1
UNITED STATES
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 SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-25058
OCEAN ENERGY, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 72-1277752
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8440 JEFFERSON HIGHWAY, SUITE 420
BATON ROUGE, LOUISIANA 70809
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (504) 927-1450
Securities Registered Pursuant to Section 12 (b) of the Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
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 [ ]
19,710,108 shares of the registrant's Common Stock were outstanding as
of November 3, 1997.
2
OCEAN ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- --------------
Current assets:
Cash and cash equivalents $ 7,053,437 $ 5,758,978
Joint interest receivables 8,572,028 2,001,605
Oil and gas sales receivables 35,966,008 33,770,044
Accounts receivable--other 1,607,128 1,500,000
Assets held for resale -- 37,200,000
Prepaid expenses 846,613 1,213,143
Other current assets 4,486,343 2,414,803
------------- -------------
Total current assets 58,531,557 83,858,573
Oil and gas properties -- full cost method:
Evaluated 735,314,377 464,485,367
Less accumulated depreciation, depletion, and amortization (272,618,395) (188,692,223)
------------- -------------
462,695,982 275,793,144
Unevaluated properties excluded from amortization 149,825,472 79,904,974
Other assets:
Furniture and equipment, less accumulated depreciation of
$4,496,613 and $2,772,983 at September 30, 1997 and
December 31, 1996, respectively 5,492,797 4,286,773
Restricted deposits 7,955,599 6,323,515
Deferred financing costs 10,474,003 10,543,226
------------- -------------
Total assets $ 694,975,410 $ 460,710,205
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 91,195,997 $ 47,718,102
Oil and gas sales payable 7,154,725 7,830,415
Accrued interest 12,612,331 5,521,070
Current notes payable -- 127,154
Deposit on assets held for resale -- 3,720,000
------------- -------------
Total current liabilities 110,963,053 64,916,741
Long-term debt 464,121,495 284,141,999
Deferred hedge revenue 300,000 400,000
Deferred tax liability 7,547,042 6,098,144
Stockholders' equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares, no shares
issued or outstanding at September 30, 1997, and
December 31,1996 -- --
Common stock, $.01 par value; authorized 100,000,000 shares;
issued and outstanding 19,702,010 shares and 19,640,656 shares
at September 30, 1997 and December 31, 1996, respectively 197,020 196,407
Paid-in capital 93,258,324 91,819,465
Retained earnings 18,588,476 13,137,449
------------- -------------
Total stockholders' equity 112,043,820 105,153,321
------------- -------------
Total liabilities and stockholders' equity $ 694,975,410 $ 460,710,205
============= =============
The accompanying notes to financial statements are an integral
part of these statements.
2
3
OCEAN ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- --------------------------------
1997 1996 1997 1996
-------------- ------------- ------------ -------------
Oil and gas sales $ 204,396,286 $ 116,671,049 $ 74,327,617 $ 47,589,030
Operating expenses:
Lease operations 40,477,049 24,930,765 13,263,763 8,408,735
Severance taxes 8,060,697 8,710,408 2,682,225 3,188,645
Depreciation, depletion and amortization 83,926,173 48,477,198 32,346,410 19,504,158
------------- ------------- ------------- -------------
Total operating expenses 132,463,919 82,118,371 48,292,398 31,101,538
General and administrative expenses 13,321,319 9,946,556 4,724,832 3,921,556
Interest expense 21,236,286 12,028,892 7,932,871 3,840,866
Other income (1,107,994) (173,027) (423,465) (174,804)
------------- ------------- ------------- -------------
Income before taxes and extraordinary item 38,482,756 12,750,257 13,800,981 8,899,874
Income tax expense 13,730,716 5,051,264 5,176,056 3,536,560
------------- ------------- ------------- -------------
Income before extraordinary item 24,752,040 7,698,993 8,624,925 5,363,314
------------- ------------- ------------- -------------
Extraordinary loss on early extinguishment
of debt, net of taxes 19,301,013 -- 19,301,013 --
------------- ------------- ------------- -------------
Net income (loss) $ 5,451,027 $ 7,698,993 $ (10,676,088) $ 5,363,314
============= ============= ============= =============
Earnings (loss) per common share:
Primary
Before extraordinary item $ 1.18 $ 0.40 $ 0.41 $ 0.26
Extraordinary item (0.92) -- (0.92) --
------------- ------------- ------------- -------------
Net income $ 0.26 $ 0.40 $ (0.51) $ 0.26
Fully diluted
Before extraordinary item $ 1.17 $ 0.40 $ 0.40 $ 0.26
Extraordinary item (0.91) -- (0.90) --
------------- ------------- ------------- -------------
Net income $ 0.26 $ 0.40 $ (0.50) $ 0.26
Weighted average common and common
equivalent shares outstanding:
Primary 20,954,384 19,172,901 21,072,063 20,706,058
Fully diluted 21,206,529 19,414,173 21,328,916 20,768,886
The accompanying notes to financial statements are an integral
part of these statements.
.
3
4
OCEAN ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1997 1996
------------- -------------
Operating activities:
Net income (loss) $ 5,451,027 $ 7,698,993
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization:
Oil and gas properties 83,926,173 48,477,198
Furniture and equipment 1,723,629 1,024,862
Deferred hedge revenue (100,000) (352,750)
Deferred tax expense 1,448,898 4,915,853
Changes in operating assets and liabilities:
Accrued interest 7,091,261 2,190,117
Receivables (8,873,515) (5,453,805)
Prepaid expenses 366,530 (419,185)
Other current assets (2,071,539) (421,752)
Accounts payable and accrued liabilities 22,542,484 1,695,917
Oil and gas sales payable (675,690) (261,752)
------------- -------------
Net cash provided by operating activities 110,829,258 59,093,696
------------- -------------
Investing activities:
Additions to oil and gas properties and furniture and equipment (322,743,754) (209,829,151)
Increase in restricted deposits (1,632,084) (1,551,499)
Proceeds from sale of oil and gas properties 33,480,000 --
------------- -------------
Net cash used in investing activities (290,895,838) (211,380,650)
------------- -------------
Financing activities:
Sale of stock 1,439,472 62,348,705
Borrowings on notes payable 479,160,000 231,620,000
Payments of notes payable (299,382,154) (117,747,726)
Deferred financing costs 143,719 (5,163,369)
------------- -------------
Net cash provided by financing activities 181,361,037 171,057,610
------------- -------------
Increase in cash and cash equivalents 1,294,459 18,770,656
Cash and cash equivalents, beginning of the period 5,758,978 212,238
------------- -------------
Cash and cash equivalents, end of the period $ 7,053,437 $ 18,982,894
============= =============
Interest paid during the period $ 35,402,120 $ 12,056,670
============= =============
The accompanying notes to financial statements are an integral
part of these statements.
