estimate. Accordingly, reserve estimates
often differ from the

S-29
<PAGE>
quantities of oil and gas that are ultimately recovered. The meaningfulness of
such estimates is highly dependent upon the accuracy of the assumptions upon
which they were based.

For further information on reserves, future net revenues and the
standardized measure of discounted future net cash flows, see Note 14 of the
Notes to our Consolidated Financial Statements incorporated by reference in the
accompanying prospectus.

COSTS INCURRED AND DRILLING RESULTS

The following table shows certain information regarding the costs incurred
by us in our acquisition, exploration and development activities during the
periods indicated.

COSTS INCURRED
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Property acquisition costs:(1)
Proved........................... $ 36,881 $ 4,088 $ 349,037 $ 36,125 $ 118,652
Unproved......................... 10,766 11,815 109,648 6,934 1,717
---------- ---------- ---------- ---------- ----------
47,647 15,903 458,685 43,059 120,369
Exploration costs................ 19,409 74,123 21,514 10,610 391
Development costs................ 116,597 136,462 122,402 80,553 64,498
---------- ---------- ---------- ---------- ----------
Total $ 183,653 $ 226,488 $ 602,601 $ 134,222 $ 185,258
========== ========== ========== ========== ==========
</TABLE>

------------------------

(1) Proved and unproved property acquisition costs for 1997 include
$339.9 million and $98.0 million, respectively, of allocated purchase price
for the American Exploration Company acquisition.

We drilled or participated in the drilling of wells as set out in the table
below for the periods indicated.

WELLS DRILLED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996
---------------------- ---------------------- ---------------------- -----------

<CAPTION>
GROSS NET GROSS NET GROSS NET GROSS
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Development wells:
Gas..................................... 191 156 237 153 223 166 179
Oil..................................... 5 2 60 37 52 20 92
Dry..................................... 17 12 27 20 20 14 9
--------- --------- --------- --------- --------- --------- ---------
Total................................... 213 170 324 210 295 200 280
========= ========= ========= ========= ========= ========= =========
Exploratory wells:
Gas..................................... 13 8 13 8 32 24 18
Oil..................................... 1 1 1 1 4 3 --
Dry..................................... 2 2 13 9 12 9 7
--------- --------- --------- --------- --------- --------- ---------
Total................................... 16 11 27 18 48 36 25
========= ========= ========= ========= ========= ========= =========

<S> <C> <C> <C>
1995
----------------------
NET GROSS NET
--------- --------- ---------
<S> <C> <C> <C>
Development wells:
Gas..................................... 130 134 115
Oil..................................... 19 114 28
Dry..................................... 5 14 5
--------- --------- ---------
Total................................... 154 262 148
========= ========= =========
Exploratory wells:
Gas..................................... 6 3 1
Oil..................................... -- -- --
Dry..................................... 2 -- --
--------- --------- ---------
Total................................... 8 3 1
========= ========= =========
</TABLE>

As of December 31, 1999, we were involved in the drilling, testing or
completing of 10 gross (6 net) development wells and 1 gross (1 net) exploratory
well.

S-30
<PAGE>
ACREAGE

The following table shows our developed and undeveloped oil and gas lease
and mineral acreage as of December 31, 1999. Excluded is acreage in which our
interest is limited to royalty, overriding royalty and other similar interests.

ACREAGE

<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED
--------------------- ---------------------
<S> <C> <C> <C> <C>
GROSS NET GROSS NET
---------- --------- ---------- ---------
Core Area:
Permian....................................... 414,588 241,641 316,903 125,918
Mid-Continent................................. 530,284 271,251 388,283 143,187
Gulf Coast.................................... 157,154 67,540 182,929 113,319
Other......................................... 278,266 43,778 253,689 90,219
---------- --------- ---------- ---------
Total......................................... 1,380,292 624,210 1,141,804 472,643
========== ========= ========== =========
</TABLE>

PRODUCTIVE WELL SUMMARY

The following table shows our ownership in productive wells at December 31,
1999. Gross oil and gas wells include 160 wells with multiple completions. Wells
with multiple completions are counted only once for purposes of the following
table.

PRODUCTIVE WELLS

<TABLE>
<CAPTION>
PRODUCTIVE WELLS
--------------------
<S> <C> <C>
GROSS NET
--------- ---------
Gas.......................................................................... 5,833 2,816
Oil.......................................................................... 3,563 593
--------- ---------
Total........................................................................ 9,396 3,409
========= =========
</TABLE>

ACQUISITIONS

We have completed a significant number of proved reserve acquisitions during
the past five years, including three ranging in size from $87 million to
$340 million. In 1999, we completed only a nominal amount of acquisitions due to
high relative prices being asked by sellers of proved properties in relation to
market prices for oil and gas. The market for proved reserve acquisitions is
uncertain and we cannot predict the amount of capital ultimately to be invested
in acquisitions during 2000. Although a significant number of oil and gas
properties are predicted to be placed on the market, we expect higher oil and
gas commodity prices to raise sellers' price expectations. The following table
summarizes our acquisition activity for the five years ended December 31, 1999.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995 TOTAL
--------- --------- --------- --------- --------- ---------
Estimated proved reserves (Bcfe)(1)......................... 41 7 234 76 190 548
Acquisition cost (MM$)...................................... $ 36.9 $ 4.1 $ 349.0 $ 36.1 $ 118.7 $ 544.8
Acquisition cost per Mcfe(2)................................ $ .90 $ .56 $ 1.49 $ .48 $ .62 $ .99
</TABLE>

------------------------

(1) Based on the first year-end reserve report prepared following the
acquisition date as adjusted for production between the acquisition date and
year-end.

S-31
<PAGE>
(2) Results for 1997 include the purchase accounting impact of the American
Acquisition.

We are actively involved in the screening of potential acquisitions and the
development and implementation of strategies for specific acquisitions. Our
staff of reservoir engineers, geologists, production engineers, landmen and
accountants have substantial experience in evaluating and acquiring oil and gas
reserves. We primarily seek acquisitions in our Core Areas in which our
experience and existing operations will enable us to readily integrate the
acquired properties. Acquisitions are targeted which have significant further
development and exploration potential and a high degree of operatorship. We
prefer to operate our properties whenever possible in order to provide more
control over the operation and development of the properties and the marketing
of the production. We also pursue additional interests in our operated
properties from holders of non-operating interests to increase our percentage
ownership at attractive acquisition prices.

EMPLOYEES

As of March 1, 2000, we had approximately 400 employees. We believe that our
relations with our employees are satisfactory. Our employees are not covered by
a collective bargaining agreement.

S-32
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors are as follows.

<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------------------------------- ----------- -----------------------------------------------------
<S> <C> <C>
Mark E. Monroe....................................... 46 President and Chief Executive Officer
Jeffrey A. Bonney.................................... 44 Executive Vice President and Chief Financial Officer
Richard E. Bross..................................... 51 Executive Vice President--Land and Operations
Ronnie K. Irani...................................... 43 Executive Vice President--Engineering and Exploration
Kevin R. White....................................... 42 Executive Vice President--Corporate Development and
Strategic Planning and Secretary
Simon B. Rich, Jr.................................... 55 Chairman of the Board of Directors
Mark E. Andrews, III................................. 50 Vice Chairman of the Board of Directors
E. William Barnett................................... 67 Director
Daniel R. Finn, Jr................................... 56 Director
Peter G. Gerry....................................... 54 Director
Gerard Louis-Dreyfus................................. 67 Director
John H. Moore........................................ 74 Director
James R. Paul........................................ 65 Director
Nancy K. Quinn....................................... 46 Director
Ernest F. Steiner.................................... 58 Director
</TABLE>

All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. The executive
officers are elected by the Board of Directors and serve at its discretion.

The following is a brief description of the business background of each of
our executive officers and directors.

MARK E. MONROE is President and Chief Executive Officer and has been a
director since 1986. Mr. Monroe joined Louis Dreyfus Natural Gas in 1980, which
was then known as Bogert Oil Company and which was later acquired by S.A. Louis
Dreyfus et Cie, and served as Vice President and Chief Financial Officer of
Louis Dreyfus Natural Gas until April 1991. From April 1991 until
September 1993, Mr. Monroe served as a Vice President of Louis Dreyfus Energy
Corp., a former indirect subsidiary of S.A. Louis Dreyfus et Cie which was
engaged in oil and natural gas trading and marketing. Mr. Monroe rejoined Louis
Dreyfus Natural Gas Corp. in September 1993 and served as Chief Operating
Officer until his election to his present position in August 1996. Mr. Monroe
holds a B.B.A. from the University of Texas and is a Certified Public
Accountant.

JEFFREY A. BONNEY is Executive Vice President and Chief Financial Officer.
Mr. Bonney joined us in November 1993. From April 1990 to November 1993,
Mr. Bonney was the Vice President and Controller of Hadson Energy Resources
Corporation, an international oil and gas concern. Prior to 1990, Mr. Bonney
held various management positions with other independent oil and gas companies.
He began his career as an auditor with Deloitte, Haskins & Sells in 1978.
Mr. Bonney is a Certified Public Accountant and holds a B.S. from Oklahoma
Christian University.

RICHARD E. BROSS is Executive Vice President--Land and Operations and was
first elected as a director in September 1993. Mr. Bross joined us in 1991 and
served as President until September 1993.

S-33
<PAGE>
Prior to 1991, Mr. Bross served in various capacities at Argent Energy, Inc.
(previously named Woods Petroleum Corporation) from 1977 until 1991, culminating
with his appointment as Executive Vice President and Chief Operating Officer in
September 1990. Mr. Bross joined Argent Energy, Inc. in 1977 after working for
Gulf Oil Corporation for seven years in various engineering functions.
Mr. Bross holds a B.S. from the University of Missouri and an M.B.A. from
Oklahoma City University.

RONNIE K. IRANI is Executive Vice President--Engineering and Exploration. He
joined us in March 1991 from Argent Energy, Inc. (previously named Woods
Petroleum Corporation) where he had worked for the previous 12 years. At Argent
Energy, Inc., Mr. Irani held the title of Manager of Reservoir Engineering.
Mr. Irani holds a B.S. from Bombay University, India, a B.S. and M.S. from the
University of Oklahoma and an M.B.A. from Oklahoma City University.

KEVIN R. WHITE is Executive Vice President--Corporate Development and
Strategic Planning and Secretary. Mr. White joined us in 1983 when our name was
Bogert Oil Company, and served in various management capacities prior to
appointment to his present position. From 1981 until 1982, Mr. White was
employed as an auditor with Arthur Andersen & Co. and Ernst & Young. Mr. White
is a Certified Public Accountant and holds B.S. and M.S. degrees from Oklahoma
State University.

SIMON B. RICH, JR. has been a director since 1990 and has served as Chairman
of the Board of Directors since August 1996. Mr. Rich is Vice Chairman,
President and Chief Executive Officer of Louis Dreyfus Holding Company Inc., a
subsidiary of S. A. Louis Dreyfus et Cie. From October 1996 until June 1997,
Mr. Rich served as Managing Director and Chief Operating Officer of Duke/Louis
Dreyfus LLC. From September 1993 until August 1996, Mr. Rich served as President
and Chief Executive Officer of Louis Dreyfus Natural Gas Corp. From 1990 to
1993, Mr. Rich served as Executive Vice President of Louis Dreyfus Energy Corp.
From 1986 to 1990, Mr. Rich served as Executive Vice President- Development and
Strategic Planning of S.A. Louis Dreyfus et Cie. Mr. Rich holds a B.A. from Duke
University.

MARK E. ANDREWS, III was first elected as a director in October 1997
following our acquisition of American Exploration Company and has served as Vice
Chairman of the Board since then. Mr. Andrews is a private investor and
previously served as Chairman of the Board and Chief Executive Officer of
American Exploration Company from 1983 until its acquisition by us. He is also a
director of IVAX Corporation. Mr. Andrews holds a B.A. from Harvard College and
an M.B.A. from Harvard Business School.

E. WILLIAM BARNETT was elected to the Board in 1998. Mr. Barnett joined
Baker & Botts, L.L.P. in 1958 and is currently Senior Counsel and was the
Managing Partner from 1984-1998. His primary areas of practice have been
commercial litigation and antitrust Law. Mr. Barnett serves as Chairman of the
Board of Trustees of Rice University, is a director of Chase Bank of Texas and a
director or trustee of numerous other civic and professional organizations. He
received his B.A. from Rice University and his LL.B. from the University of
Texas School of Law.

DANIEL R. FINN, JR. has been a director since 1990. Mr. Finn is Executive
Vice President and Chairman of the Energy Group of Louis Dreyfus Corporation, an
indirect subsidiary of S.A. Louis Dreyfus et Cie. Mr. Finn has been employed by
S.A. Louis Dreyfus et Cie or its subsidiaries since 1972, serving in various
capacities including President of Louis Dreyfus Energy Corp., a former indirect
subsidiary of S.A. Louis Dreyfus et Cie which was engaged in natural gas trading
and crude oil and petroleum product trading and marketing, Chief Executive
Officer of Duke/Louis Dreyfus LLC, Vice President of worldwide wheat
merchandising and Senior Vice President of worldwide grain merchandising. In
addition, Mr. Finn is a director of Louis Dreyfus Corporation and Louis Dreyfus
Holding Company Inc., subsidiaries of S.A. Louis Dreyfus et Cie. Mr. Finn holds
a B.A. from Fairfield University and an M.B.A. from Northwestern University.

