---

Securities and Exchange CommissionWashington, D.C. 20549

# Form 10-Q

(Mark One)

XQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE             
            

SECURITIES EXCHANGE ACT OF 1934

For
the Quarter Ended March 31, 2002

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)

Delaware              
             74-1764876(State or other jurisdiction of       
        (I.R.S. Employerincorporation 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 May 2, 2002, 175,206,439 shares of Common Stock, par value $0.10 per share, were
outstanding.

---

Ocean
Energy, Inc.

Index

|                                                                    | Page Number
|------------------------------------------------------------------- | -----------
|Part I. Financial Information                                       |            
|                                                                   
|Item 1. Unaudited Consolidated Financial Statements                 |            
|                                                                   
|Consolidated Statements of Operations for the Three Months          |            
|Ended March 31, 2002 and 2001                                       |            
|                                                                   
|Consolidated Balance Sheets  March 31, 2002 and December 31, 2001  |            
|                                                                   
|Consolidated Statements of Cash Flows for the Three Months Ended    |            
|March 31, 2002 and 2001                                             |            
|                                                                   
|Consolidated Statements of Comprehensive Income for the Three       |            
|Months Ended March 31, 2002 and 2001                                |            
|                                                                   
|Notes to Consolidated Financial Statements                          |            
|                                                                   
|Item 2. Managements Discussion and Analysis of Financial Condition |            
|and Results of Operations                                           |            
|                                                                   
|Item 3. Quantitative and Qualitative Disclosures about Market Risks |            
|                                                                   
|Part II. Other Information                                          |            
|                                                                   
|Signatures                                                          |            

(i)

---

Item 1.
Unaudited Consolidated Financial Statements

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

|                                                      | Three Months Ended March 31,
|----------------------------------------------------- | ----------------------------
|                                                     
|
|                                                     
|Revenues                                              |                             
|                                                      |                             
|Costs of Operations:                                  |                             
|Operating expenses                                    |                             
|Depreciation, depletion and amortization              |                             
|General and administrative                            |                             
|                                                     
|                                                      |                             
|                                                     
|Operating Profit                                      |                             
|                                                      |                             
|Other (Income) Expense:                               |                             
|Interest expense                                      |                             
|Interest income and other                             |                             
|                                                     
|Income Before Income Taxes                            |                             
|Income Tax Expense                                    |                             
|                                                     
|Net Income                                            |                             
|Preferred Stock Dividends                             |                             
|                                                     
|Net Income Available to Common Stockholders           |                             
|                                                     
|Earnings Per Common Share:                            |                             
|Basic                                                 |                             
|                                                     
|Diluted                                               |                             
|                                                     
|Cash Dividends Declared Per Common Share              |                             
|                                                     
|Weighted Average Number of Common Shares Outstanding: |                             
|Basic                                                 |                             
|                                                     
|Diluted                                               |                             
|                                                     

See
accompanying Notes to Consolidated Financial Statements.

1

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

|                                                                       | March 31, | December 31,
|---------------------------------------------------------------------- | --------- | ------------
|
|                                                                      
|
|Current Assets:                                                        |           |             
|Cash and cash equivalents                                              |           |             
|Accounts receivable, net                                               |           |             
|Other current assets                                                   |           |             
|                                                                      
|Total Current Assets                                                   |           |             
|                                                                       |           |             
|Property, Plant and Equipment, at cost, full cost method for oil and   |           |             
|gas properties:                                                        |           |             
|Proved oil and gas properties                                          |           |             
|Oil and gas properties excluded from amortization                      |           |             
|Other                                                                  |           |             
|                                                                      
|                                                                       |           |             
|Accumulated Depreciation, Depletion and Amortization                   |           |             
|                                                                      
|                                                                       |           |             
|Other Assets                                                           |           |             
|                                                                      
|Total Assets                                                           |           |             
|                                                                      
|                                                                       |           |             
|Liabilities and Stockholders Equity                                   |           |             
|Current Liabilities:                                                   |           |             
|Accounts and notes payable                                             |           |             
|Accrued liabilities                                                    |           |             
|                                                                      
|Total Current Liabilities                                              |           |             
|                                                                       |           |             
|LongTerm Debt                                                         |           |             
|Deferred Revenue                                                       |           |             
|Deferred Income Taxes                                                  |           |             
|Other Noncurrent Liabilities                                           |           |             
|                                                                       |           |             
|Stockholders Equity:                                                  |           |             
|Preferred stock, $1.00 par value; authorized 10,000,000 shares; issued |           |             
|50,000 shares                                                          |           |             
|Common stock, $0.10 par value; authorized 520,000,000 shares;          |           |             
|issued 176,897,934 and 174,936,240 shares, respectively                |           |             
|Additional paidin capital                                             |           |             
|Accumulated deficit                                                    |           |             
|Less  treasury stock, at cost; 2,561,978 and 2,641,640 shares,        |           |             
|respectively                                                           |           |             
|Deferred compensation and other                                        |           |             
|Accumulated other comprehensive income (loss)                          |           |             
|                                                                      
|Total Stockholders Equity                                             |           |             
|                                                                      
|Total Liabilities and Stockholders Equity                             |           |             
|                                                                      

