<PAGE>   1

                                  FORM 10-Q
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

(Mark One)

  X              QUARTERLY REPORT PURSUANT TO SECTION 13 OR
-----                           15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended              September 30, 1995
                               ------------------------------------------------

                                     OR

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

For the transition period from                    to
                               ------------------    --------------------------

Commission file number    1-8094
                       --------------------------------------------------------

                           Seagull Energy Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Texas                                             74-1764876
--------------------------------------------------------------------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)


               1001 Fannin, Suite 1700, Houston, Texas      77002-6714
--------------------------------------------------------------------------------
               (Address of principal executive offices)     (Zip code)


                                (713)  951-4700
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)



                                      None
--------------------------------------------------------------------------------
            (Former name, former address and former fiscal year,
                        if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X .  No    .
                                              -----    -----

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

   Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


          CLASS                            OUTSTANDING AT OCTOBER 31, 1995
          -----                            -------------------------------
Common Stock, $.10 par value                          36,204,078
<PAGE>   2
                 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                                     INDEX

<TABLE>
<CAPTION>
                                                                                             
                                                                                             
                                                                                                PAGE 
 PART I.  FINANCIAL INFORMATION                                                                NUMBER
 <S>                                                                                             <C>
   Presentation of Financial Information....................................                      3
   Consolidated Statements of Earnings - Three and Nine Months
     Ended September 30, 1995 and 1994 (Unaudited)..........................                      4

   Consolidated Balance Sheets - September 30, 1995
     and December 31, 1994 (Unaudited)......................................                      5

   Consolidated Statements of Cash Flows - Nine Months
     Ended September 30, 1995 and 1994 (Unaudited)..........................                      6
   Notes to Consolidated Financial Statements (Unaudited)...................                      7

   Management's Discussion and Analysis of Financial Condition
      and Results of Operations (Unaudited)................................                      10

 PART II.  OTHER INFORMATION...............................................                      22

 SIGNATURES................................................................                      23
</TABLE>





                                                                             -2-
<PAGE>   3
                         PART I.  FINANCIAL INFORMATION


                     PRESENTATION OF FINANCIAL INFORMATION


         In the opinion of management, the following unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Seagull Energy Corporation and Subsidiaries (the
"Company" or "Seagull") as of September 30, 1995, and the results of its
operations for the three and nine month periods ended September 30, 1995 and
1994, and cash flows for the nine month periods then ended.  As discussed in
Note 1 to the Company's Unaudited Consolidated Financial Statements, Seagull
adopted Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," effective March 31, 1995.  Under SFAS No. 121, the Company
recorded a non-cash impairment of gas and oil properties as a separate line
item in the accompanying consolidated statement of earnings for the nine months
ended September 30, 1995.  All other adjustments made are of a normal,
recurring nature.  The results of operations for the three and nine months
ended September 30, 1995 are not necessarily indicative of the results to be
expected for the full year.

         The financial information presented herein should be read in
conjunction with the consolidated financial statements and notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.





                                                                             -3-
<PAGE>   4
Item 1.  FINANCIAL STATEMENTS


                  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
                (Dollars in Thousands Except Per-Share Amounts)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                     Three Months Ended                         Nine Months Ended              
                                                         September 30,                             September 30,                  
                                                ----------------------------              ----------------------------
                                                     1995            1994                      1995            1994  
                                                ------------    ------------              ------------    ------------
<S>                                             <C>             <C>                       <C>             <C>            
Revenues:                                                                                                                
  Exploration and production...............     $     47,949    $     57,104              $    152,088    $    208,222   
  Pipeline and marketing...................            7,783           9,829                    26,131          29,984   
  Alaska transmission and distribution.....           12,355          14,111                    66,205          69,460   
                                                ------------    ------------              ------------    ------------
                                                      68,087          81,044                   244,424         307,666   
Costs of Operations:                                                                                                     
  Alaska transmission and distribution                                                                                   
    cost of gas sold.......................            4,779           6,559                    31,267          35,407   
  Operations and maintenance...............           25,487          29,295                    82,229          88,820   
  Exploration charges......................            7,733           7,178                    21,752          17,396   
  Depreciation, depletion and amortization.           29,633          34,594                    96,217         110,550   
  Impairment of gas and oil properties.....                -               -                    44,376               -   
                                                ------------    ------------              ------------    ------------
                                                      67,632          77,626                   275,841         252,173   
                                                ------------    ------------              ------------    ------------
                                                                                                                         
Operating Profit (Loss)....................              455           3,418                   (31,417)         55,493   
                                                                                                                         
Other (Income) Expense:                                                                                                  
  General and administrative...............            2,876           1,709                    15,377           8,754   
  Interest expense.........................           13,568          14,243                    41,499          37,790   
  Gain on sales of property,                                                                                             
    plant and equipment, net...............          (82,028)           (355)                  (82,365)           (360)  
  Interest income and other................              224            (748)                     (188)         (1,016)  
                                                ------------    ------------              ------------    ------------
                                                     (65,360)         14,849                   (25,677)         45,168   
                                                ------------    ------------              ------------    ------------
                                                                                                                         
Earnings (Loss) Before Income Taxes........           65,815         (11,431)                   (5,740)         10,325   
                                                                                                                         
Income Tax Expense (Benefit)...............           24,265          (5,140)                   (1,615)          1,120   
                                                ------------    ------------              ------------    ------------
                                                                                                                         
Net Earnings (Loss)........................     $     41,550    $     (6,291)             $     (4,125)   $      9,205   
                                                ============    ============              ============    ============

Earnings (Loss) Per Share..................     $       1.13    $      (0.17)             $      (0.11)   $       0.25   
                                                ============    ============              ============    ============
                                                                                                                         
Weighted Average Number of Common                                                                                        
  Shares Outstanding.......................       36,768,095      36,908,710                36,128,123      36,933,090   
                                                ============    ============              ============    ============
</TABLE>





See Accompanying Notes to Unaudited Consolidated Financial Statements.

