<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004

                                    FORM 10-Q

(Mark One)

[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

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934


                         Commission file number 1-13916

                       UNION PACIFIC RESOURCES GROUP INC.
             (Exact name of registrant as specified in its charter)

                   UTAH                                    13-2647483
     (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                   Identification No.)

                      801 CHERRY STREET, FORT WORTH, TEXAS
                    (Address of principal executive offices)

                                      76102
                                   (Zip Code)

                                 (817) 877-6000
              (Registrant's telephone number, including area code)


         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
   -----    -----

         As of April 30, 1998, there were 251,060,829 shares of the registrant's
common stock outstanding.




<PAGE>   2



                       UNION PACIFIC RESOURCES GROUP INC.
                                      INDEX



                          PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                                        Page Number
                                                                                                        -----------
<S>      <C>                                                                                            <C>
ITEM 1:  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

         CONDENSED CONSOLIDATED STATEMENTS OF INCOME - For the
           Three Months Ended March 31,1998 and 1997...............................................         1

         CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION -
           At  March 31, 1998 and December 31, 1997................................................       2 - 3

 .        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - For the
           Three Months Ended March 31, 1998 and 1997..............................................         4

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS......................................       5 - 8

         INDEPENDENT PUBLIC ACCOUNTANTS' REPORT....................................................         9


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
           OF OPERATIONS...........................................................................      10 - 17

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.................................      17 - 19



                                            PART II.  OTHER INFORMATION


ITEM 1:  LEGAL PROCEEDINGS.........................................................................        20

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K..........................................................      20 -21

SIGNATURE..........................................................................................        22
</TABLE>

<PAGE>   3

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       UNION PACIFIC RESOURCES GROUP INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               For the Three Months Ended March 31, 1998 and 1997
                      (Millions, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   1998          1997
                                                                 --------      --------
<S>                                                              <C>           <C>     
Operating revenues:
    Oil and gas operations:
       Producing properties ................................     $  362.0      $  370.0
       Gathering, processing and marketing .................         96.2         124.7
       Other oil and gas revenues ..........................          0.7           4.6
                                                                 --------      --------
             Total oil and gas operations ..................        458.9         499.3
    Minerals ...............................................         40.1          32.4
                                                                 --------      --------
             Total operating revenues ......................        499.0         531.7
                                                                 --------      --------

Operating expenses:
    Production .............................................         93.3          73.1
    Exploration, including exploratory dry holes ...........         56.1          42.8
    Gathering, processing and marketing ....................         59.9          76.6
    Minerals ...............................................          0.7           1.3
    Depreciation, depletion and amortization ...............        191.1         133.0
    General and administrative .............................         20.6          18.5
                                                                 --------      --------
          Total operating expenses .........................        421.7         345.3
                                                                 --------      --------

Operating income ...........................................         77.3         186.4
Other income (expense) - net ...............................          1.4          (3.0)
Interest expense ...........................................        (39.2)        (10.7)
                                                                 --------      --------
Income before income taxes .................................         39.5         172.7
Income taxes ...............................................         (8.3)        (55.5)
                                                                 --------      --------
Net income .................................................     $   31.2      $  117.2
                                                                 ========      ========

Other comprehensive income, net of tax: (Note 2)
    Foreign currency translation adjustments ...............          3.6           1.3
                                                                 --------      --------
Comprehensive income .......................................     $   34.8      $  118.5
                                                                 ========      ========

Earnings per share - basic .................................     $   0.13      $   0.47
                                                                 ========      ========
Earnings per share - diluted ...............................     $   0.13      $   0.47
                                                                 ========      ========

Weighted average shares outstanding - diluted ..............        248.2         251.0
Cash dividends per share ...................................     $   0.05      $   0.05
</TABLE>

 See the notes to the condensed consolidated financial statements (unaudited).


                                      - 1 -

<PAGE>   4



                       UNION PACIFIC RESOURCES GROUP INC.

             CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                     At March 31, 1998 and December 31, 1997
                              (Millions of dollars)

<TABLE>
<CAPTION>
                                                                            March 31,     December 31,
                                                                              1998           1997
                                                                           -----------    ------------
                                                                           (Unaudited)
<S>                                                                        <C>            <C>
ASSETS

Current assets:
    Cash and temporary investments ...................................     $    45.8      $    70.6
    Accounts receivable - net ........................................         506.3          385.4
    Inventories ......................................................          76.7           53.1
    Other current assets .............................................         159.9           67.7
                                                                           ---------      ---------
          Total current assets .......................................         788.7          576.8
                                                                           ---------      ---------

Properties (successful efforts method): (Note 3)
    Cost .............................................................      12,845.0        7,414.4
    Accumulated depreciation, depletion and amortization .............      (3,963.8)      (3,749.0)
                                                                           ---------      ---------
          Total properties - net .....................................       8,881.2        3,665.4
Intangible and other assets ..........................................         400.0          230.0
                                                                           ---------      ---------

Total assets .........................................................     $10,069.9      $ 4,472.2
                                                                           =========      =========
</TABLE>










 See the notes to the condensed consolidated financial statements (unaudited).

                                      - 2 -

<PAGE>   5



                       UNION PACIFIC RESOURCES GROUP INC.

             CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                     At March 31, 1998 and December 31, 1997
                              (Millions of dollars)

<TABLE>
<CAPTION>
                                                                  March 31,     December 31,
                                                                    1998           1997
                                                                 -----------    ------------
                                                                 (Unaudited)
<S>                                                              <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable ......................................     $   484.7      $   426.7
     Accrued taxes payable .................................          75.9           59.3
     Short-term debt .......................................         350.0             --
     Other current liabilities .............................         148.2           71.7
                                                                 ---------      ---------
          Total current liabilities ........................       1,058.8          557.7
                                                                 ---------      ---------

Long-term debt (Note 3) ....................................       4,708.7        1,230.6
Deferred income taxes ......................................       2,063.4          552.9
Other long-term liabilities (Note 5) .......................         474.0          370.3
Shareholders' equity:
     Common stock, no par value;
       Authorized shares--400,000,000
       Issued shares--254,264,385 and 251,888,275 ..........            --             --
     Paid-in surplus .......................................         991.3          991.2
     Unearned employee stock ownership plan ................        (100.5)        (102.0)
     Retained earnings .....................................         976.2          957.4
     Unearned compensation .................................          (9.9)         (11.8)
     Accumulated other comprehensive income:
         Deferred foreign exchange adjustment ..............         (13.7)         (17.3)
         Minimum pension contra equity .....................          (1.0)          (1.0)
     Treasury stock, at cost: (Note 4)
         Shares--3,220,148 and 2,379,625 ...................         (77.4)         (55.8)
                                                                 ---------      ---------
          Total shareholders' equity .......................       1,765.0        1,760.7
                                                                 ---------      ---------

Total liabilities and shareholders' equity .................     $10,069.9      $ 4,472.2
                                                                 =========      =========
</TABLE>









 See the notes to the condensed consolidated financial statements (unaudited).

