<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE YEAR ENDED SEPTEMBER 30, 1998

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM       TO
                                                         -----    -----

<TABLE>
<CAPTION>
COMMISSION                                                      IRS EMPLOYER
   FILE                                      STATE OF          IDENTIFICATION
  NUMBER           REGISTRANT             INCORPORATION           NUMBER
--------------------------------------------------------------------------------

<S>           <C>                          <C>                 <C>
1-7810        Energen Corporation             Alabama             63-0757759
2-38960       Alabama Gas Corporation         Alabama             63-0022000
</TABLE>


                              605 21st Street North
                            Birmingham, Alabama 35203
                                 (205) 326-2700
                              ht.//www.energen.com

           Securities Registered Pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
TITLE OF EACH CLASS                                       EXCHANGE ON WHICH REGISTERED
-------------------                                       ----------------------------
<S>                                                       <C>
Energen Corporation Common Stock, $0.01 par value         New York Stock Exchange
Energen Corporation Preferred Stock Purchase Rights       New York Stock Exchange
</TABLE>

        Securities Registered Pursuant to Section 12(g) of the Act: NONE

Indicate by a check mark whether registrants (1) have filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrants
were required to file such reports) and (2) have been subject to such filing
requirements for the past 90 days. YES   X   NO
                                        ---      ---

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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)

Aggregate market value of the voting stock held by non-affiliates of the
registrants as of December 10, 1998:

        Energen Corporation                            $533,117,692

Indicate number of shares outstanding of each of the registrant's classes of
common stock as of December 10, 1998:

        Energen Corporation                        29,505,273 shares
        Alabama Gas Corporation                     1,972,052 shares

Alabama Gas Corporation meets the conditions set forth in General Instruction
I(1) (a) and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format pursuant to General Instruction I(2).

                       DOCUMENTS INCORPORATED BY REFERENCE

-    Energen Corporation Proxy Statement to be filed on or about December 22,
     1998 (Part III, Item 10-13)
-    Portions of Energen Corporation 1998 Annual Report to Shareholders are
     incorporated by reference into Part II, Items 5, 6, 7, and 8 of this report


<PAGE>   2



                               ENERGEN CORPORATION
                          1998 FORM 10-K ANNUAL REPORT


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
                                     PART I

<S>       <C>                                                                   <C>
Item 1.   Business.................................................................3

Item 2.   Properties...............................................................8

Item 3.   Legal Proceedings........................................................9

Item 4.   Submission of Matters to a Vote of Security Holders......................9


                                     PART II

Item 5.   Market for Registrant's Common Stock and Related Stockholder Matters....12

Item 6.   Selected Financial Data.................................................12

Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...............................................12

Item 7a.  Quantitative and Qualitative Disclosures about Market Risk..............12

Item 8.   Financial Statements and Supplementary Data.............................13

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure................................................13


                                    PART III

Item 10.  Directors and Executive Officers of the Registrants.....................14

Item 11.  Executive Compensation..................................................14

Item 12.  Security Ownership of Certain Beneficial Owners and Management..........14

Item 13.  Certain Relationships and Related Transactions..........................14


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K........15
</TABLE>




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    This Form 10-K is filed on behalf of Energen Corporation (Energen or the
                Company) and Alabama Gas Corporation (Alagasco).

PART I

ITEM 1.  BUSINESS

GENERAL

Energen is a Birmingham-based diversified energy holding company engaged
primarily in the purchase, distribution, sale and transportation of natural gas,
principally in central and north Alabama, and in the acquisition, development,
exploration and production of oil and gas in the continental United States. Its
two major subsidiaries are Alabama Gas Corporation (Alagasco) and Energen
Resources Corporation. (As discussed more fully in Note 1 to the Consolidated
Financial Statements, Energen Resources previously was known as Taurus
Exploration Inc.)

Energen was incorporated in Alabama in 1978 in connection with the
reorganization of its largest subsidiary, Alagasco. Alagasco was formed in 1948
by the merger of Alabama Gas Company into Birmingham Gas Company, the
predecessors of which had been in existence since the mid-1800s. Alagasco became
a public company in 1953. Energen Resources was formed in 1971 as a subsidiary
of Alagasco and became a subsidiary of Energen in the 1978 reorganization.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The information required by this item is incorporated by reference from Note 15,
Industry Segment Information, to the Consolidated Financial Statements of the
1998 Annual Report to Shareholders and is attached herein as Part IV, Item 14,
Exhibit 13.

NARRATIVE DESCRIPTION OF BUSINESS

-   NATURAL GAS DISTRIBUTION

    GENERAL: Alagasco is the largest natural gas distribution utility in the
    state of Alabama. Alagasco purchases natural gas through interstate and
    intrastate marketers and suppliers and distributes the purchased gas through
    its distribution facilities for sale to residential, commercial and
    industrial customers and other end-users of natural gas. Alagasco also
    provides transportation services to industrial and commercial customers
    located on its distribution system. These transportation customers, using
    Alagasco as their agent or acting on their own, purchase gas directly from
    producers, marketers or suppliers and arrange for delivery of the gas into
    the Alagasco distribution system; Alagasco then charges a fee to transport
    this customer-owned gas through its distribution system to the customer's
    facility.

    Alagasco's service territory is located in central and parts of north
    Alabama and includes more than 185 cities and communities in 27 counties.
    The aggregate population of the counties served by Alagasco is estimated to
    be 2.3 million. Among the cities served by Alagasco are Birmingham, the
    center of the largest metropolitan area in Alabama, and Montgomery, the
    state capital. During fiscal year 1998, Alagasco served an average of
    423,602 residential customers, 34,733 small commercial and industrial sales
    and transportation customers, and 49 large commercial and industrial
    transportation customers.

    The Alagasco distribution system includes approximately 9,060 miles of main
    and more than 9,800 miles of service lines, odorization and regulation
    facilities, and customer meters. Alagasco also operates two liquified
    natural gas (LNG) facilities which it uses to meet peak demand.

    APSC REGULATION: As an Alabama utility, Alagasco is subject to regulation by
    the Alabama Public Service Commission (APSC). Alagasco's rate-setting
    process, Rate Stabilization and Equalization (RSE), was



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<PAGE>   4

     established by the APSC in 1983, extended with modifications in 1985, 1987
     and 1990, and extended without further change in 1996. RSE replaced the
     traditional utility rate case with quarterly reviews and adjustments
     designed to give Alagasco an opportunity to earn a return on average equity
     at year-end within a designated range, which presently is 13.15 percent to
     13.65 percent. Alagasco has earned at or near its allowed range since
     fiscal 1990, when the APSC modified RSE to include a forward-looking test
     year and approved a temperature adjustment rider to Alagasco's rate tariff.
     On October 7, 1996, RSE was extended without change for a five-year period,
     through January 1, 2002. Under the terms of the extension, RSE will
     continue after January 1, 2002, unless, after notice to the Company and a
     hearing, the APSC votes to modify or discontinue its operation.

     Under RSE as extended, the APSC conducts quarterly reviews to determine,
     based on Alagasco's projections and fiscal year-to-date performance,
     whether Alagasco's return on equity for the fiscal year will be within the
     allowed range. Reductions in rates can be made quarterly to bring the
     projected return within the allowed range; increases, however, are allowed
     only once each fiscal year, effective December 1, and cannot exceed 4
     percent of prior-year revenues. RSE limits the utility's equity upon which
     a return is permitted to 60 percent of total capitalization and provides
     for certain cost control measures designed to monitor Alagasco's operations
     and maintenance (O&M) expenses. If the change in O&M per customer falls
     within 1.25 percentage points above or below the Consumer Price Index for
     All Urban Customers (index range), no adjustment is required. If, however,
     the change in O&M per customer exceeds the index range, three-quarters of
     the difference is returned to customers. To the extent the change is less
     than the index range, the utility benefits by one-half of the difference
     through future rate adjustments.

     The APSC approved an Enhanced Stabilization Reserve (ESR), beginning fiscal
     year 1998, to which Alagasco may charge the full amount of: (1)
     extraordinary O&M expenses resulting from force majeure events such as
     storms, severe weather, and outages, when one or a combination of two such
     events results in more than $200,000 of additional O&M expense during a
     fiscal year; or (2) individual industrial and commercial customer revenue
     losses that exceed $250,000 during the fiscal year if such losses cause
     Alagasco's return on equity to fall below 13.15 percent. The APSC approved
     the reserve on October 6, 1998, in the amount of $3.9 million; the maximum
     approved funding level of the ESR is $4 million. The APSC provides for
     accretions to the ESR in an amount of no more than $40,000 monthly
     following a year in which a charge against the ESR is made until the
     maximum funding level is achieved. The APSC will re-evaluate the operation
     of the ESR following the conclusion of Alagasco's fiscal year 2000.

     The temperature adjustment rider to Alagasco's rate tariff, approved by the
     APSC in 1990, was designed to mitigate the earnings impact of variances
     from normal temperatures. Alagasco performs this real-time temperature
     adjustment calculation monthly, and the adjustments to customers' bills are
     made in the same billing cycle in which the weather variations occurred.
     Substantially all the customers to whom the temperature adjustment applies
     are residential, small commercial and small industrial.

     Alagasco's rate schedules for natural gas distribution charges contain a
     Gas Supply Adjustment (GSA) rider, established in 1993, which permits the
     pass-through to customers of changes in the cost of gas supply, including
     Gas Supply Realignment (GSR) surcharges imposed by Alagasco's suppliers
     resulting from changes in gas supply purchases related to the
     implementation of Federal Energy Regulatory Commission (FERC) Order 636.
     The APSC on October 7, 1996, issued an order providing for the refund to
     customers prior to January 31, 1997, of approximately $17 million of
     supplier refunds, including interest. Alagasco refunded these amounts to
     customers during January 1997. The refunds were collected from a variety of
     sources and most related to the settlement of rate case and FERC Order 636
     proceedings of Southern Natural Gas Company (Southern).

     GAS SUPPLY: Alagasco's distribution system is connected to and has firm
     transportation contracts with two major interstate pipeline systems'
     Southern and Transcontinental Gas Pipe Line Corporation (Transco). On
     Southern's system, Alagasco has 251,679 Mcfd (thousand cubic feet per day)
     of No-Notice Firm Transportation service through October 31, 2008, and
     40,000 Mcfd and 92,373 Mcfd of Firm Transportation service through April
     30, 2002 and October 31, 2008, respectively. Alagasco also has 12,464,074
     Mcf of storage capacity on Southern's system, with a maximum withdrawal
     rate of 251,679 Mcfd from storage and a maximum injection rate of 95,878
     Mcfd to storage. The Transco Firm Transportation contract, which expires in
     2002, provides for




                                       4
<PAGE>   5

     up to 100,000 Mcfd. As a result, Alagasco has a peak day firm interstate
     pipeline transportation capacity of 484,052 Mcfd.