                                                                             -4-
<PAGE>   5

                  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                           September 30,              December 31,   
                                                                                1995                      1994     
                                                                         ---------------           ---------------
 <S>                                                                     <C>                       <C>            
 ASSETS                                                                                                           
   Current Assets:                                                                                                
     Cash and cash equivalents...............................            $       12,462            $        6,432 
     Accounts receivable, net................................                    74,148                   101,346 
     Inventories.............................................                     5,112                     4,530 
     Prepaid expenses and other..............................                     1,642                     7,055 
                                                                         --------------            --------------
       Total Current Assets..................................                    93,364                   119,363 
                                                                                                                  
   Property, Plant and Equipment - at cost                                                                        
     (successful efforts method for gas and oil properties)..                 1,590,562                 1,592,152 
   Accumulated Depreciation, Depletion and Amortization......                   564,930                   467,845 
                                                                         --------------            --------------
                                                                              1,025,632                 1,124,307 
                                                                                                                  
   Other Assets..............................................                    42,933                    55,880 
                                                                         --------------            --------------
                                                                                                                  
   Total Assets..............................................            $    1,161,929            $    1,299,550 
                                                                         ==============            ==============
                                                                                                                  
 LIABILITIES AND SHAREHOLDERS' EQUITY                                                                             
   Current Liabilities:                                                                                           
     Accounts payable........................................            $       60,750            $       97,315 
     Accrued expenses........................................                    24,652                    31,598 
     Prepaid gas and oil sales...............................                         -                     2,732 
     Current maturities of long-term debt....................                     1,564                     1,549 
                                                                         --------------            --------------
       Total Current Liabilities.............................                    86,966                   133,194 
                                                                                                                  
   Long-Term Debt............................................                   538,490                   620,805 
   Other Noncurrent Liabilities..............................                    53,937                    57,737 
   Deferred Income Taxes.....................................                    39,416                    46,713 
                                                                                                                  
   Shareholders' Equity:                                                                                          
     Common Stock, $.10 par value; authorized                                                                     
      100,000,000 shares; issued 36,499,890 shares (1995)                                                         
      and 36,432,514 shares (1994)...........................                     3,650                     3,643 
     Additional paid-in capital..............................                   325,920                   324,820 
     Retained earnings.......................................                   119,834                   123,959 
     Foreign currency translation adjustment.................                     2,182                    (2,684)
     Less - note receivable from employee stock                                                                   
       ownership plan........................................                    (5,502)                   (5,502)
     Less - 308,812 shares (1995) and 326,812 shares (1994)                                                       
      of Common Stock held in Treasury, at cost..............                    (2,964)                   (3,135)
                                                                         --------------            --------------
                                                                                                                  
       Total Shareholders' Equity............................                   443,120                   441,101 
                                                                                                                  
   Commitments and Contingencies.............................                                                     
                                                                         --------------            --------------
                                                                                                                  
   Total Liabilities and Shareholders' Equity................            $    1,161,929            $    1,299,550
                                                                         ==============            ==============
</TABLE>


   See Accompanying Notes to Unaudited Consolidated Financial Statements.

                                                                             -5-
<PAGE>   6
                 SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Dollars in Thousands)
                                 (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Nine Months Ended
                                                                                                September 30,
                                                                                        ------------------------------
                                                                                            1995             1994
                                                                                        ------------       -----------
<S>                                                                                     <C>                <C>
Operating Activities:                                                                                 
  Net earnings (loss)..........................................                         $     (4,125)      $     9,205
  Adjustments to reconcile net earnings (loss) to net cash                                            
   provided by operating activities:                                                                  
    Depreciation, depletion and amortization...................                               98,624           112,763
    Impairment of gas and oil properties.......................                               44,376                 -
    Amortization of deferred financing costs...................                                2,570             3,121
    Deferred income taxes......................................                               (7,506)           (3,108)
    Dry hole expense...........................................                               11,407             9,526
    Distributions in excess of (less than) earnings                                                   
      from equity investments..................................                                 (395)            1,179
    Gain on sales of property, plant and equipment, net........                              (82,365)             (360)
    Other......................................................                                    -                90
                                                                                        ------------       -----------
                                                                                              62,586           132,416
    Changes in operating assets and                                                                   
     liabilities, net of acquisitions:                                                                
      Decrease in accounts receivable..........................                               26,705            31,724
      Decrease in inventories, prepaid expenses and other......                                7,911             4,795
      Decrease in accounts payable.............................                              (35,939)          (13,356)
      Decrease in prepaid gas and oil sales....................                               (2,732)           (5,925)
      Decrease in accrued expenses and other...................                              (10,178)          (11,509)
                                                                                        ------------       -----------
                                                                                                      
         Net Cash Provided By Operating Activities.............                               48,353           138,145
                                                                                                      
Investing Activities:                                                                                 
  Capital expenditures.........................................                              (57,208)          (96,980)
  Acquisitions, net of cash acquired...........................                                    -          (195,128)
  Proceeds from sales of property, plant and equipment.........                              102,865               542
                                                                                        ------------       -----------
                                                                                                      
         Net Cash Provided By (Used In) Investing Activities...                               45,657          (291,566)
                                                                                                      
Financing Activities:                                                                                 
  Proceeds from revolving lines of credit and other borrowings.                              550,296           688,306
  Principal payments on revolving lines of credit and                                                 
   other borrowings............................................                             (683,569)         (531,731)
  Proceeds from monetary production payment....................                               46,242                 -
  Fees paid to acquire financing...............................                                 (125)              (13)
  Proceeds from sales of common stock..........................                                  764               328
  Other........................................................                               (1,368)             (315)
                                                                                        ------------       -----------
                                                                                                      
         Net Cash Provided by (Used in) Financing Activities...                              (87,760)          156,575
                                                                                                      
Effect of Exchange Rate Changes on Cash........................                                 (220)               97
                                                                                        ------------       -----------
                                                                                                      
         Increase In Cash And Cash Equivalents.................                                6,030             3,251
                                                                                                      
Cash And Cash Equivalents At Beginning Of Period...............                                6,432             5,572
                                                                                        ------------       -----------
                                                                                                      
Cash And Cash Equivalents At End Of Period.....................                         $     12,462       $     8,823
                                                                                        ============       ===========
</TABLE>



See Accompanying Notes to Unaudited Consolidated Financial Statements.

                                                                             -6-

<PAGE>   7
                  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Supplemental Disclosures of Cash Flow Information.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(Dollars in Thousands)
                                                                 Nine Months Ended September 30,
                                                                 -------------------------------
 Cash paid during the period for:                                     1995              1994
                                                                 -------------------------------
     <S>                                                              <C>             <C>
     Interest, net of amount capitalized ....................         $46,436         $38,491

     Income taxes............................................         $   833         $ 1,269
------------------------------------------------------------------------------------------------
</TABLE>


Gas and Oil Properties.