4
5
OCEAN ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL INFORMATION
The consolidated financial statements included herein have been prepared by
Ocean Energy, Inc. (the "Company") without audit and include all
adjustments (of a normal and recurring nature) which are, in the opinion of
management, necessary for the fair presentation of interim results which
are not necessarily indicative of results for the entire year. Certain
reclassifications have been made to conform financial statement
presentation between periods. The financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report.
2. EARNINGS PER SHARE
Earnings per share applicable to common stock are based on the weighted
average number of shares of common stock outstanding for the periods,
including common equivalent shares which reflect the effect of stock
options, to the extent that they are dilutive, granted to certain employees
and outside directors on various dates through September 30, 1997. As of
September 30, 1997 and 1996, the Company had 2,510,015 and 1,972,902 stock
options outstanding, respectively. The table below reflects the weighted
average common, primary and fully diluted shares outstanding for the 1997
and 1996 periods.
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Weighted average common shares
outstanding 19,670,610 18,270,707 19,701,901 19,556,911
Primary common equivalent shares 1,283,774 902,194 1,370,162 1,149,147
---------- ---------- ---------- ----------
Weighted average common and primary
common equivalent shares outstanding 20,954,384 19,172,901 21,072,063 20,706,058
Additional fully diluted shares 252,145 241,272 256,853 62,828
---------- ---------- ---------- ----------
Weighted average common and fully diluted
common equivalent shares outstanding 21,206,529 19,414,173 21,328,916 20,768,886
========== ========== ========== ==========
In February, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128 ("SFAS 128"), "Earnings Per Share", which simplifies the
computation of earnings per share ("EPS"). SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997, and
requires restatement for all prior period EPS data presented. Pro forma EPS
and EPS assuming dilution calculated in accordance with SFAS 128 after the
extraordinary charge was $(0.54) per share and $(0.51) per share,
respectively, for the three months ended September 30, 1997, and $0.27 per
share and $0.26 per share, respectively, for the three months ended
September 30, 1996. Pro forma EPS and EPS assuming dilution calculated in
accordance with SFAS 128 after the extraordinary charge was $0.28 per share
and $0.26 per share, respectively, for the nine months ended September 30,
1997, and $0.42 per share and $0.40 per share, respectively, for the nine
months ended September 30, 1996.
3. HEDGING ACTIVITIES
The Company engages in futures contracts with a portion of its production
through master swap agreements ("Swap Agreements"). The Company considers
these futures contracts to be hedging activities and, as such, monthly
settlements on these contracts are reflected in oil and gas sales. In order
to consider these futures contracts as hedges, (i) the Company must
designate the futures contract as a hedge of future production and (ii) the
contract must reduce the Company's exposure to the risk of changes in
prices. Changes in the market value of futures contracts treated as hedges
are not recognized in income until the hedged item is also recognized in
income. If the above criteria are not met, the Company will record the
market value of the contract at the end of each month and recognize a
related gain or loss. Proceeds received or paid relating to terminated
contracts or contracts that have been sold are amortized over the original
contract period and reflected in oil and gas sales.
5
6
OCEAN ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
The Swap Agreements provide for separate contracts tied to the NYMEX light
sweet crude oil and natural gas futures contracts. The Company has
contracts which contain specific contracted prices ("Swaps") that are
settled monthly based on the differences between the contract prices and
the average NYMEX prices for each month applied to the related contract
volumes. To the extent the average NYMEX price exceeds the contract price,
the Company pays the spread, and to the extent the contract price exceeds
the average NYMEX price the Company receives the spread. Under the terms of
the Swap Agreements, each counterparty has extended the Company a $5
million line of credit in conjunction with it hedging activities. As of
November 3, 1997, the Company's exposure under all contracts covered by the
Swap Agreements was approximately $4.0 million.
As of September 30, 1997, the Company's open forward position on its
outstanding crude oil Swaps was as follows:
AVERAGE
YEAR MBBLS PRICE
---- ----- -------
1997 975 $19.93
1998 4,800 $19.80
1999 300 $18.55
2000 300 $18.55
----- ------
Total 6,375 $19.70
===== ======
The Company currently has no outstanding natural gas Swaps.
On March 7, 1997, the Company entered into a basis swap for 9,000 barrels
of oil per month for the period April 1997, through July 1997, with a fixed
price of $(0.11) per barrel basis differential between the monthly calendar
average of Platt's Louisiana Light Sweet and Platt's West Texas
Intermediate crude oil prices.
In addition, on April 7, 1997, the Company entered into a field diesel swap
for 150,000 gallons per month for the month of April 1997, and August 1997
through March 1998, relating to expected future diesel needs. This swap
obligates the Company to make or receive payments on the last day of each
respective calendar month based on the difference between $0.5425 per
gallon and the average of the daily settlement price per gallon for the
respective calendar month Platt's Gulf Coast Pipeline mean high sulfur 2
oil contract.
4. INVESTMENT IN OIL AND GAS PROPERTIES
On January 3, 1997, the Company completed the sale of its interest in the
South Marsh Island 269 field, located in federal waters offshore Louisiana.