S-34
<PAGE>
PETER G. GERRY was first elected as a director in October 1997 following our
acquisition of American Exploration Company. Mr. Gerry, a former director of
American Exploration Company, is Managing Director of Sycamore Management
Corporation, an investment management firm, and is a former President of
Citicorp Venture Capital Ltd. and director of Pond Hill Homes, Ltd. Mr. Gerry
holds a B.A. from Harvard College and an M.B.A. from Harvard Business School.

GERARD LOUIS-DREYFUS has been a director since September 1993.
Mr. Louis-Dreyfus is the Chairman, President and Chief Executive Officer of S.A.
Louis Dreyfus et Cie, the parent company of the Louis Dreyfus worldwide
organization of companies. S.A. Louis Dreyfus et Cie is privately owned by
family members and has been in business for almost 150 years. The activities of
the Louis Dreyfus group include worldwide trading and merchandising of various
agricultural and energy commodities, crushing and refining, citrus processing,
ownership and management of ocean vessels, real estate ownership, development
and management, forestry management and particleboard manufacturing and
petroleum refining and marketing. Mr. Louis-Dreyfus is the great-grandson of the
founder. Mr. Louis-Dreyfus is a graduate of Duke University and Duke University
School of Law. Upon graduation he joined the firm of Dewey Ballantine, New York,
until 1965 when he joined S.A. Louis Dreyfus et Cie.

JOHN H. MOORE was first elected as a director in October 1997 following our
acquisition of American Exploration Company. Mr. Moore, a former director of
American Exploration Company, is a petroleum consultant and was Chairman of the
Board and Chief Executive Officer of Ladd Petroleum Corporation from 1986 to
1988. He is also a former director of First Interstate Bank of Denver and a
former director of General Atlantic Resources. Mr. Moore holds B.S. and M.E.
degrees from the University of Oklahoma.

JAMES R. PAUL was first elected to the Board of Directors in February 1994.
Mr. Paul is Chairman of a private investment company and retired in
January 1994 from The Coastal Corporation after twenty years of service in
various executive capacities, including President and Chief Executive Officer
from 1989, and a director from 1981, until his retirement. He is also a director
of Transcanada Pipelines, Ltd. Mr. Paul holds a B.S. from Wichita State
University.

NANCY K. QUINN was elected as director in 1999. She is a Managing Director
of Hanover Capital, LLC, a privately held financial advisory and consulting
firm. From 1996 through January 2000 she was a Limited Partner of The Beacon
Group, LP, a private investment and advisory partnership. Prior to 1996,
Ms. Quinn was a Managing Director and Co-Head of the Energy and Natural
Resources Group at Paine Webber Inc. and Kidder Peabody & Co. Inc. Ms. Quinn
holds a B.F.A. from Louisiana State University and an M.B.A. from the University
of Arkansas.

ERNEST F. STEINER has been a director since October 1997. Mr. Steiner is a
director of S.A. Louis Dreyfus et Cie and the Chief Financial Officer of the
Louis Dreyfus Group. He is also Executive Vice President of Louis Dreyfus
Holding Company Inc. and Louis Dreyfus Corporation, subsidiaries of S.A. Louis
Dreyfus et Cie, and has been employed by Louis Dreyfus Corporation or other
subsidiaries of S.A. Louis Dreyfus et Cie since 1972. Mr. Steiner is also a
director of Louis Dreyfus Citrus S.A. Mr. Steiner holds a B.S. from Cornell
University.

S-35
<PAGE>
SELLING SHAREHOLDER

The selling shareholder in this offering is S.A. Louis Dreyfus et Cie,
through its wholly-owned subsidiary L.D. Fashions Holdings Corp. The following
table provides certain information as to the ownership of our common stock by
the selling shareholder, adjusted to reflect the sale of 3,000,000 shares
offered by us in this offering and 2,000,000 shares offered by the selling
shareholder.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING OFFERING
------------------------- SHARES -------------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
----------------------------------------------------- ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
S.A. Louis Dreyfus et Cie(1)......................... 20,750,000 50.9% 2,000,000 18,750,000 42.9%
</TABLE>

------------------------

(1) S.A. Louis Dreyfus et Cie, 87 Avenue de la Grande Armee, 75782 Paris,
France, shares voting and investment power over the shares indicated as
beneficially owned by it with its direct or indirect wholly-owned
subsidiaries Louis Dreyfus Holding Company Inc. and Louis Dreyfus Commercial
Activities Inc. ("LDCA"), 10 Westport Road, Wilton, Connecticut 06897-0810,
and Louis Dreyfus Natural Gas Holdings Corp. ("LDNGHC") and L.D. Fashions
Holdings Corp. ("LDFHC"), 3411 Silverside Road, Suite 210E, Baynard
Building, Wilmington, Delaware 19810-4808. These shares are owned of record
as follows: LDNGHC--11,000,000 shares; LDFHC--9,000,000 shares; and
LDCA--750,000 shares. Of the 11,000,000 shares of common stock held by
LDNGHC, 3,000,000 have been pledged to certain banks to secure a loan made
to S.A. Louis Dreyfus et Cie in the ordinary course of its business. A
default by S.A. Louis Dreyfus et Cie under the terms of such arrangements
could result in the sale of all or a portion of the pledged shares. In
addition, on January 25, 1999, a judgment in the amount of $166,131,529 was
rendered against LDNGHC and other defendants in Texas state court
proceedings in connection with matters unrelated to Louis Dreyfus Natural
Gas. LDNGHC has advised Louis Dreyfus Natural Gas that it is vigorously
contesting the judgment. LDNGHC has appealed the judgment and taken actions
to prevent any collection pending appeal. Pursuant to a court order in this
proceeding, LDNGHC has pledged 8,000,000 of its 11,000,000 shares, and has
given a secondary lien on its remaining 3,000,000 shares, to the judgment
creditor pending the outcome of its appeal, which is not expected to be
completed until 2001. If the appeal is unsuccessful, it is possible that all
or a portion of the shares held by LDNGHC may be sold or otherwise disposed
of in connection with these proceedings. The sale of all or a portion of the
shares held by LDNGHC, whether in connection with the bank pledge or the
litigation, could result in a change of control of Louis Dreyfus Natural
Gas. The shares being sold in this offering by the selling shareholder are
owned by LDFHC.

S-36
<PAGE>
UNDERWRITING

Under an underwriting agreement dated the date of this prospectus
supplement, each of the underwriters named below, for whom Lehman Brothers Inc.,
Salomon Smith Barney Inc., Banc of America Securities LLC, Dain Rauscher
Incorporated and Prudential Securities Incorporated are acting as
representatives, has severally agreed to purchase from us and the selling
shareholder, and we and the selling shareholder have agreed to sell to such
underwriters, the number of shares of common stock shown opposite its name
below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
--------------------------------------------------------------------------- -----------------
<S> <C>
Lehman Brothers Inc........................................................
Salomon Smith Barney Inc...................................................
Banc of America Securities LLC.............................................
Dain Rauscher Incorporated.................................................
Prudential Securities Incorporated.........................................
-----------
Total.................................................................. 5,000,000
===========
</TABLE>

The underwriting agreement provides that the underwriters' obligations to
purchase shares of the common stock depend on the satisfaction of the conditions
contained in the underwriting agreement, and that if any of the shares of common
stock are purchased by the underwriters, all of the shares of common stock must
be purchased. The conditions contained in the underwriting agreement include the
condition that all the representations and warranties made by us and the selling
shareholder to the underwriters are true, that there has been no material
adverse change in our condition or in the financial markets and that we deliver
to the underwriters customary closing documents.

The following table shows the underwriting fees to be paid to the
underwriters by us and the selling shareholder in connection with this offering.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of common stock. This
underwriting fee is the difference between the public offering price and the
amount the underwriters pay to us to purchase the shares from us. On a per share
basis, the underwriting fee is % of the initial price to public.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share.......................................................... $ $
Total paid by Louis Dreyfus Natural Gas Corp....................... $ $
Total paid by the selling shareholder.............................. $ $
</TABLE>

We and the selling shareholder have been advised by the representatives that
the underwriters propose to offer the common stock directly to the public at the
public offering price set forth on the cover page of this prospectus supplement
and to dealers (who may include the underwriters) at this initial price to the
public less a concession not in excess of per share. The underwriters
may allow, and the dealers may reallow, a concession not in excess of
per share to certain brokers and dealers. After the offering, the underwriters
may change the offering price and other selling terms.

We and the selling shareholder have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933 and liabilities arising from breaches of representations and warranties
contained in the underwriting agreement, or to contribute to payments that may
be required to be made in respect of these liabilities.

We estimate that total expenses payable by us in connection with this
offering, excluding underwriting discounts and commissions, will be
approximately $ . Lehman Brothers and the other underwriters have agreed to
reimburse us for certain of our expenses in connection with this offering.

S-37
<PAGE>
We have granted to the underwriters an option to purchase up to an aggregate
of 750,000 additional shares of common stock at the public offering price less
the underwriting discounts and commissions set forth on the cover of this
prospectus supplement exercisable to cover any overallotments. Such option may
be exercised at any time until 30 days after the date of the underwriting
agreement. If this option is exercised, each underwriter will be committed,
subject to satisfaction of the conditions specified in the underwriting
agreement, to purchase a number of additional shares of common stock
proportionate to such underwriter's initial commitment as indicated in the
preceding table, and we will be obligated, pursuant to such option, to sell such
shares of common stock to the underwriters.

We, the selling shareholder and our directors and executive officers have
agreed that we will not, directly or indirectly, sell, offer or otherwise
dispose of any shares of common stock or enter into any derivative transaction
with similar effect as a sale of common stock, for a period of 90 days after the
date of this prospectus supplement without the prior written consent of Lehman
Brothers Inc. The restrictions described in this paragraph do not apply to:

- the sale of common stock to the underwriters;

- shares of common stock issued by us under employee incentive plans or upon
the exercise of options issued under employee incentive plans; or

- shares of our common stock pledged by the selling shareholder, although we
believe the likelihood of any such sale within the 90-day period is
remote.

In connection with this offering, the underwriters may engage in
overallotment, stabilizing transactions, syndicate covering transactions,
penalty bids and passive market making in accordance with Regulation M under the
Securities Act of 1934.

- Overallotment involves syndicate sales in excess of the offering size
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the common stock so long
as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the underwriters to reclaim a selling concession from
a syndicate member when common stock originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.

- In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to certain
limitations, make bids for or purchases of the common stock until the
time, if any, at which a stabilizing bid is made.

These stabilization transactions, syndicate covering transactions and
penalty bids may cause the price of our common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on the New York Stock Exchange, on the NASDAQ National Market or
otherwise and, if commenced, may be discontinued at any time.

Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus or prospectus supplement in the relevant
province of Canada in which the sale is made.

Some of the underwriters or their affiliates have from time to time provided
investment banking, financial advisory, trustee and lending services to us and
our affiliates in the ordinary course of business for which they have received
customary fees, and they may continue to do so.

S-38
<PAGE>
Some of the underwriters or their affiliates may be lenders under our
revolving credit facility, a portion of which may be repaid with the net
proceeds from this offering.

Under Rule 2710(c)(8) of the Conduct Rule of the NASD, special
considerations apply to a public offering of an issuer's securities where more
than ten percent of the net proceeds thereof will be paid to members of the NASD
that are participating in the offering, or persons affiliated or associated with
such members. Certain of the underwriters or their respective affiliates have
loaned money to us under an existing credit facility. In the event more than ten
percent of the proceeds of this offering will be used to repay such money loaned
by any underwriter or its affiliates, the offering will be conducted in
conformity with Rule 2710(c)(8).

S-39
<PAGE>
LEGAL OPINIONS

Crowe & Dunlevy, A Professional Corporation, Oklahoma City, Oklahoma, as our
counsel, will issue an opinion for us regarding the validity of the shares of
common stock offered by this prospectus supplement and the accompanying
prospectus. Certain legal matters related to this offering will be passed upon
for the underwriters by Cravath, Swaine & Moore, New York, New York.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our annual report on Form 10-K for
the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in the accompanying prospectus and elsewhere in the
registration statement. Our financial statements and schedule are incorporated
by reference in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing. Any future audited financial statements
and the reports with respect to such audited financial statements of our
independent public accountants hereafter incorporated by reference in this
prospectus supplement or the accompanying prospectus and the registration
statement will be incorporated in reliance upon the authority of that firm as
experts in giving those reports to the extent such firm has audited those
financial statements and consented to the use of their reports with respect to
such audited financial statements.

Certain estimates of our oil and gas reserves and related information as of
December 31, 1999 included in this prospectus supplement or included in our
Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated
herein by reference in the accompanying prospectus and elsewhere in the
registration statement have been derived from engineering reports prepared by
our engineers and reviewed and reported on by Ryder Scott Company, and all such
information has been so included or incorporated in reliance on the authority of
such firm as experts regarding the matters contained in their report. Future
estimates of oil and gas reserves and related information hereafter incorporated
by reference in this prospectus supplement or the accompanying prospectus and
the registration statement will be incorporated in reliance upon the reports of
the firm examining such oil and gas reserves and related information and upon
the authority of any such firm as experts regarding the matters contained in
their reports, to the extent such firm has consented to the use of their
reports.

