Enron Oil & Gas Co. (EOG) 1998 net income was less than halfwhat it was in 1997, which could be considered additional evidencethe company really is considering an “unsolicited offer” to buy thecompany.

In December Enron notified the Securities and ExchangeCommission it received an unsolicited offer for its 53.5% share ofEOG (see Daily GPI Dec. 17, 1998). The unnamed third party wouldacquire Enron’s shares in EOG and make an offer for all theoutstanding shares. The third party also would require that Enrondispose of certain other assets. While trying not to minimize theoffer, an Enron spokesman said at the time the offer was among manysuch offers the company receives for its interests in assets. Mostoffers go unreported. But because Enron owns a majority share inEOG, it had to report the offer. One analyst noted, however, Enronwould not have filed the 13 D with the SEC if it had not received agood offer for the company. “If they can get a good price for thestock, it’s a good opportunity to get out of a business they mayhave been trying to get out of for a while,” he said.

In 1998, EOG had net income of $56.2 million, compared to $122million for 1997. EOG’s 1998 fourth quarter net income was $10.0million, less than 25% of 1997 4Q net income of $43.2 million.However, 4Q98 delivered volumes averaged 113.8 Bcfe, a 16% increaseover 4Q97 volumes of 98.3 Bcfe. And the company posted record 1998delivered volumes of 417 Bcfe, up 13% on a per-share basis over1997 volumes of 377 Bcfe.

Wellhead revenues decreased 9% to $754.5 million in 1998compared to $828.4 million in 1997, reflecting decreases in everycommodity, gas, crude oil, condensate and gas liquids. The decreasewas partially offset by an 11% increase in EOG volumes. Total gasdeliveries averaged 971 MMcf/d in 1998, up 9% compared to 889MMcf/d in 1997. EOG crude oil and condensate volumes increased 24%to 24.7 thousand barrels/d in 1998 as compared to 19.9 thousandbarrels/d in 1997. North America wellhead gas delivered volumesaveraged 776 MMcf/d in 1998, up from 758 MMcf/d during 1997. EOGNorth America wellhead gas prices decreased 15% to $1.86/Mcf in1998 compared to $2.20/Mcf in 1997.

“EOG is very proud of its volume growth performance,particularly given a difficult second half for most E&Pcompanies,” said Mark G. Papa, EOG CEO. “Our positive growth duringthe period is considered exceptional performance.”

EOG reported a 31% increase in total proved reserves at year-end1998 to 5.856 Tcfe compared with 4.467 Tcfe at year-end 1997. EOGalso reported record reserve replacement of 429%, which resultedfrom 1998 all-sources proved reserve additions of more than 1.8Tcfe. Average total all sources finding costs were $0.42/Mcfe.Average finding costs for the drilling additions alone were$0.34/Mcfe.

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