                                      - 3 -

<PAGE>   6



                       UNION PACIFIC RESOURCES GROUP INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Three Months Ended March 31, 1998 and 1997
                              (Millions of dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       1998          1997
                                                                     --------      --------
<S>                                                                  <C>           <C>     
Cash flows provided by operations:
    Net income .................................................     $   31.2      $  117.2
    Non-cash charges to income:
       Depreciation, depletion and amortization ................        191.1         133.0
       Deferred income taxes ...................................        (13.3)         28.1
       Other non-cash charges - net ............................          6.3           5.3
    Changes in current assets and liabilities ..................         80.1         138.6
                                                                     --------      --------
          Cash provided by operations ..........................        295.4         422.2
                                                                     --------      --------

Cash flows from investing activities:
    Capital and exploratory expenditures .......................       (487.1)       (284.0)
    Acquisition of companies (Note 3) ..........................     (2,623.2)           --
    Proceeds from sales of assets ..............................          6.0           1.3
    Other investing activities - net ...........................          6.4          (0.9)
                                                                     --------      --------
          Cash used by investing activities ....................     (3,097.9)       (283.6)
                                                                     --------      --------

Cash flows from financing activities:
    Dividends paid .............................................        (12.4)        (12.5)
    Debt financing .............................................      2,816.1            --
     Debt repayments ...........................................           --         (99.6)
    Purchase of treasury stock .................................        (21.6)         (0.8)
    Other financings - net .....................................         (4.4)         55.6
                                                                     --------      --------
          Cash provided (used) by financing activities .........      2,777.7         (57.3)
                                                                     --------      --------

Net change in cash and temporary investments ...................        (24.8)         81.3
Cash at beginning of period ....................................         70.6         118.9
                                                                     --------      --------
Cash at end of period ..........................................     $   45.8      $  200.2
                                                                     ========      ========
</TABLE>











 See the notes to the condensed consolidated financial statements (unaudited).

                                      - 4 -

<PAGE>   7



                       UNION PACIFIC RESOURCES GROUP INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   RESPONSIBILITIES FOR FINANCIAL STATEMENTS

     The condensed consolidated financial statements of Union Pacific Resources
     Group Inc. and subsidiaries (the "Company") have been prepared by
     management and are unaudited. Such unaudited interim financial statements
     reflect all adjustments (including normal recurring adjustments) that are,
     in the opinion of management, necessary for a fair presentation of the
     financial position and operating results of the Company for the interim
     periods; however, such condensed statements do not include all of the
     information and footnotes required by generally accepted accounting
     principles to be included in a full set of financial statements. The report
     of Arthur Andersen LLP commenting on their review accompanies the condensed
     consolidated financial statements and is included in Part I, Item 1 in this
     report. The Condensed Consolidated Statement of Financial Position at
     December 31, 1997 is derived from the audited financial statements as of
     December 31,1997. The condensed consolidated financial statements should be
     read in conjunction with the consolidated financial statements and notes
     thereto contained in the Company's Annual Report on Form 10-K for the year
     ended December 31, 1997 and the pro forma combined financial statements
     contained in the Company's Current Report on Form 8-K/A filed on May 6,
     1998. The results of operations for the three months ended March 31, 1998
     are not necessarily indicative of the results for the full year ending
     December 31, 1998.

     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 certain 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 each reporting period. Management believes its estimates
     and assumptions are reasonable; however, such estimates and assumptions are
     subject to a number of risks and uncertainties which may cause actual
     results to differ materially from the Company's estimates and assumptions.

2.   NEW ACCOUNTING STANDARDS

     In March 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures
     about Pensions and Other Postretirement Benefits," which is effective for
     fiscal years beginning after December 15, 1997. This statement revises
     employers' disclosures about pension and other postretirement benefit
     plans. It standardizes the disclosure requirements to the extent
     practicable and requires additional information on changes in the benefits
     obligations and fair values of plan assets. The Company plans to adopt SFAS
     No. 132 for the year ended December 31, 1998.

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
     "Reporting Comprehensive Income," which establishes standards for reporting
     comprehensive income and its components (revenues, expenses, gains and
     losses) in a full set of general-purpose financial statements. It requires
     classification of items of other comprehensive income by their nature in a
     financial statement and display of the accumulated balance of other
     comprehensive income separate from retained earnings

                                      - 5 -

<PAGE>   8



     and paid-in-surplus in the equity section of the statement of
     financial position. During the first quarter of 1998, the Company adopted
     and implemented this statement.

3.   ACQUISITION OF NORCEN

     On January 25, 1998, the Company and Union Pacific Resources Inc., an
     Alberta corporation and a wholly-owned subsidiary of the Company ("UPRI"),
     entered into a pre-acquisition agreement ("Pre-acquisition Agreement") with
     Norcen Energy Resources Limited ("Norcen"). Under the Pre-acquisition
     Agreement, the Company and UPRI agreed to make an offer (the "tender
     offer") of up to 100 percent of the common shares of Norcen, subject to
     certain conditions. On March 3, 1998, the Company announced the closing of
     the tender offer. In total, 95.5 percent of the outstanding common shares
     of Norcen were tendered at a purchase price of US $13.65 per share.

     On March 5, 1998, UPRI completed the compulsory acquisition of the
     remaining common shares outstanding which were not tendered. (The closing
     of the tender offer and completion of the compulsory acquisition is
     referred to as the "Norcen Acquisition".) The aggregate purchase price for
     the Norcen Acquisition, including non-recurring transaction costs of $28.1
     million, was $2.623 billion.

     Norcen is a major Canadian oil and gas exploration and development
     company with primary operations in western Canada, the Gulf of Mexico,
     Guatemala and Venezuela. 

     The Company funded the purchase price of the Norcen Acquisition through the
     issuance of commercial paper, supported by the U.S. $2.7 billion 364 Day
     Competitive Advance/Revolving Credit Agreement dated March 2, 1998. In
     accordance with Accounting Principles Board Opinion No. 16, "Business
     Combinations," the acquisition was accounted for as a purchase. The
     condensed consolidated financial statements for the period ended March 31,
     1998 include one month of Norcen's results of operations.

     The following table represents the preliminary allocation of the total
     purchase price of Norcen to the acquired assets and liabilities assumed,
     based upon their fair values on the date of Norcen Acquisition. Any future
     adjustments to the allocation of the purchase price are not anticipated to
     be material to the condensed consolidated financial statements.

<TABLE>
<CAPTION>
                                                                  (Millions of dollars)
<S>                                                                   <C>     
Working capital .................................................     $  114.2
Property, plant and equipment ...................................      4,992.2
Other assets ....................................................        181.3
Long-term debt ..................................................     (1,011.9)
Other non-current liabilities, including deferred taxes .........     (1,652.6)
                                                                      --------
Total purchase price ............................................     $2,623.2
                                                                      ========
</TABLE>











                                      - 6 -

<PAGE>   9



     The following table presents unaudited pro forma condensed consolidated
     statement of operations of the Company for the quarters ended March 31,
     1998 and 1997, as though the Norcen acquisition had occurred on January 1,
     1997. Certain adjustments were made to the financial information to conform
     to the accounting policies and financial statement presentation of the
     Company.