CERTAIN DEFINITIONS

The terms defined in this section are used throughout this prospectus
supplement:

BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to oil or other liquid hydrocarbons.

BCF. Billion cubic feet.

BCFE. Billion cubic feet of natural gas equivalent, determined using the
ratio of one Bbl of oil or condensate to six Mcf of natural gas.

BTU. British thermal unit, which is the heat required to raise the
temperature of a one pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

BBTU. Billion Btus.

DEVELOPED ACREAGE. The number of acres which are allocated or assignable to
producing wells or wells capable of production.

DEVELOPMENT LOCATION. A location on which a development well can be
drilled.

DEVELOPMENT WELL. A well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be productive in an
attempt to recover proved undeveloped reserves.

S-40
<PAGE>
DRILLING UNIT. An area specified by governmental regulations or orders or
by voluntary agreement for the drilling of a well to a specified formation or
formations which may combine several smaller tracts or subdivides a large tract,
and within which there is usually some right to share in production or expense
by agreement or by operation of law.

DRY HOLE. A well found to be incapable of producing either oil or gas in
sufficient quantities to justify completion as an oil or gas well.

EBITDAX. EBITDAX is defined as income (loss) before interest, income taxes,
depreciation, depletion and amortization, impairment, exploration costs and
change in derivative fair value. We believe that EBITDAX is a financial measure
commonly used in the oil and gas industry as an indicator of a company's ability
to service and incur debt. However, EBITDAX should not be considered in
isolation or as a substitute for net income, cash flows provided by operating
activities or other data prepared in accordance with generally accepted
accounting principles, or as a measure of a company's profitability or
liquidity. EBITDAX measures as presented may not be comparable to other
similarly titled measures of other companies.

ESTIMATED FUTURE NET REVENUES. Revenues from production of oil and gas, net
of all production-related taxes, lease operating expenses, capital costs and
abandonment costs.

EXPLORATORY WELL. A well drilled to find and produce oil or gas in an
unproved area, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir, or to extend a known reservoir.

FIXED-PRICE CONTRACTS. Physical delivery contracts, energy swaps, collars
and basis swaps entered into to reduce exposure to unfavorable changes in oil
and gas prices.

GROSS ACRE. An acre in which a working interest is owned.

GROSS WELL. A well in which a working interest is owned.

INFILL DRILLING. Drilling for the development and production of proved
undeveloped reserves that lie within an area bounded by producing wells.

LEASE OPERATING EXPENSE. All direct costs associated with and necessary to
operate a producing property.

MBBLS. Thousand barrels.

MBTU. Thousand Btus.

MCF. Thousand cubic feet.

MCFE. Thousand cubic feet of natural gas equivalent, determined using the
ratio of one Bbl of oil or condensate to six Mcf of natural gas.

MMBBLS. Million barrels.

MMBTU. Million Btus.

MMCF. Million cubic feet.

MMCFE. Million cubic feet of natural gas equivalent, determined using the
ratio of one Bbl of oil or condensate to six Mcf of natural gas.

NATURAL GAS LIQUIDS. Liquid hydrocarbons which have been extracted from
natural gas (e.g., ethane, propane, butane and natural gasoline).

S-41
<PAGE>
NET ACRES OR NET WELLS. The sum of the fractional working interests owned
in gross acres or gross wells.

OVERRIDING ROYALTY INTEREST. An interest in an oil and gas property
entitling the owner to a share of oil and gas production free of well or
production costs.

PRESENT VALUE. When used with respect to oil and gas reserves, present
value means the estimated future gross revenue to be generated from the
production of proved reserves, net of estimated production, future development
costs, and future abandonment costs, using prices and costs in effect as of the
date of the report or estimate, without giving effect to non-property related
expenses such as general and administrative expenses, debt service and future
income tax expense or to deprecation, depletion and amortization, discounted
using an annual discount rate of 10%. The prices used to estimate future net
revenues do not consider the effects of our Fixed-Price Contracts except where
otherwise specifically noted. Estimated quantities of proved reserves are
determined without regard to such contracts.

PRODUCTIVE WELL. A well that is producing oil or gas or that is capable of
production.

PROVED DEVELOPED RESERVES. Proved reserves that are expected to be
recovered through existing wells with existing equipment and operating methods.

PROVED RESERVES. The estimated quantities of oil and gas which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions.

PROVED UNDEVELOPED RESERVES. Proved reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion.

RECOMPLETION. The completion for production of an existing wellbore in
another formation from that in which the well has previously been completed.

RESERVE LIFE. A measure of how long it will take to produce a quantity of
reserves, calculated by dividing estimated proved reserves by production for the
twelve-month period prior to the date of determination (in gas equivalents).

RESERVE REPLACEMENT COST. Total costs incurred to acquire, explore and
develop oil and gas properties divided by the increase in proved reserves
through acquisition of proved properties, extensions and discoveries, improved
recoveries and revisions of previous estimates.

RESERVE REPLACEMENT RATIO. A measure of proved reserve growth determined by
dividing the net change in reserve quantities between two dates, excluding
production, by the quantity produced between the two dates.

TBTU. One trillion Btus.

TCFE. Trillion cubic feet of gas equivalent, determined using the ratio of
one Bbl of oil or condensate to six Mcf of natural gas.

UNDEVELOPED ACREAGE. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and gas regardless of whether such acreage contains proved reserves.

WORKING INTEREST. The operating interest which gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.

S-42
<PAGE>
PROSPECTUS

$400,000,000

LOUIS DREYFUS NATURAL GAS CORP.
LOUIS DREYFUS NATURAL GAS TRUST I
LOUIS DREYFUS NATURAL GAS TRUST II

LOUIS DREYFUS NATURAL GAS CORP.

We may offer and sell, in one or more offerings:

- common stock

- preferred stock

- debt securities

The common stock of Louis Dreyfus Natural Gas Corp. trades on the New York
Stock Exchange under the symbol "LD".

THE TRUSTS

The trusts are each Delaware business trusts that may offer and sell
preferred securities in one or more offerings. Each trust will use all of the
proceeds from the sale of its preferred securities to buy subordinated debt
securities of Louis Dreyfus Natural Gas Corp. The trust will receive cash
payments from the subordinated debt securities, which it will distribute to the
holders of its preferred securities. We will unconditionally guarantee the
trusts' obligation to distribute cash to the holder of trust preferred
securities, but only to the extent the trust has funds available to make those
payments and has not made the payments.

THE OFFERING

The total offering price of the securities to be offered by us or the
trusts, in the aggregate, will not exceed $400,000,000. We will provide the
specific terms and the initial public offering price for each offering in a
supplement to this prospectus. You should carefully read this prospectus and the
supplement before you decide to invest. This prospectus may not be used to sell
securities unless accompanied by a prospectus supplement.

------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

------------------------

The date of this Prospectus is October 12, 1999.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
About this Prospectus....................................... 2
Certain Forward-Looking Statements.......................... 3
Louis Dreyfus Natural Gas Corp.............................. 3
The Trusts.................................................. 3
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 4
Description of the Securities We May Offer.................. 5
Description of Common Stock................................. 7
Description of Preferred Stock.............................. 8
Description of Debt Securities.............................. 9
Description of the Trust Preferred Securities............... 20
Description of the Trust Preferred Securities Guarantee..... 25
Relationship among the Trust Preferred Securities, the Trust
Preferred Securities Guarantee and the Subordinated Debt
Securities Held by the Trust.............................. 28
Plan of Distribution........................................ 28
Validity of Offered Securities.............................. 30
Experts..................................................... 30
Where You Can Find More Information......................... 30
Incorporation by Reference.................................. 31
</TABLE>

ABOUT THIS PROSPECTUS

This prospectus is part of a "shelf" registration statement that we filed
with the Securities and Exchange Commission. By using a shelf registration
statement, we may sell, from time to time, in one or more offerings, any
combination of the securities described in this prospectus. The total dollar
amount of the securities we may sell through these offerings will not exceed
$400,000,000.

This prospectus provides you with a general description of the securities we
may offer. Each time we sell securities, we will provide a prospectus supplement
that contains more specific information about the terms of those securities. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information."

This prospectus does not contain separate financial statements for the
trusts. We do not believe these financial statements would be useful since the
trusts will not have any independent function other than to issue common and
preferred securities and to purchase our subordinated debt securities. We will
provide a full, unconditional guarantee of each trust's obligations under its
common and preferred securities. Each trust is our direct or indirect
wholly-owned subsidiary, and we file consolidated financial information under
the Securities Exchange Act of 1934.

You should rely only on the information contained or incorporated by
reference in this prospectus and the prospectus supplement. We have not, and the
underwriters have not, authorized any other person to provide you with different
information. If anyone provides you with different information, you should not
rely on it. We will not, and the underwriters will not, make an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus, as well as
information we previously filed with the SEC and incorporated by reference, is
accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.

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<PAGE>
CERTAIN FORWARD-LOOKING STATEMENTS

All statements made or incorporated by reference in this prospectus other
than purely historical information are "forward-looking statements" within the
meaning of the federal securities laws. These statements reflect our current
expectations and are based on our historical operating trends, proved reserve
and fixed-price contract positions and other currently available information.
Forward-looking statements include statements regarding our future drilling
plans and objectives and related exploration and development budgets and number
and location of planned wells and statements regarding the quality of our
properties and potential reserve and production levels. These statements assume
that no significant changes will occur in the operating environment for our oil
and gas properties and that there will be no material acquisitions or
divestitures except as otherwise described.

The forward-looking statements are subject to all the risks and
uncertainties incident to the acquisition, exploration, development and
marketing of oil and gas reserves. Some of these risks are commodity price,
counterparty, environmental, drilling, reserves, operations and production
risks. Certain of these risks are described in the documents "incorporated by
reference" which you can obtain as described under "Where You Can Find More
Information." We may also make material acquisitions or divestitures, modify our
fixed-price contract positions or enter into financing transactions. None of
these can be predicted with certainty and are not taken into consideration in
the forward-looking statements.

Statements concerning fixed-price contract, interest rate swap and other
financial instrument fair values and their estimated contribution to our future
results of operations are based upon market information as of a specific date.
This market information is often a function of significant judgment and
estimation. Further, market prices for oil and gas and market money rates are
subject to significant volatility.

For all of the these reasons, our actual results may vary materially from
the forward-looking statements and there is no assurance that the assumptions we
have used are necessarily the most likely. We will not update any
forward-looking statements to reflect events or circumstances occurring after
the date the statement is made.

LOUIS DREYFUS NATURAL GAS

Louis Dreyfus Natural Gas Corp. is one of the largest independent natural
gas companies engaged in the development, exploration, acquisition, production
and marketing of natural gas and crude oil in the United States.

The address of our principal executive offices is 14000 Quail Springs
Parkway, Suite 600, Oklahoma City, OK 73134-2600, and our telephone number is
(405) 749-1300.

THE TRUSTS

Each of the trusts is a statutory business trust formed under Delaware law
by:

- a separate declaration of trust executed by Louis Dreyfus Natural Gas, as
depositor, and the trustees (described below) for the trust; and

- the filing of a certificate of trust with the Delaware Secretary of State.
Each trust's declaration will be amended and restated substantially in the
form filed as an exhibit to the registration statement as of the date the
securities of that trust are initially issued. Each amended declaration
will be qualified as an indenture under the Trust Indenture Act of 1939.

Each trust exists solely for the purposes of:

- issuing preferred securities and common securities representing undivided
beneficial interests in the assets of that trust;

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<PAGE>
- investing the proceeds of those securities issuances in our junior
subordinated debt securities; and

- engaging only in other incidental activities.

The rights of the holders of the trust securities, including economic
rights, rights to information and voting rights, are set forth in the amended
declaration of each trust, the Delaware Business Trust Act and the Trust
Indenture Act.

We will own, directly or indirectly, all of the common securities of each
trust, which will have an aggregate liquidation amount equal to 3% of the total
capital of each trust. The common securities will generally rank equally in
right of payment with the preferred securities, and payments on both will be
made pro rata. However, upon an event of default under the trust's amended
declaration, the rights of the holders of the common securities to payment of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the preferred securities. We will
pay all fees and expenses related to the trusts and the offering of trust
securities.

Each trust has a term of approximately 55 years, but may terminate earlier
as provided in its amended declaration. As holder of all of the common
securities, we will be entitled to appoint, remove or replace any of, or
increase or reduce the number of, the trustees of each trust. The business and
affairs of each trust will be conducted by such trustees, and the duties and
obligations of the trustees will be governed by the amended declaration of each
trust.

At least one of the trustees of each trust will be a person who is our
employee or officer, or otherwise affiliated with us. These persons are
sometimes referred to as "regular" trustees. One trustee of each trust will be a
financial institution which will be unaffiliated with us and which will act as
property trustee and as indenture trustee for purposes of the Trust Indenture
Act under the terms of the amended declaration and as may be further described
in a prospectus supplement. The property trustee will hold title to the junior
subordinated debt securities for the benefit of the holders of the trust
securities. In addition, unless the property trustee maintains a principal place
of business in the State of Delaware and otherwise meets the requirements of
applicable laws, one trustee of each trust will be a legal entity having a
principal place of business in, or an individual resident of, the State of
Delaware.