     Alagasco purchases gas from various gas producers and marketers, including
     affiliates of Southern and Transco, and from certain intrastate producers
     and marketers. Alagasco has contracts in place to purchase up to 276,764
     Mcfd of firm supply, of which 232,373 Mcfd is supported by firm
     transportation on the Transco and Southern systems and approximately 23,600
     Mcfd is purchased at the city gate under intrastate firm supply contracts.
     These firm supply volumes along with Alagasco's maximum withdrawal from
     storage of 251,679 Mcfd and LNG peak-shaving capacity of 200,000 Mcfd, give
     Alagasco a peak day firm supply of 728,443 Mcfd. Alagasco also utilizes the
     Southern and Transco pipeline systems to access spot market gas in order to
     supplement its firm system supply and serve its industrial and large
     commercial transportation customers. Deliveries of sales and transportation
     gas totaled 115,347 million cubic feet (MMcf) in fiscal 1998.

     RATE FLEXIBILITY AND COMPETITION: The price of natural gas is a significant
     competitive factor in Alagasco's service territory, particularly among
     large commercial and industrial transportation customers. Propane, coal and
     fuel oil are readily available, and many industrial customers have the
     capability to switch to alternate fuels and/or alternate sources of gas. In
     the residential and small commercial and industrial markets, electricity is
     the principal competitor.

     With the support of the APSC, Alagasco has implemented a variety of
     flexible rate strategies to help it compete for the large customers' gas
     load in the deregulated marketplace. Rate flexibility remains critical as
     the utility faces intense competition for the large customer load. To date,
     the utility has been effective in utilizing its flexible rate strategies to
     minimize bypass and price-based switching to alternate fuels and alternate
     sources of gas.

     In 1994 Alagasco implemented the P Rate in response to the competitive
     challenge of interstate pipeline capacity release. Under this tariff
     provision, Alagasco releases much of its excess pipeline capacity and
     repurchases it as agent for its transportation customers under 12 month
     contracts. The transportation customers benefit from lower pipeline costs.
     Alagasco's core market customers benefit, as well, since the utility uses
     the revenues received from the P Rate to decrease gas costs for its
     residential and small commercial and industrial customers. In fiscal 1998,
     approximately 285 of Alagasco's transportation customers utilized the P
     Rate, and the resulting reduction in core market gas costs totaled
     approximately $9.6 million.

     The Competitive Fuel Clause (CFC) and Transportation Tariff also have been
     important to Alagasco's ability to compete effectively for customer load in
     its service territory. The CFC allows Alagasco to adjust large customer
     rates on a case-by-case basis to compete with alternate fuels and alternate
     sources of gas. The GSA rider to Alagasco's tariff increases the rates paid
     by other customers to recover the reduction in rates allowed under the CFC
     because the retention of any customer, particularly large commercial and
     industrial transportation customers, benefits all customers by recovering a
     portion of the system's fixed costs. The Transportation Tariff allows
     Alagasco to transport gas for customers rather than buy and resell it to
     them. The Transportation Tariff is based on Alagasco's sales profit margin,
     so operating margins are unaffected. The Transportation Tariff also may be
     adjusted under the CFC.

     Alagasco also uses long-term special contracts as a vehicle for retaining
     large customer load. At the end of fiscal 1998, 37 of the utility's largest
     commercial and industrial transportation customers were under special
     contracts of varying lengths.

     During 1998 substantially all of Alagasco's large commercial and industrial
     customer deliveries were the transportation of customer-owned gas. In
     addition, Alagasco served as gas purchasing agent for approximately 99
     percent of its transportation customers.

     Natural gas service available to Alagasco customers generally falls into
     two categories: interruptible and firm. Interruptible service is
     contractually subject to interruption by Alagasco for various reasons, the
     most common of which is curtailment of industrial customers during periods
     of peak residential heating demand. Firm service,



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<PAGE>   6

     in general, is not subject to interruption and, therefore, is more
     expensive. Firm service is generally provided to residential and small
     commercial and industrial customers, while interruptible service is
     generally provided to large commercial and industrial transportation
     customers which typically have the capability to reduce gas consumption by
     adjusting their production schedules or by switching to alternate fuels
     during periods of interruption.

     GROWTH: Customer growth presents a major challenge for Alagasco, and its
     low customer growth rate in 1998 underscores the utility's mature status
     and the slow-growth nature of its service territory. Customer growth in
     fiscal 1998 was relatively flat. At the same time, the utility penetrated
     88 percent of the new single-family homes built in its service territory
     and 53 percent of the new multi-family construction. Meanwhile, Alagasco's
     saturation rate of approximately 70 percent exceeds the national average of
     approximately 51 percent.

     A vehicle for supplementing Alagasco's normal growth continues to be
     Alagasco's municipal acquisition program. Since 1985 Alagasco has acquired
     22 municipally-owned systems, adding more than 42,000 customers through
     initial system purchases and subsequent customer additions. Alagasco has
     been successful in increasing the systems' relatively low saturation rates
     subsequent to purchase through a variety of marketing efforts including
     offering natural gas service to propane customers located on the municipal
     system's lines, expanding into nearby neighborhoods that desire natural gas
     service, and marketing natural gas appliances to existing and new
     customers. Approximately 78 municipal systems remain in Alabama. Although
     Alagasco did not acquire any new municipal gas systems in 1997 or 1998, it
     continues to pursue the purchase of municipal gas systems, and company
     management believes that such acquisitions offer future growth
     opportunities.

     WEATHER: Alagasco's gas distribution business is highly seasonal since a
     material portion of the utility's total sales and delivery volumes is to
     customers (principally residential and small commercial and industrial)
     whose use varies depending upon temperature. Alagasco's rate tariff
     includes a temperature adjustment rider which is designed to mitigate the
     effect of departures from normal temperature on Alagasco's earnings. The
     calculation is performed monthly, and adjustments are made to customers'
     bills in the actual month the weather variation occurs.

     ENVIRONMENTAL MATTERS: Alagasco is in the chain of title of eight former
     manufactured gas plant sites and five manufactured gas distribution sites.
     It still owns four of the plant sites and one of the distribution sites.
     Preliminary investigations indicate no need at present for remediation
     activities. Management expects that, should remediation of any such sites
     be required in the future, Alagasco's share of any associated costs will
     not affect materially the results of its operations or financial condition.

     OTHER: For a discussion of risks inherent in the company's businesses,
     including Alagasco, see management's Discussion and Analysis in the 1998
     Annual Report to Shareholders (pages 25 and 26), which is attached herein
     as Part IV, Item 14, Exhibit 13.

-    OIL AND GAS ACTIVITIES

     GENERAL: Energen Resources is involved primarily in the acquisition and
     exploitation of producing oil and natural gas properties with varying
     levels of development potential and, to a lessor extent, in the exploration
     and development of new reservoirs. Energen Resources also provides
     fee-based coalbed methane operating services in the Black Warrior Basin for
     its partners and third parties. All of Energen Resources' operations are
     located in the United States.

     At the end of fiscal 1998, Energen Resources' remaining recoverable
     reserves totaled 764.9 billion cubic feet equivalent (Bcfe) and were
     located primarily in Alabama, New Mexico, Texas, Mississippi and Louisiana.
     Energen Resources' reserve base is conservative in nature, with more than
     85 percent of year-end reserves classified as proved developed; in
     addition, the reserve base is long-lived, with a year-end
     reserves-to-production ratio of 13-to-1. Energen Resources' reserves also
     are concentrated in areas with multiple pay zone opportunities, such as the
     San Juan, Black Warrior and Permian Basins. Natural gas represents more
     than 70




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    percent of Energen Resources' reserves, with oil and natural gas liquids
    comprising the balance. Energen Resources' production in fiscal 1998 totaled
    57.4 Bcfe and is estimated to reach 87 Bcfe in fiscal 1999.

    GROWTH STRATEGY: Fiscal 1998 marked the third year of Energen's aggressive
    growth strategy which calls for significant capital investment in Energen
    Resources' oil and gas activities. Over the last three fiscal years, Energen
    Resources has invested approximately $365 million to acquire producing
    properties, $60 million in associated exploitation and development drilling,
    and $75 million in exploration and related development. This $500 million of
    capital investment has added approximately 820 Bcfe of proved reserves. Over
    the five-year period ending September 30, 2003, Energen Resources
    anticipates spending approximately $1 billion in the acquisition and
    exploitation of producing properties and in exploration and related
    development.

    PROPERTY ACQUISITIONS AND EXPLOITATION: Energen Resources' acquisition
    efforts focus on the purchase of producing properties which have varying
    degrees of potential for increased reserves and production through
    exploitation and development. During fiscal years 1996, 1997 and 1998,
    Energen Resources acquired an estimated 740 Bcfe of proved reserves for
    approximately $365 million, resulting in an average acquisition cost of 49
    cents per Mcfe. In addition, Energen Resources spent $60 million over the
    three years in exploitation and development costs and plans to spend
    approximately $70 million over the next several years on development of
    these reserves.

    In fiscal 1998, Energen Resources invested approximately $85 million to
    acquire an estimated 120 Bcfe of proved reserves. Energen Resources' largest
    acquisition of fiscal 1998 occurred in the first quarter with the $43.3
    million purchase of Permian Basin oil and gas reserves from B.C. Oil and Gas
    Ltd. and affiliates. Of the estimated 80 Bcfe of proved reserves in west
    Texas, approximately 70 percent were oil and approximately 40 Bcfe were
    classified as behind-pipe or proved undeveloped. Most significant was that
    Energen Resources gained a substantial operating presence in the Permian
    Basin by assuming operations for approximately 70 percent of the wells.

    Energen Resources' presence in the Permian Basin was enhanced in September
    1998 when the Company traded the majority of its shallow water Gulf of
    Mexico interests for the Permian Basin interests of EEX Corporation. Energen
    Resources gained an estimated 58 Bcfe of oil, natural gas and liquids
    reserves from EEX in exchange for 38 Bcf of proved natural gas reserves,
    with interests in 30 offshore blocks and $10.4 million in cash. Energen
    Resources also assumed operations for approximately 30 percent of the
    properties and received EEX's interests in 40,000 net undeveloped acres in
    the Permian Basin.

    Subsequent to year-end, Energen Resources acquired TOTAL Minatome
    Corporation (TOTAL) and, immediately upon closing, sold an undivided 31
    percent interest in TOTAL's assets to Westport Oil and Gas Company, Inc.
    Energen Resources' net investment totaled approximately $134.6 million,
    including the assumption of certain legal and financial obligations, for
    approximately 200 Bcfe of proved oil and gas reserves. Plans call for
    Energen Resources to spend an estimated $70 million over the next several
    years on exploitation of the approximately 45 percent of behind-pipe and
    proved undeveloped reserves.

    An expanding part of Energen Resources' business strategy is the
    exploitation and development of acquired properties. Energen Resources has
    achieved particular success in the San Juan Basin, where production
    increased approximately 8 million cubic feet per day as the result of
    low-cost operational improvements for an associated cost of $1.1 million. In
    fiscal 1998, Energen Resources also drilled eight successful development
    wells for $6.7 million and added approximately 18.5 Bcfe of reserves for 36
    cents per Mcfe.

