<PAGE>   1
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the Securities Exchange Act of
                                      1934
 
                      FOR THE YEAR ENDED DECEMBER 31, 1998
 
                         COMMISSION FILE NUMBER 1-3196
                            ------------------------
 
                        CONSOLIDATED NATURAL GAS COMPANY
 
                             A DELAWARE CORPORATION
            CNG TOWER, 625 LIBERTY AVENUE, PITTSBURGH, PA 15222-3199
                            TELEPHONE (412) 690-1000
                 IRS EMPLOYER IDENTIFICATION NUMBER 13-0596475
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
 
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<C>           <S>                                               <C>
Common Stock:                                                    Registered:
    $2.75 Par Value                                               New York Stock Exchange

Common Stock Purchase Rights                                      New York Stock Exchange
                                                                  
Debentures:
       6%  Debentures Due October 15, 2010                        New York Stock Exchange
     6.8%  Debentures Due December 15, 2027                       New York Stock Exchange
   6 5/8%  Debentures Due December 1, 2008                        New York Stock Exchange
   6 7/8%  Debentures Due October 15, 2026                        New York Stock Exchange
   7 3/8%  Debentures Due April 1, 2005                           New York Stock Exchange
   6 5/8%  Debentures Due December 1, 2013                        New York Stock Exchange
   5 3/4%  Debentures Due August 1, 2003                          New York Stock Exchange
   8 3/4%  Debentures Due June 1, 1999                            New York Stock Exchange
   8 3/4%  Debentures Due October 1, 2019                         New York Stock Exchange
</TABLE>
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
                            ------------------------
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     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 and (2) has been subject to such filing
requirements for the past 90 days.  Yes  X   No __
 
     The aggregate market value of the voting stock held by non-affiliates of
the registrant amounted to $4,898,623,041 as of January 31, 1999. It was assumed
in this calculation that the registrant's affiliates are all of its directors
and/or officers, and they beneficially owned 278,755 shares of voting stock at
that date.
 
     Shares of Common Stock, $2.75 Par Value, outstanding at January 31, 1999:
95,397,649.
 
     The registrant's "Notice of Annual Meeting and Proxy Statement, 1999" and
Appendix I thereto are hereby incorporated by reference into Parts I, II, III
and IV of this Form 10-K.
<PAGE>   2
 
CONSOLIDATED NATURAL GAS COMPANY
FORM 10-K ANNUAL REPORT
For the Year Ended December 31, 1998
 
                               TABLE OF CONTENTS
 
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PART I
  ITEM 1.        BUSINESS
                 Recent Developments.........................................    1
                 Forward-Looking Information.................................    1
                 The Company.................................................    1
                 Governmental Regulation.....................................    3
                 Capital Expenditures........................................    4
                 Competitive Conditions......................................    4
                 Gas Supply..................................................    8
                 Gas Sales and Transportation................................   11
                 Gas Sales, Supply, Transportation and Storage Statistics....   12
                 Market Expansion............................................   13
                 Rate Matters................................................   14
                 Executive Officers of the Company...........................   15
  ITEM 2.        PROPERTIES
                 General Information on Facilities...........................   16
                 Map--Principal Facilities...................................   17
                 Map--Exploration and Production Areas.......................   18
                 Gas and Oil Producing Activities............................   19
  ITEM 3.        LEGAL PROCEEDINGS...........................................   21
  ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........   21
 
PART II
  ITEM 5.        MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
                      STOCKHOLDER MATTERS....................................   21
  ITEM 6.        SELECTED FINANCIAL DATA.....................................   21
  ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS..............................   21
  ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                      RISK...................................................   21
  ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................   21
  ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                      AND FINANCIAL DISCLOSURE...............................   22
 
PART III
  ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.............   22
  ITEM 11.       EXECUTIVE COMPENSATION......................................   22
  ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                      MANAGEMENT.............................................   22
  ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............   22
 
PART IV
  ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
                      8-K....................................................   22
 
SIGNATURES ..................................................................   27
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<PAGE>   3
 
CONSOLIDATED NATURAL GAS COMPANY
FORM 10-K ANNUAL REPORT
For the Year Ended December 31, 1998
 
                                     PART I
 
ITEM 1.     BUSINESS
 
RECENT DEVELOPMENTS
 
On February 22, 1999, Consolidated Natural Gas Company (the Company) and
Dominion Resources, Inc. (DRI) announced that a definitive merger agreement
(merger agreement) was approved by the boards of directors of both companies.
Under the terms of the merger agreement, DRI will acquire all of the Company's
shares of common stock in a stock-for-stock transaction. Pursuant to the merger
agreement, each share of the Company's common stock will be converted into 1.52
shares of DRI common stock. The transaction is conditioned, among other things,
upon approvals of shareholders of both companies, opinions of independent
accountants that the transaction will be treated as a pooling of interests for
accounting purposes, approvals of various federal regulatory agencies and the
completion of regulatory processes in states where the combined company will
operate. DRI is a holding company with businesses in regulated and competitive
electric power, natural gas and oil development and selected financial services.
DRI's principal business subsidiary is Virginia Electric and Power Company, a
regulated public utility engaged in the generation, transmission, distribution
and sale of electric energy in Virginia and northeastern North Carolina.
 
Further information is hereby incorporated by reference to (i) the Notes to
Consolidated Financial Statements contained in Appendix I to the Company's
definitive proxy statement filed with the Securities and Exchange Commission
(SEC) pursuant to Regulation 14A and included as Exhibit 99 to this Annual
Report on Form 10-K (Form 10-K) (Reference is made thereto as follows: Note 19,
page 52) and (ii) the Company's Current Report on Form 8-K filed on March 1,
1999, including the merger agreement and press release filed as exhibits
thereto.
 
FORWARD-LOOKING INFORMATION
 
Certain matters discussed in this Form 10-K for the Company are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are also forward-looking statements.
Such statements may address future events and conditions concerning the
Company's proposed merger with DRI, capital expenditures, earnings, risk
management, litigation, the year 2000 technology issues and costs, environmental
matters, rate and other regulatory matters, liquidity and capital resources, and
financial accounting and reporting matters. Actual results in each instance
could differ materially from those currently anticipated in such statements, due
to factors such as: natural gas and electric industry restructuring, including
ongoing state and federal activities; the weather; demographics; general
economic conditions and specific economic conditions in the Company's
distribution service areas; developments in the legislative, regulatory and
competitive environment in which the Company operates; and other circumstances
affecting anticipated revenues and costs.
 
THE COMPANY
 
Consolidated Natural Gas Company is a Delaware corporation organized on July 21,
1942, and a public utility holding company registered under the Public Utility
Holding Company Act of 1935 (PUHCA). It is engaged solely in the business of
owning and holding all of the outstanding equity securities of nineteen directly
owned subsidiary companies.
 
                                        1
<PAGE>   4
 
ITEM 1.     BUSINESS (Continued)
The Parent Company and subsidiaries at December 31, 1998, are listed below. In
addition to operating in all phases of the natural gas business, the Company
explores for and produces oil and provides a variety of retail energy marketing
services. At December 31, 1998, the Company had 6,224 regular employees.
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                                                                 State of
                      Name of Company                         Incorporation
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<S>                                                           <C>
CONSOLIDATED NATURAL GAS COMPANY (Parent Company)...........     Delaware
All wholly owned subsidiaries of the Parent Company:
  Consolidated Natural Gas Service Company, Inc. (Service
     Company)...............................................     Delaware
  The East Ohio Gas Company (East Ohio Gas).................       Ohio
  The Peoples Natural Gas Company (Peoples Natural Gas).....   Pennsylvania
  Virginia Natural Gas, Inc. (Virginia Natural Gas).........     Virginia
  Hope Gas, Inc. (Hope Gas).................................  West Virginia
  CNG Transmission Corporation (CNG Transmission)...........     Delaware
  CNG Producing Company (CNG Producing).....................     Delaware
  CNG Main Pass Gas Gathering Corporation (CNG Main Pass)...     Delaware
  CNG Oil Gathering Corporation (CNG Oil Gathering).........     Delaware
  CNG International Corporation (CNG International).........     Delaware
  CNG Retail Services Corporation (CNG Retail)..............     Delaware
  CNG Products and Services, Inc. (CNG Products and
     Services)..............................................     Delaware
  CNG Power Company (CNG Power).............................     Delaware
  CNG Field Services Company (CNG Field Services)...........     Delaware
  CNG Power Services Corporation (CNG Power Services).......     Delaware
  Consolidated System LNG Company (Consolidated LNG)........     Delaware
  CNG Research Company (CNG Research).......................     Delaware
  CNG Coal Company (CNG Coal)...............................     Delaware
  CNG Financial Services, Inc. (CNG Financial)..............     Delaware
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The principal cities served at retail by the gas distribution subsidiaries (East
Ohio Gas, Peoples Natural Gas, Virginia Natural Gas and Hope Gas) are:
Cleveland, Akron, Youngstown, Canton, Warren, Lima, Ashtabula and Marietta in
Ohio; Pittsburgh (a portion), Altoona and Johnstown in Pennsylvania; Norfolk,
Newport News, Virginia Beach, Chesapeake, Hampton and Williamsburg in Virginia;
and Clarksburg and Parkersburg in West Virginia. At December 31, 1998, the
Company served at retail approximately 1,886,000 residential, commercial and
industrial gas sales and transportation customers in Ohio, Pennsylvania,
Virginia and West Virginia. Variations in weather conditions can materially
affect the volume of gas delivered by the distribution subsidiaries, as 98
percent of their residential and commercial customers use gas for space heating.
 
CNG Transmission is an interstate gas transmission subsidiary that operates a
regional interstate pipeline system serving each of the distribution
subsidiaries, and nonaffiliated utility and end-user customers in the Midwest,
the Mid-Atlantic states and the Northeast. Through its wholly owned subsidiary,
CNG Iroquois, Inc., CNG Transmission holds a 16% general partnership interest in
the Iroquois Gas Transmission System, L.P., a Delaware limited partnership that
owns and operates an interstate natural gas pipeline extending from the
Canada-United States border near Iroquois, Ontario, to Long Island, New York.
The Iroquois pipeline transports Canadian gas to utility and power generation
customers in metropolitan New York and New England.
 
CNG Producing is a gas and oil exploration and production subsidiary whose
activities are conducted primarily in the Gulf of Mexico, the southern and
western United States, the Appalachian region, and in Canada.
 
CNG Main Pass holds a 13.6% interest in Dauphin Island Gathering Partners, a
partnership which operates a gas gathering pipeline system in the Main Pass area
of the Gulf of Mexico.
 
                                        2
<PAGE>   5
 
ITEM 1.     BUSINESS (Continued)
CNG Oil Gathering holds a 33.3% general partnership interest in Main Pass Oil
Gathering Company which operates an oil gathering pipeline system in the Main
Pass and Viosca Knoll areas of the Gulf of Mexico.
 
CNG International engages in energy-related activities primarily through
utilities and pipeline companies outside of the United States (see
"International Activities," page 13).
 
CNG Retail was created in 1997 to market natural gas, electricity and related
products and services to residential, commercial and small industrial customers.
 