See
accompanying Notes to Consolidated Financial Statements.

2

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

|                                                                  | Three Months Ended March 31,
|----------------------------------------------------------------- | ----------------------------
|                                                                 
|
|                                                                 
|Operating Activities:                                             |                             
|Net income                                                        |                             
|Adjustments to reconcile net income to net cash                   |                             
|provided by operating activities:                                 |                             
|Depreciation, depletion and amortization                          |                             
|Deferred income taxes                                             |                             
|Other                                                             |                             
|Changes in operating assets and liabilities, net of acquisitions: |                             
|Decrease (increase) in accounts receivable                        |                             
|Increase in other current assets                                  |                             
|Decrease in accounts payable                                      |                             
|Amortization of deferred revenue                                  |                             
|Decrease in accrued expenses and other                            |                             
|                                                                 
|Net Cash Provided by Operating Activities                         |                             
|                                                                 
|Investing Activities:                                             |                             
|Oil and gas capital expenditures                                  |                             
|Acquisition costs, net of cash acquired                           |                             
|Other                                                             |                             
|                                                                 
|Net Cash Used in Investing Activities                             |                             
|                                                                 
|Financing Activities:                                             |                             
|Proceeds from debt                                                |                             
|Principal payments on debt                                        |                             
|Proceeds from issuance of common stock                            |                             
|Dividends paid                                                    |                             
|Other                                                             |                             
|                                                                 
|Net Cash Provided by Financing Activities                         |                             
|                                                                 
|Increase in Cash and Cash Equivalents                             |                             
|                                                                  |                             
|Cash and Cash Equivalents at Beginning of Period                  |                             
|                                                                 
|Cash and Cash Equivalents at End of Period                        |                             
|                                                                 

See
accompanying Notes to Consolidated Financial Statements.

3

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

|                                                                | Three Months Ended March 31,
|--------------------------------------------------------------- | ----------------------------
|                                                               
|
|                                                               
|Net income                                                      |                             
|                                                                |                             
|Other comprehensive income (loss), net of tax:                  |                             
|Cumulative effect of accounting change for derivative financial |                             
|instruments                                                     |                             
|Net change in fair value of derivative financial instruments    |                             
|Financial derivative settlements taken to income                |                             
|Other                                                           |                             
|                                                               
|                                                                |                             
|                                                               
|Comprehensive income (loss)                                     |                             
|                                                               

See
accompanying Notes to Consolidated Financial Statements.

4

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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 Delaware 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 accounting principles generally accepted in the
United States 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.

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, 2001.

Property,
Plant and Equipment  The Company capitalizes interest expense and certain
employeerelated costs that are directly attributable to oil and gas operations. For the
three months ended March 31, 2002 and 2001, the Company capitalized interest expense in
the amount of $13 million and $10 million, respectively, and certain employeerelated
costs in the amount of $17 million and $14 million, respectively.

Revenue
Recognition  The Company records revenues from the sales of crude oil and natural
gas when delivery to the customer has occurred and title has transferred. This occurs
when production has been delivered to a pipeline or a tanker lifting has occurred. The
Company may have an interest with other producers in certain properties. In this case,
the Company uses the entitlements method to account for sales of production. Under the
entitlements method, the Company may receive more or less than its entitled share of
production. If the Company receives more than its entitled share of production, the
imbalance is treated as a liability. If the Company receives less than its entitled
share, the imbalance is recorded as an asset.

