================================================================================

                       Securities And Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)

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

                       For the Quarter Ended June 30, 2000

                                       OR

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

                         Commission file number: 1-8094

                               Ocean Energy, Inc.
             (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 1600, Houston, Texas 77002-6714
               (Address of principal executive offices) (Zip code)

                                 (713) 265-6000
              (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 .

As of July 26, 2000,  166,888,642  shares of Common  Stock,  par value $0.10 per
share, were outstanding.
================================================================================
<PAGE>

                               Ocean Energy, Inc.


                                      Index

                                                                           Page
                                                                          Number
Part I.  Financial Information

    Item 1.   Unaudited Consolidated Financial Statements

              Consolidated Statements of Operations for the Three Months and
               Six Months Ended June 30, 2000 and 1999....................    1

              Consolidated Balance Sheets - June 30, 2000
               and December 31, 1999......................................    2

              Consolidated Statements of Cash Flows for the Six Months
               Ended June 30, 2000 and 1999...............................    3

              Consolidated Statements of Comprehensive Income for the Three
               Months and Six Months Ended June 30, 2000 and 1999.........    4

              Notes to Consolidated Financial Statements..................    5

    Item 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations.........................   14

    Item 3.   Quantitative and Qualitative Disclosures about Market Risks.   22

Part II.  Other Information...............................................   22

Signatures................................................................   23


                                      (i)

<PAGE>

Item. 1  Unaudited Consolidated Financial Statements

                               Ocean Energy, Inc.
                      Consolidated Statements Of Operations
                  (Amounts in Thousands, Except Per Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,       Six Months Ended June 30,
                                                            -------------------------------- ---------------------------------
                                                                 2000             1999            2000             1999
                                                            ---------------  --------------- ---------------  ----------------
<S>                                                         <C>              <C>             <C>              <C>

Revenues......................................................$  236,429       $  196,206      $  482,497       $  301,900

Costs of Operations:
   Operating expenses.........................................    57,890           65,446         114,710          110,606
   Depreciation, depletion and amortization...................    72,952           89,509         153,032          148,117
   Impairment of oil and gas properties.......................         -                -               -           28,500
   General and administrative.................................     5,950            8,507          15,072           13,083
                                                            ---------------  --------------- ---------------  ----------------
                                                                 136,792          163,462         282,814          300,306
                                                            ---------------  --------------- ---------------  ----------------

Operating Profit..............................................    99,637           32,744         199,683            1,594

Other (Income) Expense:
   Interest expense...........................................    18,866           31,021          38,094           56,191
   Merger and integration costs...............................         -                -           3,273           40,652
   Interest income and other..................................       (93)             369            (832)            (114)
                                                            ---------------  --------------- ---------------  ----------------

Income (Loss) Before Income Taxes.............................    80,864            1,354         159,148          (95,135)

Income Tax Expense (Benefit)..................................    35,371             (235)         70,677          (15,673)
                                                            ---------------  --------------- ---------------  ----------------

Income (Loss) from Continuing Operations......................    45,493            1,589          88,471          (79,462)
Income from Discontinued Operations, Net of
   Income Taxes...............................................         -              547               -              547
                                                            ---------------  --------------- ---------------  ----------------

Net Income (Loss).............................................    45,493            2,136          88,471          (78,915)
Preferred Stock Dividend......................................       812              836           1,625            1,637
                                                            ---------------  --------------- ---------------  ----------------

Net Income (Loss) Available to Common Shareholders............$   44,681       $    1,300      $   86,846       $  (80,552)
                                                            ===============  =============== ===============  ================

Earnings (Loss) Per Common Share:
   Basic:
     Income (Loss) from Continuing Operations................. $    0.27        $    0.01       $     0.52       $    (0.60)
     Income from Discontinued Operations......................        -                -                -                -
                                                            ---------------  --------------- ---------------  ----------------
     Net Income (Loss)........................................ $    0.27        $    0.01       $     0.52       $    (0.60)
                                                            ===============  =============== ===============  ================

   Diluted:
     Income (Loss) from Continuing Operations................. $    0.26        $    0.01       $    0.50        $    (0.60)
     Income from Discontinued Operations......................         -               -                 -               -
                                                            ---------------  --------------- ---------------  ----------------
     Net Income (Loss)........................................ $    0.26        $    0.01       $    0.50        $    (0.60)
                                                            ===============  =============== ===============  ================

Weighted Average Number of Common Shares
     Basic....................................................   167,217          166,441         167,022          134,991
                                                            ===============  =============== ===============  ================
     Diluted..................................................   177,484          168,371         176,057          134,991
                                                            ===============  =============== ===============  ================
</TABLE>
          See accompanying Notes to Consolidated Financial Statements.

                                       1
<PAGE>

                               Ocean Energy, Inc.
                           Consolidated Balance Sheets
                    (Amounts in Thousands, Except Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         June 30,           December 31,
                                                                                           2000                 1999
                                                                                     -----------------    ------------------
                                                          Assets
<S>                                                                                  <C>                  <C>

Current Assets:
   Cash and cash equivalents....................................................       $      84,839        $      64,889
   Accounts receivable, net.....................................................             198,344              170,034
   Inventories..................................................................              29,566               28,723
   Prepaid expenses and other...................................................              23,791               26,304
                                                                                     -----------------    ------------------
     Total Current Assets.......................................................             336,540              289,950

Property, Plant and Equipment, at cost, full cost method for oil and gas properties:
   Evaluated oil and gas properties.............................................           3,884,763            3,706,288
   Unevaluated oil and gas properties excluded from amortization................             521,007              507,197

   Other........................................................................             142,831               84,410
                                                                                     -----------------    ------------------
                                                                                           4,548,601            4,297,895
Accumulated Depreciation, Depletion and Amortization............................          (2,339,617)          (2,094,885)
                                                                                     -----------------    ------------------
                                                                                           2,208,984            2,203,010

Deferred Income Taxes...........................................................             177,518              233,406
Other Assets....................................................................              54,000               56,777
                                                                                     -----------------    ------------------
Total Assets....................................................................       $   2,777,042        $   2,783,143
                                                                                     =================    ==================

                                           Liabilities And Shareholders' Equity

Current Liabilities:
   Accounts and notes payable...................................................       $     280,105        $     275,629
   Accrued interest payable.....................................................              38,787               41,119
   Accrued liabilities..........................................................              23,576               51,542
   Current maturities of long-term debt.........................................               8,023               13,651
                                                                                     -----------------    ------------------
     Total Current Liabilities..................................................             350,491              381,941

Long-Term Debt..................................................................           1,257,268            1,333,410
Other Noncurrent Liabilities and Deferred Revenue...............................             138,683              120,097
Commitments and Contingencies...................................................