CNG Products and Services provides energy-related services to customers of the
Company's local distribution subsidiaries and others.
 
CNG Power, via CNG Market Center Services, Inc., holds a 50% general partnership
interest in the CNG/Sabine Center gas marketing hub.
 
CNG Field Services (formerly CNG Storage Service Company) provides natural gas
storage facilities and services and other activities of a full service gas
storage business. During 1998, CNG Field Services also engaged in activities
related to Appalachian area natural gas supply, including the administration of
supply contracts transferred from CNG Energy Services Corporation (CNG Energy
Services), a former subsidiary of the Company (see "Discontinued Operations,"
page 5).
 
Service Company is a subsidiary service company authorized by the SEC under the
PUHCA. It advises and assists the other subsidiary companies on administrative
and technical matters and manages centralized activities and facilities for
their benefit. It also provides services to the Parent Company.
 
CNG Power Services is a power marketing subsidiary which has FERC approval to
purchase and sell electricity at market-based prices. The Company exited the
power marketing business during 1998 (see "Discontinued Operations," page 5).
 
Consolidated LNG ended its involvement in liquefied natural gas operations in
1982 and, as of February 28, 1998, had recovered its undepreciated investment in
related facilities, plus carrying charges and taxes, through a FERC-approved
amortization surcharge.
 
CNG Research administers proprietary research activities. Amounts spent on
research activities in the calendar years 1996 through 1998 by all the
subsidiaries were not material.
 
CNG Coal formerly owned coal reserves and a related plant site, which were sold
in 1996.
 
CNG Financial was formed to engage in financing of gas-utilizing equipment, but
has not yet engaged in any such transactions.
 
GOVERNMENTAL REGULATION
 
The Company is subject to regulation by the SEC pursuant to the PUHCA. After an
in-depth study of the PUHCA in the context of fundamental changes in the energy
industry over the past decade, the SEC's Division of Investment Management
issued a report in 1995 on the regulation of public utility holding companies.
This report contained recommendations for legislative action, including repeal
of the PUHCA with more oversight responsibility borne by the FERC and state
commissions. The report also proposed reform to remove a substantial portion of
the administrative burden inherent in the current PUHCA regulatory policies and
procedures. Legislation has been introduced which would completely repeal the
PUHCA, while another group has proposed a comprehensive energy reform program to
address market power issues, particularly regarding the electric industry (see
"Gas and Electric Industry Developments," page 5).
 
CNG Transmission and Consolidated LNG are "natural-gas companies" subject to the
Natural Gas Act of 1938, as amended. CNG Transmission's interstate
transportation and storage activities are regulated under such Act and are
conducted in accordance with tariffs and service agreements on file with the
FERC. CNG Power Services and CNG Retail, public utilities as defined by section
201 of the Federal Power Act, are
                                        3
<PAGE>   6
 
ITEM 1.     BUSINESS (Continued)
also subject to limited FERC regulation. The distribution subsidiaries are
subject to regulation by the respective utility commissions in the states within
which they operate. Additionally, CNG Retail is classified as a public utility
in Pennsylvania for the limited purpose of its participation in the Pennsylvania
electric retail access programs.
 
Certain subsidiaries are subject to various provisions of the five statutes
which are referred to as the National Energy Act of 1978. One of these statutes,
the National Energy Conservation Policy Act, requires utilities to offer home
energy audits and other assistance to residential customers.
 
The Natural Gas Pipeline Safety Act of 1968 (which, among other things,
authorizes the establishment and enforcement of federal pipeline safety
standards) subjects the interstate pipeline of CNG Transmission to the safety
jurisdiction of the Department of Transportation. Intrastate facilities remain
within the safety jurisdiction of the state regulatory agencies, presuming
compliance by such agencies with certain prerequisites contained in such Act.
 
The Company is subject to the provisions of various federal laws dealing with
the protection of the environment. CNG Transmission and certain of the
distribution subsidiaries are subject to the Federal Clean Air Act (Clean Air
Act) and the Federal Clean Air Act Amendments of 1990 which added significantly
to the existing requirements established by the Clean Air Act. In addition, the
subsidiary companies are subject to the environmental laws and regulations of
state and local governmental authorities in the areas within which the
subsidiaries have operations or facilities.
 
The electric utility company in Argentina, in which the Company has an interest,
is subject to regulation at the federal and provincial level. The Argentine gas
utility companies, in which the Company has an interest, are regulated at the
federal level. The pipelines in Australia, in which the Company has an interest,
are currently subject to state regulation, and will become subject to national
regulation being developed by the Commonwealth and state and territorial
governments.
 
CAPITAL EXPENDITURES
 
The current capital spending program for 1999 is estimated at $524.5 million, a
31% decrease compared with total capital spending in 1998. The estimated 1999
budget has been allocated as follows: exploration and production, $337.0
million; distribution, $128.4 million; transmission, $51.3 million; and
corporate and other, $7.8 million. The decreased level of capital expenditures
planned for 1999 anticipates lower spending for international projects, which
will be evaluated on a case-by-case basis. Exploration and production operations
reflect increased spending on deep-water projects and increased conventional
onshore and offshore drilling. Transmission and distribution operations
expenditures will primarily be limited to spending for enhancements and
improvements in the pipeline system and related facilities. The "corporate and
other" category includes expenditures to upgrade information systems technology.
The capital budget will be reviewed during the year and is subject to revision.
 
COMPETITIVE CONDITIONS
 
Various regulatory and market trends have combined to increase competition for
the Company in recent years, and for the energy industry in general. The factors
affecting the Company include: federal and state regulatory efforts, such as the
FERC's various initiatives to increase competition in both the gas and electric
industries; the overall availability of energy nationwide at relatively low
prices; competition from producers and other sellers and brokers of gas for the
retail and wholesale markets; expansion of competition among distribution
companies for industrial and commercial customers; competition with existing and
proposed pipelines and projects to import gas from Canada and other foreign
countries; and competition with other energy forms, such as electricity, fuel
oil and coal.
 
FERC Order No. 636 (Order 636) significantly increased competition in the
natural gas industry. In the restructured marketplace, local gas utilities and
large-volume end users, including former pipeline sales customers, bear all the
responsibilities and risks for arranging the procurement of their gas supplies
and contracting with pipelines to transport purchases. However, as the Company's
distribution subsidiaries had
                                        4
<PAGE>   7
 
ITEM 1.     BUSINESS (Continued)
been managing a part of their own gas supplies for a number of years, the
transition to a more competitive environment under Order 636 did not have a
significant impact on their operations. Storage facilities owned and operated as
part of the Company's distribution and transmission operations, as well as
acquired storage capacity, have become even more important factors in gas supply
management.
 
     DISCONTINUED OPERATIONS
 
During April 1998, management approved a plan to discontinue the Company's
wholesale trading and marketing of natural gas and electricity, including
integrated energy management. On July 31, 1998, the sale of the capital stock of
CNG Energy Services to Sempra Energy Trading, a subsidiary of Sempra Energy, was
finalized. Included in the transaction were contracts for the purchase and sale
of natural gas as well as rights to natural gas pipeline and storage capacity,
mainly in the Northeast and Mid-Atlantic regions, and related working capital.
Proceeds of $37.4 million were received from the sale of the stock, as adjusted
for working capital items. The Company's transition out of the wholesale gas
business was substantially complete at December 31, 1998.
 
     GAS AND ELECTRIC INDUSTRY DEVELOPMENTS
 
Gas industry competition at the retail level is receiving increased attention
from both regulators and legislators. Governments in three of the states in
which the Company operates distribution subsidiaries have enacted or considered
legislation regarding deregulation of natural gas at the retail level. In Ohio,
a 1996 law established customer choice as a state policy in the supply of
natural gas services. Implementation of the law, which allows retail customers
to obtain gas from an array of suppliers, is under way. In Pennsylvania, pending
legislation would unbundle gas utility merchant functions and permit the
Pennsylvania Public Utility Commission to certify marketers, in addition to gas
utilities, as suppliers of last resort, creating competition in a traditional
gas utility function. Most recently, Virginia has begun to consider gas
unbundling legislation.
 
In addition to restructuring of the gas industry, the emerging unbundling of
services provided by electric utilities is leading toward the convergence of the
two industries to create one overall, highly competitive marketplace for a
customer's total energy needs. Regulators and legislators at the federal level
and in many states are considering, or are already implementing, initiatives to
promote increased competition in the electric industry. A major development was
the issuance in 1996 of FERC Orders 888 and 889. By requiring open access to the
national electric transmission grid, Order 888 fosters increased competition in
both the generation of electricity and the supply of bulk power to major
wholesale customers. The companion order, Order 889, addresses the timing,
information access and other administrative details associated with the FERC
deregulation initiative. Congress also is considering legislation intended to
facilitate the move to competition in the electric industry.
 
Although progress status varies, pro-competition electric legislation is at
least under consideration in many states. In Ohio, leaders of the General
Assembly have predicted passage in 1999 of a bill to assure customer choice. In
Pennsylvania, the 1996 Electric Generation Customer Choice and Competition Act
required the transition to a competitive retail electric market to begin in
January 1999, with full competition by 2001. In Virginia, the General Assembly
has passed a restructuring bill which would, if approved by the Governor, phase
in retail competition starting on January 1, 2002. Regulators and legislators in
West Virginia are also debating issues related to electric industry
restructuring.
 
Reflecting the evolution to a more competitive energy environment, the pace and
size of business combinations among natural gas and electric utilities has
increased in recent years (see "Recent Developments," page 1, regarding the
Company's proposed merger with DRI). These business combinations have generally
been initiated to provide benefits from economies of scale, to reduce costs by
the elimination of duplicate facilities and processes, and to improve the
strategic and competitive position of the surviving entity.
 
                                        5
<PAGE>   8
 
ITEM 1.     BUSINESS (Continued)
Recent and pending regulatory actions may serve to further facilitate more
business combinations in the energy industry. The FERC has streamlined its
regulatory review process regarding pending mergers. In addition, Congress has
considered legislation to conditionally repeal the PUHCA, to which the Company
is subject (see "Governmental Regulation," page 3).
 
To focus the distribution and transmission operations on being more responsive
to customer needs and to enable them to more effectively seize growth
opportunities in the competitive marketplace, the Company announced a
significant reorganization of the management structure of its regulated
businesses in December 1998. The new structure brings all five regulated
subsidiaries--CNG Transmission, East Ohio Gas, Peoples Natural Gas, Virginia
Natural Gas and Hope Gas--under the leadership of a single management team. This
new team will manage by business process rather than by company. However, all
five companies will remain separate legal entities and will retain their names.
 
     DISTRIBUTION
 
The distribution subsidiaries generally operate in long-established service
areas and have extensive facilities already in place. Growth in the Company's
traditional service areas in Ohio, Pennsylvania and West Virginia is limited in
that natural gas is already the fuel of choice for heating and for most
significant industrial applications. These areas have experienced minimal
population growth in recent years, and almost all customers have become more
energy efficient, resulting in lower gas usage per customer. In addition, the
economies of these areas, which were formerly based mainly on heavy industry,
have diversified with increased emphasis on high technology and service-oriented
firms. Opportunities for growth in the distribution operations, however, are
expected to continue at Virginia Natural Gas. This subsidiary offers the
potential for future growth through its expanding service territory and the
prospect of conversion of space-heating customers and commercial and industrial
applications to gas.
 