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

|                               | Net Income Available | Weighted Average | Earnings
|------------------------------ | -------------------- | ---------------- | --------
|
|                              
|Quarter Ended March 31, 2002:  |                      |                  |         
|Basic                          |                      |                  | $       
|Effect of dilutive securities: |                      |                 
|Stock options                  |                      |                  |         
|Convertible preferred stock    |                      |                  |         
|                              
|Diluted                        |                      |                  | $       
|                              

5

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

|                               |  |  |  
|------------------------------ |  |  | -
|
|
|                              
|Quarter Ended March 31, 2001:  |  |  |  
|Basic                          |  |  | $
|Effect of dilutive securities: |  | 
|Stock options                  |  |  |  
|Convertible preferred stock    |  |  |  
|                              
|Diluted                        |  |  | $
|                              

Options
to purchase 7.2 million shares of common stock at $17.91 to $36.54 per share and options
to purchase 4.8 million shares of common stock at $17.94 to $36.54 per share were
outstanding during the first quarter of 2002 and 2001, 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 2012.

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

Derivative
Instruments and Hedging Activities  From time to time, the Company has utilized and
expects to continue to utilize derivative financial instruments to hedge cash flow from
operations or to hedge the fair value of financial instruments. The Company accounts for
its derivative instruments and hedging activities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. The Company adopted SFAS No. 133 as of
January 1, 2001, with deferred hedging losses of $14 million, net of taxes, included in
accumulated other comprehensive income as the effect of the change in accounting
principle.

The
Company uses derivative financial instruments with respect to a portion of its oil and
gas production to achieve a more predictable cash flow by reducing its exposure to price
fluctuations. These transactions generally are swaps, collars or options, 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 prices of natural gas and crude oil that the Company produces and sells, and
to manage cash flow in support of the Companys annual capital expenditure budget.

For
derivative instruments designated as cash flow hedges, changes in fair value, to the
extent the hedge is effective, are recognized in other comprehensive income until the
hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly
based on total changes in the derivatives fair value. Any ineffective portion of
the derivative instruments change in fair value is recognized immediately in
revenues.

The
Company may utilize derivative financial instruments that have not been designated as
hedges under SFAS No. 133 even though they protect the Company from changes in commodity

6

---

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

prices. These instruments are marked to market with the resulting changes
in fair value recorded in oil and gas revenues.

The
Company may also utilize derivative financial instruments such as interest rate swap
agreements. Interest rate swap contracts are reflected at fair value on the Companys
Consolidated Balance Sheets. If the transaction qualifies as a fair value hedge, the
related portion of fixedrate debt being hedged is reflected at an amount equal to the
sum of its carrying value plus an adjustment representing the change in its fair value
attributable to the interest rate risk being hedged. The gains or losses on the
derivative financial instrument and the hedged item, as well as the settlements on the derivative
financial instrument, are recognized currently in interest expense. The net effect of this
accounting on the Companys operating results is that interest expense on the
portion of fixedrate debt being hedged is generally recorded based on variable interest
rates.

Adoption
of SFAS No. 144  As of January 1, 2002, the Company adopted SFAS No. 144, Accounting
for the Impairment or Disposal of LongLived Assets. Because the Company has elected
the full cost method of accounting for oil and gas exploration and development
activities, the impairment provisions of SFAS No. 144 do not apply to the Companys
oil and gas assets, which are subject to the ceiling limitations. For the Companys
nonoil and gas assets, the method of impairment assessment is largely unchanged
from SFAS No. 121, Accounting for the Impairment of LongLived Assets and for LongLived
Assets to be Disposed Of. The adoption of SFAS No. 144 had no impact on the Companys
financial statements.

Note 2.
Acquisition and Disposition of Assets

Acquisition
of Texoil, Inc.  During March 2001, the Company acquired Texoil, Inc. (Texoil)
for a cash purchase price of approximately $115 million before assumed bank debt of $15
million. Texoil was an independent oil and gas company engaged in exploration,
development and acquisition of oil and gas reserves in Texas and Louisiana. No goodwill
was recorded in connection with the purchase of Texoil.