    In the Permian Basin, exploitation activities are proceeding as planned.
    During 1998, Energen Resources drilled four new wells and eight well
    recompletions, thus developing approximately 442,000 barrels of previously
    classified proved undeveloped reserves at an associated cost of $1.9
    million, or approximately $4 per barrel.

    Over the next four years, Energen Resources plans to drill approximately 60
    development wells in the San Juan Basin and perform 125 well recompletions
    at a net cost of some $48 million. In the Permian Basin, Energen



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    Resources plans to drill approximately 20 wells and perform 15 recompletions
    at a net cost of about $7 million.

    EXPLORATION AND DEVELOPMENT: Energen Resources' business strategy also calls
    for limited exploration and related development. During 1998, the property
    swap with EEX Corporation (discussed above) marked an important strategic
    shift for Energen Resources by refocusing the company's future exploration
    efforts away from the offshore Gulf and toward onshore areas where it has a
    strong operating presence. In connection with the EEX transaction, Energen
    Resources also received interests in 40,000 net undeveloped acres in the
    Permian Basin. Energen Resources did not participate in any offshore
    exploratory drilling in fiscal 1998. As a 9 percent interest partner,
    Energen Resources participated in the drilling of one unsuccessful well in
    the Cotton Valley Pinnacle Reef play in the east Texas salt basin. During
    1998 Energen Resources invested approximately $11 million in exploration and
    related development.

    RISK MANAGEMENT: Energen Resources attempts to lower the risk associated
    with its oil and gas business plan. A key component of the company's efforts
    to manage risk is its acquisition orientation and the conservative character
    of the company's reserve base. To help reduce short-term commodity price
    risk, Energen Resources uses market-driven pricing estimates and hedging
    strategies. In pursuing an acquisition, Energen Resources uses in its models
    then-current oil and gas futures prices, the prevailing swap curve and, for
    the longer-term, its own pricing assumptions. After a purchase, Energen
    Resources may use futures, swaps and/or fixed-price contracts to hedge
    targeted prices on a portion of the acquisition's flowing production.
    Typically, where used, such acquisition related hedges have been for 12 to
    36 months. On an on-going basis, Energen Resources may hedge up to 80
    percent of its flowing production in any given fiscal year depending on its
    pricing outlook. For fiscal 1999, Energen Resources entered into contracts
    and swaps for 48.9 Bcf of its flowing gas production at an average contract
    price (before basis differentials) of $2.31 per Mcf and 1,080 MBbl of its
    oil production at an average contract price of $16.31 per barrel. For fiscal
    2000 and 2001, Energen Resources entered into contracts and swaps for 5.2
    Bcf of its flowing gas production at an average contract price (before basis
    differentials) of $2.22 per Mcf and 180 MBbl of its oil production at an
    average contract price of $17.31 per barrel. (See Item 7a, Quantitative and
    Qualitative Disclosures About Market Risk, and the Forward-Looking
    Statements and Risk in Item 7, Management's Discussion and Analysis of
    Financial Condition and Results of Operations, for further discussion with
    respect to price and other risk.)

    ENVIRONMENTAL MATTERS: Energen Resources is subject to various environmental
    regulations. Management believes that Energen Resources is in compliance
    with currently applicable standards of the environmental agencies to which
    it is subject and that potential environmental liabilities, if any, are
    minimal. Also, to the extent that Energen Resources has operating agreements
    with various joint venture partners, environmental costs, if any, would be
    shared proportionately.

    OTHER: For a discussion of risks inherent in the Company's businesses, see
    Management's Discussion and Analysis in the 1998 Annual Report to
    Shareholders (pages 25 and 26) which is attached herein as Part IV, Item 14,
    Exhibit 13.

EMPLOYEES

The Company has 1,421 employees; Alagasco employs 1,238; Energen Resources
employs 171; and Energen's other subsidiaries employ 12.

ITEM 2.      PROPERTIES

The corporate headquarters of Energen, Alagasco and Energen Resources are
located in recently constructed office space in Birmingham, Alabama. The Company
expects to close negotiations on a sale and leaseback of the new headquarters
building facility in fiscal 1999. The proceeds from the sale are expected to
approximate the investment in the facility.



                                       8
<PAGE>   9


The properties of Alagasco consist primarily of its gas distribution system,
which includes more than 9,060 miles of main, more than 9,800 miles of service
lines, odorization and regulation facilities, and customer meters. Alagasco also
has two liquified natural gas facilities, eight division offices, 10 payment
centers, six district offices, nine service centers, and other related property
and equipment, some of which are leased by Alagasco. For a further description
of Alagasco's properties, see discussion under Item I-Business.

For a description of Energen Resources' oil and gas properties, see the
discussion under Item 1-Business. Information concerning Energen Resources'
production, reserves and development is included in Note 14, Oil and Gas
Producing Activities (unaudited), to the Consolidated Financial Statements which
is incorporated by reference from the 1998 Annual Report to Shareholders and
included in Part IV, Item 14, Exhibit 13, herein. The proved reserve estimates
are consistent with comparable reserve estimates filed by Energen Resources with
any federal authority or agency.

ITEM 3.      LEGAL PROCEEDINGS

Energen and its affiliates are, from time to time, parties to various pending or
threatened legal proceedings. Certain of these lawsuits include claims for
punitive damages in addition to other specific relief. Based upon information
presently available and in light of available legal and other defenses,
contingent liabilities arising from threatened and pending litigation are not
considered material in relation to the respective financial positions of Energen
and its affiliates. It should be noted, however, that Energen and its affiliates
conduct business in Alabama and other jurisdictions in which the magnitude and
frequency of punitive damage awards may bear little or no relation to
culpability or actual damages thus making it increasingly difficult to predict
litigation results.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 1998.



                                       9
<PAGE>   10


EXECUTIVE OFFICERS OF THE REGISTRANTS

ENERGEN CORPORATION

<TABLE>
<CAPTION>
       Name                                     Age                        Position (1)
       ----                                     ---                        ------------
<S>                                             <C>               <C>
Wm. Michael Warren, Jr.                         51                Chairman of the Board
                                                                  President and Chief Executive Officer (2)

Geoffrey C. Ketcham                             47                Executive Vice President, Chief Financial
                                                                  Officer and Treasurer (3)

Gary C. Youngblood                              55                President and Chief Operating Officer of
                                                                  Alagasco (4)

James T. McManus                                40                President and Chief Operating Officer of
                                                                  Energen Resources (5)

Dudley C. Reynolds                              45                General Counsel and Secretary (6)

J. David Woodruff, Jr.                          42                Vice President-Legal and Assistant Secretary
                                                                  and Vice President-Corporate Development (7)

Grace B. Carr                                   43                Controller (8)
</TABLE>


NOTES:  (1) All executive officers of Energen except for Ms. Carr have been
            employed by Energen or a subsidiary for the past five years.
            Officers serve at the pleasure of its Board of Directors.

        (2) Served as Senior Vice President and General Counsel of Alagasco from
            September 1983 to October 1984, when he was elected President and
            Chief Operating Officer of that corporation. Elected Executive Vice
            President of Energen June 1987 and elected President and Chief
            Operating Officer of Energen April 1991. Elected President and Chief
            Operating Officer of all Energen subsidiaries January 1992. Elected
            Chief Executive Officer of Alagasco and Energen Resources effective
            October 1995. Elected Chief Executive Officer of Energen February
            1997. Elected Chairman of the Board of Energen effective January 1,
            1998. Serves as a Director of Energen and each of its subsidiaries.

        (3) Elected Controller of Alagasco November 1981, Vice President and
            Controller June 1984, Vice President-Finance and Planning of
            Alagasco June 1985, and Vice President-Planning of Energen August
            1986. Elected Vice President-Finance, Chief Financial Officer and
            Treasurer of Energen and each of its subsidiaries June 1987. Elected
            Senior Vice President-Finance, Chief Financial Officer and Treasurer
            of Energen and each of its subsidiaries April 1989. Elected
            Executive Vice President, Chief Financial Officer and Treasurer of
            Energen and each of its subsidiaries April 1991.

        (4) Served as District Manager-Birmingham District until June 1985, when
            he was elected Vice President-Birmingham Operations; Elected Senior
            Vice President-Administration of Alagasco April 1991, Executive Vice
            President of Alagasco October 1993, Chief Operating Officer of
            Alagasco effective October 1995, and President of Alagasco April
            1997.

        (5) Served as Director of Corporate Accounting of Energen until November
            1988, when he was elected Controller of Energen; Elected Controller
            of Alagasco May 1989, Assistant Vice President-Corporate Development
            of Energen June 1990, Vice President-Finance and Corporate
            Development of Energen and Vice President-Finance and Planning of
            Alagasco effective April 1991, Executive Vice President 




                                       10
<PAGE>   11


            and Chief Operating Officer of Energen Resources effective October
            1995, and President of Energen Resources April 1997.

        (6) Served as Staff Attorney for Energen and its subsidiaries until
            November 1984, when he was named Senior Attorney. Elected Assistant
            Secretary in 1985 and Secretary effective September 1986, Vice
            President-Legal and Secretary of Energen and each of its
            subsidiaries June 1987, and General Counsel and Secretary of Energen
            and each of its subsidiaries April 1991.

        (7) Served as Staff Attorney for Alagasco until June 1987, when he was
            named Senior Attorney. Elected Assistant Vice President-Legal and
            Assistant Secretary of Energen and each of its subsidiaries November
            1988, Vice President-Legal and Assistant Secretary of Energen and
            each of its subsidiaries April 1991, Vice President-Legal, and
            Assistant Secretary of Energen and each of its subsidiaries and Vice
            President-Corporate Development of Energen October 1995.

        (8) Served as Director of Accounting and Budgets for Alagasco until June
            1987, when she was elected Controller of Alagasco. Served as
            Controller of Alagasco until April 1989 and was not employed from
            April 1989 through December 1997. Elected Controller of Energen in
            January 1998.




                                       11
<PAGE>   12


PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The information regarding Energen's common stock and the frequency and amount of
dividends paid during the past two years with respect to such stock is
incorporated by reference from the 1998 Annual Report to Shareholders, page 26,
and is included in Part IV, Item 14, Exhibit 13, herein. At December 10, 1998,
there were approximately 9,140 holders of record of Energen's common stock. For
restrictions on Energen's present and future ability to pay dividends, see Note
3 to the Consolidated Financial Statements which is incorporated by reference
from the 1998 Annual Report to Shareholders and included in Part IV, Item 14,
Exhibit 13, herein.

At the date of this filing, Energen Corporation owns all the issued and
outstanding common stock of Alabama Gas Corporation.