The Company realized proceeds of $37.2 million from the sale. The Company
owned a non-operated working interest of approximately 20% in three blocks
in the field. No gain or loss was recognized on the sale.
On March 7, 1997, the Company completed an acquisition of certain interests
in various state leases in the Main Pass Block 69 field, offshore
Plaquemines Parish, Louisiana for a net purchase price of $55.9 million
(the "Main Pass Acquisition"). The acquisition included interests in 27
producing wells located on 5,898 gross acres situated contiguous to the
Company's pre-existing Main Pass 69 holdings. Following the acquisition,
the Company owns a 100% working interest in the 27 wells.
On October 15, 1997, the Company acquired certain oil and gas interests in
various federal leases in the South Pass 61 and 65 fields (the "South Pass
Properties") from Shell Offshore, Inc. ("SOI") and its affiliate for a
gross purchase price of $60.8 million. The Company has acquired a 50%
working interest in the fields and has become operator of the properties.
The acquisition includes interests in 95 producing wells located on
approximately 26,250 gross acres. Current estimated production from the
newly acquired interests is approximately 3,500 barrels of oil equivalent
per day net to the Company.
6
7
OCEAN ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
On October 15, 1997, the Company also entered into an exploratory Joint
Venture Agreement with SOI which establishes an Area of Mutual Interest
("AMI") covering approximately 240 square miles located in coastal and
offshore areas of Plaquemines Parish, Louisiana. Under the terms of the oil
and gas exploration agreement, the Company and SOI have agreed to
contribute existing leasehold, project inventory and proprietary 3-D
seismic data within the AMI. The Company expects the venture to spud the
initial exploratory well in 1998.
5. RECENT OFFERINGS
On July 2, 1997, the Company completed an offering of $200 million of 8
7/8% Senior Subordinated Notes due 2007 (the "8 7/8% Notes") at a discount
for proceeds of approximately $199.7 million (before offering costs).
Interest will be payable semi-annually on January 15 and July 15 of each
year commencing January 15, 1998. Proceeds to the Company were
approximately $195.2 million, which were used primarily to finance the
purchase of the 13 1/2% Notes (See Note 6) and to repay outstanding
indebtedness under the Company's $250 million amended and restated senior
revolving bank credit facility dated October 15, 1997 (the "Revolving
Credit Facility"). The remainder of the proceeds were used for general
corporate and working capital purposes. On August 1, 1997, the Company
filed a registration statement to register notes with the Securities and
Exchange Commission which were identical to the Notes issued on July 2,
1997, in order to exchange these Notes for registered notes. Such exchange
offer was completed on October 2, 1997.
On October 16, 1997, the Company filed a Registration Statement on Form S-3
related to the underwritten public offering by the Company of 3,500,000
shares of common stock. If the Company sells all of such shares, net
proceeds to the Company are estimated to be as much as approximately $215
million, a portion of which will be used to repay outstanding indebtedness
under its Revolving Credit Facility. As of November 3, 1997, the
outstanding balance on the Revolving Credit Facility was $180.0 million. Of
this amount, approximately $60.8 million was incurred to finance the
acquisition of the South Pass Properties, with the remainder incurred
during 1997 to date in connection with the Company's exploration,
development and production activities and for general corporate purposes.
The remaining net proceeds, if any, will be used for exploration and
exploitation drilling activities and for possible future acquisitions, as
well as for other general corporate purposes.
6. REPURCHASE OF 13 1/2% NOTES
On July 22, 1997, the Company amended the Indenture governing its 13 1/2%
Senior Notes due 2004 (the "13 1/2% Notes"), removing the principal
restrictive covenants and repurchased approximately $124.8 million of the
$125 million in original principal amount of the 13 1/2% Notes for
approximately $151.5 million. This purchase resulted in an extraordinary
charge of $19.3 million, net of taxes of $11.6 million. The extraordinary
charge represented the difference between the purchase price and related
expenses and the net carrying value of the 13 1/2% Notes.
7. NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 130 ("SFAS 130"), "Reporting
Comprehensive Income", and Statement No. 131 ("SFAS 131"), "Disclosures
About Segments of an Enterprise and Related Information". SFAS 130
establishes standards for reporting and display of comprehensive income in
the financial statements. Comprehensive income is the total of net income
and all other non-owner changes in equity. SFAS 131 requires that companies
disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. SFAS 130
and 131 are effective for 1998. Adoption of these standards is not expected
to have an effect on the Company's financial statements, financial position
or results of operations.
7
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1996 AND 1997
The following table reflects certain information with respect to the Company's
oil and gas operations.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- --------------------
1996 1997 1996 1997
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
SALES VOLUMES
Oil (MBbls) 1,909 2,589 4,917 6,939
Gas (MMcf) 4,657 11,172 11,672 27,689
Oil and Gas (MBOE) 2,685 4,451 6,863 11,554
REVENUES (1)
Total Oil Revenues $40,580 $47,389 $100,141 $135,308
Total Gas Revenues 10,918 26,865 30,950 69,397
AVERAGE SALES PRICES (1)
Oil (per Bbl) $21.26 $18.31 $20.37 $19.50
Gas (per Mcf) 2.34 2.40 2.65 2.51
Per BOE 19.18 16.68 19.10 17.72
Severance Taxes $3,189 $2,682 $ 8,710 $8,061
Lease Operating Expenses 8,409 13,264 24,931 40,477
Lease Operating Expenses per BOE $3.13 $2.98 $3.63 $3.50
- ----------------
(1)Excludes the results of hedging activities which increased (decreased)
revenue recognized in the three and nine months ended September 30, 1996, by
$(4.2) million and $(14.7) million, respectively, and increased (decreased)
revenue recognized in the three and nine months ended September 30, 1997, by
$0.2 million and $(0.1) million, respectively. Including the effect of
hedging activities, the Company's average oil price per Bbl received was
$19.31 and $18.46 in the three and nine months ended September 30, 1996,
respectively, and $18.39 and $19.48 in the three and nine months ended
September 30, 1997, respectively. The average gas price per Mcf received was
$2.24 and $2.20 in the three and nine months ended September 30, 1996,
respectively. No gas volumes were hedged for the three and nine months ended
September 30, 1997. Also excluded is income relating to plant processing of
$0.3 million and $0.2 million for the three and nine months ended September
30, 1996, respectively. Losses relating to plant processing were $0.1 million
and $0.2 million for the three and nine months ended September 30, 1997.