The Clean Air Act may also provide opportunities for increased throughput in the
Company's distribution markets. The Company is promoting the use of natural gas
as a means for industrial customers and electric generators to reduce emissions.
The Clean Air Act and the Energy Policy Act of 1992 contain a number of
provisions relating to the use of alternative fuel vehicles. The Company is
participating in various programs to demonstrate the advantages and
environmental benefits of natural gas powered vehicles.
 
Competition in the markets served by the distribution subsidiaries continues to
increase. As the gas industry has restructured and government regulations have
changed, a marketplace has evolved with new and traditional competitors--the
usual oil and electric companies, other gas companies, producers seeking to gain
direct access to the Company's customers, and gas brokers and dealers seeking to
supplant supplies with spot market gas. Natural gas faces price competition with
other energy forms, and certain of the distribution companies' industrial
customers have the ability to switch to fuel oil or coal if desired. In
addition, competition is increasing among local distribution companies to
provide gas sales and transportation services to commercial and residential
customers (see "Retail Unbundling," page 13). Currently, local distribution
companies operate in what are essentially dual markets--a traditional utility
market, where a utility has an obligation to provide service and offers a
"bundled" package of services to all customers; and a "contract" market, where
obligations are defined by contract terms. In the latter market, large customers
can elect individually or in various combinations whatever gas supplies, storage
and/or transportation services they require. The Company has responded to this
competitive environment by offering a variety of firm and interruptible
services, including gas transportation, storage, supply pooling and balancing,
and brokering, to industrial and commercial customers. Also, residential
customers in certain of the Company's service territories can choose an
alternative source of gas supply, including CNG Retail, with the distribution
subsidiaries continuing to provide the transportation service to the customers.
 
     TRANSMISSION
 
CNG Transmission operates a regional interstate pipeline system with the
principal pipeline and storage facilities located in Ohio, Pennsylvania, West
Virginia and New York. CNG Transmission offers gas
 
                                        6
<PAGE>   9
 
ITEM 1.     BUSINESS (Continued)
transportation, storage and related services to its affiliates, as well as to
utilities and end users in the Northeast, Mid-Atlantic and Midwest regions of
the country.
 
The changing regulatory environment has provided CNG Transmission and other
pipeline companies with a number of opportunities for expansion. CNG
Transmission has taken advantage of selected market expansion opportunities,
concentrating its efforts primarily in the Northeast and along the East Coast
(see "Market Expansion," page 13). CNG Transmission's large underground storage
capacity and the location of its gridlike pipeline system as a link between the
country's major gas pipelines and large markets on the East Coast have been key
factors in the success of these expansion efforts. The Company's pipelines are
part of an interconnected gas transmission system which will continue to enable
retail end users to take advantage of the accessibility of supplies nationwide
as gas utilities unbundle services at the retail level (see "Gas and Electric
Industry Developments," page 5 and "Retail Unbundling," page 13).
 
CNG Transmission competes with domestic as well as Canadian pipeline companies
and gas marketers seeking to provide or arrange transportation, storage and
other services for customers. Also, certain end users have the ability to switch
to fuel oil or coal if desired. Although competition is based primarily on
price, the array of services that can be provided to customers is also an
important factor. The combination of capacity rights held on certain longline
pipelines, a large storage capability and the availability of numerous receipt
and delivery points along its own pipeline system enables CNG Transmission to
tailor its services to meet the individual needs of customers.
 
     EXPLORATION AND PRODUCTION
 
Exploration and production operations are conducted by CNG Producing in several
of the major gas and oil producing basins in the United States, both onshore and
offshore. In this highly competitive business, the Company competes with a large
number of entities ranging in size from large international oil companies with
extensive financial resources to small, cash flow-driven independent producers.
 
CNG Producing faces significant competition in the bidding for federal offshore
leases and in obtaining leases and drilling rights for onshore properties. Since
CNG Producing is the operator of a number of properties, it also faces
competition in securing drilling equipment and supplies for exploration and
development.
 
From the production perspective, the marketing of gas and oil is highly
competitive with price being the most significant factor. Gas producers
throughout the industry, including CNG Producing, face a diverse and active
market with purchasers seeking to balance the advantage of lower-cost spot
market supplies with the security of higher-priced, longer-term contracts. The
growth of gas and energy marketing firms has added to the competition for CNG
Producing. When the economics warrant, the Company attempts to sell its gas
production under long-term contracts to customers such as electric power
generators and others that require a secure source of supply. However, these
arrangements represent only a portion of the Company's gas production. Further,
the deliverability of gas produced is influenced by competition for downstream
pipeline transportation capacity. The Company continues to develop marketing
strategies, contracts and arrangements to address customer needs for
intermediate and long-term gas supplies as well as swing, peaking and other
energy services. In addition, in the ordinary course of business, CNG Producing
participates in price risk management activities to manage exposure to price
risk in connection with the production and sale of natural gas and oil.
 
The exploration for and production of gas and oil is subject to various federal
and state laws and regulations which may, among other things, limit well
drilling activity and volumes produced. Changes in these laws and regulations
can impact the exploration and production operations.
 
                                        7
<PAGE>   10
 
ITEM 1.     BUSINESS (Continued)
GAS SUPPLY
 
     GENERAL INFORMATION
 
The Company's gas supply is obtained from various sources including: purchases
from major and independent producers in the Southwest and Midwest regions;
purchases from local producers in the Appalachian area; purchases from gas
marketers; purchases on the spot market; production from Company-owned wells in
the Appalachian area, the Southwest, Midwest and offshore; and withdrawals from
the Company's underground storage fields.
 
Regulatory actions, economic factors, and changes in customers and their
preferences continue to reshape the Company's gas sales markets. A significant
number of industrial and commercial customers and a growing number of
residential customers currently purchase a large portion of their gas supplies
from producers, marketers, or on the spot market, and contract with the
transmission and/or distribution subsidiaries for transportation and other
services. Since these customers are less reliant on the distribution
subsidiaries for sales service, the volume of gas that these subsidiaries must
obtain to meet sales requirements has been reduced. This trend is likely to
continue as the state regulators continue unbundling services at the retail
level. The distribution subsidiaries continue to purchase gas supplies for their
remaining merchant customers and recover the costs through their approved rates.
CNG Retail has the responsibility and assumes the price risk for obtaining its
own gas supplies to meet customer needs.
 
The Company's available gas supply in 1998 was again in a surplus
position--where available supplies exceeded sales requirements. Considering the
Company's large storage capacity, the volumes obtainable under its gas purchase
and gas supply contracts, Company-owned gas reserves, and assuming the future
availability of spot market gas, the Company believes that supplies will be
available to meet sales requirements for several years. Gas supply statistics
for the past five years are on page 12.
 
     GAS PURCHASED
 
Purchased gas volumes were 294.8 Bcf in 1998, representing 65% of the Company's
1998 gas supply of 451.9 Bcf. Spot market and short-term purchases were 256.0
Bcf, or about 57% of the total 1998 supply. Volumes purchased under contracts
with Appalachian area producers totaled 38.8 Bcf or 8% of the 1998 supply.
Purchased gas volumes are impacted by the effects of weather, withdrawals from
stored gas inventory and the activities of CNG Retail.
 
The Company has continued to purchase volumes from the array of accessible
producing basins using its firm capacity resources. These purchased supplies
include Appalachian resources in Ohio, Pennsylvania and West Virginia, and
production from the Gulf Coast, Mid-Continent and offshore areas. Gas purchase
contract terms have continued to undergo transformation initiated with the
removal of CNG Transmission and other gas pipelines from the merchant function.
Much of the supply is purchased under seasonal or spot purchase agreements.
While the average term of the Company's gas purchase agreements has declined,
the reliability of supply has been adequate. The availability of supplies and
heightened competition have forged a viable market which has proven capable of
satisfying the firm delivery requirement for supplies to the Company's markets
in a highly reliable manner.
 
At December 31, 1998, the subsidiaries had 351.0 Bcf of firm annual transport
capacity on various pipelines to move supplies from purchase locations to
market, yielding deliveries of up to 1.0 Bcf of gas a day. These pipelines
include CNG Transmission, Tennessee Gas Pipeline Company, Panhandle Eastern Pipe
Line Company, Texas Eastern Transmission Corporation, ANR Pipeline Company,
Texas Gas Transmission Corporation, Transcontinental Gas Pipe Line Corporation,
Columbia Gas Transmission Corporation, Columbia Gulf Transmission and Trunkline
Gas Company.
 
     GAS STORAGE
 
The Company's underground storage facilities play an important part in balancing
gas supply with sales demand and are essential to servicing the Company's large
volume of space-heating business. In addition,
 
                                        8
<PAGE>   11
 
ITEM 1.     BUSINESS (Continued)
storage capacity is an important element in the effective management of both gas
supply and pipeline transport capacity. The Company operates 26 underground gas
storage fields located in Ohio, Pennsylvania, West Virginia and New York. The
Company owns 21 of these storage fields and has joint-ownership with other
companies in 5 of the fields. The total designed capacity of the storage fields
is approximately 885 Bcf. The Company's share of the total capacity is about 669
Bcf. About one-half of the total capacity is base gas which remains in the
reservoirs at all times to provide the primary pressure which enables the
balance of the gas to be withdrawn as needed.
 
CNG Transmission operates 719 Bcf of the total designed storage capacity and
owns 503 Bcf of the Company's capacity. CNG Transmission utilizes a large
portion of its turnable capacity to provide approximately 265 Bcf of gas storage
service for others. This service is provided principally to affiliates, end
users and many of CNG Transmission's former wholesale gas sales customers who
primarily serve consumers in the Northeast.
 
Two of the distribution subsidiaries, East Ohio Gas and Peoples Natural Gas, own
and operate the remaining 166 Bcf of storage capacity. In addition to owning
their own storage, these companies, as well as several of the other
subsidiaries, have access to a portion of the storage capacity operated by CNG
Transmission. The distribution subsidiaries also have capacity available in
storage fields owned by others.
 
The Company controls other acreage in the Appalachian area suitable for the
development of additional storage facilities which would enable further
expansion of capacity to meet possible future storage needs.
 
     GAS AND OIL PRODUCING ACTIVITIES
 
The Company's total gas production in 1998 was 157.5 Bcf, down from 158.1 Bcf in
1997. Oil production was 7.9 million barrels, up 8% from 7.3 million barrels in
1997.
 
The Company's gas wellhead prices in 1998 averaged $2.26 a thousand cubic feet
(Mcf), down from $2.43 in 1997. The Company's average gas wellhead prices are
generally higher and less volatile than industry spot prices since its average
price reflects a mix of longer-term contracts and the impact of price risk
management activities. However, due to market-based pricing mechanisms under
many of the contracts, the Company's gas prices generally follow industry
trends. The average oil wellhead price in 1998 decreased to $11.54 a barrel,
compared with $16.07 in 1997, consistent with the general decline in world oil
prices.
 