         Effective March 31, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".  This SFAS
requires that an impairment loss be recognized when the carrying amount of an
asset exceeds the sum of the estimated future cash flow (undiscounted) of the
asset.  Under SFAS No. 121, the Company reviewed the impairment of gas and oil
properties on a depletable unit basis.  For each depletable unit determined to
be impaired, an impairment loss equal to the difference between the carrying
value and the fair value of the depletable unit was recognized.  Fair value, on
a depletable unit basis, was estimated to be the present value of expected
future cash flows computed by applying estimated future gas and oil prices, as
determined by management, to estimated future production of gas and oil
reserves over the economic lives of the reserves.  As a result of the adoption
of SFAS No. 121, the Company recognized a non-cash pre-tax charge against
earnings during the first quarter of 1995 of $44.4 million.

         Prior to March 31, 1995, the Company determined the impairment of
proved gas and oil properties on a world-wide basis.  Using the world-wide
basis, if the net capitalized costs exceeded the estimated future undiscounted
after-tax net cash flows from proved gas and oil reserves using period-end
pricing, such excess costs would be charged to expense.

Earnings Per Share.

         The weighted average number of common shares outstanding used in the
computation of earnings per share for the three months ended September 30, 1995
and 1994 and nine months ended September 30, 1994 gives effect to the assumed
exercise of dilutive stock options as of the beginning of the period.  The
effect of the assumed exercise of stock options as of the beginning of the
period has an anti-dilutive effect on the computation of loss per share for the
nine months ended September 30, 1995 and has therefore not been included in the
weighted average number of common shares outstanding.





                                                                             -7-
<PAGE>   8
                  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Changes in Financial Presentation.

         Certain reclassifications have been made in the 1994 financial
statements to conform to the presentation used in 1995.

NOTE 2.  DISPOSITION OF ASSETS

         On September 25, 1995, the Company and three other sellers completed
the sale of their disparate interests in 19 natural gas gathering systems and a
gas processing plant.  The purchaser, a subsidiary of Tejas Power Corporation,
paid Seagull and the other sellers $154.8 million in cash for the assets.  The
Company's share of gross proceeds was approximately $100 million.  Net proceeds
after payment of approximately $3 million in transaction costs were used to
lower the Company's borrowings under its U.S. revolving credit facility (the
"U.S. Credit Agreement").  From its share of the proceeds, Seagull realized a
one-time, pre-tax gain of approximately $82 million recorded in the third
quarter.  For the three and nine months ended September 30, 1995, the pipeline
assets disposed of (the "Pipeline Assets") contributed $2.1 million and $6.2
million, respectively, to the operating profit of the pipeline and marketing
segment.

         In September 1995, the Company sold Section 29 tax credit-bearing gas
properties to an investment group which includes a Seagull subsidiary and two
financial investors.  For accounting purposes, the Company has treated the sale
as a non-recourse monetary production payment reflected in long-term debt on
the balance sheet.  Net of transaction costs, the proceeds from the sale of
approximately $46.3 million in cash were used to pay down the Company's
borrowings under the U.S. Credit Agreement.

NOTE 3.  WORKFORCE REDUCTION AND CONSOLIDATION

         In April 1995, the Company announced plans to reduce its workforce and
consolidate operations into a smaller number of locations.  Company-wide,
approximately 90 of about 770 positions were eliminated in the combined
workforce reduction and consolidation.  The eliminated positions primarily
represent technical and administrative positions in two regional offices.
During the quarter ended June 30, 1995, the Company recorded one-time pre-tax
charges, included in general and administrative expense, of $8 million to
account for the expenses involved in the workforce reduction and consolidation.
Furthermore, the sale of the Pipeline Assets resulted in the elimination of
approximately 35 primarily field positions.

NOTE 4.  LONG-TERM DEBT

Revolving Credit Facilities.

         Under a provision included in the U.S. Credit Agreement, the amount of
senior indebtedness available to the Company is subject to a borrowing base
(the "Borrowing Base"), based upon the proved reserves of the Company's
exploration and production segment and the


               


                                                                             -8-

<PAGE>   9
                  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 4.  LONG-TERM DEBT, continued

financial performance of the Company's other business segments.  The Borrowing
Base is generally determined annually but may be redetermined one additional
time each year, at the option of either Seagull or the banks, and upon the sale
of certain assets included in the Borrowing Base.  As a result of the sale of
the Pipeline Assets and Section 29 tax credit-bearing gas properties, the
available Borrowing Base decreased by approximately $75 million to $500
million.  In June 1995, the Company requested the maximum commitment under the
U.S. Credit Agreement be reduced from $725 million to $650 million.  Under the
terms of the U.S. Credit Agreement, the maximum commitment reduces in equal
quarterly amounts of $45 million commencing on March 31, 1997, with a final
reduction of $20 million on September 30, 2000.

         In June 1995, the Company requested the maximum commitment under its
Canadian revolving credit facility (the "Canadian Credit Agreement") be reduced
from $175 million to $100 million.  Under the terms of the Canadian Credit
Agreement, the maximum commitment reduces in equal quarterly installments of
approximately $10.9 million commencing on March 31, 1997, with a final
reduction of $1.6 million on June 30, 1999.

Interest Rate Swap Agreements.

         The Company enters into interest rate swaps to manage the impact of
changes in interest rates.  During the nine months ended September 30, 1995,
the following interest rate swap agreements were in effect:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                                            Interest Rate
  Notional        Effective        Maturity       -------------------------------
   Amount            Date            Date            Receive               Pay
 -----------     ------------    ------------     ------------         ----------
   <S>             <C>             <C>              <C>                  <C>
   $40,000         09/11/92        09/11/95         Floating             6.76%
                                               
    50,000         08/02/93        07/31/98          5.635%              Floating
                                               
    50,000         08/02/93        07/31/97          5.43%               Floating
                                               
    50,000         08/02/93        07/31/96          5.199%              Floating
                                               
    65,000         05/02/95        12/29/95         Floating             6.35%
                                               
    35,000         05/02/95        12/29/95         Floating             6.355%
                                               
    65,000         01/02/96        12/30/96         Floating             6.83%
                                               
    35,000         01/02/96        12/30/96         Floating             6.837%
</TABLE>



NOTE 5.  COMMITMENTS AND CONTINGENCIES

         The Company is a party to ongoing litigation in the normal course of
business.  Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters.  While the outcome of lawsuits or other proceedings against the
Company cannot be predicted with certainty, management believes that the effect
on its financial condition and results of operations, if any, will not be
material.