Note 3.
Supplemental Disclosures of Cash Flow Information

Supplemental
disclosures of cash flow information (stated in thousands) are as follows:

|                                 | Three Months Ended March 31,
|-------------------------------- | ----------------------------
|                                
|
|                                
|Cash paid during the period for: |                             
|Interest                         |                             
|Income taxes                     |                             

7

---

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

Note 4.
Derivative Financial Instruments

The Company
has the following volumes under derivative contracts
related to its oil and gas producing activities:

|                           |  |  | Weighted
|-------------------------- |  |  | --------
|
|                          
|Crude Oil:                 |  |  |         
|April  December 2002      |  |  |         
|April  May 2002           |  |  |         
|January  December 2003    |  |  |         
|                           |  | 
|Natural Gas:               |  | 
|April  October 2002       |  |  |         
|April  December 2002      |  |  |         
|January  December 2003    |  |  |         
|                           |  | 
|Gas Swap of Related Trust: |  | 
|April  December 2002      |  |  |         
|January  December 2003    |  |  |         
|January  December 2004    |  |  |         
|January  December 2005    |  |  |         

(1) The basis
swap contracts fix the sales price differential between WTI and Brent and provide that
the Company receives/pays a net settlement of WTI less Brent less $1.29 per Bbl.

(2) These
derivative contracts were entered into subsequent to March 31, 2002, and are not included
in the evaluation of the change in fair value of derivative financial instruments for the
threemonth period ending March 31, 2002 in the following table. A 3way collar combines
a sold call, a purchased put and a sold put. The purchased put and sold put establish a
floating minimum price (floating floor) and the sold call establishes a
maximum price (ceiling price) the Company will receive for the volumes under
contract.

8

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

The
change in fair value of derivative financial instruments included in oil and gas revenues
comprises the following (amounts in thousands):

|                                                          | Three Months Ended March 31,
|--------------------------------------------------------- | ----------------------------
|                                                         
|
|                                                         
|Financial derivative settlements transferred from other   |                             
|comprehensive income                                      |                             
|Net change in fair market value of put options            |                             
|Ineffective portion of derivative financial instruments   |                             
|                                                         
|Increase (decrease) in revenues from derivative financial |                             
|instruments qualifying as cash flow hedges                |                             
|Decrease in revenues from other oil and gas               |                             
|derivative financial instruments                          |                             
|                                                         
|Increase (decrease) in revenues from oil and              |                             
|gas derivative financial instruments                      |                             
|                                                         

Approximately
$7.9 million of net deferred losses included in accumulated other comprehensive income at
March 31, 2002 will be reversed during the next 12 months as the forecasted transactions
actually occur. All forecasted transactions currently being hedged are expected to occur
by December 2005.

The
Company has also entered into interest rate swap agreements relating to its 7 5/8% senior
notes due July 2005 and its 7 7/8% senior notes due August 2003. Under the terms of the
agreements, the counterparties pay the Company a weighted average fixed annual rate of
7.74% on total notional amounts of $225 million, and the Company pays the counterparties
a variable annual rate equal to the sixmonth LIBOR rate on the respective settlement dates plus a weighted average
rate of 2.73%. At March 31, 2002 the sixmonth LIBOR rate was 2.36%. The swap agreements
remain in effect through the maturity dates of the respective notes. The swap agreements
have been designated as fair value hedges pursuant to SFAS No. 133. Interest expense for
the first quarter of 2002 was reduced by approximately $1 million as a result of the
interest rate swaps.

9

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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 the quarters ended March 31, 2002 and
2001.

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, 2001 contain detailed
information that should be referred to in conjunction with the following discussion. The Annual Report on
Form 10K for the year ended December 31, 2001 also includes a discussion of the Companys
critical accounting policies and contractual obligations.

Results of
Operations

During
the first quarter of 2002 the Company continued to experience the effects of lower
commodity prices. Although average realized prices, excluding the impact of
financial derivatives, have increased approximately 8% for crude oil and 3.5% for natural gas from the fourth quarter 2001, they remain substantially
lower than the average prices realized by the Company during the first three quarters of
2001.

Oil and Gas
Operations(Amounts in Thousands)

|                                         | Three Months Ended March 31,
|---------------------------------------- | ----------------------------
|                                        
|
|                                        
|Revenues:                                |                             
|Oil and NGL                              |                             
|Natural gas                              |                             
|                                        
|                                         |                             
|                                        
|Operating expenses                       |                             
|Depreciation, depletion and amortization |                             
|                                        
|Operating profit                         |                             
|Corporate                                |                             
|                                        
|Total operating profit                   |                             
|                                        

Revenues
 Oil revenues have remained relatively flat at $128 million for the first quarter of
2002 compared to $131 million for the first quarter of 2001. Crude oil revenues for the
first quarter of 2002 were approximately $36 million lower due to lower average realized
prices as compared to the first quarter of 2001. The average realized price for oil
excluding the impact of financial derivatives decreased 22% to $18.32 per barrel for the
first quarter of 2002 as compared to $23.51 for the first quarter of 2001.