The following table sets forth 1998 drilling activity by region:
 
<TABLE>
--------------------------------------------------------------------------------------------
                                                                       Wells Drilled
                                                                Exploratory     Development
--------------------------------------------------------------------------------------------
                                                                Gross    Net    Gross    Net
                                                                 --      --      --      --
<S>                                                             <C>      <C>    <C>      <C>
Onshore (Southwest and West)................................     14       7      29      19
Gulf of Mexico..............................................     14       7      17       7
Appalachian Region..........................................      4       2      31      29
                                                                 --      --      --      --
     Total..................................................     32      16      77      55
                                                                 ==      ==      ==      ==
--------------------------------------------------------------------------------------------
</TABLE>
 
Of the total 109 wells drilled in 1998, 93 were successful, an 85% success rate.
Of the 32 exploratory wells drilled, 18 were successful.
 
Total Company-owned proved gas reserves at year-end were 1,313 Bcf, up from
1,183 Bcf at the end of 1997. Proved oil reserves were 57.1 million barrels,
compared with 50.6 million barrels in 1997. The exploration and production
segment added 374 Bcf of gas equivalent from additions, revisions, and purchases
of gas and oil reserves in 1998 and also purchased 39 Bcf of gas reserves from
an affiliate, Peoples Natural Gas (See "Company-Owned Reserves," page 19).
 
                                        9
<PAGE>   12
 
ITEM 1.     BUSINESS (Continued)
During 1997, major discoveries were made in the Main Pass area of the Gulf of
Mexico. Production at Nautilus and Atlantis, two projects in the Main Pass area,
is expected to begin in the first quarter of 1999. Gas production began in
December 1998 at a third field, Nemo. Three platforms have been installed for
these fields along with facilities capable of processing 240 million cubic feet
of gas and 20,000 barrels of oil a day. The Company is the operator of the
Nautilus/Atlantis/Nemo complex and has 68.5%, 75% and 100% interests,
respectively, in the three fields.
 
The Company's production at Popeye, a deep-water natural gas discovery in the
Green Canyon area of the Gulf of Mexico, was the equivalent of 22 Bcf of gas
during 1998, including .6 million barrels of condensate. CNG Producing's
interest in this property is 37.5%. Shell Offshore, Inc. is the operator in the
joint venture and Mobil Oil Exploration and Producing Southeast and BP
Exploration Inc. are the other participants.
 
At Neptune, a deep-water oil discovery at Viosca Knoll 826, 1998 represented the
first full year of production. This project, in which the Company holds a 50%
interest, added proved reserves equivalent to 190 Bcf of gas in 1994,
representing the largest single addition to the Company's reserves in its
history. Since 1994, proved reserves have been added at Neptune equivalent to 71
Bcf of gas. The Company's portion of production from this field was the
equivalent of 26 Bcf of gas during 1998. This production was comprised of 3.9
million barrels of oil and 3.1 Bcf of gas. Facilities designed with Oryx Energy
Company, the operating partner, were reworked during 1998 to produce up to
35,000 barrels of oil and 30 million cubic feet of natural gas a day.
 
During 1998, two deepwater discoveries were made in the Viosca Knoll area of the
Gulf of Mexico, North Marlin and Einset. North Marlin is a natural gas discovery
in over 2,500 feet of water three miles east of the Neptune project. CNG
Producing and its partners plan to install subsea production facilities at North
Marlin similar to those at Popeye. Shell Deepwater Development, Inc. (Shell
Deepwater) has a 35% interest in North Marlin and is the operator, while CNG
Producing holds a 35% interest and Murphy Exploration and Production Company
holds a 30% interest. The Einset discovery is southeast of North Marlin and was
made in about 3,600 feet of water. CNG Producing's interest in this property is
50% and Shell Deepwater holds a 50% interest and is the operator of this
project.
 
CNG Producing was the successful bidder on nine leases offered in the federal
government's Gulf of Mexico lease sales in 1998, including five blocks in deep
water areas of the Gulf of Mexico. At year-end 1998, the Company held 2.0
million net acres of exploration and production properties, approximately the
same as year-end 1997. The Company's lease holdings include about 1.4 million
net acres in the Appalachian area, 385,200 in the offshore Gulf of Mexico, and
230,600 in the inland areas of the Southwest, Gulf Coast and West. The Company
holds a 21% interest in heavy oil producing properties in Alberta, Canada.
Proved reserves associated with the Canadian properties approximated 1.0 Bcf of
gas and 5.8 million barrels of oil at December 31, 1998. On an energy-equivalent
basis, these reserves represent 2% of the Company's total proved reserves at
that date.
 
The Company drilled 35 wells in the Appalachian Region during 1998. The Company
plans to continue production from these properties and to maintain its strong
acreage position in the Appalachian Region, and may seek to acquire additional
properties in this area that meet the Company's longer-term strategy.
 
The Company will continue to review its property inventory during 1999, and
sales of selected properties are possible depending on economic conditions.
 
                                       10
<PAGE>   13
 
ITEM 1.     BUSINESS (Continued)
GAS SALES AND TRANSPORTATION (Five-year statistics are on page 12. Certain prior
year amounts have been restated to reflect continuing operations only.)
 
     GAS SALES CUSTOMERS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Customers      Total*    Residential   Commercial   Industrial   Wholesale   Nonregulated
-----------------------------------------------------------------------------------------
<S>           <C>        <C>           <C>          <C>          <C>         <C>
December 31,
    1998      1,878,008   1,605,426**   121,395         919         11         150,257
    1997      1,864,853   1,655,587**   124,141       1,813         39          83,273
    1996      1,841,227   1,713,504     125,842       1,764         37              80
    1995      1,824,115   1,695,949     126,304       1,736         12             114
    1994      1,799,435   1,672,630     124,803       1,697         14             291
-----------------------------------------------------------------------------------------
</TABLE>
 
 * Includes residential and commercial space-heating customers as follows:
   1998-1,695,943; 1997-1,750,136; 1996-1,808,062; 1995-1,788,778; and
   1994-1,762,207.
** Reflects the shift of former residential sales customers to other suppliers,
   including CNG Retail (see "Retail Unbundling," page 13).
 
     REGULATED GAS SALES
 
Sales of gas to residential customers in 1998 were 160 Bcf, down 48 Bcf from
1997, while sales to commercial customers were 44 Bcf in 1998, down 16 Bcf
compared to 1997. Warmer weather and the effect of the displacement of sales
volumes to other suppliers, including CNG Retail, were the reasons for the
decrease in gas sales volumes in 1998 compared to 1997. The weather in the
Company's retail service areas in 1998 was 18% warmer than normal and 19% warmer
than 1997.
 
Industrial sales in 1998 were 3 Bcf, down 1 Bcf from 1997. Due to both
availability and price, many industrial users buy gas directly from producers,
from marketers, or on the spot market, and contract with the subsidiaries for
transportation service. Total gas deliveries (sales and transportation) to
industrial customers were 136 Bcf in 1998, compared with 138 Bcf in 1997.
 
     NONREGULATED SALES
 
Nonregulated gas sales in 1998 were 207 Bcf, up 36 Bcf from 1997. The increased
sales volumes in 1998 were due to gas sales by CNG Retail in its first full year
of operation.
 
     GAS TRANSPORTATION
 
Total transportation volumes in 1998 were 641 Bcf, down from 736 Bcf in 1997.
CNG Transmission transported 442 Bcf of gas in 1998, down from 546 Bcf in 1997
due in large part to the impact of warmer weather during 1998. Total
transportation volumes also include volumes transported by the distribution
subsidiaries for residential, commercial, industrial and off-system customers
amounting to 199 Bcf in 1998, up 10 Bcf over 1997. This increase reflects
transportation provided to former residential sales customers of 15 Bcf in 1998,
compared to 3 Bcf in 1997, in connection with the retail unbundling initiative.
This increase was partially offset by declines in volumes transported to
commercial, industrial and off-system customers.
 
                                       11
<PAGE>   14
 
ITEM 1.     BUSINESS (Continued)
GAS SALES, SUPPLY, TRANSPORTATION AND STORAGE STATISTICS* (Excludes affiliated
transactions)
 
<TABLE>
-----------------------------------------------------------------------------------------------
Years Ended December 31,                     1998       1997       1996       1995       1994
<S>                                        <C>        <C>        <C>        <C>        <C>
-----------------------------------------------------------------------------------------------
GAS SALES REVENUES (MILLIONS)
Regulated
  Residential............................  $1,089.9   $1,449.1   $1,346.1   $1,214.2   $1,254.9
  Commercial.............................     267.6      369.7      361.6      345.9      373.4
  Industrial.............................      13.4       22.8       30.6       32.6       45.8
  Wholesale..............................       2.8        9.4       15.4        4.7        5.2
Nonregulated.............................     494.4      433.4      396.1      239.8      723.6
                                           --------   --------   --------   --------   --------
     Total...............................  $1,868.1   $2,284.4   $2,149.8   $1,837.2   $2,402.9
                                           ========   ========   ========   ========   ========
AVERAGE SALES RATES PER MCF
Regulated
  Residential............................  $   6.82   $   6.97   $   6.15   $   5.71   $   6.09
  Commercial.............................      6.04       6.19       5.41       4.95       5.38
  Industrial.............................      5.32       5.33       4.47       4.49       4.89
  Wholesale..............................        **         **         **         **         **
Nonregulated.............................      2.39       2.53       2.48       1.94       2.17
     Weighted average....................  $   4.51   $   5.16   $   4.74   $   4.44   $   3.89
                                           ========   ========   ========   ========   ========
GAS REQUIREMENTS (BCF)
Regulated gas sales
  Residential............................     159.9      207.8      218.7      212.5      205.9
  Commercial.............................      44.3       59.7       66.8       69.8       69.4
  Industrial.............................       2.5        4.3        6.9        7.3        9.4
  Wholesale..............................        .4         .2        1.8         .3         .3
Nonregulated gas sales...................     207.1      171.0      159.7      123.5      332.8
                                           --------   --------   --------   --------   --------
     Total sales.........................     414.2      443.0      453.9      413.4      617.8
Used and unaccounted for.................      37.7       29.0       23.3       37.8       48.3
                                           --------   --------   --------   --------   --------
     Total requirements..................     451.9      472.0      477.2      451.2      666.1
                                           ========   ========   ========   ========   ========
GAS SUPPLY (BCF)
Purchased gas............................     294.8      295.9      353.2      323.5      559.6
Storage (input) withdrawal...............       (.4)      18.0      (23.5)      20.5      (13.0)
Gas produced
  Gulf region............................     111.4      116.5      108.1       68.3       76.4
  Appalachian area.......................      26.6       25.8       26.0       27.2       27.8
  Other areas............................      19.5       15.8       13.4       11.7       15.3
                                           --------   --------   --------   --------   --------
     Total produced......................     157.5      158.1      147.5      107.2      119.5
                                           --------   --------   --------   --------   --------
     Total supply........................     451.9      472.0      477.2      451.2      666.1
                                           ========   ========   ========   ========   ========
PURCHASED GAS COSTS (MILLIONS)***........  $  900.4   $1,114.1   $  963.2   $  864.6   $1,375.8
                                           ========   ========   ========   ========   ========
AVERAGE PURCHASE RATES PER MCF***........  $   2.95   $   3.39   $   3.37   $   2.73   $   2.46
                                           ========   ========   ========   ========   ========
GAS TRANSPORTATION
Revenues (Millions)......................  $  416.7   $  369.1   $  297.9   $  345.2   $  293.7
                                           ========   ========   ========   ========   ========
Gas Transported (Bcf)....................     641.2      736.0      754.0      743.3      724.9
                                           ========   ========   ========   ========   ========
GAS STORED AT DECEMBER 31 (BCF)..........     397.2      407.2      426.2      406.4      427.4
                                           ========   ========   ========   ========   ========
-----------------------------------------------------------------------------------------------
</TABLE>
 
  * Continuing operations.
 ** Demand charges and low sales volumes produce an average rate which is not
    meaningful.
*** Includes transportation charges.
 
