-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BLEy48juSjr5pWNIq6DifmMe2MArioFFQshWIZmYWJD6ylNSwZXD9cQetcjvIjs/ NODR5ufao7apX3lmTnF2MQ== 0000950129-98-002131.txt : 19980518 0000950129-98-002131.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950129-98-002131 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENRON OIL & GAS CO CENTRAL INDEX KEY: 0000821189 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 470684736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09743 FILM NUMBER: 98621771 BUSINESS ADDRESS: STREET 1: 1400 SMITH ST CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7138535482 10-Q 1 ENRON OIL & GAS COMPANY 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------ FORM 10-Q ------------ X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-9743 ENRON OIL & GAS COMPANY (Exact name of registrant as specified in its charter) DELAWARE 47-0684736 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1400 SMITH STREET, HOUSTON, TEXAS 77002-7369 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-853-6161 ------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 30, 1998. Common Stock, $.01 Par Value 154,864,907 shares - --------------------------------------- ----------------------- CLASS NUMBER OF SHARES =============================================================================== 2 ENRON OIL & GAS COMPANY TABLE OF CONTENTS
PAGE NO. ------- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statements of Income and Comprehensive Income - Three Months Ended March 31, 1998 and 1997 3 Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 11 ITEM 4. Submission of Matters to a Vote of Security Holders 11 ITEM 6. Exhibits and Reports on Form 8-K 11
-2- 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, - -------------------------------------------------------------------------------------------------------- 1998 1997 NET OPERATING REVENUES Natural Gas Trade $ 129,567 $ 141,171 Associated Companies 23,023 (2,599) Crude Oil, Condensate and Natural Gas Liquids Trade 30,237 31,211 Associated Companies 2,739 9,681 Gains on Sales of Reserves and Related Assets and Other, Net 14,265 1,187 ---------- --------- TOTAL 199,831 180,651 OPERATING EXPENSES Lease and Well 24,909 23,469 Exploration 17,398 15,483 Dry Hole 7,881 984 Impairment of Unproved Oil and Gas Properties 8,348 6,013 Depreciation, Depletion and Amortization 71,961 62,639 General and Administrative 16,554 13,607 Taxes Other Than Income 14,494 17,286 ---------- ---------- TOTAL 161,545 139,481 OPERATING INCOME 38,286 41,170 OTHER INCOME (EXPENSE), NET (970) 1,256 ---------- ---------- INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 37,316 42,426 INTEREST EXPENSE, NET 9,110 5,115 ---------- ---------- INCOME BEFORE INCOME TAXES 28,206 37,311 INCOME TAX PROVISION 1,201 14,246 ---------- ---------- NET INCOME 27,005 23,065 Other Comprehensive Income (Loss) Foreign Currency Translation Adjustment 2,157 (1,000) ---------- ---------- COMPREHENSIVE INCOME $ 29,162 $ 22,065 ========== ========== EARNINGS PER SHARE OF COMMON STOCK Basic .17 .15 ========== ========== Diluted .17 .14 ========== ========== AVERAGE NUMBER OF COMMON SHARES Basic 154,736 158,866 ========== ========== Diluted 155,522 159,790 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. -3- 4 PART I. FINANCIAL INFORMATION - (CONTINUED) ITEM 1. FINANCIAL STATEMENTS - (CONTINUED) ENRON OIL & GAS COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, DECEMBER 31, 1998 1997 - ------------------------------------------------------------------------------------------------------------------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 5,060 $ 9,330 Accounts Receivable Trade 209,565 185,979 Associated Companies 27,093 46,120 Inventories 34,355 32,040 Other 7,808 8,566 ----------- ----------- TOTAL 283,881 282,035 OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 4,375,212 4,291,405 Less: Accumulated Depreciation, Depletion and Amortization (1,973,383) (1,904,198) ----------- ----------- Net Oil and Gas Properties 2,401,829 2,387,207 OTHER ASSETS 53,053 54,113 ----------- ----------- TOTAL ASSETS $ 2,738,763 $ 2,723,355 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable Trade $ 184,630 $ 198,109 Associated Companies 20,902 37,613 Accrued Taxes Payable 19,430 28,841 Dividends Payable 4,712 4,705 Other 16,102 21,729 ----------- ----------- TOTAL 245,776 290,997 LONG-TERM DEBT Trade 764,200 548,775 Affiliate 35,000 192,500 OTHER LIABILITIES Trade 20,967 37,739 Associated Companies 62,050 44,699 DEFERRED INCOME TAXES 