                                                                             -9-
<PAGE>   10
            ITEM 2.   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS
                                 (UNAUDITED)

                                   GENERAL

         The following discussion is intended to assist in an understanding of
the Company's financial position and results of operations for each of the
periods indicated.  The Company's accompanying unaudited financial statements
and the notes thereto and the consolidated financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 contain detailed information that should be referred to in
conjunction with the following discussion.


                             RESULTS OF OPERATIONS

CONSOLIDATED HIGHLIGHTS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Amounts)

                                               Three Months Ended                      Nine Months Ended
                                                  September 30,                          September 30,          
                                            -----------------------      Percent    ----------------------      Percent
                                               1995          1994        Change       1995          1994        Change
                                            ------------------------------------------------------------------------------
 <S>                                         <C>            <C>          <C>        <C>           <C>           <C>
 Revenues:

   Exploration and production ............   $ 47,949       $57,104      -   16     $152,088      $208,222      -  27

   Pipeline and marketing ................      7,783         9,829      -   21       26,131        29,984      -  13

   Alaska transmission and distribution ..     12,355        14,111      -   12       66,205        69,460      -   5
--------------------------------------------------------------------------------------------------------------------------
                                             $ 68,087       $81,044      -   16     $244,424      $307,666      -  21
==========================================================================================================================

 Operating Profit (Loss):

   Exploration and production ............   $(3,053)       $    78      -4,014     $(53,763)     $ 33,709       -259

   Pipeline and marketing ................      2,601         2,800      -    7        8,511         9,663       - 12

   Alaska transmission and distribution...        907           540      +   68       13,835        12,121       + 14
--------------------------------------------------------------------------------------------------------------------------
                                             $    455       $ 3,418      -   87     $(31,417)     $ 55,493       -157
==========================================================================================================================


 Net Earnings (Loss) .....................   $ 41,550       $(6,291)     +  760     $ (4,125)     $  9,205       -145

 Earnings (Loss) Per Share ...............   $   1.13       $ (0.17)     +  765     $  (0.11)     $   0.25       -144

 Net Cash Provided by Operating
   Activities Before Changes in Operating          
   Assets   and Liabilities ..............   $ 15,767       $28,725      -   45     $ 62,586      $132,416       - 53

 Net Cash Provided by Operating
   Activities ............................   $ 12,123       $45,357      -   73     $ 48,353      $138,145       - 65

 Weighted Average Number of Common
 Shares Outstanding (in thousands) .......     36,768        36,909           -      36 ,128        36,933       -  2
==========================================================================================================================
</TABLE>


         The decrease in net earnings for the nine months ended September 30,
1995 was due to the decrease in operating profit and increases in general and
administrative ("G&A") expense and interest expense, which were partially
offset by the pre-tax gain on sale of certain pipeline assets (the "Pipeline
Assets") of $82 million and the decrease in income taxes.  The increase in net
earnings for the 1995 third quarter was due to the pre-tax gain on sale of the
Pipeline Assets of $82 million partially offset by a decrease in operating
profit and an increase in income taxes.





                                                                            -10-
<PAGE>   11
            ITEM 2.   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                            RESULTS OF OPERATIONS
                                 (UNAUDITED)

CONSOLIDATED HIGHLIGHTS, CONTINUED

Revenues and operating  profit  are  discussed in  the  respective segment
sections.  The pre-tax gain on the sale of the Pipeline Assets is discussed in
the "Pipeline and Marketing" section, G&A expense and interest expense are
discussed under the "Other (Income) Expense" section, and income taxes are
discussed under the "Income Tax" section.

         Net cash provided by operating activities before and after changes in
operating assets and liabilities decreased for the three and nine month periods
of 1995 versus 1994 primarily due to decreases in exploration and production
("E&P") revenues which are due to decreases in natural gas prices coupled with
lower natural gas production.  In addition, net cash provided by operating
activities before and after changes in operating assets and liabilities for the
nine month period of 1995 was lower due to one-time pre-tax charges, included
in general and administrative expense, of $8 million to account for the
expenses involved in the workforce reduction and consolidation recorded during
the second quarter.





                                                                            -11-
<PAGE>   12
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)


EXPLORATION AND PRODUCTION


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Unit Amounts)                                                                           
                                                                                                                         
                                              Three Months Ended                      Nine Months Ended                  
                                                 September 30,                          September 30,                    
                                          --------------------------   Percent    -------------------------    Percent   
                                               1995        1994        Change        1995         1994          Change   
                                          -------------------------------------------------------------------------------
 <S>                                         <C>          <C>           <C>         <C>          <C>             <C>     
 Revenues:

   Natural Gas..........................     $41,754      $50,875       -   18      $134,512     $188,898        - 29

   Oil and Condensate...................       4,821        5,866       -   18        15,287       17,703        - 14

   Natural Gas Liquids..................         688          812       -   15         2,109        2,119           -

   Other................................         686         (449)      +  253           180         (498)       +136
-------------------------------------------------------------------------------------------------------------------------
                                              47,949       57,104       -   16       152,088      208,222        - 27


 Lifting Costs..........................      14,414       15,515       -    7        43,937       47,136        -  7

 General Operating Expense..............       1,512        2,850       -   47         7,162        8,890        - 19

 Exploration Charges....................       7,734        7,178       +    8        21,753       17,396        + 25

 Depreciation, Depletion and
   Amortization.........................      27,342       31,483       -   13        88,623      101,091        - 12
                                                                                                                     

 Impairment of Gas and Oil Properties              -            -            -        44,376            -          NA
-------------------------------------------------------------------------------------------------------------------------
 Operating Profit (Loss)................     $(3,053)     $    78       -4,014      $(53,763)    $ 33,709        -259
=========================================================================================================================

 OPERATING DATA:

 Net Daily Production (1):

   Natural Gas (MMcf)...................       308.4        330.2       -    7        333.6         360.1        -  7

   Oil and Condensate (Bbl).............       3,304        3,869       -   15        3,377         4,265        - 21

   Natural Gas Liquids (Bbl)............       1,092          987       +   11          890           898        -  1

   Combined (MMcfe) (2).................       334.8        359.4       -    7        359.2         391.1        -  8