                                       12
<PAGE>   15
 
ITEM 1.     BUSINESS (Continued)
MARKET EXPANSION
 
In recent years the Company has pursued a broad program designed to expand its
interstate pipeline system and extend its marketing territory. A pipeline
expansion project in conjunction with East Ohio Gas and others is expected to
provide additional capacity at minimal cost. The Company's principal objective
has been to build long-term supply relationships with customers in the growing
markets at the perimeter of its system, markets which offer opportunities for
growth in throughput due to their increasing demand for energy. The Company has
taken advantage of selected market expansion opportunities, concentrating its
efforts primarily in the Northeast and along the East Coast. These markets are
particularly attractive in that gas space heating is not yet as widely used in
these areas as in the Company's traditional service areas of western
Pennsylvania, eastern Ohio, West Virginia and upstate New York. Because of its
large gas storage capacity and the location of its gridlike pipeline system in
close proximity to these markets, the Company has an opportunity to be an
important gas supplier to utilities with growing space-heating markets and for
customers seeking an environmentally clean, efficient fuel for electric
generation.
 
     RETAIL UNBUNDLING
 
Similar to the unbundling of the services provided by gas pipeline companies,
gas distribution companies are adapting to the deregulation and unbundling of
the retail energy market. Under open access programs, natural gas suppliers
other than the local gas utility can use the utility's existing lines to deliver
gas to customers.
 
CNG Retail markets natural gas, electricity, and consumer products and services
to residential, commercial and small industrial customers, including those
within the Company's traditional service territories. CNG Retail will enable the
Company to take advantage of emerging deregulated energy markets for both gas
and electricity.
 
During the spring of 1997, Peoples Natural Gas opened its system in Pennsylvania
to customer choice. In addition, on July 2, 1997, the Public Utilities
Commission of Ohio approved the East Ohio Gas "Energy Choice" pilot program.
Under this program, approximately 15% of East Ohio Gas's residential and small
business customers are being given the opportunity to purchase their natural gas
from competing suppliers, if they so choose.
 
     INTERNATIONAL ACTIVITIES
 
During December 1997, CNG International acquired ownership interests in two gas
utility holding companies, Sodigas Pampeana S.A. and Sodigas Sur S.A., and in an
electric utility holding company, Buenos Aires Energy Company (BAECO), from CEI
Citicorp Holdings S.A. in Argentina. The gas utility holding companies have
ownership interests in two gas distribution companies, Camuzzi Gas Pampeana and
Camuzzi Gas del Sur, and BAECO has an ownership interest in an electric
distribution company, EDEA. The service territories of these companies span from
Buenos Aires province to the southernmost tip of Argentina. In March 1998 CNG
International purchased additional interests in Sodigas Pampeana S.A., Sodigas
Sur S.A. and BAECO from Loma Negra, bringing the Company's ownership interests
in these entities to 21.55%, 21.55% and 25%, respectively. Camuzzi Argentina
S.A. maintains majority ownership interests in the holding companies. At
December 31, 1998, CNG International's investments in the Argentine holding
companies totaled $122.8 million.
 
In March 1998 CNG International purchased a 33.3% ownership interest in the
Dampier-to-Bunbury Natural Gas Pipeline (DBNGP) in Western Australia from the
Western Australia Government. One of CNG International's partners in the
purchase was El Paso Energy Corporation (El Paso), which also holds a 33.3%
ownership interest. In connection with their investments in DBNGP, CNG
International and El Paso formed DBNGP Finance Company LLC (DBNGP Finance).
DBNGP Finance is owned 50% by CNG International and 50% by EPED Holding Company,
a wholly-owned subsidiary of El Paso. Subsequent to the formation of DBNGP
Finance, the equity ownership interests of CNG International and El Paso in
DBNGP were transferred to this entity.
 
                                       13
<PAGE>   16
 
ITEM 1.     BUSINESS (Continued)
In October 1998 DBNGP Finance borrowed $250 million under a Senior Term Loan
Facility (Term Loan). The Term Loan matures October 2, 2001, can be extended in
one-year increments to October 2, 2003, and bears interest at a variable rate.
Of the gross proceeds received by DBNGP Finance under the Term Loan, $100
million was distributed to CNG International and was accounted for as a
reduction to the Company's investment in DBNGP Finance. In connection with the
Term Loan, CNG International entered into an Equity Contribution Agreement with
DBNGP Finance. CNG International is contractually obligated to make equity
contributions to DBNGP Finance equal to the Term Loan proceeds distributed to
CNG International, plus interest on such proceeds, in the event that DBNGP
Finance is unable to service this debt. The Company is contractually obligated
to cause CNG International to make such contributions.
 
CNG International's investments in Australia at December 31, 1998, including
DBNGP Finance, totaled $77.6 million.
 
RATE MATTERS
 
The regulated subsidiaries continue to seek general rate increases on a timely
basis to recover increased operating costs and to ensure that rates of return
are compatible with the cost of raising capital. In addition to general rate
increases, certain distribution companies make separate filings with their
respective regulatory commissions to reflect changes in the costs of purchased
gas.
 
On April 29, 1998, the Virginia State Corporation Commission issued a final
order in connection with the September 25, 1996 expedited rate application of
Virginia Natural Gas. The order resulted in an annual revenue increase of $7.2
million, retroactive to October 25, 1996, the date new rates went into effect
subject to refund. Customer refunds resulting from the order were made in 1998.
The order reflects an imputed return on equity of 10.9%. In its filing, Virginia
Natural Gas had requested a $13.9 million increase in annual revenues and a
return on equity of 11.3%.
 
On July 28, 1998, the Public Service Commission of West Virginia approved a
settlement agreement filed by Hope Gas in connection with its January 5, 1998
general rate filing. The new rates became effective November 1, 1998. Under the
settlement, Hope Gas is not permitted to request an increase in rates prior to
January 1, 2002, nor is it obligated to file for new rates after that date. The
approved settlement agreement grants Hope Gas a combined $6.5 million annual
revenue increase for both base rates and gas costs. Hope Gas had originally
proposed a $14.5 million annual increase in revenues.
 
On November 24, 1998, the FERC approved a settlement filed by CNG Transmission
in connection with its July 1, 1997 general rate filing. The settlement resolves
the outstanding issues in the case and maintains the preexisting level of annual
revenues. The settlement reflects an imputed return on equity of 10.7%. CNG
Transmission made interim customer refunds amounting to $39.2 million in
December 1998, and expects to make a final settlement refund of approximately
$19 million by the end of the first quarter of 1999. In its filing, CNG
Transmission had requested a $71 million increase in annual revenues and a
return on equity of 14.5%.
 
                                       14
<PAGE>   17
 
ITEM 1.     BUSINESS (Concluded)
EXECUTIVE OFFICERS OF THE COMPANY (Note 1)
 
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
        Name, Age and                                   Business Experience
      Position (Note 2)                                During Past Five Years
<S>                                 <C>
------------------------------------------------------------------------------------------------
George A. Davidson, Jr. (60)        Mr. Davidson was elected to his present position on May 19,
Chairman of the Board and           1987, and has been a Director since October 1985.
Chief Executive Officer,
and Director
 
David M. Westfall (51)              Mr. Westfall was elected to his present position on May 1,
Senior Vice President,              1998. He served as Senior Vice President and Chief Financial
Nonregulated Business and           Officer from December 1995 to April 1998, and as Senior Vice
Chief Financial Officer             President, Financial from January 1995 to November 1995.
                                    From January 1988 to January 1995, he served as Senior Vice
                                    President at CNG Transmission.
 
Ronald L. Adams (39)                Mr. Adams was elected to his present position on May 1,
Senior Vice President,              1998. He joined the Company as President of CNG Transmission
Regulated Business                  in July 1996. Prior to joining the Company, Mr. Adams held
                                    numerous positions at Transcontinental Gas Pipe Line
                                    Corporation (Transco) from December 1981 until June 1996.
                                    His final position at Transco was Vice President, Operations
                                    and Engineering.
 
Stephen E. Williams (50)            Mr. Williams was elected to his present position on January
Senior Vice President and           1, 1993.
General Counsel
 
Stephen R. McGreevy (48)            Mr. McGreevy was elected to his present position on March 1,
Vice President, Accounting          1993.
and Financial Control
 
Robert M. Sable, Jr. (47)           Mr. Sable was elected to his present position on July 31,
Vice President and                  1998. He served as Senior Vice President and Chief Financial
Treasurer                           Officer of CNG Energy Services from May 1997 through July
                                    1998. Mr. Sable served as Treasurer of the Company from May
                                    1995 until May 1997 and served as Senior Assistant Treasurer
                                    from January 1993 to April 1995.
 
E. J. Marks, III (35)               Mr. Marks was elected to his present position on January 1,
Secretary                           1999. He served as Assistant Secretary and Assistant to the
                                    Chairman from January 1998 to December 1998. From November
                                    1993 to December 1997, he served as Manager, Corporate
                                    Secretary's Department.
 
Thomas F. Garbe (46)                Mr. Garbe was elected to his present position on March 1,
Controller                          1993.
------------------------------------------------------------------------------------------------
</TABLE>
 
Notes:
 
(1) The Company has been advised that there are no family relationships between
    any of the officers listed, and there is no arrangement or understanding
    between any of them and any other person pursuant to which the individual
    was elected as an officer.
 
(2) The By-Laws of the Company provide that each officer shall hold office until
    a successor is chosen and qualified.
 
                                       15
<PAGE>   18
 
ITEM 2.     PROPERTIES
 
GENERAL INFORMATION ON FACILITIES (Maps are on pages 17 and 18.)
 
The Company's total gross investment in property, plant and equipment was $9.2
billion at December 31, 1998. The largest portion of this investment (57%) is in
facilities located in the Appalachian area. Another significant portion (27%) is
located in the Gulf of Mexico.
 
Of the $9.2 billion investment, $4.3 billion is in production and gathering
systems, of which 64% is invested in the Gulf of Mexico and the Gulf coast and
22% in the Appalachian area. The Company's production subsidiary, CNG Producing,
accounts for $3.8 billion of the $4.3 billion investment, and CNG Transmission
and the distribution subsidiaries account for the remaining $.5 billion. In
addition to the wells and acreage listed elsewhere in ITEM 2, this investment
includes 6,488 miles of gathering lines which are located almost entirely within
the Appalachian area.
 