285,802 287,678 DEFERRED REVENUE 25,566 39,918 SHAREHOLDERS' EQUITY Common Stock, $.01 Par, 320,000,000 Shares Authorized and 160,000,000 Shares Issued 201,600 201,600 Additional Paid In Capital 402,786 402,877 Unearned Compensation (5,665) (4,694) Cumulative Foreign Currency Translation Adjustment (17,614) (19,771) Retained Earnings 823,074 800,709 Common Stock Held in Treasury, 5,199,753 shares at March 31, 1998 and 4,935,744 shares at December 31, 1997 (104,779) (99,672) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 1,299,402 1,281,049 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,738,763 $ 2,723,355 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -4- 5 PART I. FINANCIAL INFORMATION - (CONTINUED) ITEM 1. FINANCIAL STATEMENTS - (CONTINUED) ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, - ----------------------------------------------------------------------------------------------------------------- 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income $ 27,005 $ 23,065 Items Not Requiring (Providing) Cash Depreciation, Depletion and Amortization 71,961 62,639 Impairment of Unproved Oil and Gas Properties 8,348 6,013 Deferred Income Taxes 5,500 5,589 Other, Net 2,286 (122) Exploration Expenses 17,398 15,483 Dry Hole Expenses 7,881 984 Gains on Sales of Reserves and Related Assets and Other, Net (12,954) (206) Other, Net (3,428) (3,357) Changes in Components of Working Capital and Other Liabilities Accounts Receivable 38,955 50,523 Inventories (2,315) (7,440) Accounts Payable (36,896) (12,271) Accrued Taxes Payable (9,411) 934 Other Liabilities (6,780) 2,760 Other, Net (5,141) (1,070) Amortization of Deferred Revenue (10,688) (10,688) Changes in Components of Working Capital Associated with Investing and Financing Activities 20,167 2,495 ----------- ----------- NET OPERATING CASH INFLOWS 111,888 135,331 INVESTING CASH FLOWS Additions to Oil and Gas Properties (117,503) (136,170) Exploration Expenses (17,398) (15,483) Dry Hole Expenses (7,881) (984) Proceeds from Sales of Reserves and Related Assets 3,303 2,982 Changes in Components of Working Capital Associated with Investing Activities (20,144) (2,495) Other, Net (3,259) (2,404) ----------- ----------- NET INVESTING CASH OUTFLOWS (162,882) (154,554) FINANCING CASH FLOWS Long-Term Debt Trade 215,425 52,600 Affiliate (157,500) - Dividends Paid (4,633) (4,784) Treasury Stock Purchased (7,231) (34,078) Proceeds from Sales of Treasury Stock 755 1,185 Other, Net (92) 266 ----------- ----------- NET FINANCING CASH INFLOWS 46,724 15,189 ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS (4,270) (4,034) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,330 7,644 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,060 $ 3,610 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -5- 6 PART I. FINANCIAL INFORMATION - (CONTINUED) ITEM 1. FINANCIAL STATEMENTS - (CONTINUED) ENRON OIL & GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements of Enron Oil & Gas Company and subsidiaries (the "Company") included herein have been prepared by management without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial results for the interim periods. Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior period financial statements to conform with the current presentation. As more fully discussed in notes 1 and 13 to the consolidated financial statements included in the Company's 1997 Annual Report on Form 10-K, the Company engages in price risk management activities from time to time primarily for non-trading and to a lesser extent for trading purposes. Derivative financial instruments (primarily price swaps and costless collars) are utilized for non-trading purposes to hedge the impact of market fluctuations on natural gas and crude oil market prices. Hedge accounting is utilized in non-trading activities when there is a high degree of correlation between price movements in the derivative and the item designated as being hedged. Gains and losses on derivative financial instruments used for hedging purposes are recognized as revenue in the same period as the hedged item. Gains and losses on hedging instruments that are closed prior to maturity are deferred in the consolidated balance sheets. In instances where the anticipated correlation of price movements does not occur, hedge accounting is terminated and future changes in the value of the derivative are recognized as gains or losses using the mark-to-market method of accounting. Derivative and other financial instruments utilized in connection with trading activities, primarily price swaps and call options, are accounted for using the mark-to-market method, under which changes in the market value of outstanding financial instruments are recognized as gains or losses in the period of change. The cash flow impact of derivative and other financial instruments used for non-trading and trading purposes is reflected as cash flows from operating activities in the consolidated statements of cash flows. 