ITEM 6.  SELECTED FINANCIAL DATA

The information regarding selected financial data is incorporated by reference
from the 1998 Annual Report to Shareholders, pages 50-51, and is included in
Part IV, Item 14, Exhibit 13, herein.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

This information is incorporated by reference from the 1998 Annual Report to
Shareholders, pages 19-26, and is included in Part IV, Item 14, Exhibit 13,
herein.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Energen Resources' major market risk exposure is in the pricing applicable to
its oil and gas production. Historically, prices received for oil and gas
production have been volatile because of seasonal weather patterns, national
supply and demand factors and general economic conditions. Crude oil prices are
also affected by quality differentials, by worldwide political developments and
by actions of the Organization of Petroleum Exporting Countries. Basis
differentials, like the underlying commodity prices, can be volatile because of
regional supply and demand factors, including seasonal factors and the
availability and price of transportation to consuming areas.

Energen Resources enters into derivative commodity instruments to hedge its
exposure to the impact of price fluctuations on oil and gas production. Such
instruments include regulated natural gas and crude oil futures contracts traded
on the New York Mercantile Exchange and over-the-counter swaps and basis hedges
with major energy derivative product specialists. All hedge transactions are
subject to the Company's risk management policy, approved by the Board of
Directors, which does not permit speculative positions. These transactions are
accounted for under the hedge method of accounting. Under this method, any
unrealized gains and losses are recorded as a current receivable/payable and a
deferred gain/loss. Realized gains and losses are deferred as current
liabilities or assets until the revenues from the related hedged volumes are
recognized in the income statement. Cash flows from derivative instruments are
recognized as incurred through changes in working capital. The Company had
deferred gains of $0.6 million and deferred losses of $12.9 million on the
balance sheet at September 30, 1998, and September 30, 1997, respectively.

The Company uses a sensitivity analysis to evaluate the hypothetical effect that
changes in the market value of crude oil and natural gas may have on the fair
value of its derivative instruments. This analysis measures the impact on the
commodity derivative instruments and, thereby, does not consider the underlying
exposure related to the commodity. At September 30, 1998, the Company estimates
that a 10 percent change in the underlying commodities prices would result in a
$13.4 million change in the fair value of open derivative contracts. However,
gains and losses on derivative contracts are expected to be similarly offset by
sales at the spot market price. Due 



                                       12
<PAGE>   13


to the short duration of the contracts, time value of money is ignored. The
hypothetical change in fair value is calculated by multiplying the difference
between the hypothetical price and the contractual price by the contractual
volumes.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item for Energen Corporation and subsidiaries
is incorporated by reference from the 1998 Annual Report to Shareholders and is
included in Part IV, Item 14, Exhibit 13, herein. The information required by
this item for Alabama Gas Corporation is contained in Part IV, Item 14, herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None



                                       13
<PAGE>   14


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

Information regarding the executive officers of Energen is included in Part I.
The other information required by Item 10 is incorporated herein by reference
from Energen's definitive proxy statement for the Annual Meeting of Shareholders
to be held January 27, 1999. The proxy statement will be filed on or about
December 22, 1998.

ITEM 11. EXECUTIVE COMPENSATION

The information regarding executive compensation is incorporated herein by
reference from Energen's definitive proxy statement for the Annual Meeting of
Shareholders to be held January 27, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

A.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The information regarding the security ownership of the beneficial owners
     of more than five percent of Energen's common stock is incorporated herein
     by reference from Energen's definitive proxy statement for the Annual
     Meeting of Shareholders to be held January 27, 1999.

B.  SECURITY OWNERSHIP OF MANAGEMENT

     The information regarding the security ownership of management is
     incorporated herein by reference from Energen's definitive proxy statement
     for the Annual Meeting of Shareholders to be held January 27, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information regarding certain relationships and related transactions is
incorporated herein by reference from Energen's definitive proxy statement for
the Annual Meeting of Shareholders to be held January 27, 1999.



                                       14
<PAGE>   15


PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A.  DOCUMENTS FILED AS PART OF THIS REPORT

     (1)   FINANCIAL STATEMENTS
           The financial statements listed in the accompanying Index to
           Financial Statements and Financial Statement Schedules are filed as
           part of this report and are included in Part IV, Item 14, Exhibit 13,
           herein.

     (2)   FINANCIAL STATEMENT SCHEDULES
           The financial statement schedules listed in the accompanying Index to
           Financial Statements and Financial Statement Schedules are filed as
           part of this report.

     (3)   EXHIBITS
           The exhibits listed on the accompanying Index to Exhibits are filed
           as part of this report.

B.  REPORTS ON FORM 8-K

     (1)   Form 8-K dated June 24, 1998, reporting the adoption of a new
           Shareholders Rights Plan to replace the existing Rights Plan when it
           expired at the close of business on July 27, 1998.

     (2)   Form 8-K dated October 15, 1998, reporting Energen Resources'
           acquisition of TOTAL Minatome Corporation.



                                       15
<PAGE>   16


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned thereunto duly authorized.


                               ENERGEN CORPORATION
                                  (Registrant)


                             ALABAMA GAS CORPORATION
                                  (Registrant)



  December 16, 1998           /s/Wm. Michael Warren, Jr.
-------------------------     --------------------------------------------------
      DATE                    Wm. Michael Warren, Jr.
                              Chairman, President and Chief Executive Officer of
                              Energen Corporation, Chairman and Chief Executive
                              Officer of Alabama Gas Corporation






                                       16
<PAGE>   17


                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrants and
in the capacities and on the dates indicated:


  December 16, 1998           /s/Wm. Michael Warren, Jr.
-------------------------     --------------------------------------------------
      DATE                    Wm. Michael Warren, Jr.
                              Chairman, President and Chief Executive Officer of
                              Energen Corporation, Chairman and Chief Executive
                              Officer of Alabama Gas Corporation


  December 16, 1998           /s/Geoffrey C. Ketcham
-------------------------     --------------------------------------------------
      DATE                    Geoffrey C. Ketcham
                              Executive Vice President, Chief Financial Officer
                              and Treasurer of Energen Corporation and Alabama
                              Gas Corporation


  December 16, 1998           /s/Grace B. Carr
-------------------------     --------------------------------------------------
      DATE                    Grace B. Carr
                              Controller of Energen Corporation


  December 16, 1998           /s/Paula H. Rushing
-------------------------     --------------------------------------------------
      DATE                    Paula H. Rushing
                              Vice President-Finance of Alabama Gas
                              Corporation


  December 16, 1998           /s/J. Mason Davis, Jr.
-------------------------     --------------------------------------------------
      DATE                    J. Mason Davis, Jr.
                              Director


  December 16, 1998           /s/Julian W. Banton
-------------------------     --------------------------------------------------
      DATE                    Julian W. Banton
                              Director


  December 16, 1998           /s/R. D. Cash
-------------------------     --------------------------------------------------
      DATE                    R. D. Cash
                              Director


  December 16, 1998           /s/James S. M. French
-------------------------     --------------------------------------------------
     DATE                     James S. M. French
                              Director


  December 16, 1998           /s/Rex J. Lysinger
-------------------------     --------------------------------------------------
     DATE                     Rex J Lysinger
                              Director



                                       17
<PAGE>   18


                               ENERGEN CORPORATION
                             ALABAMA GAS CORPORATION
                          INDEX TO FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES

                                   ITEM 14(A)

<TABLE>
<CAPTION>
                                                                                            Reference Page
                                                                                            ----------------
                                                                                                       1998
                                                                                            1998      Annual
                                                                                            10-K      Report
                                                                                            ----      ------
<S>  <C>                                                                                    <C>       <C>
1.   Financial Statements

     ENERGEN CORPORATION

              Report of Independent Certified Public Accountants......................                    49

              Consolidated Statements of Income for the years ended
              September 30, 1998, 1997 and 1996.......................................                    27

              Consolidated Balance Sheets as of September 30, 1998 and 1997...........                    28

              Consolidated Statements of Shareholders' Equity for the years
              ended September 30, 1998, 1997 and 1996.................................                    30

              Consolidated Statements of Cash Flows for the years ended
              September 30, 1998, 1997 and 1996.......................................                    31

              Notes to Consolidated Financial Statements..............................                    32

     ALABAMA GAS CORPORATION

              Report of Independent Certified Public Accountants......................         22

              Statements of Income for the years ended
              September 30, 1998, 1997 and 1996.......................................         23

              Balance Sheets as of September 30, 1998 and 1997........................         24

              Statements of Shareholder's Equity for the years ended
              September 30, 1998, 1997 and 1996.......................................         26

              Statements of Cash Flows for the years ended
              September 30, 1998, 1997 and 1996.......................................         27

              Notes to Financial Statements...........................................         28
</TABLE>





                                       18
<PAGE>   19


<TABLE>
<CAPTION>
                                                                                            Reference Page
                                                                                            ----------------
                                                                                                       1998
                                                                                            1998      Annual
                                                                                            10-K      Report
                                                                                            ----      ------
<S>  <C>                                                                                    <C>       <C>
2.   Financial Statement Schedules

     ENERGEN CORPORATION

              Report of Independent Certified Public Accountants......................         37

              Schedule II     Valuation and Qualifying Accounts.......................         38

     ALABAMA GAS CORPORATION

              Schedule II     Valuation and Qualifying Accounts.......................         39
</TABLE>


Schedules other than those listed above are omitted for the reason that they are
not required or are not applicable, or the required information is shown in the
financial statements or notes thereto.




                                       19
<PAGE>   20


                               ENERGEN CORPORATION
                             ALABAMA GAS CORPORATION
                                INDEX TO EXHIBITS
                                  ITEM 14(A)(3)

<TABLE>
<CAPTION>
Exhibit
Number                                  Description
<S>            <C>                                                           
 3(a)          Restated Certificate of Incorporation of Energen Corporation
               (composite, as amended February 2, 1998) which was filed as
               Exhibit 3(b) to Energen's Quarterly Report on Form 10-Q for the
               quarter ended December 31, 1997 (File No. 1-7810)

*3(b)          Articles of Amendment to Restated Certificate of Incorporation of
               Energen, designating Series 1998 Junior Participating Preferred
               Stock (July 27, 1998) which was filed as Exhibit 4(b) to
               Energen's Post Effective Amendment No. 1 to Registration
               Statement on Form S-3 (Registration No. 333-00395)

 3(c)          Bylaws of Energen Corporation (as amended through June 22, 1998)

*3(d)          Articles of Amendment and Restatement of the Articles of
               Incorporation of Alabama Gas Corporation, dated September 27,
               1995, which was filed as Exhibit 3(i) to the registrant's Annual
               Report on Form 10-K for the year ended September 30, 1995, (file
               No. 1-7810)

 3(e)          By-laws of Alabama Gas Corporation (as amended through June 22,
               1998)

*4(a)          Rights Agreement, dated as of July 27, 1998, between Energen
               Corporation and First Chicago Trust Company of New York, Rights
               Agent, which was filed as Exhibit 1 to Energen's Registration
               Statement on Form 8-A, dated July 10, 1998 (File No. 1-7810)

*4(b)          Indenture, dated as of January 1, 1992, between Energen
               Corporation and Boatmen's Trust Company, Trustee, which was filed
               as Exhibit 4 to Energen's Amendment No. 1 to Registration
               Statement on Form S-3 (Registration No. 33-44936)