The Company's investment in its gas distribution network includes 30,251 miles
of pipe, exclusive of service pipe, the cost of which represents 60% of the $2.0
billion invested in the total function.
 
The Company's storage operation, the largest in the industry, consists of 26
storage fields, 334,086 acres of operated leaseholds, 2,067 storage wells and
802 miles of pipe. The investment in storage properties is $716 million,
including $91 million of cushion gas stored.
 
Of the $1.6 billion invested in transmission facilities, 67% represents the cost
of 6,653 miles of pipe required to move large volumes of gas throughout the
Company's operating area.
 
The Company has 92 compressor stations with 481,604 installed compressor
horsepower. Some of the stations are used interchangeably for several functions.
 
The Company's investment in its natural gas system is considered suitable to do
all things necessary to bring gas to the consumer. The Company's properties
provided the capacity to meet a record system peak day sendout, including
transportation service, of 11.4 Bcf on February 6, 1995. The system peak day
sendout in 1998 was 7.0 Bcf on March 12.
 
                                       16
<PAGE>   19
 


                               CNG FACILITIES MAP


The following graphic material which appeared in the paper format version of 
the document is omitted from this electronic format document:

Map of Principal Facilities at December 31, 1998

This map shows the primary operating areas of Consolidated Natural Gas Company 
in Ohio, Pennsylvania, Virginia and West Virginia. The map shows the principal 
cities served at retail including Cleveland, Akron, Youngstown, Canton, Warren, 
Lima, Ashtabula and Marietta in Ohio; Pittsburgh (a portion), Altoona and 
Johnstown in Pennsylvania; Norfolk, Newport News and Williamsburg in Virginia; 
and Clarksburg and Parkersburg in West Virginia. The map also shows the general 
location of the Company's pipelines and joint venture pipelines, including gas 
delivery connections with customers and gas receipt or delivery connections 
with other pipelines. Also shown on the map are the general locations of 
certain compressor facilities and underground storage fields.

                                     17

<PAGE>   20
 


                       CNG EXPLORATION AND PRODUCTION MAP
 
The following graphic material which appeared in the paper format version of 
the document is omitted from this electronic format document:

Map of Exploration and Production Areas at December 31, 1998

This United States map shows the general areas in which the Company conducts 
its exploration and production activities. These areas include: the Gulf of 
Mexico, offshore Louisiana and Texas; the Gulf Coast Basin; Permian Basin; 
Anadarko Basin; Arkoma Basin; Black Warrior Basin; San Juan Basin; Williston 
Basin; Michigan Basin; Rocky Mountain Basins and the Appalachian Region. Also 
shown is the general location of the Company's Canadian exploration and 
production properties in Alberta, Canada.


                                       18
<PAGE>   21
 
ITEM 2.     PROPERTIES (Continued)
 
GAS AND OIL PRODUCING ACTIVITIES
 
Properties and activities subject to cost-of-service rate regulation are
indicated as applicable and are shown together with non-cost-of-service
properties and activities in the statistical presentations which follow.
 
     COMPANY-OWNED RESERVES
Estimated net quantities (net before royalty) of proved gas and oil reserves at
December 31, 1996 through 1998, follow:
 
<TABLE>
<S>                              <C>         <C>      <C>         <C>      <C>         <C>
---------------------------------------------------------------------------------------------
 
<CAPTION>
         December 31,                   1998                 1997                 1996
---------------------------------------------------------------------------------------------
                                  Proved     Total     Proved     Total     Proved     Total
                                 Developed   Proved   Developed   Proved   Developed   Proved
---------------------------------------------------------------------------------------------
<S>                              <C>         <C>      <C>         <C>      <C>         <C>
Gas Reserves (Bcf)
  Non-cost-of-service..........    1,052      1,313       925      1,141       900      1,040
  Cost-of-service*.............       --         --        42         42        43         43
                                  ------     ------    ------     ------    ------     ------
     Total.....................    1,052      1,313       967      1,183       943      1,083
                                  ======     ======    ======     ======    ======     ======
Oil Reserves (000 Bbls)........   42,750     57,074    37,568     50,627    24,989     50,457
                                  ======     ======    ======     ======    ======     ======
</TABLE>
 
* In December 1998, Peoples Natural Gas transferred by sale all of its remaining
  gas production properties to CNG Producing.
--------------------------------------------------------------------------------
 
CNG Producing and CNG Transmission file Form EIA-23 with the Department of
Energy. The reserves reported on Form EIA-23 at December 31, 1997, as well as
those which will be reported at December 31, 1998, are not reconcilable with
Company-owned reserves because they are calculated on an operated basis and
include working interest reserves of all parties.
 
     QUANTITIES OF GAS AND OIL PRODUCED
 
Quantities (net before royalty) of gas and oil produced during each of the last
three years follow:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                  Years Ended December 31,                    1998     1997     1996
-------------------------------------------------------------------------------------
<S>                                                           <C>      <C>      <C>
Gas Production (Bcf)*.......................................    157      158      148
                                                              =====    =====    =====
Oil Production (000 Bbls)...................................  7,895    7,312    4,766
                                                              =====    =====    =====
</TABLE>
 
* Includes cost-of-service production of 2, 3, and 3 Bcf for 1998, 1997 and
  1996, respectively.
--------------------------------------------------------------------------------
 
The average sales price (including transfers to other operations as determined
under Financial Accounting Standards Board rules) per Mcf of non-cost-of-service
gas produced during the years 1998, 1997 and 1996 was $2.26, $2.43 and $2.46,
respectively. The respective average sales prices for oil were $11.54, $16.07
and $17.60 per barrel. The average production (lifting) cost per Mcf equivalent
of non-cost-of-service gas and oil produced during the years 1998, 1997 and 1996
was $.31, $.33 and $.32, respectively.
 
     PRODUCTIVE WELLS
 
The number of productive gas and oil wells in which the Company's subsidiaries
have an interest at December 31, 1998, follow:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                                Gas Wells          Oil Wells
                                                              -------------       -----------
                                                              Gross    Net        Gross   Net
---------------------------------------------------------------------------------------------
<S>                                                           <C>     <C>         <C>     <C>
Non-cost-of-service*........................................  6,520   5,613       1,028   411
</TABLE>
 
* Includes 82 gross (23 net) multiple completion gas wells and 21 gross (8 net)
  multiple completion oil wells.
--------------------------------------------------------------------------------
 
                                       19
<PAGE>   22
 
ITEM 2.     PROPERTIES (Continued)
     ACREAGE
 
The following table sets forth the gross and net developed and undeveloped
acreage of the Company's subsidiaries at December 31, 1998:
 
<TABLE>
----------------------------------------------------------------------------------------------
                                       Developed Acreage                 Undeveloped Acreage
                                   --------------------------           ----------------------
                                     Gross             Net               Gross          Net*
----------------------------------------------------------------------------------------------
<S>                                <C>              <C>                 <C>            <C>
Non-cost-of-service..............  1,748,451        1,339,853           840,665        482,904
Cost-of-service..................    212,055          212,055                --             --
                                   ---------        ---------           -------        -------
     Total.......................  1,960,506        1,551,908           840,665        482,904
                                   =========        =========           =======        =======
</TABLE>
 
* Approximately 29% of this acreage is located in the Appalachian area.
--------------------------------------------------------------------------------
 
     NET WELLS DRILLED IN THE CALENDAR YEAR
 
The number of non-cost-of-service net wells completed during each of the last
three years follow (there were no cost-of-service wells completed during this
three-year period):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                           Exploratory         Development           Total
                                         ----------------   -----------------   ----------------
                                         Productive   Dry   Productive*   Dry   Productive   Dry
------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>   <C>           <C>   <C>          <C>
Years Ended December 31,
  1998.................................      9         7        54         1        63        8
  1997.................................      4         5        69         2        73        7
  1996.................................      4         5        33         1        37        6
</TABLE>
 
* Includes Canadian completions: 1998 --zero wells, 1997--12 wells and 1996--23
  wells.
--------------------------------------------------------------------------------
 
As of December 31, 1998, 6 gross (5.5 net) non-cost-of-service wells were in
process of drilling, including wells temporarily suspended. During 1998, the
Company was engaged in two waterflood projects in Oklahoma.
 
     GAS PURCHASE CONTRACT RESERVES (AT DECEMBER 31, 1998) AND AVAILABILITY OF
SUPPLY
     (CALENDAR YEAR 1999)
 
Gas purchase reserves under contract with independent producers in the
Appalachian area total 233 Bcf at December 31, 1998. In addition, at December
31, 1998, the Company had gas supply contracts with various other producers and
marketers with contract lengths ranging from a few months to seven years. The
volume of gas available to the Company under these supply contracts totals 151
Bcf if all volumes are requested, and has declined from the prior year due
chiefly to the sale of CNG Energy Services (see "Discontinued Operations," page
5). These gas purchase contract reserve and gas supply contract volume amounts
are as contained in the February 3, 1999 report of Ralph E. Davis Associates,
Inc. Of the total 233 Bcf under contract from Appalachian producers, the volume
of gas expected to be purchased in 1999 under such contracts is not estimable as
such contracts are generally life-of-the-well arrangements and contain
provisions adaptable to changing market conditions. Of the total 151 Bcf
available under contract from other producers and marketers, approximately 99
Bcf of gas will be available to the Company in 1999, assuming all volumes are
requested.
 
The Company anticipates that substantial volumes of gas will be available for
purchase during 1999 on the spot market. Due to the nature of spot market
transactions, the volumes of such gas available to the Company in 1999 cannot be
reasonably estimated. However, for the calendar year 1999, the Company expects
its distribution subsidiaries to have approximately 1 Bcf per day of firm
transport capacity available on upstream pipelines and 124 Bcf of storage
capacity available to meet their customer requirements.
 
                                       20
<PAGE>   23
 
ITEM 2.     PROPERTIES (Concluded)
 
The volumes expected to be available from Company-owned wells in 1999 amount to
194 Bcf of gas and 9,535 thousand barrels of oil, all from non-cost-of-service
properties. The foregoing volumes are based on the Company's current production
estimates of proved gas and oil reserves. Actual production may differ from
these amounts due to a number of factors, including changing market conditions
and the discovery, acquisition and/or sale of reserves.
 
ITEM 3.     LEGAL PROCEEDINGS
 
Environmental-related information is hereby incorporated by reference to the
Notes to Consolidated Financial Statements contained in Appendix I to the
Company's definitive proxy statement filed with the SEC pursuant to Regulation
14A and included as Exhibit 99 to this Form 10-K. Reference is made thereto as
follows: Note 16, page 46.
 
Reference is made to "Rate Matters," page 14, for descriptions of certain
regulatory proceedings.
 