2. Natural gas revenues, trade for the three-month periods ended March 31, 1998 and 1997, is net of costs of natural gas purchased for sale related to natural gas marketing activities of $12.5 million and $23.0 million, respectively. Natural gas revenues, associated for the three-month periods ended March 31, 1998 and 1997, is net of costs of natural gas purchased for sale related to natural gas marketing activities of $12.4 million and $11.6 million, respectively. 3. Income tax provision for the three-month periods ended March 31, 1998 and 1997 includes tax benefits of $1.3 million and $3.2 million, respectively, related to tight gas sand federal income tax credit utilization. Additionally, the income tax provision for the three-month period ended March 31, 1998 includes a benefit of $3.8 million from certain recently incurred international costs and other benefits of $5.0 million from the resolution of certain domestic and international issues. 4. The difference between the average number of common shares outstanding for basic and diluted earnings per share of common stock is due to the assumed issuance of common shares relating to employee stock options in each period presented. -6- 7 PART I. FINANCIAL INFORMATION - (CONTINUED) ITEM 1. FINANCIAL STATEMENTS - (CONTINUED) ENRON OIL & GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. As reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, Enron Oil & Gas India Ltd. ("EOGIL"), a wholly-owned subsidiary of the Company, is a respondent in two public interest lawsuits filed in the Delhi High Court, India. The first (the "Wadehra Action") was brought by B. L. Wadehra, an Indian public interest lawyer, against the Union of India, EOGIL, EOGIL co-participants in the Panna and Mukta fields, Reliance Industries Limited ("Reliance") and Oil & Natural Gas Corporation Limited ("ONGC"), and certain other respondents. ONGC is the Indian national oil company and is wholly-owned by the Union of India. The second suit (the "CPIL Action") was brought by the Centre for Public Interest Litigation and the National Alliance of People's Movement against the Union of India, the Central Bureau of Investigation, ONGC, Reliance and EOGIL. Petitioners in both the Wadehra Action and the CPIL Action allege various improprieties in the award of the Panna and Mukta fields to EOGIL, Reliance and ONGC, and seek the cancellation of the Production Sharing Contract for the Panna and Mukta fields. The Union of India is vigorously disputing these allegations. The Company believes that the public competitive bidding process for the fields was fair and that the award of these fields to EOGIL, Reliance and ONGC was proper. Although no assurances can be given, based on currently available information the Company believes that the claims made by the petitioners in both actions are without merit, and that the ultimate resolution of these matters will not have a material adverse effect on its financial condition or results of operations. There are various other suits and claims against the Company that have arisen in the ordinary course of business. However, management does not believe these suits and claims will individually or in the aggregate have a material adverse effect on the Company's financial condition or results of operations. The Company has been named as a potentially responsible party in certain Comprehensive Environmental Response Compensation and Liability Act proceedings. However, management does not believe that any potential assessments resulting from such proceedings will individually or in the aggregate have a materially adverse effect on the financial condition or results of operations of the Company. 6. In April 1998, the Company issued, pursuant to a public offering, $150 million of 6.65% Notes due April 1, 2028. -7- 8 PART I. FINANCIAL INFORMATION - (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ENRON OIL & GAS COMPANY The following review of operations for the three-month periods ended March 31, 1998 and 1997 should be read in conjunction with the consolidated financial statements of the Company and Notes thereto. RESULTS OF OPERATIONS Three Months Ended March 31, 1998 vs. Three Months Ended March 31, 1997 In the first quarter of 1998, Enron Oil & Gas Company (the "Company") generated net income of $27 million compared to net income of $23 million for the first quarter of 1997. Net operating revenues for the first quarter of 1998 were $200 million as compared to $181 million for the first quarter of 1997. Wellhead volume and price statistics are as follows:
- ------------------------------------------------------------------------------- 1998 1997 - ------------------------------------------------------------------------------- NATURAL GAS VOLUMES (MMCF PER DAY)(1) United States (2) 644 643 Canada 101 95 ---- --- North America 745 738 Trinidad 109 112 India 47 - --- -- TOTAL 901 850 ==== ==== AVERAGE NATURAL GAS PRICES ($/MCF)(3) United States (4) $ 2.01 $ 2.71 Canada 1.39 1.71 North America Composite 1.93 2.58 Trinidad 1.09 1.04 India 2.70 - COMPOSITE 1.86 2.38 CRUDE OIL/CONDENSATE VOLUMES (MBBL PER DAY)(1) United States 12.6 10.7 Canada 2.7 2.4 ---- ---- North America 15.3 13.1 Trinidad 2.8 3.7 India 4.2 2.8 ---- ---- TOTAL 22.3 19.6 ===== ===== AVERAGE CRUDE OIL/CONDENSATE PRICES ($/BBL)(3) United States $14.68 $22.33 Canada 13.97 18.04 North America Composite 14.55 21.55 Trinidad 14.03 21.56 India 15.33 22.99 COMPOSITE 14.64 21.76 NATURAL GAS EQUIVALENT VOLUMES (MMCFE PER DAY)(5) United States (2) 735 723 Canada 124 117 ---- ---- North America 859 840 Trinidad 126 134 India 73 17 ----- --- TOTAL 1,058 991 ===== ==== TOTAL BCFE(5) DELIVERIES 95 89 - -------------------------------------------------------------------------------
(1) Million cubic feet per day or thousand barrels per day, as applicable. (2) Includes 48 MMcf per day for the three-month periods ended March 31, 1998 and 1997 delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended. (3) Dollars per thousand cubic feet or per barrel, as applicable. (4) Includes an average equivalent wellhead value of $1.62/Mcf and $2.47/Mcf for the three-month periods ended March 31, 1998 and 1997, respectively, for the volumes described in note (2), net of transportation costs. (5) Million cubic feet equivalent per day or billion cubic feet equivalent, as applicable. -8- 9 PART I. FINANCIAL INFORMATION - (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) ENRON OIL & GAS COMPANY Wellhead revenues decreased 19% to $184 million in the first quarter of 1998 compared to $226 million in the first quarter of 1997 primarily due to lower average wellhead prices for natural gas, crude oil and condensate and natural gas liquids. First quarter 1998 average wellhead natural gas prices for North America decreased approximately 25% from the comparable period in 1997 reducing net operating revenues by approximately $44 million. Average wellhead crude oil and condensate prices were down by nearly 33% worldwide decreasing net operating revenues by $14 million. First quarter 1998 wellhead natural gas volumes were approximately 6% higher than the comparable period in 1997, increasing net operating revenues by $13 million. This increase was primarily due to 47 MMcf per day from the Tapti and Panna fields in India which had not commenced production in the first quarter of 1997. Wellhead crude oil and condensate volumes were higher than the prior year period increasing net operating revenues by approximately $5 million as North America production increased 17% and production from the Panna and Mukta fields in India was up by 50%. Other marketing activities associated with sales and purchases of natural gas, natural gas and crude oil price hedging and trading transactions and margins related to the volumetric production payment increased net operating revenue by $2 million during the first quarter of 1998, compared to a $46 million reduction in the first quarter of 1997. Gains on sale of reserves and related assets and other, net totaled $14 million in the first quarter of 1998 compared to $1 million in the comparable period of 1997. Included in 1998 are $27 million in gains on the sale of producing properties in South Texas and other revenues of $1 million partially offset by nonrecurring charges of $14 million associated with the costs of terminating certain physical natural gas contracts. During the first quarter of 1998, operating expenses of $162 million were approximately $22 million higher than in the first quarter of 1997. Depreciation, depletion and amortization expense ("DD&A") increased by $9 million reflecting increased production volumes in North America