Shareholders' Equity:
   Preferred stock, $1.00 par value; authorized 10,000,000 shares;
     issued 50,000 shares.......................................................                  50                   50
   Common stock, $.10 par value; authorized 230,000,000 shares; issued
     168,638,285 and 166,979,981 shares, respectively...........................              16,864               16,699
   Additional paid-in capital...................................................           1,499,559            1,484,688
   Accumulated deficit..........................................................            (460,372)            (547,216)
   Less - treasury stock, at cost; 1,758,653 and 378,171 shares, respectively...             (22,310)              (3,114)
   Less - Other.................................................................              (3,191)              (3,412)
                                                                                     -----------------    ------------------
     Total Shareholders' Equity.................................................           1,030,600              947,695
                                                                                     -----------------    ------------------
Total Liabilities and Shareholders' Equity......................................       $   2,777,042        $   2,783,143
                                                                                     =================    ==================
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                       2
<PAGE>

                               Ocean Energy, Inc.
                      Consolidated Statements Of Cash Flows
                             (Amounts in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    Six Months Ended June 30,
                                                                              ---------------------------------------
                                                                                    2000                 1999
                                                                              -----------------    ------------------
<S>                                                                           <C>                  <C>
 Operating Activities:
   Net income (loss)......................................................      $      88,471        $     (78,915)
   Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
     Depreciation, depletion and amortization.............................            153,032              148,117
     Impairment of oil and gas properties.................................                  -               28,500
     Deferred income taxes................................................             56,003              (25,727)
     Noncash merger and integration costs.................................                  -               21,047
     Other................................................................              3,453                6,659
     Changes in operating assets and liabilities, net of acquisitions:
       Decrease (increase) in accounts receivable.........................            (28,310)              41,317
       Decrease in inventories, prepaid expenses and other................                148               16,718
       Decrease in accounts and notes payable.............................            (50,039)             (94,117)
       Amortization of deferred revenue...................................            (12,395)                   -
       Increase in accrued expenses and other.............................              2,614               41,795
                                                                              -----------------    ------------------
     Net Cash Provided by Operating Activities............................            212,977              105,394
                                                                              -----------------    ------------------

 Investing Activities:
   Capital expenditures...................................................           (251,348)            (144,082)
   Capital expenditures of Discontinued Operations........................                  -               (2,171)
   Acquisition costs, net of cash acquired................................               (309)              (2,327)
   Proceeds from sales of property, plant and equipment...................             92,655              109,442
                                                                              -----------------    ------------------
     Net Cash Used In Investing Activities................................           (159,002)             (39,138)
                                                                              -----------------    ------------------

 Financing Activities:
   Proceeds from debt.....................................................            672,583              823,189
   Principal payments on debt ............................................           (698,540)            (946,931)
   Proceeds from deferred revenue.........................................                  -              100,000
   Proceeds from sales of common stock....................................             11,518                  311
   Purchase of treasury stock.............................................            (19,173)                   -
   Deferred debt issue costs..............................................                  -               (6,406)
   Other..................................................................               (413)                (759)
                                                                              -----------------    ------------------
     Net Cash Used In Financing Activities................................            (34,025)             (30,596)
                                                                              -----------------    ------------------

 Increase In Cash and Cash Equivalents....................................             19,950               35,660

 Cash and Cash Equivalents at Beginning of Period.........................             64,889               10,706
                                                                              -----------------    ------------------

 Cash and Cash Equivalents at End of Period...............................      $      84,839        $      46,366
                                                                              =================    ==================
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                       3

<PAGE>

                               Ocean Energy, Inc.
                 Consolidated Statements Of Comprehensive Income
                             (Amounts in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ended June 30,        Six Months Ended June 30,
                                                      --------------------------------- ---------------------------------
                                                            2000             1999            2000             1999
                                                      ----------------- --------------- ---------------- ----------------
<S>                                                   <C>               <C>             <C>              <C>

Net income (loss)....................................    $   45,493        $    2,136      $   88,471       $  (78,915)

Other comprehensive income, net of tax:
   Foreign currency translation adjustment...........             -             9,741               -           10,720
                                                      ----------------- --------------- ---------------- ----------------

Comprehensive income (loss) .........................    $   45,493        $   11,877      $   88,471       $  (68,195)
                                                      ================= =============== ================ ================
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                       4


<PAGE>

                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

Note 1.       Presentation of Financial Information

     The consolidated financial statements of Ocean Energy, Inc. ("Ocean", "OEI"
or "the  Company"),  a Texas  corporation,  included  herein have been prepared,
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange Commission ("SEC").  Although certain information  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles  has  been  condensed  or  omitted,   management  believes  that  the
disclosures are adequate to make the information  presented not misleading.  The
financial  statements  reflect all normal  recurring  adjustments  that,  in the
opinion of management, are necessary for a fair presentation.

     On March 30, 1999,  Ocean  Energy,  Inc.  ("Old Ocean") was merged with and
into Seagull Energy Corporation ("Seagull", the "Merger"). The resulting company
was renamed Ocean Energy, Inc. The Merger was treated for accounting purposes as
an acquisition of Seagull by Ocean with the assets and  liabilities of Old Ocean
being recorded based upon their  historical costs and the assets and liabilities
of Seagull being recorded at their estimated fair market values.  As of December
31, 1999 a total purchase price of $642 million had been allocated to assets and
liabilities.  The  Merger,  completed  through  the  issuance  of common  stock,
increased property,  plant and equipment by $1.3 billion,  debt by $563 million,
other liabilities by $200 million, and equity by $595 million through a non-cash
transaction. The financial results presented here include those of Ocean Energy,
Inc. on a stand alone-basis for the first  quarter of 1999 and of the  combined
company thereafter.

     The accompanying consolidated financial statements of the Company should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Annual Report on Form 10-K for the year ended December 31, 1999.

     Property,  Plant and Equipment - The Company  capitalizes  interest expense
and certain employee-related costs that are directly attributable to oil and gas
operations.  For the three  months  ended June 30,  2000 and 1999,  the  Company
capitalized  interest  expense in the  amount of $11  million  and $13  million,
respectively,  and certain  employee-related  costs in the amount of $11 million
and $10 million,  respectively. For the six months ended June 30, 2000 and 1999,
the Company  capitalized  interest  expense in the amount of $23 million and $20
million,  respectively,  and certain employee-related costs in the amount of $21
million and $15 million, respectively.

     During the first six months of 1999, the Company recognized  impairments in
the  amount of $28.5  million,  pre-tax,  related  primarily  to the sale of the
Canadian subsidiary on April 15, 1999.


                                       5
<PAGE>

                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)


     Earnings Per Share - The following table provides a reconciliation  between
basic and diluted  earnings  (loss) per share  (stated in  thousands  except per
share data):

<TABLE>
<CAPTION>
                                                 Net Income (Loss)          Weighted Average          Earnings (Loss)
                                                Available to Common           Common Shares              Per Share
                                                   Shareholders                Outstanding                Amount
                                              ------------------------    ----------------------     ------------------
<S>                                           <C>                         <C>                        <C>
Quarter Ended June 30, 2000:
     Basic...................................        $ 44,681                    167,217                  $ 0.27
     Effect of dilutive securities:
          Stock options......................               -                      6,880
          Convertible preferred stock........             812                      3,387
                                              ------------------------    ----------------------
     Diluted.................................        $ 45,493                    177,484                  $ 0.26
                                              ========================    ======================

Quarter Ended June 30, 1999:
     Basic...................................         $ 1,300                    166,441                  $ 0.01
     Effect of dilutive securities:
          Stock options......................               -                      1,930
                                              ------------------------    ----------------------
     Diluted.................................         $ 1,300                    168,371                  $ 0.01
                                              ========================    ======================

Six Months Ended June 30, 2000:
     Basic..................................         $ 86,846                    167,022                  $ 0.52
     Effect of dilutive securities:
          Stock options.....................                -                      5,648
          Convertible preferred stock.......            1,625                      3,387
                                              ------------------------    ----------------------
     Diluted................................         $ 88,471                    176,057                  $ 0.50
                                              ========================    ======================

Six Months Ended June 30, 1999:
     Basic..................................        $ (80,552)                   134,991                 $ (0.60)
     Effect of dilutive securities..........                -                          -
                                              ------------------------    ----------------------
     Diluted................................        $ (80,552)                   134,991                 $ (0.60)
                                              ========================    ======================
</TABLE>

     Weighted  average options to purchase  7,661,000  shares of common stock at
$12.19 to $36.54  per share and  6,890,000  shares of common  stock at $14.88 to
$36.54  per share  were  outstanding  during the first six months and during the
second quarter of 2000,  respectively,  but were not included in the computation
of diluted earnings per share because the options'  exercise prices were greater
than the average  market price of the common  shares.  These  options  expire at
various dates  through 2010.  Weighted  average  options to purchase  17,597,000
shares of common stock for the six months ended June 30, 1999 at prices  ranging
from $2.11 to $36.54 per share were  outstanding  but were not  included  in the
computation  of  diluted  loss per share  because  such  options  would  have an
antidilutive  effect on the computation of diluted loss per share. These options
expire at various dates from 1999 to 2009.  The preferred  stock  conversion was
also  excluded  from the  computation  for the six months  ended  June 30,  1999
because  of its  antidilutive  effect.  Weighted  average  options  to  purchase
8,658,000  shares of common stock at $9.23 to $36.54 per share were  outstanding
during the second  quarter of 1999 but were not included in the  computation  of
diluted  earnings per share  because the options'  exercise  prices were greater
than the average  market price of the common  shares.  These  options  expire at
various dates through 2009.