REVENUES. The following table reflects an analysis of differences in the
Company's oil and gas revenues (expressed in thousands of dollars) between the
three and nine months ending September 30, 1997 and the comparable periods in
1996:
THIRD QUARTER 1997 NINE MONTHS 1997
COMPARED TO COMPARED TO
THIRD QUARTER 1996 NINE MONTHS 1996
------------------ ----------------
Increase (decrease) in oil and gas revenues resulting
from differences in:
Crude oil and condensate-
Price $ (7,648) $ (6,012)
Production 14,457 41,179
-------- --------
6,809 35,167
Natural gas-
Price 672 (4,022)
Production 15,275 42,469
-------- --------
15,947 38,447
-------- --------
Plant processing and hedging, net 3,983 14,111
-------- --------
Increase in oil and gas revenues $ 26,739 $ 87,725
======== ========
8
9
The Company's total revenues increased approximately $26.7 million, or 56%, to
$74.3 million for the three months ended September 30, 1997, from $47.6 million
for the comparable period in 1996. Production levels for the three months ended
September 30, 1997, increased 66% to 4,451 MBOE from 2,685 MBOE for the
comparable period in 1996. The Company's average sales prices (excluding hedging
activities) for oil and natural gas for the three months ended September 30,
1997 were $18.31 per Bbl and $2.40 per Mcf versus $21.26 per Bbl and $2.34 per
Mcf in the prior period. The increase in revenues was primarily due to the
aforementioned production increases, partially offset by the decreased oil and
gas prices. For the nine months ended September 30, 1997, the Company's total
revenues increased approximately $87.7 million, or 75%, to $204.4 million, from
$116.7 million for the comparable period of 1996. Production levels for the nine
months ended September 30, 1997, increased 68%, to 11,554 MBOE from 6,863 MBOE
for the comparable period in 1996. The Company's average sales prices (excluding
hedging activities) for oil and natural gas for the nine months ended September
30, 1997, were $19.50 per Bbl and $2.51 per Mcf versus $20.37 per Bbl and $2.65
per Mcf in the 1996 period. The increase in revenues was primarily due to the
aforementioned production increases, partially offset by the decreased oil and
gas prices. The increases for the three and nine months ended September 30,
1997, included additional production of 1,503 MBOE and 3,401 MBOE and related
revenues of $25.1 million and $58.8 million associated with the acquisition of
certain interests in certain oil and gas producing fields and related production
facilities primarily situated in the shallow federal waters of the central Gulf
of Mexico, offshore Louisiana (the "Central Gulf Properties") on September 26,
1996.
For the three and nine months ended September 30, 1997, the Company's total
revenues were further affected by increases of $4.4 million and $14.5 million
over the comparable prior year periods, respectively, relating to hedging
activities. In order to manage its exposure to price risks in the sale of its
crude oil and natural gas, the Company from time to time enters into price
hedging arrangements. See "--Other Matters - Energy Swap Agreements." The
Company's average sales prices (including hedging activities) for oil for the
three and nine months ended September 30, 1997, were $18.39 per Bbl and $19.48
per Bbl versus $19.31 per Bbl and $18.46 per Bbl in the prior year periods. The
average sales price (including hedging activities) for gas for the three and
nine months ended September 30, 1996, was $2.24 per Mcf and $2.20 per Mcf. No
gas volumes were hedged in the three or the nine months ended September 30,
1997.
LEASE OPERATING EXPENSES. On a BOE basis, lease operating expenses decreased to
$2.98 per BOE for the three months ended September 30, 1997, from $3.13 per BOE
in the comparable 1996 period. Lease operating expenses decreased to $3.50 per
BOE for the nine months ended September 30, 1997, from $3.63 per BOE in the
comparable 1996 period. For the three months ended September 30, 1997, lease
operating expenses were $13.3 million as compared to $8.4 million in the 1996
period. For the nine months ended September 30, 1997, lease operating expenses
were $40.5 million, as compared to $24.9 million in the 1996 period. The
increases of $4.9 million and $15.6 million in the three and nine month periods
partially result from fluctuations in operating expenses associated with
increased production and increases of approximately $3.5 million and $10.4
million in the three and nine months ended September 30, 1997, respectively,
relating to lease operating expenses associated with the acquired Central Gulf
Properties. Workover expenses decreased by $0.5 million in the three months
ended September 30, 1997, and increased by $1.1 million in the nine months ended
September 30, 1997, from the comparable 1996 periods.
SEVERANCE TAXES. The effective severance tax rate as a percentage of oil and gas
revenues (excluding the effect of hedging activities) decreased to 3.6% and 3.9%
for the three and nine months ended September 30, 1997, respectively, from 6.2%
and 6.6% in the three and nine months ended September 30, 1996, respectively.
These decreases were primarily due to increased production from new wells on
federal leases, including wells located on the Central Gulf Properties, and from
state leases which were exempt from state severance tax under Louisiana's
severance tax abatement program.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses per BOE
decreased to $1.06 per BOE and $1.15 per BOE for the three and nine months ended
September 30, 1997, respectively, from $1.46 per BOE and $1.45 per BOE in the
comparable 1996 periods. For the three and nine months ended September 30, 1997,
general and administrative expenses were $4.7 million and $13.3 million, as
compared to $3.9 million and $9.9 million in the comparable 1996 periods. The
increases in both of these periods are primarily due to costs associated with
increased corporate staffing associated with both an increase in drilling
activities and the Company's acquisition of the Central Gulf Properties, an
increase in franchise taxes due to the issuance of $160 million of 9 3/4% Senior
Subordinated Notes due 2006 (the "9 3/4% Notes") on September 26, 1996, an
increase in advertising as a result of the Company's name
9
10
change on June 17, 1997 and an increase in accrued bonuses in the 1997 periods.