and India and a higher per unit rate of $.76 per thousand cubic feet equivalent ("Mcfe") compared to $.70 in the first quarter of 1997. Dry hole expense increased by $7 million as a result of increased exploratory drilling activity in North America. First quarter 1998 exploration expenses were up $2 million due to increased exploration activity in North America, primarily offshore Gulf of Mexico. The per unit operating costs of the Company for lease and well, DD&A, general and administrative, interest expense, and taxes other than income averaged $1.44 per Mcfe during the first quarter of 1998 compared to $1.37 per Mcfe during the first quarter of 1997. This increase is primarily due to a higher per unit rate of DD&A expense and increased interest expense associated with expanded worldwide operations and stock repurchases. Income tax provision decreased $13 million for the first quarter of 1998 as compared to the first quarter of 1997 primarily due to lower income before income tax, a $3.8 million benefit associated with certain recently incurred international costs and approximately $5.0 million of other benefits from resolution of certain domestic and international issues. Federal income taxes accrued in interim periods are calculated using the estimated annual effective income tax rate. -9- 10 PART I. FINANCIAL INFORMATION - (CONCLUDED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONCLUDED) ENRON OIL & GAS COMPANY CAPITAL RESOURCES AND LIQUIDITY The Company's primary sources of cash during the three months ended March 31, 1998, included funds generated from operations and proceeds from new borrowings. Primary cash outflows included funds used in operations, exploration and development expenditures, common stock repurchases, dividends paid to Company shareholders and the repayment of debt. Discretionary cash flow, a frequently used measure of performance for exploration and production companies, is derived by adjusting net income to eliminate the effects of depreciation, depletion and amortization, impairment of unproved oil and gas properties, deferred income taxes, gains on sales of reserves and related assets, certain other miscellaneous non-cash amounts, except for amortization of deferred revenue, and exploration and dry hole expenses. The Company generated discretionary cash flow of $124 million during the first three months of 1998 compared to $110 million generated for the comparable period in 1997 primarily due to increased cash operating revenues and lower current income taxes partially offset by higher interest expense. Net operating cash flows of $112 million for the first three months of 1998 decreased approximately $23 million as compared to the first three months of 1997 primarily reflecting increased working capital requirements for operating activities. Based upon existing economic and market conditions, management believes net operating cash flow and available financing alternatives in 1998 will be sufficient to fund net investing and other cash requirements of the Company for the remainder of the year. Exploration and development expenditures for the first three months of 1998 and 1997 are as follows (in millions): - ------------------------------------------------------------------------------- 1998 1997 - ------------------------------------------------------------------------------- NORTH AMERICA $ 120 $ 115 OUTSIDE NORTH AMERICA India 13 26 Other 10 12 ----- ----- TOTAL $ 143 $ 153 ===== ===== - ------------------------------------------------------------------------------- Exploration and development expenditures of $143 million for the first three months of 1998 were $10 million lower than expenditures in the first three months of 1997 primarily due to lower expenditures in India due to the completion of production facilities in 1997. Expenditures in North America were $5 million higher than the prior year period due to increased exploratory and developmental drilling activities. During the quarter ended March 31, 1998, the Company closed a sale of South Texas reserves and related assets and received the proceeds on April 2, 1998. The proceeds from this sale were approximately $46 million for proved reserves of 31 Bcfe. Early in the second quarter of 1998, the Company completed the purchase of properties in the East Texas area for approximately $27 million with approximately 27 Bcfe of proved reserves. The level of exploration and development expenditures will vary in future periods depending on energy market conditions and other related economic factors. The