                                       6

<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)



     Treasury Stock - The Company  follows the average cost method of accounting
for treasury stock transactions.

     Discontinued  Operations  - During the first six months of 1999 the Company
operated  in  Alaska  through  a  division  of the  Company  and a  wholly-owned
subsidiary  (collectively  referred  to  herein as  "ENSTAR").  In July 1999 the
Company  committed  to a plan to dispose of ENSTAR,  and on November 1, 1999 the
Company  completed the sale. Prior to the sale the results of operations and net
assets of ENSTAR were reflected as discontinued operations.

     Accounting   Pronouncements  -  In  June  1998,  the  Financial  Accounting
Standards  Board ("FASB")  issued  Statement of Financial  Accounting  Standards
("SFAS") No. 133, Accounting for Derivative  Instruments and Hedging Activities,
and in June  2000,  the  FASB  issued  SFAS  No.  138,  Accounting  for  Certain
Derivative  Instruments  and Certain  Hedging  Activities,  an amendment of FASB
Statement No. 133. These  statements  establish  standards of accounting for and
disclosures of derivative  instruments and hedging activities.  These statements
are effective for fiscal years beginning after June 15, 2000.  While the Company
has not yet completed  its  evaluation  of the impact of these  statements,  the
Company does not believe the  statements  will have a significant  impact on its
results of  operations  as it expects its current  derivative  activities  would
continue to qualify under hedge accounting.

Note 2.       Disposition of Assets

     Disposition of East Bay - On March 31, 2000, the Company completed the sale
of its East Bay Complex receiving net proceeds of approximately $78 million. The
properties  consisted  of South Pass 24, South Pass 27 and South Pass 30 Fields,
located in the  Mississippi  Delta  Region of the Gulf of  Mexico.  The East Bay
Complex  contributed  revenues of $23 and $25  million for the first  quarter of
2000 and the first six months of 1999,  respectively,  and had operating  profit
(loss) of $10 million and $(3)  million,  respectively.  Proceeds from this sale
were used to repay  amounts  outstanding  under the  Company's  existing  credit
facilities.

     Disposition  of  Canadian  Subsidiary  - On April  15,  1999,  the  Company
completed a sale of its Canadian oil and gas assets,  realizing  net proceeds of
$68 million  which were used to repay  existing  long-term  debt.  The  Canadian
assets disposed of contributed  revenues of $7 million, and had operating loss
of $21 million (including impairment) for the six months ended June 30, 1999.

                                       7
<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

Note 3.       Supplemental Disclosures of Cash Flow Information

<TABLE>
<CAPTION>
                                                                               Six Months Ended June 30,
                                                                   -------------------- ------ ----------------------
                                                                          2000                         1999
                                                                   --------------------        ----------------------
                                                                                (amounts in thousands)
<S>                                                                <C>                         <C>
Cash paid during the period for:
  Interest..................................................          $    37,540                 $    57,584
  Income taxes..............................................          $    22,075                 $     6,244
</TABLE>

Note 4.       Financial Instruments

     From time to time,  the  Company  has  utilized  and expects to continue to
utilize  hedging  transactions  with respect to a portion of its oil and natural
gas production to achieve a more  predictable cash flow as well as to reduce its
exposure to price fluctuations.  These transactions generally are swaps or price
collars and are entered into with major  financial  institutions  or commodities
trading  institutions.  Derivative financial  instruments are intended to reduce
the Company's  exposure to declines in the market price of natural gas and crude
oil.  As a result,  gains and losses on  derivative  financial  instruments  are
generally  offset by similar  changes in the realized  prices of natural gas and
crude oil. Gains and losses from these  financial  instruments are recognized in
revenues for the periods to which the derivative  financial  instruments relate.
Oil and gas  revenues  have  decreased by $52 million and $5 million for the six
months ended June 30, 2000 and 1999, respectively, as a result of the derivative
financial instruments and a prepaid crude oil sales contract.

     As of June 30,  2000 and based on NYMEX  oil and gas  strip  prices at that
date, the Company's derivative financial instruments were as follows:

<TABLE>
<CAPTION>
                                                 Crude Oil                               Natural Gas
                                    ------------------------------------     ------------------------------------
                                        Daily                                    Daily
                                      Production        Average Hedged         Production        Average Hedged
            Period                      (Bbl)                Price               (Mcf)               Price
-------------------------------     ---------------     ----------------     ---------------    -----------------
<S>                                 <C>                 <C>                  <C>                <C>

Third Quarter, 2000...............      35,000              $  22.80           115,000               $   2.95

Fourth Quarter, 2000..............      25,000              $  21.93           115,000               $   2.95

First Six Months, 2001............      15,000              $  21.53                 -                    -
</TABLE>


Note 5.       Supplemental Guarantor Information

     Ocean Energy, Inc., a Louisiana corporation and wholly-owned  subsidiary of
the Company ("Ocean  Louisiana"),  has  unconditionally  guaranteed the full and
prompt  performance of the Company's  obligations under certain of the notes and
related  indentures,  including the payment of  principal,  premium (if any) and
interest. None of the referenced indentures place significant

                                       8
<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

restrictions on a wholly-owned subsidiary's ability to make distributions to the
parent. In order to provide meaningful  financial data relating to the guarantor
(i.e.,  Ocean Louisiana on an  unconsolidated  basis),  the following  condensed
consolidating financial information has been provided following the policies set
forth below:

1)   The Company  accounts for  investments in  subsidiaries  on the cost basis.
     Earnings  of  subsidiaries  are  therefore  not  reflected  in the  related
     investment accounts.

2)   Certain  reclassifications  were  made  to  conform  all of  the  financial
     information  to the financial  presentation  on a consolidated  basis.  The
     principal  eliminating  entries  eliminate  investments in subsidiaries and
     intercompany balances.