Unless otherwise indicated in a prospectus supplement, Wilmington Trust
Company will be the property trustee and the Delaware trustee. The address of
the principal office of Wilmington Trust Company in the State of Delaware is
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
The principal place of business of each trust will be c/o Louis Dreyfus Natural
Gas Corp., 14000 Quail Springs Parkway, Suite 600, Oklahoma City, OK 73134-2600.

USE OF PROCEEDS

Unless we have indicated otherwise in the accompanying prospectus
supplement, we expect to use the net proceeds we receive from any offering of
these securities for our general corporate purposes, including working capital,
repayment or reduction of debt, capital expenditures, and acquisitions of
additional oil and gas properties. Each of the trusts will use the net proceeds
from the sale of its preferred securities to purchase a series of junior
subordinated debt securities from us. We also expect to use the net proceeds
from the sale of those junior subordinated debt securities for the purposes
described in this section.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our ratio of earnings to fixed charges for
the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------- SIX MONTHS ENDED
1994 1995 1996 1997 1998 JUNE 30, 1999
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........ 1.9x 1.7x 2.1x -- -- 1.2x
</TABLE>

4
<PAGE>
For the purpose of calculating the ratio of earnings to fixed charges,
earnings represents net income before income taxes plus fixed charges, less
capitalized interest. Fixed charges consist of interest expense, including
amortization of debt discount and financing costs, capitalized interest and the
portion of rental expense which we believe is representative of the interest
component of rental expense. Earnings were insufficient to cover fixed charges
by $28.3 million and $61.5 million for the years ended December 31, 1997 and
1998, respectively.

DESCRIPTION OF THE SECURITIES WE MAY OFFER

GENERAL

We may issue, in one or more offerings:

- common stock, par value $.01 per share;

- preferred stock, par value $.01 per share; and

- debt securities, which may be senior or subordinated.

The trusts may issue, from time to time, in one or more offerings, trust
preferred securities that we will unconditionally guarantee.

This prospectus contains a summary of the general terms of the various
securities that we or the trusts may offer. The prospectus supplement relating
to any particular securities offered will describe the specific terms of the
securities, which may be in addition to or different from the general terms
summarized in this prospectus. The summary in this prospectus and in any
prospectus supplement does not describe every aspect of the securities and is
subject to and qualified in its entirety by reference to all applicable
provisions of the documents relating to the securities offered. These documents
are or will be filed as exhibits to or incorporated by reference in the
registration statement.

In addition, the prospectus supplement will set forth the terms of the
offering, the initial public offering price and net proceeds to us. Where
applicable, the prospectus supplement will also describe any material United
States federal income tax considerations relating to the securities offered and
indicate whether the securities offered are or will be listed on any securities
exchange.

BOOK-ENTRY SYSTEM

We or the trusts may issue securities in the form of one or more fully
registered global securities. These will be deposited with, or on behalf of, the
Depository Trust Company and registered in the name of its nominee. Except as
described below, the global securities may be transferred, in whole and not in
part, only to DTC or to another nominee of DTC.

DTC has advised us that it is:

- A limited-purpose trust company organized under the laws of the state of
New York;

- 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 under the provisions of Section 17A of the
Securities Exchange Act of 1934.

DTC was created to hold securities for institutions that have accounts with
DTC ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants through electronic book-entry
changes in participants' accounts. Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, some of whom own DTC. Access to DTC's book-entry system is also
available to others that clear through or maintain

5
<PAGE>
a custodial relationship with a participant, either directly or indirectly. DTC
administers its book-entry system in accordance with its rules and bylaws and
legal requirements.

Upon issuance of a global security representing offered securities, DTC will
credit on its book-entry registration and transfer system the principal amount
to participants' accounts. Ownership of beneficial interests in the global
security will be limited to participants or to persons that hold interests
through participants. Ownership of interests in the global security will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by DTC with respect to participants' interests and
the participants with respect to the owners of beneficial interests in the
global security. The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of those securities in
definitive form. These limits and laws may impair the ability to transfer
beneficial interests in a global security.

So long as DTC or its nominee is the registered holder and owner of a global
security, DTC or its nominee will be considered, for all purposes under the
applicable indenture, the sole owner and holder of the related offered
securities. Except as described below, owners of beneficial interests in a
global security will not:

- be entitled to have the offered securities registered in their names; or

- receive or be entitled to receive physical delivery of certificated
offered securities in definitive form.

Each person owning a beneficial interest in a global security must rely on
DTC's procedures, and, if that person holds through a participant, on the
participant's procedures to exercise any rights of a holder of offered
securities under the global security or any applicable indenture, or otherwise.
The indentures provide that DTC may grant proxies and otherwise authorize
participants to take any action which it as the holder of a global security is
entitled to take under the indentures or the global security. We understand that
under existing industry practice, if we or a trust request any action of holders
or an owner of a beneficial interest in a global security desires to take any
action that DTC as the holder of the global security is entitled to take, DTC
would authorize the participants to take that action and the participants would
authorize their beneficial owners to take the action or would otherwise act upon
the instructions of their beneficial owners.

We or the trusts will make payments with respect to securities represented
by a global security to DTC. We expect that DTC, upon receipt of any payments,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests. We also expect that
payments by participants to owners of beneficial interests in a global security
held through them will be governed by standing instructions and customary
practices, as is the case with securities held for customers' accounts in
"street name", and will be the responsibility of the participants. We, the
trusts or any trustee will not have any responsibility or liability for:

- any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a global security for any securities;

- maintaining, supervising, or reviewing any records relating to any
beneficial ownership interests;

- any other aspect of the relationship between DTC and its participants; or

- the relationship between the participants and the owners of beneficial
interests in a global security.

Unless and until they are exchanged in whole or in part for certificated
securities in definitive form, the global securities may not be transferred
except as a whole by DTC to its nominee or by its nominee to DTC or another
nominee.

6
<PAGE>
The securities of any series represented by a global security may be
exchanged for certificated securities in definitive form if:

- DTC notifies us that it is unwilling or unable to continue as depositary
for the global security or if at any time it ceases to be a clearing
agency registered under the Securities Exchange Act of 1934;

- We decide at any time not to have the securities of that series
represented by a global security and so notify DTC; or

- in the case of debt securities, an event of default has occurred and is
continuing with respect to the debt securities.

If there is such an exchange, we will issue certificated securities in
authorized denominations and registered in such names as DTC directs. Subject to
the foregoing, the global securities are not exchangeable, except for a global
securities of the same aggregate denomination to be registered in DTC's or its
nominee's name.

DESCRIPTION OF COMMON STOCK

GENERAL

Our authorized capital stock consists of 100,000,000 shares of common stock,
par value $.01 per share, and 10,000,000 shares of preferred stock, par value
$.01 per share. We describe the preferred stock under the heading "Description
of Preferred Stock" below.

This section summarizes the general terms of the common stock that we may
offer. The prospectus supplement relating to the common stock offered will set
forth the number of shares offered, the initial offering price and market price,
dividend information and any other relevant information. The summary in this
section and in the prospectus supplement does not describe every aspect of the
common stock and is subject to and qualified in its entirety by reference to all
the provisions of our Amended and Restated Certificate of Incorporation and
Bylaws and the Oklahoma General Corporation Act.

TERMS OF THE COMMON STOCK

As of March 31, 1999, there were 40,109,758 shares of common stock issued
and outstanding. All shares of common stock have equal rights to participate in
dividends and, in the event of liquidation, assets available for distribution to
stockholders, subject to any preference established with respect to preferred
stock. Each share of common stock entitles the holder to one vote for such share
held on all matters submitted to a vote of stockholders. Voting rights for the
election of directors are noncumulative. Shares of common stock carry no
conversion, preemptive or subscription rights, and are not subject to
redemption. All outstanding shares of common stock are, and any shares of common
stock issued upon conversion of any convertible securities will be, fully paid
and nonassessable. We may pay dividends on the common stock when, as and if
declared by the Board of Directors. Dividends may be declared in the discretion
of the Board of Directors from funds legally available, subject to restrictions
under agreements related to our indebtedness.

TRANSFER AGENT AND REGISTRAR

The outstanding shares of common stock are listed on the New York Stock
Exchange and trade under the symbol "LD." The transfer agent and registrar of
the common stock is Chase Mellon Shareholder Services, L.L.C.

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<PAGE>
DESCRIPTION OF PREFERRED STOCK

GENERAL

This section summarizes the general terms of the preferred stock that we may
offer. The prospectus supplement relating to a particular series of preferred
stock offered will describe the specific terms of that series, which may be in
addition to or different from the general terms summarized in this section. The
summary in this section and in any prospectus supplement does not describe every
aspect of the preferred stock and is subject to and qualified in its entirety by
reference to all the provisions of our certificate of incorporation, the
certificate of designation relating to the applicable series of preferred stock,
and the Oklahoma General Corporation Act. The certificate of designation will be
filed as an exhibit to or incorporated by reference in the registration
statement.

AUTHORITY OF THE BOARD TO ISSUE PREFERRED STOCK

Our certificate of incorporation authorizes the issuance of 10,000,000
shares of preferred stock, par value of $.01 per share. On March 31, 1999, there
were no shares of preferred stock outstanding. Preferred stock may be issued
from time to time in one or more classes or series with such rights and
preferences, including voting, dividend and conversion rights and other terms,
as the Board of Directors may establish without any further authorization by the
stockholders.

The preferred stock that we may offer will be issued in one or more classes
or series. The prospectus supplement relating to the particular class or series
of preferred stock will describe the specific terms of the class or series,
including:

- the designation and stated value per share of such preferred stock and the
number of shares offered;

- the amount of liquidation preference per share;

- the initial public offering price at which such preferred stock will be
issued;

- the dividend rate (or method of calculation), the dates on which dividends
will be payable and the dates from which dividends shall commence to
cumulate, if any;

- any redemption or sinking fund provisions;

- any conversion or exchange rights; and

- any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions.

The holders of preferred stock will have no preemptive rights. Upon issuance
against full payment of the purchase price, the preferred stock will be fully
paid and nonassessable. Unless otherwise provided in the prospectus supplement
relating to the particular class or series, the preferred stock will have the
rights described below.

DIVIDENDS

The preferred stock will be preferred over the common stock as to payment of
dividends. Before any dividends or distributions, other than dividends or
distributions payable in common stock, on the common stock shall be declared and
set apart for payment or paid, the holders of shares of each series of preferred
stock will be entitled to receive dividends when, as and if declared by the
Board of Directors. We will pay those dividends either in cash, shares of common
stock or preferred stock or otherwise, at the rate and on the date or dates set
forth in the prospectus supplement. With respect to each series of preferred
stock, the dividends on each share of the series will be cumulative from the
date of issue of the share unless some other date is set forth in the prospectus
supplement relating to the series. Accruals of dividends will not bear interest.

8
<PAGE>
LIQUIDATION

The preferred stock will be preferred over the common stock as to asset
distributions so that the holders of each series of preferred stock will be
entitled to be paid, upon our voluntary or involuntary liquidation, dissolution
or winding up and before any distribution is made to the holders of common
stock, the amount set forth in the applicable prospectus supplement. However, in
this case the holders of preferred stock will not be entitled to any other or
further payment. If upon any liquidation, dissolution or winding up our net
assets are insufficient to permit the payment in full of the respective amounts
to which the holders of all outstanding preferred stock are entitled, our entire
remaining net assets will be distributed among the holders of each series of
preferred stock in amounts proportional to the full amounts to which the holders
of each series are entitled.

REDEMPTION OR CONVERSION

The shares of any series of preferred stock will be redeemable or will be
convertible into shares of common stock or any other series of preferred stock
to the extent set forth in the prospectus supplement relating to the series.

DESCRIPTION OF DEBT SECURITIES

GENERAL

The debt securities will be unsecured general obligations and may include:

- senior debt securities, to be issued under the senior indenture; or

- subordinated debt securities, to be issued under the subordinated
indenture.

We may also issue junior subordinated debt securities under the junior
subordinated indenture to one or more of the trusts which will be purchased by
the trusts using proceeds from issuances of trust preferred securities.

This section summarizes the general terms of the debt securities we may
offer. The prospectus supplement relating to any particular debt securities
offered will indicate whether the debt securities are senior debt securities,
subordinated debt securities or junior subordinated debt securities, and will
describe the specific terms of the debt securities, which may be in addition to
or different from the general terms summarized in this section. The summary in
this section and in any prospectus supplement does not describe every aspect of
the senior indenture, subordinated indenture or junior subordinated indenture or
the debt securities, and is subject to and qualified in its entirety by
reference to all the provisions of the applicable indenture and the debt
securities. The forms of the senior indenture, subordinated indenture and junior
subordinated indenture and the forms of the debt securities are or will be filed
as exhibits to or incorporated by reference in the registration statement.