*4(c)          First Supplemental Indenture, dated as of September 5, 1997,
               between Energen Corporation and The Bank of New York, Trustee, to
               Indenture dated as of January 1, 1992, which was filed as Exhibit
               4(a) to the Registrant's Quarterly Report on Form 10-Q for the
               quarter ended December 31, 1997 (File No. 1-7810)

*4(d)          Indenture, dated as of March 1, 1993, between Energen Corporation
               and Boatmen's Trust Company, Trustee, which was filed as Exhibit
               4 to Energen's Registration Statement on Form S-3 (Registration
               No. 33-25435)

*4(e)          First Supplemental Indenture, dated as of September 5 ,1997,
               between Energen Corporation and The Bank of New York, Trustee, to
               Indenture dated as of March 1, 1993, which was filed as Exhibit
               4(b) to the Registrant's Quarterly Report on Form 10-Q for the
               quarter ended December 31, 1997 (File No.
               1-7810)

*4(f)          Form of Indenture between Energen Corporation and The Bank of New
               York, as Trustee, which was dated as of September 1, 1996, and
               which was filed as Exhibit 4(i) to the Registrant's Registration
               Statement on Form S-3 (Registration No. 333-11239)

*4(g)          Indenture dated as of November 1, 1993, between Alabama Gas
               Corporation and NationsBank of Georgia, National Association,
               Trustee, which was filed as Exhibit 4(k) to Alabama Gas'
               Registration Statement on Form S-3 (Registration No. 33-70466)
</TABLE>



                                       20
<PAGE>   21



<TABLE>
<CAPTION>
Exhibit
Number                                   Description
<S>            <C>                                                              
 *10(a)        Form of Service Agreement Under Rate Schedule CSS (No. S10710),
               between Southern Natural Gas Company and Alabama Gas Corporation
               which was filed as Exhibit 10(a) to Energen's Annual Report on
               Form 10-K for the year ended September 30, 1993 (File No. 1-7810)

 *10(b)        Form of Service Agreement Under Rate Schedule FT-NN (No. 866941),
               between Southern Natural Gas Company and Alabama Gas Corporation
               which was filed as Exhibit 10(c) to Energen's Annual Report on
               Form 10-K for the year ended September 30, 1993 (File No. 1-7810)

  10(c)        Form of Executive Retirement Supplement Agreement between Energen
               Corporation and certain executive officers

  10(d)        Form of Severance Compensation Agreement between Energen
               Corporation and certain executive officers

  10(e)        Energen Corporation 1988 Stock Option Plan (as amended November
               25, 1997)

  10(f)        Energen Corporation 1992 long-range Performance Share Plan, as
               amended April 25, 1997, which was filed as Exhibit 10(f) to
               Energen's Annual Report on Form 10-K for the year ended September
               30, 1997 (File 1-7810)

 *10(g)        Energen Corporation 1997 Stock Incentive Plan, which was filed as
               Appendix A to Energen's Proxy Statement for its January 28, 1998,
               Annual Meeting (File No. 1-7810)

  10(h)        Energen Corporation 1997 Deferred Compensation Plan, (as amended
               September 23, 1998)

  10(i)        Energen Corporation 1992 Directors Stock Plan, (as amended April
               25, 1997)

 *10(j)        Energen Corporation Director Fees Deferral Plan which was filed
               as Exhibit 10(l) to Energen's Annual Report on Form 10-K for the
               year ended September 30, 1993 (File No. 1-7810)

 *10(k)        Energen Corporation Annual Incentive Compensation Plan, Revised
               5/90, as amended effective October 1, 1993, which was filed as
               Exhibit 10(m) to Energen's Annual Report on Form 10-K for the
               year ended September 30, 1994 (File No. 1-7810)

  13           Information incorporated by reference from pages 19-53 of the
               Energen Corporation 1998 Annual Report to Stockholders

  21           Subsidiaries of Energen Corporation

  23           Consent of Independent Certified Public Accountants (Energen
               Corporation)

  27.1         Financial Data Schedule of Energen Corporation (for SEC purposes
               only)

  27.2         Financial Data Schedule of Alabama Gas Corporation (for SEC
               purposes only)

  27.3         Restated Financial Data Schedule of Energen Corporation for
               September 30, 1997 (for SEC purposes only)

  27.4         Restated Financial Data Schedule of Energen Corporation for
               September 30,1996 (for SEC purposes only)
</TABLE>

*Incorporated by reference



                                       21
<PAGE>   22


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF ALABAMA GAS CORPORATION:

In our opinion, the accompanying financial statements of Alabama Gas Corporation
listed in the index on page 18 of this form 10-K present fairly, in all material
respects, the financial position of Alabama Gas Corporation at September 30,
1998 and 1997, and the results of its operations and cash flows for each of the
three years in the period ended September 30, 1998, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the index on page 19 of this form 10-K presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and the financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.




PricewaterhouseCoopers LLP
Birmingham, Alabama
October 28, 1998



                                       22
<PAGE>   23


STATEMENTS OF INCOME
ALABAMA GAS CORPORATION

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS)                             1998             1997              1996
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>              <C>        
OPERATING REVENUES                                               $   369,940       $   362,984      $   357,252
---------------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
Cost of gas                                                          176,124           177,837          181,400
Operations and maintenance                                            98,897            96,211           92,541
Depreciation                                                          25,153            23,486           21,269
Income taxes
    Current                                                           16,801            11,223            8,699
    Deferred, net                                                     (4,932)             (618)             835
    Deferred investment tax credits, net                                (469)             (487)            (487)
Taxes, other than income taxes                                        28,103            26,658           26,772
---------------------------------------------------------------------------------------------------------------

       Total operating expenses                                      339,677           334,310          331,029
---------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                      30,263            28,674           26,223
---------------------------------------------------------------------------------------------------------------

OTHER INCOME
Allowance for funds used during construction                             400               490              972
Other, net                                                               145               215             (649)
---------------------------------------------------------------------------------------------------------------

       Total other income                                                545               705              323
---------------------------------------------------------------------------------------------------------------

INTEREST CHARGES
Interest on long-term debt                                             8,843             8,843            7,390
Other interest expense                                                 1,378             1,966            2,195
---------------------------------------------------------------------------------------------------------------

       Total interest charges                                         10,221            10,809            9,585
---------------------------------------------------------------------------------------------------------------

NET INCOME AVAILABLE FOR COMMON                                  $    20,587       $    18,570      $    16,961
---------------------------------------------------------------------------------------------------------------
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
statements.



                                       23
<PAGE>   24


BALANCE SHEETS
ALABAMA GAS CORPORATION

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS)                                                     1998             1997
---------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>              <C>        
ASSETS

PROPERTY, PLANT AND EQUIPMENT
Utility plant                                                                      $   632,165      $   583,630
Less accumulated depreciation                                                          307,488          287,749
---------------------------------------------------------------------------------------------------------------


    Utility plant, net                                                                 324,677          295,881
---------------------------------------------------------------------------------------------------------------


Other property, net                                                                        318              347
---------------------------------------------------------------------------------------------------------------


CURRENT ASSETS
Cash                                                                                     1,222            2,580
Accounts receivable
    Gas                                                                                 32,191           36,098
    Merchandise                                                                          2,362            2,001
    Other                                                                                1,621            1,442
    Allowance for doubtful accounts                                                     (3,482)          (3,156)
Inventories, at average cost
    Storage gas inventory                                                               21,237           25,367
    Materials and supplies                                                               5,533            5,391
    Liquified natural gas in storage                                                     3,381            3,630
Deferred gas costs                                                                       1,774            2,512
Deferred income taxes                                                                   10,470            5,675
Prepayments and other                                                                    2,112            6,696
---------------------------------------------------------------------------------------------------------------


       Total current assets                                                             78,421           88,236
---------------------------------------------------------------------------------------------------------------


DEFERRED CHARGES AND OTHER ASSETS                                                        4,733            5,917
---------------------------------------------------------------------------------------------------------------


TOTAL ASSETS                                                                       $   408,149      $   390,381
---------------------------------------------------------------------------------------------------------------
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
statements.



                                       24
<PAGE>   25





BALANCE SHEETS
ALABAMA GAS CORPORATION


<TABLE>
<CAPTION>                                                                                                     
--------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS)                                                    1998              1997  
--------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>              <C>    

CAPITAL AND LIABILITIES

CAPITALIZATION
Common shareholder's equity
    Common stock, $0.01 par value; 3,000,000 shares authorized,
       1,972,052 shares outstanding in 1998 and 1997                               $        20      $        20
    Premium on capital stock                                                            31,682           31,682
    Capital surplus                                                                      2,802            2,802
    Retained earnings                                                                  120,205          106,894
---------------------------------------------------------------------------------------------------------------

    Total common shareholder's equity                                                  154,709          141,398
Long-term debt                                                                         119,650          125,000
---------------------------------------------------------------------------------------------------------------

       Total capitalization                                                            274,359          266,398
---------------------------------------------------------------------------------------------------------------

CURRENT LIABILITIES
Long-term debt due within one year                                                       5,350               --
Notes payable to banks                                                                  15,000           11,000
Accounts payable
    Trade                                                                               23,217           28,923
    Affiliated companies                                                                 2,738            4,984
Accrued taxes                                                                           19,428           16,745
Customers' deposits                                                                     16,344           16,399
Other amounts due customers                                                             12,070            7,347
Accrued wages and benefits                                                               4,217            3,879
Other                                                                                   11,915           10,481
---------------------------------------------------------------------------------------------------------------

       Total current liabilities                                                       110,279           99,758
---------------------------------------------------------------------------------------------------------------

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes                                                                   17,136           16,739
Accumulated deferred investment tax credits                                              2,661            3,130
Regulatory liability                                                                     2,910            3,651
Customer advances for construction and other                                               804              705
---------------------------------------------------------------------------------------------------------------

       Total deferred credits and other liabilities                                     23,511           24,225
---------------------------------------------------------------------------------------------------------------

TOTAL CAPITAL AND LIABILITIES                                                      $   408,149      $   390,381
---------------------------------------------------------------------------------------------------------------
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
statements.



                                       25
<PAGE>   26


STATEMENTS OF SHAREHOLDER'S EQUITY
ALABAMA GAS CORPORATION


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
-----------------------------------------------------------------------------------------------------------------
                                               COMMON STOCK
                                               ------------
                                                 NUMBER OF     PAR         PREMIUM ON       CAPITAL     RETAINED
                                                  SHARES      VALUE       CAPITAL STOCK     SURPLUS     EARNINGS
-----------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>         <C>               <C>        <C>     
BALANCE AT SEPTEMBER 30, 1995                   1,972,052     $20          $ 31,682         $2,802     $ 87,638
Net income                                                                                               16,961
Cash dividends                                                                                           (9,555)
-----------------------------------------------------------------------------------------------------------------
                                                                                          
BALANCE AT SEPTEMBER 30, 1996                   1,972,052      20            31,682          2,802       95,044
Net income                                                                                               18,570
Cash dividends                                                                                           (6,720)
-----------------------------------------------------------------------------------------------------------------
                                                                                          
BALANCE AT SEPTEMBER 30, 1997                   1,972,052      20            31,682          2,802      106,894
Net income                                                                                               20,587
Cash dividends                                                                                           (7,276)
-----------------------------------------------------------------------------------------------------------------
                                                                                          
BALANCE AT SEPTEMBER 30, 1998                   1,972,052     $20          $ 31,682         $2,802     $120,205
-----------------------------------------------------------------------------------------------------------------
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
statements.