 Average Sales Prices:

   Natural Gas ($ per Mcf)...............       1.47         1.67       -   12         1.48          1.92        - 23

   Oil and Condensate ($ per Bbl)........      15.85        16.48       -    4        16.58         15.20        +  9

   Natural Gas Liquids ($ per Bbl).......       6.86         8.94       -   23         8.68          8.64           -

   Combined ($ per Mcfe) (2).............       1.56         1.72       -    9         1.55          1.95        - 21


 Lifting Costs ($ per Mcfe):

   Lease Operating.......................       0.29         0.28       +    4         0.27          0.25        +  8

   Workovers.............................       0.01         0.02       -   50         0.02          0.02           -

   Production Taxes......................       0.05         0.06       -   17         0.05          0.07        - 29

   Transportation........................       0.09         0.08       +   13         0.08          0.08           -

   Ad Valorem Taxes......................       0.03         0.03            -         0.03          0.02        + 50
                                                                                                                     
   Total.................................       0.47         0.47            -         0.45          0.44        +  2

 DD&A Rate ($ per Mcfe)..................       0.89         0.95       -    6         0.90          0.95        -  5
=========================================================================================================================
</TABLE>


(1)      Natural gas stated in million cubic feet ("MMcf") or thousand cubic
         feet ("Mcf"); oil and condensate and natural gas liquids stated in
         barrels ("Bbl").

(2)      MMcfe and Mcfe represent the equivalent of one million and one
         thousand cubic feet of natural gas, respectively.  Oil and condensate
         and natural gas liquids are converted to gas at a ratio of one barrel
         of liquids per six Mcf of gas, based on relative energy content.





                                                                            -12-
<PAGE>   13
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

EXPLORATION AND PRODUCTION, CONTINUED


         The decrease in operating profit of the E&P segment for the nine
months ended September 30, 1995 as compared to the 1994 period was primarily
due to a 27% decrease in the Company's revenues coupled with an increase in
exploration charges partially offset by decreased depreciation, depletion and
amortization ("DD&A") expense, lifting costs and general operating expense. In
addition, the nine month period of 1995 was lower due to a non-cash charge for
impairment of gas and oil properties.  The decrease in operating profit for the
1995 third quarter as compared to the 1994 period was primarily due to a 16%
decrease in revenues, partially offset by decreased DD&A, general operating
expense and lifting costs.

         The decrease in revenues for the three and nine months ended September
30, 1995 as compared to 1994 was primarily the result of decreases in the
Company's average realized price of natural gas of 12% and 23%, respectively,
due to several factors beyond the control of the Company (warm weather, new gas
supply, utilization of competitive fuels, low demand for storage refills,
etc.).  Additionally, because of the lower natural gas prices, the Company
voluntarily curtailed production throughout each of the first nine months of
1995, versus only June, August and September in 1994.  In addition, production
decreased as a result of lower deliverability during 1995 due to the natural
production declines of the reserves and substantially less development capital
expenditures being spent to maintain deliverability.  However, sustainable gas
deliverability should reach nearly 370 MMcfd by the end of 1995 as five new
offshore platforms are connected and begin flowing during the fourth quarter.

         Lifting costs decreased for the three and nine months ended September
30, 1995 as a result of the lower production.  While the overall amount of
lifting costs decreased, lifting costs per equivalent unit of production
increased slightly due to the element of fixed costs included in total lifting
costs.

         General operating expense was lower for the three and nine months
ended September 30, 1995 in comparison to the 1994 periods as a result of the
workforce reduction and consolidation implemented by the Company during the
second quarter of 1995.  Estimated annual savings from the Company's workforce
reduction and consolidation are expected to total approximately $8 million and
will be reflected in lower general operating and G&A expenses.

         Exploration charges increased for the nine months ended September 30,
1995 due to a significant increase in seismic and dry hole costs during the
first quarter of 1995.  The increase in seismic costs is primarily due to an
increase in 3-D seismic surveys on offshore exploratory blocks.  Eight of
twenty exploratory wells drilled were successful, two wells were being
completed and four wells were drilling or being evaluated as of early November
1995 in comparison to four successes out of fourteen exploratory wells drilled
for the 1994 period.

         Effective March 31, 1995,  the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".  As a result of
the adoption of SFAS No. 121, the Company recognized a non-cash pre-tax charge
against earnings during the first quarter of $44.4





                                                                            -13-
<PAGE>   14
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

EXPLORATION AND PRODUCTION, CONTINUED


million.  As a result of the impairment and a change in the mix of properties
being produced, the Company's average DD&A rate per equivalent unit of
production decreased from $0.96 per Mcfe for the first quarter of 1995 to $0.89
per Mcfe for the third quarter of 1995.  DD&A expense for the three and nine
months ended September 30, 1995 decreased as compared to the 1994 periods due
to the lower average DD&A rate per equivalent unit of production and the 7% to
8% decrease in total production.

         If natural gas prices remain at their current level, E&P operating
results will be substantially lower in 1995 versus the prior year.  As in the
past, the Company will curtail production whenever prices are deemed to be
below acceptable levels.  As E&P operating profit represented nearly one-half
of the Company's total operating profit for the year ended December 31, 1994, a
substantial decrease in E&P operating results will have a significant impact on
the Company's total operating results.  The Company's operating profit from
pipeline and marketing is expected to decrease in 1995 from the year ended
December 31, 1994 due to the sale of  the Pipeline Assets (see "Pipeline and
Marketing" section below).  Operating profit for the Alaska transmission and
distribution segment is not expected to change significantly in 1995 from that
of 1994.  The Company expects its interest costs to increase slightly in 1995
due to the effect of higher interest rates for the entire year, partially
offset by a decrease in the overall level of debt due to the sale of certain
pipeline assets and Section 29 tax credit-bearing gas properties.