These increases were partially offset in the 1997 periods by an increase in the
capitalization of a portion of the salaries paid to employees directly engaged
in the acquisition, exploration and development of oil and gas properties.
DEPRECIATION, DEPLETION, AND AMORTIZATION EXPENSE. For the three and nine months
ended September 30, 1997, depreciation, depletion and amortization ("DD&A")
expense was $32.3 million and $83.9 million, as compared to $19.5 million and
$48.5 million in the comparable 1996 periods. On a BOE basis, DD&A for the three
and nine months ended September 30, 1997, was $7.27 per BOE and $7.26 per BOE,
respectively, as compared to $7.26 per BOE and $7.06 per BOE for the three and
nine months ended September 30, 1996, respectively. These variances can
primarily be attributed to (i) the Company's increased production and related
current and future capital costs from the 1996 and 1997 drilling programs and
(ii) the Company's purchase of the Central Gulf Properties, partially offset by
the increase in proved reserves resulting from such drilling programs and
acquisitions.
INTEREST EXPENSE. For the three and nine months ended September 30, 1997,
interest expense increased to $7.9 million and $21.2 million, respectively, from
interest expense of $3.8 and $12.0 million in the comparable 1996 periods. These
increases were primarily due to the increased interest expense of approximately
$3.9 million and $11.7 million in the three and nine months ended September 30,
1997, respectively, relating to the 9 3/4% Notes and interest expense of $4.4
million in the three months ended September 30, 1997, relating to the Company's
8 7/8% Senior Subordinated Notes due 2007 (the "8 7/8% Notes") issued on July 2,
1997. In addition, interest expense increased in both periods due to a higher
average outstanding balance on the Company's $250 million senior revolving bank
credit facility (the "Revolving Credit Facility"). These increases were
partially offset by a decrease in interest expense of $3.2 million in the three
months ended September 30, 1997, which is the result of the repurchase of $124.8
million of the $125 million in original principal amount of the 13 1/2% Notes by
the Company on July 22, 1997, and increases in the amount of interest
capitalized in the 1997 periods, which is the result of increases in the
Company's unevaluated assets, including additional seismic data and acreage.
INCOME TAX EXPENSE. For the three and nine months ended September 30, 1997, the
Company recorded income tax expense of $5.2 million and $13.7 million,
respectively, as compared to $3.5 million and $5.1 million in the comparable
1996 periods. Income tax expense for the nine months ended September 30, 1997,
was reduced by $0.7 million due to a change in the Company's estimated deferred
tax liability.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. On July 22, 1997, the
Company repurchased approximately $124.8 million of the $125 million in original
principal amount of the 13 1/2% Notes for approximately $153.4 million. This
repurchase resulted in an after tax extraordinary charge of $19.3 million,
representing the difference between the purchase price and the net carrying
value of the 13 1/2% Notes.
NET INCOME. Due to the factors described above, net income before an
extraordinary charge increased to $8.6 million and $24.8 million for the three
and nine months ended September 30, 1997, respectively, from $5.4 million and
$7.7 million for the comparable periods in 1996. Including the effect of the
extraordinary charge, the Company recorded a net loss of $10.7 million and net
income of $5.5 million for the three and nine months ended September 30, 1997,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The following summary table reflects comparative cash flows for the Company for
the nine months ended September 30, 1996 and 1997:
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1996 1997
--------- ---------
(IN THOUSANDS)
Net cash provided by operating activities $ 59,094 $ 110,829
Net cash used in investing activities (211,381) (290,896)
Net cash provided by financing activities 171,058 181,361
For the nine months ended September 30, 1997, net cash provided by operating
activities increased by $51.7 million. This increase relates primarily to
increased revenues, partially offset by increases in lease operating expenses,
general and administrative expenses, interest expense and the extraordinary loss
related to the repurchase of a portion of the
10
11
13 1/2% Notes. In addition, timing differences on certain receivable and payable
balances affect cash provided by operating activities at any period end.
Cash used in investing activities during the nine months ended September 30,
1997, increased to $290.9 million as compared to $211.4 million in the
comparable 1996 period. The increase in the 1997 period is primarily a result of
the Company's acquisition of certain interests in various state leases in the
Main Pass Block 69 field on March 7, 1997, for a net purchase price of
approximately $55.9 million (the "Main Pass Acquisition"), as well as increased
drilling activity and increased seismic and leasehold purchases in the 1997
period, partially offset by the sale of the Company's interest in the South
Marsh Island 269 field which generated cash of $33.5 million in the 1997 period
and the Company's $117.1 million acquisition of the Central Gulf Properties in
the 1996 period.
Financing activities during the nine months ended September 30, 1997, generated
cash of $181.4 million, as compared to $171.1 million in the comparable 1996
period. The increase in cash during the 1997 period was primarily a result of a
$105 million increase in net borrowings on the Company's Revolving Credit
Facility and the issuance of the 8 7/8% Notes, which generated cash of $199.7
million. This increase in cash was offset by the repurchase of $124.8 million of
the 13 1/2% Senior Notes in the third quarter of 1997. The cash generated in the
comparable 1996 period was the result of (i) the issuance of 4.5 million shares
of common stock at $14.75 per share on March 19, 1996, which yielded net
proceeds to the Company of approximately $62.2 million and (ii) the issuance of
the 9 3/4% Notes on September 26, 1996, which yielded net proceeds to the
Company of approximately $154 million, partially offset by the (x) net payment
of $32.2 million on the Company's Revolving Credit Facility and (y) the
repayment a $13.0 million note to Shell Offshore, Inc. in the 1996 period.