                                       26
<PAGE>   27


STATEMENTS OF CASH FLOWS
ALABAMA GAS CORPORATION


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS)                             1998             1997              1996
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>              <C>        
OPERATING ACTIVITIES
Net Income                                                       $    20,587       $    18,570      $    16,961
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                                     25,153            23,486           21,269
    Deferred income taxes, net                                        (4,932)             (618)             835
    Deferred investment tax credits                                     (469)             (487)            (487)
    Net change in:
       Accounts receivable                                             3,693            (7,686)          (5,539)
       Inventories                                                     4,237             2,071           (6,784)
       Deferred gas costs                                                738              (537)            (549)
       Accounts payable - gas purchase                                (7,466)            5,758           (1,614)
       Accounts payable - other trade                                  1,760              (593)            (788)
       Amount due customers                                            4,723            (9,810)          13,942
       Other current assets and liabilities                            9,129            (5,202)          (1,894)
    Other, net                                                           530             1,124           (1,019)
---------------------------------------------------------------------------------------------------------------

       Net cash provided by operating activities                      57,683            26,076           34,333
---------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Additions to property, plant and equipment                           (53,581)          (43,724)         (42,037)
Net advances (to) from parent company                                 (2,246)           14,054           (8,871)
Other, net                                                                62             1,091            1,377
---------------------------------------------------------------------------------------------------------------

       Net cash used in investing activities                         (55,765)          (28,579)         (49,531)
---------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Payment of dividends on common stock                                  (7,276)           (6,720)          (9,555)
Proceeds from medium-term notes                                            -                 -           24,829
Net change in short-term debt                                          4,000            11,000                -
---------------------------------------------------------------------------------------------------------------

       Net cash provided by (used in) financing activities            (3,276)            4,280           15,274
---------------------------------------------------------------------------------------------------------------

Net change in cash and cash equivalents                               (1,358)            1,777               76
Cash and cash equivalents at beginning of period                       2,580               803              727
---------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                       $     1,222       $     2,580      $       803
---------------------------------------------------------------------------------------------------------------
</TABLE>


The accompanying Notes to Financial Statements are an integral part of these
statements.



                                       27
<PAGE>   28




NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Alabama Gas Corporation (Alagasco), a wholly-owned subsidiary of Energen
Corporation (the Company), is the largest natural gas distribution utility in
the State of Alabama, serving customers primarily in central and parts of north
Alabama. The following is a description of its significant accounting policies
and practices.

A.   UTILITY PLANT AND DEPRECIATION: Property, plant and equipment is stated at
     cost. The cost of utility plant includes an allowance for funds used during
     construction. Maintenance is charged for the cost of normal repairs and the
     renewal or replacement of an item of property which is less than a
     retirement unit. When property which represents a retirement unit is
     replaced or removed, the cost of such property is credited to utility plant
     and, together with the cost of removal less salvage, is charged to the
     accumulated reserve for depreciation. Depreciation is provided on the
     straight-line method over the estimated useful lives of utility property at
     rates established by the Alabama Public Service Commission (APSC). Approved
     depreciation rates averaged approximately 4.4 percent in 1998 and 1997 and
     4.3 percent in 1996.

B.   INVENTORIES: Inventories, which consist primarily of gas stored
     underground, are stated at average cost.

C.   OPERATING REVENUE AND GAS COSTS: In accordance with industry practice,
     Alagasco records natural gas distribution revenues on a monthly- and
     cycle-billing basis. The commodity cost of purchased gas applicable to gas
     delivered to customers but not yet billed under the cycle-billing method is
     deferred as a current asset.

D.   REGULATORY ACCOUNTING: Alagasco is subject to the provisions of Statement
     of Financial Accounting Standard (SFAS) No. 71, Accounting for the Effects
     of Certain Types of Regulation. In general, SFAS No. 71 allows utilities to
     capitalize or defer certain costs or revenues, based upon approvals
     received from regulatory authorities, to be recovered from or refunded to
     customers in future periods.

E.   INCOME TAXES: Alagasco files a consolidated federal income tax return with
     its parent. The consolidated federal income taxes are allocated to the
     appropriate subsidiaries using the separate return method. Deferred income
     taxes reflect the impact of temporary differences between the tax basis of
     assets and liabilities and their carrying amounts for financial reporting
     purposes and are measured in compliance with enacted tax laws. Investment
     tax credits have been deferred and are being amortized over the lives of
     the related assets.

F.   CASH EQUIVALENTS: Alagasco includes highly liquid marketable securities and
     debt instruments purchased with a maturity of three months or less in cash
     equivalents.

G.   ESTIMATES: The preparation of financial statements in conformity with
     generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities at the date of the financial statements and the reported amount
     of revenues and expenses during the reporting period. Actual results could
     differ from those estimates.

2.   REGULATORY MATTERS

As an Alabama utility, Alagasco is subject to regulation by the APSC which, in
1983, established the Rate Stabilization and Equalization (RSE) rate-setting
process. RSE was extended with modifications in 1985, 1987 and 1990. On October
7, 1996, RSE was extended, without change, for a five-year period through
January 1, 2002. Under the terms of that extension, RSE will continue after
January 1, 2002, unless, after notice to the Company and a hearing, the
Commission votes to either modify or discontinue its operation.

Under RSE as extended, the APSC conducts quarterly reviews to determine, based
on Alagasco's projections and fiscal year-to-date performance, whether
Alagasco's return on equity for the fiscal year will be within the allowed range
of 13.15 percent to 13.65 percent. Reductions in rates can be made quarterly to
bring the projected return within the allowed range; increases, however, are
allowed only once each fiscal year, effective December 1, and 




                                       28
<PAGE>   29


cannot exceed 4 percent of prior-year revenues. RSE limits the utility's equity
upon which a return is permitted to 60 percent of total capitalization and
provides for certain cost control measures designed to monitor Alagasco's
operations and maintenance (O&M) expense. If the change in O&M expense per
customer falls within 1.25 percentage points above or below the Consumer Price
Index For All Urban Customers (index range), no adjustment is required. If,
however, the change in O&M expense per customer exceeds the index range,
three-quarters of the difference is returned to customers. To the extent the
change is less than the index range, the utility benefits by one-half of the
difference through future rate adjustments. Under RSE as extended, an $11.8
million annual increase in revenue became effective December 1, 1997, and a $2.5
million annual decrease became effective July 1, 1998.

Alagasco calculates a temperature adjustment to customers' monthly bills to
remove the effect of departures from normal temperature on Alagasco's earnings.
The calculation is performed monthly, and the adjustments to customers' bills
are made in the same billing cycle the weather variation occurs. Substantially
all the customers to whom the temperature adjustment applies are residential,
small commercial and small industrial. Alagasco's rate schedules for natural gas
distribution charges contain a Gas Supply Adjustment (GSA) rider, established in
1993, which permits the pass-through to customers of changes in the cost of gas
supply, including Gas Supply Realignment (GSR) surcharges imposed by Alagasco's
suppliers resulting from changes in gas supply purchases related to the
implementation of Federal Energy Regulatory Commission (FERC) Order 636. The
APSC on October 7, 1996, issued an order providing for the refund to customers
prior to January 31, 1997 of approximately $17 million of supplier refunds,
including interest. The Company refunded these amounts to customers during
January 1997. The refunds were collected from a variety of sources and most
relate to the settlement of rate case and FERC Order 636 proceedings of Southern
Natural Gas Company.

The APSC approved an Enhanced Stability Reserve (ESR), beginning fiscal year
1998, to which Alagasco may charge the full amount of: (1) extraordinary O&M
expenses resulting from force majeure events such as storms, severe weather, and
outages, when one or a combination of two such events results in more than
$200,000 of additional O&M expense during a fiscal year; or (2) individual
industrial and commercial customer revenue losses that exceed $250,000 during
the fiscal year if such losses cause Alagasco's return on equity to fall below
13.15 percent. The APSC approved the reserve on October 6, 1998, in the amount
of $3.9 million; the maximum approved funding level of the ESR is $4 million.
The APSC provides for accretions to the ESR in an amount of no more than $40,000
monthly following a year in which a charge against the ESR is made until the
maximum funding level is achieved. The APSC will re-evaluate the operation of
the ESR following the conclusion of Alagasco's fiscal year 2000.

In accordance with APSC-directed regulatory accounting procedures, Alagasco in
1989 began returning to customers excess utility deferred taxes which resulted
from a reduction in the federal statutory tax rate from 46 percent to 34 percent
using the average rate assumption method. This method provides for the return to
ratepayers of excess deferred taxes over the lives of the related assets. In
1993 those excess taxes were reduced as a result of a federal tax rate increase
from 34 percent to 35 percent. Remaining excess utility deferred taxes of $1.9
million are being returned to ratepayers over approximately 12 years. At
September 30, 1998 and 1997, a regulatory liability related to income taxes of
$2.9 million and $3.7 million, respectively, was included in the consolidated
financial statements.

As of November 1, 1998, the Company offered a Voluntary Early Retirement Program
to certain eligible employees. The APSC has allowed the Company to amortize over
a three-year period the cost associated with this early retirement program.

The excess of total acquisition costs over book value of net assets of acquired
municipal gas distribution systems is included in utility plant and is being
amortized on a straight-line basis over approximately 23 years. At September 30,
1998 and 1997, the net acquisition adjustment was $15.4 million and $16.4
million, respectively.



                                       29
<PAGE>   30



3. LONG-TERM DEBT AND NOTES PAYABLE


Long-term debt consists of the following:


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
As of September 30, (in thousands)                                                       1998           1997
---------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>       
Medium-term Notes, interest ranging from 5.4% to 7.97%, for notes
   redeemable December 1, 1998, to September 23, 2026                                $ 125,000      $ 125,000
Less amounts due within one year                                                         5,350             --
---------------------------------------------------------------------------------------------------------------
  Total                                                                              $ 119,650      $ 125,000
---------------------------------------------------------------------------------------------------------------
</TABLE>

The aggregate maturities of long-term debt for the next five years are as
follows:


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                        Years ending September 30, (in thousands)
---------------------------------------------------------------------------------------------------------------
            1999                   2000                   2001                  2002               2003
---------------------------------------------------------------------------------------------------------------
          <S>                   <C>                    <C>                   <C>                 <C>     
          $ 5,350               $     -                $ 4,650               $ 5,000             $  5,000
---------------------------------------------------------------------------------------------------------------
</TABLE>


Energen and Alagasco have short-term credit lines and other credit facilities of
$228 million available as of September 30, 1998 to either entity for working
capital needs. The following is a summary of information relating to notes
payable to banks:


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
As of September 30, (in thousands)                   1998           1997           1996
---------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>
Alagasco outstanding                             $ 15,000       $ 11,000       $     --
Other Energen outstanding                         138,000        141,000         59,000
---------------------------------------------------------------------------------------
Notes payable to banks                            153,000        152,000         59,000
Available for borrowings                           75,000         51,000         97,000
---------------------------------------------------------------------------------------
  Total                                          $228,000       $203,000       $156,000
---------------------------------------------------------------------------------------
Maximum amount outstanding at any month-end      $ 36,000       $ 41,000       $ 22,000
Average daily amount outstanding                 $ 13,225       $  9,962       $  6,672
Weighted average interest rates based on:
  Average daily amount outstanding                   5.94%          5.83%          5.73%
  Amount outstanding at year-end                     5.75%          5.99%            --
---------------------------------------------------------------------------------------
</TABLE>


Total interest expense for Alagasco in 1998, 1997 and 1996 was $10,221,000,
$10,809,000 and $9,585,000, respectively.