                                                                            -14-
<PAGE>   15
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

PIPELINE AND MARKETING

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)                                                                                                   
                                              Three Months Ended                      Nine Months Ended                  
                                                 September 30,                          September 30,                    
                                          --------------------------   Percent    -------------------------    Percent   
                                               1995        1994        Change        1995         1994          Change   
                                          -------------------------------------------------------------------------------
 <S>                                         <C>          <C>           <C>         <C>          <C>             <C>     
OPERATING PROFIT:

   Pipelines (*).........................    $1,933       $1,695        +14         $5,468       $5,066         +  8
                                                                                                                 
   Marketing and Supply..................       216          364        -41          1,172        3,313         - 65
                                                                                                              
   Gas Processing (*)....................       370          529        -30          1,216          307         +296
                                                                                                              
   Operating and Construction                                                                                   
     Services............................        82          212        -61            655          977         - 33
-------------------------------------------------------------------------------------------------------------------------
                                             $2,601       $2,800        - 7         $8,511       $9,663         - 12
=========================================================================================================================
                                                                                                              
 Average Daily Volumes (MMcf):                                                                                
                                                                                                              
   Gas Gathering.........................       200          287        -30            214          283         - 24
                                                                                                                
   Partnership Systems (net).............       104          111        - 6            106          112         -  5
                                                                                                                
   Marketing and Supply..................       534          528        + 1            535          563         -  5
                                                                                                              

 Gas Processing:                                                                                              
                                                                                                              
   Average Daily Inlet Volumes (MMcf)....       255          274        - 7           238           279         - 15
                                                                                                                 
   Average Daily Net Production (Bbl)....     2,982        4,709        -37         3,926         3,892         +  1
=========================================================================================================================
</TABLE>        
                

(*) On September 25, 1995, the Company sold substantially all of its pipelines
    and gas processing assets.
   
         On September 25, 1995, the Company and three other sellers completed
the sale of their disparate interests in 19 natural gas gathering systems and a
gas processing plant.  The purchaser, a subsidiary of Tejas Power Corporation,
paid Seagull and the other sellers $154.8 million in cash for the assets.  The
Company's share of gross proceeds was approximately $100 million.  Net proceeds
after payment of approximately $3 million in transaction costs were used to
lower the Company's borrowings under  its U.S. revolving credit facility (the
"U.S. Credit Agreement").  From its share of the proceeds, Seagull realized a
one-time, pre-tax gain of approximately $82 million recorded in the third
quarter.  For the three and nine months ended September 30, 1995, the Pipeline
Assets contributed $2.1 million and $6.2 million, respectively, to the
operating profit of the pipeline and marketing segment.

         In the pipeline and marketing segment, operating profit for the nine
months ended September 30, 1995 declined in comparison to the 1994 period due
primarily to declines in the marketing and supply area which more than offset
improvements in the pipelines and gas processing areas.

         The improvements in operating profit for the pipelines area for both
the three and nine months ended September 30, 1995 in comparison to the prior
year were primarily due to decreases in DD&A.  In accordance with SFAS No. 121,
the Company ceased depreciating the Pipeline Assets at the time of the
announcement in April 1995 of the Company's intention to sell those assets.





                                                                            -15-
<PAGE>   16
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

PIPELINE AND MARKETING, CONTINUED

         Operating profit in the marketing and supply area declined for the
three and nine months ended September 30, 1995 in comparison to the prior year
primarily due to significant decreases in the margins received on third party
marketing sales and on the marketing fees received from the sale of gas
produced by the E&P segment due to lower gas prices and production.

         In the gas processing area, operating profit improved for the nine
months ended September 30, 1995 in comparison to the prior year due to
decreases in the cost of gas processed and decreases in DD&A.  In accordance
with SFAS No. 121, the Company ceased depreciating the gas processing plant
sold at the time of the announcement in April 1995 of the Company's intention
to sell this asset.

         For the nine months ended September 30, 1994, operating profit for the
operating and construction area included profit related to a gas pipeline
construction project the Company completed in the first quarter of 1994.  The
Company recognized additional operating profit of $250,000 during the nine
months ended September 30, 1995 when the warranty period for this project
expired.  In June 1995, Seagull was engaged to build an approximately 114 mile
onshore pipeline.  The Company expects to begin recognizing profit on this
project during the fourth quarter of 1995.  The project is expected to be
completed in late 1996.





                                                                            -16-
<PAGE>   17
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)


ALASKA TRANSMISSION AND DISTRIBUTION

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)                                                                                                      
                                                 Three Months Ended                      Nine Months Ended                  
                                                    September 30,                          September 30,                    
                                             --------------------------   Percent    -------------------------    Percent   
                                                  1995        1994        Change        1995         1994          Change   
                                             -------------------------------------------------------------------------------
 <S>                                            <C>          <C>           <C>         <C>           <C>            <C>     
 Revenues...................................    $12,355      $14,111        -12        $66,205       $69,460        - 5

 Cost of Gas Sold...........................      4,779        6,559        -27         31,267        35,407        -12

 Operations and Maintenance Expense.........      4,674        5,093        - 8         15,166        16,114        - 6
                                                                                                    
 Depreciation, Depletion and Amortization...      1,995        1,919        + 4          5,937         5,818        + 2
----------------------------------------------------------------------------------------------------------------------------
 Operating Profit...........................    $   907      $   540        +68        $13,835       $12,121        +14
============================================================================================================================

 OPERATING DATA:                                                                                    
                                                                                                    
 Degree Days (1)............................        732          851        -14          6,417         6,313        + 2
                                                                                                    
 Volumes (Bcf) (2):                                                                                 
                                                                                                    
   Gas Sold.................................       2.7           3.8        -29           17.7          20.4        -13
                                                                                                    
   Gas Transported..........................       5.5           4.3        +28           13.2           9.7        +36
                                                                                                    
   Combined.................................       8.2           8.1        + 1           30.9          30.1        + 3
                                                                                                    
 Margins ($ per Mcf):                                                                               
                                                                                                    
   Gas Sold.................................      2.03          1.64        +24           1.67          1.51        +11

   Gas Transported..........................      0.38          0.31        +23           0.40          0.34        +18
                                                                                                    
   Combined.................................      0.93          0.93          -           1.13          1.13          -
                                                                                                    
 Customers (end of period)..................    91,174        89,285        + 2         91,174        89,285        + 2
============================================================================================================================
</TABLE>  


 (1)     A measure of weather severity calculated by subtracting the mean
         temperature for each day from 65 degrees Fahrenheit.  More degree 
         days equate to colder weather.
 (2)     Bcf represents one billion cubic feet.

         Operating profit of the Alaska transmission and distribution segment
(ENSTAR Natural Gas Company, a division of the Company, and Alaska Pipeline
Company, a wholly owned subsidiary, (collectively referred to herein as "ENSTAR
Alaska")) for the three and nine month periods ended September 30, 1995
improved from the 1994 periods primarily as a result of slightly higher volumes
coupled with lower operations and maintenance expense.