On October 16, 1997, the Company filed a Registration Statement on Form S-3
related to the underwritten public offering by the Company of 3,500,000 shares
of common stock. If the Company sells all of such shares, net proceeds to the
Company are estimated to be as much as approximately $215 million, of which up
to approximately $180 million will be used to repay outstanding indebtedness
under its Revolving Credit Facility. Of this amount, approximately $61 million
was incurred to finance the acquisition of the South Pass Properties, with the
remainder incurred during 1997 to date in connection with the Company's
exploration, development and production activities and for general corporate
purposes. The remaining net proceeds, if any, will be used for exploration and
exploitation drilling activities and for possible future acquisitions, as well
as for other general corporate purposes.
CAPITAL REQUIREMENTS. The Company's expenditures for property acquisition,
exploration and development for the nine months ended September 30, 1996 and
1997, were as follows:
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996 1997
---------- ----------
(IN THOUSANDS)
Property acquisition costs of evaluated properties $ 78,372 $ 50,657
Property acquisition costs of unevaluated properties 48,892 42,094
Exploration costs (drilling and completion) 17,796 66,540
Development costs (drilling and completion) 60,807 99,322
Abandonment costs 225 230
Geological and geophysical costs 10,559 27,804
Capitalized interest and general and administrative costs 4,670 12,401
Other capital costs 16,503 41,702
--------- ---------
$ 237,824 $ 340,750
========= =========
A primary component of the Company's strategy is to continue its exploration and
development activities. The Company intends to finance capital expenditures
related to this strategy primarily with funds provided by operations and
borrowings under the Revolving Credit Facility. During the nine months ended
September 30, 1997, the Company spent $165.9 million on exploration and
development drilling and $27.8 million on 3-D seismic surveys and other
geological and geophysical costs. Included in property acquisition costs in the
nine months ended September 30, 1997, is the $55.9 million net purchase price of
the Main Pass Acquisition. Of the total net purchase price for the Main Pass
Acquisition, approximately $50.5 million was allocated to evaluated properties
and $5.4 million was allocated to unevaluated properties. Included in other
capital costs for the nine months ended September 30, 1997, is $38.6 million,
which relates primarily to capital costs incurred to install and upgrade
production facilities and flowlines. The Company is also a party to two escrow
agreements which provide for the
11
12
future plugging and abandonment costs associated with oil and gas properties.
The first agreement, related to its East Bay properties, requires monthly
deposits of $100,000 through June 30, 1998, and $350,000 thereafter until the
balance in the escrow account equals $40 million, unless the Company commits to
the plug and abandonment of a certain number of wells in which case the increase
will be deferred. The second agreement, related to its Main Pass 69 properties,
required an initial deposit of $250,000 and monthly deposits thereafter of
$50,000 until the balance in the escrow account equals $7,500,000. As of
September 30, 1997, the escrow balances totaled approximately $8.0 million.
On October 15, 1997, the Company acquired certain oil and gas interests in
various federal leases in the South Pass 61 and 65 fields (the "South Pass
Properties") from Shell Offshore, Inc. ("SOI") and its affiliate for a gross
purchase price of $60.8 million. The Company has acquired a 50% working interest
in the fields and has become operator of the properties. The acquisition
includes interests in 95 producing wells located on approximately 26,250 gross
acres. Current estimated production from the newly acquired interests is
approximately 3,500 barrels of oil equivalent per day net to the Company. Also
on October 15, 1997, the Company entered into an exploratory Joint Venture
Agreement with SOI which establishes an Area of Mutual Interest ("AMI") covering
approximately 240 square miles located in coastal and offshore areas of
Plaquemines Parish, Louisiana. Under the terms of the oil and gas exploration
agreement, the Company and SOI have agreed to contribute existing leasehold,
project inventory and proprietary 3-D seismic data within the AMI. The Company
expects the venture to spud the initial exploratory well in 1998.
In addition to developing its existing reserves, the Company will continue to
attempt to increase its reserve base, production and operating cash flow by
engaging in strategic acquisitions of oil and gas properties. In order to
finance any such possible future acquisitions, the Company may seek to obtain
additional debt or equity financing. The availability and attractiveness of
these sources of financing will depend upon a number of factors, including the
financial condition and performance of the Company, as well as prevailing
interest rates, oil and gas prices and other market conditions. There can be no
assurance that the Company will acquire any additional producing properties. In
addition, the ability of the Company to incur additional indebtedness and grant
security interests with respect thereto will be subject to the terms of the
Indentures (as defined below).
The Company plans to spend approximately $281.0 million for 1997 drilling
activities and an additional $62.3 million for other direct capital expenditures
including lease acquisitions and seismic purchases. In addition, on March 7,
1997, the Company completed the Main Pass Acquisition for a net purchase price
of $55.9 million, and on October 15, 1997 acquired from Shell Offshore, Inc. a
50% working interest in various producing federal leases and related processing
facilities in South Pass 61 and 65 fields for a gross purchase price of
approximately $60.8 million. The Company plans to spend approximately $325.0
million for capital expenditures in 1998. The Company's other primary capital
requirements for the remainder of 1997 and early 1998 will be for the payment of
interest of approximately of $7.8 million on its 9 3/4% Notes, interest of
approximately $8.9 million on its 8 7/8% Notes and interest on any borrowings
the Company may incur under the Revolving Credit Facility. The Company expects
to fund its current debt service obligations with operating cash flow.