<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                                ----------------------------
                                                                     1998          1997
                                                                     ----          ----
<S>                                                              <C>           <C>     
                                                       (Millions of dollars, except per share amounts)
     Revenues ..............................................     $  599.2      $  694.7
     Costs and expenses ....................................        552.8         522.1
                                                                 --------      --------
     Operating income ......................................         46.4         172.6
     Interest expense ......................................        (73.7)        (58.7)
     Other income (expense) - net ..........................          1.5          (3.0)
                                                                 --------      --------
     Income (loss) before income taxes .....................        (25.8)        110.9
     Income tax benefit (expense) ..........................         15.8         (36.0)
                                                                 --------      --------
       Net income (loss) ...................................     $  (10.0)     $   74.9
                                                                 ========      ========

     Earnings (loss) per share - basic .....................     $  (0.04)     $   0.30
     Earnings (loss) per share - diluted ...................        (0.04)         0.30
</TABLE>

     The unaudited pro forma condensed consolidated information presented above
     is not necessarily indicative of the results of operations or the financial
     position which would have occurred had the Norcen Acquisition been
     consummated on January 1, 1997, nor is it necessarily indicative of future
     results of operations of the Company.

4.   PURCHASE OF COMMON STOCK

     In November 1997, the Company's Board of Directors authorized the purchase
     of up to $50 million in shares of Common Stock ("Common Stock") of the
     Company during 1998. During the first quarter of 1998, the Company
     purchased approximately $21.6 million of Common Stock

5.   COMMITMENTS AND CONTINGENCIES

     The Company is subject to federal, state, provincial and local
     environmental laws and regulations and currently is participating in the
     investigation and remediation of a number of sites. Where the remediation
     costs can reasonably be determined, and where such remediation is probable,
     the Company has recorded a liability. Management does not expect future
     environmental obligations to have a material impact on the results of
     operations, financial condition or cash flows of the Company.

     In the last ten years, the Company has disposed of significant pipeline,
     refining and producing property assets. In disposition agreements in
     connection therewith, the Company has made certain representations and
     warranties relating to the assets sold and provided certain indemnities
     with respect to liabilities associated with such assets. The Company has
     been advised of possible claims which may be asserted by the purchasers of
     certain of the disposed assets for alleged breaches of such representations
     and warranties and under certain indemnities. Certain claims related to
     compliance with environmental laws remain pending. In addition, some of the
     representations, warranties and indemnities related to some of


                                      - 7 -

<PAGE>   10


     the disposed assets continue to survive under such disposition agreements.
     Further claims may be made against the Company under such disposition
     agreements or otherwise. While no assurance can be given as to the ultimate
     outcome of these claims, the Company does not expect these matters to have
     a materially adverse effect on its results of operations, financial
     condition or cash flows.

     The Company is a defendant in a number of lawsuits and is involved in
     governmental proceedings arising in the ordinary course of business in
     addition to those described above. The Company also has entered into
     commitments and provided guarantees for specific financial and contractual
     obligations of its subsidiaries and affiliates. The Company does not expect
     that these lawsuits, commitments or guarantees to have a materially adverse
     effect on its results of operations, cash flows or financial condition.

6.   NORCEN SUMMARIZED FINANCIAL INFORMATION

     The following table presents summarized financial information for Norcen as
     of and for the month ended March 31, 1998. This summarized financial
     information is being provided pursuant to Section G of Topic 1 of Staff
     Accounting Bulletin No. 53 -- "Financial Statement Requirements in Filings
     Involving the Guarantee of Securities of a Parent" ("SAB 53") The Norcen
     debt securities, 7 3/8% Debentures due May 15, 2006 in the aggregate
     principal amount of $250 million, 7.8% Debentures due July 2, 2008 in the
     aggregate principal amount of $150 million and 6.8% Debentures due July 2,
     2002 in the aggregate principal amount of $250 million (collectively, "Debt
     Securities") have been fully and unconditionally guaranteed by the Company.
     The Company will continue to provide such summarized financial information
     for Norcen for as long as the Debt Securities remain outstanding and
     guaranteed by the Company. 


<TABLE>
<CAPTION>
          
                                                          Two Months Ended                One Month Ended
                                                         February 28, 1998(1)             March 31, 1998(2)         
Summarized Income Statement Information:                (Dollars in millions)           (Dollars in millions)
<S>                                                         <C>                             <C> 
  Operating revenues .............................          $  104.0                        $   50.5  
  Operating income ...............................               4.0                           (16.0)  
  Net (loss) .....................................          $  (30.0)(3)                    $  (12.8)

Summarized Balance Sheet Information:
  Current assets .................................          $  275.6                           337.8
  Non-current assets .............................           2,456.2                         5,208.8
  Current liabilities ............................             182.6                           266.8
  Non-current liabilities ........................           2,549.2                         5,279.8
</TABLE>

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

(1)  Actual results for Norcen as of and for the month ended February 28, 1998.
     Results have not been restated in accordance with U.S. generally accepted
     accounting principles ("GAAP") and reflect the full cost method for
     accounting for oil and gas operations.

(2)  Results for Norcen as of and for the month ended March 31, 1998 include
     adjustments to reflect U.S. GAAP and the successful efforts method of
     accounting. Adjustments to reflect the application of purchase method of
     accounting for the Norcen Acquisition are included effective March 3, 1998.

(3)  Net loss includes $40 million in costs incurred by Norcen in connection
     with the Norcen Acquisition which were not reimbursed by the Company.



7.   PLANNED DIVESTITURES

     In April 1998, the Company announced a plan to divest of certain oil and
     gas producing properties which the Company considers to be non-core after
     the Norcen Acquisition. The planned divestitures are part of an overall
     deleveraging program designed to reduce the Company's debt to total
     capitalization ratio. The Company plans to sell at approximately $600
     million of producing properties, in two phases. Phase one is expected to
     include producing properties in the Gulf of Mexico, southern Louisiana,
     southern Texas and eastern Texas. The second phase is expected to include
     properties located in the Rocky Mountains area, Argentina, Egypt and
     Australia. The sale of certain Canadian properties will also be offered in
     several property packages. The Company intends to dispose of the producing
     properties before the end of 1998. These properties represent less than ten
     percent of the Company's reserves, cash flows and production volumes. The
     Company also has announced its plan to explore opportunities to monetize
     its gathering, processing and marketing business.




                                      - 8 -

<PAGE>   11



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders of
Union Pacific Resources Group Inc.
Fort Worth, Texas

We have reviewed the accompanying condensed consolidated statement of financial
position of Union Pacific Resources Group Inc. (a Utah corporation) and
subsidiaries as of March 31, 1998, and the related condensed consolidated
statements of income and cash flows for the three-month period then ended. These
financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.






ARTHUR ANDERSEN LLP
Fort Worth, Texas

April 28, 1998


                                      - 9 -

<PAGE>   12



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

                       UNION PACIFIC RESOURCES GROUP INC.