         In the first quarter of 1995, two large utility customers that
previously purchased gas from ENSTAR Alaska began purchasing gas directly from
gas producers.  However, ENSTAR Alaska has been approved by the Alaska Public
Utilities Commission to transport the customers' gas supplies for a fee that is
comparable to the margin (revenues net of the associated cost of gas sold) it
previously earned.  Accordingly, overall operating profit for the Alaska
transmission and distribution segment was basically unaffected by this change.

         This segment's business is seasonal with approximately 65% of its
sales made in the first and fourth quarters of each year.





                                                                            -17-
<PAGE>   18
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)



OTHER (INCOME) EXPENSE

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)                                                                                                      
                                                 Three Months Ended                      Nine Months Ended                  
                                                    September 30,                          September 30,                    
                                             --------------------------   Percent    -------------------------    Percent   
                                                  1995        1994        Change        1995         1994          Change   
                                             -------------------------------------------------------------------------------
 <S>                                           <C>          <C>          <C>          <C>         <C>           <C>         
 General and Administrative                    $  2,876     $ 1,709      +    68      $15,377     $ 8,754       +    76

 Interest Expense                                13,568      14,243      -     5       41,499      37,790       +    10

 Gains on Sale of Property, Plant and
   Equipment, net                               (82,028)       (355)     +23,006      (82,365)       (360)      +22,779

 Interest Income and Other                          224        (748)     -   130         (188)     (1,016)      -    81
----------------------------------------------------------------------------------------------------------------------------
                                               $(65,360)    $14,849      -   540     $(25,677)    $45,168       -   157
============================================================================================================================
</TABLE>

         G&A expenses increased for the nine months ended September 30, 1995 in
comparison to 1994 primarily due to one-time pre-tax charges of $8 million to
account for expenses involved in the Company's workforce reduction and
consolidation and increases in costs associated with three compensation plans,
one for outside directors, one for key managers, and the other for all Seagull
employees, that are tied directly to the price of Seagull Common Stock,
partially offset by declines in the costs relating to potential acquisitions
which were not consummated and accrued incentive compensation expense.  The
closing price of Seagull Common Stock increased 6% for the nine months ended
September 30, 1995 from $19.125 at December 31, 1994 to $20.25 on September 30,
1995, compared to a 8% decrease in the 1994 period.  G&A expenses increased for
the three months ended September 30, 1995 in comparison to 1994 primarily due
to costs associated with the three compensation plans discussed above.  The
closing price of Seagull Common Stock increased 23% in the third quarter of
1995 from $16.50 at June 30, 1995 to $20.25 on September 30, 1995 compared to a
10% decrease in the 1994 period.  Lower operations and maintenance expenses and
G&A expenses resulting from the Company's workforce reduction and consolidation
are expected to total approximately $8 million annually.

         Increases in interest expense for the nine months ended September 30,
1995 over 1994 were a result of an increase in the overall level of interest
rates since the 1994 period.  The average interest rates on the Company's U.S.
Credit Agreement were 6.8% and 5.0% for the nine months ended September 30,
1995 and 1994, respectively.

         The decrease in interest expense for the third quarter of 1995  as
compared to 1994 is primarily due to a lower average debt balance outstanding
under the Company's Canadian revolving credit facility (the "Canadian Credit
Agreement") partially offset by an increase in specific interest rates since
the 1994 period.  While the payment of the Canadian Credit Agreement was funded
through additional borrowings under the U.S. Credit Agreement, the average
interest rate for the U.S. Credit Agreement was significantly lower than the
average interest rate for the Canadian Credit Agreement.





                                                                            -18-
<PAGE>   19
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

OTHER (INCOME) EXPENSE, CONTINUED

         Approximately 55% to 65% of the Company's long-term debt bears
interest at various fixed rates through the end of 1996.  The remainder of the
outstanding debt bears interest at various market sensitive interest rates.

         As proceeds from the sale of the Pipeline Assets and the Section 29
tax credit-bearing properties were used to pay down the Company's borrowings
under the U.S. Credit Agreement, the Company's expects its interest costs to
decrease substantially for the three months ended December 31, 1995 and the
year ended December 31, 1996.

         The increase in the gain on sale of property, plant and equipment for
both the three and nine month periods ended September 30, 1995 as compared to
the 1994 periods is primarily due to the $82 million pre-tax gain on sale of
the Pipeline Assets recorded in the third quarter.


INCOME TAXES

         The decrease in income taxes for the nine months ended September 30,
1995 was primarily a result of the decrease in earnings before income
taxes for the period.  The increase in income taxes for the three months ended
September 30, 1995 was primarily a result of the increase in earnings
before income taxes for the periods.


                        LIQUIDITY AND CAPITAL RESOURCES

CAPITAL EXPENDITURES

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)                                                                                                      
                                                 Three Months Ended                      Nine Months Ended                  
                                                    September 30,                          September 30,                    
                                             --------------------------   Percent    -------------------------    Percent   
                                                  1995        1994        Change        1995         1994          Change   
                                             -------------------------------------------------------------------------------
 <S>                                            <C>         <C>             <C>       <C>          <C>            <C>         
 Exploration and Production:

   Lease acquisitions                           $ 3,207     $ 2,887         +11       $ 5,430      $10,283        -47

   Exploration costs                              5,854      10,249         -43        21,515       18,069        +19

   Development costs                             10,800      22,951         -53        24,283       58,411        -58
----------------------------------------------------------------------------------------------------------------------------
                                                 19,861      36,087         -45        51,228       86,763        -41
============================================================================================================================

 Pipeline and Marketing                               -         313          NA           137          901        -85

 Alaska Transmission and Distribution             2,178       2,438         -11         4,992        5,602        -11

 Corporate                                          378         877         -57           851        3,714        -77
----------------------------------------------------------------------------------------------------------------------------
                                                $22,417     $39,715         -44       $57,208      $96,980        -41
============================================================================================================================
</TABLE>

         Current plans for 1995 call for capital expenditures of approximately
$100 million, including about $90 million in exploration and production, of
which about $40 million is





                                                                            -19-
<PAGE>   20
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

exploration.  Since the Company funds capital expenditures from internally
generated funds, the Company will reduce or increase capital expenditures as
economic conditions dictate.