LIQUIDITY. The ability of the Company to satisfy its obligations and fund
planned capital expenditures will be dependent upon its future performance,
which will be subject to prevailing economic conditions, including oil and gas
prices, and to financial and business conditions and other factors, many of
which are beyond its control, supplemented with existing cash balances and if
necessary, borrowings under the Revolving Credit Facility. The Company expects
that its cash flow from operations, existing cash balances and availability
under the Revolving Credit Facility will be adequate to execute the remainder of
its 1997 and 1998 business plan. However, no assurance can be given that the
Company will not experience liquidity problems from time to time in the future
or on a long-term basis. If the Company's cash flow from operations, existing
cash balances and availability under the Revolving Credit Facility are not
sufficient to satisfy its cash requirements, there can be no assurance that
additional debt or equity financing will be available to meet its requirements.
The Revolving Credit Facility currently has a borrowing base of $200 million.
The lenders may redetermine the borrowing base at their option once within any
12-month period as well as on scheduled redetermination dates as outlined in the
Revolving Credit Facility. The Revolving Credit Facility terminates on October
31, 2000, unless the Company requests and is granted a one-year deferral of such
termination.
Under the terms of the Revolving Credit Facility, the Company is required to
comply with certain financial tests, which may reduce the $200.0 million
borrowing base. Currently, the Company does not believe that these financial
tests will
12
13
reduce the borrowing base. As of November 3, 1997, the Company's outstanding
balance on its Revolving Credit Facility was $182.0 million, including letters
of credit of $2.0 million primarily associated with bonding for future
abandonment obligations. The Company had remaining availability of $18.0 million
under the Revolving Credit Facility as of November 3, 1997.
EFFECTS OF LEVERAGE. The Company is highly leveraged with outstanding long-term
debt of approximately $464.1 million as of September 30, 1997. The Company's
level of indebtedness has several important effects on its future operations,
including (i) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of interest on its indebtedness and will not be
available for other purposes, (ii) the covenants contained in the Indentures
require the Company to meet certain financial tests, and other restrictions
which may limit its ability to borrow additional funds or to dispose of assets
and may affect the Company's flexibility in planning for, and reacting to,
changes in its business, including possible acquisition activities and (iii) the
Company's ability to obtain additional financing in the future for working
capital, expenditures, acquisitions, general corporate purposes or other
purposes may be impaired.
The Company is required to make semi-annual interest payments of $7.8 million on
its 9 3/4% Notes each April 1 and October 1 through the year 2006 and
semi-annual interest payments of approximately $8.9 million on its 8 7/8% Notes
each January 15 and July 15 through the year 2007, commencing January 15, 1998.
In addition, the Company is required to make quarterly interest payments on the
Revolving Credit Facility based on outstanding borrowings for the quarterly
period. The Company may also, at its discretion, make principal payments on the
Revolving Credit Facility.
Pursuant to the indenture governing the 9 3/4% Notes (together with the
indenture governing the 8 7/8% Notes, the "Indentures"), the Company may not
incur any Indebtedness other than Permitted Indebtedness (as defined in the
Indentures) unless the Company's Consolidated Fixed Charge Coverage Ratio (as
defined in the Indentures) for the four full fiscal quarters preceding the
proposed new Indebtedness is greater than 2.5 to 1.0 after giving pro forma
effect to the proposed new Indebtedness, the application of the proceeds of
such Indebtedness and other significant transactions during the period.
In accordance with the terms of the Indentures, if the Company disposes of oil
and gas assets, it must apply such proceeds to permanently pay down certain
indebtedness or within a specified time from the date of the asset sale,
purchase additional oil and gas assets. If proceeds not applied as indicated
above exceed $15 million ($20 million with respect to the 8 7/8% Notes), the
Company shall be required to offer to purchase outstanding 9 3/4% Notes and 8
7/8% Notes or other pari passu indebtedness in an amount equal to the unapplied
proceeds. A similar provision exists with respect to the 13 1/2% Notes, of which
only $245,000 in principal amount currently remains outstanding.
The Company believes it is currently in compliance with all covenants contained
in the Indentures and has been in compliance since the issuance of the 13 1/2%
Notes, the 9 3/4% Notes and the 8 7/8% Notes.
The Company's ability to meet its debt service obligations and to reduce its
total indebtedness will be dependent upon the Company's future performance,
which will be subject to oil and gas prices, general economic conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control. There can be no assurance that the
Company's future performance will not be adversely affected by such economic
conditions and financial, business and other factors.
OTHER MATTERS
ENERGY SWAP AGREEMENTS. The Company engages in futures contracts with certain of
its production through master swap agreements ("Swap Agreements"). The Company
considers these futures contracts to be hedging activities and, as such, monthly
settlements on these contracts are reflected in oil and gas sales. In order to
consider these futures contracts as hedges, (i) the Company must designate the
futures contract as a hedge of future production and (ii) the contract must
reduce the Company's exposure to the risk of changes in prices. Changes in the
market value of futures contracts treated as hedges are not recognized in income
until the hedged item is also recognized in income. If the above criteria are
not met, the Company will record the market value of the contract at the end of
each month and recognize a related gain or loss. Proceeds received or paid
relating to terminated contracts or contracts that have been sold are amortized
over the original contract period and reflected in oil and gas sales.
13
14
The Swap Agreements provide for separate contracts tied to the NYMEX light sweet
crude oil and natural gas futures contracts. The Company has contracts which
contain specific contracted prices ("Swaps") that are settled monthly based on
the differences between the contract prices and the average NYMEX prices for
each month applied to the related contract volumes. To the extent the average
NYMEX price exceeds the contract price, the Company pays the spread, and to the
extent the contract price exceeds the average NYMEX price the Company receives
the spread. Under the terms of the Swap Agreements, each counterparty has
extended the Company a $5 million line of credit for use in conjunction with its
hedging activities. As of November 3, 1997, the Company's exposure under all
contracts covered by the Swap Agreements was approximately $4.0 million.
As of September 30, 1997, the Company's open forward position on its outstanding
crude oil Swaps was as follows:
AVERAGE
YEAR MBBLS PRICE
---- ----- -------
1997 975 $19.93
1998 4,800 $19.80
1999 300 $18.55
2000 300 $18.55
----- ------
6,375 $19.70
===== ======
The Company currently has no outstanding natural gas Swaps.