                                       9

<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

          Supplemental Condensed Consolidating Statements of Operations
                For the Three Months Ended June 30, 2000 and 1999
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                            Unconsolidated
                                     --------------------------------------------------------------
                                                               Guarantor          Non-Guarantor
2000                                        OEI               Subsidiary           Subsidiaries      Consolidated OEI
                                     ------------------   --------------------  -------------------  ------------------
<S>                                  <C>                  <C>                   <C>                  <C>
Revenues...........................    $           -        $      66,563         $     169,866        $     236,429
Costs of Operations:
   Operating expenses..............                -               15,860                42,030               57,890
   Depreciation, depletion and
     amortization..................            1,582               13,579                57,791               72,952
   General and administrative......            5,950                    -                     -                5,950
                                     --------------------  -------------------  ------------------   ------------------
Operating Profit (Loss) ...........           (7,532)              37,124                70,045               99,637
Interest Expense...................           18,644                    -                   222               18,866
Interest Income and Other..........             (550)                  13                   444                  (93)
                                     ------------------   --------------------  -------------------  ------------------
Income (Loss) Before Taxes.........          (25,626)              37,111                69,379               80,864
Income Tax Provision (Benefit) ....           (9,354)              13,545                31,180               35,371
                                     ------------------   --------------------  -------------------  ------------------
Net Income (Loss)..................    $     (16,272)       $      23,566         $      38,199        $      45,493
                                     ==================   ====================  ===================  ==================

1999
Revenues...........................    $           -        $      65,550         $     130,656        $     196,206
Costs of Operations:
   Operating expenses..............                -               26,467                38,979               65,446
   Depreciation, depletion and
     amortization..................            1,061               27,002                61,446               89,509
   General and administrative......            4,363                4,144                     -                8,507
                                     ------------------   --------------------  -------------------  ------------------
Operating Profit (Loss)............           (5,424)               7,937                30,231               32,744
Interest Expense...................           30,487                  649                  (115)              31,021
Interest Income and Other..........           (1,543)               5,249                (3,337)                 369
                                     ------------------   --------------------  -------------------  ------------------
Income (Loss) Before Taxes.........          (34,368)               2,039                33,683                1,354
Income Tax Provision (Benefit).....            9,885              (30,185)               20,065                 (235)
                                     ------------------   --------------------  -------------------  ------------------
Income (Loss) from Continuing
   Operations......................          (44,253)              32,224                13,618                1,589
Income from Discontinued
   Operations, net of income taxes.                -                    -                   547                  547
                                     ------------------   --------------------  -------------------  ------------------
Net Income (Loss)..................    $     (44,253)       $      32,224         $      14,165        $       2,136
                                     ==================   ====================  ===================  ==================
</TABLE>

                                       10
<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

          Supplemental Condensed Consolidating Statements of Operations
                 For the Six Months Ended June 30, 2000 and 1999
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                            Unconsolidated
                                     --------------------------------------------------------------
                                                               Guarantor          Non-Guarantor
2000                                        OEI               Subsidiary           Subsidiaries      Consolidated OEI
                                     ------------------   --------------------  -------------------  ------------------
<S>                                  <C>                  <C>                   <C>                  <C>
Revenues...........................    $           -        $     158,985         $     323,512        $     482,497
Costs of Operations:
   Operating expenses..............                -               35,613                79,097              114,710
   Depreciation, depletion and
     amortization..................            3,165               36,051               113,816              153,032
   General and administrative......           15,072                    -                     -               15,072
                                     ------------------   --------------------  -------------------  ------------------
Operating Profit (Loss)............          (18,237)              87,321               130,599              199,683
Interest Expense...................           37,629                    -                   465               38,094
Merger and integration costs.......            3,273                    -                     -                3,273
Interest Income and Other..........             (102)                  27                  (757)                (832)
                                     ------------------   --------------------  -------------------  ------------------
Income (Loss) Before Taxes.........          (59,037)              87,294               130,891              159,148
Income Tax Provision (Benefit) ....          (21,549)              31,862                60,364               70,677
                                     ------------------   --------------------  -------------------  ------------------

Net Income (Loss)..................    $     (37,488)  $    $      55,432         $      70,527        $      88,471
                                     ==================   ====================  ===================  ==================

1999
Revenues...........................    $           -        $     114,350         $     187,550        $     301,900
Costs of Operations:
   Operating expenses..............                -               50,936                59,670              110,606
   Depreciation, depletion and
     amorization...................            1,061               57,330                89,726              148,117
   Impairment of oil and gas
     properties....................                -                    -                28,500               28,500
   General and administrative......            4,363                8,474                   246               13,083
                                     ------------------   --------------------  -------------------  ------------------
Operating Profit (Loss)............           (5,424)              (2,390)                9,408                1,594
Interest Expense...................           44,971               13,126                (1,906)              56,191
Merger and integration costs.......                -               40,652                     -               40,652
Interest Income and Other..........           (1,544)               1,762                  (332)                (114)
                                     ------------------   --------------------  -------------------  ------------------
Income (Loss) Before Taxes.........          (48,851)             (57,930)               11,646              (95,135)
Income Tax Provision (Benefit).....          (17,831)             (21,144)               23,302              (15,673)
                                     ------------------   --------------------  -------------------  ------------------
Loss from Continuing Operations....          (31,020)             (36,786)              (11,656)             (79,462)
Income from Discontinued
   Operations, net of income taxes.                -                    -                   547                  547
                                     -----------------------------------------  -------------------  ------------------
Net Loss...........................    $     (31,020)       $     (36,786)        $     (11,109)       $     (78,915)
                                     =========================================  ===================  ==================
</TABLE>
                                       11
<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

               Supplemental Condensed Consolidating Balance Sheets
                     At June 30, 2000 and December 31, 1999
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                 Unconsolidated
                                --------------------------------------------------
                                                   Guarantor       Non-Guarantor     Eliminating       Consolidated
June 30, 2000                        OEI           Subsidiary       Subsidiaries       Entries             OEI
                                --------------   ---------------   ---------------  ---------------   ---------------
<S>                             <C>              <C>               <C>              <C>               <C>
Assets
Current Assets................    $    28,667      $    68,744       $   239,129      $         -       $   336,540
Intercompany Investments......      2,472,465          (75,273)          (75,118)      (2,322,074)                -
Property, Plant and Equipment,
   Net........................         21,330          539,659         1,647,995                -         2,208,984
Other Assets..................         30,902          187,393            13,223                -           231,518
                                --------------   ---------------   ---------------  ---------------   ---------------
Total Assets..................    $ 2,553,364      $   720,523       $ 1,825,229      $(2,322,074)      $ 2,777,042
                                ==============   ===============   ===============  ===============   ===============

Liabilities and Shareholders' Equity
Current Liabilities...........    $   193,720      $   106,583       $    50,188      $         -       $   350,491
Long-Term Debt................      1,248,399                -             8,869                -         1,257,268
Other Liabilities.............        115,526           11,390            11,767                -           138,683
Shareholders' Equity..........        995,719          602,550         1,754,405       (2,322,074)        1,030,600
                                --------------   ---------------   ---------------  ---------------   ---------------
Total Liabilities and
   Shareholders' Equity.......    $ 2,553,364      $   720,523       $ 1,825,229      $(2,322,074)      $ 2,777,042
                                ==============   ===============   ===============  ===============   ===============

December 31, 1999
Assets
Current Assets................    $     3,266      $    60,340       $   226,344      $         -       $   289,950
Intercompany Investments......      2,498,760         (167,761)           (8,925)      (2,322,074)                -
Property, Plant and Equipment,
    Net.......................         22,630          586,164         1,594,216                -         2,203,010
Other Assets..................         72,943          187,393            29,847                -           290,183
                                --------------   ---------------   ---------------  ---------------   ---------------
Total Assets..................    $ 2,597,599      $   666,136       $ 1,841,482      $(2,322,074)      $ 2,783,143
                                ==============   ===============   ===============  ===============   ===============

Liabilities and Shareholders' Equity
Current Liabilities...........    $   131,041      $   107,628       $   143,272      $         -       $   381,941
Long-Term Debt................      1,324,811                -             8,599                -         1,333,410
Other Liabilities.............        102,976           11,390             5,731                -           120,097
Shareholders' Equity..........      1,038,771          547,118         1,683,880       (2,322,074)          947,695
                                --------------   ---------------   ---------------  ---------------   ---------------
Total Liabilities and
   Shareholders' Equity.......    $ 2,597,599      $   666,136       $ 1,841,482      $(2,322,074)      $ 2,783,143
                                ==============   ===============   ===============  ===============   ===============
</TABLE>
                                       12
<PAGE>
                               Ocean Energy, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