Oil
revenues also included an increase of approximately $13 million due to an increase in oil
production. Daily oil production increased 8% to 77 MBbl for the first quarter of 2002 as
compared to 71 MBbl for the first quarter of 2001. Higher production volumes were
attributable

10

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Ocean
Energy, Inc.

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

to increased exploration and exploitation success from the Gulf of Mexico
properties, the East Zeit concession in Egypt and the Zafiro field in Equatorial Guinea.

Oil
revenues for the first quarter of 2002 included a positive net quarteroverquarter
change of approximately $20 million relating to the Companys use of derivative
financial instruments to reduce its exposure to declines in commodity
prices. The effect of derivative financial instruments on oil revenues was an increase of
$1 million for the first quarter of 2002 as compared to a decrease of $20 million for the first
quarter of 2001.

Natural
gas revenues for the first quarter of 2002 decreased 66% compared to the first quarter of
2001. This decrease was due primarily to lower average gas prices realized during the
period. The average realized price for natural gas excluding the impact of financial
derivatives was $2.40 per Mcf for the first quarter of 2002 as compared to $7.11 for the first
quarter of 2001. This decrease resulted in a reduction
in gas revenues of approximately $167 million.

Natural
gas revenues also included a reduction of approximately $24 million due to a reduction in
gas production. Daily natural gas production for the first quarter of 2002 was 393 MMcf,
a decrease of 9% as compared to daily production of 431 MMcf for the first quarter of
2001. The reduction was due primarily to the curtailment of drilling expenditures
beginning the second quarter of 2001 in response to high drilling costs in North America
and declining market prices of natural gas.

Natural
gas revenues included a positive net quarteroverquarter change of approximately $11
million relating to the use of derivative financial instruments. The effect of derivative
financial instruments on natural gas revenues was an increase of $7 million for the first
quarter of 2002 as compared to a decrease of $4 million for the first quarter of 2001.

11

---

Ocean
Energy, Inc.

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

Operating Data

|                                                | Three Months Ended March 31,
|----------------------------------------------- | ----------------------------
|                                               
|
|                                               
|Net Daily Oil and NGL Production (Bbl):         |                             
|Domestic                                        |                             
|Equatorial Guinea                               |                             
|Egypt                                           |                             
|Other International                             |                             
|                                               
|Total                                           |                             
|                                               
|Average Oil and NGL Prices ($ per Bbl):         |                             
|Domestic                                        |                             
|Equatorial Guinea                               |                             
|Egypt                                           |                             
|Other International                             |                             
|Weighted Average                                |                             
|Average Oil and NGL Prices Including the Impact |                             
|of Financial Derivatives ($ per Bbl)            |                             
|                                                |                             
|Net Daily Natural Gas Production (Mcf):         |                             
|Domestic                                        |                             
|International                                   |                             
|                                               
|Total                                           |                             
|                                               
|Average Natural Gas Prices ($ per Mcf):         |                             
|Domestic                                        |                             
|International                                   |                             
|Weighted Average                                |                             
|Average Natural Gas Prices Including the Impact |                             
|of Financial Derivatives ($ per Mcf)            |                             
|                                                |                             
|Wells Drilled:                                  |                             
|Gross                                           |                             
|Net                                             |                             
|Success Rate                                    |                             

All
price information excludes the impact of financial derivatives, unless otherwise stated.

Average
daily production was 143 thousand barrels of oil equivalent (BOE) per day for the first
quarters of 2002 and 2001. The Company expects its production to increase during 2002 as
a result of new production from the deepwater Nansen and Boomvang fields in the Gulf of
Mexico and continued exploitation in the Zafiro field in Equatorial Guinea, net of
anticipated declines in areas where the Company has reduced its budgeted capital
expenditures, such as in the U.S. Onshore and Gulf of Mexico shelf properties. Production
from the Nansen field in the East Breaks complex of the Gulf of Mexico began in January
2002 and the Company expects that additional development wells and a subsea tieback of
its initial Navajo discovery will continue to

12

---

Ocean
Energy, Inc.

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

increase production at Nansen. The Company expects production to begin
from the neighboring Boomvang field in the third quarter of 2002.