                              RESULTS OF OPERATIONS

             QUARTER ENDED MARCH 31, 1998 COMPARED TO MARCH 31, 1997

SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
                                                     Three Months Ended March 31,
                                                     ----------------------------
                                                         1998        1997
                                                         ----        ----
                                                       (Millions of dollars)
<S>                                                    <C>         <C>    
       Total operating revenues ..................     $ 499.0     $ 531.7
       Total operating expenses ..................       421.7       345.3
       Operating income ..........................        77.3       186.4
           Net income ............................        31.2       117.2
</TABLE>


Operating income for the first quarter of 1998 of $77.3 million decreased by
$109.1 million (59%) from the first quarter 1997, primarily as a result of lower
producing property operating income. Producing property operating income
decreased $101.2 million as a result of lower product price realizations and
higher production costs, depreciation, depletion and amortization expense. The
lower prices were partially offset by increased volumes. Gathering, processing
and marketing operating income for the first quarter of 1998 was lower as
compared to the same period in 1997. The decrease in the two segments was
partially offset by higher minerals operating income.

Net income for the first quarter 1998 was $31.2 million or $0.13 per diluted
share. Net income was less by $86.0 million (73%) compared to the same period in
1997 as a result of lower operating income ($109.1 million) and increased
interest costs ($28.5 million). Tax expense was lower due to the lower taxable
income.

SUMMARY OF SEGMENT FINANCIAL DATA

<TABLE>
<CAPTION>
                                                               Three Months Ended March 31,
                                                               ----------------------------
                                                                   1998         1997
                                                                   ----         ----
                                                                 (Millions of dollars)
<S>                                                              <C>          <C>    
      Segment operating income:
           Producing property operations ...................     $  41.2      $ 142.4
           Gathering, processing and marketing .............        18.5         32.8
           Minerals ........................................        39.4         30.6
           Corporate/general and administrative ............       (21.8)       (19.4)
                                                                 -------      -------
              Total ........................................     $  77.3      $ 186.4
                                                                 =======      =======
</TABLE>



                                     - 10 -

<PAGE>   13



PRODUCING PROPERTY OPERATIONS


<TABLE>
<CAPTION>
                                                              Three Months Ended March 31,
                                                              ----------------------------
                                                                   1998        1997
                                                                   ----        ----
                                                                (Millions of dollars)
<S>                                                              <C>         <C>    
      Operating revenues ...................................     $ 362.7     $ 374.6
      Operating expenses:
         Production ........................................        93.3        73.1
         Exploration .......................................        56.1        42.8
         Depreciation, depletion and amortization ..........       172.1       116.3
                                                                 -------     -------
         Total operating expenses ..........................       321.5       232.2
                                                                 -------     -------
      Operating income .....................................     $  41.2     $ 142.4
                                                                 =======     =======
</TABLE>

Producing property revenues for the first quarter of 1998 decreased by $11.9
million compared to the first quarter of 1997. Production volume increased by
439.7 MMcfed (27%) adding $100.9 million to revenues, while lower product prices
of $0.59 per Mcfe (23%) reduced revenues by $108.9 million for the first quarter
of 1998 compared to the first quarter of 1997.

<TABLE>
<CAPTION>
                                                                           Three Months Ended March 31,
                                                                           ----------------------------
                                                                   1998         1997         1998         1997
                                                                 --------     --------     --------     --------
                                                                   (without hedging)          (with hedging)
<S>                                                              <C>          <C>          <C>          <C>     
      Average price realizations - producing properties:
         Natural gas (per Mcf) .............................     $   1.86     $   2.54     $   1.97     $   2.41
         Natural gas liquids (per Bbl) .....................         9.30        13.23         9.30        13.20
         Crude oil (per Bbl) ...............................        11.93        20.83        12.32        19.51
         Average (per Mcfe) ................................         1.87         2.68         1.96         2.55
</TABLE>

<TABLE>
<CAPTION>
                                                                              Three Months Ended March 31,
                                                                              ----------------------------
                                                                                1998              1997
                                                                                ----              ----
<S>                                                                            <C>              <C>
      Production volumes - producing properties:
         Natural gas (MMcfd)...............................................    1,271.2          1,118.2
         Natural gas liquids (MBbld).......................................       31.4             30.8
         Crude oil (MBbld).................................................       98.6             51.4
         Total (MMcfed)....................................................    2,051.6          1,611.9
</TABLE>

Natural gas volumes increased by 153 MMcfd (14%) in the first quarter of 1998 to
1,271.2 MMcfd, primarily as a result of the inclusion of one month of Norcen
production volumes (153.4 MMcfd). During the first quarter of 1998, natural gas
volumes in the Austin Chalk business unit declined 82.1 MMcfd compared to the
first quarter of 1997 primarily in the Giddings field area. The declines in the
Austin Chalk business unit were partially offset by increases in natural gas
volumes during the first quarter of 1998 in the East Texas (33.2 MMcfd), South
Texas/Plains/Canada (24.0 MMcfd) and Gulf Onshore/Offshore (23.2 MMcfd) business
units.

Crude oil volumes increased by 47.2 MBbld (92%) over the first quarter of 1997
to 98.6 MBbld in the first quarter of 1998. The increase in crude oil volumes
was primarily the result of the inclusion of one month

                                     - 11 -

<PAGE>   14



of Norcen production volumes (35.9 MBbld) and an increase of 11.4 MBbld in the
Austin Chalk business unit. The Austin Chalk business unit increase is the
result of discoveries in the Austin Chalk area in Louisiana. The additional
production volumes attributable to the Norcen Acquisition include production
from the Canada (16.0 MBbld), Guatemala (10.5 MBbld) and Venezuela (6.3 MBbld)
areas for the month of March 1998.

Production expenses increased by $20.2 million (28%) during the first quarter of
1998 compared to the first quarter of 1997. The increase in production expenses
was attributable to Norcen's lease operating costs, which contributed $13.2
million to the increase for the month of March. Higher salt water disposal
costs, salaries and benefits and maintenance in other business units made up the
remainder of the increase. Production expenses on a per unit basis were $0.51
per Mcfe during the first quarter of 1998 compared to $0.50 per Mcfe during the
first quarter of 1997.

Exploration expenses increased by $13.3 million (31%) during the first quarter
of 1998. The increase in exploration expenses was primarily attributable to
increased surrendered lease expense and geological and geophysical expense. The
surrendered lease expense, which was higher by $6.6 million, reflects increased
leasing activity in the East Texas and Gulf Onshore/Offshore business units.
Geological and geophysical expenses were higher by $3.6 million, primarily due
to the exploration efforts on properties acquired in connection with the Norcen 
Acquisition ($2.9 million).

Depreciation, depletion and amortization ("DD&A") increased by $55.8 million
(48%) during the first quarter of 1998 to $172.1 million primarily due to the
Norcen Acquisition ($44.4 million) and higher producing property volumes in
other business units.

GATHERING, PROCESSING AND MARKETING OPERATIONS

<TABLE>
<CAPTION>
                                                              Three Months Ended March 31,
                                                              ----------------------------
                                                                   1998        1997
                                                                   ----        ----
                                                                (Millions of dollars)
<S>                                                              <C>         <C>    
      Operating revenues ...................................     $  96.2     $ 124.7
      Gas purchases ........................................        27.3        50.2
                                                                 -------     -------
         Operating margin ..................................        68.9        74.5
      Operating expenses:
         Operating costs ...................................        32.6        26.4
         Depreciation, depletion and amortization ..........        17.8        15.3
                                                                 -------     -------
           Total operating expenses ........................        50.4        41.7
                                                                 -------     -------
      Operating income .....................................     $  18.5     $  32.8
                                                                 =======     =======
</TABLE>

Gathering, processing and marketing operating margins for the first of quarter
1998 decreased by $5.6 million (8%) to $68.9 million. Processing margins
decreased by $6.8 million, primarily due to lower plant product prices of $0.71
per Mcfe (30%) combined with a smaller relative decline in gas purchase prices. 
The decrease was partially offset by additional margins attributable to the
acquisition of Highlands Gas Corporation ("Highlands") ($2.1 million) and the
start-up of the Masters Creek plant ($2.4 million). Gathering margins decreased
by $2.6 million from the first quarter of 1997, primarily due to lower volume
throughput at the Ferguson/Burleson pipeline.