          Supplemental Condensed Consolidating Statements of Cash Flows
                 For the Six Months Ended June 30, 2000 and 1999
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                          Unconsolidated
                                     ----------------------------------------------------------
                                                             Guarantor         Non-Guarantor
2000                                        OEI              Subsidiary         Subsidiaries      Consolidated OEI
                                     ------------------   -----------------   -----------------   ------------------
<S>                                  <C>                  <C>                 <C>                 <C>
Cash Flows from Operating
   Activities:
   Net Income (Loss)...............    $     (37,488)       $      55,432       $      70,527       $      88,471
   Adjustments to reconcile net
     income (loss) to net cash from
     operating activitives.........           62,621               36,051             113,816             212,488
   Changes in assets and liabilities          (6,564)              (9,448)            (71,970)            (87,982)
                                     ------------------   -----------------   -----------------   ------------------
Net Cash Provided by  Operating
   Activities......................           18,569               82,035             112,373             212,977
Cash Flows Provided by (Used in)
   Investing Activities............            1,865               10,453            (171,320)           (159,002)
Cash Flows Provided by (Used In)
   Financing Activities............           (8,000)             (92,488)             66,463             (34,025)
                                     ------------------   -----------------   -----------------   ------------------
Net Increase in Cash and Cash
   Equivalents.....................           12,434                    -               7,516              19,950
Cash and Cash Equivalents:
   Beginning of Period.............            1,552                    -              63,337              64,889
                                     ------------------   -----------------   -----------------   ------------------
   End of Period...................    $      13,986        $           -       $      70,853       $      84,839
                                     ==================   =================   =================   ==================

1999
Cash Flows from Operating
   Activities:
   Net Loss........................    $     (31,020)       $     (36,786)      $     (11,109)      $     (78,915)
   Adjustments to reconcile net
      loss to net cash from operating
      activities...................          (15,446)              36,031             158,011             178,596
   Changes in assets and liabilities        (273,931)             374,464             (94,820)              5,713
                                     ------------------   -----------------   -----------------   ------------------
Net Cash Provided by (Used in)
   Operating Activities............         (320,397)             373,709              52,082             105,394
Cash Flows Used in Investing
   Activities......................           (2,057)             (10,339)            (26,742)            (39,138)
Cash Flows Provided by (Used in)
   Financing Activities............          330,680             (363,370)              2,094             (30,596)
                                     ------------------   -----------------   -----------------   ------------------
Net Increase in Cash and Cash
   Equivalents.....................            8,226                    -              27,434              35,660
Cash and Cash Equivalents:
   Beginning of Period.............                -                    -              10,706              10,706
                                     ------------------   -----------------   -----------------   ------------------
   End of Period...................    $       8,226        $           -       $      38,140       $      46,366
                                     ==================   =================   =================   ==================
</TABLE>

                                       13

<PAGE>

                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

     The  following  discussion  is  intended  to  assist in  understanding  the
Company's financial  position,  results of operations and cash flows for each of
the periods indicated.

     On March 30, 1999,  Ocean Energy,  Inc.  ("Old Ocean") merged with and into
Seagull Energy Corporation  ("Seagull",  "the Merger").  In conjunction with the
Merger,  Seagull  amended its  Articles of  Incorporation  to change its name to
Ocean  Energy,  Inc.  The merger  was  treated  for  accounting  purposes  as an
acquisition of Seagull by Ocean. As such, the financial  results  presented here
include those of Ocean Energy, Inc. on a stand-alone basis for the first quarter
of 1999 and of the combined company thereafter.

     The Company's  accompanying unaudited consolidated financial statements and
the notes thereto and the  consolidated  financial  statements and notes thereto
included in the Annual Report on Form 10-K for the year ended  December 31, 1999
contain detailed  information that should be referred to in conjunction with the
following discussion.

                              Results Of Operations
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                    Three Months Ended June 30,          Six Months Ended June 30,
                                                  ---------------------------------    -------------------------------
                                                      2000               1999              2000              1999
                                                  --------------     --------------    --------------    -------------
<S>                                               <C>                <C>               <C>               <C>
Oil and gas operations:
   Revenues:
     Natural gas............................       $  106,602         $   87,982        $  199,987       $   135,006
     Oil and NGL............................          129,827            108,224           282,510           166,894
                                                  --------------     --------------    --------------    -------------
                                                      236,429            196,206           482,497           301,900
                                                  --------------     --------------    --------------    -------------

   Operating expenses.......................           57,890             65,446           114,710           110,606
   Depreciation, depletion and amortization.           71,369             87,129           149,867           144,300
   Impairment of oil and gas properties.....                -                  -                 -            28,500
                                                  --------------     --------------    --------------    -------------
    Operating profit .......................          107,170             43,631           217,920            18,494
Corporate...................................           (7,533)           (10,887)          (18,237)          (16,900)
                                                  --------------     --------------    --------------    -------------
   Total operating profit ..................       $   99,637         $   32,744        $  199,683        $    1,594
                                                  ==============     ==============    ==============    =============
</TABLE>

     With the Merger,  the Company  gained new  operations in Egypt,  Russia and
Indonesia  and  expanded  its  operations  in the  U.S.  and Cote  d'Ivoire.  In
addition, the Company sold more than $700 million of non-core assets during 1999
and $92 million in the first half of 2000 as part of its debt reduction program.
The Company's expanded operations,  offset by property sales,  combined with the
continued  escalation  of world  crude oil and  natural  gas prices  which began
during the second  quarter of 1999 and has  continued  into 2000,  resulted in a
$181 million  increase in revenues during the first six months of 2000 and a $40
million increase for the current  quarter.  During the first six months of 1999,
the Company  recorded  impairments  of oil and gas  properties  in the amount of
$28.5 million related primarily to the sale of the Canadian  subsidiary on April
15, 1999.  These  factors  combined to improve  total  operating  profit by $198
million  for the first  six  months of 2000 and by $67  million  for the  second
quarter of 2000  compared to the same periods of 1999.  For the first quarter of
1999, prior to the Merger,  Seagull on a stand-alone  basis

                                       14
<PAGE>
                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations


recorded  revenues  of $57  million  from  its oil and  gas  operations  and had
production of 19,456 barrels of oil per day and 277 MMcf of gas per day.

     Revenues - Natural gas  revenues  increased  $65  million,  or 48%, to $200
million for the six months  ended June 30,  2000,  from $135 million for the six
months ended June 30, 1999. Gas revenues increased $19 million,  or 22%, to $107
million for the second quarter of 2000 as compared to $88 million for the second
quarter of 1999.  These increases are primarily due to higher average gas prices
realized during the period, offset by the effects of property sales as discussed
below. The average realized price for natural gas increased 52% to $2.75 per Mcf
in the first six months of 2000 as  compared to $1.81 in the first six months of
1999 and increased 61% to $3.06 for the second quarter of 2000 compared to $1.90
for the second  quarter of 1999.  Daily natural gas production for the first six
months of 2000 was 399.6  MMcf as  compared  to 411.0 MMcf per day for the first
six months of 1999.  Daily  production  decreased  25% from 1999 volumes for the
second quarter of 2000 to 382.4 MMcf due primarily to property sales.