The indentures do not limit the amount of debt securities which may be
issued under the indentures and provide that debt securities may be issued in
principal amounts which may be authorized from time to time. The debt securities
may be issued from time to time in one or more series. Unless otherwise
specified in the prospectus supplement, the senior debt securities will be
unsecured and will rank equally with all other unsecured and unsubordinated
indebtedness. Our subordinated debt securities and our junior subordinated debt
securities will be subordinated in right of payment to the prior payment in full
of our senior indebtedness as described below under "Provisions Applicable to
Subordinated Debt Securities--Subordination," "Provisions Applicable to Junior
Subordinated Debt Securities--Subordination of Junior Subordinated Debt
Securities," and in the applicable prospectus supplement.

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<PAGE>
Each prospectus supplement will describe the following terms of the offered
debt securities:

- The title;

- Any limit on the aggregate principal amount;

- Whether the offered debt securities will be issued initially in the form
of a temporary global security or issued in the form of a permanent global
security; the terms and conditions, if any, upon which the global security
may be exchanged in whole or in part for other definitive debt securities;
and the depositary for the global security;

- The date(s) on which the principal and any premium is payable and the
method of determination thereof;

- The interest rate(s), if any, and the method of determination thereof and
the date(s) from which the interest accrues;

- The dates on which the interest, if any, is payable and the regular record
dates for the interest payment dates;

- Our right, if any, to defer payment of interest and the maximum length of
any deferral period;

- The place(s) where principal and any premium and interest is payable;

- Whether the offered debt securities are redeemable at our option and the
redemption price(s) and other redemption terms and conditions;

- Whether we are obligated to redeem or purchase the offered debt securities
according to any sinking fund or similar provision or at the holder's
option and the price(s), period(s), and terms and conditions of that
redemption or purchase obligation;

- If other than denominations of $1,000 and any integral multiple of $1,000,
the denominations in which offered debt securities of the series will be
issuable;

- If other than United States Dollars, the currency or currencies of payment
of principal and any premium and interest;

- If payments are based on an index, the manner in which the amount of
principal payments and any premium and interest is to be determined;

- If other than the full principal amount, the portion of the principal
amount payable if the maturity of the offered debt securities is
accelerated;

- Whether the provisions relating to satisfaction, discharge, and defeasance
described below apply and any additional means of satisfaction, discharge
and defeasance;

- Whether the offered debt securities are subordinated debt securities or
junior subordinated securities and the terms of subordination including
any modification to the subordination provisions described below;

- Any deletions or modifications to the Events of Default described below;

- If applicable, the terms of any right to convert or exchange the offered
debt securities into common stock or other securities;

- Any authenticating or paying agents, registrars, conversion agents or any
other agents with respect to the offered debt securities; and

- Any other terms.

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Debt securities may be issued and sold at a substantial discount below their
principal amount. If applicable, the prospectus supplement will describe any
special United States federal income tax consequences and other considerations
which apply to debt securities issued at a discount or to any offered debt
securities denominated or payable in a foreign currency or currency unit.

PROVISIONS APPLICABLE TO ALL DEBT SECURITIES

EVENTS OF DEFAULT

Unless otherwise provided in the prospectus supplement with respect to any
series of debt securities, the following are events of default under each
indenture with respect to the debt securities of such series issued under such
indenture:

- failure to pay principal of or premium, if any, on any debt security of
such series when due;

- failure to pay interest, if any, on any debt security of such series when
due, continued for 60 days;

- failure to deposit any mandatory sinking fund payment, when due, in
respect of any debt security of such series, continued for 60 days;

- failure to perform any other covenant made by us in the indenture, other
than a covenant included in the indenture for the benefit of a series of
debt securities other than such series, continued for 90 days after
written notice as provided in the indenture;

- certain events of bankruptcy, insolvency or reorganization; and

- any other event of default as may be specified with respect to debt
securities of such series.

If an event of default with respect to any outstanding series of debt
securities occurs and is continuing, either the trustee or the holders of at
least 25% in principal amount of the outstanding debt securities of such series,
in the case of an event of default described above relating to payment of
principal, premium and interest and other events of default specified with
respect to such series, or at least 25% in principal amount of all outstanding
debt securities under the applicable indenture, in the case of other events of
default, may declare the principal amount of all the debt securities of the
applicable series, or of all outstanding debt securities under the applicable
indenture, as the case may be, to be due and payable immediately. At any time
after a declaration of acceleration has been made, but before a judgment has
been obtained, the holders of a majority in principal amount of the outstanding
debt securities of such series (or of all outstanding debt securities under the
applicable indenture, as the case may be) may, under certain circumstances,
rescind and annul such acceleration. Depending on the terms of our other
indebtedness outstanding from time to time, an event of default under an
indenture may give rise to cross defaults on our other indebtedness.

Each indenture provides that the trustee will, within 90 days after the
occurrence of a default in respect of any series of debt securities, give to the
holders of the debt securities of such series notice of all uncured and unwaived
defaults known to it; provided, however:

- that except in the case of a default in the payment of the principal of or
premium or interest, if any, on, or any sinking fund installment with
respect to, any debt securities of such series, the trustee will be
protected in withholding such notice if it in good faith determines that
the withholding of such notice is in the interest of the holders of the
debt securities of such series; and provided further,

- that such notice shall not be given until at least 60 days after the
occurrence of a default in the performance, or breach, of any covenant or
warranty of ours under such indenture other than for the payment of the
principal of or premium or interest, if any, on, or any sinking fund
installment with respect to, any debt securities of such series.

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For the purpose of this provision, "default" with respect to debt securities
of any series means any event which is, or after notice or lapse of time, or
both, would become, an event of default with respect to the debt securities of
such series.

The holders of a majority in principal amount of the outstanding debt
securities of any series, or, in certain cases, all outstanding debt securities
under the applicable indenture, have the right, 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 with respect to the debt securities of such series or of all outstanding
debt securities under the applicable indenture. Each indenture provides that in
case an event of default shall occur and be continuing, the trustee shall
exercise such of its rights and powers under the applicable indenture and use
the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
Subject to such provisions, the trustee will be under no obligation to exercise
any of its rights or powers under any applicable indenture at the request of any
of the holders of the debt securities unless they shall have offered to the
trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request.

The holders of a majority in principal amount of the outstanding debt
securities of any series, or, in certain cases, all outstanding debt securities
under the applicable indenture, may on behalf of the holders of all debt
securities of such series, or of all outstanding debt securities under the
applicable indenture waive any past default under the applicable indenture,
except a default in the payment of the principal of or premium or interest, if
any, on any debt security or in respect of a provision which under the
applicable indenture cannot be modified or amended without the consent of the
holder of each outstanding debt security affected. The holders of a majority in
principal amount of the outstanding debt securities may on behalf of the holders
of all such debt securities waive compliance by us with certain restrictive
provisions of the indentures.

We are required to furnish to the trustee annually a statement as to the
performance by us of certain of our obligations under each indenture and as to
any default in such performance.

MODIFICATION

Modifications and amendments of each indenture may be made by us and the
trustee with the consent of the holders of a majority in principal amount of the
outstanding debt securities under the applicable indenture; provided, however,
that no such modification or amendment may, without the consent of the holder of
each outstanding debt security:

- change the stated maturity date of the principal of or any installment of
interest, if any, on any debt security;

- reduce the principal amount of or the premium or interest, if any, on any
debt security;

- change the place or currency, currencies, or currency unit or units or
payment of principal of or premium or interest, if any, on any debt
security;

- impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security; or

- reduce the percentage in principal amount of outstanding debt securities
the consent of whose holders is required for modification or amendment of
the indentures or for waiver of compliance with certain provisions of the
indentures or for waiver of certain defaults.

Each indenture provides that we and the trustee may, without the consent of
any holders of debt securities, enter into supplemental indentures for the
purposes, among other things, of adding to our covenants, adding additional
events of default, establishing the form or terms of debt securities or curing
ambiguities or inconsistencies in the applicable indenture, provided such action
to cure

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ambiguities or inconsistencies does not adversely affect the interests of the
holders of the debt securities in any material respect.

CONSOLIDATION, MERGER AND SALE OF ASSETS

Without the consent of any holders of outstanding debt securities, we may
consolidate with or merge into, or convey, transfer or lease our assets
substantially as an entirety to any entity, provided that:

- the entity formed by such consolidation or into which we are merged or
which acquires or leases our assets substantially as an entirety is a
corporation, partnership or trust organized under the laws of any United
States jurisdiction and assumes by supplemental indenture our obligations
on the debt securities and under the indentures;

- after giving effect to the transaction, no event of default, and no event
which, after notice or lapse of time or both, would become an event of
default, shall have occurred and be continuing; and

- and certain other conditions are met.

Upon compliance with these provisions by a successor entity, we will (except in
the case of a lease) be relieved of our obligations under the indentures and the
debt securities.

DISCHARGE AND DEFEASANCE

We may terminate our obligations under each indenture, other than our
obligations to pay the principal of and premium and interest, if any, on the
debt securities of any series and certain other obligations, if we:

- irrevocably deposit or cause to be irrevocably deposited with the trustee
as trust funds money or U.S. Government Obligations maturing as to
principal and interest sufficient to pay the principal of, any interest
on, and any mandatory sinking funds in respect of, all outstanding debt
securities of such series on the stated maturity of such payments or on
any redemption date; and

- comply with any additional conditions specified to be applicable with
respect to the defeasance of debt securities of such series.

The terms of any series of debt securities may also provide for legal
defeasance under each indenture. In such case, if we:

- irrevocably deposit or cause to be irrevocably deposited money or U.S.
Government Obligations as described above;

- make a request to the trustee to be discharged from our obligations on the
debt securities of such series; and

- comply with any additional conditions specified to be applicable with
respect to legal defeasance of securities of such series

then we shall be deemed to have paid and discharged the entire indebtedness on
all the outstanding debt securities of such series and our obligations under the
applicable indenture and the debt securities of such series to pay the principal
of and premium and interest, if any, on the debt securities of such series shall
cease, terminate and be completely discharged, and the holders thereof shall
then be entitled only to payment out of the money or U.S. Government Obligations
deposited with the trustee as described above, unless our obligations are
revived and reinstated because the trustee is unable to apply such trust fund by
reason of any legal proceeding, order or judgment.

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The term "U.S. Government Obligations" is defined in each indenture as
direct noncallable obligations of, or noncallable obligations the payment of
principal of and interest on which is guaranteed by, the United States of
America, or to the payment of which obligations or guarantees the full faith and
credit of the United States of America is pledged, or beneficial interests in a
trust the corpus of which consists exclusively of money or such obligations or a
combination thereof.

FORM, EXCHANGE, REGISTRATION AND TRANSFER

Debt securities will be issuable in definitive, registered form. Debt
securities are also issuable in temporary or permanent global form. See
"Description of the Securities We May Offer--Book-Entry System."

Debt securities of any series will be exchangeable for other debt securities
of the same series and of a like aggregate principal amount and tenor of
different authorized denominations.

Debt securities may be presented for exchange as provided above, and may be
presented for registration of transfer with the form of transfer endorsed
thereon duly executed, at the office of the security registrar or at the office
of any transfer agent designated by us for such purpose with respect to any
series of debt securities and referred to in an applicable prospectus
supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the applicable indenture. Such transfer or
exchange will be effected upon the security registrar or such transfer agent, as
the case may be, being satisfied with the documents of title and identity of the
person making the request. The indentures provide that the applicable trustee
will be appointed as security registrar. If a prospectus supplement refers to
any transfer agents, in addition to the security registrar, initially designated
by us with respect to any series of debt securities, we may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts. We will be required to maintain a
transfer agent in each designated place of payment for each series of debt
securities. We may at any time designate additional transfer agents with respect
to any series of debt securities.

In the event of any redemption in part, we will not be required to:

- issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of debt securities of that series for redemption and ending on
the close of business on the day of mailing of the relevant notice of
redemption; or

- register the transfer of or exchange any debt security, or portion
thereof, called for redemption, except the unredeemed portion of any debt
security being redeemed in part.

PAYMENT AND PAYING AGENTS

Unless otherwise indicated in a prospectus supplement, payment of principal
of and premium and interest, if any, on debt securities will be made in the
designated currency or currency unit at the office of such paying agent or
paying agents as we may designate from time to time, except that our option
payment of any interest may be made by check mailed to the address of the person
entitled thereto as such address shall appear in the security register. Unless
otherwise indicated in a prospectus supplement, payment of any installment of
interest on debt securities will be made to the person in whose name such debt
security is registered at the close of business on the regular record date for
such interest.

Unless otherwise indicated in a prospectus supplement, the corporate trust
office of the trustee in the Borough of Manhattan, The City of New York will be
designated as our paying agent for payments with respect to debt securities. Any
other paying agents in the United States initially designated by us for the debt
securities will be named in an applicable prospectus supplement. We may at any
time designate additional paying agents or rescind the designation of any paying
agent or approve a change

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in the office through which any paying agent acts, except that, we will be
required to maintain a paying agent in each designated place of payment for each
series of debt securities.

All moneys we pay to a paying agent for the payment of principal of and any
premium or interest on any debt security which remain unclaimed at the end of
three years after such principal, premium or interest shall have become due and
payable will, subject to applicable escheat laws, be repaid to us and the holder
of such debt security or any coupon will look only to us for payment.