On March 7, 1997, the Company entered into a basis swap for 9,000 barrels of oil
per month for the period April 1997, through July 1997, with a fixed price of
$(0.11) per barrel basis differential between the monthly calendar average of
Platt's Louisiana Light Sweet and Platt's West Texas Intermediate crude oil
prices.
In addition, on April 7, 1997, the Company entered into a field diesel swap for
150,000 gallons per month for the month of April 1997, and August 1997 through
March 1998, relating to expected future diesel needs. This swap obligates the
Company to make or receive payments on the last day of each respective calendar
month based on the difference between a specified price of $0.5425 per gallon
and the average of the daily settlement price per gallon for the respective
calendar month Platt's Gulf Coast Pipeline mean high sulfur 2 oil contract.
As a result of hedging activity under the Swap Agreements, on a BOE basis, the
Company estimates that approximately 20% of its estimated remaining 1997
production that is classified as proved reserves as of September 30, 1997, will
not be subject to price fluctuation for 1997.
Currently, it is the Company's intention to commit no more than 50% of its total
annual production on a BOE basis to such arrangements. Moreover, under the
Revolving Credit Facility, the Company is prohibited from committing more than
80% of its production estimates for the next 24 months to such arrangements at
any point in time. As the current swap agreements expire, the portion of the
Company's oil and natural gas production that is subject to price fluctuations
will increase significantly, unless the Company enters into additional hedging
transactions.
Despite the measures taken by the Company to attempt to control price risk, the
Company remains subject to price fluctuations for natural gas and oil sold in
the spot market. Prices received for natural gas sold on the spot market are
volatile due primarily to seasonality of demand and other factors beyond the
Company's control. Domestic oil prices generally follow worldwide oil prices,
which are subject to price fluctuations resulting from changes in world supply
and demand. While the price the Company receives for its oil and natural gas
production has significant financial impact on the Company, no prediction can be
made as to what price the Company will receive for its oil and natural gas
production in the future.
GAS BALANCING. It is customary in the industry for various working interest
partners to produce more or less than their entitlement share of natural gas
from time to time. The Company's net overproduced position on its properties
decreased from 2,059,954 Mcf at December 31, 1996, to 658,728 Mcf at September
30, 1997. This decrease is primarily the result of the Company's Main Pass
Acquisition. During the make-up period for the remaining imbalance, the
Company's gas revenues will be adversely affected. The Company recognizes
revenue and imbalance obligations under the sales method of accounting.
14
15
CERTAIN STATEMENTS IN THIS FORM 10-Q REGARDING FUTURE EXPECTATIONS AND PLANS FOR
OIL AND GAS EXPLORATION, DEVELOPMENT, PRODUCTION AND ACQUISITIONS MAY BE
REGARDED AS "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES
LITIGATION REFORM ACT. THEY ARE SUBJECT TO VARIOUS RISKS, SUCH AS OPERATING
HAZARDS, DRILLING RISKS, AND THE INHERENT UNCERTAINTIES IN INTERPRETING
ENGINEERING DATA RELATING TO UNDERGROUND ACCUMULATIONS OF OIL AND GAS, AS WELL
AS OTHER RISKS DISCUSSED IN DETAIL IN THE COMPANY'S SEC FILINGS, INCLUDING THE
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996. ACTUAL RESULTS
MAY VARY MATERIALLY.
15
16
OCEAN ENERGY, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
[A] Exhibits
4.1 Second Supplemental Indenture, dated as of July 14, 1997,
among the Company, the Subsidiary Guarantors named therein,
and State Street Bank & Trust Company (formerly Fleet
National Bank), as Trustee.
10.1 Amended and Restated Credit Agreement among Ocean Energy
Louisiana and certain lenders in the amount of $200
million, dated October 15, 1997.
10.2 Second Amendment and Supplement to Mortgage, Assignment of
Production, Security Agreement and Financing Statement by
Ocean Energy Louisiana, dated October 15, 1997.
10.3 Amended and Restated Guaranty Agreement by the Company
in favor of certain lenders dated October 15, 1997.
10.4 1996 Long-Term Incentive Plan.
10.5 Form of Third Amendment to Employment Agreements among the
Company and its executive officers.
10.6 Indenture Assumption Agreement by Ocean Energy Louisiana
in favor of the Company (8 7/8% Senior Subordinated Notes).
27.1 Financial Data Schedule
[B] Reports on Form 8-K
None
16
17
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.
OCEAN ENERGY, INC.
By: /s/ James C. Flores November 12, 1997
------------------------------------------------
James C. Flores
Chairman of the Board of Directors, President
and Chief Executive Officer
/s/ Robert L. Belk November 12, 1997
------------------------------------------------
Robert L. Belk
Executive Vice President, Chief Financial Officer,
Treasurer and Director (Principal Accounting Officer)
17
18
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Second Supplemental Indenture, dated as of July 14, 1997,
among the Company, the Subsidiary Guarantors named therein,
and State Street Bank & Trust Company (formerly Fleet
National Bank), as Trustee.
10.1 Second Amended and Restated Credit Agreement among Ocean
Energy Louisiana and certain lenders in the amount of $200
million, dated October 15, 1997.
10.2 Second Amendment and Supplement to Mortgage, Assignment of
Production, Security Agreement and Financing Statement by
Ocean Energy Louisiana, dated October 15, 1997.
10.3 Second Amended and Restated Guaranty Agreement by the
Company in favor of certain lenders dated October 15, 1997.
10.4 1996 Long-Term Incentive Plan.
10.5 Form of Third Amendment to Employment Agreements among the
Company and each of its executive officers.
10.6 Assumption Agreement by Ocean Energy Louisiana in favor of
the Company (8 7/8% Senior Subordinated Notes).
27.1 Financial Data Schedule