                                     - 12 -

<PAGE>   15



<TABLE>
<CAPTION>
                                                          Three Months Ended March 31,
                                                          ----------------------------
                                                               1998         1997
                                                               ----         ----
<S>                                                            <C>          <C> 
Sales volumes - plants:
   Natural gas (MMcfd) ................................         25.3         21.4
   Natural gas liquids (MBbld) ........................         43.7         41.6
   Total (MMcfed) .....................................        287.4        270.9



Average product price realizations - plants:
   Natural gas (per Mcf) ..............................     $   2.08     $   2.81
   Natural gas liquids (per Bbl) ......................         9.83        14.12
   Average (per Mcfe) .................................         1.68         2.39
</TABLE>

Natural gas volumes for the first quarter of 1998 increased by 3.9 MMcfd (18%)
over the first quarter of 1997. Increases in natural gas volumes were due to the
start-up of the Masters Creek plant and were partially offset by lower inlet
volumes at an East Texas business unit plant.

Natural gas liquids volumes increased by 2.1 MBbld (5%) during the first quarter
of 1998. The additional volumes were attributable to the Highlands plants in the
western Texas area (6.2 MBbld). These additional volumes were partially offset
by lower inlet volumes at the Austin Chalk area plants (2.4 MBbld) and declines
at East Texas area plants (1.8 MBbld).

Operating expenses increased by $8.7 million to $50.4 million in the first
quarter of 1998. The increase in operating expenses was primarily associated
with the acquisition of Highlands plants in the third quarter of 1997 and the
start-up of the Masters Creek plant in the second quarter of 1997.

MINERALS OPERATIONS

Minerals operating income increased by $8.8 million during the first quarter of
1998, primarily due to higher income from the Company's 50% non-operating
interest in Black Butte Coal Company. The higher income resulted from increased
coal shipments under a coal supply contract.

INTEREST EXPENSE

Interest expense increased by $28.5 million to $39.2 million during the first
quarter of 1998 from $10.7 million in the first quarter of 1997. The higher
interest expense is primarily due to the increased debt balances incurred to
fund the Norcen Acquisition, Highlands, and other property acquisitions and
capital spending programs.

INCOME TAXES

Income taxes decreased by $47.2 million during the first quarter of 1998 to $8.3
million. The decrease in income taxes resulted from lower income before taxes
and a lower effective tax rate. The effective tax rate for 1998 was 21.0%
(including Section 29 tax credits of $4.1 million) compared with 32.1% in 1997
(including $4.8 million of Section 29 tax credits).


                                     - 13 -

<PAGE>   16



                         LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of cash during the first quarter of 1998 was debt
financing and cash provided by operations. Cash outflows during the first
quarter of 1998 were primarily related to the Norcen Acquisition, capital and
exploratory expenditures, including producing property purchases and the
repurchase of Common Stock by the Company.

During the first quarter of 1998, the Company issued commercial paper supported
by the $2.7 billion 364 Day Competitive Advance/Revolving Credit Agreement
("Norcen Acquisition Facility") entered into in connection with the Norcen
Acquisition. As a result of the Norcen Acquisition, the Company also assumed the
net debt of Norcen, including commercial paper and debentures, aggregating
approximately $1.0 billion. The Norcen Acquisition Facility includes a mandatory
prepayment provision and a series of "prepayment events." The mandatory
prepayment provision requires that $1.35 billion be repaid prior to March 1999.
In addition, 75% of the net proceeds resulting from any prepayment events must
be applied to reduce the indebtedness under the credit agreement. Prepayment
events include sales of assets in excess of $10 million and debt and equity
issuances. In addition, as a result of the Norcen Acquisition, the covenants in
the Company's other credit agreements, including the Company's $600 million and
$300 million revolving credit agreements and Norcen's credit facilities were
modified. The Company's $600 million and $300 million revolving credit
agreements were amended to provide that debt should not exceed 75% of the total
of the Company's debt and shareholders' equity (65% after September 30, 1999).
Additionally, the EBITDAX (the sum of operating income, depreciation, depletion
and amortization, and exploration expenses) of the Company's principal
subsidiaries (as defined in the agreements) are required to be at least 80% of
the Company's consolidated EBITDAX. The modifications also placed other
restrictions on the Company regarding the creation of liens, incurrence of
additional indebtedness, transactions with affiliates, sales of stock of Union
Pacific Resources Company (a wholly owned subsidiary of the Company) and certain
mergers, consolidations, and asset sales. The Norcen credit agreements were also
modified to provide additional events of default to the Norcen Acquisition
Facility. One of the additional events of default was an event of default under
the Norcen Acquisition Facility. The Company also issued approximately $116
million of additional commercial paper supported by other credit facilities
during the first quarter of 1998. These proceeds were used for general corporate
purposes.

Excluding commercial paper, the Company has no debt maturing in the next four
years. All debt of the Company except for $350 million of outstanding commercial
paper has been classified as long-term debt reflecting the Company's intent to
maintain these short-term borrowings on a long-term basis either through the
issuance of additional commercial paper or debt securities. The Company intends
to sell long-term debt securities, including notes and debentures aggregating
approximately $1.0 billion in the second quarter of 1998. The aggregate net
proceeds from the sale of these debt securities will be used to reduce
outstanding commercial paper.



                                     - 14 -

<PAGE>   17



As of March 31, 1998 and 1997, the total capitalization of the Company was as
follows:

<TABLE>
<CAPTION>
                                                                  March 31,   December 31,
                                                                    1998          1997
                                                                    ----          ----
<S>                                                              <C>           <C>     
Short-term debt:
      Commercial paper, net ................................     $  350.0      $     --

Long-term debt:
      Commercial paper, net ................................      3,479.7         663.1
      6.8% debentures due 2002 .............................        250.0            --
      7% notes due 2006 ....................................        200.0         200.0
      7.375% debentures due 2006 ...........................        250.0            --
      7.8% debentures due 2008 .............................        150.0            --
      7.5% debentures due 2026 .............................        200.0         200.0
      7.5% debentures due 2096 .............................        150.0         150.0
      Tax exempt revenue bonds .............................         20.1          20.1
      (Discount) premium on notes and debentures - net .....          8.9          (2.6)
                                                                 --------      --------
         Total long-term debt ..............................      4,708.7       1,230.6
Shareholders' equity .......................................      1,765.0       1,760.7
                                                                 --------      --------
      Total capitalization .................................     $6,823.7      $2,991.3
                                                                 ========      ========
      Debt to total capitalization .........................         74.1%         41.1%
                                                                 ========      ========
</TABLE>

Inasmuch as the Company's debt to total capitalization ratio at March 31, 1998
was 74.1%, the Company has minimal capacity to incur additional debt. On April
20, 1998, the Company announced its intention to proceed with a deleveraging
program. In connection with this program, the Company intends to sell
approximately $600 million of non-core exploration and production properties by
the end of 1998, explore opportunities to monetize its gathering, processing,
and marketing business, and reduce its 1998 capital and exploratory spending by
approximately $300 million. The aggregate net proceeds from the sale of the
properties will be used to reduce the Company's outstanding commercial paper or
other indebtedness. The Company plans to reduce its debt to total capitalization
ratio to approximately 50% within the next 12 to 18 months.