MEETINGS

The indentures contain provisions for convening meetings of the holders of
debt securities of a series. A meeting may be called at any time by the trustee,
and also, upon request, by us or the holders of at least 10% in principal amount
of the outstanding debt securities of such series, in any such case upon notice
given as described under "--Notices" below. Except for any consent that must be
given by the holder of each outstanding debt security, as described under
"--Modification" above, any resolution presented at a meeting or adjourned
meeting at which a quorum is present may be adopted by the affirmative vote of
the holders of a majority in principal amount of the outstanding debt securities
of that series; provided, however, that, except for any consent that must be
given by the holder of each outstanding debt security, as described under
"--Modification" above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority in principal amount of the outstanding debt securities of a
series, may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding debt securities of
that series. Subject to the proviso set forth above, any resolution passed or
decision taken at any meeting of the holders of debt securities of any series
duly held in accordance with the indenture will be binding on all holders of
debt securities of that series and any related coupons. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding debt securities of a series.

NOTICES

Notices to holders of debt securities will be given by mail to the addresses
of such holders as they appear in the security register.

THE TRUSTEE

The applicable prospectus supplement will specify the trustee under the
senior indenture and the subordinated indenture. Wilmington Trust Company or
such other trustee as may be named in a prospectus supplement will be the
trustee under the junior subordinated indenture. Each indenture contains certain
limitations on the right of the trustee, if it is one of our creditors, to
obtain payment of claims in certain cases or to realize on certain property
received with respect to any such claims, as security or otherwise. The trustee
is permitted to engage in other transactions, except that, if it acquires any
conflicting interest, it must eliminate such conflict or resign.

GOVERNING LAW

The senior indenture, the subordinated indenture, the junior subordinated
indenture and the debt securities shall be governed by and construed under New
York law except to the extent that the Trust Indenture Act is applicable.

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PROVISIONS APPLICABLE TO SUBORDINATED DEBT SECURITIES

CERTAIN DEFINITIONS APPLICABLE TO DESCRIPTION OF SUBORDINATION

The term "indebtedness," is defined in the subordinated indenture to mean,
without duplication, with respect to any person, the principal component of:

(a) all obligations of such person

- in respect of borrowed money, whether or not the recourse of the
lender is to the whole or only a portion, of the assets of such
person,

- evidenced by bonds, notes, debentures or similar instruments,

- for the payment of money representing the balance deferred and unpaid
of the purchase price of any property or services other than accounts
payable or other obligations arising in the ordinary course of
business,

- evidenced by bankers acceptances or similar instruments issued or
accepted by banks,

- for the payment of money relating to capitalized lease obligations, or

- evidenced by letter of credit or reimbursement obligation of such
person with respect to any letter of credit other than a letter of
credit entered into for the purpose of providing security in
connection with the forward purchase and sale contracts or energy
swaps with respect to our oil and gas business;

(b) all current net obligations of such person under interest rate swap
obligations and foreign currency hedges;

(c) all liabilities of others of the kind described in the preceding clauses
(a) or (b) that such person has guaranteed or that are otherwise its legal
liability;

(d) indebtedness, as otherwise defined in this definition, of others secured
by a lien on any asset of such person, other than liens securing obligations of
such person under delivery contracts with respect to our oil and gas business,
whether or not such indebtedness is assumed by such person, provided that if the
obligations so secured have not been assumed in full by such person or are not
otherwise such person's legal liability in full, then such obligation shall be
deemed to have been an amount equal to the greater of

(1) the lesser of

- the full amount of such obligations and

- the fair market value of such asset, as determined in good faith
by the Board of Directors of such person, which determination
shall be evidenced by a board resolution, and

(2) the amount of obligations as have been assumed by such person or
which are otherwise such person'slegal liability,

(e) such other items as are described in the prospectus supplement relating
to a particular series of subordinated debt securities; and

(f) any and all deferrals, renewals, and extensions, refinancings and
refunding, whether direct or indirect, of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses or this clause, whether or not between or among the same parties.

The term "permitted junior securities" is defined in the subordinated
indenture as our subordinated debt securities or any successor obligor with
respect to the senior indebtedness, provided

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for by a plan of reorganization or readjustment that are subordinated in right
of payment to all senior indebtedness that may be outstanding to substantially
the same extent as, or to a greater extent than, the subordinated debt
securities are subordinated as provided in the subordinated indenture.

The term "securities payment" is defined in the subordinated indenture to
mean any payment or distribution of any kind or character, whether by way of
set-off or otherwise and whether in cash, property or securities, including any
junior subordinated payment, as defined in the subordinated indenture, on
account of principal of, or premium, if any, or interest on, or additional
amounts, as defined in the subordinated indenture, with respect to, the
securities or on account of any purchase, repurchase, redemption or other
acquisition of securities, in any case whether by us or by any other person on
our behalf.

The term "senior indebtedness" is defined in the subordinated indenture as:

- all of our indebtedness, including principal, premium, if any, interest
and all other amounts owing in respect of such indebtedness, including
interest that, but for the filing of a petition initiating any proceeding
under to any bankruptcy law with respect to us, would accrue on such
indebtedness at the contractual rate provided in the instruments
evidencing the respective obligations, whether or not such claim is
allowed in such bankruptcy proceeding, whether existing on the date of
issuance of any subordinated debt securities or created, incurred or
assumed later unless such indebtedness by its terms or by the terms of the
instrument creating or evidencing it is subordinate in right of payment to
or equal with the subordinated debt securities;

- all of our reimbursement obligations with respect to letters of credit not
otherwise constituting indebtedness;

- all of our obligations under forward purchase and sale contracts or energy
swaps with respect to our oil and gas business, including obligations to
deliver natural gas or other commodities and liabilities for any breach of
obligations under such contracts;

- all charges, fees, expenses, including reasonable attorneys fees and
expenses, and other amounts incurred by or owing to holders of
indebtedness or obligations described in the preceding clauses in
connection with such indebtedness or obligations;

- all interest payable during the pendency of a proceeding under Title 11 of
the United States Code on indebtedness or obligations referred to in the
first three clauses incurred prior to the commencement of such proceeding;
and

- any of our other indebtedness or obligations as may be defined in the
prospectus supplement for the particular issue of subordinated debt
securities.

Notwithstanding the foregoing, senior indebtedness shall not include:

- any of our indebtedness to a subsidiary of ours,

- our indebtedness to, or guaranteed on behalf of any affiliate, including
without limitation amounts owed for compensation, and

- such other indebtedness or obligations as defined in the prospectus
supplement for the particular issue of subordinated debt securities.

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SUBORDINATION

The payment of the principal of and premium, if any, and interest on the
subordinated debt securities is, to the extent set forth in the subordinated
indenture and in any applicable prospectus supplement, subordinated in right of
payment to the prior payment in full of all senior indebtedness, whether now
outstanding or incurred in the future. Upon any payment or distribution of our
assets to creditors upon any liquidation, dissolution, winding up, assignment
for the benefit of creditors or marshaling of assets and liabilities or any
bankruptcy, insolvency, receivership, liquidation, reorganization or similar
proceedings, the holders of all senior indebtedness will first be entitled to
receive any payment in full of all amounts due or to become due thereon in cash,
or such payment duly provided for, before any securities payment is made, other
than in permitted junior securities.

If a payment event of default shall have occurred and be continuing with
respect to any senior indebtedness, no securities payment shall be made, other
than in permitted junior securities. The term "payment event of default" is
defined as any default in the payment of principal of or premium, if any, or
interest on any senior indebtedness when due, whether at maturity, upon
acceleration or otherwise. In the event that, notwithstanding the restriction
described in the preceding sentence, payment is made to the trustee or a holder
of subordinated debt securities prohibited by any such restriction, then such
payment shall be held in trust for the benefit of, and shall be paid over or
delivered to the holders of senior indebtedness or their representatives, if
any, as their respective interests may appear, prorated to such holders on the
basis of the respective amount of senior indebtedness held by such holders.

The subordination rights of holders of senior indebtedness will not be
prejudiced or impaired by any acts or failures to act by us or by any such
holder. The subordination of the subordinated debt securities set forth above
will not prevent the occurrence of any event of default under the subordinated
indenture. Furthermore, the subordination of the subordinated debt securities as
set forth above will not impair, as between us, the holders of the subordinated
debt securities and creditors other than holders of senior indebtedness, our
obligations to make payments on the subordinated debt securities in accordance
with their terms. In certain circumstances, as set forth in the indenture, the
holders of subordinated debt securities will be subrogated to certain rights of
the holders of senior indebtedness upon payment in full of all senior
indebtedness.

By reason of such subordination, in the event of insolvency of the holders
of senior indebtedness, as well as our other creditors who are holders of
indebtedness that is not subordinated to the senior indebtedness, may recover
more, ratably, than the holders of the subordinated debt securities. The
subordinated debt securities will also be effectively subordinated to all
liabilities, including trade payables and capitalized lease obligations, if any,
of our subsidiaries. Our right to receive the assets of any of our subsidiaries
upon their liquidation or reorganization and the consequent right of the holders
of the subordinated debt securities to participate in those assets will be
subject to the prior payment of claims of that subsidiary's creditors, including
trade creditors, except to the extent that we are a creditor of such subsidiary,
in which case our claims would still be subject to the prior payment of claims
secured by security interests in the assets of such subsidiary and any other
indebtedness of such subsidiary senior to that held by us.

If the subordinated debt securities are issued under the subordinated
indenture, the aggregate principal amount of senior indebtedness outstanding as
of a recent date will be set forth in the prospectus supplement. The
subordinated indenture does not restrict the amount of senior indebtedness that
we may incur, although the terms of the subordinated debt securities offered in
connection with any prospectus supplement may contain such limitations.

The terms of our existing outstanding 9-1/4% Senior Subordinated Notes due
2004 prohibit us from issuing subordinated debt securities ranking senior in
right of payment to the 9-1/4% Notes.

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PROVISIONS APPLICABLE TO JUNIOR SUBORDINATED DEBT SECURITIES

EVENTS OF DEFAULT

In addition to the events described above under "Provisions Applicable to
All Debt Securities--Events of Default" applicable to all debt securities, the
voluntary or involuntary dissolution, winding up or termination of the trust
that owns the series of junior subordinated debt securities will constitute an
event of default for any series of junior subordinated debt securities issued
under the junior subordinated indenture, except in connection with:

- the distribution of such junior subordinated debt securities to holders of
trust securities of the trust;

- the redemption of all of the trust securities of the trust; and

- mergers, consolidations or amalgamations permitted by the amended
declaration of the trust.

The holders of at least a majority in aggregate liquidation amount of the
trust preferred securities of the trust may waive any default or event of
default with respect to such series and its consequences, except defaults or
events of default that:

- are not waivable under the junior subordinated indenture, such as defaults
regarding payment of principal, premium, if any, or interest; or

- require the consent or vote of greater than a majority in principal amount
of the holders of junior subordinated debt securities to be waived under
the junior subordinated indenture, in which case the event of default may
only be waived by the holders of the same "super-majority" in liquidation
amount of the trust preferred securities.

Any such waiver shall cure such default or event of default. If, under the
amended declaration of a trust, an event of default has occurred and is
attributable to our failure to pay principal, premium, if any, or interest on,
such junior subordinated debt securities, then each holder of the trust
preferred securities of the trust may sue us or seek other remedies, to force
payment to such holder of the principal of, premium, if any, or interest on,
such junior subordinated debt securities having a principal amount equal to the
aggregate liquidation amount of the trust preferred securities held by such
holder.

MODIFICATION OF JUNIOR SUBORDINATED INDENTURE

Under the junior subordinated indenture, we and the indenture trustee may
change certain rights of holders of a series of junior subordinated debt
securities with the written consent of the holders of a majority in principal
amount of the series of junior subordinated debt securities that is affected.
Any such change will be subject to the limitations described above under
"Modification" applicable to the other debt securities. If the property trustee
of the trust, as holder of junior subordinated debt securities, is required to
consent to any amendment, modification or termination of the junior subordinated
indenture, the property trustee will request directions from the holders of the
trust securities of the applicable trust.

SUBORDINATION OF JUNIOR SUBORDINATED DEBT SECURITIES

The junior subordinated debt securities will be unsecured and will be
subordinate and junior in priority of payment to certain of our other
indebtedness to the extent described in a prospectus supplement. The junior
subordinated indenture will not limit the amount of junior subordinated debt
securities which we may issue, nor does it limit us from issuing any other
secured or unsecured debt.

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DESCRIPTION OF THE TRUST PREFERRED SECURITIES

GENERAL

The amended declaration of each trust authorizes the respective trustees to
issue, on behalf of the trust, one series of trust preferred securities. Each
trust will use the proceeds from the sale of the trust preferred securities to
purchase a series of our junior subordinated debt securities issued. The
property trustee will hold these junior subordinated debt securities in trust
for the benefit of the holders of such trust preferred securities.

This section summarizes the general terms of the preferred securities that
the trusts may offer. The prospectus supplement relating to any particular
preferred securities offered by a trust will describe the specific terms of the
preferred securities, which may be in addition to or different from the general
terms summarized in this section. The summary in this section and in any
prospectus supplement does not describe every aspect of the trust preferred
securities offered and is subject to and qualified in its entirety by reference
to all the provisions of the amended declarations and the trust preferred
securities. The forms of the amended declarations and the trust preferred
securities are or will be filed as exhibits to or incorporated by reference in
the registration statement.