Operating
Expenses  Operating expenses per BOE increased 2%, to $5.88 per BOE for the first
quarter of 2002, from $5.78 per BOE for the first quarter of 2001, and total operating
expenses were $76 million for the first quarter of 2002 as compared to $75 million for
the first quarter of 2001. Total production and ad valorem taxes for the first quarter of
2002 have decreased approximately $8 million, or 47%, from the first quarter of 2001 due
to lower sales prices. Lease operating expense for the first quarter of 2002 increased
approximately $10 million, or 19%, as compared to the first quarter of 2001 due to increased workover expense.

Depreciation,
Depletion and Amortization Expense  Total depreciation, depletion and amortization (DD&A) expense
for oil and gas operations remained flat at $82 million for the first quarter of 2002 as
compared to $81 million for the first quarter of 2001. DD&A expense per BOE related to oil
and gas operations also remained relatively flat at $6.36 per BOE for the first quarter
of 2002 as compared to $6.25 per BOE for the first quarter of 2001.

Corporate

Corporate
expenditures comprise general and administrative expenses and DD&A expense for nonoil
and gas assets.

General
and Administrative Expenses  General and administrative expenses increased $3 million,
or 50%, to $9 million for the first quarter of 2002 from $6 million for the first quarter
of 2001. The difference was due primarily to the increase in employee related costs,
insurance and transportation expenses.

DD&A
  DD&A expense for nonoil and gas assets was approximately $1 million and $2 million for
the first quarter of 2002 and 2001, respectively.

Other

Interest
Expense  Interest expense decreased $3 million, or 18%, to $14 million for the first
quarter of 2002 compared to $17 million for first quarter of 2001. The decrease was due
primarily to the effect of interest rate swaps and an increase in the amount of interest
capitalized during the first quarter of 2002. Interest expense for the first quarter of
2002 was reduced by approximately $1 million as a result of interest rate swaps.

Income
Tax Expense  Income tax expense of $17 million was recognized for the first quarter of
2002 as compared to $101 million for the first quarter of 2001. The decrease in tax
expense for the first quarter of 2002 was due primarily to the decrease in revenues and
operating profit. The effective income tax rate was 45% for the first quarter of 2002 and
2001.

13

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Ocean
Energy, Inc.

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

Liquidity and
Capital Resources

Liquidity
 The Companys primary sources of liquidity are its cash on hand, cash flow from
operations and available borrowing capacity under its credit facility. As of March 31,
2002, the Companys credit facility consisted of a $500 million revolving facility due in
2004. The credit facility bears 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
March 31, 2002, borrowings outstanding totaled $130 million. Letters of Credit totaled
$31 million, leaving $339 million of available credit. The Companys longterm debt
totaled $1.4 billion and its debt to capitalization ratio was 48% at March 31, 2002. The
Companys longterm debt and its debt to capitalization ratio were $1.3 billion and 47%,
respectively, at December 31, 2001.

Capital
Expenditures(Amounts in Thousands)

|                           | Three Months Ended March 31,
|-------------------------- | ----------------------------
|                          
|
|                          
|Oil and Gas Operations:    |                             
|Leasehold acquisitions     |                             
|Exploration costs          |                             
|Development costs          |                             
|                          
|                           |                             
|Corporate                  |                             
|                          
|Total Capital Expenditures |                             
|                          
|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 through 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s capital expenditure budget for the year 2002 is approximately $650
million. The reduction from the prior years expenditures reflects the Companys
desire to manage expenditures in relation to expected cash flow from operations at a time
when the Company is operating in an environment of economic recession and lower commodity
prices. The Company expects to fund its expenditures from cash flows from operations
based on anticipated commodity prices subject to change if market conditions shift
or new opportunities are identified. The 2002 capital expenditure budget was developed
using certain assumed price

14

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Ocean
Energy, Inc.

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

levels for the
sales of natural gas and crude oil. Changes in commodity prices could impact the Companys
cash flow from operations and funds available for reinvestment. For example, shortfalls
in budgeted cash flows from operations could result in the reduction of the Companys
capital spending program, increases in borrowing under the credit facility or divestments
of properties. 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.

On
March 12, 2002, the Companys Board of Directors declared a quarterly common stock
dividend of four cents per share payable on April 25, 2002, to stockholders of record at
the close of business on April 11, 2002. The amount of future dividends on OEI common
stock will be determined on a quarterly basis and will depend on earnings, financial
condition, capital requirements and other factors.