Company has significant flexibility with respect to financing alternatives and the ability to adjust its exploration and development expenditure budget as circumstances warrant. There are no material continuing commitments associated with expenditure plans. INFORMATION REGARDING FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that such expectations will be achieved. Important factors that could cause actual results to differ materially from those in the forward looking statements herein include, but are not limited to, the timing and extent of changes in commodity prices for crude oil, natural gas and related products and interest rates, the extent of the Company's success in discovering, developing and producing reserves and in acquiring oil and gas properties, political developments around the world and conditions of the capital and equity markets during the periods covered by the forward looking statements. -10- 11 PART II. OTHER INFORMATION ENRON OIL & GAS COMPANY ITEM 1. Legal Proceedings See Part 1, Item 1, Note 5 to Consolidated Financial Statements which is incorporated herein by reference. ITEM 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Enron Oil & Gas Company was held on May 5, 1998 in Houston, Texas, for the purpose of electing a board of directors and ratifying the appointment of auditors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management's solicitations. (a) Each of the directors nominated by the Board and listed in the proxy statement was elected with votes as follows: Shares Shares Nominee For Withheld ------- ----- -------- Fred C. Ackman 138,527,237 240,841 James V. Derrick, Jr. 138,412,917 355,161 Ken L. Harrison 138,532,356 235,722 Forrest E. Hoglund 138,443,960 324,118 Kenneth L. Lay 138,441,930 326,148 Edward Randall, III 138,522,009 246,069 Jeffery K. Skilling 138,439,228 328,850 Frank G. Wisner 138,521,665 246,413 (b) The appointment of Arthur Andersen LLP, independent public accountants, as auditors for the year ending December 31, 1998 was approved by the following vote: 138,583,230 shares for; 99,687 shares against; and 85,161 shares abstaining. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges (b) Reports on Form 8-K Current Report on Form 8-K filed on April 17, 1998 to report the sale on April 8, 1998 of $150 million principal amount of 6.65% notes due April 1, 2028 pursuant to an underwritten public offering. -11- 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENRON OIL & GAS COMPANY (Registrant) Date: May 15, 1998 By /S/ W. C. WILSON ----------------------- W. C. Wilson Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 15, 1998 By /S/ BEN B. BOYD ------------------------- Ben B. Boyd Vice President and Controller (Principal Accounting Officer) -12- 13 EXHIBIT INDEX Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges Exhibit 27 - Financial Data Schedule EX-12 2 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 ENRON OIL & GAS COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, - -------------------------------------------------------------------------------------------------------------------- MARCH 31,1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- EARNINGS AVAILABLE FOR FIXED CHARGES: Net Income $ 27,005 $121,970 $140,008 $142,118 $147,998 $138,025 Less: Capitalized Interest Expense (3,295) (13,706) (9,136) (6,490) (6,124) (5,457) Add: Fixed Charges 12,405 41,423 21,997 18,414 14,613 15,378 Income Tax Provision(Benefit) 1,201 41,500 50,954 41,936 5,937 (25,752) -------- -------- -------- -------- -------- -------- EARNINGS AVAILABLE $ 37,316 $191,187 $203,823 $195,978 $162,424 $122,194 ======== ======== ======== ======== ======== ======== FIXED CHARGES: Interest Expense 9,047 27,369 12,370 11,310 8,135 9,921 Capitalized Interest 3,295 13,706 9,136 6,490 6,124 5,457 Rental Expense Representative of Interest Factor 63 348 491 614 354 - -------- -------- -------- -------- -------- -------- TOTAL FIXED CHARGES $ 12,405 $ 41,423 $ 21,997 $ 18,414 $ 14,613 $ 15,378 ======== ======== ======== ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES 3.01 4.62 9.27 10.64 11.12 7.95 - --------------------------------------------------------------------------------------------------------------------
EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 MAR-31-1998 5,060 0 236,658 0 34,355 283,881 4,375,212 (1,973,383) 2,738,763 245,776 0 0 0 201,600 1,097,802 2,738,763 185,566 199,831 0 161,545 970 0 9,110 28,206 1,201 27,005 0 0 0 27,005 0.17 0.17 BASIC
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