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
Not applicable
 
                                    PART II
 
ITEM 5.     MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
            STOCKHOLDER MATTERS
 
This information is hereby incorporated by reference to the Notes to
Consolidated Financial Statements contained in Appendix I to the Company's
definitive proxy statement filed with the SEC pursuant to Regulation 14A and
included as Exhibit 99 to this Form 10-K. Reference is made thereto as follows:
Note 20(C), page 58.
 
ITEM 6.     SELECTED FINANCIAL DATA
 
This information is hereby incorporated by reference to page 21 of Appendix I to
the Company's definitive proxy statement filed with the SEC pursuant to
Regulation 14A and included as Exhibit 99 to this Form 10-K.
 
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS
 
This information is hereby incorporated by reference to pages 1 through 20 of
Appendix I to the Company's definitive proxy statement filed with the SEC
pursuant to Regulation 14A and included as Exhibit 99 to this Form 10-K.
 
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
This information is hereby incorporated by reference to Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in
Appendix I to the Company's definitive proxy statement filed with the SEC
pursuant to Regulation 14A and included as Exhibit 99 to this Form 10-K.
Reference is made thereto as follows: Price Risk Management Activities, page 18.
 
ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
SUPPLEMENTARY DATA
 
This information is hereby incorporated by reference to the Notes to
Consolidated Financial Statements contained in Appendix I to the Company's
definitive proxy statement filed with the SEC pursuant to
 
                                       21
<PAGE>   24
 
ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Concluded)
Regulation 14A and included as Exhibit 99 to this Form 10-K. Reference is made
thereto as follows: Gas and Oil Producing Activities--Note 20(A), page 52;
Quarterly Financial Data--Note 20(B), page 57.
 
FINANCIAL STATEMENTS
 
This information is hereby incorporated by reference to pages 22 through 58 of
Appendix I to the Company's definitive proxy statement filed with the SEC
pursuant to Regulation 14A and included as Exhibit 99 to this Form 10-K.
 
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE
 
Not applicable
 
                                    PART III
 
ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
 
Information concerning the directors of the Company is hereby incorporated by
reference to the Company's definitive proxy statement filed with the SEC
pursuant to Regulation 14A. Information concerning the executive officers of the
Company is on page 15 of this Report.
 
ITEM 11.     EXECUTIVE COMPENSATION
 
This information is hereby incorporated by reference to the Company's definitive
proxy statement filed with the SEC pursuant to Regulation 14A.
 
ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
This information is hereby incorporated by reference to the Company's definitive
proxy statement filed with the SEC pursuant to Regulation 14A.
 
ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
This information is hereby incorporated by reference to the Company's definitive
proxy statement filed with the SEC pursuant to Regulation 14A.
 
                                    PART IV
 
ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
REPORTS ON FORM 8-K
 
No reports on Form 8-K were filed during the last quarter of the calendar year
1998, the year for which this Form 10-K is being filed.
 
On March 1, 1999, the Company filed a Current Report on Form 8-K regarding its
proposed merger with DRI (see "Recent Developments," page 1, and Exhibit (2A),
page 24).
 
                                       22
<PAGE>   25
 
ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
             8-K (Continued)

DOCUMENTS FILED AS A PART OF THIS REPORT
 
     Financial Statements
 
All of the financial statements filed as a part of this Report are hereby
incorporated by reference to Appendix I to the Company's definitive proxy
statement filed with the SEC pursuant to Regulation 14A and included as Exhibit
99 to this Form 10-K. Reference is made thereto as follows:
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                               Page in
                                                              Appendix I
------------------------------------------------------------------------
<S>                                                           <C>
Report of Independent Accountants...........................        22
Consolidated Statement of Income for the Years 1996 through           
  1998......................................................        23
Consolidated Balance Sheet at December 31, 1997 and 1998....        24
Consolidated Statement of Cash Flows for the Years 1996               
  through 1998..............................................        26
Consolidated Statement of Comprehensive Income for the Years          
  1996 through 1998.........................................        27
Notes to Consolidated Financial Statements..................        28
Schedule II--Valuation and Qualifying Accounts..............    Note 2
</TABLE>
 
Notes:
(1) Schedules I, III, IV, and V have been excluded because they are not
applicable.
(2) Omitted inasmuch as amounts involved are not significant.
--------------------------------------------------------------------------------
 
     Consent of Independent Accountants
 
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-63931,
333-10869 and 333-25347) and Form S-8 (Nos. 2-77204, 2-97948, 33-40478,
33-44892, 333-18783 and 333-33505) of Consolidated Natural Gas Company of our
report dated February 9, 1999, except as to the subsequent event described in
Note 19 which is as of February 22, 1999, appearing on page 22 of Appendix I to
the Consolidated Natural Gas Company proxy statement for the 1999 annual meeting
of stockholders which is incorporated in this Annual Report on Form 10-K. We
also consent to the references to us under the heading "Experts" in certain of
these Prospectuses.
 
PRICEWATERHOUSECOOPERS LLP
 
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
March 15, 1999
 
                                       23
<PAGE>   26
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
         (Continued)
 
EXHIBITS
<TABLE>
<CAPTION>
----------------------------------------------------------------------
  SEC
Exhibit
Number                       Description of Exhibit
----------------------------------------------------------------------
<C>       <S>
 
 (2)      Plan of acquisition, reorganization, arrangement,
          liquidation or successor:

          (2A)  Agreement and Plan of Merger, dated as of February 19,
                1999, by and between Dominion Resources, Inc. and
                Consolidated Natural Gas Company, is hereby
                incorporated by reference to Exhibit 2 to the Current
                Report on Form 8-K filed on March 1, 1999

 (3)      Articles of Incorporation and By-Laws:

          (3A)  Certificate of Incorporation of Consolidated Natural
                Gas Company, restated October 4, 1990 (incorporated by
                reference to Exhibit A-1 to the
                Application-Declaration of Consolidated Natural Gas
                Company on Form U-1, File No. 70-7811), as amended May
                31, 1996 (such amendment incorporated by reference to
                Exhibit 4(B) to the Form S-3 Registration Statement
                under the Securities Act of 1933, Consolidated Natural
                Gas Company, Registration No. 333-10869)

          (3B)  By-Laws of Consolidated Natural Gas Company, last
                amended May 19, 1998, are filed herewith

 (4)      Instruments Defining the Rights of Security Holders,
          Including Indentures:

          (4A)  Indentures of Consolidated Natural Gas Company:
                Indentures of Consolidated Natural Gas Company are
                incorporated by reference to previously filed material as
                indicated on the list filed herewith

          (4B)  Section 203 of the Delaware General Corporation Law,
                "Business Combinations With Interested Stockholders,"
                effective February 2, 1988 (incorporated by reference
                to Exhibit (4B) filed with Consolidated Natural Gas
                Company's Form 10-K for the year ended December 31,
                1987, File No. 1-3196). Other portions of the Delaware
                General Corporation Law affecting security holder
                rights are considered routine and are not filed
                hereunder

          (4C)(i)   Description of Consolidated Natural Gas Company
                    Rights Agreement (Rights Agreement), is hereby incorporated
                    by reference to Exhibit 1 to the Current Report on
                    Form 8-K filed on January 23, 1996

             (ii)   First Amendment to the Rights Agreement, dated as of
                    January 19, 1999, is hereby incorporated by reference to
                    Exhibit 2 to the Registration Statement on Form 8-A/A
                    filed on March 4, 1999

             (iii)  Amendment No. 2 to the Rights Agreement, dated as of
                    February 19, 1999, is hereby incorporated by reference to
                    Exhibit 3 to the Registration Statement on Form 8-A/A
                    filed on March 4, 1999
</TABLE>
 
                                       24
<PAGE>   27
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
         (Continued)
 
EXHIBITS (Continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------------
  SEC
Exhibit
Number                       Description of Exhibit
----------------------------------------------------------------------
<C>       <S>
(10)      Material Contracts:
          The following exhibits are filed with this Form 10-K by
          being incorporated by reference to their filing in the
          Company's Forms 10-K for previous years. The following table
          indicates for each of such exhibits the Form 10-K, File No.
          1-3196, where such exhibit was filed. Exhibits not included
          in this table are filed herewith or incorporated by
          reference to another source as indicated below.

          Form 10-K Exhibit Number                  Reporting Year of Form 10-K
          ------------------------                  ---------------------------
          (10A), (10B), (10C), (10E), (10G)                    1987
          (10I)                                                1989
          (10J), (10L)                                         1994
          (10D), (10K), (10N)                                  1995
          (10M), (10O), (10P), (10Q)                           1996
          (10F), (10J)(i)                                      1997

          (10A)  Form of Split Dollar Insurance Agreement between
                 Consolidated Natural Gas Company and certain employees and
                 Directors

          (10B)  Form of Supplemental Death Benefit Payment Agreement
                 between Consolidated Natural Gas Company and certain
                 employees and Directors

          (10C)  Consolidated Natural Gas Company Supplemental
                 Retirement Benefit Plan

          (10D)  System Supplemental Retirement Plan for Certain
                 Management Employees of Consolidated Natural Gas Company and
                 Its Participating Subsidiaries, as amended December
                 12, 1995

          (10E)  Form of agreement between Consolidated Natural Gas
                 Company and non-employee Directors for deferral of payment
                 of retainer and attendance fees, effective before
                 1987

          (10F)  Deferred Compensation Plan for Directors of
                 Consolidated Natural Gas Company, effective for years
                 beginning with 1987, as amended February 18, 1997

          (10G)  Consolidated Natural Gas Company Cash Incentive Bonus
                 Deferral Plan

          (10H)  Form of Change of Control Employment Agreement
                 between Consolidated Natural Gas Company and certain
                 employees, dated January 19, 1999, is filed herewith

          (10I)  Form of Change of Control Salary Continuation
                 Agreement between Consolidated Natural Gas Company and
                 certain employees

          (10J)  Consolidated Natural Gas Company Annual Executive
                 Incentive Program, as amended December 13, 1994
                 (10J)(i) Attachment C, as amended February 18, 1997, to the
                 Consolidated Natural Gas Company Annual Executive Incentive
                 Program

          (10K)  Unfunded Supplemental Benefit Plan for Employees of
                 Consolidated Natural Gas Company and Its Participating
                 Subsidiaries Who Are Not Represented by a Recognized
                 Union, as amended December 12, 1995

          (10L)  Consolidated Natural Gas Company Non-Employee
                 Directors' Restricted Stock Plan

          (10M)  Consolidated Natural Gas Company 1995 Employee Stock
                 Incentive Plan, as amended September 10, 1996
</TABLE>
 
                                       25
<PAGE>   28
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
         (Concluded)
 
EXHIBITS (Concluded)
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
  SEC
Exhibit
Number                       Description of Exhibit
  --------------------------------------------------------------------
<C>       <S>
          (10N)  Form of Change of Control Employment Agreement
                 between Consolidated Natural Gas Company and certain
                 employees dated December 12, 1995

          (10O)  Consolidated Natural Gas Company 1991 Stock Incentive
                 Plan, as amended September 10, 1996

          (10P)  Trust Agreement between Consolidated Natural Gas
                 Company and Mellon Bank (Trustee) relating to funding of
                 certain beneficial plans for certain employees,
                 dated June 1, 1995