Accounting
Pronouncements

In
2001 the Financial Accounting Standards Board issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related longlived asset. The
Company will be required to adopt SFAS No. 143 effective January 1, 2003, using the
cumulative effect approach to recognize transition amounts for asset retirement
obligations, asset retirement costs and accumulated depreciation. The Company currently
records estimated costs of dismantlement, removal, site reclamation and similar
activities as part of its depreciation, depletion and amortization for oil and gas
properties without recording a separate liability for such amounts. The Company has not
yet completed its assessment of the impact of SFAS No. 143 on its financial condition and
results of operations. It expects that adoption of the statement will result in increases
in the capitalized costs of its oil and gas properties and in the recognition of
additional liabilities related to asset retirement obligations.

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

Oil,
condensate and natural gas liquids (NGL) are stated in barrels (Bbl)
or thousand barrels (MBbl). Natural gas is stated herein in billion cubic
feet (Bcf), million cubic feet (MMcf) or thousand cubic feet (Mcf).
Oil, condensate and NGL are converted to gas at a ratio

15

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Ocean
Energy, Inc.

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

of one barrel
of liquids per six Mcf of gas. 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. BBtu represents one billion British Thermal Units.

ForwardLooking
Statements May Prove Inaccurate

This
document contains forwardlooking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and
information that is based on managements belief and assumptions based on currently
available information. All statements other than statements of historical fact included
in this document are forwardlooking statements. When used in this document, words such
as anticipate, believe, estimate, expect, forecast,
intend, projectand similar expressions serve to identify forwardlooking statements. Although we believe
that the expectations reflected in our forwardlooking statements are reasonable, we can
give no assurance that these expectations will prove correct. Our forwardlooking
statements are subject to risks, uncertainties and assumptions. Should one of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect, our
actual results may vary materially from those expected. Among the key factors that may
have a direct bearing on our results of operations and financial condition are:

- competitive practices in the oil and gas industry;
- geological, mechanical and economic risk inherent in the drlling and operation of exploratory and development wells;
- risk of noncash writedown of unproved property costs in countries where proved reserves have not yet been established;
- risk of noncash  writedown of proved property costs due to declines in prices,  downward revisions in reserves or significant
              increases in finding and development costs;
- volatility of energy  commodity  prices,  generally,  and  fluctuations in the commodity  prices for crude oil and natural gas
              that have not been properly hedged;
- general economic and capital markets conditions, including fluctuations in interest rates;
- the impact of current and future laws and governmental  regulations,  particularly  environmental  regulations,  affecting the
              energy industry in general, and our oil and gas operations, in particular;
- environmental liabilities that are not covered by insurance or indemnity;
- the  political  and  economic  climate in the  foreign  jurisdictions  in which we conduct oil and gas  operations,  including
              potential adverse results of military or terrorist actions in those areas; and
- the effect on our results of operations and financial  condition  associated with  implementing  various  accounting rules and
              regulations.

16

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Ocean
Energy, Inc.

Item 3.
Quantitative and Qualitative Disclosures About Market Risks

The
Company experiences market risk primarily in the area of commodity prices. To mitigate a
portion of its exposure to fluctuations in commodity prices, the Company has entered into
various oil and gas derivative financial instruments for its oil and gas production. See
Notes 1 and 4 to the Companys Consolidated Financial Statements for a discussion of
activities involving derivative financial instruments during the first quarter of 2002.
To calculate the potential effect of the derivatives contracts on future revenues, the
Company applied the average NYMEX oil and gas strip prices as of March 31, 2002 to the
quantity of the Companys oil and gas production covered by those derivative
contracts as of that date. The following table shows the estimated potential effects of
the derivative financial instruments on future revenues (in millions):

|                          | Estimated | Estimated Increase in | Estimated Decrease in
|------------------------- | --------- | --------------------- | ---------------------
|
|
|                         
|Oil collars               |           |                       | $                    
|Gas collars               |           |                       | $                    
|Gas swap of related trust |           |                       | $                    

Part II.
Other Information

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

None
during the first quarter of 2002.

Item 6.
Exhibits and Reports on Form 8K

(a) Exhibits:
      None

(b) Reports on
Form 8-K:       None

17

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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: May 3, 2002
| | -----------------

| | By:  
/s/ Robert L. Thompson       Robert L. Thompson 
       Vice President and Controller
       (Principal Accounting Officer)
| | ---------------------------------------------------------------------------------------------------------------------------------

| | Date: May 3, 2002
| | -----------------

18

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