4. INCOME TAXES


The components of income taxes consist of the following:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands)          1998           1997         1996
------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>
Taxes estimated to be payable currently:
    Federal                                           $ 15,306       $ 10,219       $7,924
    State                                                1,495          1,004          775
------------------------------------------------------------------------------------------
      Total current                                     16,801         11,223        8,699
------------------------------------------------------------------------------------------
Taxes deferred:
    Federal                                             (4,962)        (1,050)         274
    State                                                 (439)           (55)          74
------------------------------------------------------------------------------------------
      Total deferred                                    (5,401)        (1,105)         348
------------------------------------------------------------------------------------------
Total income tax expense                              $ 11,400       $ 10,118       $9,047
------------------------------------------------------------------------------------------
</TABLE>



                                       30
<PAGE>   31


Temporary differences and carryforwards which give rise to a significant portion
of deferred tax assets and liabilities for 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
As of September 30, (in thousands)                   1998                       1997
-----------------------------------------------------------------------------------------------
                                              Current     Noncurrent     Current     Noncurrent
-----------------------------------------------------------------------------------------------
<S>                                           <C>         <C>            <C>         <C>     
Deferred tax assets:
    Deferred investment tax credits           $    --      $    850       $   --      $  1,024
    Regulatory liabilities                         --         1,081           --         1,356
    Enhanced stability reserve                  1,452            --           --            --
    Unbilled revenue                            1,770            --        1,699            --
    Gas supply adjustment                         768            --           --            --
    Insurance and accruals                      3,320            --        2,854            --
    Inventories                                   574            --          520            --
    Allowance for uncollectible accounts        1,293            --        1,173            --
    Other, net                                  1,586            61        1,267           156
-----------------------------------------------------------------------------------------------
    Subtotal                                   10,763         1,992        7,513         2,536
    Valuation allowance                            --            --           --            --
-----------------------------------------------------------------------------------------------
       Total deferred tax assets               10,763         1,992        7,513         2,536
-----------------------------------------------------------------------------------------------
Deferred tax liabilities:
    Depreciation and basis differences             --        18,170           --        18,349
    Gas supply adjustment                          --            --        1,308            --
    Other, net                                    293           958          530           926
-----------------------------------------------------------------------------------------------
       Total deferred tax liabilities             293        19,128        1,838        19,275
-----------------------------------------------------------------------------------------------
Net deferred tax assets (liabilities)         $10,470      $(17,136)      $5,675      $(16,739)
-----------------------------------------------------------------------------------------------
</TABLE>


No valuation allowance with respect to deferred taxes is deemed necessary, as
Alagasco anticipates generating adequate future taxable income to realize the
benefits of all deferred tax assets on Alagasco's balance sheet.

Total income tax expense differs from the amount which would be provided by
applying the statutory federal income tax rate to earnings before taxes as
illustrated below:


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands)                 1998           1997          1996
--------------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>            <C>    
Income tax expense at statutory federal income tax rate      $ 11,195       $ 10,042       $ 9,103
Increase (decrease) resulting from:
  Investment tax credits-deferred                                (469)          (487)         (487)
  State income taxes, net of federal income tax benefit           688            617           559
  Other, net                                                      (14)           (54)         (128)
--------------------------------------------------------------------------------------------------
Total income tax expense                                     $ 11,400       $ 10,118       $ 9,047
--------------------------------------------------------------------------------------------------
</TABLE>


There were no tax-related balances due to affiliates at September 30, 1998 or
1997.

5. EMPLOYEE BENEFIT PLANS


All information presented concerning retirement income and other benefit plans
includes other affiliates of Energen Corporation as well as Alagasco.

The Company has two defined benefit non-contributory pension plans which cover a
majority of the employees. Benefits are based on years of service and final
earnings. The Company's policy is to use "the projected unit credit" actuarial
method for funding and financial reporting purposes. The expense for the plan
covering the majority of employees (Plan A) for the years ended September 30,
1998, 1997 and 1996 was $1,716,000, $1,228,000, and $412,000, respectively. The
expense for the plan covering employees under certain labor union agreements
(Plan B) for 1998, 1997 and 1996 was $403,000, $437,000, and $197,000,
respectively.



                                       31
<PAGE>   32


The funded status of the plans is as follows:


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
As of June 30, (in thousands)                                 PLAN A                       PLAN B
----------------------------------------------------------------------------------------------------------
                                                       1998           1997           1998           1997
                                                     --------       --------       --------       --------
<S>                                                  <C>            <C>            <C>            <C>      
Vested benefits                                      $(67,476)      $(57,617)      $(16,467)      $(14,610)
Nonvested benefits                                     (5,268)        (4,739)        (2,431)        (2,256)
----------------------------------------------------------------------------------------------------------
Accumulated benefit obligation                        (72,744)       (62,356)       (18,898)       (16,866)
Effects of salary progression                         (15,537)       (11,402)            --             --
----------------------------------------------------------------------------------------------------------
Projected benefit obligation                          (88,281)       (73,758)       (18,898)       (16,866)
Fair value of plan assets, primarily equity and
   fixed income securities                             90,661         84,859         23,081         20,820
Unrecognized net (gain) loss                           (2,773)        (6,477)        (2,944)        (2,747)
Unrecognized prior service cost                         3,025             29            791            998
Unrecognized net transition obligation (asset)         (2,686)        (3,494)           226            282
----------------------------------------------------------------------------------------------------------
Accrued pension asset (liability)                    $    (54)      $  1,159       $  2,256       $  2,487
----------------------------------------------------------------------------------------------------------
</TABLE>


At September 30, 1998 and 1997, the discount rate used to measure the projected
benefit obligation for both plans was 7 percent and 7.75 percent, respectively,
and the expected long-term rate of return on plan assets was 8.25 percent. The
annual rate of salary increase for the salaried plan was 5.25 percent in 1998
and 5.75 percent in 1997.

The components of net pension expense for 1998, 1997 and 1996 were:


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands)                   PLAN A                                     PLAN B
---------------------------------------------------------------------------------------------------------------------------------
                                                     1998           1997           1996          1998          1997          1996
                                                     ----           ----           ----          ----          ----          ----
<S>                                                <C>           <C>            <C>            <C>           <C>           <C>    
Service Cost                                       $ 2,386       $  2,227       $  2,147       $   224       $   243       $   255
Interest cost on projected benefit obligation        5,842          5,524          4,617         1,261         1,238         1,166
Actual return on plan assets                        (9,516)       (12,629)       (15,280)       (3,450)       (3,803)       (2,971)
Net amortization and deferral                        3,004          6,106          8,928         2,368         2,759         1,747
----------------------------------------------------------------------------------------------------------------------------------
Net pension expense                                $ 1,716       $  1,228       $    412       $   403       $   437       $   197
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


The Company has deferred compensation plan agreements with certain key
executives providing for payments on retirement, termination, death or
disability. Expense under these agreements for 1998, 1997 and 1996 was
($54,000), $399,000, and $1,002,000, respectively. At June 30, 1998 and 1997,
the accumulated post-retirement benefit obligation related to these agreements
was $2,901,000 and $5,961,000, respectively, and the projected benefit
obligation was $7,088,000 and $9,839,000, respectively. A prepaid
post-retirement benefit asset of $434,000 and $499,000 was recorded at June 30,
1998 and 1997, respectively.

In addition to providing pension benefits, the Company provides certain
post-retirement health care and life insurance benefits. Substantially all of
the Company's employees may become eligible for such benefits if they reach
normal retirement age while working for the Company. While the Company has not
adopted a formal funding policy, all of its accrued post-retirement liability
was funded at year-end. The expense for salaried employees for the years ended
September 30, 1998, 1997, and 1996 was $2,040,000, $2,221,000, and $1,984,000,
respectively. The expense for union employees was $4,367,000, $4,204,000, and
$4,076,000 during 1998, 1997 and 1996, respectively. The "projected unit credit"
actuarial method was used to determine the normal cost and actuarial liability.



                                       32
<PAGE>   33


A reconciliation of the estimated status of the obligation is as follows:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
As of June 30, (in thousands)                               SALARIED EMPLOYEES                UNION EMPLOYEES
------------------------------------------------------------------------------------------------------------------
                                                          1998            1997             1998             1997
                                                      -------------------------        ---------------------------
<S>                                                   <C>             <C>              <C>             <C>         
Retirees                                              $   (13,916)    $   (9,590)      $   (15,162)    $   (14,529)
Active, fully-eligible                                     (3,107)        (2,121)           (4,957)         (4,340)
Other active                                              (12,289)        (8,309)          (17,632)        (14,151)
------------------------------------------------------------------------------------------------------------------
Accumulated post-retirement benefit obligation            (29,312)       (20,020)          (37,751)        (33,020)
Fair value of plan assets, primarily equity and
  fixed income securities                                  30,476         23,719            23,081          13,363
Unamortized amounts                                        (1,561)        (4,686)           13,558          17,405
------------------------------------------------------------------------------------------------------------------
Accrued post-retirement benefit liability             $      (397)    $     (987)      $    (1,112)    $    (2,252)
==================================================================================================================
</TABLE>

Net periodic post-retirement benefit expense for the years ended September 30,
1998, 1997, and 1996 included the following:


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands)             SALARIED EMPLOYEES              UNION EMPLOYEES
---------------------------------------------------------------------------------------------------------------------
                                                         1998       1997      1996       1998       1997       1996
                                                     -------------------------------    -----------------------------
<S>                                                  <C>         <C>        <C>         <C>        <C>        <C>    
Service cost                                         $     967   $    979   $    516    $  1,314   $  1,198   $   876
Interest cost on accumulated post-retirement
  benefit obligation                                     2,049      2,204      1,679       2,612      2,542     2,195
Amortization of transition obligation                      723        723        723       1,285      1,285     1,285
Amortization of actuarial gains and losses                (510)      (568)      (277)       (107)         -         -
Deferred asset gain (loss)                               4,972      3,682        658       5,891      2,006       177
(Gain) or loss on plan assets                           (6,161)    (4,799)    (1,315)     (6,628)    (2,827)     (457)
=====================================================================================================================
Net periodic post-retirement benefit expense         $   2,040   $  2,221   $  1,984    $  4,367   $  4,204   $ 4,076
=====================================================================================================================
</TABLE>


The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7 percent in 1998 and 7.75 percent in
1997. The expected long-term rate of return on assets is 8.25 percent for both
years, and the tax rate on investment income is assumed to be 40 percent. The
weighted average health care cost trend rate used in determining the accumulated
post-retirement benefit obligation was 7.5 percent and 8.25 percent in 1998 and
1997, respectively. That assumption has a significant effect on the amounts
reported. For example, with respect to salaried employees, increasing the
weighted average health care cost trend rate by 1 percent would increase the
accumulated post-retirement benefit obligation by 2.7 percent and the net
periodic post-retirement benefit cost by 2.4 percent. For union employees,
increasing the weighted average health care cost trend rate by 1 percent would
increase the accumulated post-retirement benefit obligation by 7.3 percent and
the net periodic post-retirement benefit cost by 7.1 percent. For pay-related
life insurance benefits, the salary scale averages 5.25 percent and 5.75 percent
in 1998 and 1997, respectively.