     Oil  revenues  reached $283 million for the six months ended June 30, 2000,
an increase of $116  million,  or 69%, over revenues of $167 million for the six
months  ended June 30,  1999.  For the  second  quarter  of 2000,  oil  revenues
increased $22 million, or 20%, to $130 million for 2000 compared to $108 million
for the second quarter of 1999. These increases are the result of an increase in
the  average  realized  oil price  during the  period,  offset by the effects of
property sales as discussed  below. The average realized price for oil increased
77% to $22.59 for the first six months of 2000  compared  to $12.79 for the same
period in 1999.  The  average  realized  oil price  increased  to $22.14 for the
second quarter of 2000 compared to $15.03 for the second quarter of 1999.  Daily
oil  production  decreased  slightly,  to 68,703 Bbl for the first six months of
2000 as  compared  to 72,078  Bbl for the same  period in 1999.  For the  second
quarter of 2000,  daily oil production  decreased 19%, to 64,429 Bbl as compared
to 79,145 Bbl for the second quarter of 1999 primarily due to property sales.

     During  1999 and the  first  quarter  of 2000,  the  Company  sold  various
non-core oil and gas assets as part of its debt reduction program as follows:

<TABLE>
<CAPTION>
                                                                                 Net Daily Production
                                                                            Six Months Ending June 30, 1999
                                                                       ------------------------------------------
                                                                         Oil and NGL's               Gas
                    Asset                           Date of Sale             (Bbl)                  (MMcf)
----------------------------------------------     ----------------    -------------------    -------------------
<S>                                                <C>                 <C>                    <C>
Canadian subsidiary........................          April 1999                    708                   21
Arkoma Basin assets (acquired primarily
  in Merger)...............................          August 1999                     -                   59
Gulf of Mexico assets......................          August 1999                 2,517                    6
East Bay assets............................          March 2000                  8,685                   19
                                                                       -------------------    -------------------
Total reduction in daily production
   associated with property sales..........                                     11,910                  105
                                                                       ===================    ===================
</TABLE>

     Oil and gas revenues have been  decreased by $52 million and $5 million for
the six  months  ended  June 30,  2000 and  1999,  respectively,  and have  been
decreased by $32 million for the three  months ended June 30, 2000,  as a result
of derivative  contracts and a prepaid  crude oil sales

                                       15
<PAGE>

                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

contract.  There was no increase or decrease in oil and gas revenues as a result
of derivative contracts during the second quarter of 1999.

                                 Operating Data

<TABLE>
<CAPTION>
                                                                   Three Months Ended               Six Months Ended
                                                                        June 30,                        June 30,
                                                              -----------------------------   ------------------------------
                                                                  2000           1999            2000             1999
                                                              -------------  --------------  --------------  ---------------
<S>                                                           <C>            <C>             <C>             <C>
   Net Daily Natural Gas Production (MMcf):
     Domestic.............................................           344.2          465.0           359.2           358.9
     Cote d'Ivoire........................................            28.8           32.1            30.7            27.8
     Other International..................................             9.4           12.9             9.7            24.3
                                                              -------------  --------------  --------------  ---------------
     Total................................................           382.4          510.0           399.6           411.0
                                                              =============  ==============  ==============  ===============

   Average Natural Gas Prices ($ per Mcf)  (1):
     Domestic.............................................      $     3.36     $     1.92      $     2.88      $     1.82
     Cote d'Ivoire........................................      $     2.47     $     1.63      $     2.23      $     1.71
     Other International..................................      $     3.44     $     1.81      $     3.45      $     1.61
     Weighted Average.....................................      $     3.30     $     1.90      $     2.84      $     1.80
Average Natural Gas Prices including Hedging Activities and
     Prepaid Crude Oil Sales Contract ($ per Mcf).........      $     3.06     $     1.90      $     2.75      $     1.81

   Net Daily Oil and NGL Production (Bbl):
     Domestic.............................................          25,220         38,722          29,016          39,263
     Equatorial Guinea....................................          21,484         19,516          21,390          19,458
     Cote d'Ivoire........................................           4,011          4,975           4,286           4,734
     Egypt ...............................................           9,022         11,495           9,231           5,779
     Other International..................................           4,692          4,437           4,780           2,844
                                                              -------------  --------------  --------------  ---------------
     Total................................................          64,429         79,145          68,703          72,078
                                                              =============  ==============  ==============  ===============

   Average Oil and NGL Prices ($ per Bbl) (1):
     Domestic.............................................      $    26.81     $   15.44       $   27.39       $   13.22
     Equatorial Guinea....................................      $    27.27     $   14.84       $   26.81       $   13.07
     Cote d'Ivoire........................................      $    24.07     $   18.75       $   23.91       $   14.57
     Egypt................................................      $    27.20     $   15.48       $   26.67       $   15.48
     Other International..................................      $    16.49     $    6.38       $   17.46       $    7.41
     Weighted Average.....................................      $    26.09     $   15.00       $   26.20       $   13.22
Average Oil and NGL Prices including Hedging Activities and
   Prepaid Crude Oil Sales Contract ($ per Bbl)...........      $    22.14     $   15.03       $   22.59       $   12.79
</TABLE>

(1)  All price information  excludes the results of hedging  activities,  unless
     otherwise stated.


     Operating Expenses - Total operating  expenses remained  relatively flat at
$115 million for the six months ended June 30, 2000 compared to $111 million for
the comparable  1999 period.  Operating  expenses per BOE were $4.66 per BOE for
the first six months of 2000 compared to $4.35 per BOE for the  comparable  1999
period.  For the second quarter of 2000 total  operating  expenses  decreased $7
million,  or 11%, to $58 million  compared to $65 million for the second quarter
of 1999,  while  operating  expenses  per BOE were  $4.97 per BOE for the second
quarter of

                                       16
<PAGE>

                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

2000  compared to $4.38 per BOE for the second  quarter of 1999.The  increase in
operating  expenses per BOE is attributable to increases in production taxes and
workover expenses.

     Depreciation,  Depletion  and  Amortization  Expense - Total  depreciation,
depletion and amortization  (DD&A) expense for oil and gas operations  increased
$6 million to $150  million  for the six  months  ended June 30,  2000 from $144
million for the same  period in 1999.  DD&A  expense for oil and gas  operations
decreased $16 million to $71 million for the second  quarter of 2000 compared to
$87 million for the second quarter of 1999 primarily due to decreased production
during the second  quarter of 2000.  DD&A expense per BOE related to oil and gas
operations rose 7% to $6.09 per BOE for the six months ended June 30, 2000, from
$5.67 per BOE for the comparable  period in 1999. DD&A per BOE was $6.12 per BOE
for the  second  quarter  of 2000 as  compared  to $5.83 per BOE for the  second
quarter of 1999.  The higher DD&A  expense per BOE for both the first six months
and the first  quarter of 2000 is primarily  attributable  to the effects of the
Merger and the geographic mix of production.

     General and Administrative  Expenses - General and administrative  expenses
totaled $15 million for the six months ended June 30, 2000. This amount includes
approximately $3 million in expense relating to compensation plans that are tied
directly  to the  market  price  of the  Company's  common  stock.  General  and
administrative  expenses  totaled $13 million for the  comparable  1999  period.
General and administrative expense for the second quarter of 2000 decreased 33%,
or $3 million,  to $6 million,  as compared to $9 million for the second quarter
of 1999 as the  Company  has  been  able to  realize  cost  savings  related  to
personnel  reduction,  office  consolidations  and reduced combined expenses for
professional fees and other expense items as a result of the Merger.

                                      Other

     Interest Expense - Interest expense  decreased $18 million,  or 32%, to $38
million  for the six  months  ended  June  30,  2000  from  $56  million  in the
comparable  1999  period.  Interest  expense  for  the  second  quarter  of 2000
decreased $12 million to $19 million from $31 million for 1999.  These decreases
are the result of the Company's debt reduction program undertaken  subsequent to
the Merger in 1999 and to the  increase  in the amount of  interest  capitalized
during  the first six  months of 2000 ($23  million  in 2000 as  opposed  to $20
million in 1999) due to the increase in the level of capital expenditures.