We will guarantee the payments of distributions and payments on redemption
or liquidation with respect to the trust preferred securities, but only to the
extent the trust has funds available to make those payments and has not made the
payments. Our trust preferred securities guarantee is described in more detail
below under "Description of the Trust Preferred Securities Guarantee."

The assets of each trust available for distribution to the holders of its
trust preferred securities will be limited to payments from us under the series
of junior subordinated debt securities held by the trust. If we fail to make a
payment on the junior subordinated debt securities, the trust will not have
sufficient funds to make related payments, including distributions, on its trust
preferred securities.

The trust preferred securities guarantee, when taken together with our
obligations under the series of junior subordinated debt securities, the junior
subordinated indenture and the amended declaration of the trust, will provide a
full and unconditional guarantee of amounts due on the trust preferred
securities issued by each trust.

The prospectus supplement relating to any particular preferred securities
offered by a trust will describe the specific terms of the preferred securities,
which may be in addition to or different from the general terms summarized in
this section. In particular, the prospectus supplement will describe:

- the name of such trust preferred securities;

- the designation of the trust preferred securities;

- the dollar amount and number of trust preferred securities issued;

- the annual distribution rate(s) or method of determining such rate(s), the
payment date(s) and the record dates used to determine the holders who are
to receive distributions;

- the date(s) or the method to determine the date(s) from which
distributions shall be cumulative;

- the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions for which such trust preferred
securities shall be purchased or redeemed, in whole or in part;

- the terms and conditions, if any, upon which the applicable series of
junior subordinated debt securities and the related trust preferred
securities guarantee may be distributed to holders of the trust preferred
securities upon liquidation, dissolution, termination or winding up of the
trust;

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- any voting rights of the trust preferred securities other than those
described in this section;

- any securities exchange on which the trust preferred securities will be
listed;

- whether the trust preferred securities are to be issued in book-entry form
and represented by one or more global certificates, and if so, the
depositary for the global certificates and the specific terms of the
depositary arrangements;

- any other relevant rights, preferences, privileges, limitations or
restrictions of such trust preferred securities; and

- any applicable United States Federal income tax considerations.

LIQUIDATION DISTRIBUTION UPON DISSOLUTION

The amended declaration of each trust states that the trust shall be
dissolved:

- on the expiration of the term of the trust;

- upon our bankruptcy, dissolution or liquidation;

- upon a change in law requiring the trust to register as an investment
company under the Investment Company Act of 1940;

- unless we take certain actions, upon a change in the law resulting in the
trust being subject to United States Federal income tax on income received
from the junior subordinated debt securities held by the trust, the
interest payable by us on the junior subordinated debt securities not
being deductible for United State Federal income tax purposes, or the
trust being subject to more than a de minimus amount of other taxes;

- upon the redemption, conversion or exchange of all of the trust securities
of the trust;

- upon the repayment of all of the junior subordinated debt securities held
by the trust or at such time as no such junior subordinated debt
securities are outstanding;

- upon entry of a court order for the dissolution of the trust; or

- upon our election to terminate the trust and distribute the related junior
subordinated debt securities directly to the holders of the trust
securities.

In the event of a dissolution, after the trust pays all amounts owed to
creditors, the holders of the trust securities will be entitled to receive:

- cash equal to the aggregate liquidation amount of each trust security
specified in an accompanying prospectus supplement, plus accumulated and
unpaid distributions to the date of payment; or

- junior subordinated debt securities in an aggregate principal amount equal
to the aggregate liquidation amount of the trust securities.

If a trust cannot pay the full amount due on its trust securities because
insufficient assets are available for payment, then the amounts payable by the
trust on its trust securities shall be paid pro rata. However, if an event of
default under the related indenture has occurred, the total amounts due on the
trust preferred securities will be paid before any distribution on the trust
common securities.

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EVENTS OF DEFAULT

An event of default under the junior subordinated indenture relating to a
series of junior subordinated debt securities is an event of default under the
amended declaration of the trust that owns those junior subordinated debt
securities. We have described these events of default under the sections
entitled "Description Debt Securities--Provisions Applicable to All Debt
Securities--Events of Default" and "--Provisions Applicable to Junior
Subordinated Debt Securities--Events of Default."

We and the regular trustees of each trust must file annually with the
property trustee for the trust a certificate stating whether or not they are in
compliance with all the applicable conditions and covenants under the related
amended declaration.

Upon the occurrence of an event of default, the property trustee of the
trust, as the sole holder of the junior subordinated debt securities held by the
trust, will have the right under the junior subordinated indenture to declare
the principal of, premium, if any, and interest on such junior subordinated debt
securities to be immediately due and payable.

If a property trustee fails to enforce its rights under the amended
declaration or the junior subordinated indenture then, to the fullest extent
permitted by law, and subject to the terms of the amended declaration and the
junior subordinated indenture, any holder of trust preferred securities may sue
us, or seek other remedies, to enforce the property trustee's rights under the
amended declaration or the junior subordinated indenture without first
instituting a legal proceeding against such property trustee or any other
person.

If we fail to pay principal, premium, if any, or interest on a series of
junior subordinated debt securities when payable, then a holder of such trust
preferred securities may directly sue us or seek other remedies, to collect its
pro rata share of payments owned.

REMOVAL AND REPLACEMENT OF TRUSTEES

Only the holders of trust common securities may remove or replace the
trustees of a trust. The resignation or removal of any trustee and the
appointment of a successor trustee will be effective only on the acceptance of
appointment by the successor trustee in accordance with the provisions of the
amended declaration for the trust.

CONVERSION OR EXCHANGE RIGHTS

The applicable prospectus supplement will set forth the terms on which the
trust preferred securities are convertible into or exchangeable for our common
stock or other securities or securities of any other person. Such terms will
include provisions as to whether conversion or exchange is mandatory, at the
option of the holder or at our option, and may include provisions for adjustment
of the number of shares of common stock or other securities of ours or any other
person to be received by the holders of trust preferred securities.

MERGERS, CONSOLIDATIONS, CONVERSIONS OR AMALGAMATIONS OF THE TRUSTS

The trusts may not consolidate, amalgamate, merge with or into, or be
converted into or replaced by or convey, transfer or lease their properties and
assets substantially as an entirety to any other corporation or other body,
except as described below. A trust may, with the consent of a majority of its
regular trustees and without the consent of the holders of its trust securities
or the other trustees, engage in any of the merger events referred to above,
provided that:

- the successor entity either

(1) assumes all of the obligations of the trust relating to its trust
securities or

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(2) substitutes other securities for the trust securities that are
substantially similar to such trust securities, so long as the
successor securities rank the same as such trust securities for
distributions and payments upon liquidation, redemption and
otherwise;

- we acknowledge a trustee of such successor entity who has the same powers
and duties as the property trustee of the trust, as the holder of the
particular series of junior subordinated debt securities;

- the trust preferred securities are listed, or any successor securities
will be listed, upon notice of issuance, on the same national securities
exchange or other organization that the trust preferred securities are
then listed;

- the merger event does not cause the trust preferred securities or
successor securities to be downgraded by any national rating agency;

- the merger event does not adversely affect the rights, preferences and
privileges of the holders of the trust securities or successor securities
in any material way;

- the successor entity has a purpose identical to that of the trust;

- prior to the merger event, we have received an opinion of counsel from a
nationally recognized law firm stating that

(1) such merger event does not adversely affect the rights of the holders
of the trust's preferred securities or any successor securities in
any material way (other than with respect to any dilution of the
holders' interest in the new entity) and

(2) following the merger event, neither the trust nor the successor
entity will be required to register as an investment company under
the Investment Company Act of 1940; and

- we or any permitted successor owns all of the common stock of such
successor entity and guarantees the obligations of the successor entity
under the successor securities in the same manner as in the trust
preferred securities guarantee and the guarantee of the common securities
for the trust.

In addition, unless all of the holders of the trust preferred securities and
trust common securities approve otherwise, the trust may not consent to or
engage in a merger event if that event would cause the trust or the successor
entity to be classified other than as a grantor trust for United States federal
income tax purposes.

VOTING RIGHTS; AMENDMENT OF DECLARATION

The holders of trust preferred securities have no voting rights except as
discussed above under "--Mergers, Consolidations, Conversion or Amalgamations of
the Trust" and below under "Description of the Trust Preferred Securities
Guarantee--Amendments and Assignment," and as otherwise required by law or the
amended declaration for the trust.

The amended declaration may be amended if approved by a majority of the
regular trustees of the trust. However, if any proposed amendment provides for,
or such regular trustees otherwise propose,

- any action that would adversely affect the powers, preferences or special
rights of the trust securities, whether by way of amendment to such
amended declaration or otherwise or

- the dissolution, winding-up or termination of the trust other than by the
terms of its amended declaration,

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then the holders of the trust securities as a single class will be entitled to
vote on such amendment or proposal. In that case, the amendment or proposal will
only be effective if approved by a majority in liquidation amount of the trust
securities affected by such amendment or proposal.

If any amendment or proposal referred to in clause (1) above would adversely
affect only a particular class of the trust securities of the trust, then only
the affected class will be entitled to vote on such amendment or proposal. Such
amendment or proposal will only be effective with the approval of a majority in
liquidation amount of such affected class.

No amendment may be made to an amended declaration if such amendment would:

- cause the trust to be characterized as other than a grantor trust for
United States federal income tax purposes;

- impose any additional obligation on us without our consent;

- reduce or otherwise adversely affect the powers of the property trustee;
or

- cause the trust to be deemed to be an "investment company" which is
required to be registered under the Investment Company Act.

The holders of a majority in aggregate liquidation amount of the trust
preferred securities have the right to:

- direct the time, method and place of conducting any proceeding for any
remedy available to the property trustee of the trust; or

- direct the exercise of any trust or power conferred upon the property
trustee under the trust's amended declaration, including the right to
direct the property trustee, as the holder of a series of junior
subordinated debt securities, to

(1) exercise the remedies available under the junior subordinated
indenture with respect to those junior subordinated debt securities,

(2) waive any event of default under the junior subordinated indenture
that is waivable or

(3) cancel an acceleration of the principal of the junior subordinated
debt securities.

However, if the junior subordinated indenture requires the consent of the
holders of more than a majority in aggregate principal amount of the junior
subordinated debt securities, then the property trustee must get approval of the
holders of such "super-majority" in liquidation amount of the trust preferred
securities.

In addition, the property trustee will not be required to take certain of
the actions described above unless it has obtained an opinion of counsel stating
that, as a result of such action, the trust will continue to be classified as a
grantor trust for United States federal income tax purposes.

The property trustee of the trust will notify all holders of trust preferred
securities of the trust of any notice received from the indenture trustee with
respect to the junior subordinated debt securities held by the trust.

As described in the amended declaration, the property trustee may hold a
meeting to have holders of trust preferred securities vote on a change or have
them approve a change by written consent.

Any trust preferred securities that we or our affiliates own will be treated
as if they were not outstanding for purposes of any vote or consent of trust
preferred securities. This means:

- we and any of our affiliates will not be able to vote on or consent to
matters requiring the vote or consent of holders of trust preferred
securities and

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- any trust preferred securities owned by us or any of our affiliates will
not be counted in determining whether the required percentage of votes or
consents has been obtained.

INFORMATION CONCERNING DUTIES OF THE PROPERTY TRUSTEE

For matters relating to compliance with the Trust Indenture Act, the
property trustee of the trust will have all of the duties and responsibilities
of an indenture trustee under the Trust Indenture Act. The property trustee,
other than during the occurrence and continuance of an event of default under
the trust, undertakes to perform only such duties as are specifically set forth
in the amended declaration and, upon an event of default, must use the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the property
trustee is under no obligation to exercise any of the powers given it by the
applicable amended declaration at the request of any holder of trust preferred
securities unless it is offered reasonable security or indemnity against the
costs, expenses and liabilities that it might incur. However, the holders of the
trust preferred securities will not be required to offer such an indemnity where
the holders, by exercising their voting rights, direct the property trustee to
take any action following an event of default.

MISCELLANEOUS

The regular trustees of a trust are authorized and directed to conduct the
affairs of the trust and to operate the trust in such a way that

- it will not be deemed to be an "investment company" required to be
registered under the Investment Company Act;

- it will be classified as a grantor trust for United States federal income
tax purposes; and

- the junior subordinated debt securities held by it will be treated as our
indebtedness for the United States federal income tax purposes.

We and the regular trustees of the trust are authorized to take any action,
so long as it is consistent with applicable law or the certificate of trust or
amended declaration, that we and the regular trustees of the trust determine to
be necessary or desirable for such purposes.

Holders of trust preferred securities have no preemptive or similar rights.

The trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.

GOVERNING LAW

The amended declaration and the related trust preferred securities will be
governed by and construed in accordance with the laws of the State of Delaware
and the Trust Indenture Act.

DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEE

GENERAL

We will execute a trust preferred securities guarantee, which benefits the
holders of trust preferred securities, at the time that a trust issues those
trust preferred securities. The trust preferred securities guarantee will be
qualified as an indenture under the Trust Indenture Act and will be held for the
benefit of holders of trust preferred securities by a guarantee trustee meeting
the requirements of the Trust Indenture Act. Unless otherwise indicated in a
prospectus supplement, Wilmington Trust Company will be the guarantee trustee.