Cash provided by operations during the first quarter of 1998 decreased by $126.8
million (30%) from the same period in 1997, primarily due to lower hydrocarbon
product sales prices and higher interest expense associated with the increased
debt level.

Capital and exploratory expenditures for the first quarter of 1998, excluding
the Norcen Acquisition, were $487.1 million, a $203.1 million increase (72%)
compared to the first quarter of 1997. Capital and exploratory expenditures are
summarized as follows:



                                     - 15 -

<PAGE>   18



<TABLE>
<CAPTION>
                                                                    Three Months Ended March 31,
                                                                    ----------------------------
                                                                        1998         1997
                                                                        ----         ----
                                                                      (Millions of dollars)
<S>                                                                   <C>          <C>     
      Capital and exploratory expenditures:
         Exploration and production .............................     $  439.7     $  247.8
         Gathering, processing and marketing ....................         41.0         31.1
         Minerals and other .....................................          6.4          5.1
                                                                      --------     --------
              Total .............................................        487.1        284.0
         Norcen acquisition .....................................      2,623.2           --
                                                                      --------     --------
              Total capital and exploratory expenditures ........     $3,110.3     $  284.0
                                                                      ========     ========
</TABLE>

Exploration and production capital spending increased by $191.1 million (77%)
during the first quarter of 1998 as compared to the first quarter of 1997.
Increased spending for property acquisitions ($88.8 million) and development
drilling primarily in the Canada and Austin Chalk business units accounted for a
majority of the increase. These increases were partially offset by lower lease
acquisition spending in the Austin Chalk and East Texas business units ($48.9
million).

The Company expects its total capital and exploratory spending during 1998,
excluding the Norcen Acquisition, to be approximately $1.3 billion. However, the
extent and timing of this expected spending may be affected by changes in
business and operating conditions as well as by the timing and availability of
suitable investment opportunities. Such spending will be funded primarily
through cash provided by operations. Such spending is expected to be focused on
drilling, lease acquisitions, and property acquisitions. Drilling is expected to
be concentrated in the Gulf of Mexico, Austin Chalk, western Canada, and
Guatemala. The Company expects to increase its total annual sales volumes in
1998 by approximately 60% over 1997 while increasing its hydrocarbon reserves.
The sales volume growth is expected to be achieved primarily through the Norcen
Acquisition. The Company may selectively pursue opportunities to expand its
gathering, processing, and marketing business. The Company also may pursue
additional international investment opportunities where its technological and
operating expertise can be utilized.

The Company purchased $21.6 million of its Common Stock during the first quarter
of 1998. The Company paid a $0.05 per share quarterly cash dividend ($12.4
million) on its outstanding Common Stock in January 1998. On February 19, 1998
and April 17, 1998, the Board of Directors declared a cash dividend of $0.05 per
share payable in the second and third quarter of 1998, respectively.



                           FORWARD LOOKING INFORMATION

Certain information included in this quarterly report and other materials filed
by the Company with the Securities and Exchange Commission contain projections
and other forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended. Such forward looking statements may be or may concern,
among other things, capital expenditures, drilling activity, acquisitions and
dispositions, development activities, cost savings efforts, production
activities and volumes, hydrocarbon reserves, hydrocarbon prices, hedging
activities and the results thereof, liquidity, regulatory matters, competition
and the Company's ability to realize significant improvements with the change to
a more adaptive corporate culture. Such forward looking


                                     - 16 -

<PAGE>   19



statements generally are accompanied by words such as "estimate," "expect,"
"predict," "anticipate," "goal," "should," "assume," "believe" or other words
that convey the uncertainty of future events or outcomes.

Such forward looking information is based upon management's current plans,
expectations, estimates and assumptions and is subject to a number of risks and
uncertainties that could significantly affect current plans, anticipated
actions, the timing of such actions and the Company's financial condition and
results of operations. As a consequence, actual results may differ materially
from expectations, estimates or assumptions expressed in or implied by any
forward looking statements made by or on behalf of the Company. The risks and
uncertainties include generally the volatility of hydrocarbon prices and
hydrocarbon-based financial derivative prices; basis risk and counterparty
credit risk in executing hydrocarbon price risk management activities; economic,
political, judicial and regulatory developments; competition in the oil and gas
industry as well as competition from other sources of energy; the economics of
producing certain reserves; demand and supply of oil and gas; the ability to
find or acquire and develop reserves of natural gas and crude oil; and the
actions of customers and competitors. Additionally, unpredictable or unknown
factors not discussed herein could have material adverse effects on actual
results related to matters which are the subject of forward looking information.
The Company does not intend to update these cautionary statements.

With respect to expected capital expenditures and drilling activity, additional
factors such as the extent of the Company's success in acquiring oil and gas
properties and in identifying prospects for drilling, the availability of
acquisition opportunities which meet the Company's objectives as well as
competition for such opportunities, exploration and operating risks, the success
of management's cost reduction efforts and deleveraging program and the
availability of technology may affect the amount and timing of such capital
expenditures and drilling activity. With respect to expected growth in
production and sales volumes and estimated reserve quantities, factors such as
the extent of the Company's success in finding, developing and producing
reserves, the timing of capital spending and acquisition programs, uncertainties
inherent in estimating reserve quantities and the availability of technology may
affect such production volumes and reserve estimates.

With respect to liquidity, factors such as the state of domestic capital
markets, credit availability from banks or other lenders and the Company's
results of operations may affect management's plans or ability to incur
additional indebtedness. With respect to cash flow, factors such as changes in
oil and gas prices, the Company's success in acquiring producing properties,
environmental matters and other contingencies, hedging activities, the Company's
credit rating and debt levels, and the state of domestic capital markets may
affect the Company's ability to generate expected cash flows. With respect to
contingencies, factors such as changes in environmental and other governmental
regulation, and uncertainties with respect to legal matters may affect the
Company's expectations regarding the potential impact of contingencies on the
operating results or financial condition of the Company. Certain factors, such
as changes in oil and gas prices and underlying demand and the extent of the
Company's success in exploiting its current reserves and acquiring or finding
additional reserves may have pervasive effects on many aspects of the Company's
business in addition to those outlined above.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has established policies and procedures for managing risk within its
organization. These policies and procedures incorporate internal controls and
are governed by a risk management committee. The level of risk assumed by the
Company is based on its objectives and earnings, and its capacity to manage

                                     - 17 -

<PAGE>   20



risk. Limits are established for each major category of risk, with exposures
monitored and managed by Company management and reviewed by the risk management
committee.