          (10Q)  Consolidated Natural Gas Company 1997 Stock Incentive
                 Plan, is incorporated by reference to Exhibit A in the
                 Company's 1997 definitive proxy statement filed with
                 the SEC

          (10R)  Employment Agreement between Consolidated Natural
                 Gas Company and George A. Davidson, Jr. dated December 22,
                 1998, and related letter dated January 8, 1999, are
                 filed herewith

(11)      Statement re Computation of Per Share Earnings:
          Computations of Earnings Per Common Share--Basic, and
          Earnings Per Common Share--Diluted of Consolidated Natural
          Gas Company and Subsidiaries for the years ended December
          31, 1996 through 1998, are filed herewith

(12)      Statement re Computation of Ratios:
          Ratio of Earnings to Fixed Charges of Consolidated Natural
          Gas Company and Subsidiaries for the calendar years
          1994-1998, inclusive, are filed herewith

(21)      Subsidiaries of the Registrant:
          Subsidiaries of Consolidated Natural Gas Company, is filed
          herewith

(23)      Consents of Experts and Counsel:

          (23A)  Report of Ralph E. Davis Associates, Inc.,
                 independent geologists, dated February 3, 1999, and consent
                 letter authorizing the filing of such report as an
                 exhibit to Consolidated Natural Gas Company's Form
                 10-K for the year ended December 31, 1998, are filed
                 herewith

          (23B)  Consent of PricewaterhouseCoopers LLP--included as
                 part of this ITEM 14

(27)      Financial Data Schedule has been filed electronically

(99)      Appendix I to the Consolidated Natural Gas Company "Notice
          of Annual Meeting and Proxy Statement, 1999," is filed
          herewith
----------------------------------------------------------------------
</TABLE>
 
                                       26
<PAGE>   29
 
                                   SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) 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.
 
                                             CONSOLIDATED NATURAL GAS COMPANY
                                          --------------------------------------
                                                       (Registrant)
 
                                          By:  /S/ GEORGE A. DAVIDSON, JR.
                                            ------------------------------------
                                                 (George A. Davidson, Jr.)
                                                   Chairman of the Board
                                                and Chief Executive Officer
 
March 15, 1999
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 15, 1999.
 
 /S/ GEORGE A. DAVIDSON, JR.
---------------------------
(George A. Davidson, Jr.)
Chairman of the Board
and Chief Executive Officer,
and Director

/S/ D. M. WESTFALL
---------------------------
(D. M. Westfall)
Senior Vice President,
Nonregulated Business
and Chief Financial Officer
 
/S/ S. R. MCGREEVY
---------------------------
(S. R. McGreevy)
Vice President, Accounting
and Financial Control
 
/S/ WILLIAM S. BARRACK, JR.
---------------------------
(William S. Barrack, Jr.)
Director
 
/S/ J. W. CONNOLLY
---------------------------
(J. W. Connolly)
Director
 
/S/ RAYMOND E. GALVIN
---------------------------
(Raymond E. Galvin)
Director
 
/S/ RAY J. GROVES
---------------------------
(Ray J. Groves)
Director
 
/S/ PAUL E. LEGO
---------------------------
(Paul E. Lego)
Director
 
/S/ MARGARET A. MCKENNA
---------------------------
(Margaret A. McKenna)
Director
 
/S/ STEVEN A. MINTER
---------------------------
(Steven A. Minter)
Director
 
/S/ RICHARD P. SIMMONS
---------------------------
(Richard P. Simmons)
Director
 
                                       27
<PAGE>   30
                                  EXHIBIT INDEX


--------------------------------------------------------------------------------
   SEC
 Exhibit
  Number                    Description of Exhibit
--------------------------------------------------------------------------------


   (2)   Plan of acquisition, reorganization, arrangement, liquidation or
         successor:
         (2A)    Agreement and Plan of Merger, dated as of February 19, 1999, by
                 and between Dominion Resources, Inc. and Consolidated Natural
                 Gas Company, is hereby incorporated by reference to Exhibit 2
                 to the Current Report on Form 8-K filed on March 1, 1999

   (3)   Articles of Incorporation and By-Laws:
         (3A)    Certificate of Incorporation of Consolidated Natural Gas
                 Company, restated October 4, 1990 (incorporated by reference to
                 Exhibit A-1 to the Application-Declaration of Consolidated
                 Natural Gas Company on Form U-1, File No. 70-7811), as amended
                 May 31, 1996 (such amendment incorporated by reference to
                 Exhibit 4(B) to the Form S-3 Registration Statement under the
                 Securities Act of 1933, Consolidated Natural Gas Company,
                 Registration No. 333-10869)

         (3B)    By-Laws of Consolidated Natural Gas Company, last amended May
                 19, 1998, are filed herewith

   (4)   Instruments Defining the Rights of Security Holders, Including
         Indentures:

         (4A)    Indentures of Consolidated Natural Gas Company: 
                 Indentures of Consolidated Natural Gas Company are incorporated
                 by reference to previously filed material as indicated on the 
                 list filed herewith

         (4B)    Section 203 of the Delaware General Corporation Law, "Business
                 Combinations With Interested Stockholders," effective February
                 2, 1988 (incorporated by reference to Exhibit (4B) filed with
                 Consolidated Natural Gas Company's Form 10-K for the year ended
                 December 31, 1987, File No. 1-3196). Other portions of the
                 Delaware General Corporation Law affecting security holder
                 rights are considered routine and are not filed hereunder

         (4C)(i) Description of Consolidated Natural Gas Company Rights
                 Agreement, is hereby incorporated by reference to Exhibit 1 to
                 the Current Report on Form 8-K filed on January 23, 1996

            (ii) First Amendment to the Rights Agreement, dated as of January
                 19, 1999, is hereby incorporated by reference to Exhibit 2 to
                 the Registration Statement on Form 8-A/A filed on March 4,
                 1999

           (iii) Amendment No. 2 to the Rights Agreement, dated as of February
                 19, 1999, is hereby incorporated by reference to Exhibit 3 to
                 the Registration Statement on Form 8-A/A filed on March 4, 1999

   (10)  Material Contracts:
         The following exhibits are filed with this Form 10-K by being
         incorporated by reference to their filing in the Company's Forms 10-K
         for previous years. The following table indicates for each of such
         exhibits the Form 10-K, File No. 1-3196, where such exhibit was filed.
         Exhibits not included in this table are filed herewith or incorporated
         by reference to another source as indicated below.

               Form 10-K Exhibit Number              Reporting Year of Form 10-K
               ------------------------              ---------------------------
           (10A), (10B), (10C), (10E), (10G)                      1987
           (10I)                                                  1989
           (10J), (10L)                                           1994
           (10D), (10K), (10N)                                    1995
           (10M), (10O), (10P), (10Q)                             1996
           (10F), (10J)(i)                                        1997

<PAGE>   31

--------------------------------------------------------------------------------
   SEC
 Exhibit
  Number                    Description of Exhibit
--------------------------------------------------------------------------------


   (10)  Material Contracts (Continued):
         (10A)   Form of Split Dollar Insurance Agreement between Consolidated
                 Natural Gas Company and certain employees and Directors

         (10B)   Form of Supplemental Death Benefit Payment Agreement between
                 Consolidated Natural Gas Company and certain employees and
                 Directors

         (10C)   Consolidated Natural Gas Company Supplemental Retirement
                 Benefit Plan

         (10D)   System Supplemental Retirement Plan for Certain Management
                 Employees of Consolidated Natural Gas Company and Its
                 Participating Subsidiaries, as amended December 12, 1995

         (10E)   Form of agreement between Consolidated Natural Gas Company and
                 non-employee Directors for deferral of payment of retainer and
                 attendance fees, effective before 1987

         (10F)   Deferred Compensation Plan for Directors of Consolidated
                 Natural Gas Company, effective for years beginning with 1987,
                 as amended February 18, 1997

         (10G)   Consolidated Natural Gas Company Cash Incentive Bonus Deferral
                 Plan

         (10H)   Form of Change of Control Employment Agreement between
                 Consolidated Natural Gas Company and certain employees, dated
                 January 19, 1999, is filed herewith

         (10I)   Form of Change of Control Salary Continuation Agreement between
                 Consolidated Natural Gas Company and certain employees

         (10J)   Consolidated Natural Gas Company Annual Executive Incentive
                 Program, as amended December 13, 1994

         (10J)(i)Attachment C, as amended February 18, 1997, to the Consolidated
                 Natural Gas Company Annual Executive Incentive Program

         (10K)   Unfunded Supplemental Benefit Plan for Employees of
                 Consolidated Natural Gas Company and Its Participating
                 Subsidiaries Who Are Not Represented by a Recognized Union, as
                 amended December 12, 1995

         (10L)   Consolidated Natural Gas Company Non-Employee Directors'
                 Restricted Stock Plan

         (10M)   Consolidated Natural Gas Company 1995 Employee Stock Incentive
                 Plan, as amended September 10, 1996

         (10N)   Form of Change of Control Employment Agreement between
                 Consolidated Natural Gas Company and certain employees dated
                 December 12, 1995

         (10O)   Consolidated Natural Gas Company 1991 Stock Incentive Plan, as
                 amended September 10, 1996

         (10P)   Trust Agreement between Consolidated Natural Gas Company and
                 Mellon Bank (Trustee) relating to funding of certain beneficial
                 plans for certain employees, dated June 1, 1995

         (10Q)   Consolidated Natural Gas Company 1997 Stock Incentive Plan, is
                 incorporated by reference to Exhibit A in the Company's 1997
                 definitive proxy statement filed with the SEC

<PAGE>   32

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   SEC
 Exhibit
  Number                    Description of Exhibit
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   (10)  Material Contracts (Continued):
         (10R)   Employment Agreement between Consolidated Natural Gas Company
                 and George A. Davidson, Jr. dated December 22, 1998, and 
                 related letter dated January 8, 1999, are filed herewith

   (11)  Statement re Computation of Per Share Earnings: 
         Computations of Earnings Per Common Share -- Basic, and Earnings 
         Per Common Share -- Diluted of Consolidated Natural Gas Company and
         Subsidiaries for the years ended December 31, 1996 through 1998, are
         filed herewith

   (12)  Statement re Computation of Ratios:
         Ratio of Earnings to Fixed Charges of Consolidated Natural Gas
         Company and Subsidiaries for the calendar years 1994-1998, inclusive,
         are filed herewith

   (21)  Subsidiaries of the Registrant:
         Subsidiaries of Consolidated Natural Gas Company, is filed herewith

   (23)  Consents of Experts and Counsel:
         (23A)   Report of Ralph E. Davis Associates, Inc., independent
                 geologists, dated February 3, 1999, and consent letter
                 authorizing the filing of such report as an exhibit to
                 Consolidated Natural Gas Company's Form 10-K for the year ended
                 December 31, 1998, are filed herewith

         (23B)   Consent of PricewaterhouseCoopers LLP - included as part of
                 ITEM 14

   (27)  Financial Data Schedule, is filed herewith

   (99)  Appendix I to the Consolidated Natural Gas Company "Notice of Annual
         Meeting and Proxy Statement, 1999," is filed herewith
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