     Merger and Integration  Costs - Merger and integration  costs of $3 million
relating  primarily to severance  costs were recorded in the first six months of
2000.  Costs of $41  million  were  recorded in the first six months of 1999 and
consisted primarily of Old Ocean's severance costs ($21 million),  the write-off
of certain  costs  relating to Old Ocean's  information  technology  system ($14
million)  and  compensation  expense  related  to the  vesting  of  Old  Ocean's
restricted stock ($6 million).

                                       17
<PAGE>
                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

     Income Tax  Expense  (Benefit)  - Income tax  expense  of $71  million  was
recognized  for the six months  ended June 30,  2000  compared  to an income tax
benefit of $16 million for the six months  ended June 30,  1999.  This change is
primarily the result of three factors: (i) significant  improvement in operating
results;  (ii) changes in the nature of deferred tax assets and  liabilities due
to the Merger and subsequent asset sales; and (iii) the relative significance of
international operating results and taxes to the Company's total results.

                         Liquidity And Capital Resources

     Liquidity - As a result of the Merger, the Company had nearly $2 billion in
long-term  debt as of March 31,  1999.  One of  management's  goals has been the
reduction of these high debt levels.  Using proceeds primarily from asset sales,
excess  cash flows  attributable  to higher  commodity  prices  and  disciplined
capital  spending,  long-term debt has been reduced to less than $1.3 billion at
June 30, 2000.

     Concurrent  with the closing of the Merger on March 30,  1999,  the Company
entered credit facilities (the "Credit  Facilities") which combined the existing
credit facilities of both Old Ocean and Seagull. As of June 30, 2000, the Credit
Facilities  consist  of a  $500  million  five-year  revolving  facility  and  a
renewable $200 million 364-day facility. The Credit Facilities bear interest, at
the Company's  option,  at LIBOR or prime rates plus applicable  margins ranging
from  zero to 1.7% or at a  competitive  bid.  As of June 30,  2000,  borrowings
outstanding  against the Credit  Facilities  totaled $225 million and Letters of
Credit totaled $45 million, leaving $430 million of available credit.

     The Company's  debt to total  capitalization  ratio has decreased to 55% at
June 30, 2000, from 58% at December 31, 1999, and 66% at June 30, 1999.

     Effects  of  Leverage  -  The  Company  has  outstanding   indebtedness  of
approximately  $1.3  billion  as of  June  30,  2000.  The  Company's  level  of
indebtedness has several important effects on its future  operations,  including
(i) a substantial  portion of the Company's  cash flow from  operations  must be
dedicated  to the  payment  of  interest  on its  indebtedness  and  will not be
available  for other  purposes,  (ii) the  covenants  contained  in the  various
indentures  require the Company to meet  certain  financial  tests,  and contain
other  restrictions  that limit the Company's ability to borrow additional funds
or to dispose of assets and may affect the  Company's  flexibility  in  planning
for, and reacting to, changes in its business,  including  possible  acquisition
activities and (iii) the Company's ability to obtain additional financing in the
future for working capital,  expenditures,  acquisitions,  general  corporate or
other purposes may be impaired.

                                       18
<PAGE>
                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

                              Capital Expenditures
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                            Three Months Ended June 30,             Six Months Ended June 30,
                                          ---------------------------------     -----------------------------------
                                              2000               1999                2000                1999
                                          --------------     --------------     ---------------     ---------------
<S>                                       <C>                <C>                <C>                 <C>
Oil and Gas Operations:
  Leasehold acquisitions...............     $  13,574          $   8,672          $  28,998           $ 12,571
  Exploration costs...................         35,218             40,854             83,975             49,845
  Development costs...................         75,291             40,194            132,264             76,213
                                          --------------     --------------     ---------------     ---------------
                                              124,083             89,720            245,237            138,629
Corporate.............................          3,781              2,636              6,111              5,453
                                          --------------     --------------     ---------------     ---------------
Total Continuing Operations...........        127,864             92,356            251,348            144,082
   Discontinued Operations............              -              2,171                  -              2,171
                                          --------------     --------------     ---------------     ---------------
Total Capital Expenditures............      $ 127,864          $  94,527          $ 251,348           $146,253
                                          ==============     ==============     ===============     ===============
</TABLE>


     During the first six  months of 2000 the  Company  drilled  90  development
wells, 77 of which were successful,  and 32 exploratory  wells, 17 of which were
successful, for an overall success rate of 77% on total wells drilled.

     During the second quarter,  the Company's Board of Directors approved a $50
million  increase  to the  Company's  capital  expenditure  budget  for  2000 to
approximately  $550 million  (excluding  proved property  acquisitions).  Actual
capital spending may vary from the capital  expenditure budget. The Company will
evaluate its level of capital  spending  throughout the year based upon drilling
results, commodity prices, cash flows from operations and property acquisitions.

     The  Company  makes,  and  will  continue  to  make,   substantial  capital
expenditures  for the  acquisition,  exploration,  development,  production  and
abandonment  of its oil and natural gas reserves.  The Company has  historically
funded  its  expenditures  from  cash  flows  from  operating  activities,  bank
borrowings,  sales of equity and debt securities, sales of non-strategic oil and
natural gas properties,  sales of partial  interests in exploration  concessions
and project  finance  borrowings.  The Company  intends to finance  2000 capital
expenditures primarily with funds provided by operations.

                          Update of Year 2000 Estimates

     On  February  23,  2000,  the  Company  filed a Current  Report on Form 8-K
containing the Company's current  estimates of its operating  statistics for the
year ended December 31, 2000. The Company has revised its estimates of operating
statistics for the year ended  December 31, 2000 based on operating  performance
for the first half of 2000 and  revised  estimates  for the second half of 2000.
Annual production  estimates have been reduced by approximately 5% due primarily
to production  delays in the Gulf of Mexico and Equatorial  Guinea.  The revised
mid-points  of annual  production  estimates  ranges  are 25 MMBbls of crude oil
production and 156 Bcf of natural gas  production  for the year 2000.  Operating
costs  per BOE have  been  increased  by  approximately  10% to  $4.40  per BOE,
primarily due to increased production taxes attributable to

                                       19
<PAGE>
                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

higher  commodity  prices and  increased  workover  expenses.  The  increase  in
workover  expenses is  complementary  to the Company's  $50 million  increase in
planned  capital  expenditures  for  2000  in  order  to take  advantage  of new
opportunities caused by higher commodity prices.

     The Company  cautions  that the revised 2000  estimates set forth above are
given as of the date hereof only based on currently available  information,  and
that the Company is not undertaking any obligations to update these estimates as
conditions change or other information becomes available.

Accounting Pronouncements

     In June 1998,  the FASB  issued  SFAS No. 133,  Accounting  for  Derivative
Instruments and Hedging  Activities,  and in June 2000, the FASB issued SFAS No.
138,   Accounting  for  Certain  Derivative   Instruments  and  Certain  Hedging
Activities,  an amendment of FASB Statement No. 133. These statements  establish
standards of  accounting  for and  disclosures  of  derivative  instruments  and
hedging  activities.  These  statements are effective for fiscal years beginning
after June 15, 2000.  While the Company has not yet completed its  evaluation of
the impact of these statements, the Company does not believe the statements will
have a  significant  impact on its results of  operations as it expects that its
current derivative activities would continue to qualify under hedge accounting.

Environmental

     Compliance  with  applicable  environmental  and safety  regulations by the
Company has not required any  significant  capital  expenditures  or  materially
affected  its business or earnings.  The Company  believes it is in  substantial
compliance with  environmental  and safety  regulations and foresees no material
expenditures in the future; however, the Company is unable to predict the impact
that  compliance  with  future  regulations  may have on  capital  expenditures,
earnings and competitive position.