COMMODITY PRICE RISK - NON-TRADING ACTIVITIES

The Company uses derivative financial instruments for non-trading purposes in
the normal course of business to manage and reduce risks associated with
contractual commitments, price volatility, and other market variables. These
instruments are generally put in place to limit risk of adverse price movements,
however, when this is done, these same instruments usually limit future gains
from favorable price movements. Such risk management activities are generally
accomplished pursuant to exchange-traded futures and over-the-counter options.

Recognition of realized gains/losses and option premium payments/receipts in the
Condensed Consolidated Statements of Income are deferred until the underlying
physical product is purchased or sold. Unrealized gains/losses on derivative
financial instruments are not recorded. Margin deposits, deferred gains/losses
on derivative financial instruments and net premiums are included in other
current assets or liabilities in the Condensed Consolidated Statements of
Financial Position. The cash flow impact of derivative and other financial
instruments is reflected as cash flows from operations in the Condensed
Consolidated Statements of Cash Flows. At March 31, 1998, the Company had 
margin deposits of $4.0 million.

In connection with purchase accounting adjustments relating to the Norcen
Acquisition, an asset was recorded on the balance sheet for $26.8 million
representing the fair value of acquired futures contracts. The value 
of the asset will be amortized over the contracts' term. Excluding the $26.8
million unamortized value associated with the acquired contracts, the Company's
unrecognized loss at March 31, 1998 was $22.7 million.

In connection with purchase accounting adjustments relating to the Norcen 
Acquisition, an asset was recorded on the balance sheet for $26.8 million 
representing the fair value of acquired futures contracts. The 

The following table summarizes the Company's open positions as of March 31,
1998, which hedge the Company's future oil & gas production from oil and gas
activities.

<TABLE>
<CAPTION>
                                                                                WEIGHTED           FAIR          UNRECOGNIZED
                                 CONTRACT                                     AVG. PRICES          VALUE          GAIN(LOSS)
PRODUCT          TYPE           TIME PERIOD                  VOLUME             PER MCF          (MILLIONS)       (MILLIONS)
----------------------------------------------------------------------------------------------------------------------------
<S>         <C>                <C>                          <C>                <C>                <C>             <C>
Gas         Futures/swaps      May - Oct 1998               226 MMcfd             $2.08           $ (17.8)        $ (17.8)
Gas         Futures/swaps      May - Oct 1998                71 MMcfd             $1.30              (2.0)           (2.0)
Gas         Futures/swaps      May - Oct 1998                20 MMcfd             $2.19              (1.4)           (1.4)
Gas         Futures/swaps      May - Dec 1998                15 MMcfd             $2.36              (0.4)           (0.4)
Gas         Futures/swaps      Nov - Dec 1998                22 MMcfd             $2.17              (0.8)           (0.8)
Gas         Futures/swaps      Jan - Dec 1999                 5 MMcfd             $2.28              (0.4)           (0.4)
Gas         Net calls sold     May - Oct 1998               100 MMcfd             $2.58               2.8            (1.2)
Gas         Option collars     May - Oct 1998                10 MMcfd           $2.00/2.10           (0.8)           (0.8)
Gas         Puts               May - Oct 1998               153 MMcfd             $2.04               0.7            (3.4)
            purchased
Gas         Fixed price        May 1998 - Jun 2008         62.2 Bcf               $2.98              15.9            15.9
Gas         Fixed price        May 1998 - Dec 2000         76.4 Bcf               $1.70             (11.4)          (11.4)


Oil         Futures/swaps      May - Jul 1998               3.6 Mbd              $18.94               0.8             0.8
Oil         Futures/swaps      May - Dec 1998                26 Mbd              $18.88              14.0            14.0
Oil         Futures/swaps      Jan - Dec 1999                11 Mbd              $20.00              10.7            10.7
Oil         Futures/swaps      Jan 1999 - Dec 2000            2 Mbd              $12.06               0.7             0.7
Oil         Calls sold         Jul - Dec 1998                 1 Mbd              $21.00               0.2             0.1
Oil         Fixed price        May - Dec 1998               3.4 Mmb              $10.15               1.5             1.5
                                                                                                  -------         -------
                                                                                                $  12.3         $   4.1
                                                                                                  =======         =======
</TABLE>


                                     - 18 -

<PAGE>   21




Union Pacific Fuels, Inc. ("UP Fuels") periodically enters into financial
contracts in conjunction with transportation, storage, and customer service
programs. The following table summarizes UP Fuels' open positions as of March
31, 1998.

<TABLE>
<CAPTION>
                                                                                WEIGHTED           FAIR           UNRECOGNIZED
                                    CONTRACT                                   AVG. PRICES         VALUE           GAIN(LOSS)
PRODUCT         TYPE               TIME PERIOD               VOLUME              PER MCF         (MILLIONS)        (MILLIONS)
------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                <C>                          <C>                <C>                 <C>              <C>
Gas         Futures/swaps
            purchased          May 1998 - Dec 2001          45.0 Bcf               $2.08           $  13.8          $  13.8
Gas         Futures/swaps
            sold               May 1998 - Dec 2001          39.6 Bcf               $2.25             (10.4)           (10.4)
                                                                                                   -------          -------
                                                                                                   $   3.4          $   3.4
                                                                                                   =======          =======
</TABLE>

Additionally, the Company had previously sold near-term futures contacts and
swaps for May through December 1998 with respect to notional natural gas volumes
of 47 MMcfd. Subsequently these positions were offset by purchasing
corresponding volumes through futures contracts and swaps for the same delivery
periods. The unrecognized gain at March 31, 1998 relating to these transactions
was $0.5 million.

Unrecognized mark-to-market gains and losses were determined based on current
market prices, as quoted by recognized dealers, assuming round lot transactions
and using a mid-market convention without regard to market liquidity.

INTEREST RATE SWAPS

The Company periodically enters into rate swaps and contracts to hedge certain
interest rate transactions. As of March 31, 1998, the Company had entered into
$250 million of Treasury rate lock contracts to hedge the interest rates related
to the future issuance of bonds. The unrecognized gain associated with these
contracts was approximately $1.0 million. Additionally, the Company acquired
interest rate swap contracts with maturity dates varying between March 1999 and
July 2008 in connection with the Norcen Acquisition. These such contracts have
aggregate notional amounts of approximately $450 million, with interest rates
between 7.1% and 7.79%. As a result of purchase accounting for the Norcen
Acquisition, the Company recorded a $38.4 million deferred asset on the balance
sheet representing the fair value such contracts. The asset will be amortized
over the life of such contracts. The unrecognized gain on such contracts at
March 31, 1998, excluding the purchase accounting treatment, was approximately
$39.6 million. Subsequent to March 31, 1998, the Company has closed all such
contracts.

FOREIGN CURRENCY CONTRACTS

The Company periodically enters into foreign currency contracts to hedge
specific currency exposures from commercial transactions. As a result of the
Norcen Acquisition, the Company acquired foreign currency forward exchange
contracts with a $348 million notional amount and maturities between March 1998
and December 1999. As a result of purchase accounting for the Norcen
Acquisition, the Company recorded a $15 million deferred liability on the
balance sheet representing the fair value of such contracts. The deferred
liability will be amortized over the life of such contracts. The unrecognized
loss on such contracts at March 31, 1998, excluding the purchase accounting
treatment, was $16.4 million.