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GUARANTEE PAYMENT

This section summarizes the general terms of the guarantees that we will
provide in respect of the preferred securities that the trusts may offer. The
summary in this section does not describe every aspect of the guarantee and is
subject to and qualified in its entirety by reference to any description in the
related prospectus supplement and to all the provisions of the guarantee
agreements. The form of the guarantee agreement is filed as an exhibit to the
registration statement.

We will irrevocably agree, as described in the trust preferred securities
guarantee, to pay in full, to the holders of the trust preferred securities
issued by a trust, the following trust preferred securities guarantee payments
when due to the extent not paid by the trust, regardless of any defense, right
of set-off or counterclaim which the trust may have or assert:

- any accrued and unpaid distributions required to be paid on the trust
preferred securities, to the extent that the trust has funds available to
make the payment;

- the redemption price, to the extent that the trust has funds available to
make the payment; and

- upon a voluntary or involuntary dissolution and liquidation of the trust
(other than in connection with a distribution of junior subordinated debt
securities to holders of such trust preferred securities or the
redemption of all such trust preferred securities), the lesser of

(1) the aggregate of the liquidation amount specified in the prospectus
supplement for each trust preferred security plus all accrued and
unpaid distributions on the trust preferred securities to the date of
payment, to the extent the trust has funds available to make the
payment and

(2) the amount of assets of the trust remaining available for
distribution to holders of its trust preferred securities upon a
dissolution and liquidation of the trust ("liquidation payment").

Our obligation to make a trust preferred securities guarantee payment may be
satisfied by directly paying the required amounts to the holders of the trust
preferred securities or by causing the trust to pay the amounts to the holders.

The combined operation of our obligations under the junior subordinated
indenture and the trust preferred securities guarantee and amended declaration
has the effect of providing a full, irrevocable and unconditional guarantee of
the trust's obligations under its trust preferred securities.

STATUS OF THE TRUST PREFERRED SECURITIES GUARANTEE

The trust preferred securities guarantee will constitute an unsecured
obligation of ours and will rank:

- subordinated and junior in right of payment to all of our other
liabilities, including the junior subordinated debt securities, except
those liabilities made equal or subordinate to the guarantee by their
terms; and

- senior to the following:

(1) all capital stock issued by us, other than the most senior preferred
shares issued, from time to time, by us, which will rank equally with
the guarantee, and

(2) any guarantee entered into by us relating to our capital stock, other
than the most senior preferred shares issued, from time to time, by
us.

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The trust preferred securities guarantee will rank equally with obligations
under other guarantee agreements that we may enter into from time to time if
both:

- the agreements are in substantially the form of the preferred securities
guarantee and provide for comparable guarantees payment on preferred
securities issued by other trusts or financing vehicles of ours; and

- the debt relating to those preferred securities are junior subordinated,
unsecured indebtedness of ours.

By acceptance of the trust preferred securities, holders accept the
subordination provisions and other terms of the trust preferred securities
guarantee. The holder of the guaranteed security may sue us or seek other
remedies, to enforce its rights under the trust preferred securities guarantee
without first suing any other person or entity. The trust preferred securities
guarantee will not be discharged except by payment of the guarantee payments in
full to the extent not previously paid or upon distribution of the corresponding
series of junior subordinated debt securities to the holders of trust preferred
securities under the terms of the amended declaration.

AMENDMENTS AND ASSIGNMENT

Except with respect to any changes which do not adversely affect the rights
of holders of trust preferred securities in any material respect, in which case
no consent of such holders will be required, a trust preferred securities
guarantee may only be amended with the prior approval of the holders of a
majority in aggregate liquidation amount of such trust preferred securities. We
have described the way to obtain any approval under "Description of the Trust
Preferred Securities--Voting Rights; Amendment of Declaration." All guarantees
and agreements contained in the trust preferred securities guarantee will be
binding on our successors, assigns, receivers, trustees and representatives and
are for the benefit of the holders of the applicable trust preferred securities.

TRUST PREFERRED SECURITIES GUARANTEE EVENTS OF DEFAULT

An event of default under the trust preferred securities guarantee occurs if
we fail to make any of our required payments or perform our obligations under
the trust preferred securities guarantee.

The holders of at least a majority in aggregate liquidation amount of the
trust preferred securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the guarantee
trustee or to direct the exercise of any trust or power given to the guarantee
trustee under the trust preferred securities guarantee.

INFORMATION CONCERNING DUTIES OF THE TRUST PREFERRED GUARANTEE TRUSTEE

The guarantee trustee under the trust preferred securities guarantee, other
than during the occurrence and continuance of an event of default under the
trust preferred securities guarantee, will only perform the duties that are
specifically described in the trust preferred securities guarantee. After such a
default, the trust preferred guarantee trustee will exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the guarantee trustee is under no
obligation to exercise any of its powers as described in the trust preferred
securities guarantee at the request of any holder of covered trust preferred
securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that it might incur.

TERMINATION OF THE TRUST PREFERRED SECURITIES GUARANTEE

The trust preferred securities guarantee will terminate once the trust
preferred securities are paid in full or upon distribution of the corresponding
series of junior subordinated debt securities to the holders of the trust
preferred securities. The trust preferred securities guarantee will continue to
be

27
<PAGE>
effective or will be reinstated if at any time any holder of trust preferred
securities must restore payment of any sums paid under such trust preferred
securities or such trust preferred securities guarantee.

GOVERNING LAW

The trust preferred securities guarantee will be governed by and construed
in accordance with the laws of the State of New York and the Trust Indenture
Act.

RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE TRUST PREFERRED SECURITIES GUARANTEE
AND THE SUBORDINATED DEBT SECURITIES HELD BY THE TRUST

Payments of distributions and redemption and liquidation payments due on the
trust preferred securities, to the extent the trust has funds available for the
payments, will be guaranteed by us to the extent described above under
"Description of the Trust Preferred Securities Guarantee." The combined
operation of our obligations under the trust preferred securities guarantee,
amended declaration and the junior subordinated indenture has the effect of
providing a full, irrevocable and unconditional guarantee of each of the trusts'
obligations under its trust preferred securities.

As long as we make payments of interest and other payments when due on the
junior subordinated debt securities held by a trust, such payments will be
sufficient to cover the payment of distributions and redemption and liquidation
payments due on the trust preferred securities issued by the trust. This is
because:

- the aggregate principal amount of the junior subordinated debt securities
will be equal to the sum of the aggregate liquidation amount of the trust
securities;

- the interest rate and interest and other payment dates on the junior
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the trust preferred securities;

- we will pay for any and all costs, expenses and liabilities of each trust
except the trust's obligations under its trust preferred securities; and

- each amended declaration provides that a trust will not engage in any
activity that is not consistent with the limited purposes of the trust.

If and to the extent that we do not make payments on such junior
subordinated debt securities, the trust will not have funds available to make
payments of distributions or other amounts due on its trust preferred
securities. In those circumstances, you will not be able to rely upon the trust
preferred securities guarantee for payment of these amounts. Instead, you may
directly sue us or seek other remedies to collect your pro rata share of
payments owed. If you sue us to collect payment, then we will assume your rights
as a holder of trust preferred securities under the amended declaration to the
extent we make a payment to you in any such legal action.

A holder of any trust preferred security may sue us, or seek other remedies,
to enforce its rights under the trust preferred securities guarantee without
first suing the guarantee trustee, the trust or any other person or entity.

PLAN OF DISTRIBUTION

We may sell common stock, preferred stock, any series of debt securities or
guarantees and the trusts may sell trust preferred securities in one or more of
the following ways from time to time:

- to underwriters for resale to the public or to institutional investors;

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<PAGE>
- directly to institutional investors; or

- through agents to the public or to institutional investors.

The offered securities may be distributed periodically in one or more
transactions at:

- a fixed price or prices, which may be changed;

- market prices prevailing at the time of sale;

- prices related to the prevailing market prices; or

- negotiated prices.

In connection with the sale of offered securities, underwriters or agents
may receive compensation from us in the form of underwriting discounts or
commissions. They may also receive commissions from purchasers of offered
securities for whom they may act as agent. Underwriters or agents may sell
offered securities to or through dealers. Those dealers may receive compensation
in the form of discounts, concessions, or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.

The prospectus supplement will set forth the terms of the offering of the
securities, including the name or names of any underwriters or agents, the
purchase price of such securities and the proceeds to us or the trusts, as the
case may be, from such sale, any underwriting discounts or agency fees and other
items constituting underwriters' or agents' compensation, any initial public
offering price, any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchanges on which the securities may be listed.

If underwriters are used in the sale, the offered 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.

Unless otherwise set forth in a prospectus supplement, the obligations of
the underwriters to purchase any series of securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
such series of securities, if any are purchased.

Underwriters, dealers, and agents participating in the distribution of the
offered securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
offered securities may be deemed to be underwriting discounts and commissions,
under the Securities Act of 1933. Underwriters and agents may be entitled under
agreements entered into with us and/or the trusts to indemnification by us
and/or the trusts against certain civil liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which the
underwriters or agents may be required to make in respect thereof.

Underwriters and agents and/or their affiliates may engage in transactions
with or perform services for us and our affiliates in the ordinary course of
business.

Each series of offered securities will be a new issue of securities and will
have no established trading market, other than the common stock which is listed
on the New York Stock Exchange. Any common stock sold will be listed on the New
York Stock Exchange subject to official notice of issuance. Other securities may
or may not be listed on a national securities exchange. Any underwriters to whom
securities are sold by us or by a trust for public offering and sale may make a
market in the securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without notice.

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<PAGE>
VALIDITY OF OFFERED SECURITIES

The validity of the offered securities will be passed upon for us by Crowe &
Dunlevy, A Professional Corporation, and for the underwriters or agents, if any,
by a firm named in the prospectus supplement relating to the particular
security. Certain matters of Delaware law relating to the trust preferred
securities will be passed upon on behalf of the trusts by Richards, Layton &
Finger, P.A., special Delaware counsel to the trusts.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule, as amended, included in our Annual Report on
Form 10-K as amended for the year ended December 31, 1998, as set forth in their
report, which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Our financial statements and schedule, as amended,
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing. Any future audited
financial statements and the reports with respect to such audited financial
statements of our independent public accountants hereafter incorporated by
reference in this prospectus and the registration statement will be incorporated
in reliance upon the authority of that firm as experts in giving those reports
to the extent such firm has audited those financial statements and consented to
the use of their reports with respect to such audited financial statements.

Certain estimates of our oil and gas reserves and related information as of
December 31, 1998 included in our Annual Report on Form 10-K for the year ended
December 31, 1998 and incorporated by reference in this prospectus and elsewhere
in the registration statement have been derived from engineering reports
prepared by our engineers and reviewed and reported on by Ryder Scott Company,
and all such information has been so incorporated in reliance on the authority
of such firm as experts regarding the matters contained in their report. Future
estimates of oil and gas reserves and related information hereafter incorporated
by reference in this prospectus and the registration statement will be
incorporated in reliance upon the reports of the firm examining such oil and gas
reserves and related information and upon the authority of any such firm as
experts regarding the matters contained in their reports, to the extent such
firm has consented to the use of their reports.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the Securities
and Exchange Commission. Our filings are available over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy any document we
file with the SEC at the SEC's public reference rooms at:

- 450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549;

- Seven World Trade Center
13th Floor
New York, New York 10048; and

- Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60601.

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<PAGE>
You may call the SEC at (202) 942-8090 for more information on the public
reference rooms and their copy charges. You may also inspect the reports and
other information we file with the SEC at:

New York Stock Exchange
20 Broad Street
New York, New York 10005.

We have filed a registration statement on Form S-3 with the SEC that covers
the securities described in this prospectus. For further information about us,
the trusts and the securities, you should refer to our registration statement
and its exhibits. In this prospectus, we have summarized material provisions of
contracts and other documents. Since this prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. We have included copies of these documents as exhibits to our
registration statement. The registration statement can be obtained from the SEC
in the ways described above, or from us.

INCORPORATION BY REFERENCE

The SEC allows us to "incorporate by reference" information we file with
them. This means that we can disclose important information to you by referring
you to those documents. Any information we reference in this manner is
considered part of this prospectus. Certain information we file with SEC after
the date of this prospectus will automatically update and, to the extent
inconsistent, supersede the information contained in this prospectus.

We incorporate by reference the following document which we have filed with
the SEC:

- Annual Report on Form 10-K as amended for the year ended December 31,
1998; and

- Quarterly Reports on Form 10-Q as amended for the quarters ended
March 31, 1998 and June 30, 1999.

We also incorporate by reference any future filings we will make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus but before the end of the offering of the
securities made by this prospectus.

You may request a copy of these filings, at no cost, by contacting us at:

Investor Relations Department
Louis Dreyfus Natural Gas Corp.
14000 Quail Springs Parkway, Suite 600
Oklahoma City, Oklahoma 73134-2600.

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5,000,000 SHARES

LOUIS DREYFUS NATURAL GAS CORP.

COMMON STOCK

[LOGO]

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PROSPECTUS SUPPLEMENT
, 2000

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LEHMAN BROTHERS

SALOMON SMITH BARNEY

BANC OF AMERICA SECURITIES LLC

DAIN RAUSCHER WESSELS

PRUDENTIAL SECURITIES