Defined Terms

     Natural gas is stated herein in thousand cubic feet ("Mcf"),  million cubic
feet  ("MMcf") or billion cubic feet ("Bcf").  Oil,  condensate  and natural gas
liquids  ("NGL") are stated in barrels  ("Bbl"),  thousand  barrels  ("MBbl") or
million  barrels  ("MMBbl").  Oil,  condensate and NGL are converted to gas at a
ratio of one  barrel of liquids  per six Mcf of gas,  based on  relative  energy
content. MMBOE, MBOE and BOE represent one million barrels, one thousand barrels
and one barrel of oil equivalent, respectively, with six Mcf of gas converted to
one barrel of liquid.

Forward-Looking Statements May Prove Inaccurate

     This document  includes  forward-looking  statements  within the meaning of
Section  27A of  the  Securities  Act of  1933,  Section  21E of the  Securities
Exchange Act of 1934 and the Private
                                       20
<PAGE>
                               Ocean Energy, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results Of Operations

Securities  Litigation  Reform Act of 1995. All statements other than statements
of historical  fact included in this document,  including,  without  limitation,
statements regarding the financial position,  business strategy,  production and
reserve growth and other plans and  objectives for the future  operations of the
Company are forward-looking statements.

     Although the Company  believes  that such  forward-looking  statements  are
based on reasonable assumptions,  it can give no assurance that its expectations
will in fact  occur.  Important  factors  could cause  actual  results to differ
materially  from  those  in  the  forward-looking  statements.   Forward-looking
statements  are  subject  to risks and  uncertainties  and  include  information
concerning general economic conditions and possible or assumed future results of
operations  of the Company,  estimates of oil and gas  production  and reserves,
drilling  plans,  future  cash  flows,  anticipated  capital  expenditures,  the
Company's   realization  of  its  deferred  tax  assets,  the  level  of  future
expenditures for  environmental  costs, and management's  strategies,  plans and
objectives as set forth herein.

     When used in this document, the words "believes," "expects," "anticipates,"
"intends" or similar  expressions are intended to identify such  forward-looking
statements.  The following  important  factors,  in addition to those  discussed
elsewhere  in this  document  could  affect  the  future  results  of the energy
industry  in general and could cause  those  results to differ  materially  from
those expressed in such forward-looking statements:

- Risks incident to the drilling and operation of oil and gas wells;
- Future production and development costs;
- The effect of existing and future laws and regulatory actions;
- The political and economic climate in the foreign jurisdictions in
   which the Company conducts oil and gas operations;
- The effect of changes in commodity prices, hedging activities and
   conditions in the capital markets; and
- Competition from others in the energy industry.

                                       21
<PAGE>

                               Ocean Energy, Inc.

Item 3.       Quantitative and Qualitative Disclosures About Market Risks.

     To mitigate a portion of its exposure to fluctuations in commodity  prices,
the Company has entered into various  derivative  financial  instruments for its
oil and natural gas  production for the remainder of 2000 and for 2001. See Note
4 to the Company's Consolidated Financial Statements for a discussion of hedging
activities  during  the first six months of 2000.  To  calculate  the  potential
effect of the derivative financial instruments on revenues, the Company applies
the average  NYMEX oil and gas strip  prices for the  remainder  of 2000 and for
2001 to the quantity of the Company's oil and gas  production  hedged as of June
30,  2000.  Using  this  calculation,  the  estimated  potential  effect  of the
derivative  financial  instruments is an approximate $76 million net decrease in
revenues for the remainder of the year 2000 and an  approximate  $13 million net
decrease for 2001.  Assuming a 10% decrease in oil and gas prices, the potential
effect of the  derivative  financial  instruments  would be an approximate  $44
million  decrease in revenues for the  remainder of 2000 and an  approximate  $6
million  decrease for 2001.  Assuming a 10% increase in oil and gas prices,  the
potential  effect  of  the  derivative   financial   instruments  would  be  an
approximate  $102 million  decrease in revenues for the remainder of 2000 and an
approximate $20 million decrease for 2001.

     The Company also evaluated the potential  effect that  reasonably  possible
near term changes in interest rates may have on the Company's Credit Facilities.
Debt outstanding under the Credit Facilities represents approximately 18% of the
Company's  total debt as of June 30,  2000 and is the only  floating  rate debt.
Based upon the balances  outstanding as of June 30, 2000 and assuming no changes
in the  amount of debt  outstanding,  the  potential  effect on annual  interest
expense of a 10%  increase or decrease in  interest  rates is  approximately  $2
million.

Part II. Other Information

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

     At the Annual Meeting of  Shareholders of the Company held on May 10, 2000,
the  shareholders  elected  certain  directors  to serve  until the 2003  Annual
Meeting of Shareholders  and ratified the appointment of KPMG LLP as independent
auditors of the Company for the fiscal year ended December 31, 2000.

Votes cast were as follows:

<TABLE>
<CAPTION>
                                                                                           Broker
                                                     For               Against           Non-Votes         Abstained
                                                ---------------     ---------------    ---------------    -------------
<S>                                             <C>                 <C>                <C>                <C>
Election as a Director of the Company of:
   J. Evans Attwell.......................       133,474,303                   -                  -        1,309,344
   Barry J. Galt..........................       133,014,688                   -                  -        1,768,959
   Elvis L. Mason.........................       133,072,707                   -                  -        1,710,940
   David K. Newbigging....................       133,815,287                   -                  -          968,360
   Dee S. Osborne.........................       133,895,146                   -                  -          888,501
Ratification of Selection of KPMG LLP
   as Independent Auditors For 2000.......       134,477,189             148,461                  -          157,997
</TABLE>

                                       22
<PAGE>

                               Ocean Energy, Inc.

Item 6.       Exhibits and Reports on Form 8-K

(a)  Exhibits:


<TABLE>
<CAPTION>
<S>                <C>
    4.1            Amendment  No. 4 to the Amended and Restated  Rights  Agreement,  dated as of May 19,  2000,  by and
                   between the Company and Fleet National Bank (f/k/a  BankBoston,  N.A.)  incorporated by reference to
                   the Company's  Current Report on Form 8-K filed with the  Securities and Exchange  Commission on May
                   22, 2000.

 * 27.1            Financial Data Schedule.
</TABLE>

 *  Filed herewith.


(b)      Reports on Form 8-K:

     On May 22, 2000,  the Company filed a Current  Report on Form 8-K dated May
19, 2000 with respect to the Amendment and  Restatement of the Company's  Rights
Agreement.  The items reported in such Current Report were Item 5 (Other Events)
and Item 7 (Financial Statements and Exhibits).


                                   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.

                                Ocean Energy, Inc.

                    By:        /s/ William L. Transier
                               William L. Transier
                               Executive Vice President and
                               Chief Financial Officer
                              (Principal Financial Officer)

                    Date:      August 1, 2000


                    By:        /s/Gordon L. McConnell
                               Gordon L. McConnell
                               Vice President and Controller
                               (Principal Accounting Officer)

                    Date:      August 1, 2000

                                       23

<PAGE>
                               Ocean Energy, Inc.
                                 Exhibit Index
<TABLE>
<CAPTION>
<S>                <C>
    4.1            Amendment  No. 4 to the Amended and Restated  Rights  Agreement,  dated as of May 19,  2000,  by and
                   between the Company and Fleet National Bank (f/k/a  BankBoston,  N.A.)  incorporated by reference to
                   the Company's  Current Report on Form 8-K filed with the  Securities and Exchange  Commission on May
                   22, 2000.

 * 27.1            Financial Data Schedule.
</TABLE>

 *  Filed herewith.