CREDIT RISK

Credit risk is the risk of loss as a result of nonperformance by counterparties
pursuant to the terms of their contractual obligations. Because the loss can
occur at some point in the future, a potential exposure is added to the current
replacement value to arrive at a total expected credit exposure. The Company has
established methodologies to establish limits, monitor and report
creditworthiness and concentrations of credit to reduce such credit risk. At
March 31, 1998, the Company's largest credit risk associated with any single
counterparty, represented by the net fair value of open contracts with such
counterparty, was less than $5.2 million.



                                     - 19 -

<PAGE>   22



PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

GENERAL

The Company is a defendant in a number of lawsuits and is involved in
governmental proceedings arising in the ordinary course of business, including
but not limited to royalty claims, contract claims, personal injury claims and
environmental claims. While management of the Company cannot predict the outcome
of such litigation and other proceedings, management does not expect these
matters to have a materially adverse effect on the consolidated financial
condition, cash flows or results of operations of the Company. Refer to the
Company's Annual Report on Form 10-K for additional information regarding such
proceedings.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)     EXHIBITS

10.1    Guarantee and subordination agreement dated as of March 31, 1998, among
        Union Pacific Resources Group Inc., Union Pacific Resources Inc., and
        Canadian Imperial Bank of Commerce, related to the Extendable Revolving
        Term Credit Facility Agreement dated May 30, 1997.

10.2    Guarantee and subordination agreement dated as of March 31, 1998, among
        Union Pacific Resources Group Inc., Union Pacific Resources Inc., and
        The Toronto-Dominion Bank related to the Amended and Restated Extendable
        Revolving Term Credit Facility Agreement dated May 29, 1997.

10.3    Guarantee and subordination agreement dated as of March 31, 1998, among
        Union Pacific Resources Group Inc., Union Pacific Resources Inc., and
        ABN AMRO Bank Canada related to the Amended and Restated Extendable
        Revolving Term Credit Facility Agreement dated June 10, 1997.

10.4    Guarantee and subordination agreement dated as of March 31, 1998, among
        Union Pacific Resources Group Inc., Union Pacific Resources Inc., and
        Union Bank of Switzerland (Canada) related to the Amended and Restated
        Extendable Revolving Term Credit Facility Agreement dated May 29, 1997.

10.5    Guarantee and subordination agreement dated as of March 31, 1998, among
        Union Pacific Resources Group Inc., Union Pacific Resources Inc., and
        Royal Bank of Canada related to the Amended and Restated Extendable
        Revolving Term Credit Facility Agreement dated May 30, 1997.

11      Computation of earnings per share

12      Computation of ratio of earnings to fixed charges

15      Awareness letter of Arthur Andersen LLP dated May 12, 1998

27      Financial data schedule





                                     - 20 -

<PAGE>   23





(b)     REPORTS ON FORM 8-K

On January 26, 1998, the Company filed a Current Report on Form 8-K containing a
copy of two press releases issued by the Company on January 26, 1998. The first
press release announced that the Company's Board of Directors and the Board of
Directors of Norcen, had unanimously approved the Norcen Acquisition by UPRI.
The second press release announced the Company's 1997 annual operating revenues,
net income and certain other financial information.

On March 17, 1998, the Company filed a Current Report on Form 8-K containing a
copy of two press releases issued by the Company. The first press release issued
on March 3, 1998, announced the closing of its tender offer for up to 100% of
the common shares of Norcen. In the second press release, issued on March 6,
1998, UPRI announced that on March 5, 1998, UPRI completed the compulsory
acquisition procedures pursuant to Section 206 of the Canada Business
Corporations Act to acquire the remaining issued and outstanding common shares
of Norcen.

On March 27, 1998, the Company filed a Current Report on Form 8-K concerning
changes in the Company's certifying auditors. Deloitte & Touche LLP was
dismissed effective with the completion of its annual audit of the Company's
financial statements and the filing on March 26, 1998 of the Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.

On May 6, 1998, the Company filed a Current Report on Form 8-K/A. This Current
Report included financial statements and supplemental information for Norcen for
the period ending December 31, 1997. Additionally it included an unaudited pro
forma balance sheet as of December 31, 1997 to give effect to the Norcen
Acquisition as if the Norcen Acquisition had occurred on December 31, 1997. The
Current Report also included an unaudited proforma condensed consolidated
statement of operations for the year ended December 31, 1997 to give effect to
the Norcen Acquisition, as if the acquisition and certain events had occurred on
January 1, 1997.

On May 6, 1998, the Company filed a Current Report on Form 8-K containing a copy
of three press releases issued by the Company on April 20, 1998 and April 27,
1998. Two of the press releases relate to the Company's deleveraging program.
The third press release announced the Company's first quarter 1998 results of
operations.



                                     - 21 -

<PAGE>   24



SIGNATURE


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.



Dated: May 12, 1998




                                      UNION PACIFIC RESOURCES GROUP INC.
                                      (Registrant)


                                      /s/ Morris B. Smith
                                      ---------------------------------
                                      Morris B. Smith,
                                      Vice President and Chief Financial Officer
                                      (Chief Financial Officer and
                                        Duly Authorized Officer)



<PAGE>   25




                       UNION PACIFIC RESOURCES GROUP INC.

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <S>           <C>
     10.1        Guarantee and subordination agreement dated as of March 31,
                 1998, among Union Pacific Resources Group Inc., Union Pacific
                 Resources Inc., and Canadian Imperial Bank of Commerce, related
                 to the Extendable Revolving Term Credit Facility Agreement
                 dated May 30, 1997.

     10.2        Guarantee and subordination agreement dated as of March 31,
                 1998, among Union Pacific Resources Group Inc., Union Pacific
                 Resources Inc., and The Toronto-Dominion Bank related to the
                 Amended and Restated Extendable Revolving Term Credit Facility
                 Agreement dated May 29, 1997.

     10.3        Guarantee and subordination agreement dated as of March 31,
                 1998, among Union Pacific Resources Group Inc., Union Pacific
                 Resources Inc., and ABN AMRO Bank Canada related to the Amended
                 and Restated Extendable Revolving Term Credit Facility
                 Agreement dated June 10, 1997.

     10.4        Guarantee and subordination agreement dated as of March 31,
                 1998, among Union Pacific Resources Group Inc., Union Pacific
                 Resources Inc., and Union Bank of Switzerland (Canada) related
                 to the Amended and Restated Extendable Revolving Term Credit
                 Facility Agreement dated May 29, 1997.

     10.5        Guarantee and subordination agreement dated as of March 31,
                 1998, among Union Pacific Resources Group Inc., Union Pacific
                 Resources Inc., and Royal Bank of Canada related to the Amended
                 and Restated Extendable Revolving Term Credit Facility
                 Agreement dated May 30, 1997.

     11          Computation of earnings per share

     12          Computation of ratio of earnings to fixed charges

     15          Awareness letter of Arthur Andersen LLP dated May 12, 1998

     27          Financial data schedule
</TABLE>