         Under provisions in the U.S. Credit Agreement the Company, at its
option, may request a reduction in the maximum commitment.  In June 1995, the
Company requested the maximum commitment under the U.S. Credit Agreement be
reduced from $725 million to $650 million.  The maximum commitment under the
U.S. Credit Agreement reduces in equal quarterly amounts of $45 million
commencing on March 31, 1997, with a final reduction of $20 million on
September 30, 2000.  Under provisions included in the U.S. Credit Agreement,
the amount of senior indebtedness available to the Company is subject to a
borrowing base (the "Borrowing Base"), based upon the proved reserves of the
Company's exploration and production segment and the financial performance of
the Company's other business segments.  The Borrowing Base is generally
determined annually but may be redetermined one additional time each year, at
the option of either Seagull or the banks, and upon the sale of certain assets
included in the Borrowing Base.  The sale of the Pipeline Assets and Section 29
tax credit-bearing gas properties reduced the available Borrowing Base under
the U.S. Credit Agreement by approximately $75 million to $500 million.

         As of November 7, 1995, borrowings outstanding under the U.S. Credit
Agreement were $89.0 million, leaving immediately available unused commitments
of approximately $206.2 million, net of outstanding letters of credit of $2.9
million, $100.0 million of borrowings outstanding under the Company's senior
notes, the nominated borrowing availability of $95.0 million under the Canadian
Credit Agreement and $6.9 million of borrowings outstanding under Seagull's
money market facilities.

         In September 1995, the Company sold its Section 29 tax credit-bearing
gas properties to an investment group which includes a Seagull subsidiary and
two financial investors.  For accounting purposes, the Company has treated the
sale as a non-recourse monetary production payment reflected in long-term debt
on the balance sheet.  Net of transaction costs, the proceeds from the sale of
approximately $46.3 million in cash were used to pay down the Company's
borrowings under the U.S. Credit Agreement.

         During the first quarter of 1995, the Company made a capital
contribution of approximately $73 million to a wholly-owned subsidiary, Seagull
Energy Canada Ltd. ("Seagull Canada").  The Company funded the capital
contribution by an additional borrowing under the U.S. Credit Agreement.
Seagull Canada used the proceeds to repay a portion of the balance outstanding
under the Canadian Credit Agreement and concurrently elected to reduce the
nominated maximum borrowing available under the Canadian Credit Agreement from
$160 million to $95 million.  The Canadian Credit Agreement provides for dual
currency borrowings in U.S. and Canadian dollars and has a flexible nominated
maximum borrowing availability which amount is taken into consideration in the
calculation of availability under the U.S. Credit Agreement, and which may be
increased or decreased by Seagull Canada at its discretion.





                                                                            -20-
<PAGE>   21
              ITEM 2.  SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                  (UNAUDITED)

LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

         In addition to the facilities discussed above, Seagull has money
market facilities with two major U. S. banks with a combined maximum commitment
of $70 million.  These lines of credit bear interest at rates made available by
the banks at their discretion and may be canceled at either Seagull's or the
banks' discretion.  The lines are subject to annual renewal.
  
         On November 7, 1995, Seagull filed a shelf registration statement with
the Securities and Exchange Commission to issue up to $300 million in one or
more forms of securities.  The shelf registration statement provides for the
issuance of debt securities, depositary shares, preferred stock, common stock
or securities warrants from time to time in the future.  No securities have yet
been issued pursuant to the registration statement and the Company has no
current plans to issue the securities pursuant to the registration statement.
Seagull believes the shelf registration statement provides the Company with
the ability, should the appropriate situation arise, to promptly and
efficiently pursue a more aggressive capital spending program or other
promising growth opportunities.





                                                                            -21-
<PAGE>   22
PART II.  OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits:

* 10.1    Trust Agreement dated as of September 1, 1995 for the Seagull Series
          1995 Trust.

* 10.2    Guaranty by Seagull Energy Corporation in favor of the Seagull
          Series 1995 Trust.

*#10.3    Severance Agreement between Seagull Energy Corporation and Barry J.
          Galt.

*#10.4    Seagull Employee Stock Ownership Plan (the "Plan") as amended,
          including First through Fourth Amendments thereto (incorporated by
          reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q for
          the quarterly period ended June 30, 1993; the Fifth and Sixth
          Amendments are incorporated by reference to Quarterly Report on Form
          10-Q for the quarterly period ended June 30, 1995 and the Seventh
          Amendment is filed herewith).

*27.1     Financial Data Schedule.

(b)       Reports on Form 8-K:

          There were no Reports on Form 8-K filed during the three months ended
          September 30, 1995.





_______________
*  Filed herewith.
#  Identifies management contracts and compensatory plans or arrangements.





                                                                            -22-
<PAGE>   23
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       SEAGULL ENERGY CORPORATION



                                       By:   /s/ Robert W. Shower               
                                             -----------------------------------
                                             Robert W. Shower, Executive Vice 
                                             President and Chief Financial 
                                             Officer (Principal Financial
                                             Officer)

                                       Date:  November 13, 1995     
                                             -----------------------------------





                                       By:   /s/ Rodney W. Bridges              
                                             -----------------------------------
                                             Rodney W. Bridges, Vice President
                                             and Controller (Principal 
                                             Accounting Officer)


                                       Date:  November 13, 1995     
                                             -----------------------------------





                                                                            -23-
<PAGE>   24
                                EXHIBIT INDEX



<TABLE>
<CAPTION>
EXHIBIT                                                                                                         
NUMBER          DESCRIPTION                                                                        
------          -----------                                                                        
<S>             <C>
*10.1           Trust Agreement dated as of September 1, 1995 for the Seagull
                Series 1995 Trust.
                
*10.2           Guaranty by Seagull Energy Corporation in favor of the Seagull
                Series 1995 Trust.
                
*#10.3          Severance Agreement between Seagull Energy Corporation and
                Barry J. Galt.
                
* 10.4          Seagull Employee Stock Ownership Plan (the "Plan") as amended, including First through
                Fourth Amendments thereto (incorporated by reference to Exhibit 10.9 to the Quarterly
                Report on Form 10-Q for the quarterly period ended June 30, 1993; the Fifth and Sixth
                Amendments are incorporated by reference to Quarterly Report on Form 10-Q for the quarterly
                period ended June 30, 1995 and the Seventh Amendment is filed herewith).
                
*27.1           Financial Data Schedule.
</TABLE>





_______________
*  Filed herewith.
#  Identifies management contracts and compensatory plans or arrangements.