While Enron Corp. enjoyed a first-quarter increase in operatingresults in each of its core businesses, the company reportedanother loss for Enron Energy Services due to start-up costs. AndEnron Oil &amp Gas results were up despite lower commodity prices.

Enron after-tax earnings were $0.65 per diluted share in thefirst quarter of 1998 compared to $0.57 before a non-recurring gainof $0.24 per diluted share on the sale of liquids properties in thefirst quarter of 1997. Enron reported total diluted earnings pershare of $0.65 and $0.81 and total net income of $214 million and$222 million for the first quarter of 1998 and 1997, respectively.

“Enron’s 1998 first quarter results reflect substantial earningsgrowth across our core business activities,” said Kenneth L. Lay,CEO. “Our wholesale business was particularly strong during thequarter, and we made significant progress in building our energyservices business by increasing direct sales to end-use customers.”

Such was not the case for Enron Energy Services (EES). EESreported an operating loss before interest, minority interest andtaxes of $27 million in the first quarter of 1998 compared to aloss of $14 million in the first quarter of 1997, or $0.06 and$0.03 per diluted share for the first quarter of 1998 and 1997,respectively. This loss mainly reflects costs of developing thecommodity, capital and services capability to deliver on contractssigned to date by EES.

EES sells gas, electricity and energy management services tocommercial and light industrial customers. In the first quarter of1998, EES executed several commodity and services contracts withnew customers. The largest customers to switch electricityproviders in California – Pacific Telesis and the University ofCalifornia and California State University systems – chose EES tosupply power and implement energy management services. In the firstquarter of 1998, EES signed contracts representing about $850million of future revenues, bringing the total to date to more than$2 billion in future revenues.

In the first quarter of 1998 Enron’s core business groupsincreased income before interest, minority interest and taxes(IBIT) by 46% to $498 million compared to $341 million a year ago.The core businesses realized after-tax earnings of $0.71 and $0.60per diluted share for the first quarter of 1998 and 1997,respectively. Among core business results:

Exploration and Production includes Enron Oil &amp Gas andhedging of exposure to commodity prices related to Enron’s majorityownership of EOG. In the 1998 first quarter, Exploration andProduction generated IBIT of $43 million compared with $42 millionin the first quarter of 1997.

“Despite lagging prices in all product categories – natural gas,crude oil and condensate and natural gas liquids – we increaseddiscretionary cash flow by 13%,” said EOG CEO Forrest E. Hoglund.”Natural gas deliveries in the first quarter 1998 totaled 901MMcf/d and crude oil, condensate and natural gas liquids deliveriestotaled 26.1 thousand barrels per day, compared to first quarter1997 deliveries of 850 MMcf/d and 23.5 thousand barrels per day,respectively.” North America gas production averaged 745 MMcf/d inthe first quarter compared to 738 MMcf/d a year ago. First quarter1998 North America wellhead gas prices averaged $1.93/Mcf, down 25%from an average of $2.58/Mcf in the first quarter of 1997.

Transportation and Distribution includes Enron’s North Americaninterstate gas pipelines (Gas Pipeline Group) and its electricutility in Oregon (Portland General). Gas Pipeline Group generatedIBIT of $126 million in the first quarter of 1998 compared with$135 million in the first quarter of 1997. Portland Generalgenerated IBIT of $79 million in the first quarter of 1998. Noresults from Portland General were included for the 1997 firstquarter as the merger was completed in July 1997. First quarter1998 operating margins and volumes for both groups declinedslightly due to an unusually warm winter in their respectiveservice territories.

PaineWebber’s natural gas group was pleased by Enron’s results.”With the positive outlook of its Energy Services division,heightened interest from electric-oriented investors, the increasein the overall market and its strong first quarter 1998 earnings,we are reiterating our attractive rating on Enron Corp.,”PaineWebber said. Joe Fisher, Houston

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