For both defined benefit plans and other post-retirement plans, certain
financial assumptions are used in determining the Company's projected benefit
obligation. These assumptions are examined periodically by the Company, and any
required changes are reflected in the subsequent determination of projected
benefit obligations.

The Company has a long-term disability plan covering most salaried employees.
Expense for the years ended September 30, 1998, 1997, and 1996 was $173,000,
$163,000, and $370,000, respectively.

6. CAPITAL STOCK

Alagasco's authorized common stock consists of 3 million, $0.01 par value common
shares. At September 30, 1998 and 1997, 1,972,052 shares were issued and
outstanding. Alagasco is authorized to issue 120,000 shares of preferred stock
par value $0.01 per share, in one or more series. There are no preferred shares
currently outstanding.

                                       33
<PAGE>   34


7. COMMITMENTS AND CONTINGENCIES


CONTRACTS AND AGREEMENTS: Alagasco has various firm gas supply and firm gas
transportation contracts which expire at various dates through the year 2008.
These contracts typically contain minimum demand charge obligations on the part
of Alagasco.

ENVIRONMENTAL MATTERS: Alagasco is in the chain of title of eight former
manufactured gas plant sites, of which it still owns four, and five manufactured
gas distribution sites, of which it still owns one. A preliminary investigation
of the sites does not indicate the present need for remediation activities.
Management expects that, should remediation of any such sites be required in the
future, Alagasco's share, if any, of such costs will not affect materially the
results of operations or financial condition of Alagasco.

LEGAL MATTERS: Alagasco is, from time to time, party to various pending or
threatened legal proceedings. Certain of these lawsuits include claims for
punitive damages in addition to other specified relief. Based upon information
presently available, and in light of available legal and other defenses,
contingent liabilities arising from threatened and pending litigation are not
considered material in relation to the financial position of Alagasco. It should
be noted, however, that Alagasco conducts business in Alabama and other
jurisdictions in which the magnitude and frequency of punitive damage awards
bear little or no relation to culpability or actual damages thus making it
increasingly difficult to predict litigation results. Various legal proceedings
arising in the normal course of business are currently in progress, and Alagasco
has accrued a provision for estimated costs.

LEASE OBLIGATIONS: Total payments related to leases included as operating
expense were $2,292,000, $2,280,000 and $2,146,000 in 1998, 1997 and 1996,
respectively. Minimum future rental payments (in thousands) required after 1998
under leases with initial or remaining noncancelable lease terms in excess of
one year are as follows:


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
          1999              2000            2001              2002             2003          2004 AND THEREAFTER
----------------------------------------------------------------------------------------------------------------
       <S>              <C>              <C>              <C>              <C>               <C>      
       $   2,538        $   2,252        $   2,193        $    2,149       $   2,133            $   4,223
----------------------------------------------------------------------------------------------------------------

</TABLE>


The Company expects to close negotiations on a sale and leaseback of the new
building headquarters in fiscal 1999. Accordingly, anticipated rentals payments
under that lease are included in the preceding table.

8. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental information concerning cash flow activities is as follows:


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands)                         1998            1997          1996
-------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>            <C>      
Interest paid, net of amount capitalized                              $   11,256     $  10,192      $   9,216
Income taxes paid                                                     $   16,253     $  13,228      $   5,932
Noncash investing activities:
  Capitalized depreciation                                            $      187     $     168      $     166
  Allowance for funds used during construction                        $      400     $     490      $     972
Noncash financing activities (debt issuance costs)                    $        -     $      --      $     171
-------------------------------------------------------------------------------------------------------------
</TABLE>


9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

FINANCIAL INSTRUMENTS: The fair value of cash and cash equivalents, trade
receivables (net of allowance), and short-term debt approximates fair value due
to the short maturity of the instruments. The fair value of fixed-rate long-term
debt, including the current portion, with a carrying value of $125,000,000,
would be $130,003,000 at September 30, 1998. The fair value was based on the
market value of debt with similar maturities and with interest rates currently
trading in the marketplace.

Alagasco has entered into an agreement with a financial institution whereby it
can sell on an ongoing basis, with recourse, certain installment receivables
related to its merchandising program up to a maximum of $20 million. 

                                       34
<PAGE>   35


During 1998, 1997 and 1996, Alagasco sold $8,100,000, $7,926,000 and $8,831,000,
respectively, of installment receivables. At September 30, 1998 and 1997, the
balance of these installment receivables was $17,105,000 and $17,160,000,
respectively. Receivables sold under this agreement are considered financial
instruments with off-balance sheet risk. Alagasco's exposure to credit loss in
the event of non-performance by customers is represented by the balance of
installment receivables.

CONCENTRATION OF CREDIT RISK: Natural gas distribution operating revenues and
related accounts receivable are generated from state-regulated utility natural
gas sales and transportation to more than 468,000 residential, commercial and
industrial customers located in central and north Alabama. A change in economic
conditions may affect the ability of customers to meet their obligations;
however, Alagasco believes that its provision for possible losses on
uncollectible accounts receivable is adequate for its credit loss exposure.

10. RECENT PRONOUNCEMENTS OF THE FASB


In fiscal 1998, the Company adopted SFAS No. 128, Earnings Per Share (EPS),
which specifies computation, presentation, and disclosure requirements for EPS.
SFAS No. 128 requires dual presentation of basic and diluted EPS on the face of
the income statement and requires a reconciliation of the numerator and the
denominator of the basic EPS computation to that of the diluted computation.

The Company also adopted during fiscal 1998, SFAS No. 129, Disclosures of
Information about Capital Structure. It contains no change in disclosure
requirements for public entities that were previously subject to the
requirements of Accounting Principles Board No. 10 and No. 15 and SFAS No. 47.
As a result, SFAS 129 had no impact on the Company's consolidated financial
statements.

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information to be
required, was issued in June 1997. SFAS No. 131 relates solely to disclosure
provisions, and therefore does not have any effect on the results of operations
or financial position of the Company. The Company has chosen to early adopt this
pronouncement as of September 30, 1998.

In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which requires the reporting and display of comprehensive income and its
components in an entity's financial statements. There are currently no
differences between the Company's net income and comprehensive income. In
February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which revises employers' disclosures
about pension and other postretirement benefit plans. This pronouncement relates
solely to disclosure provisions, and therefore will have no effect on the
results of operations or financial position of the Company. The Company is
required to adopt these statements in fiscal year 1999.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments. The Company is required to adopt this
statement in fiscal year 2000. The impact of this pronouncement on the Company
is currently being evaluated.


                                       35


<PAGE>   36
11. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)


The following data summarize quarterly operating results. Alagasco's business is
seasonal in character and strongly influenced by weather conditions.


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Fiscal year 1998 quarters (in thousands)                   First        Second           Third        Fourth
-------------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>            <C>            <C>      
Operating revenues                                       $   95,755   $  161,747     $  66,327      $  46,111
Operating income (loss)                                  $    4,798   $   26,393     $   1,631      $  (2,559)
Net income (loss) available for common                   $    2,183   $   23,946     $    (586)     $  (4,956)
-------------------------------------------------------------------------------------------------------------
Fiscal year 1997 quarters (in thousands)
-------------------------------------------------------------------------------------------------------------
Operating revenues                                       $   83,305   $  160,152     $  70,147      $  49,380
Operating income (loss)                                  $    4,055   $   22,963     $   4,282      $  (2,626)
Net income (loss) available for common                   $    1,807   $   20,163     $   1,701      $  (5,101)
-------------------------------------------------------------------------------------------------------------
</TABLE>



12. TRANSACTIONS WITH RELATED PARTIES


Alagasco purchased natural gas from affiliates amounting to $4,142,000,
$5,165,000 and $5,097,000, in 1998, 1997 and 1996, respectively. These amounts
are included in gas purchased for resale. Alagasco had net payables to
affiliates of $2,738,000 and $4,984,000 at September 30, 1998 and 1997,
respectively.

                                       36
<PAGE>   37


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF ENERGEN CORPORATION:

Our report on the consolidated financial statements of Energen Corporation and
subsidiaries has been incorporated by reference in this Form 10-K from page 49
of the 1998 Annual Report to Stockholders of Energen Corporation and
subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in the index
on page 19 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects the information required to be included
therein.



PricewaterhouseCoopers LLP
Birmingham, Alabama
October 28, 1998

                                       37
<PAGE>   38


SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ENERGEN CORPORATION AND SUBSIDIARIES



<TABLE>
<CAPTION>
========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS)                     1998              1997             1996
========================================================================================================
<S>                                                     <C>               <C>               <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT BEGINNING OF YEAR                            $     3,185       $     3,002       $      2,533
--------------------------------------------------------------------------------------------------------
     Additions:
       Charged to income                                      3,472             1,837              2,361
       Recoveries and adjustments                              (215)             (186)              (187)
--------------------------------------------------------------------------------------------------------
          Net additions                                       3,257             1,651              2,174
--------------------------------------------------------------------------------------------------------
    Less uncollectible accounts written off                  (2,895)           (1,468)            (1,705)
--------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR                                  $     3,547       $     3,185       $      3,002
========================================================================================================
</TABLE>


                                       38





<PAGE>   39


SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ALABAMA GAS CORPORATION



<TABLE>
<CAPTION>
========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS)                     1998              1997             1996
========================================================================================================
<S>                                                     <C>               <C>               <C>         
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT BEGINNING OF YEAR                            $     3,156       $     2,985       $      2,000
--------------------------------------------------------------------------------------------------------
     Additions:
       Charged to income                                      3,430             1,575              2,349
       Recoveries and adjustments                              (215)             (186)              (187)
--------------------------------------------------------------------------------------------------------
          Net additions                                       3,215             1,389              2,162
--------------------------------------------------------------------------------------------------------
    Less uncollectible accounts written off                  (2,889)           (1,218)            (1,177)
--------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR                                  $     3,482       $     3,156       $      2,985
========================================================================================================
</TABLE>